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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 ..... ical 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22.3.84 By cheque No. 067781 of Canara Bank,Agraissued in favour of M/s Mahavir Iron Foundry, 67, Ind. Estate,Agra. . 32,000 The ITO proceeded to examine the genuineness of the cash credits appearing in the books of account of the assessee. Therefore, he recorded the statement of Smt. Praveen Jain. In the statement she had stated her source of income from teaching Sirta Vadan to girls in her locality but stated that she had stopped this work for the last 4-5 months 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. Prav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al and it was mentioned that in case letter dt.19th April, 1985was actually given on that date, Shri Agarwal must have examined Shri K.K. Goyal. Therefore, the letter contradicts the deposition made by him. Referring to another amount to Rs. 10,000 stated to have been received by Smt. Praveen Jain from Indian Ceramic House (Potteries),Agra, which was lent out on5th Nov., 1980, the ITO noticed that apart from Smt. Praveen Jain the same firm was alleged to have taken loans from Smt. Madhubala 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly members of the partners. 9. On appeal, the CIT(A) further analysed the evidence produced by the assessee vis-a-vis case law relied upon by the assessee and came to the conclusion that the assessee had not been able to prove the creditworthiness and capacity of these ladies in whose names these cash credits appeared. Therefore, he confirmed the order of the ITO. The assessee is aggrieved and has come up in appeal before the Tribunal. 10. The learned counsel for the assessee Shri C.S. 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Revenue authorities had gone wrong in disbelieving the evidence of the assessee and has wrongly pointed out the inherent weakness in the explanation of the assessee. Our attention was also invited to the fact that the report of the IT Inspector which was the main basis for the infirmity in the statement was never supplied to the assessee. As against this, the learned Departmental Representative Shri Amitabh Kumar submitted that if there is an entry in the account book of the assessee 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 po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must come from the assessee and not from the Department. In cases of high denomination notes, where the business and the state of accounts and dealings of the assessee justify a reasonable inference that he might have for convenience kept the whole or a part of a particular sum in high denomination notes, the assessee, prima facie, discharges his initial burden when he proves the balance and that it might reasonably have been kept in high denomination notes. Before the Department rejects such 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so investing this amount in the borrowings by individuals. The so-called borrowings by individuals on interest is also unbelievable in the circumstances that this lady belongs to the trading class. She has been giving amounts on interest to various individuals but no pro note or 'Rooka' was ever executed by this lady. The story of financial crisis of the borrower stated by the lady is also not satisfactorily explained. It is not understood as to how these ladies have entered into the moneylending 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income, without any details, no option is open to the Department, not to assess him on that income when he has returned a particular income from particular source. So far as that case is concerned, the Department cannot go behind that estimation unless it is reopened under s. 147 or 263. But when it comes to examination in another case, the Department has every right to go behind the veil. It means that so far as this case is concerned, the Department has every right to examine the source 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 circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuary 396 6 working days February 396 6 working days March 198 3 working days Total 15,180 . *The above monthly days of his attendance in the months of Dec., Jan., February March, are evident from the employees attendance register in which his name duly appears alike other employees of the assessee firm and the same is produced." However, the ITO did not agree with the explanation given by the assessee relating to any work done by Shri Rajesh Kumar in the assessee's firm. Therefore, he disallowed Rs. 12,000 under s. 40A(2)(a) of the IT Act, holding that this payment is being made on account of diverting the income of the firm to son of one of the partners and it is highly excessive in view of the work done by him. This finding 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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