MAHABIR INDUSTRIES Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee, the following two questions have been referred under S. 256(1) of the INCOME TAX ACT, 1961, for opinion of this Court :

(2.) THE questions relate to the assessee's asst. year 1985 -86. For the said assessment year, the assessee claimed deduction under r. 6DD(j) of the IT Rules, 1962 (for short, "the Rules"). The case of the assessee, inter alia, is that it made payment in cash for repair of truck, etc., to Sharma Enterprises, A.T. Road, Guwahati, on different dates amounting to Rs. 61,200. The assessee claimed deduction of the said amount under r. 6DD(j) of the Rules. Before the ITO, the assessee stated that the repairing works, etc., of major items were undertaken by Sharma Enterprises, A.T. Road, Guwahati, in whose workshop the assessee was a regular customer. The ITO disallowed the claim on the grounds that the workshop was located in the heart of the city at Guwahati and on 16th March, 1985, and 30th March, 1985, payments were made by the assessee by cheques and that most of the bills did not contain proper letter head and, therefore, in respect of such payment, S. 40A(3) would come into play. He also noted that r. 6DD(j) would not apply. The assessee took up the matter before the CIT(A) contending that the confirmatory letters from Sharma Enterprises given on 3rd Jan., 1989, would show that it insisted on cash payment and, therefore, the payment was so made. The assessee further contended that the identity of the party, genuineness of transaction as well as factual circumstances had been established and, therefore, no disallowance ought to have been made. However, the CIT(A) affirmed the order of the ITO and sustained disallowances. While affirming the order passed by the ITO, the CIT(A) held that the assessee had been able to establish the identity of the party and genuineness of payments, but the assessee had failed to establish the exceptional and unavoidable circumstances under which payment had to be made in cash exceeding Rs. 2,500, that there was a wide gap between the date of raising the bill and the date of payment by the assessee and that it was not the case of the assessee that there had seen urgency for which payment had to be made in cash nor was it the case of the assessee that both the parties did not have bank accounts. As regards the confirmatory letter from Sharma Enterprises, the CIT(A) held that it could not be admitted within the meaning of r. 46A of the Rules. The assessee being aggrieved further took up the matter before the Tribunal, Guwahati. The Tribunal, after hearing the parties, passed order holding that the claim of the assessee could not be accepted. Thereafter, the assessee submitted an application under S. 256(1) of the INCOME TAX ACT, 1961 (for short, "the Act"), for referring the following two questions for opinion of this Court :

(3.) DR . Saraf submitted that the finding regarding existence of exceptional and unavoidable circumstances by the Tribunal was a question of fact and this Court in exercise of the power under s. 256(1) might not answer such question of fact. Dr. Saraf further submitted that if the challenge was against the finding of the Tribunal on the basis that it was unjustified or perverse or not based on reasonably acceptable evidence, that could be the subject -matter of a reference and in the absence of such challenge the finding of fact by the Tribunal was binding on the High Court. In support of his submission, Dr. Saraf relied on the following two decisions : P.C. Sharma & Sons vs. CIT (1979) 116 ITR 758 (Cal); CIT vs. Bijoy Kumar Pandya (1993) 115 CTR (Gau) 380 : (1993) 200 ITR 667 (Gau) Mr. Bhattacharjee, on the other hand, submitted that always the findings arrived at by the Tribunal regarding existence of exceptional and unavoidable circumstances might not be findings of fact. If the conclusion was arrived at by the Tribunal without looking to the relevant provisions of law, rules or circulars issued by the authorities which were binding on the IT authorities, then it would not remain a question of fact and it would, definitely, be a question of law. In support of his submission, Mr. Bhattacharjee relied on the following decisions : CIT vs. Scindia Steam Navigation Co. Ltd. (1961) 42 ITR 589 (SC) CIT vs. Indian Molasses Co. P. Ltd. (1970) 78 ITR 474 (SC)