2001 PLP 545 (PTD)

Held, that the deletion of addition of Rs. two lakhs had been founded on the finding of fact that the promissory notes were executed somewhere‑in 1982 and the income represented by these promissory notes had been already subjected to tax for the assessment in the assessment year 1983‑

84. These findings did not give rise to any question of law. So also the disallowance of Rs.24,000 on the supposed accrued income on the amount of promissory notes had been deleted on the ground that the assessee was not maintaining his accounts on the mercantile system. Therefore, the income arising from the investment made should be taxed on the basis of actual receipts only. Therefore, no question of law arose. Manish R. Bhatt for the Commissioner. The Commissioner of Income‑tax, Gujarat III, Ahmedabad, by this application under section 256(2) of the Income Tax Act, 1961, requires us to direct the Income‑tax Appellate Tribunal, Ahmedabad Bench B, to submit the statement of case and refer the following question said to be a question of law arising out of the order made by the Tribunal in I.T.A. No.4557/Ahd. of 1992, for the assessment year 1987‑88 in the case of the respondent‑assessee. "Whether the Appellate Tribunal is right in law and on facts, in confirming 'the, order passed by the Commissioner of Income‑tax (Appeals) deleting the additions of unexplained income of Rs.2 lakhs and interest thereof of Rs.24,000?" The facts giving rise to this application as emerging from the material produced before us are that a search was carried out at the residential premises, of the assessee on October 14, 1986, during the course of which three promissory notes executed by Vinay Corporation in favour of the assessee were found. The three promissory notes are of the denomination of Rs.50,000, Rs.one lakh and Rs.one lakh. The Assessing Officer found that the promissory note of Rs.50,000 was bearing the date of June 2, 1982, and did not relate to the assessment year 1987‑88 with which this application is concerned. However, it was of the opinion, that from the other two promissory notes it was not possible to discern the date of their execution and having regard to the fact that search took place during the financial year 1986‑87 the amount represented by the two promissory notes Rs.2 lakhs was brought to tax by making additions in the income of the assessee for the assessment year 1987‑88.. The plea of the assessee had been that he had earlier made a declaration under the amnesty scheme declaring his undisclosed income between 1975 and 1979. The Assessing Officer found that the declaration of the assessee under the amnesty scheme was not accepted and he, therefore, brought the amount represented by the two promissory notes and interest accrued thereon to tax. It was also the case of the respondent that the addition of the amount represented by the promissory notes in question had already been added to the income of the assessee for the assessment year 1983‑84 and the same amount cannot again be taxed in the assessment year 1987‑

88. As the Assessing Officer had found that it is not discernible from the promissory notes the year to which they belong he did not accept the plea of the assessee. However, the Commissioner of Income‑tax (Appeals) referring to certain noting made on the reverse of the promissory notes which bore the date May 1, 1982, held that the promissory notes were executed in 1982 and referring to the assessment order for the assessment year 1983‑84 made on March 30, 1988, deleted the additions made on account of income represented by the promissory notes as the same had already suffered tax in the assessment year 1983‑

84. Referring to the additions made on account of Rs.24,000 on the said sum on the ground that the interest at the rate of 12 percent. per 'annum accrued to the assessee on the abovementioned promissory notes of Rs.2 lakhs, the Commissioner of Income‑tax (Appeals) found that the assessee has not followed the mercantile system of accounting and the promissory notes were lying in the custody of the Department with the result that there is no scope for payment of any interest by the parties, there is substantial merit in the submission that the interest income if any should be brought to the charge of tax on receipt basis only, therefore, the addition of Rs.24,000 was deleted. These findings were affirmed by the Tribunal and the additions made by the Assessing Officer stood deleted as per the orders of the Commissioner of Income‑tax (Appeals), whose order was affirmed by the Tribunal. From the aforesaid facts it is apparent that the deletion of addition of Rs.2 lakhs has been founded on the finding of fact that the promissory notes were executed somewhere in 1982 and the income represented by these promissory notes had been already subjected to tax for the assessment in the assessment year 1983‑

84. These findings do not give rise to any question of law. So also the disallowance of Rs.24,000 on the supposed accrued income on the amount of promissory notes has been deleted on the ground that the assessee is not maintaining his accounts on the mercantile system, therefore, the income arising from the investment made in the panchnama should be taxed on the basis of actual receipts only also do not give rise to any question of law as the primary findings on the basis of which the answer depends is a finding of fact. We, therefore, are satisfied that the order of the Tribunal rejecting the application under section. 256(1) is not erroneous in any manner. The application is rejected. M.B.A./211/FC ????????????????????????????????????????????????????????????????????????????????? Application rejected.