COMMISSIONER OF INCOME-TAX, ORISSA vs. ORISSA CORPORATION (P) LTD.

CIVIL APPEAL No. 1379/1974Supreme Court[1986] 1 S.C.R. 97919 March 1986Bench: 2 JudgesAuthor: R.S. PATHAK, SABYASACHI MUKHERJI CCJIMISSIONER OF INCOME10 pages
AI SummaryDismissed

What were the facts?

For the accounting year ending March 31, 1961 (Assessment Year 1962-63), the Income-tax Officer (ITO) disallowed a cash credit of Rs. 1,50,000 claimed by the assessee, Orissa Corporation (P) Ltd., as loans from three individuals. The assessee provided discharged hundis and confirmation letters. Notices under Section 131 of the Income Tax Act, 1961, to locate the creditors were returned 'left'. The ITO found inconsistencies in the confirmation letters and considered the creditors to be name lenders, adding the amount to the assessee's income. The Assistant Appellate Commissioner upheld this. A penalty of Rs. 50,000 was also imposed under Section 271(1)(c). The Tribunal deleted the addition and the penalty, finding that the revenue had not discharged its onus and that the creditors, who were income-tax assessees, admitted to lending their names. The High Court refused to direct the Tribunal to state a case, and the Revenue appealed to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court dismissed the appeals. It held that the High Court has no power under Section 256(2) to direct the Tribunal to state a case if there is some evidence to support the Tribunal's finding, even if the High Court might have arrived at a different conclusion upon re-appreciation of evidence. The Court found that the Tribunal's conclusion that the assessee had discharged the burden was not unreasonable, perverse, or based on no evidence. The assessee had provided the names and addresses of the creditors, who were known income-tax assessees. The Revenue, despite having the creditors' index numbers, did not pursue the matter further by examining their creditworthiness or attempting to locate them. Therefore, the assessee could not have done more. The Court also noted that the penalty aspect depended on the quantum aspect. Since the Tribunal's findings were based on some evidence, no question of law arose, and the High Court was correct in refusing to refer the questions.

What were the issues?

1. Whether the assessee discharged its initial onus by producing confirmation letters and hundis, without proving the confirmation letters and hundis themselves, to prove the nature of the transaction (Section 68)? 2. Whether the Tribunal was right in ordering the deletion of Rs. 1,50,000 as income from undisclosed sources? 3. Whether the cash credit constituted the assessee's income from undisclosed sources? 4. Whether the Tribunal was right in shifting the onus from the assessee to the Revenue in deleting the penalty (Section 271(1)(c) read with Section 274(2))? Assessee's Contention: The Tribunal correctly deleted the addition and penalty. The assessee had provided all available information, including the names and addresses of creditors who were income-tax assessees. The Revenue failed to pursue the matter further by examining the creditors' creditworthiness or whereabouts. Revenue's Contention: In view of Section 68 of the Act, the onus was on the assessee to prove the source of the cash credit, and the assessee had not discharged this onus.

Which sections of the Income-tax Act were involved?

Section 68,Section 271(1)(c),Section 131,Section 274(2),Section 256(2)

AI-generated summary — verify with the full judgment below

979 CCJIMISSIONER OF INCOME-TAX, ORISSA v. ORISSA CORPORATION (P) LTD. MARCH 19, 1986 [R.S. PATHAK AND SABYASACHI MUKffAIUI, JJ.] Income Tax Act 1961-ss.68 and 256(2) - Cash credits in books of assessee - Onus of proof about source of income.

High Court refusing to direct Tribunal to state case - A B When valid. C Interference with findings of fact by the Tribunal - Permissible under what circumstances.

For the accounting year ending on 31st March, 1961, corresponding to the assessment year 1962-63, the Income-tax D Officer did not accept the assessee 's accounts showing cub credit of Rs.1,50,000 said to have been received by way of loans from three individual creditors. He produced before the Incmae-tax Officer, discharged hundies and confirmation letters from these creditors who were income-tax assessees.

The assessee made attempts to bring the creditors before the E Income-tax Officer by issue of notices under s.131 of the Income Tax Act, 1961 but failed, as these were returned with the endorsement 'left'. The assessee thereafter wante4 fUrther opportunity to find out the whereabouts of the lenders. The Income-tax Officer observed certain inconsis

The order continues below.

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