COMMISSIONER OF INCOME TAX Vs. MOGHUL DURBAR

JUDGEMENT

(1.) On the Tribunal refusing to state the case, the Revenue in this petition, under s. 256(2) of the IT Act, 1961, seeks the following three questions of law referred for the opinion of this Court :

(2.) The facts necessary for appreciating whether these questions arise out of the order of the Tribunal are as follows : The assessee is a partnership firm of three brothers under a partnership deed dt. 29th Dec., 1979. It ran a non-vegetarian restaurant by name "Moghul Durbar" from 23/05/1980, during the previous year ending 31/03/1981, relevant to the asst. yr. 1981-82 which was the first year of its business. For that assessment year, the assessee returned an income of Rs. 68,574 by its return dt. 28th Aug., 1981. The ITO, by his order dt. 18/07/1984, assessed the assessee-firm determining its total income as Rs. 5,17,690 which included income of Rs. 2,00,000 from other sources in the shape of short-term deposits in the names of four persons, namely : Rs.1. Sunder G. Chellani 50,000 2. Hassan Ali 50,000 3 Smt. Sakina Kaka 50,000 4. Smt. Izzat Khanum 50,000

(3.) On appeal, the CIT(A)-I, Hyderabad, sustained the addition of Rs. 1,50,000 and deleted that relating to Smt. Izzat Khanum. On further appeal by the assessee to the Tribunal, the Tribunal held that there was no justification for treating even that amount of Rs. 1,50,000 to be the income of the assessee. The Tribunal found that each of these persons, i.e., Sunder G. Chellani, Hassan Ali and Smt. Sakina Kaka, had taken fixed deposits of Rs. 50,000 on 13th Feb., 1981, from the State Bank of Hyderabad and that the said fixed deposits were initially for 45 days and subsequently renewed for a period of 36 months w.e.f. 28/03/1981. They pledged their fixed deposits in order to enable the assessee to have an overdraft facility. The Tribunal observed that these persons were identified and they had permanent addresses and that they were also examined by the ITO and that their sworn statements were also taken. The assessee filed a letter from the manager of the bank wherein it was stated that the fixed deposits were taken by four persons named therein and that at their request the fixed deposits were paid prematurely and that the proceeds were credited in the overdraft account of the assessee. It is their case that they were repaid the amounts subsequently. The Tribunal observed that Smt. Sakina Kaka was the wife of Mr. Rasool, one of the partners of the assessee-firm, and that Sri Hasan Ali and Sunder G. Chellani were outsiders unconnected with any of the partners of the assessee-firm. After consideration of the material on record, the Tribunal found that there was no reason why they should be disbelieved when they gave statements on oath even though their statements in general gave an impression that they did not disclose their own source of investments to a certain extent by clinching evidence. The Tribunal finally held that there was no reason to disbelieve that the amount deposited in fixed deposits in the names of Sri Sunder G. Chellani and Sri Hasan Ali did not belong to them but belonged to the assessee as held by the ITO. As regards the fixed deposit made by Smt. Sakina Kaka, the Tribunal held that her explanation was plausible and could not be termed as false or unnatural and that her claim from the beginning was that she purchased the fixed deposit with the monies of her father and that she was repaid the entire amount subsequently by her husband. The Tribunal also observed that according to the submissions before the CIT(A), the creditors were all paid from out of the withdrawals made by the partners in the accounting year ending with 31/03/1984. Even the CIT(A) only held :