S.B. Sinha, C.J.

The substantial question of law, which has been raised in this appeal under section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act) rotates around the question as to whether the Income Tax Appellate Tribunal (hereinafter referred to as the "Tribunal") was right in deleting the addition of Rs. 10 lakhs made on account of interest-free loan/advance of Rs. 47,67,740 given by the assessed to a sister concern.

2. The relevant fact of the matter, in a nutshell, is as follows

The assessed, namely, M/s Motor General Finance Ltd. filed its return of income on 26-12-1990, declaring income under section 115J of theat Rs. 1,74,88,930. The assessing officer noticed that the assessed had advanced interest-free loan/advance of Rs. 47,67,740 during the relevant assessment year, i.e., 1990-91 to its sister concern, namely, M/s National Air Products Ltd. The said transaction increased the total interest-free loan/advance given to its sister concern from Rs. 154.40 lakhs to Rs. 202.27 lakhs. The assessing officer further noticed that the assessed itself had from time to time borrowed money and taken loans and had paid interest on the said loans. Thus, the assessing officer disallowed the interest liability to the extent of Rs. 10 lakhs on the aforesaid grounds and held that the interest should be charged under section 234B of theand assessed the total income of the assessed at Rs. 6,74,56,380. The assessed preferred an appeal against the said order before the Commissioner (Appeals).The Commissioner (Appeals) remanded the matter back to the assessing officer to collect details of cash flow in order to examine whether the loan of Rs. 47,67,740 was given out of borrowed fund or out of profit earned during the year. The assessed was asked to furnish bank statement clearly showing as to whether the assessed had credit balance or debit balance on the dates when the loan/advances were given by the assessed. In spite of the aforesaid direction, the assessed did not furnish any information before the assessing officer. Thus, adverse inference was drawn by the assessing officer and held that the loans taken by the assessed were utilized for giving advances to its sister concern. The assessing officer also held that the assessed is liable to pay interest under section 234B of the Act, as the advance tax paid was less than 90 per cent of the assessed tax. The assessed again filed an appeal before the Commissioner (Appeals). However, the Commissioner (Appeals) vide order dated 11-3-1994, upheld the order of the assessing officer. It was also held that the interest has been rightly charged under section 234B of the. Thereafter, the assessed preferred an appeal before the Tribunal. The Tribunal vide its order dated 26-3-2000, held that the assessing officer was not right in making addition of Rs. 10 lakhs on account of disallowance of interest for fresh advances made to the sister concern and also held that the interest under section 234B of thehas been wrongly charged and deleted the same. The said order dated 26-3-2000, passed by the Tribunal is in dispute in this appeal.

3. Mr. Sanjiv Khanna, the learned counsel appearing on behalf of the appellant/revenue submitted that the learned Tribunal wrongly allowed deduction of the sum, which was advanced by way of a loan in favor of a sister concern. It was further submitted that the Tribunal wrongly placed reliance on its earlier decision.

The learned counsel also raised a contention that the assessed, itself having taken loan, was not supposed to grant an interest-free loan in favor of a sister concern.

The learned counsel contended that despite several opportunities granted to the assessed, as no record was produced, the same would clearly show that the assessed did not make any advance to its sister concern out of the profit earned by it. Strong reliance in this connection has been placed on CIT v. Anjum M.H. Ghaswala & Ors. : [2001]252ITR1(SC) .

4. The learned counsel appearing on behalf of the respondent/assessed, on the other hand, submitted that the findings arrived at by the learned Tribunal being findings of fact, the question of law raised before this court is not required to be answered.

5. Before adverting to the question involved in this appeal, we may notice the finding of the Income Tax Officer, which is in the following term:

"The assessed-company, during the year made a further interest-free advance to its sister concern, namely, National Air Product Ltd. At the end of the accounting period, the amount of interest-free loan stood at Rs. 202.27 lakhs (previous year Rs. 154.50 lacs). In this regard, it may be noted that assessed from time to time is raising loan and during the year has paid interest to various parties amounting to Rs. 13.57 crores. On the interest-free loan advanced to the sister concern, the department has consistently taken the stand that in fact the interest-bearing loans in a way has been utilized to make the interest-free advance to the sister concern, and which is not for the purpose of business. The interest expenditure referable to the amount advanced to the sister concern has been to be not allowable while giving deduction for the interest expenditure. "

6. The Commissioner (Appeals), however, was of the view that the assessing officer should correct the details of cash flow with a view to ascertain as to whether the loan was given out of the borrowed sum or not.

Pursuant to and in furtherance of the aforesaid direction, an opportunity was given to the assessed to place additional material. The assessed merely furnished the statement of the deposits made in the bank account on those dates, on which the advance amounting to Rs. 50 lakhs was made to sister concern. It, however, despite the direction did not furnish the copy of the bank statement to show as to whether there had been a credit balance or a debit balance in the bank accounts on those dates. In this situation, it was observed:

"If there was a debit balance, then it could safely be inferred that interest bearing overdraft facility of the bank was utilized to make those advances. But the assessed, till date has not furnished any such statement. In view of this fact, the disallowance of Rs. 10 lakhs is to be sustained."

The aforesaid order was upheld by the Commissioner (Appeals).

7. The Tribunal, however, without going into the aforementioned question proceeded on the basis that the assessed had earned profit after tax at Rs. 4,86,96,416 and had also reserves in its account, the loan of Rs. 47,67,740 to its sister concern was entitled out of the profit of the year.

8. The character of interest payable in terms of the provisions of sections 234A, 234B and 234C of the are required to be noticed.

"234A. Interest for defaults in furnishing return of income.(1) Where the return of income for any assessment year under sub-section (1) or sub-section (4) of section 139, or in response to a notice under sub-section (1) of section 142, is furnished after the due date, or is not furnished, the assessed shall be liable to pay simple interest at the rate of (one and one-half per cent) with effect from 1-6-2001 one and one-fourth per cent for every month or part of a month comprised in the period commencing on the date immediately following the due date, and,

(a) where the return is furnished after the due date, ending on the date of furnishing of the return; or

(b) where no return has been furnished, ending on the date of completion of the assessment under section 144,

on the amount of the tax on the total income as determined under sub-section (1) of section 143 or on regular assessment as reduced by the advance tax, if any paid and any tax deducted or collected at source.

Explanation 1: In this section, due date means the date specified in sub-section (1) of section 139 as applicable in the case of the assessed.

Explanation 2: In this sub-section, tax on the total income as determined under sub-section (1) of section 143 shall not include the additional Income Tax, if any, payable under section 143.

Explanation 3: Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this section.

(2) The interest payable under sub-section (1) shall be reduced by the interest, if any, paid under section 140A towards the interest chargeable under this section.

(3) Where the return of income for any assessment year, required by a notice under section 148 issued after the determination of income under sub-section (1) of section 143 or after the completion of an assessment under sub-section (3) of section 143 or section 144 or section 147, is furnished after the expiry of the time allowed under such notice, or is not furnished, the assessed shall be liable to pay simple interest at the rate of one and one-half per cent with effect from 1-6-2001, one and one-fourth per cent for every month or part of a month comprised in the period commencing on the day immediately following the expiry of the time allowed as aforesaid, and ..

(a) where the return is furnished after the expiry of the time aforesaid, ending on the date of furnishing the return; or

(b) where no return has been furnished, ending on the date of completion of the reassessment or recomputation under section 147,

on the amount by which the tax on the total income determined on the basis of such reassessment or recomputation exceeds the tax on the total income determined under sub-section (1) of section 143 or on the basis of the earlier assessment aforesaid.

Explanation (inserted by Direct Taxes Law (Amendment) Act, 1987, and omitted by Direct Taxes Law (Amendment) Act, 1989, with effect from 1-4-19891.

(4) Where as a result of an order under section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount of tax on which interest was payable under sub-section (1) or sub-section (3) of this section has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and-

(i) in a case where the interest is increased, the assessing officer shall serve on the assessed a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly;

(ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded.

(5) The provisions of this section shall apply in respect of assessments for the assessment year commencing on 1-4-1989, and subsequent assessment years.

Section 234-IB. Interest for defaults in payment of advance tax.(1) Subject to the other provisions of this section, where, in any financial year, an assessed who is liable to pay advance tax under section 208 has failed to pay such tax or, where the advance tax paid by such assessed under the provisions of section 210 is less than ninety percent of the assessed tax, the assessed shall be liable to pay simple interest at the rate of one and one-half per cent (with effect from 1-6-2001) one and one-fourth per cent for every month or part of a month comprised in the period from the 1st day of April next following such financial year to the date of determination of total income under sub-section (1) of section 143 and where a regular assessment is made, to the date of such regular assessment, on an amount equal to the assessed tax or, as the case may be, on the amount by which the advance tax paid as aforesaid falls short of the assessed tax.

Explanation 1.In this section, "assessed tax" means the tax on the total income determined under sub-section (1) of section 143 or on regular assessment reduced by the amount of tax deducted or collected at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income.

Explanation 2.Where in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this section.

Explanation 3.In Explanation 1 and in sub-section (3), tax on the total income determined under sub-section (1) of section 143 shall not include the additional Income Tax, if any, payable under section 143.

(2) Where, before the date of determination of total income under sub-section (1) of section 143 or completion of a regular assessment, tax is paid by the assessed under section 140A or otherwise.-

(i) interest shall be calculated in accordance with the foregoing provisions of this section up to the date on which the tax is so paid, and reduced by the interest, if any, paid under section 140A towards the interest chargeable under this section;

(ii) thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax so paid together with the advance tax paid falls short of the assessed tax.

(3) Where, as a result of an order of reassessment or recomputation under section 147, the amount on which interest was payable under sub-section (1) is increased, the assessed shall be liable to pay simple interest at the rate of one and one-half per cent (with effect from 1-6-2001 one and one-fourth per cent) for every month or part of a month comprised in the period commencing on the day following the date of determination of total income under sub-section (1) of section 143 and where a regular assessment is made as is referred to in sub-section (1) following the date of such regular assessment and ending on the date of the reassessment or recomputation under section 147, on the amount by which the tax on the total income determined on the basis of the reassessment or recomputation exceeds the tax on the total income determined under sub-section (1) of section 143 or on the basis of the regular assessment aforesaid.

(4) Where, as a result of an order under section 154 or section 155 or section 250 or 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) or sub-section (3) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and

(i) in a case, where the interest is increased, the assessing officer shall serve on the assessed a notice of demand in the prescribed form specifying the sum payable and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly;

(ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded.

(5) The provisions of this section shall apply in respect of assessments for the assessment year commencing on 1-4-1989, and subsequent assessment years.

Section 234C. Interest for deferment of advance tax.(1) Where in any financial year,-

(a) the company which is liable to pay advance tax under section 208 has failed to pay such tax; or

(i) the advance tax paid by the company on its current income on or before the 15th day of June is less than fifteen per cent of the tax due on the returned income or the amount of such advance with effect tax from paid on or before the 15th day of September, is less than forty-five per cent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than seventy-five per cent of the tax due on the returned income, then, the company shall be liable to pay simple interest at the rate of one and one-half per cent, (with effect from 1-6-2001 one and one-fourth per cent) per month for a period of three months on the amount of the shortfall from fifteen per cent or forty-five per cent or seventy-five per cent, as the case may be, of the tax due on the returned income;

(ii) the advance tax paid by the company on its current income on or before the 15th day of March is less than the tax due on the returned income, then, the company shall be liable to pay simple interest at the rate of one and one-half per cent (with effect from 1-6-2001 one and one-fourth per cent) on the amount of the shortfall from the tax due on the returned income :

Provided that if the advance tax paid by the company on its current income on or before the 15th day of June or the 15th day of September, is not less than twelve per cent, or, as the case may be, thirty-six per cent of the tax due on the returned income, then, it shall not be liable to pay any interest on the amount of the shortfall on those dates;

(b) the assessed, other than a company, who is liable to pay advance tax under section 208 has failed to pay such tax or,

(i) the advance tax paid by the assessed on his current income on or before the 15th day of September, is less than thirty per cent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than sixty per cent of the tax due on the returned income, then, the assessed shall be liable to pay simple interest at the rate of one and one-half per cent (with effect from 1-6-2001, one and one-fourth per cent) per month for a period for three months on the amount of the shortfall from thirty per cent, or, as the case may be, sixty per cent of the tax due on the returned income;

(ii) the advance tax paid by the assessed on his current income on or before the 15th day of March is lest than the tax. due on the returned income, then, the assessed shall be liable to pay simple interest at the rate of one and one-half per cent (with effect from 1-6-2001 one and one-fourth per cent) on the amount of the shortfall from the tax due on the returned income :

Provided that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of underestimate or failure to estimate,-

(a) the amount of capital gains; or

(b) income of the nature referred in sub-clause (ix) of clause (24) of section 2, and the assessed has paid the whole of the amount of tax payable in respect of income referred to in clause (a) or clause (b), as the case may be, had such income been a part of the total income, as part of the remaining Installments of advance tax which are due or where on such Installments are due, by the 31st day of March of the financial year :

Provided further that nothing contained in this sub-clause shall apply to any shortfall in the payment of the tax due on the returned income where such shortfall is on account of increase in the rate of surcharge under section 2 of the Finance Act, 2000 (10 of 2000), as amended by the Taxation Laws (Amendment) Act, 2000, and the assessed has paid the amount of shortfall on or before 15-3-2001, in respect of the Installment of advance tax due on 15-6-2000, the 15-9-2000, and 15-12-2000 :

Provided also that nothing contained in this sub-section shall apply to any shortfall in the payment of the tax due on the returned income, where such shortfall is on account of increase in the rate of surcharge under section 2 of the Finance Act, 2000 (10 of 2000), as amended by the Taxation Laws (Amendment) Act, 2001 and the assessed has paid the amount of shortfall on or before 15-3-2001, in respect of the Installment of advance tax due on 15-6-2000, 15-9-2000 and 15-12-2000.

Explanation.In this section, "tax due on the returned income means the tax chargeable on the total income declared in the return of income furnished by the assessed for the assessment year commencing on the 1st day of April immediately following the financial year in which the advance tax is paid or payable as reduced by the amount of tax deductible or collectible at source in accordance with the provisions of Chapter XVII on any income which is subject to such deduction or collection and which is taken into account in computing such total income.

(2) The provisions of this section shall apply in respect of assessments for the year commencing on 1-4-1989, and subsequent assessment years.

The Apex Court in Anjum M.H. Ghaswala (supra) held that the interest payable, therein is mandatory in nature. It was held that the Settlement Commission does not have any power to refund or waive interest statutorily payable under sections 234A, 234B and 234C of the except to the extent of granting relief under circulars issued by the Board under section 119 of the.

The assessed is a financing company. Whether it borrows a huge sum of money, cash balance in its own account may show a huge account and the same may not be determinative of the question as to whether the said amount was earned by way of profit or not. Normally a financing company would not grant any interest-free loan.

9. In the instant case, the assessed despite several opportunities are granted, did not produce the relevant documents. An adverse inference, Therefore, should have been drawn against the assessed.

In CIT v. H.R. Sugar Factory (P) Ltd. : [1991]187ITR363(All) , it was held at p. 370:

"The approach adopted by Sri S.N. Verma, learned counsel for the assessed, namely, that you must look only to the particular assessment year, and not beyond, looks attractive at first flush, but does not stand scrutiny in depth. It is true that, for the purposes of Income Tax, each assessment year is a separate unit. It may be equally true that the amounts of loans to the directors are not substantial in each of the years. But, this approach would have been valid if the assessed had been paying interest only on the amounts lent during a particular assessment year. As a matter of fact, the difference of interest, which the assessed is made to bear on account of loans to the directors, is more than rupees two lakhs in the assessment year 1968-69. With respect to the assessment year 1967-68 it is Rs. 1,85,858. The court cannot shut its eyes to realities. What has actually happened is visible to the naked eye. The assessed, a private limited company closely held by three family groups, is made to lend huge amounts (up to 23 lakhs of rupees as per the compromise arrived at between the assessed and the directors/shareholders in the civil suits referred to above) at a very low rate of interest and the entire difference of interest is being charged to the assessed. The assessed is not a finance company. It is engaged in the manufacture of sugar. No business purpose of the assessed-company is served by such lending’s to its directors/shareholders. It cannot be said that it is expedient in the interest of business or is laid out for the purpose of the business of the assessed, It is not even a case, where employees of the company are being lent some small amounts at a lower rate of interest with a view to keep them happy and satisfied. The amount of interest paid each year payable on account of the loans to directors is very substantial and this fact cannot be glossed over by saying that the amount is not substantial in each of the years.- It must be remembered that, in pursuance of the compromise referred to above, the limit of amounts to be lent to the directors/shareholders was substantially raised while, at the same time, drastically reducing the rate of interest to be charged to them. It is clear that the directors/shareholders are taking unfair advantage of their control over the assessed and that they are exploiting it for their private ends. We are not saying that it is a device, we need not go that far. What has happened in this case is self-evident, viz., the assessed is made to pay huge amounts by way of interest on account of heavy amounts advanced to its directors, bearing no relation whatsoever with the business purpose of the assessed. A look at the figures mentioned in. the questions referred clearly shows that huge amounts are being paid by the assessed on account of interest. May be that the company borrows large amounts for the purpose of its business every year, but that does not explain the huge advances to the directors/shareholders. Had this money been not advanced to the directors, it would have been available to the assessed for its business purposes and to that extent it may not have been necessary to borrow from the banks. We are, Therefore, of the opinion that the Income Tax Officer was right in disallowing the difference of interest under section 36(1)(iii) of the Income Tax Act and that the Tribunals approach is not only superficial but too naive. "

We may notice that the Orissa High Court in Indian Metals & Ferro Alloys Ltd. v. CIT : [1992]193ITR344(Orissa) has held

........ it may be pointed out that, in a hypothetical case, an assessed can earn profits only after the date of investment and advance. It cannot be said that because, in the concerned assessment year, the profit was more than the investment and advance, those came only out of the profit. The actual financial liquidity position on the relevant date has to be established by the assessed. "

Furthermore, the Bombay High Court in Phaltan Sugar Works Ltd. v. CIT : [1994]208ITR989(Bom) has held :

"............The business of the subsidiary company cannot be considered in law as the business of the assessed. The finding of the Tribunal based on commercial expediency appears to us to be incorrect. The fact remains that the moneys borrowed were utilized for business of the subsidiary company and not for the business of the assessed as such. In this view of the matter, we hold that the Tribunal was not justified in holding that the interest on loans borrowed for advancing to its subsidiary company, was allowable under section 36(1)(iii) of the Income Tax Act, 1961. The plain language of section 36(1)(iii) of the Income Tax Act, 1961, militates against the submissions urged on behalf of the assessed. "

Yet again in Regal Theatre v. CIT : [1997]225ITR205(Delhi) it has been held :

".......... The learned Judges held that the view taken by the Income Tax Officer was unsustainable, that as had been pointed out by the Madhya Pradesh High Court in Ram Kishan Oil Mills v. CIT : [1965]56ITR186(MP) , the only conditions required to be satisfied in order to enable the assessed to claim a deduction in respect of the interest under section 10(2)(iii) were, firstly, that the money must have been borrowed by the assessed; secondly, it must have been borrowed for the purpose of business, and, thirdly, the assessed must have paid interest on the said amount and claimed it as a deduction. It is not the requirement of the law that the assessed must further show that the borrowing of the capital was necessary for the business, so that if at the time of borrowing, the assessed had sufficient amount of its own, the deduction could not be allowed. The learned Judges also relied upon a judgment of the Madras High Court in Amna Bai Hajee Issa v. CIT : [1964]51ITR835(Mad) which held that in deciding whether a claim for interest on borrowing could be allowed, the fact that the assessed had ample resources at its disposal and need not have borrowed, was not a relevant matter for consideration. The question to be decided was whether the amount of interest was paid in fact on the capital borrowed for the business.

It may also be noticed that in the Supreme Court decision in Madhav Prasad Jatia v. CIT : [1979]118ITR200(SC) , already referred to, their Lordships distinguished the decision of the Bombay High Court in CIT v. Bombay Samachar : [1969]74ITR723(Bom) , on the ground that, that case did not touch the issue raised before them but did not think that the Bombay case was wrongly decided. The above principles of law do not, in our opinion, go against the principle that the net profit must be calculated after giving allowance to the depreciation. Nor do they contradict the view that interest can be disallowed if the borrowed funds are used for non-business purposes.

Learned counsel for the respondent has contended that the High Court cannot go against the opinion of the Tribunal, nor go behind the facts mentioned by the Tribunal, nor disturb any findings of fact arrived at by the Tribunal. We are of the view that the question is one purely of law as to the conditions required by section 36(1)(iii) of the Income Tax Act and has been referred to us for a decision by the Tribunal. While dealing with the question, we have not disturbed any findings of fact arrived at by the Tribunal. The contention that the Tribunal had given a finding of fact that a part of the borrowings had been diverted by the assessed to its non-business purposes is in our opinion not a finding of fact, but was an inference drawn by the Tribunal on the basis that the interest paid on the capital borrowed was not in law an allowable deduction from the profit, in case the profit minus depreciation was in excess of the withdrawals made by the partners and in such a case, the withdrawals made by the partners and in such a case, the withdrawals should be deemed to be in part from the capital account and would mean that the original borrowing was utilised for other purposes and not for business purposes. The finding of the Tribunal in this behalf is surely an inference in law. It ignores the law laid down by the Supreme Court in Madhav Prasad Jatia v. CIT (supra), and in the Bombay High Court case CIT v. Bombay Samachar Ltd. (supra), that once the three conditions laid down are satisfied, the deduction under section 36(1)(iii) must be given. Again, the contention that the correct amount of debit balance to the account of the partners should be taken as Rs. 1,73,643 instead of Rs. 1,93,049 as calculated by the Income Tax Officer is again a figure arrived at as a matter of law."

10. From the conspectus of the decisions as noticed hereinbefore, there cannot be any doubt whatsoever that the nexus between the amount paid by way of advance to a sister concern and the fund available at the relevant time in assesseds hands must be found out from the advances taken by the assessed. The. onus to prove that, it is entitled to in this regard was on the assessed. It was to be proved that a bona fide loan had been granted in favor of a sister concern. It was, Therefore, its duty to place requisite materials on record.

11. The Apex Court in East India Pharmaceutical Works Ltd. v. CIT : [1997]224ITR627(SC) has held :

In the aforesaid premises and in view of the question, that arose out of the order of the Tribunal and which was referred by the Tribunal to the High Court for being answered, we find no error in the answer given by the High Court. It may further be stated that even before the High Court, the assessed had not taken any step to get the question referred in the light of the contentions, which were advanced in this court by filing an application under section 256(2) of the. In this view of the matter, notwithstanding the fact that we find considerable force in the question of law urged by Mr. Bhattacharyya, learned counsel appearing for the appellant, but, on the materials on record and on the amplitude of the question, which had been referred to the High Court, we find it difficult to entertain and decide the contention raised by learned counsel, for the appellant. Further, we do not find any error in the answer given by the High Court to the question posed before it and, Therefore, the appeal is devoid of merit and the same is accordingly dismissed. But, in the circumstances, there will be no order as to costs."

12. We may also notice that retrospective effect has been given to sections 234A, 234B and 234C of the. Keeping in view the fact that the assessed had not produced materials, despite opportunities having been granted to it, by the assessing officer, we are of the opinion that the purported finding of fact arrived at by the learned Tribunal must be held to be perverse.

13. The learned counsel for the assessed contended that neither in the previous years nor in the later years such transactions had been questioned, but in absence of any material having been placed either before the assessing officer and Commissioner (Appeals) or the Tribunal to show that in those years, also the assessed had despite opportunities being given did not produce documents, we are of the opinion that the same by itself would not deter this court from examining the said question.

14. The learned counsel for the assessed has pointed that in case HR. Sugar Factory (supra), the assessed was an industry for manufacturing of sugar and it was not a finance company and as such in the case of finance company, such decision would not be applicable.

However, we are of the opinion that such an observation is not of much significance, as indeed, the said observation would counter to the submission of the learned counsel for the assessed.

As the assessed was a finance company, it could show a huge amount at its hands at any point of time, but the bank accounts of the assessed during the relevant period having not been produced, it was for the assessing officer to ascertain as to whether the advance had been paid out of the loan taken by it or not. At the cost of repetition, we may reiterate that it is also not expected that a financing company would advance an interest-free loan to another, when it itself takes loan and pays interest upon the principal sum.

As the assessed could not produce any document in this regard, an adverse inference in terms of section 114 of the Evidence Act should be drawn to the effect that had those documents been produced, the same would have gone against the interest of the assessed, we are of the opinion that the questions of law involved in the instant case should be answered in negative, i.e., in favor of revenue and against the assessed.

15. This appeal is disposed accordingly.

OPEN