1972 (6) TMI 10 - HC - Income Tax

While enquiring into the purchase and sale of flats the Income-tax Officer found entries pertaining to a sum of Rs.95, 000 in the books of the assessee. A sum of Rs. 95, 000 was alleged to have been borrowed by her(assessee) on hundi loans held that once the assessee indicated reasonably a source to which the amount of Rs. 95, 000 could well be attributed the assessee has discharged the burden of proof on her - finding of the Tribunal that the transactions of loans were fictitious was based on evidence - issue being one of fact it cannot be taken up in reference

Issues Involved:
1. Legitimacy of the hundi loans amounting to Rs. 95,000.
2. Credibility of the solicitor's testimony and account books.
3. Discrepancies in the account books of the assessee and the solicitor.
4. Role and credibility of Nichani & Co. in arranging the loans.
5. Burden of proof regarding the source of the alleged loans.

Issue-wise Detailed Analysis:

1. Legitimacy of the hundi loans amounting to Rs. 95,000:
The Income-tax Officer found entries of Rs. 95,000 in the assessee's books, allegedly borrowed through hundi loans. The assessee initially failed to disclose that these transactions were managed by her solicitor, Shantikumar Gandhi. Upon investigation, the Income-tax Officer summoned the alleged financiers, but most summonses were returned as "Not claimed," and the solicitor failed to produce these financiers. The Tribunal ultimately disbelieved the solicitor's evidence, finding that the alleged loans were not genuine.

2. Credibility of the solicitor's testimony and account books:
The solicitor, Shantikumar, claimed to have arranged the loans through Nichani & Co., but his account books did not fully support this claim. He admitted to handling finances for the assessee and her mother but failed to provide documentary evidence for significant transactions, particularly the Rs. 50,000 loan. The Tribunal found discrepancies between his oral testimony and account books, leading to a conclusion that his testimony was unreliable.

3. Discrepancies in the account books of the assessee and the solicitor:
The Tribunal noted several inconsistencies between the account books of the assessee and the solicitor. For instance, the repayment dates for the Rs. 45,000 loan differed in their respective accounts. The solicitor's account indicated repayment on 13th October 1960, while the assessee's books showed repayment on 19th October 1960. Such discrepancies led the Tribunal to question the authenticity of the transactions.

4. Role and credibility of Nichani & Co. in arranging the loans:
The solicitor claimed that the loans were arranged through Nichani & Co., but the proprietor, Kanayalal Hiranand, denied any involvement in these transactions. Kanayalal admitted to being a name-lender and dealing in smuggled gold but denied arranging loans for the solicitor or the assessee. The Tribunal believed Kanayalal's testimony over the solicitor's, further discrediting the alleged loans.

5. Burden of proof regarding the source of the alleged loans:
The Tribunal held that the assessee failed to prove the source of the Rs. 95,000. The solicitor's testimony and account books did not provide credible evidence of the loans' origin. The Tribunal found that merely stating that a solicitor arranged the loans was insufficient; the actual source of the funds had to be established, which was not done in this case.

Conclusion:
The Tribunal's findings were based on a thorough evaluation of evidence and circumstances. The discrepancies in the account books, the unreliable testimony of the solicitor, and the denial by Nichani & Co. led to the conclusion that the alleged loans were not genuine. The Tribunal's decision to disbelieve the solicitor and treat the amount as income from undisclosed sources was upheld, and the rule was discharged with costs.

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