Vijay Kumar Talwar — v. Commissioner of Income Tax, Delhi —

1. Challenge in these two appeals, by special leave, is to the orders dated st December, 2001 and 19 th February, 2002 whereby the High Court of Delhi dismissed : (i) the appeal filed by the appellant herein under Section 260-A of the Income Tax Act, 1961 (for short “the Act”) in I.T.A. No.202 of 2001, holding that the order of the Income Tax Appellate Tribunal, New Delhi (for short “the Tribunal”) did not give rise to any substantial question of law; and (ii) the review petition preferred by the appellant against order dated 21 st December, 2001, holding that the petition was not maintainable.

2. Shorn of unnecessary details, the facts material for adjudication of the present appeals may be stated. These are :

The appellant (hereinafter referred to as “the assessee”) was a partner in a firm, named and styled as M/s Des Raj Tilak Raj, having its business at Delhi, with a branch at Calcutta. The said partnership firm was dissolved w.e.f. 1 st April 1982. As per the dissolution deed, the assessee took over the business of the Calcutta branch of the erstwhile firm. Thereafter, from 21 st October, 1982, the assessee started a proprietary concern by the name of M/s Des Raj Vijay Kumar.

3. On 27 th May, 1983, a search took place at the assessee’s premises during which certain incriminating documents were recovered and seized. During the course of assessment proceedings for the assessment year 1983-1984, for which the previous year ended on 31 st March 1983, the assessing officer examined the seized record. One of the registers so examined, revealed cash receipts of `3,49,991/- in the name of 15 persons, most of which were purportedly received during the period of April, 1982 to October, 1982. When the assessing officer sought an explanation from the assessee with regard to the said cash credits in the register, the assessee merely stated that the cash receipts were in the nature of realisations from the past debtors of the erstwhile firm. In order to appreciate the said stand, the assessing officer called for the account books of the Calcutta branch of the erstwhile firm for the relevant period, but the assessee failed to produce them. The assessing officer also examined the assessee’s brother, a partner in the erstwhile firm, who also stated that the account books were not available.

4. Having noted that the outstanding realisations of the Calcutta branch in the preceding years varied from `25,000/- to `30,000/-, the assessing officer held that the assessee’s submission that cash receipts of `3,49,991/- related to earlier years was untenable. Therefore, vide order dated 20 th February, 1986, the assessing officer added a sum of `3,49,991/- as assessee’s income under the head “unexplained cash receipts.”

5. Aggrieved, the assessee appealed to the Commissioner of Income Tax, (Appeals)-XV, New Delhi, who vide his order dated 6 th December 1989, dismissed the same and confirmed the addition made by the assessing officer.

6. Being still aggrieved, the assessee carried the matter in appeal before the Tribunal. Vide order dated 27 th September, 1994, the Tribunal, while partly allowing the appeal, remitted the matter back to the assessing officer for de-novo adjudication. The Tribunal observed that:

“We find that some of the entries pertained to the period when the erstwhile firm was in existence whereas the assessee did not conduct business at Calcutta in a proprietary capacity but was only a partner in the erstwhile firm. The A.O. himself observed in the assessment order that the cash receipts are from April 1982 to October, 1982 i.e. prior to the start of the assessee’s proprietary business in the name of M/s Desraj Vijay Kumar. As against this, we find that some of the entries are dated prior to April, 1982 when the erstwhile firm was in existence. Then again, it is not known as to what happened to the income between the period 1.4.1982 to October, 1982 as the erstwhile firm is supposed to have been dissolved w.e.f 1.4.1982 and as per the assessee’s version the proprietary business was started from October 1982. There is no information made available to us as to whether the Department initiated any action u/s 148 to subject the cash receipts aggregating Rs. 3,49,991/- in the hands of the erstwhile firm…………………………………………… ……………..…………………………………………………… …………….….

11. In view of the aforesaid discussion, we although taking the view that the onus on the facts and circumstances of the case squarely lies on the assessee, hold that the material has to be re-considered in light of the afore-said observations…..”

7. Pursuant thereto, on 17 th May, 1995, the assessing officer asked the assessee to file confirmations of the 15 parties, in whose names cash credit entries appeared in the register seized during the search. In his reply dated 22 nd May, 1995, the assessee stated that the said cash receipts were realisations of the sales effected in the earlier years by the erstwhile firm. Subsequently, the assessee was given three more opportunities on 2 nd June 1995, 16 th June, 1995, and 3 rd July, 1995 to produce fresh evidence, which were not availed of by him. Vide letter dated 28 th July, 1995, the assessee was given a final opportunity to file confirmations of the 15 parties, with their complete addresses. In his reply, the assessee filed the confirmations of 7 parties, with the address of 6 other parties. The assessing officer considered the two remaining parties as non-existent. It is pertinent to note that all the seven confirmations filed by the assessee were identical, and did not contain either a date or the GIR No. of the confirming party; and merely stated that the concerned party had dealings with the erstwhile firm, and it had made purchases from them in the year ending 31 st March, 1982 and had made payments prior to October, 1982; and since the matter was really old, the books of accounts of the firm were not available.

8. When the assessing officer sent letters to the six parties, whose addresses had been supplied, three did not respond, while two others denied any relationship with the firm, and remaining one letter was returned by the post office with remarks “not known.” Similarly, when letters were sent to parties who had filed confirmations, three of those letters were returned by the post office marked “not known.”, and another one as “no claims.” One of the parties denied any relationship with the firm. In light of these circumstances, the assessing officer, vide order dated 19 th March, 1996, confirmed the original assessment.

9. The assessee preferred an appeal before the Commissioner of Income Tax, (Appeals)-III, which was dismissed vide order dated 16 th December, 1998. The Commissioner observed that:

“The contention of the appellant is apparently unacceptable. Any business realisations of the partnership would have been shared by the erstwhile partners. The cash receipts of `3,49,991/- as per the seized material is, therefore, held to belong to the appellant and assessable as unexplained receipts in the hands of the appellant. The assessment of appellant’s income including the aforesaid receipt is, therefore, confirmed and the appeal is dismissed.”

10. Still not being satisfied, the assessee carried the matter in appeal before the Tribunal. The Tribunal, vide order dated 23 rd October, 2000, while partly allowing the appeal, held that the addition of `3,49,991/- was correct. It observed that:

“We are also of the opinion that the confirmations filed by the appellant are of no use because they have not been co-related with the transactions alleged to have been found entered in the register seized during the time of search if it represents the realization of outstanding amount on sales, this could have been proved with the cross reference to the entries in the register. We cannot ignore the fact that the enquiry letters sent by the A.O. remained unserved, unanswered and denial.”

11. On 22 nd February, 2001, the assessee moved an application under Section 254(2) of the Act before the Tribunal for rectification of mistakes in the order of the Tribunal dated 23 rd October, 2000. It was pleaded that the Tribunal had erred in observing that the assessee’s premises were raided due to heavy sales, and that cash amounting to `3,49,991/- was seized; that the assessing officer had issued ITNS 150, which the assessee had filed before the Commissioner (Appeals); and that the Tribunal did not take into consideration the arguments and various judgments relied on by the assessee. Vide order dated 25 th September, 2001, the Tribunal rejected the rectification petition on the ground that:- (i) the Tribunal had relied on the assessing officer’s order in relation to the factual position, and there was no reason to interfere with the same; (ii) while it was true that cash amounting to `3,49,991/- was not recovered, but the said amount was entered in the register which was recovered; and therefore, this would not affect the findings of the Tribunal; (iii) the remarks in relation to ITNS 150 were not made by the Tribunal, but by the department’s representative and (iv) re-considering the judgments relied on, and the arguments made, would tantamount to a review, which power the Tribunal is not authorised to exercise under Section 254(2) of the Act.

12. The assessee preferred an appeal before the High Court under Section 260-A of the Act. As already stated, the High Court, vide judgment dated 21 st December 2001, dismissed the appeal of the assessee, observing that:

“To us it appears that the findings recorded by the Commissioner of Income Tax as also the Income Tax Appellate Tribunal are pure findings of fact. Appreciation of evidence does not fall within the realm of this Court’s jurisdiction under section 260-A of the Income Tax Act………………………… ………………………………………………………………… ……………………………………..

Having regard to the fact and circumstances of this case we are, therefore, of the opinion that no question of law far less any substantial question of law arises for consideration in this appeal.”

13. Thereafter, the assessee filed a review petition before the High Court, which was also dismissed vide order dated 19 th February, 2002.

14. Hence, the present appeals.

15. Mr. K.R. Manjani, learned counsel appearing on behalf of the assessee, assailed the impugned orders on the ground that since the Tribunal had taken into consideration irrelevant materials, its findings were perverse and, therefore, the High Court has erred in holding that there was no substantial question of law involved.

16. Per contra, Mr. R.P. Bhatt, learned senior counsel appearing on behalf of the Revenue supported the view taken by the High Court and asserted that the impugned orders deserve to be affirmed.

17. Before adverting to the rival submissions, it would be expedient to refer to Section 260-A of the Act. The provisions, relevant for our purpose, read thus:

“(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal, if the High Court is satisfied that the case involves a substantial question of law…