Income-tax---

----Income from undisclosed sources---Appeal to Appellate Tribunal---Finding that assessee had satisfactory explanation regarding amount added as income from undisclosed sources---Tribunal Justified in deleting addition---Indian Income Tax Act, 1961, S.68.

The assessee had purchased a property at a cost of Rs.4,00,000 and his explanation was that finance to the extent of Rs.3,20,000 had been obtained by him by way of loan from different persons. One of his creditors was B who had advanced a sum of Rs.80,000. B was summoned and examined by the Assessing Officer but the explanation offered by him was not accepted by the Assessing Officer. The Assessing Officer added the sum of Rs.80,000 to the income of the assessee. The Tribunal found that the assessee had duly established the factum of taking a loan of Rs.80,000 from B. It deleted the sum from the assessment On a reference:

Held, that the appellate authority as well as the second appellate authority were fully entitled to re-appreciate the evidence and either to accept or reject the same. There was no fetter on those authorities in believing the statement and coming to a conclusion contrary to that of the Assessing Officer. In the facts and circumstances of the case, the deletion of Rs.80,000 from the income of the assessee was proper.

JUDGMENT

On an application being filed by the Commissioner of Income-tax, Orissa, under section 256(2) of the Income Tax Act, 1961, this Court had formulated the following question and had called upon the Tribunal to submit a statement of case. The question formulated was:

"Whether, on the facts and in the circumstances of the case, the deletion of Rs.80,000 which was added under section 68 of the Income Tax Act, 1961, was proper?"

Though the order-sheets reveal that the aforesaid question had been formulated by this Court, the statement of case reveals a different picture and in fact two questions had been formulated by the Tribunal. We fail to understand from where the Tribunal has framed the said two questions referred to in the statement of case. In view of the fact that this Court had formulated the question as, stated earlier, we are required to answer the said question alone.

The short facts are that the assessee had purchased a property at a cost of Rs.4,00,000 and his explanation was that finance to the extent of Rs.3,20,000 had been taken by him by way of loan from different persons. One of his creditors was one Sri R.K. Bhagania who had advanced a sum of Rs.80,000. The said Sri Bhagania was summoned and examined by the Assessing Officer but the explanation offered by him was not accepted by the Assessing officer on the ground that Shri Bhagania's premises had been searched and it was revealed that he was engaged in hawala transactions. The Assessing Officer, therefore, treated the statement of Sri Bhagania to be unbelievable and, rejecting the same, added the sum of Rs.80,000 to the income of the assessee. The assessee thereafter carried the matter in appeal. The Commissioner of Income-tax (Appeals), however, examined the materials and came to the conclusion that there was no justification on the part of the Income Tax Officer to discard the evidence of Shri Bhagania particularly when he had filed an affidavit that he had advanced a sum of Rs.80,000 to the assessee by way of loan which was also duly disclosed in the accounts of Shri Bhagania relating to the assessment year 1978-79. The appellate authority therefore allowed the appeal and deleted the sum of Rs.80,000 from the income of the assessee. The Department thereafter carried the matter in second appeal before the Tribunal but the Tribunal dismissed the second appeal on the finding that the assessee had duly established the factum of taking a loan of Rs.80,000 from Shri Bhagania. The Department then filed an application under section 256(1) for making a reference to this Court and having failed in its attempt, the Department approached this Court under section 256(2) of the Act and then on the direction of this Court the question of law was formulated and the statement of case has been made.

Under section 68 of the Income Tax Act, if any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, then the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The question therefore arises for consideration is whether the appellate authority as well as the Tribunal were justified in believing the statement of Shri Bhagania in view of the affidavit filed by him and deleting the amount of Rs.80,000 from the income of the assessee. The appellate authority as well as the second appellate authority were fully entitled to re-appreciate the evidence and either to accept or reject the same. There was no fetter on those authorities in believing the statement and coming to a conclusion contrary to that of the Assessing Officer. In this view of the matter, we see no infirmity in the conclusion of the appellate authority which has been affirmed by the second appellate authority. We accordingly answer the question posed in favour of the assessee and against the Revenue to the effect that, in the facts and circumstances of the case, the deletion of Rs.80,000 from the income of the assessee was proper. The reference is answered accordingly.

M.B.A./1058/F??????????????????????????????????????????????????????????????????????????????????? Reference answered.