COMMISSIONER OF INCOME-TAX VS GNAN GANGA SCIENCE INSTITUTE
2001 P T D 189
[238 I T R 473]
[Gujarat High Court (India)]
Before J. N. Bhatt and A.R. Dave, JJ
COMMISSIONER OF INCOME‑TAX
versus
GNAN GANGA SCIENCE INSTITUTE
I.T.As. Nos. 28 to 50 with 57 of 1999, decided on 16/03/1999.
Income‑tax‑‑‑
‑‑‑‑Reference‑‑‑Firm‑‑‑Registration‑‑‑Search of five firms and ITO holding that all firms were benamidars of one person‑‑‑Registration refused ‑‑‑CIT (Appeals) holding that five firms were genuine ‑‑‑ITAT confirming CIT's orders‑‑‑Findings of facts‑‑‑Conclusion after due consideration of evidence‑‑ Reference application refused‑‑‑Indian Income Tax Act, 1961, S.256(2).
The finding of facts recorded and challenged in a reference jurisdiction can be interfered with, as a question of law, only upon satisfaction of one or more following aspects; that (1) it is perverse; (2) it is based on irrelevant materials; (3) it is unreasonable; (4) it is based on no evidence; (5) it is based on material not on record; (6) it suffers from the vice of non‑application of mind to the vital and important materials; (7) the decision or the order is such that no reasonable man can conclude upon the appraisal of the facts on record; (8) there was misapplication of the provisions of law; (9) the authority misdirected itself in law in arriving at the conclusion; (10) there was a complete failure of justice.
When the Appellate Authority particularly agrees with the views taken by the authority below he need not meticulously and minutely discuss all the points at the same length as the original authority.
Whether a firm registered is a genuine one or not is ordinarily a question of fact and the High Court cannot go behind the facts found by the Tribunal. The finding of fact would be erroneous in law only if it is unsupported by any evidence or it is unreasonable or perverse.
There was a search in the premises of five educational institutions as well as residential premises of some of the partners, one of whom was KGD. The Assessing Officer held that all the five institutions were benamidars of the said KGD. Thus, the Assessing Officer was of the view that KGD was the real owner of the five institutions and the said five firms were not genuine. The Assessing Officer, therefore; refused registration under the Income‑tax Act. On appeal, the Commissioner of Income‑tax (Appeals), after consideration of the relevant materials and the facts and circumstances, reversed the view of the Assessing Officer and held that KGD could not be characterised as the real owner of the five educational institutions and that the said firms were genuine and, therefore, registration could not be refused. On further appeals before the Income‑tax Appellate Tribunal, the orders of the Commissioner of Income‑tax came to be affirmed. As reference applications under section 256(1) of the Income Tax Act, 1961, were rejected, applications under section 256(2) of the Act‑were filed:
Held, that having considered the facts and circumstances of the case and the finding of facts recorded by the Appellate Assistant Commissioner and the Tribunal the applications under section 256(2) were liable to be rejected.
CIT v. Juggilal Kamlapat (1967) 63 ITR 292 (SC); CIT v. Karam Chand Thaper & Bros. (P.) Ltd. (1989) 176 ITR 535 (SC); (1989) 65 Comp. Cas. 728 (SC); CIT v. S.M. Bhatiya Associates (1997) 226 ITR 675 (Raj.); CIT v. Sir Shadilal Sugar and General Mills Ltd. (1972) 86 ITR 776 (All.); Prem Family (Pvt.) (Specific) Trust v. CIT (1997) 226 ITR 694 (SC); Ratanchand Darbarilal v. CIT (1985) 155 ITR 720 (SC) and Sir Shadilal Sugar and General Mills Ltd. v. CIT (1987) 168 ITR 705 (SC) ref.
B.B. Naik with Manish R.Bhatt for Petitioner.
K.H. Kaji for Respondent.
JUDGMENT
J. N. BHATT, J.‑‑‑In this group of 24 applications under section 256(2) of the income Tax Act, 1961, common, questions are involved arising out of the common order of the Income‑tax Appellate Tribunal, Rajkot Bench, dated August 3, 1998, between common parties. They are being disposed of by this common judgment.
There was a search in the premises of the five educational institutions as well as residential premises of some of the partners, one of whom was Krishnakani G. Dholakia. The Assessing Officer held that all the five institutions are benamidars of one said Shri Dholakia (KGD, for short hereinafter). Thus, the Assessing Officer was of the view that KGD was the real owner of the five institutions and the said five firms were not genuine. The assessment years involved and covered in this group of applications are 1986‑87, 1987‑88 and 1988‑89, except in I.T.A. No.31 of 1999. The Assessing Officer on a finding that the said firms are fake refused registration under the Income‑tax Act.
Upon appeals, at the instance of the assessee, against the orders of the Assessing Officer, the Commissioner of Income‑tax (Appeals), Rajkot, after consideration of the relevant materials, and the facts and circumstances, reversed the view of the Assessing Officer and held that KGD could not be characterised as the real owner of the five educational institutions and that the said firms are genuine and, therefore, registration cannot be refused. The appeals filed by the assessee, thus, came to be allowed for the relevant assessment years. Upon further appeals by the Revenue before the Income -tax Appellate Tribunal, the orders of the Commissioner Income‑tax came to be affirmed. Thus, the Tribunal confirmed the views of the first appellate authority. As a result of which, at the instance of the Revenue, reference applications under section 256(1) of the Income‑tax Act came to be filed before the Tribunal, which came to be rejected by the common order, dated August 3, 1998. That is how this group of applications came up before this Court praying for exercise of power, under section 256(2) of the Income‑tax Act, calling for reference.
We have heard learned counsel appearing for the parties and have, dispassionately, examined the facts and circumstances emerging from the record of the case and also the relevant proposition of law. Learned counsel appearing for the Revenue has, vehemently, supported the views of the Assessing Officer, inter alia, contending that the orders of both the appellate authorities are perverse. It was, therefore, submitted on behalf of the Revenue that the five educational institutions are not genuine firms and KDG is the sole owner of all the five institutions and the firms are fake, whereas, learned counsel appearing for the assessee has countered the submissions and has supported the concurrent views taken by the two appellate authorities. It was also contended by him that in view of the limited scope of the provisions of section 256(2) of the Income‑tax Act, the reference applications are liable to be rejected as no questions of law are involved.
It is a settled proposition of law that the jurisdictional ambit and scope of section 256(2) of the Income‑tax Act is circumscribed. The powers thereunder can be exercised only in case of satisfaction that the decision of the Appellate Tribunal is unsupportable in refusing to make reference under section 256(1) of the Income‑tax Act. It is, therefore, necessary to satisfy or to successfully spell out from the record that the decision of the Tribunal is questionable and not correct and the Appellate Tribunal is required to state 'the case and refer it on the questions of law. Therefore, in a case where the finding or the questioned decision does not involve any question of law, the exercise of powers under section 256(2) of the Income‑tax Act could not be invoked.
Upon assessment of the facts and circumstances, the first appellate authority reversed the views taken by the Assessing Officer that the five educational institutions are fake and that the real owner of the five firms is one KGD and the same is also confirmed by the second appellate authority, namely, the Income‑tax Appellate Tribunal. The two appellate authorities have, thus, consistently and concurrently, held on the facts that the decision of the Assessing Officer is wrong. Undoubtedly, the final fact‑finding forum is the Tribunal. Unless it is successfully pointed out from the record that the finding of Act recorded by the Tribunal is perverse, the exercise of powers under section 256(2) of the Income‑tax Act by the High Court for calling for reference would not come into play. In other words, unless the assessment of facts and appraisal of the evidence before the appellate authorities below is shown to be or is spelt out perverse, the High Court would be loath to interfere with the findings of facts recorded by the Tribunal more so in a case where two appellate authorities have concurrently recorded findings of facts.
Since, in our opinion, no questions of law are involved, we do not find any justification or merit in this group of 24 applications praying for exercise of power under section 256(2) of the Income‑tax Act. However, since we are addressed at length and a host of authorities are referred to, we would not like to make an interception en route without referring to the following aspects which have remained unimpeachable.
(1) All the partnership firms have common feature in the title which appeared to be educational institutions, like, Gnan Ganga Classes, a firm which was commenced with effect from April 1, 1976, Gnan Ganga Science Institute, commenced with effect from April 1, 1982, Gnan Ganga Commerce Classes, commenced with effect form April 1, 1984, and Gnan Ganga Coaching Classes, commenced from April 1, 1984 and Gnan Ganga Arts Institute commenced from April 1, 1986.
(2) The Revenue Authority upon search found that the bank account in which cash was being deposited was in the joint names of KGD and his brother.
(3) The first appellate authority upon assessment of all facts and circumstances reached the conclusion that each of the firms has its independent existence by the very nature of its constitution as per the partnership deed and enjoys the fruits of profits as defined by the terms and conditions of the firm.
(4) It was also found by the first appellate authority that none of the partners had ever diverted any part of his income to KGD or his wife either directly or indirectly.
(5) That there is no iota of evidence that KGD is the owner of all the assets or that he is the only one person enjoying the fruits of income of all the firms.
(6) That the statements recorded on the day of raid were interpreted and inferred by the Assessing Officer as if they were mere benamidars of the remaining two partners of the firm.
(7) That the registration of the firms were continued and allowed subsequently as continuing firms till 1997‑98.
One of the contentions advanced on behalf of the Revenue before us was that the Tribunal has not considered and, as such, ignored material circumstances cited by the Assessing Officer and, therefore, the impugned views of the Tribunal is perverse. Needless to reiterate that the appellate authority when particularly agrees with the views taken by the authority below need not meticulously and minutely divulge on all the points at the same length as that of an original authority. It cannot be gainsaid that the appellate authority while confirming and affirming the views of the authority below is not required to address itself upon all the points with the same length. No doubt, we are satisfied from the facts that the Appellate Tribunal has not at all ignored the material circumstances relied on by the Assessing Officer. It is true that the length of the decision of the first appellate authority covering all the aspects in greater detail are not repeated in the order of the second appellate authority, which is not required. Therefore, the contention that the order of the Tribunal is perverse in not considering or in ignoring the material circumstances, as such the material circumstances having bearing on the decision have been considered even by the Tribunal. The first appellate authority, namely, the Commissioner of Income‑tax, has also fully addressed itself to all the material circumstances.
What is important is the assessment of the facts and the analysis of the evidence cumulatively reached by the authority. The correctness of the decision can be examined and judged not with the help of one circumstance in isolation from the entire scenario emerging from the record of the case. It is the cumulative effect and the result of the fact situation from the record on merits and it has been considered in greater detail by the first appellate authority and is, in our opinion, rightly also, confirmed by the second appellate authority.
Since the finding of fact recorded by both the authorities finally culminating into the impugned order of the Tribunal does not raise any question of law, the applications under section 256(2) of the Income‑tax need to be rejected. The finding of fact recorded and challenged in a reference jurisdiction can be interfered with, as a question of law, only upon satisfaction of one or more following aspects, that :
(1) it is perverse;
(2) it is based on irrelevant materials;
(3) it is unreasonable;
(4) it is based on no evidence;
(5) it is based on material not on record;
(6) it suffers from the .vice of non‑application of mind to vital and important materials;
(7) the decision or the order is such that no reasonable man can conclude upon the appraisal of the facts on record;
(8) there was misapplication of the provisions of law;
(9) the authority misdirected itself in law in arriving at the conclusion;
(10) there was a complete failure of justice.
In fact, the relevant proposition of law is very well settled: However, the following authorities are referred to which reinforce the views taken hereinbefore by us on the question of law.
It has been held by the Supreme Court in Ratanchand Darbarilal v. CIT (1985) 155 ITR 720, that the Court cannot interfere with the findings of fact recorded by the Tribunal and make reappraisal of the materials so as to arrive at a conclusion different from that of the Tribunal. The jurisdictional sweep of the High Court under section 256(2) of the Income‑tax Act cannot be equated with the powers of an appellate Court.
In Sir Shadilal Sugar and General Mills Ltd. v. CIT (1987) 168 ITR 705, the Supreme Court reversing the view taken by the High Court in a decision reported in CIT v. Sir Shadilal Sugar and General Mills Ltd. (1972) 86 ITR 776 (All.), held that in a reference section 66 of the Indian Income -tax Act, 1922 (as it stood at the relevant time), the High Court was in error in preferring one to the other view of the factual appreciation. It is very clear from this decision that upon the reappraisal of the facts, the High Court transgressed the limits of its reference jurisdiction. It is not within the competence of the High Court to say that proper weight had not been given to all the evidence and admissions made by the assessee. There was a finding of fact and unless it could be said that all the relevant facts had not been considered in a proper light, no question of law arises. The conclusion of fact arrived at by the Income‑tax Appellate Tribunal after due consideration of evidence is, obviously, not open to interference by the High Court, in reference jurisdiction. The Tribunal performs a judicial function‑under the Act and it is invested with authority to determine, finally, all questions of fact. The proposition that an inference from the facts is one of law is correct in its application to mixed questions of fact and law but not to pure and simple questions of fact. In the case of pure questions of fact an inference from the facts is as much a question of fact as the evidence of facts. Non- appreciation of evidence may give rise to a question of law but not mere mis-appreciation, even if there be any, from a certain angle. Change of perspective in viewing a thing does not transform a question of fact into a question of law.
It is interesting to note that the apex Court in CIT v. Karam Chand Thaper & Bros. (P.) Ltd. (1989) 176 ITR 535, has clearly propounded that it is not necessary for the Tribunal to state in its judgment specifically or in express words that it has taken into account the cumulative effect of the circumstances or has considered the totality of facts. If the judgment of the Tribunal shows that it has, in fact, done so, there is no reason to interfere with the decision of the Tribunal. The Tribunal's decision on facts cannot be questioned unless it is based on irrelevant evidence or is perverse and ordinarily, the finding of fact is final and not open to further reference to the High. Court. Therefore, the High Court need not undertake minute scrutiny to find out whether all facts and materials have been taken into account by the Tribunal. The Tribunal is the final fact‑finding body. The decision of the Tribunal has not to be scrutinised sentence by sentence to find out ‑whether all facts have been set out in detail by the Tribunal or whether some incidental fact which appears on record has not been noticed by the Tribunal in its judgment. If the Court, on a fair reading of the judgment of the Tribunal finds that it has taken into account all relevant material and has not taken into account any irrelevant material in basing its conclusions, the decision of the Tribunal is not liable to be interfered with unless the conclusions arrived at by the Tribunal are totally perverse.
Whether a firm registered is a genuine one or not is, ordinarily, a question of fact and the High Court cannot go behind the facts found by the Tribunal. The finding of fact would be erroneous in law only if it is unsupported by any evidence or it is unreasonable or perverse. When a conclusion has been reached upon appraisal of various facts and circumstances, from the record of the case, the question whether the conclusion is sound or not must be determined not by considering the weight to be attached to each single fact in isolation but in assessing the cumulative facts put together. This view is also supported by the decision of the Rajasthan High Court in CIT v. S.M. Bhatiya Associates. (1997) 226 ITR 675. In this decision, reliance is also placed on the various decision of the Bombay, Calcutta and other High Courts and also on the decision of the Supreme Court in CIT v. Juggilal Kandapat (1967) 63 ITR 292. Therefore, the question whether, in fact, firm had been constituted and came into existence is a pure question of fact on which the decision of the Tribunal is final and no reference to the High Court would lie. The scope of reference jurisdiction under section 66 of the Indian Income‑tax Act, 1922, and now section 256 of the Income Tax Act, 1961, is very much limited and in case of dispute about the genuineness of "he firm or the trust cannot be reassessed or reappraised by the High Court. The view which we have taken is also very much reinforced by a latest decision of the Supreme Court in Prem Family (Private) (Specific) Trust v. CIT (1997) 226 ITR 694.
After having considered the overall facts and circumstances and the consistent and concurrent findings of fact recorded by the two appellate authorities and in the background of the legal proposition enunciated hereinabove, we find no merit in this group of 24 applications. They are therefore, required to be rejected.
Consequently, they shall stand rejected: Rule discharged without any order of costs.
M.B.A./115/FC
Reference answered.