MISC. APPEAL No.189 OF 2003 ***** Against the order dated 17.12.2002, passed by the Income Tax Appellate Tribunal, Patna Bench, Patna in ITA No.2/Pat/2002 for Assessment year 1998-99 confirming the appellate order dated 19.11.2001 in ITA No.13/P/A-II/2001-02 of CIT(A). ***** Pradip Kumar Saravgi, S/o Mahabir Pd. Saraogi, M/s Kalaniketan, Old GT Road, Dehri-on-Sone. ...Assessee- Appellant. Versus 1. The Commissioner of Income-tax-I, Patna. 2. The Asstt. Commissioner of Income-tax, Circle- 2(1), Patna. 3. The Income Tax Officer, Ward-2, Sasharam (Present A.O.) ...Assessing Officer- Respondents. ***** For the Appellant: Mr. Pankaj, Advocate & Mr. Vikash Jain, Advocate. For the Respondents: Mr. Harshwardhan Prasad,SSC. With Mr. Rishi Raj Sinha,J.S.C. ****** P R E S E N T THE HON'BLE MR. JUSTICE SUDHIR KUMAR KATRIAR THE HON'BLE MR. JUSTICE JYOTI SARAN ***** S K Katriar & J. Saran, JJ. The assessee (the appellant herein) has preferred this appeal under Section 260A of the Income Tax Act 1961 (hereinafter referred to as the „Act‟), and is directed against the order dated 17.12.2002, passed by the Income Tax Appellate Tribunal, Patna Bench, at Patna, in ITA No.2/Patna/2002, whereby the assessee‟s appeal in terms of Section 246A of the Act has been rejected, and the orders of the learned Assessing Officer 2 and the appellate authority have been upheld. This case is concluded by concurrent findings of fact and relates to assessment year 1998-99. 2. The assessee is engaged in the business of textiles products and is engaged in retail business at Dehri-On-Sone, district Rohtas at Sasaram. It submitted its returns for the assessment year 1998-99, and decision was taken for detailed scrutiny of the same. Therefore, notice in terms of section 143 (2) was issued to the assessee. The learned Deputy Commissioner of Income Tax, being the Assessing Officer, recorded three transactions of purchase relevant in the present context. He found that the three payments made to Aditi Synthetics, Bhilwara (Rajsthan), by three different demand drafts were really not paid for the purchases made by the assessee from Aditi Synthetics. The learned Assessing Officer, therefore, concluded the same to be income escaping assessment and has, therefore, added it to the total income of the assessee totalling Rs.2,10,101/-. The assessment order was passed in terms of section 143 (2) of the Act. 2.1) The second transaction under consideration was purchase made from one M/S Woolen House. The accounts submitted by the assessee had shown a balance sum of Rs.54,993/- 3 against Woolen House, whereas the account sent by M/s Woolen House had shown Rs.42,990/-. The learned Assessing Officer, therefore, concluded that the assessee has shown Rs.12,003/- as excess credit standing in the name of M/s Woolen House and, therefore, treated the differential amount as unexplained and added the same to the total income of the assessee. 2.3) The third transaction under consideration was purchase of textiles materials from M/s G.K. Synthetics and M/s. S.K. Bross. The learned Assessing Officer came to the conclusion that the assessee had understated the purchase from these two parties to the extent of Rs.11,835/-, and thereby payments made to them remained out of books. Therefore, the same amount i.e. Rs.11,835/-, added to the total income of the assessee. 3. Aggrieved by the order of assessment, the assessee preferred appeal before the learned Commissioner of Income Tax (appeals) in terms of Section 246A of the Act. By order dated 19.11.2001, the appeal was dismissed and the aforesaid findings of facts recorded by the learned Assessing Officer have been upheld. 4. Aggrieved by the order of the learned appellate authority, the assessee preferred appeal 4 before the Income Tax Appellate Tribunal in terms of Section 253 of the Act which has been rejected by order dated 17.12.2002, and the findings of facts recorded by the two authorities have been upheld. 5. This appeal was admitted by order dated 16.11.2006, and the following substantial question of law was formulated for consideration “Whether on the facts and in the circumstances of the appellant‟s case the Tribunal was justified in confirming the findings of CIT(A) with regard to addition of Rs.2,10.101/-, Rs.12,003/- and Rs.11,835/- by ignoring the evidence/material on record?” 6. While assailing the validity of the impugned order, learned counsel for the assessee submits that the three authorities have made a perfunctory scrutiny of the evidence on the first issue, and has erroneously held that the said sum of Rs.2,10,101/- as income escaping assessment and has erroneously added the same to the income of the assessee. Learned counsel for the assessee has also assailed the validity of findings of facts with respect to the remaining two issues on identical grounds. 7. The learned Assistant Standing Counsel has supported the impugned order. He submits that the issues are concluded by consistent findings of facts of the three authorities and, therefore, it 5 is not open to this Court to reopen the issues of facts. He relies on the following judgments: (i) (2005) 2 SCC 324 ( M.Janardhana Rao Vs. Joint Commissioner of Income Tax. (ii) (2007) 291 ITR 278 (SC) (Commissioner of Income-Tax Vs. P. Mohanakala). (iii) (2008) 300 ITR 19 (P & H) (Shiv Rice and General Mills Vs. Commissioner of Income-Tax) 8. We have perused the materials on record and considered the submissions of learned counsel for the parties. We shall first take up the transaction with respect to Aditi Synthetics. The assessee claims to have purchased textile materials from M/s Aditi Synthetics on three occasions, and the consignment was for Rs.1,00,000/- each on two occasions, and the third was valued at Rs.10,101/-. In order to prove the payment to Aditi Synthetics made after nearly 14 months, the assessee placed before the learned Assessing Officer the bills raised by Aditi Synthetics, photo copies of which are at page 27- 30 of the paper-book. He also claims to have produced extracts of his own ledger before the assessing officer showing payment. He also claims to have produced a copy of the certificate (at page 31 of our paper book) dated 7.3.2001, issued by the Central Bank of India, Dehri On-Sone Branch, 6 and was produced on the same date which certified that the Bank had issued three demand drafts in favour of Aditi Synthetics. The certificate gave sufficient details of the three demand drafts. The assessee claims to have produced an identical certificate (at page 32 of our paper book), issued by the Central Bank of India, Dehri On-Sone Branch, dated 26.10.2002, and was perhaps placed before the leaned appellate authority. He has also produced the certificate issued by M/s Aditi Synthetics showing receipt of the three demand drafts and is at page 33 of our paper book. The learned assessing officer has come to the conclusion that the payments were really not made and were, therefore, treated to be undisclosed income and added to the assessee‟s income. 9. Supreme Court in M. Janardhana Rao Vs. Joint Commissioner of Income Tax (Supra), has held that the Supreme Court has considered the scope and sweep of Section 260 of the Act and has held that the High Court must make every effort to distinguish between a question of law and a substantial question of law. In exercise of powers under Section 260-A, the findings of fact of ITAT cannot be disturbed. Moreover, the right of appeal is neither a natural nor an inherent right attached to the litigation. Being a substantive 7 statutory right, it has to be regulated in accordance with law in force at the relevant time. Paragraphs 14 and 15 of the judgment are reproduced hereinbelow for the facility of quick reference: “14. Without insisting on the statement of substantial question of law in the memorandum of appeal and formulating the same at the time of admission, the High Court is not empowered to generally decide the appeal under Section 260-A without adhering to the procedure prescribed under Section 260-A. Further, the High Court must make every effort to distinguish between a question of law and a substantial question of law. In exercise of powers under Section 260-A, the findings of fact of the Tribunal cannot be disturbed. It has to be kept in mind that the right of appeal is neither a natural nor an inherent right attached to the litigation. Being a substantive statutory right, it has to be regulated in accordance with law in force at the relevant time. The conditions mentioned in Section 260-A must be strictly fulfilled before an appeal can be maintained under Section 260-A. Such appeal cannot be decided on merely equitable grounds.” “15. An appeal under Section 260-A can only be in respect of a “substantial question of law”. The expression “substantial question of law” has not been defined anywhere in the statute. But it has acquired a definite connotation through various judicial pronouncements. In Sir Chunilal V. Mehta & Sons Ltd. v. Century Spg. & Mfg. Co. Ltd1 this Court laid down the following tests to determine whether a substantial question of law is involved. The tests are: (1) whether directly or indirectly it affects substantial rights of the parties, or (2) the question is of general public importance, or (3) whether it is an open question in the 8 sense that the issue is not settled by pronouncement of this Court or Privy Council or by the Federal Court, or (4) the issue is not free from difficulty, and (5) it calls for a discussion for alternative view. There is no scope for interference by the High Court with a finding recorded when such finding could be treated to be a finding of fact.” It is thus evident that the powers of the High Court to interfere with the decisions of the Tribunal is extremely narrow and is confined to substantial questions of law. Their Lordships have clearly observed that the substantial question of law is not defined in the statute, but it has acquired a definite connotation by judgments of Courts. 10. The question which really in the facts and circumstances of the case comes to the fore that the authorities below have recorded unsatisfactory or perverse findings of facts is fit to be set aside by this Court, and whether or not the same constitutes a substantial question of law in contradistinction to mere question of law. In the peculiar facts and circumstances of the present case, the issues are not free from difficulties and we take the view for the reasons assigned hereinafter. In so far as the Bank certificate dated 7.3.2001 is concerned, the same could not have been taken into account by the learned Assessing Officer for the reason that he 9 has passed the order on the same day. The assessee had produced an identical certificate dated 26.10.2002, before the learned appellate authority and the reason is to be found in the order of the learned Commissioner of Income Tax. He has, however, refused to decide in favour of the assessee for the reason that the same read with the extracts of the assessee ledger do not constitute adequate evidence to conclude in his favour which, in our view, is a possible conclusion. In so far as the bills raised by the assessee and the acknowledgement of its letter head showing receipt of three demand drafts are concerned, no material on record show that these were placed before the authorities below. In such a situation, we feel bound to accept the findings of facts recorded by the learned Assessing Officer and the learned appellate authority. We must frankly acknowledge that the discussion of facts and the scrutiny of evidence by the three authorities, though consistent but not satisfactory, but then at the same time is not perverse. In such a situation, in view of the law enunciated by the Supreme Court in M. Janardhana Rao (supra), we conclude that the findings of facts recorded by the three authorities below is a possible conclusion in view of the materials 10 placed by the assessee, and surely does not constitute a question of law, let alone a substantial question of law. 11. In so far as the other two transactions with respect to M/S Woolen House and M/S G.K. Synthetics and M/s S.K. Bross. are concerned, we are of the same view as indicated hereinabove. 12. In the result, we do not find any merit in this appeal and is accordingly dismissed. In the facts and circumstances of the case, however, there shall be no order as to costs. (S K Katriar, J.) (Jyoti Saran, J.) Patna High Court, Patna. Dated the 26th day of August, 2009. S.K.Pathak/ (N.A.F.R.)