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TMI Blog2006 (1) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... 00. Thus, any sum found credited in the books of account of the assessee maintained for the previous year may be charged to income-tax as the income of that previous year if (i) the assessee offers no explanation about the nature and source of such sum, or (ii) explanation offered by him in the opinion of the AO is not satisfactory. From a careful perusal of the record, we are of the opinion that the assessee has not properly discharged the onus of proving the cash credit by placing some documentary evidence as to what efforts he has made in order to produce the creditor before the AO and also to what has happened to the credit, whether it was returned or not. We, therefore, set aside the order of the CIT(A) and restore the matter to the file of the AO with a direction to re-adjudicate the issue afresh after affording a proper opportunity of being heard to the assessee and if the assessee succeeds in discharging its onus by placing some evidence that he has made all possible efforts to produce the creditor, but, failed to do so, AO shall issue summons u/s 131 to the creditor, if it is not responded, he may exercise his powers enshrined under order 16 of CPC in the same manner as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an appeal before the Tribunal with the submission that the assessee was badly failed to produce the creditor and as such, the creditworthiness of creditor and genuineness of transactions was not proved and the CIT(A) having ignored these facts has deleted the additions. The learned counsel for the assessee, on the other hand, has, submitted that since the assessee did not have a cordial relation with the creditor, he made a request to the AO to summon the creditor and accordingly summons under s. 131 was issued but the creditor did not appear. By making the request to the AO to summon the creditors and by furnishing a bank certificate and the PAN of the creditor, the assessee has discharged its primary onus which lay upon it. Now the onus is upon the Revenue to find out something contrary to establish that the creditor was not man of means and the transaction was not genuine. Once the creditor has flouted the directions of the AO, the AO can enforce his presence before him by adopting a coercive measure available under the law. But he did not do so and fixed the responsibility upon the assessee to produce him. 5. Having carefully examined the orders of the lower authorities and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement and that powers include issuance of proclamations and bailable and nonbailable warrants when he is satisfied that the witness is avoiding the service or not complying the summons issued to him. In the case of Nathu Ram Premchand vs. CIT (1963) 49 ITR 561 (All), their Lordships of the Allahabad High Court have come across with a similar type of problem as to how the presence of the witness can be enforced by the AO if he defies the directions or the summons issued by the AO. Their Lordships have examined the relevant provisions of the CPC, which entail the power to the Civil Court to enforce the attendance of the person or witness and after having examined the relevant provisions of order 16, r. 10 of the CPC, their Lordships have categorically held that the presence of the witness can be enforced by issue of a proclamation or warrant bailable or non-bailable. The relevant observations of their Lordships are extracted hereunder: It appears that Banarasidas was examined not in the assessment proceedings giving rise to this reference but in those relating to the assessment of Banarasidas. Sec. 37(1) of the Act confers on the ITO, the AAC, the CIT and the Tribunal the powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rasidas. We are of the opinion that under these circumstances neither the ITO nor the IAC nor the Tribunal were justified in fastening the blame at the door of the assessee and disbelieving his version that the amount of ₹ 10,000 entered in his account books was the deposit made by Banarasidas on the ground that the former has failed to produce the latter. The assessee took all the steps that lay in his power to secure the presence of Banarasidas before the ITO. In these circumstances, it appears to us that the Tribunal wrongly took into consideration the circumstances that Banarasidas had not been produced. On the material on the record there is nothing to refute the allegation of the appellant that this sum of ₹ 10,000 is the deposit of Banarasidas with the assessee-firm. The Tribunal had before it no legal material on which it could come to a contrary conclusion. 6. The powers of the AO under s. 131 was also considered by the Hon'ble Calcutta High Court in Jhabarmull Agarwalla vs. Kashiram Agarwalla Ors. (1969) 71 ITR 269 (Gal), wherein the Hon'ble Calcutta High Court held that order 11, r. 14 CPC confers power of Civil Court to call for documents from a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viz., the ITO, AAC, IAC, CIT(A) and CIT are conferred with the same powers as are vested in a Court under the CPC, 1908, when trying a suit. The CPC confers upon a Court powers, for the exercise whereof, existence of a suit or a proceeding is a sine qua non. In pari materia, therefore, powers in respect of matters mentioned in s. 131(1), viz., (a) discovery and inspection; (b) enforcing the attendance of any person and examining him on oath; (c) compelling the production of books of account and other documents; and (d) issuing commissions, can be exercised only if a proceeding is pending before the concerned officer and not otherwise. 8. Similar views were expressed by the Hon'ble Calcutta High Court in ITO vs. James Joseph O'Gorman (1993) 204 ITR 454 (Cal) , in Dwijendralal Brahmachari vs. New Central Jute Mills Co. Ltd. (1978) 112 ITR 568 (Cal) and by Hon'ble Rajasthan High Court in CIT vs. Globe Transport Co. (1991) 93 CTR (Raj) 121 : (1992) 195 ITR 311 (Raj). 9. CBDT had also an occasion to consider this issue. It issued a Circular No. 31D(XL-67) of 1966, dt.23rd Nov., 1966, which describes the procedure for enforcing the summons. The said circular reads as under: & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppears and satisfies the ITO that he had not without lawful cause, failed to comply with the summons or intentionally avoided his services or that he has no notice of the proclamation in time to attend. (v) Under r. 12 of order 16, the ITO has also the powers to impose upon the person, who does not appear or appears but fails. to satisfy him as above, to impose upon him such fine not exceeding ₹ 500 as he thinks fit having regard to such persons conditions in life and all the circumstances of the case. (vi) It should be noted that, under sub-s. 2 of S. 131 of the IT Act, 1961, the ITO has a similar power to impose a fine not exceeding ₹ 500 in case where the person summoned intentionally omits to attend or produce the books of account and documents at the place and time named. (vii) The warrant for arrest or the order for attachment may be made according to the procedure laid down for the Civil Courts. In matters of doubt the local Government pleader may be consulted. (viii) Disobedience of the summons to attend renders the person summoned liable to prosecution under s. 174 of the IPC. In this connection, the ITO should bear in mind the provisions of s. 195(1)(a) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bombay High Court in Ramkumar Jalan was also rendered for the asst. yr. 1949-50. During those years, there was no provision equivalent to s. 68 of IT Act, 1961. Sec. 68 was introduced in the statute with new Act of 1961. It is a self-contained code so far as burden of proof is concerned. Before analysing s. 68 further with the reported decisions on the subject, certain facts relevant to the issue needed to be considered. A loan of ₹ 5,00,000 was introduced through cheque in the name M/s Equinox Assets Capital Management (P) Ltd. The assessee was required to prove the loan. However, he requested the AO to summon the creditor to verify his creditworthiness and genuineness of the transaction. Summons under s. 131 was issued but the creditor did not appear, then the AO asked the assessee to produce the creditor. Since the assessee failed to produce the creditor, the AO treated the said loan of ₹ 5,00,000 as unexplained and added the same to the total income of the assessee along with interest of ₹ 75,000. Sec. 68 reads as under: 68. Cash Credits Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icient to discharge the onus, as has been repeatedly held by various High Courts in the case of M.A. Unneeri Kutty vs. CIT (1992) 198 ITR 147 (Ker); CIT vs. Precision Finance (P) Ltd. (1994) 121 CTR (Cal) 20 : (1994) 208 ITR 465 (Cal); Nizam Wool Agency vs. CIT (1992) 193 ITR 318 (All); Nanak Chandra Laxman Das vs. CIT (1982) 28 CTR (All) 280 : (1983) 140 ITR 151 (All); B. Tex Corp. vs. ITO (1993) 46 TTJ (Bom)(TM) 668 : (1993) 202 ITR 17 (Bom)(TM)(AT). Further, Hon'ble Bombay High Court in Velji Deoraj Co. vs. CIT (1968) 68 ITR 708 (Bom) held that (under 1922 Act) the assessee's duty to prove that an unexplained credit entry in his account books does not represent undisclosed income, is not discharged by merely showing that the entry appears in the account of a third party and that the party in whose name the amount is credited is not a fictitious party but a real party. He has to prove further that the entry made in the account books is a genuine entry. 18. The onus will shift on to the Department only when identity and creditworthiness of the creditor are established and there is prima facie material to show that transaction is genuine. Merely by making a request for issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rined in order 16 of the CPC, 1908 being a Civil Court by virtue of s. 131 of the IT Act. He has simply filed the bankers certificate to prove that the transaction was performed through banking channels, but, these documents are not suffice to hold that the primary onus which lay upon the assessee has been discharged. Even before us, it has not been established by the assessee through any evidence that the loan received by it has been duly refunded to the creditor or he has made all possible efforts to produce the creditor before the AO. Since the creditor was the witness of the assessee, it was for him to produce him before the AO in order to discharge his primary onus. But, the assessee did not do the same. Before making a request to the AO for summoning the creditors, assessee should establish with some evidence that he has done something more in order to produce the creditor before the AO. If it is done, the onus is certainly shifted upon the Revenue and it is for the AO to enforce the attendance by summoning the creditors under s. 131 of the IT Act and examine them with respect to cash credits. If the creditor did not respond the summons issued under s. 131 of the IT Act, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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