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TMI Blog1990 (12) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... at the facts in the present year are identical to the facts in the asst. yr. 1982-83 where the disallowance was reduced to 1/12th. Therefore, there is no justification for restricting it to 1/6th of the total expenses. The learned Departmental Representative Shri Amitabh Kumar supported the action of the CIT(A). 6. We have considered to rival submissions. Keeping in view the fact that in the asst. yr. 1982-83, the disallowance was reduced to 1/12th by the CIT(A), we modify the order of the CIT(A) and restrict the disallowance to 1/12th of the total expenses. 7. Now we come to main ground of the assessee's appeal where the assessee has challenged the confirmation of addition of Rs. 69,517 in the following names: (a) Rs. 28,000 cash credit in the account of Mrs. Praveen Jain (b) Rs. 32, 000 cash credit in the account of Mrs. Sunita Jain (c) Rs. 9,517 interest on the deposits made by Smt. Praveen Jain and Smt. Sunita Jain. At the time of assessment the ITO found that the assessee had shown cash credits amounting to Rs. 60,000 (Rs. 28,000 in the name of Smt. Praveen Jain w/o Shri Inder Kumar Jain, partner and Rs. 32,000 in the name of Smt. Sunita Jain w/o Shri Virendra Kumar J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onths because of her two growing daughters aged about 12 years and 4 years. On this statement the ITO observed that when Smt. Praveen Jain had a responsibility to bring up two children, how could she be able to work on Sirta Vadan at earlier stage and when the children are comparatively more grown up and school going, she has left the work. On this statement given by Smt. Praveen Jain, the ITO pointed out infirmity regarding teaching of about 250 to 300 girls in a group of 7-8 girls at a time and 1 to 4 groups a day. The ITO further observed that Smt. Praveen Jain was maintaining a diary but she could not produce the same and stated that the diary has been destroyed. The ITO highlighted that Smt. Praveen Jain had admitted that she had not obtained any diploma or degree in music but studied music as a subject upto Intermediate. The instrument 'Sitar' was presented to her by her father at the time of her marriage. In order to verify the correctness of this statement, the ITO deputed Inspector to make enquiries at her residence. Inspector after making local enquiries, found that never any coaching centre for Sirta Vadan worked at her residence. He was of the view that considering her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubala Jain, Rs. 15,000 and Smt. Kanchan Jain Rs. 10,000. The other two ladies are also closely related to the partners of this firm and the sister concern M/s Paras Foundry,Agraand have made deposits with them. Shri R.S. Garg was also cross-examined in connection with all these loans. He explained that the financial position of the firm M/s Indian Ceramic House was tight and there were debit balances in the bank, therefore, they did not want to route the transaction through bank. The ITO observed that when M/s Indian Ceramic House was in financial crisis, how the alleged loans were given to that firm without pro notes. In the absence of any evidence, the statement of Shri R.C. Garg was considered by the ITO, to be false and sham. The ITO referring to receipt of Rs. 7,500 by cheque on9th June, 1982from M/s Samrat Engg. Works,Agra, had mentioned that this amount was found to have been received in cash on12th April, 1981. Similarly Rs. 3,000 were deposited in bank on29th March, 1984stated to have been received from LIC. He concluded that the ladies have no independent source of income, so he treated the deposits as not genuine and held that these are the secreted income of the firm pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Aggarwal pointed out that there are two sets of partners in the firm, Group 'A' consists of S/Shri D.K. Jain, R.K. Jain and I.K. Jain whereas Group 'B' consists of S/Shri K.L. Jain, Praveen Jain and Shri A.K. Jain. But there is no direct relationship of these ladies and the partners in whose names cash appeared in the books of account. It is pointed out that these ladies are income-tax assessees. They have made the payment to the assessee firm through account payee cheques. Therefore, the identity as well as the genuineness of the transactions cannot be doubted. In respect of creditworthiness, it was pointed out that these ladies have confirmed in their statements before ITO the lending of this money and the source from where they have earned this amount. It was pointed out that these ladies are income-taxpayers, their first assessment was completed under s. 143(3) and the subsequent assessments were accepted under s.143(1), where the source of their income was accepted by the Department. Relying on the decision of Patna High Court in the case of Addl. CIT vs. Hanuman Agarwal (1984) 40 CTR (Pat) 15 : (1985) 151 ITR 150 (Pat) it was submitted that where the assessee had given GIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee which shows cash credit in the name of certain person, it is necessary for the assessee to establish the source of that money. The burden of proof lies upon him. The Department can reject the evidence of the assessee on the point of inherent weakness in the explanation or it can rebut it by putting to the assessee some information or evidence which came in its possession. In this case the assessee had shown cash credits in the names of ladies. These ladies are not directly related to the firm but somehow have relation with the person who in turn have relation with the partners. Therefore, the ladies are indirectly related to the firm. It is also submitted that the Revenue authorities have pointed out infirmities and inherent weaknesses in the evidence of the assessee which goes to show that these ladies had no source of income. The Department can go behind the assessment orders of these ladies which do not conclusively prove the source of income of these ladies. In reply, the learned counsel for the assessee pointed out that when the Department admitted the source of income by taxing their source of earning separately in the income-tax assessments, now the Department cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch evidence, it must either show an inherent weakness in the explanation or rebut it by putting to the assessee some information or evidence which it has in its possession. The Department cannot by merely rejecting unreasonably a good explanation, convert good proof into no proof. When proceedings are validly commenced under s. 34 of the Indian IT Act, 1922, there is no difference between an ordinary assessment and an additional assessment under s.34 and the same rule as to burden of proof governs the additional assessment." In the case of Shankar Industries vs. CIT (1978) 114 ITR 689 (Cal), the Hon'ble Calcutta High Court has laid down that the assessee is required to prove the identity of the creditor, the capacity of such creditor to advance the money and the genuineness of the transaction. Keeping in view the principles laid down by the Hon'ble Supreme Court and the Hon'ble Calcutta High Court, we find that in the present case the creditworthiness and the capacity of the creditors are not proved, Besides the findings given by the CIT(A) with which we agree, we would like to mention here that the mode of private earning in almost all the cases is private coaching/classes at ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding business themselves without getting registered under Moneylending Act. Therefore, the source of income stated by these ladies is not at all believable because of the infirmity and inherent weakness in the explanations of these ladies. There is no proof to substantiate this source of income. Therefore, the affidavit and the explanation given by these ladies can at the most be a self-serving statement or a self-serving document which cannot be made the basis of proof of their source of income. It is pertinent to mention here that the CIT(A) has brought out in his discussion on paragraph 4.22 of his order the relationship of these ladies with the partners of M/s Paras Foundry and M/s Mahavir Iron Foundry and in the absence of proof, he has doubted the very source of earning of this amount which to our mind is a correct conclusion when these ladies had failed to stand the test of cross-examination regarding their original source of income from private tuitions, coaching and moneylending business. The learned counsel for the assessee strongly relying upon the decisions of the Patna High Court in the cases of Hanuman Agarwal and Bahri Brothers (P) Ltd., contended that these ladies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of these creditors. So the assessment orders are not conclusive proof of their sources of income so far as the present case is concerned. It may be a good escape for the cases of ladies but when it comes to verification the Department is at liberty to examine the source. Hence, we are of the opinion that the assessment orders passed in the ladies' cases are not the conclusive proof of their source of income specifically when the Department has not given any decision about their sources on merit. So the assessee cannot take benefit of these assessment orders. So far as the case law referred by the assessee's counsel is concerned, every case stands on its own footing on the given facts and circumstances of the case. The ratio laid down in those cases cannot be mechanically applied in another case where the facts are different as this is a case before us. Therefore, the Department has every right to point out the inherent weakness in the explanation given by the assessee regarding source of income and come to the conclusion that the assessee had miserably failed to discharge the onus of proving creditworthiness of these creditor ladies and their capacity to advance loan to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the ITO was confirmed by the CIT(A). 13. The learned counsel for the assessee pointing out the qualification of Shri Rajesh Kumar and the outstanding career, submitted that he was well qualified person who was looking after the business of the assessee. Therefore, the payment made to him should not be rejected. It is also pointed out that whenever he has devoted full time, he was given full-time payment and whenever he has worked only part-time, he was given part-time salary, which is clear from the details given above. Therefore, the lower authorities have gone wrong in doubting the capacity of Shri Rajesh Kumar to do work from morning till evening without appreciating his qualifications. As against this, the learned Departmental Representative supported the action of the Revenue authorities. 14. We have considered the rival submissions. Keeping in view the qualification and the factor that whenever Shri Rajesh Kumar has devoted full time in the company, he was given full payment and whenever he was not able to devote full time, he was given part-time payment and whenever he was absent, he was not given any payment for the day when he was absent, we are of the opinion that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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