VIJAY KUMAR TALWARversusCOMMISSIONER OF INCOME TAX, DELHI

               [2010] 14 (ADDL.) S.C.R. 499


                   VIJAY KUMAR TALWAR                               A
                               v.
        COMMISSIONER OF INCOME TAX, DELHI
          (Civil Appeal Nos.3265-3266 of 2003)
                    DECEMBER 6, 2010
                                                                    B
            [D.K. JAIN AND T.S. THAKUR, JJ.]

    Income Tax Act, 1961:

    s. 68 - Presumption under - Non-satisfactory explanation        c
by assessee about the nature and source of the cash receipts
credited in his account books - Held: Presumption u/s. 68 is
to be drawn against him - The sum found credited in the books
of assessee for the previous year, to be charged to tax as
income of assessee of that previous year since no satisfactory D
explanation was offered by him - The conclusion of the
Tribunal to the effect that the assessee has failed to prove the
source of the cash credits cannot be said to be perverse,
giving rise to a substantial question of law.

     s. 260A - Substantial question of law - Formulation of -       E
Held: Appeal to the High Court from the decision of the
Tribunal lies only when a substantial question of law is involved
- If the High Court comes to the conclusion that there is a
substantial question of law in the case, it is mandatory on its
part to formulate such question.                                    F

     One partnership firm was dissolved on 1.4.1982. The
assessee took over the business of the dissolved
(erstwhile) firm on 21.10.1982. On 27.5.1983, a search took
place in the premises of the assessee and certain records G
were seized. The seized accounts of the assessee
revealed cash receipts of Rs.3.49 lacs in the names of 15
persons purportedly received during the period April 1982
to October 1982. The assessee gave explanation that the
                              499                                   H
    500    SUPREME COURT REPORTS [2010] 14 (ADDL.) S.C.R.


A cash receipts of Rs.3.49 lacs were realizations from the
  past debtors of the erstwhile firm. The assessee,
  however, could not produce proof to substantiate the
  said stand. The assessee was given several opportunities
  to file confirmations of 15 persons in whose names cash
B credit entries appeared in the register. The assessee
  ultimately filed 7 confirmations with the addresses of 6
  other parties, but the enquiry letters sent by the
  Assessing Officer to them remained unserved,
  unanswered or denied. By assessment order, the
c Assessing Officer added Rs.3.49 lacs as assessee's
  income under the head "unexplained cash receipts". The
  assessee unsuccessfully appealed before the Tribunal.
  The High Court dismissed the second appeal on the
  ground that no substantial question of law was involved
  in the case. Aggrieved, the assessee filed the instant
0
  appeals.

          Dismissing the appeals, the Court
       HELD: 1.1. It is manifest from a bare reading of the
E Section 260A of the Income Tax Act, 1961 that an appeal
  to the High Court from a decision of the Tribunal lies only
  when a substantial question of law is involved, and
  wtlere the High Court comes to the conclusion that a
  substantial question of law arises from the said order, it
F is mandatory that such question(s) must be formulated.
  The expression "substantial question of law" is not
  defined in the Act. Nevertheless, it has acquired a definite
  connotation through various judicial pronouncements. A
  finding of fact may give rise to a substantial question of
  law, inter alia, in the event t'1e findings are based on no
G evidence and/or while arriving at the said finding, relevant
  admissible evidence has not been taken into
  consideration or inadmissible evidence has been taken
  into consideration or legal principles have not been

H
  VIJAY KUMAR TALWAR v. COMMISSIONER OF                501
            INCOME TAX, DELHI
applied in appreciating the evidence, or when the             A
evidence has been misread. [Paras 18, 21] [509-C-E; 511-
B-C]
     Sir Chunilal v. Mehta & Sons, Ltd. v. Century Spinning
and Manufacturing Co. Ltd. AIR 1962 SC 1314 Santosh
Hazari v. Purushottam Tiwari (2001) 3 SCC 179; Hero Vinoth    B
(Minor) v. Seshamma/ 2006) 5 SCC 545; Madan Lal v. Mst.
Gopi & Anr. (1980) 4 SCC 255; Narendra Gopal Vidyarthi v.
Rajat Vidyarthi (2009) 3 SCC 287; Commissioner of
Customs (Preventive) v. Vijay Oasharath Patel (2007) 4 SCC
118; Metroark Ltd. v. Commissioner of Central Excise,         C
Calcutta (2004) 12 SCC 505; West Bengal Electricity
Regulatory Commission v. CESC Ltd. (2002) 8 SCC 715 -
relied on.
     1.2. In the instant case, the High Court has correctly D
concluded that no substantial question of law has arisen
from the order of the T;ibunal. Alf the authorities below,
in particular, the Tribunal, have observed in unison that
the assessee did not produce any evidence to rebut the
presumption drawn against him under Section 68 of the E
Act, by producing the parties in whose names the
amounts in question were credited by the assessee in his
books of account. In the absence of any cogent
evidence, a bald explanation furnished by the assessee
about the source of the credits in question, viz.,
                                                             F
realisation from the debtors of the erstwhile firm, in the
opinion of the assessing officer, was not satisfactory. It
is well settled that in view of Section 68 of the Act, where
any sum is found credited in the books of the assessee
for any previous year, the same may be charged to
income tax as the income of the assessee of that previous G
year, if the explanation offered by the assessee about the
nature and source thereof is, in the opinion of the
assessing officer, not satisfactory. On a conspectus of
the factual scenario, the conclusion of the Tribunal to the
effect that the assessee has failed to prove the source of H
    502    SUPREME COURT REPORTS (2010] 14 (ADDL.) S.C.R.


A the cash credits cannot be said to be perverse for giving
  rise to a substantial question of law. The Tribunal being
  a final fact finding authority, in the absence of
  demonstrated perversity in its finding, interference
  therewith by this Court is not warranted. [Para 22) [511-
B E-G; 512-A-D]
        Sumati Dayal v. Commissioner of Income Tax,
    Bangalore 1995 Supp (2) SCC 453; Commissioner o/
    Income Tax v. P. Mohanakala (2007) 6 SCC 21 - relied on.
c                       Case Law Reference:
          AIR 1962 SC 1314          relied on         Para 18
          (2001) 3 sec 119          relied on         Para 19

D         (2006) 5 sec 545          relied on         Para 20
          (1980) 4 sec 255          relied on         Para 21
          (2009) 3 sec 287          relied on         Para 21
          (2007) 4 sec 118          relied on         Para 21
E
          (2004) 12 sec 505         relied on         Para 21
          (2002) 8 sec 115          relied on         Para 21
          1995 Supp (2) sec 453     relied on         Para 22
F         (2001) 6 sec 21           relied on         Para 22
        CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    3265-3266 of 2003.
      From the Judgment & Order dated 21.12.2001 and
G 19.02.2002 of the High Court of Delhi at New Delhi in LT.A. No.
  202 of 2001 and RA No. 10 of 2002 in ITA No. 66 of 2001.

        K.R. Manjani, Pankaj Kumar Singh, Dr. Vinod Tewari, K.L.
    Janjani for the Appellant.
H
   VIJAY KUMAR TALWAR v. COMMISSIONER OF                     503
             INCOME TAX, DELHI
    R.P. Bhatt, H.R. Rao, Prateek Jalan, Vikas Malhotra, B.V.       A
Balaram Das for the Respondent.

    The Judgment of the Court was delivered by

      D.K. JAIN, J. 1. Challenge in these two appeals, by special
leave, is to the orders dated 21st December, 2001 and 19th          B
February, 2002 whereby the High Court of Delhi dismissed :
(i) the appeal filed by the appellant herein under Section 260-
A of the Income Tax Act, 1961 (for short "the Act") in l.T.A.
No.202 of 2001, holding that the order of the Income Tax
Appellate Tribunal, New Delhi (for short "the Tribunal") did not    C
give rise to any substantial question of law; and (ii) the review
petition preferred by the appellant against order dated 21st
December, 2001, holding that the petition was not maintainable.

    2. Shorn of unnecessary details, the facts material for         D
adjudication of the present appeals may be stated. These are:

     The appellant (hereinafter referred to as "the assessee")
was a partner in a firm, named and styled as M/s Des Raj Tilak
Raj, having its business at Delhi, with a branch at Calcutta. The
said partnership firm was dissolved w.e.f. 1st April 1982. As       E
per the dissolution deed, the assessee took over the business
of the Calcutta branch of the erstwhile firm. Thereafter, from
21st October, 1982, the assessee started a proprietary concern
by the name of Mis Des Raj Vijay Kumar.
                                                                    F
      3. On 27th May, 1983, a search took place at the
assessee's premises during which certain incriminating
documents were recovered and seized. During the course of
assessment proceedings for the assessment year 1983-1984,
for which the previous year ended on 31st March 1983, the           G
assessing officer examined the seized record. One of the
registers so examined, revealed cash receipts of Rs.3,49,991/
- in the name of 15 persons, most of which were purportedly
received during the period of April, 1982 to October, 1982.
When the assessing officer sought an explanation from the
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    504    SUPREME COURT REPORTS (2010] 14 (ADDL.) S.C.R.

A assessee with regard to the said cash credits in the register,
  the assessee merely stated that the cash receipts were in the
  nature of realisations from the past debtors of the erstwhile firm.
  In order to appreciate the said stand, the assessing officer
  called for the account books of the Calcutta branch of the
8 erstwhile firm for the relevant period, but the assessee failed
  to produce them. The assessing officer also examined the
  assessee's brother, a partner in the erstwhile firm, who also
  stated that the account books were not available.

       4. Having noted that the outstanding realisations of the
C Calcutta branch in the preceding years varied from Rs.25,000/
  - to Rs.30,000/-, the assessing officer held that the assessee's
  submission that cash receipts of Rs.3,49,991/- related to earlier
  years was untenable. Therefore, vide order dated 20th
  February, 1986, the assessing officer added a sum of
D Rs.3,49,991/- as assessee's income under the head
  "unexplained cash receipts."

       5. Aggrieved, the assessee appealed to the
  Commissioner of Income Tax, (Appeals)-XV, New Delhi, who
E vide his order dated 6th December 1989, dismissed the same
  and confirmed the addition made by the assessing· officer.

         6. Being still aggrieved, the assessee carried the matter
    in appeal before the Tribunal. Vide .order dated 27th
    September, 1994, the Tribunal, while partly allowing the appeal,
F   remitted the matter back to the assessing officer for de-novo
    adjudication. The Tribunal observed that:

          "We find that some of the entries pertained to the period
          when the erstwhile firm was in existence whereas the
G         assessee did not conduct business at Calcutta in a
          proprietary capacity but was only a partner in the erstwhile
          firm. The A.O. himself observed in the assessment order
          that the cash receipts are from April 1982 to October,
          1982 i.e. prior to the start of the assessee's proprietary
H
   VIJAY KUMAR TALWAR v. COMMISSIONER OF                            505
        INCOME TAX, DELHI [D.K. JAIN, J.]
    business in the name of M/s Desraj Vijay Kumar. As                      A
    against this, we find that some of the entries are dated
    prior to April, 1982 when the erstwhile firm was in
    existence. Then again, it is not known as to what happened
    to the income between the period 1.4.1982 to October,
    1982 as the erstwhile firm is supposed to have been                     B
    dissolved w.e.f 1.4.1982 and as per the assessee's
    version the proprietary business was started from October
    1982. There is no information made available to us as to
    whether the Department initiated any action u/s 148 to
    subject the cash receipts aggregating Rs.3,49,991/- in the              c
    hands of the erstwhile firm ....................................... .

    11. In view of the aforesaid discussion, we although taking
    the view that the onus on the facts and circumstances of
    the case squarely lies on the assessee, hold that the
    material has to be re-considered in light of the afore-said             D
    observations ..... "

     7. Pursuant thereto, on 17th May, 1995, the assessing
officer asked the assessee to file confirmations of the 15
parties, in whose names cash credit entries appeared in the                 E
register seized during the search. In his reply dated 22nd May,
1995, the assessee stated that the said cash receipts were
realisations of the sales effected in the earlier years by the
erstwhile firm. Subsequently, the assessee was given three
more opportunities on 2nd June 1995, 16th June, 1995, and                   F
3rd July, 1995 to produce fresh evidence, which were not
availed of by him. Vide letter dated 28th July, 1995, the
assessee was given a final opportunity to file confirmations of
the 15 parties, with their complete addresses. In his reply, the
assessee filed the confirmations of 7 parties, with the address             G
of 6 other parties. The assessing officer considered the two
remaining parties as non-existent. It is pertinent to note that all
the seven confirmations filed by the assessee were identical,
and did not contain either a date or the GIR No. of the confirming
party; and merely stated that the concerned party had dealings
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    506    SUPREME COURT REPORTS [2010] 14 (ADDL.) S.C.R.


A   with the erstwhile firm, and it had made purchases from them
    in the year ending 31st March, 1982 and had made payments
    prior to October, 1982; and since the matter was really old, the
    books of accounts of the firm were not available.

       8. When the assessing officer sent letters to the six parties,
8
  whose addresses had been supplied, three did not respond,
  while two others denied any relationship with the firm, and
  remaining one letter was returned by the post office with
  remarks "not known." Similarly, when letters were sent to
C parties who had filed confirmations, three of those letters were
  returned by the post office marked "not known.", and another
  one as "no claims." One of the parties denied any relationship
  with the firm. In light of these circumstances, the assessing
  officer, vide order dated 19th March, 1996, confirmed the
  original assessment.
D
        9. The assessee preferred an appeal before the
    Commissioner of Income Tax, (Appeals)-111, which was
    dismissed vide order dated 16th December, 1998: The
    Commissioner observed that:
E
          "The contention of the appellant is apparently
          unacceptable. Any business realisations of the partnership
          would have been shared by the erstwhile partners. The
          cash receipts of Rs.3,49,991/- as per the seized material
          is, therefore, held to belong to the appellant and
F         assessable as unexplained receipts in the hands of the
          appellant. The assessment of appellant's income including
          the aforesaid receipt is, therefore, confirmed and the
          appeal is dismissed."

G        10. Still not being satisfied, the assessee carried the matter
    in appeal before the Tribunal. The Tribunal, vide order dated
    23rd October, 2000, while partly allowing the appeal, held that
    the addition of Rs. 3,49,991/- was correct. It observed that:

          "We are also of the opinion that the confirmations filed by
H
     VIJAY KUMAR TALWAR v. COMMISSIONER OF                        507
          INCOME TAX, DELHI [D.K. JAIN, J.]
      the appellant are of no use because they have not been              A
      co-related with the transactions alleged to have been found
      entered in the register seized during the time of search if
      it represents the realization of outstanding amount on
      sales, this could have been proved with the cross
      reference to the entries in the register. We cannot ignore          s
      the fact that the enquiry letters sent by the A.O. remained
      unserved, unanswered and denial."

         11. On 22nd February, 2001, the assessee moved an
   application under Section 254(2) of the Act before the Tribunal
   for rectification of mistakes in the order of the Tribunal dated       C
   23rd October, 2000. It was pleaded that the Tribunal had erred
   in observing that the assessee's premises were raided due to
   heavy sales, and that cash amounting to Rs.3,49,991/- was
   seized; that the assessing officer had issued ITNS 150, which
   the assessee had filed before the Commissioner (Appeals);              D
   and that the Tribunal did not take into consideration the
   arguments and various judgments relied on by the assessee.
   Vide order dated 25th September, 2001, the Tribunal rejected
   the rectification petition on the ground that:- (i) the Tribunal had
   relied on the assessing officer's order in relation to the factual     E
   position, and there was no reason to interfere with the same;
   (ii) While it was true that cash amounting to Rs.3,49,991/- was
   not recovered, but the said amount was entered in the_ register
   which was recovered; and therefore, this would not affect the
· findings of the Tribunal; (iii) the remarks in relation to ITNS 150     F
   were not made by the Tribunal, but by the department's
   representative and (iv) re-considering the judgments relied on,
   and the arguments made, would tantamount to a review, which
   power the Tribunal is not authorised to exercise under Section
 . 254(2) of the_ Act.                                                    G

       12. The assessee preferred an appeal before the High
· Court under Section 260-A of the Act. As already stated, the
  Hig.h Court, vide judgment dated 21st December 2001,
  dismissed the appeal of the assessee, observing that:
                                                                          H
    508     SUPREME COURT REPORTS (2010) 14 (ADDL.) S.C.R.


A         "To us it appears that the findings recorded by the
          Commissioner of Income Tax as also the Income Tax
          Appellate Tribunal are pure findings of fact. Appreciation
          of evidence does not fall within the realm of this Court's
          jurisdiction under section 260-A of the Income Tax
B         Act. ................................................................ .

          Having regard to the fact and circumstances of this case
          we are, therefore, of the opinion that no question of law
          far less any substantial question of law arises for
          consideration in this appeal."
c
         13. Thereafter, the assessee filed a review petition before
    the High Court, which was also dismissed vide order dated 19th
    February, 2002.

0         14. Hence, the present appeals.

       15. Mr. K.R. Manjani, learned counsel appearing on behalf
  of the assessee, assailed the impugned orders on the ground
  that since the Tribunal had taken into consideration irrelevant
  materials, its findings were perverse and, therefore, the High
E Court has erred in holding that there was no substantial
  question of law involved.

         16. Per contra, Mr. R.P. Bhatt, learned senior counsel
    appearing on behalf of the Revenue supported the view taken
F   by the High Court and asserted that the impugned orders
    deserve to be affirmed.

         17. Before adverting to the rival submissions, it would be
    expedient to refer to Section 260-A of the Act. The provisions,
    relevant for our purpose, read thus:
G
          "(1) An appeal shall lie to the High Court from every order
          passed in appeal by the Appellate Tribunal, if the High
          Court is satisfied that the case involves a substantial
          question of law ....................................... .
H
     VIJAY KUMAR TALWAR v. COMMISSIONER OF                       509
          INCOME TAX, DELHI [D.K. JAIN, J.]
                                                                         A
      (3) Where the High Court is satisfied that a substantial
      question of law is involved in any case, it shall formulate
      that question ............................................ .
                                                                         B

      (7) Save as otherwise provided in this Act, the provisions
      of the Code of Civil Procedure, 1908 (5 of 1908), relating
      to appeals to the High Court shall, as far as may be, apply
      in the case of appeals under this section."                        C

     18. It is manifest from a bare reading of the Section that
an appeal to the High Court from a decision of the Tribunal lies
only when a substantial question of law is involved, and where
the High Court comes to the conclusion that a substantial
                                                                 0
question of law arises from the said order, it is mandatory that
such question(s) must be formulated. The expression
"substantial question of law" is not defined in the Act.
Nevertheless, it has acquired a definite connotation through
various judicial pronouncements. In Sir Chuni/al V. Mehta &
Sons, Ltd. Vs. Century Spinning and Manufacturing Co. Ltd. 1, E
a Constitution Bench of this Court, while explaining the import
of the said expression, observed that:

      'The proper test for determining whether a question of law
      raised in the case is substantial would, in our opinion, be        F
      whether it is of general public importance or whether it
      directly and substantially affects the rights of the parties and
      if so whether it is either an open question in the sense that
      it is not finally settled by this Court or by the Privy Council
      or by the Federal Court or is not free from difficulty or calls    G
      for discussion of alternative views. If the question is settled
      by the highest Court or the general principles to be applied
      in determining the question are well settled and there is a
      mere question of applying those principles or that the plea
1.   AIR 1962 SC 1314.                                                   H
    510     SUPREME COURT REPORTS [2010] 14 (ADDL.) S.C.R.


A         raised is palpably absurd the question would not be a
          substantial question of law."

         19. Similarly, in Santosh Hazari Vs. Purushottam Tiwari2.
    a three judge Bench of this Court observed that:
B         "A point of law which admits of no two opinions may be a
          proposition of law but cannot be a substantial question of
          law. To be "substantial" a question of law must be
          debatable, not previously settled by law of the land or a
          binding precedent, and must have a material bearing on
c         the decision of the case, if answered either way, insofar
          as the rights of the parties before it are concerned. To be
          a question of law "involving in the case" there must be first
          a foundation for it laid in the pleadings and the question
          should emerge from the sustainable findings of fact arrived
D         at by court of facts and it must be necessary to decide that
          question of law for a just and proper decision of the case.
          An entirely new point raised for the first time before the
          High Court is not a question involved in the case unless it
          goes to the root of the matter. It will, therefore, depend on
E         the facts and circumstance of each case whether a
          question of law is a substantial one and involved in the
          case, or not; the paramount ov13rall consideration being the
          need for striking a judicious balance between the
          indispensable obligation to do justice at all stages and
F         impelling necessity of avoiding prolongation in the life of
          any lis."

        20. In Hero Vinoth (Minor) Vs. Seshamma/3, this Court
    has observed that:

G         'The general rule is that High Court will not interfere with
          the concurrent findings of the courts below. But it is not an
          absolute rule. Some of the well-recognised exceptions are
          where (1) the courts below have ignored material evidence
    2.   (2001) 3 sec 179.
H   3.   (2006) 5 sec 545.
     VIJAY KUMAR TALWAR v. COMMISSIONER OF                     511
          INCOME TAX, DELHI [D.K. JAIN, J.]
      or acted on no evidence; (it) the courts have drawn wrong       A
      inferences from proved facts by applying the law
      erroneously; or (iii) the courts have wrongly cast the burden
      of proof. When we refer to "decision based on no
      evidence", it not only refers to cases where there is a total
      dearth of evidence, but also refers to any case, where the      B
      evidence, taken as a whole, is not reasonably capable of
      supporting the finding."

     21. A finding of fact may give rise to a substantial question
of law, inter alia, in the event the findings are based on no
evidence and/or while arriving at the said finding, relevant C
admissible evidence has not been taken into consideration or
inadmissible evidence has been taken into consideration or
legal principles have not been applied in appreciating the
evidence, or when the evidence has been misread. (See:
Madan Lal Vs. Mst. Gopi & Anr. 4; Narendra Gopal Vidyarthi D
Vs. Rajat Vidyarthi5; Commissioner of Customs (Preventive)
Vs. Vijay Dasharath Patel6; Metroark Ltd. Vs. Commissioner
of Central Excise, Calcutta 7; West Bengal Electricity
Regulatory Commission Vs. CESC Ltd. 8 )
                                                                    E
     22. Examined on the touch-stone of the afore-noted legal
principles, we are of the opinion that in the instant case the High
Court has correctly concluded that no substantial question of
law arises from the order of the Tribunal. All the authorities
below, in particular the Tribunal, have observed in unison that F
the assessee did not produce any evidence to rebut the
presumption drawn against him under Section 68 of the Act,
by producing the parties in whose name the amounts in
question had been credited by the assessee in his books of
account. In the absence of any cogent evidence, a bald G
4. 51980) 4 sec 255.
5. (2009) 3 sec 281.
6.   c2001) 4 sec 118.
7. (2004) 12 sec 505.
8.   c2002) 8 sec 115.                                                H
    512     SUPREME COURT REPORTS [2010] 14 (ADDL.) S.C.R.


A   explanation furnished by the assessee about the source of the
    credits in question viz., realisation from the debtors of the
    erstwhile firm, in the opinion of the assessing officer, was not -
    satisfactory. It is well settled that in view of Section 68 of the
    Act, where any sum is found credited in the books of the
s   assessee for any previous year, the same may be charged to
    income tax as the income of the assessee of that previous year,
    if the explanation offered by the assessee about the nature and
    source thereof is, in the opinion of the assessing officer, not
    satisfactory. (See: Sumati Dayal Vs. Commissioner of Income
c   Tax, Bangalore 9 and Commissioner of Income Tax Vs. P.
    Mohanakala 10 ). We are of the opinion that on a conspectus of
    the factual scenario, noted above. the conclusion of the Tribunal
    to the effect that the assessee has failed to prove the source
    of the cash credits cannot be said to be perverse, giving rise
    to a substantial question of law. The Tribunal being a final fact
0
    finding authority, in the absence of demonstrated perversity in
    its finding, interference therewith by this Court is not warranted.

       23. For the foregoing reasons, we have no hesitation in
  holding that no question of law, much less any substantial
E question of law arises from the order of the Tribunal requiring
  consideration of the High Court. There is no merit in the
  appeals. Both the appeals are dismissed accordingly with
  costs, quantified at Rs.20,000/-.

    D.G.                                       Appeals dismissed.




    9.   1995 Supp (2) sec 453.
    10. (2007) a sec 21.