9911796707
TMI Blog1995 (6) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... make the assessment afresh. 4. In pursuance of the directions of the Commissioner of Income-tax (Appeals) in his order dated 24-3-1988, the Assessing Officer passed a fresh assessment order under section 143(3)/250 on 20-1-1989 determining the total income at Rs. 36,55,170. This assessment also was set aside by the CIT (Appeals) by his order dated 29-1-1990. The CIT (Appeals) directed the Assessing Officer to frame a fresh assessment by observing as under : " I would direct the Assessing Officer to consider the appellant's explanations, details and evidence in respect of drafts/cash deposit and give proper, just and fair finding. While so doing he must bear in mind the appellant's handicap that the records were destroyed in the riots of November 1984. In view of this he must consider in a just and fair manner the probability of the explanation that the drafts/cash deposits were out of the realisation from the sundry debtors, bank withdrawals, cash transfers, etc. In this connection, he will examine the subsequent balance-sheet, company's net assets, the investments and acquisitions of the Directors of the company, etc. An analysis of these factors along with the other relevant fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations from the sundry debtors did not exceed the figure of Rs. 5 lakhs in any of the above assessment years. In that view he concluded that it was unlikely that in the assessment year under consideration, namely 1981-82, the assessee suddenly had a realisation from sundry debtors amounting to Rs. 18,00,763. The Assessing Officer further observed that in view of the fact that the books of account have been burnt and the inability of the assessee to produce any detail regarding the drafts deposited except by way of an explanation that the same were realisations from sundry debtors, no other verifiable details had been filed. He opined that one of the explanations for this can be that 'properly' the sales were not being accounted for in the books of the assessee and the same were being directly deposited in various bank accounts. He held that drafts deposited in the Bank of Tokyo as per List I reproduced in the assessment order, for which no explanation was forthcoming, were actually undisclosed sales of the assessee. Accordingly, he treated the same as income of the assessee under section 68 of the Income-tax Act, 1961 for the assessment year under consideration. 6. In the said ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the voluminous requisition of 1-10-1984 for compliance on 5-10-1984." 9. The CIT (Appeals) observed that before examining the various contentions of the assessee, it would be proper to examine the question of burnt books of account. He noted that when the first assessment order was passed on 8-10-1984, the handicap of books having been burnt was not there and that the assessee had ample time and opportunity to have placed its card openly before the Assessing Officer for drawing the proper inference and that this was not done. He referred to the copy of the police Report filed by the assessee before the Assessing Officer and copy of letter dated 15-11-1984 sent to the Station House Officer, Moti Nagar Police Station and observed that in them there was no reference of destruction of cash book and other account books. He further observed that copy of the F.I.R., as registered in the "Rojnamcha" was never filed before the Assessing Officer. He also referred to the assessee's letter dated 3-10-1985 wherein it was mentioned that the partywise details of sundry debtors outstanding as on 30-6-1978 based on the party's ledger for that year are being compiled and the same shall be furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for acceptance. 13. He observed that the plea of the assessee that in any case, the amount of Bank drafts would only be income from business and not income from undisclosed sources, was not acceptable. in support of his reasoning he referred to the Kanga and Palkhivala's " The Law and Practice of Income Tax " page 864 of Eighth Edition, Volume-I, wherein it was stated that the cash credits may be assessed either as business profits or as income from other sources. 14. He also observed that the records showed that assessee was given numerous opportunities to put forth its case. 15. He further held that the Assessing Officer has followed the CBDT's Instruction No. 1659 faithfully and the same was evident from the office note recorded by the Assessing Officer himself and the fact that addition of only Rs. 15.59 lakhs was maintained in the assessment order dated 13-1-1992 as against the addition of Rs. 34 lakhs approximately, in the earlier two assessment orders dated 8-10-1984 and 20-1-1989, for which no explanation was forthcoming although the assessee was in possession of party ledger etc. He also held that nowhere the said Instruction No. 1659 laid down that the accounts as pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... realisation from debtors would not amount to proving prima facie transactions which has resulted in a cash credit in the accounts of the assessee. Even after allowing the benefit of the handicap of the cash book stated to have been destroyed in riots would not entitle the acceptance of the credit because even the evidence which was in the possession of the assessee in the form of party ledger which was promised to be made available was never delivered. If either before the Assessing Officer or before the CIT (Appeals) the assessee had made endeavours or efforts to make the supporting evidence available for the drafts founds credited in the bank, a liberal and sympathetic view was always possible in view of the Instruction of the CBDT. But in the absence of evidence and based on a mere statement, it is not possible to accept the surfacing of huge deposits in the bank except for a credit of Rs. 17,845 on 28-11-1979 with a narration "drafts of Rs. 17,845 is from S.P.S.". It appears to be the credit in the name of Sardar Puran Singh who happens to be the Managing Director of the assessee company and this amount is found reflected in his copy of account. Thus, considering the facts of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td v. Sales Tax Officer [1989] 72 STC 334 and the judgment of the Supreme Court in the case of Tata Engg. & Locomotive Co. Ltd. v. Assistant CCT [1970] 26 STC 354. According to the said judgment the assessing authority was bound to examine each individual transaction. For this case law reference may be made to page 568 of paper book No. 6. The credits are taken from the bank pass books and not from the books of account of the assessee. Bank pass book is not a book maintained by the assessee as per the judgment of the Bombay High Court in the case of CIT v. Bhaichand H. Gandhi [1983] 141 ITR 67. The Tribunal in the case of Kishan Chand Sobhraj Mal v. ACIT [1992] 41 ITD 109 following the judgment of the Bombay High Court in the case of CIT v. Bhai Chand H. Gandhi's case held that there is no justification formaking any additions on the basis of entries found in the books of account which did not belong to the assessee. There is no evidence whatsoever with the Department to prove that the amount of Rs. 15,59,845 are undisclosed sales of the assessee. Even assuming, but not conceding, that there were any sales, section 68 cannot apply as sales constitute business activity, income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t must have nexus to the material on record. This can be seen at page 217 of paper book No. 2. In the assessment order originally passed under section 144 on 8-10-1984, it was held that the impugned deposits are the realisation of the sale proceeds against sales not disclosed in the past years in the books of account. (page 538 of paper book No. 5). Same is the finding in the assessment order passed under section 143(3)/250 dated 20-1-1989 (see page 549 of paper book No. 5). Contrary to these findings by the earlier Assessing Officers, the present Assessing Officer who passed the assessment order on 13-1-1992 held that these were the receipts from the suppressed sales during the year ending 30-6-1980. Such contrary findings by the concerned authorities vitiate the order. The taxation authorities cannot go on changing their mind from time to time and cannot be allowed to create uncertainty in the realm of taxation. 6 ELT 756 Guj. (sic) (see page 577 of paper book No. 6). Further, departure from earlier conclusion without explanation is vitiated. Please see 209 ITR 433 (sic). When they themselves were not sure about the correct factual position, any addition made is not sustainable u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quisitions of the Directors of Company etc. He observed that an analysis of these factors along with the other relevant factors would help to arrive at the truth or near truth about the tenability, probability and acceptability of the explanations. These specific directions were completely ignored by the Assessing officer when he passed the assessment order dated 13-1-1992. These directions given by the CIT (Appeals) cannot be ignored by the Assessing officer as laid down by the Bombay High Court in the case of Smt. Mukundkumari v. K.V.S. Namoondari, 17th ITO [1979] 118 ITR 433. The judgment of the Supreme Court in AIR 1984 SC at page 897 (sic) is also to the same effect. The assessee filed an affidavit dated 10-2-1992 before the CIT (Appeals) which was not considered at all by him. The assessee filed another affidavit dated 17-3-1993 before the Tribunal. No counter-affidavit was filed by the revenue. Hence, the averments made by the assessee are not controverted and should be deemed to be admitted by the doctrine of non-traverse as laid down by the Delhi High Court in the case of Ganesh Rolling Mills v. Union of India 45 ELT 407. This judgment can be seen at page 87 of the paper b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 30-6-1978. From the ledger for the year ended 30-6-1978, the assessee could have given the names of the debtors from whom the drafts were received during the year ended 30-6-1980 relevant for the assessment year 1981-82. CBDT's instruction No. 1659 is not an instruction to be blindly followed by the Assessing Officer. The assessee cannot say that it will not produce its books of account and yet claim the following of the said Instruction. The assessee cannot claim that directions issued by the CIT (Appeals) in the remand order were not followed. Directions issued by the CIT (Appeals) at para 23 of the appellate order dated 29-1-1990 are nothing but extension of section 68 to the assessee's case. The instructions of the CIT (Appeals) were fully and completely followed. Cash credits added under section 68 cannot be treated as income from the business. An explanation of the assessee cannot be equated with evidence whether it is in the form of an affidavit or otherwise. Affidavits cannot be always accepted when other factors are there. Affidavits need not always be accepted as correct as laid down by the Allahabad High Court in the case of Sri Krishna v. CIT[1983] 142 ITR 618. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made to that effect in the respective assessment order/appellate order. The present assessment order dated 13-1-1992 was made as original assessment. It was not made as an assessment as directed by the CIT (Appeals) in para 23 of his appellate order dated 29-1-1990. The CIT (Appeals) is bound by the findings of his coordinate authority. He cannot go beyond the findings given by his predecessors. Reliance is placed on the decision of the Tribunal in ITO v. Ram Prasad [1984] 101 TD 96 (All.).The judgment of the Supreme Court in the case of Jasraj Indersingh v. Hemraj Multanchand AIR 1977 SC 1011 is also to the same effect. This judgment can be seen at page 423 of paper book No. 3. The CIT (Appeals) in his appellate order dated 31-1-1994 has made out a new case without giving any opportunity to the assessee. Section 68 is a fictional provision. It should be construed strictly. The marginal note of section 68 reads as "cash credits". The marginal note can be relied upon to show what the section deals with as laid down by the Supreme Court in the case of K.P. Varghese v. ITO [1981] 131 ITR 597. The head of income is not mentioned in section 68. It was nobody's case that no evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; 25,000 ] 26-10-1979 40,000 28-11-1979 17,845 Draft of Rs. 17,845 is from S.P.S. That appears to be Sardar Puran Singh. 17-12-1979 1,25,000 1,00,000 29-2-1980 1,50,000 26-3-1980 50,000 3-5-1980 50,000 31-5-1980 25,000 25,000 28-6-1980 &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; Remarks (Rs.) 17-12-1979 1,25,000 1,00,000 29-2-1980 1,50,000 26-3-1980 50,000 3-5-1980 50,000 31-5-1980 25,000 25,000 28-6-1980 17,000 75,000 50,000 So it cannot be said by the Assessing Officer in page 5 of the assessment order dated 13-1-1992 that " in view of ....... inability of the assessee to produce any details regarding drafts deposited ". Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order dated 8-10-1984, that Assessing Officer (Mr. O.S. Bajpai) at page 18 stated that " these deposits are the realisation of the sale proceeds against the sales not disclosed in the past years in the books of account ". However, in the assessment order dated 13-1-1992 at page 5 the Assessing Officer (Mrs. Gunjan Misra) stated that "drafts deposited in the Bank of Tokyo as per List-I ......... are actually undisclosed sales of the assessee" and "the sales were not being accounted for in the books of the assessee and the same were being directly deposited in various bank accounts". Thus, the successive Assessing Officers are not sure of the stand taken by them. Added to this, no evidence was brought on record by the Assessing Officer to substantiate the allegation that the impugned amount of Rs. 15,59,845 represented undisclosed sales. In the circumstances, benefit of doubt should have been given to the assessee as contended by the assessee's counsel reproduced earlier. The taxation authorities cannot go on changing their mind from time to time and cannot be allowed to create uncertainty in the realm of taxation [6 ELT 756 Guj. (sic)]. Departure from earlier conclusion witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er that section. Further, the realisations from the sundry debtors cannot be treated as cash credits. Cash credits always appear as a liability in the balance sheet of the assessee. Realisation from the sundry debtors would reduce the sundry debtors appearing on the 'assets' side of the balance sheet. 25. As already stated the Assessing Officer has not brought any material on record to substantiate his allegation that the impugned amount of Rs. 15,59,845 represented undisclosed sales of the assessee. Even assuming that it represents undisclosed sales, the whole of the said amount cannot be included in the total income of the assessee. Only the net profit element in the alleged undisclosed sales of Rs. 15,59,845 can be included in the total income of the assessee. For this proposition reference can be made to the order of the Tribunal in the case of Tarachand Shantilal (given at page 101 of paper book No. 1) and also the judgment of the Calcutta High Court in the case of S.M. Omer given at page 102 of paper book No. 1. 26. Even assuming that some amount is to be added in the total income of the assessee towards the profit element embedded in the alleged unaccounted sales, it can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andum of Appeal. Hence the addition of Rs. 15,59,845 by the Assessing Officer is not warranted. 30. The CIT (Appeals) after referring to the assessee's letter dated 3-10-1985 in para 23 of his order, concluded in para 24 that " it is rather unfortunate that till date such partywise details of persons paying Rs. 18 lakhs and odd has never been furnished in spite of above admission and promise. This obviously shows that the appellant had no such intention ". This conclusion is based on his misreading of assessee's letter dated 3-10-1985. In that letter dated 3-10-1985 (given at pages 3 to 6 of revenue's paper book) the assessee referred to compilation of "partywise details of sundry debtors outstanding as on 30-6-1978 based on the party's ledger for that year". The party's ledger referred to by the assessee is for the year ending 30-6-1978 relevant for the assessment year 1979-80 and not for the year ending 30-6-1980 relevant for the assessment year 1981-82 under consideration. Hence the said observation of the CIT (Appeals) in para 24 is misleading. 31. His observation at the end of the para 25 that "In view of the appellant's counsel's letter dated 3-10-1985 mentioned earlier it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wards undisclosed sales of the assessee and in applying section 68 or the Income-tax Act, 1961 to the same. We delete the sustained addition of Rs. 15,42,000. 38. In the assessment order dated 13-1-1992 the Assessing Officer disallowed Rs. 98,532 out of interest payments claimed by the assessee, holding it as "of penal nature". He did not give the nature of the same and did not give any reason how it is of penal in nature. Before the CIT (Appeals), it was contended by the assessee's counsel that it was paid for default in making payments to banks as per the terms and conditions of the sanctioned loan and that it was compensatory in nature and that it was not paid for any violation of law. The CIT (Appeals) simply held that the Assessing Officer was fully justified making the disallowance 'if the same was not a legitimate deduction". Both the orders of the Assessing Officer and the CIT (Appeals) are not speaking orders. The CIT (Appeals) left the question open by observing "if the same was not a legitimate deduction". Such non-speaking orders deserve to be annulled. Reliance is placed on the judgment of Gauhati High Court in the case of Baidya Nath Sarma v. CWT [1983] 140 ITR 801 w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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