CIT vs Bharat Engineering & Construction Co.

1. The controversy in this appeal is whether a question of law arises from the order of the Tribunal. The Tribunal came to the conclusion that the cash credit entries totalling Rs 2,50,000/-brought to tax by the Income-tax Officer on the ground that they represented the income of the assessee-respondent from undisclosed sources was not correct It came to the conclusion that though the explanation given by the assessee in respect of those cash credit entires is not true, yet from the proved circumstances those cash credits could not be the income of the assessee. Aggrieved by the decision of the Tribunal, the Commissioner of Income-tax moved the Tribunal under Section 66(1) of the Indian Income-tax Act, 1922 to refer certain questions to the High Court for its opinion. The Tribunal rejected that application on the ground that its findings are findings of fact and that no question of law arose from them. Thereafter the assessee moved the High Court under Section 66(2). That application was rejected by the High Court. Against that decision this appeal has been brought by special leave.

2. The assessee company is an Engineering Construction Company. It commenced business in May 1943. In their account books, there are several cash credit entries in the first year of its business. We are concerned with only five of those cash credit entries On 1-6-43 there is a cash credit entry of Rs. 1,00,000/-. On 6-7-1943 there is a cash credit entry of Rs. 50,000/-. On 30-8-1943 there is a cash credit entry of Rs 50,000/-Oh 2-12 43 there is a cash credit entry of Rs. 15,000/-, and on 15-3-44 there is a cash credit entry of Rs. 35,000/-. These cash credit entries total up to Rs. 2,50,000/-. The Income-tax Officer called upon the assessee to explain those cash credit entries. The explanation given by the assessee was found to be false by the Income. tax Officer, the Appellate Assistant Commissioner and the Tribunal. But all the game the Tribunal felt that these cash credit entries could not represent the income or profits of the assessee company as they were all made very soon after the company commenced its activities. In our opinion, though the order of the Tribunal is not happily worded, its finding appears to be, that in the very nature of things the assessee could not have earned such a huge amount as profits very soon after it commenced its activities. A Construction Company takes time to earn profits. It could not have earned a profit of Rs. 1,00,000/-within a few days, after the commencement of its business. Hence it is reasonable to assume that those cash credit entries are capital receipts though (or one reason or other the assessee had not come out with the true story as regards the person from whom it got those amounts. It is true that in the absence of satisfactory explanation from the assessee the Income-tax Officer may assume that cash credit entries in its book represent income from undisclosed sources. But what inference should De drawn from the facts proved is a question of fact and the Tribunal's finding on that question is final.

3. The High Court after careful examination of the various findings reached by the Tribunal was come to the conclusion that the Tribunal's findings are findings of fact. We agree with that conclusion.

4. In the result this appeal fails and is dismissed-In the circumstances of the case, we make no order as to costs.