1. Heard learned counsel for the Revenue and learned counsel for the assessee.
2. The Revenue seeks reference of the following questions of law to this court u/s 256(2) of the Income Tax Act, 1961, as follows :
(1) Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in upholding the action of the Commissioner of
Income Tax (Appeals) in deleting the addition of Rs. 65,08,000 (assessment year 1981-82), Rs. 73,84,300 (assessment year 1982-83), Rs.
83,95,000 (assessment year 1983-84) and Rs. 6,76,250 (in the assessment year 1985-86) which were made u/s 69 of the Income Tax Act on
account of profits on undisclosed hundi sales not recorded in the books of account ?
(2) Whether the Tribunal was legally justified in confirming the findings of the Commissioner of Income Tax (Appeals) that these were only
accommodation hundis and there were no genuine sales, when, on the facts and in the circumstances of the case, the onus of proof that there were
no genuine sales completely rested on the assessee and this onus had not been discharged ?
(3) Whether there was material or evidence before the Tribunal to justify the confirmation of findings of the Commissioner of Income Tax
(Appeals) that there were no genuine sales ?
(4) Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in upholding the Commissioner of Income Tax
(Appeals'') action in deleting the addition of Rs. 1,09,148 made for the assessment year 1985-86 on account of unpaid bonus, in spite of the fact
that the statutory audit report in Form No. 3CD certified the fact that the assessee had been following the cash system of accounting for bonus ?
3. The assessee is a company engaged in the business of manufacture and sale of year during the course of assessment proceedings for the
assessment year 1984-85 and while scrutinising the ledger book of the Moradabad office of the company, the Assessing Officer found that
substantial amounts had been debited on account of payment of interest and commission to the bank on a large number of hundis drawn on parties
at Delhi where the head office of the company was situated. Enquiries with the Bareilly Corporation Bank, through which these hundis had been
discounted, revealed that there were a large number of hundi sales effected by the assessee but these sales were not reflected in the books of
account of the assessee. Details of these hundi sales were obtained from the bank as well as the sales tax office at Moradabad. When confronted
with these details, the assessee pleaded that these were only accommodation hundis which were raised in order to get bank finance for its business
and there were no actual sales or movement of goods involved. The Assessing Officer, however, rejected the above explanation of the assessee
and made an addition of Rs. 15,72,080 as profits on undisclosed sales relating to the discounted hundis as per details given in the assessment
order.
4. Being aggrieved by the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax who by means of order
dated February 22, 1988, deleted the aforesaid additions holding that there were no undisclosed sales.
5. Being aggrieved against the order, the Revenue went up before the Tribunal who by means of order dated September 25, 1991, upheld the
order of the first appellate authority deleting the additions made by the assessing authority. The main contention on behalf of the Revenue is that no
finding has been recorded by the Tribunal independently but it has only upheld the finding of the first appellate authority. This contention raised on
behalf of the Revenue is not correct. We find that the Tribunal has recorded its own findings. The relevant portion quoted below :
Therefore, from the facts as detailed out and as are emerging from the record and as found by the Commissioner of Income Tax (Appeals) and as
per records and materials placed on record, the entire practice of the assessee was towards raising of temporary finances by raising fake hundis
which hundis were met on the due date by the assessee itself. Therefore, there was no question of any profit on the sale of these hundis. The
addition was rightly deleted by the Commissioner of Income Tax (Appeals) and we confirm the deletion as these are no materials brought on
record to take a contrary view.
6. The further contention is that the first appellate authority merely recorded the argument of learned counsel for the assessee and had not applied
its mind. This contention is also not correct. We find that the first appellate court after recording the arguments of learned counsel in paragraph 17
onwards has recorded its finding. Thus even this contention of the Revenue has no merit. Thus, we find that the finding recorded by the
Commissioner of Income Tax as upheld by the Tribunal is a finding of fact and hence no question arises out of the Tribunal''s order.
7. We, accordingly, reject the present application u/s 256(2) of the Income Tax Act.
