Allahabad H.C : Whether, in law and in the circumstances of the case, the Tribunal was justified in holding that the item as mentioned in annexure BM-67 seized at the time of search and seizure operation was the same as appearing in the assessee’s valuation report of May, 1980, and, as such, it stood explained, and whether it is not a case of miscarriage of justice and drawing wrong conclusions from the given facts ?

R. K. GULATI, J.:

These two reference applications under s. 256(2) of the IT Act, 1961, pertaining to the assessment year 1982-83 have been filed at the instance of the Revenue. In each of these two applications, the applicant has desired that the Tribunal may be directed to refer the following two common questions to be questions of law for the opinion of this Court :

” 1. Whether, in law and in the circumstances of the case, the Tribunal was justified in holding that the item as mentioned in annexure BM-67 seized at the time of search and seizure operation was the same as appearing in the assessee’s valuation report of May, 1980, and, as such, it stood explained, and whether it is not a case of miscarriage of justice and drawing wrong conclusions from the given facts ?

2. Whether, in law and in the circumstances of the case, the Tribunal was justified in deleting the entire addition of Rs. 5 lakhs made by the ITO to the income of the assessee as unexplained investment under s. 69A of the IT Act, 1961 ?”

2. As common questions have been raised, we propose to deal with them by a common order. Briefly stated, the facts are these : The assessee-respondent is an HUF and is assessed to tax under the name “B. M. Kanodia”. It appears that in a search conducted by the officials of the IT Department at the residential premises of the assessee and that of the bigger HUF, certain items of jewellery were seized as per annexure BM-67 to the panchnama drawn in the name of B. M. Kanodia. During the assessment proceedings for the year in question, the ITO felt satisfied that the assessee was able to reconcile all items of jewellery except two items, vide its valuation report dated May 29, 1980, as on December 31, 1978. Out of these two items, one was a diamond ring valued at Rs. 5 lakhs by the Departmental valuer. The case of the assessee was that the diamond ring found and seized during the search was one and the same item which found mention in its valuation report dated May 29, 1980 and was valued at the relevant time at Rs. 1 lakh. However, the ITO did not agree with the assessee and he brought to tax the amount of Rs. 5 lakhs under the head “Unexplained investment” under s. 69A of the IT Act.

In appeal, the CIT (Appeals) granted partial relief to the assessee by substituting the valuation at Rs. 2,62,500 for Rs. 5 lakhs adopted by the ITO. Feeling still aggrieved, the assessee preferred a further appeal to the Tribunal. The Department also felt aggrieved against the appellate order which allowed the relief of Rs. 2,37,000 to the assessee, and it also filed a cross-appeal to the Tribunal. Both the appeals were decided by a common order. The appeal filed by the Department was dismissed and that of the assessee was allowed. The applications under s. 256(1) for a reference to this Court were also rejected by the Tribunal. Feeling aggrieved, the Revenue has come up in these two applications.

We have carefully gone through the records of the case and, after hearing learned counsel for the parties, we are of the opinion that the questions sought to be referred are not questions of law but are pure questions of fact.

As it is apparent from the questions themselves, the sole controversy is whether the diamond ring seized at the time of the search was the same as appearing in the assessee’s valuation report of May, 1980, and as such, it stood explained. In support of respective claims, reliance was placed on valuation reports, two filed on behalf of the Revenue and two filed by the assessee. The addition came to be made because of the Government valuer’s report which was at variance with the assessee’s valuation report dated May 29, 1980, both in respect of value and weight of the diamond in dispute. The Tribunal, before reaching its conclusion, took note of all the valuation reports that were filed before it and other attending circumstances to which reference was made by the assessee. The Tribunal noticed that the two Government Valuers had given different versions and their reports did not agree with each other, both in regard to value and weight. The first Government Valuer’s report gave the value as Rs, 5 lakhs. On a fresh reference to another Government Valuer, the ring was valued at Rs. 2,62,500. The Tribunal also found that the difference in weight when compared with the assessee’s report dated May 29, 1980, was very marginal which was 1.1 gram only. The Government valuers, the Tribunal noted, adopted the weight of the diamond by estimate without separating the diamond from the metal. This, in the opinion of the Tribunal, explained the discrepancy in weight because, in these circumstances, the reports of the valuers could not be accurate and exact, and the possibility in difference of weight could not be ruled out. Another finding recorded by the Tribunal was that once the difference in weight was ignored there was no other material worth relying on brought on record by the Revenue to suggest that the ring seized during search was different from the one which the assessee possessed way back in 1978 and the value of which was assessed to wealth-tax in the asst. yrs. 1977-78 and onwards.

The Tribunal also noticed that another addition under s. 69A made in identical circumstances with regard to diamond ear tops was deleted by the first appellate authority against which no further appeal was filed by the Revenue, and there was no justification for the said authority to take a different view, with regard to the disputed ring, in similar circumstances. Further, there was no evidence placed on record that the ring which the assessee admittedly possessed in the past years and the value of which was assessed in wealth-tax assessments was sold or disposed of in any manner. On a consideration of all these aspects, the Tribunal preferred to accept the assessee’s case in preference to the evidence-produced by the Revenue in the shape of two Government Valuers’ reports.

For the Revenue, it was canvassed that the conclusions drawn by the Tribunal are not sustainable and in these circumstances, the questions sought in these applications deserve a reference to this Court and, therefore, the Tribunal’s order gives rise to questions of law. We do not agree with the submission advanced on behalf of the Revenue. Where the determination of an issue depends upon the appreciation of evidence or material resulting in ascertaining of basic facts without application of any principle of law, the issue raises a mere question of fact. In such matters, the Tribunal is the final authority on facts. The findings of fact are open to question only if the same are not supported by any legal evidence or material or the conclusions of fact drawn by the Tribunal are perverse and are not rationally possible.

8. In Sree Meenakshi Mills Ltd. vs. CIT (1957) 31 ITR 28, the Supreme Court pointed out that when the finding is one of fact, the fact that it is itself an inference from other basic facts will not alter its character as one of fact. It was observed (at page 41 ) : “It has consistently been held that inferences from facts may themselves be inferences of fact and not of law, and that such inferences are not open to review by the Court.”

9. In our opinion, the conclusions reached by the Tribunal in the instant case are based on appreciation of evidence. It is not possible for us to say that the conclusions which appealed to the Tribunal were not plausible on the evidence and the circumstances that were placed before it. That being so, in our opinion, the order of the Tribunal does not give rise to any question of law. There is, thus, no merit in these applications and the same are, accordingly, rejected with costs, which we assess as one set at Rs. 200.

[Citation : 185 ITR 333]