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TMI Blog1990 (12) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... stricted the disallowance to 1/6th of the total expenses. 5. The learned counsel for the assessee Shri C.S. Aggarwal pointed out that the facts in the present case are identical to the facts in the case of M/s Mahavir Iron Foundry wherein the disallowance was reduced to 1/12th in the asst. yr. 1982-83. 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 the rival submissions. Keeping in view the fact that in the case of the assessee's sister concern M/s Mahavir Iron Foundry, 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 in the following names: (a) Rs. 18,000 cash credit in the account of Smt. Madhu Bala Jain. Rs. 7,746 credited in her account as interest as well as the old balance in her account. (b) Rs. 54,000 cash credit in the account of Smt. Kanchan Jain. Rs. 6,808 credited a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rwal,Agra, cheque No. 1347. . Rs. 9,000 8.4.1983 By amount deposited in Canara Bank loans amount received back with interest and work done. . Rs. 20,000 12.4.1983 To cheque No. 053061 Canara Bank issued to Paras Foundry,Agra Rs. 35,000 . 25.6.1983 To cheque No. 050062 Canara Bank issued to Paras Foundry Rs. 10,000 . 26.10.1983 To cheque No. 053063 Canara Bank issued to Paras Foundry,Agra. Rs. 9,000 . In view of the reply given by the assessee, the ITO issued summons under s. 131 of the IT Act, of Smt. Madhubala Jain and Smt. Kanchana Jain. In the statement recorded on 18th March, 1985 Smt. Madhubala Jain disclosed her source of income from Coaching/teaching painting to girls at her residence and money-lending business on interest. During the cross-examination Smt. Madhubala Jain could not tell the names of persons to whom she has taught the subject painting and also the name of the lender of money. On the basis of improbabilities regarding nature of painting imparted by her, the story of imparting knowledge of painting was disbelieved. Besides this, the ITO sent Inspector to enquire into the existence of any school for painting. The report was that no such coachi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding out of money by these firms or persons belonging to these firms to outside parties. He has also shown his ignorance regarding transaction entered into between Smt. Munni Devi Agarwal and Smt. Madhubala Jain. Smt. Madhubala Jain in her statement mentioned that she has lent money to Smt. Munni Devi Agarwal through Shri K.K. Goyal, Dalal. The ITO doubted the genuineness of these transactions because Shri Darshan Lal, partner did not produce letter dt.19th April, 1985addressed to ITO (SIC),Agrafrom Shri K.K. Goyal, nor cross-examined Shri K.K. Goyal. From all these facts, he concluded that the loan given to Smt. Munni Devi and alleged receipt of the money were actually sham transactions. Similarly in the case of Smt. Kanchana Jain, the ITO made enquiries regarding pay order of Rs. 9,000 purchased in her favour. A letter Smt. Munni Devi Agarwal showed repayment on6th Oct., 1983through a cheque whereas in the credit account of Smt. Kanchana Jain in Canara Bank, it appears on26th Oct., 1983by pay order No. 1347. The ITO examined the issuance of pay order and noticed that credit slips of pay order clearly show the name of person in whose favour the pay order was purchased as well as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of M/s Mahavir Iron Foundry,Agra. The assessee is aggrieved. 9. 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 the 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. Ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 names 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 persons who in turn have relationship 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 admit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 Calcutta High Court, we find that in the present case, the credit worthiness and the capacity of the creditors are not proved. Besides, the finding given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 tuition, coaching and money lending 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 who made investment in the assessee firm are income-taxpayers. In the case of Smt. Praveen Jain and Smt. Madhubala Jain, the assessments for asst. yr. 1980-81 were completed under s. 143(3) though later on their assessment were completed under s. 143(1) in which the Department has accepted the income returned by them relating to the source of income, they have shown in this case also. Therefore, when the Department has accepted the investment, it is not proper to doubt the source of income. It was also pointed out that even if the sources of third parties are disbelievable, what is the duty of the assessee, the duty of the assessee is only to establish the source of the creditor and it is not expected from him to indicate or prove the source of such loans whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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