9911796707
TMI Blog1993 (6) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... third round of assessment. Fresh notice under s. 143(2) was served on the assessee and in compliance of that notice, the assessee appeared before the ITO where he contended that the account books for the asst. yr. 1980-81 having been lost as per copy of report dt.1st Jan., 1981, made to the Police, already filed. The same cannot be produced. However, he filed copies of trading account, P L a/c and balance sheet on the basis of books of account so maintained and requested that the assessment should be made on the basis of statutory statement filed with the return. The ITO found that the assessee made purchases from MMTC apart from purchase made from other sources. During the year under consideration, the assessee purchased imported goods on high sea basis on12th July, 1979through M/s Narain Dass Rattan Lal. The payments toward the said purchases were made by means of pay order dt.16th Sept., 1979for Rs. 2,04,000 and draft dt.5th Dec., 1979for Rs. 14,800. The ITO mentioned that the assessee had not been able to explain the source of investment for Rs. 2,18,800 despite the fact that the assessee had explained that the payments were made by raising loans from the following parties: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties are not under the control of the assessee. Therefore, it is not possible to produce them. It was pleaded that the assessee had been able to prove genuineness of loans and capacity of the parties which could be verified by summoning them. On the request of the assessee summons were issued to the aforesaid parties for verification of alleged loans. But the notices were received back with the remarks that there was no person/firm of such name on the given address. This was confronted to the assessee. The assessee further filed copies of assessment orders of the parties from whom he has shown raising of loans and submitted that explanation and evidences filed regarding the source of purchase proved the identity of the creditors, genuineness of the transaction and their capacity. Therefore, no addition is called for. However, the CIT(A), was not satisfied with his explanation. So, he confirmed an addition of Rs. 2,18,000 in the hands of the assessee. Similarly addition of Rs. 12,500 was also made in respect of interest payment shown by the assessee. Aggrieved by that order, the assessee filed appeal before the Tribunal. 5. The learned counsel for the assessee, Shri O.P. Sapra ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and why the ITO took up the matter hurriedly to complete assessment ex parte only towards the end of the financial year. Keeping in view the complexity of investigations and information available on record, the order was set aside which proves that the assessee made efforts to produce those parties through legal processes issued by Assessing Officer and submitted for the enquiries in respect to the raising of loans from those four parties. It was also pointed out that the assessee has also given their addresses. Instead of all this in the third round of assessment, the ITO just completed the formality and sustained the additions made. When this matter was taken up in the second round of appeal before the first appellate authority, the assessee reiterated that the evidence in support of the claim of the assessee regarding raising of loans from these four parties were available before the Assessing Officer. However, he has no control over these parties and it is not possible for the assessee to produce them at this later stage, particularly when the amount in question raised by the assessee from the parties related to September 1979. Therefore, he requested the Asstt. CIT(A) to issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vastava submitted that as per the decision of Hon'ble Calcutta High Court in the case of Shanker Industries vs. CIT (1978) 114 ITR 689 (Cal), the assessee is required to prove the identity of the creditor, genuineness of the transaction and capacity of the creditor. As per the evidence filed by the assessee, the burden laid upon the assessee has been discharged. Our attention was invited to the assessment orders filed along with the Paper Book in respect of Shri Chandra Gupta and in respect of Shri Ram Saran. It was pointed out that these pertained to the assessment year after 1981-82, whereas the loan is raised in the asst. yr. 1980-81. These documents have no relevance. However, if we see all these assessment orders, it will be clear that these persons have shown no business income. If there is no business income and the assessees were assessed in the salary circle, certificates in which they have shown savings from business become falsified. Regarding Aggarwal Trading Co., it was submitted that this gentleman had not appeared before the ITO. A certificate has been given by him simply in respect of Shri Puran Chand, Proprietor of M/s Puran Chand Mohinder Kumar Rewari. It was subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could prove the genuineness of raising of loans in respect of three parties. However, with respect to fourth one, M/s Puran Chand Mohinder Kumar, he can only produce the pronote and no other evidence. To this extent if at all it is considered, the evidence will not be sufficient. So additions cannot be sustained in full. 7. We have considered the rival submissions. In this case, the first and second assessment orders were passed under s. 144 of the IT Act on8th March, 1983and4th March, 1985. In both these assessment orders, the Assessing Officer has mentioned that the assessee had not been able to explain the source of payment of Rs. 2,18,800 but it is surprising that the Assessing Officer has not mentioned whether the assessee was ever called upon to produce these parties or not. From the letter of the assessee, dt. Feb., 1983, to the Asstt. Director/Inspector Intelligence and another letter to the ITO, dt. 9th March, 1983, makes it clear that the assessee had given all bank statements and pass books, GIR number of the assessee 3170-S, District V(13), copy of account of M/s Reliance International Corpn. Pvt. Ltd. with details of parties' amount and PNR number along with address ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber, addresses of the parties, were also made available. But the Assessing Officer did not care to verify the genuineness of the transactions and capacity of these creditors. But in the third round of assessment instead of making enquiries from those parties, whose details were made available, the Assessing Officer had gone on the basis of contradiction in the statement recorded and the plea taken by the assessee and thus, he decided the matter. The assessee had submitted an explanation vide letter dt.24th March, 1988, before him that the purchase of imported goods on high sea basis was made from M/s Reliance International Corpn. Pvt. Ltd. after raising loans from four parties as per details already furnished to the Department. The purchases and sales were duly incorporated in the books of account. The Assessing Officer did not care to verify the truthfulness of the matter from M/s Reliance International Corpn. Ltd. and also from M/s Narain Dass Ratan Lal through whom these purchases were made. When the matter was carried before the CIT(A), in second round, the assessee made it clear that in the reassessment proceedings before the Assessing Officer, he has filed copies of affidavi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he correct name, address and GIR number of the creditor, he has discharged his onus to prove the genuineness of credits in his accounts and unless a notice in due form under s. 131 of the Act is issued by the Revenue authorities to test the genuineness of the transaction or the capacity of the creditor to pay, the amounts cannot be assessed in the hands of the assessee. We are aware that Allahabad High Court in the case of Nanak Chandra Laxman Das, has taken a view that mere confirmation letter from alleged creditor could not be treated as sufficient evidence to prove the genuineness of the loan and it will not amount to discharge of burden placed. This view was further reiterated in another case of Sri Krishna vs. CIT, by Allahabad High Court where the observations were made that ordinarily, in the absence of denial, the statements may be accepted as true but if there are circumstances which suggest that the statements on affidavit should not be accepted as true, the absence of denial by the other side, would not by itself be sufficient to clothe the statements on affidavit with truthfulness and reliability. The Supreme Court in the case of CIT vs. Vegetable Products and in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had no control over these parties, he was asked to produce them by the CIT(A) and the assessee had given all the details relating to them before the CIT(A). Therefore, the burden laid upon the assessee had been discharged with respect to these parties and unless the Department is able to show from the evidence available or from additional evidence on the record that these are not genuine transactions or the parties have no capacity, no adverse inference can be drawn. So far as the loan from M/s Puran Chander Mohinder Kumar to the extent of Rs. 50,000 is concerned, the only evidence available with the assessee is a receipt which has been placed on record. No other evidence is available with the assessee. There is no GIR number, no address of this party is available. Therefore, so far as this party is concerned, the burden which laid upon the assessee had not been fully discharged. There is no sufficient evidence to prove that the loan to the extent of Rs. 50,000 shown to have been raised from M/s Puran Chander Mohinder Kumar, had a capacity to make such loan. Therefore, in the absence of this evidence, addition to this extent can be sustained as unexplained investment under s. 69. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s M/s Aggarwal Trading Co., M/s Chander Trading Co. and M/s Ram Saran Das Lakshman Das Co. Therefore, to this extent of Rs. 1,50,000, no addition can be made under s. 69 of the IT Act in the income of the assessee as unexplained investment. However, we find that the assessee had not given sufficient evidence with regard to creditworthiness of M/s Puran Chand Mohinder Kumar from whom a loan of Rs. 50,000 had been shown to have been raised. Therefore, to this extent addition can be sustained. We, therefore, modify the order of the CIT(A) accordingly and direct the ITO to delete the addition of Rs. 1,50,000 out of Rs. 2,00,000 shown to have been raised as loan. The Revenue authorities have wrongly made addition of Rs. 2,18,800 shown in the bill of purchase of nickel silver scrap. The assessee explained that a sum of Rs. 2,04,000 was paid by means of pay order and Rs. 14,800 by means of a draft. The Department had suspected the raising of loan of Rs. 2 lakhs. Therefore, addition to that extent was not justified. Now as per our order addition to the extent of Rs. 50,000 can be sustained. 8. The next question relates to disallowance of interest. The assessee had claimed payment of in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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