THE COMMISSIONER OF INCOME TAX vs. M/S.TUBKI CASHEW WORKS AND ANR.

ORAL JUDGMENT: (PER KAKADE, J.) (PER KAKADE, J.) (PER KAKADE, J.)

This is an appeal under Section 260A of the Income Tax Act, 1961 preferred against the Judgment

and Order passed by the Income Tax Appellate

Tribunal, Panaji Bench, Panaji in IT Appeal

No.146/PN/1993 for the Assessment Year 1990-91

whereby Order of CIT(A) was upheld and appellant’s

appeal came to be dismissed by Order dated 2nd

January, 2002. 2. The facts giving rise to the dispute in a

-- 2 --

nutshell are thus :-

Respondent no.1/Assessee is a dealer in cashews. The A.O. found that there was no opening

stock as on 1.4.1989 and the Assessee had purchased

meaning thereby that 22706.65 kgs. of cashew seeds

had been sold without there being corresponding

purchase to that extent. Likewise in the month of May, 1989, 28691.30 kgs. of cashew seeds were purchased and the sale was recorded at 61280.70 kgs.

The cumulative difference at the end of May, 1989

was 55295.35 kgs. of cashew seeds for which no corresponding purchase was there. On this basis,

the A.O. worked out the purchase rate at 16.5 per

kg. and calculated the cost of 55295.35 kgs. at Rs.9,12,373/- which he added to the income of the Assessee as unexplained investment in purchases

outside the books as discussed.

preferred an appeal before CIT(A). The Respondent

No.1/Assessee submitted that he had maintained rough

books for purchase of cashews. The CIT(A) obtained

a remand report from the A.O. which was submitted

by A.O. after examination of the said rough books

-- 3 --

maintained by the assessee for cashew purchases. It was the case of the assessee that it had made

purchases of raw cashews through agents, sent to remote forest from where the agents directly make

purchases and supply them to cashew factories. It was stated that advance payments are given to such agents which are fully reflected in the bank account

of the assessee. It was submitted that the said

advances and purchases were periodically reconciled

whenever the agents come back to the headquarters.

The explanation of the assessee was that cashews is a seasonal crop and all the purchases had to be made

within the months of April, May and June. The purchases and sales both are accounted and are periodically reconciled. It was also demonstrated

that total purchases and total sales for the whole

year tallied. The record shows that it was brought

to the notice of the CIT(A) that there was excess

purchase of 17000 kgs which were sold to the assessee’s processing unit for Rs.3,62,052/- which amount had been shown as sales and is accounted for in arriving at the income of the assessee. On consideration of the above contentions of the assessee and there being no serious objection raised

by the A.O. the CIT(A) reached the conclusion that there was no suppression of purchases and hence the impugned addition was not justified. Being

-- 4 --

aggrieved by the said order the appellant preferred

an appeal before the Tribunal.

The Tribunal, on assessing the facts and circumstances on record, vis-a-vis the relevant

legal aspects, came to the conclusion that there was no dispute that the assessee was engaged in business

which is seasonal in nature and perusal of the assessment order revealed that no explanation

whatsoever was sought from the assessee in respect

of the alleged excess of sales of cashew seeds

without there being corresponding purchases in the months of April and May, 1989. The assessee had furnished quantitative details for the months of April, May and June and demonstrated that the allegation of the A.O. was not correct. The quantities were tallied and the explanation offered

by the assessee could not be adversely commented

upon by the A.O. in the Remand Report submitted by him before the CIT(A). Therefore the Tribunal was of the opinion that on appreciation of the nature of assessee’s business and the explanation offered by the assessee for the alleged discrepancy which could

not be found fault with, the CIT(A) reached the right conclusion so that the impugned addition was unwarranted having regard to the facts and circumstances of the assessee’s case and therefore

-- 5 --

in the result the appeal came to be dismissed.

Hence this Tax Appeal.

counsel for the appellant and Mr. M.S. Usgaonkar,

the learned Senior Advocate for the Respondent No.

of the appeal the substantial questions of law

sought to be raised on behalf of the appellant were found to be incorrect. The appellant sought and obtained amendment regarding the substantial

questions of law and added the following substantial

question of law :-

" Whether on the facts and circumstances of the case there was any relevant material before the ITAT to come to the conclusion that there was no suppression of purchases by the assessee ? "

the correct position, there was suppression by the Respondent No.1 in that regard. In support of this version, provisions of Section 44AA of the Income

Tax Act was brought to our notice, which makes it

-- 6 --

obligatory on the part of every person carrying on profession and business to keep and maintain such book of accounts and other documents as may enable

the assessing officers to compute his total income

in accordance with the provisions of this Act. It was urged on behalf of the appellant that since the rough books which were subsequently presented by the appellant were not in accordance with Section 44AA

of the Income Tax Act, the Respondent No.1 was guilty of suppression of accounts and consequently

the order of the Tribunal was illegal.

In this regard Mr. M.S. Usgaonkar, the learned Senior Counsel for the respondent No.1

brought to our notice the Rules framed under Section 44AA of the Income Tax Act. Rule 6F is regarding

the books of account and other documents to be kept

and maintained under Section 44AA(3) by persons

carrying on certain professions. It is clear

therefrom that the proviso to such Rule makes it clear that the respondent No.1 and his business are not covered by the said Rule which regulates the mode of maintaining accounts regarding certain

professions.

-- 7 --

the Income Tax Act enabling filing of this appeal,

contemplates involvement of substantial question of law. Therefore, it is needless to mention that the said provision is akin to the provisions of Section 100 of C.P.C. Therefore if we assess the merits of this appeal on the touchstone of the established

principles of Civil Procedure Code pertaining to entertainment and adjudication of second appeal it is obvious that the appeal cannot be entertained if no substantial question of law is involved at all.

As noted earlier, the so called substantial

questions of law which are sought to be raised in this appeal are in respect of either factual aspects

or pertaining to the allegations of the A.O. that certain purchases were suppressed by the assessee.

In our considered view the members of the Appellate

Tribunal have rightly dealt with this aspect and have come to the conclusion that the books of account as well as the contemporaneous record of the purchases and sales maintained by the assessee were sufficient compliance on their part to show that there was no suppression of any accounts or purchases in any manner whatsoever.

In this regard it would be worthwhile to take

note of the ruling of the Supreme Court in the case

of Kondiba Dagadu Kadam v. Savitribai Sopan Gujar Kondiba Dagadu Kadam v. Savitribai Sopan Gujar Kondiba Dagadu Kadam v. Savitribai Sopan Gujar

-- 8 --

and and and others others others (1999) 3 S.C.C., 722, wherein the Apex

Court has come to the conclusion that it is not within the domain of the High Court to investigate

the ground on which the findings were arrived at by the last Court of fact, being the first appellate

court. In a case where from a given set of circumstances two inferences are possible, one drawn

by the lower appellate court is binding on the High

Court in second appeal. Adopting any other approach

is not permissible. The High Court cannot

substitute its opinion for the opinion of the first

appellate court unless it is found that the conclusions drawn by the lower appellate court were erroneous being contrary to the mandatory provisions

of law applicable or its settled position on the basis of pronouncements made by the Apex Court, or was based upon inadmissible evidence or arrived at without evidence.

the lower Tribunals are found to be legal, proper

and reasonable. The reasoning adopted by the Tribunal is also found to be based upon factual

evidence and there is no perversity at all in the said conclusion drawn by the said authority.

-- 9 --

In view of this situation, we have no hesitation to hold that the order passed by the Tribunal does not suffer from any irregularity or illegality and has to be maintained as it is legal

and proper.

stands dismissed with no order as to costs.

P. P. P. V. KAKADE, J.

P. P. P. V. HARDAS, J.

sl.