9911796707
TMI Blog1994 (6) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... 25,000 (iv) Roshan Lal (50,000 + 1652 intt.) : Rs. 51,652 (v) Madan Trading Co. (1,00,000 + 3452 intt.) : Rs. 1,03,432 (vi) Ved Prakash Sons (1,25,000 + 4469 intt.) : Rs. 1,29,469 (vii) Madan Lal Sons (75,000 + 3298) : Rs. 78,298 (viii) Dhiraj Raj Thakur Dass (1,50,000 + 13,500 intt.) : Rs. 1,63,500 (ix) Ashok Kumar Singhal (1,00,000 + 9,000 intt.) : Rs. 1,09,000 (x) Rajesh Kumar (1,00,000 + 9,000 intt.) : Rs. 1,09,000 (xi) Ashok Kumar (1,00,000 + 9,000 intt.) : Rs. 1,09,000 . Rs. 9,88,351 The Assessing Officer called upon the assessee to explain the nature and source of these deposits and to establish genuineness thereof. He also required the assessee to furnish copies of bank account of these parties and also copies of balance-sheets of those who are assessed to income-tax and "even by producing such persons". In reply, the assessee filed copies of account of these parties and explained that all are assessed to income- tax and accordingly loans in their respective names should be accepted. The Assessing Officer did not find the explan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer, his action deserves to be upheld and that the assessee has not discharged the onus cast on it by s. 68 of the Act by identifying the creditors, proving their creditworthiness and establishing the genuineness of their loans. He further held that there was no error or even irregularity in assessing the amounts simultaneously under the provisions of ss. 68 and 69 of the Act or even in the Assessing Officer insisting on the physical presence of the parties. Relying on Supreme Court judgment in the case of Biju Patnaik and Chuhar Mal vs. CIT (1988) 70 CTR (SC) 88 : (1988) 172 ITR 250 (SC) as also in the case of Sree Lakha Banerjee vs. CIT (1962) 49 ITR 112 (SC) at 117 and further Kale Khan Mohd. Hanif vs. CIT (1963) 50 ITR 1 (SC) as also judgment of various High Courts in CIT vs. R. Girdhar (1984) 43 CTR (Kar) 253 : (1984) 145 ITR 246 (Kar), Swaran Kanta vs. CIT (1989) 176 ITR 29 (P H), CIT vs. K. Saraswati Ammal (1984) 39 CTR (Mad) 35 : (1984) 146 ITR 486 (Mad) and CIT vs. Krishna Mining Co. (1972) 83 ITR 860 (AP), the AAC confirmed the addition. Hence, the assessee is in second appeal before us. 3. The learned counsel for the assessee, assailing the action of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation in all the 11 cases. In the case of Ved Prakash (Rs. 1,29,469), Roshan Lal (Rs. 51,652), Madan Trading Co. (Rs. 1,03,432) and Madan Lal Sons (Rs. 78,298) copies of their respective assessment orders had been filed which was the best proof in support of the transaction. In all the cases where tax was deducted at source on interest paid on the loans by the assessee, the parties have been given adjustments thereof by their respective Assessing Officers against their tax liability. The authorities below had completely blacked out the vital information in the case of M/s Dhraj Das Thakur Das of his being an income-tax assessee. Various steps in the verification of cash credits can be traced from the decisions following: (a) Sarogi Credit Corporation vs. CIT 1975 CTR (Pat) 1 : (1976) 103 ITR 344 (Pat). (b) Shankar Industries vs. CIT (1978) 114 ITR 689 (Cal). (c) Addl. CIT vs. Hanuman Agarwal (1985) 151 ITR 150 (Pat). (d) Addl. CIT vs. Bahri Bros. Pvt. Ltd. (1984) 42 CTR (Pat) 66 : (1985) 154 ITR 244 (Pat). (e) Jhaveribhai Biharilal Company vs. CIT (1984) 43 CTR (Pat) 125 : (1985) 154 ITR 591 (Pat). (f) CIT vs. S.C. Ghosal (1977) 106 ITR 980 (Cal). Reliance is hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al submissions heard and relevant orders read besides the concerned pages of the paper book as well as the case law relied upon and also the relevant provisions of law in this regard. Sec. 68 of the IT Act governs treatment of cash credits and reads as under: "68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." 5.2 The requirements of s. 68 are that there ought to be a sum which is found credited in the books of accounts of the assessee maintained for any previous year, wherein support of genuineness of the same the assessee offers no explanation or the same offered is not in the opinion of the Assessing Officer satisfactory, then the cash credits may be charged to income-tax as income of the assessee of the relevant previous year. This section has received repeated judicial attention of various High Courts and also of Hon'ble Supreme Court into the manner and im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kar Industries vs. CIT, the Hon'ble Calcutta High Court observed that: "It is necessary for the assessee to prove, prima facie, the transaction which results in a cash credit in his books of account. Such proof includes proof of the identity of his creditor, the capacity of such creditor to advance the money and, lastly, the genuineness of the transaction. Only after the assessee has adduced evidence to establish prima facie the aforesaid, the onus shifts to the Department. where the assessee establishes only the identity of the creditor and nothing more, the cash credits can be treated as the income of the assessee from undisclosed sources." 5.4 The Hon'blePatnaHigh Court again had an occasion to consider the meaning and import of s. 68 in the case of Addl. CIT vs. Hanuman Aggarwal: "Where an assessee gives the 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 authority 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." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the assessee had only chosen to file at that stage confirmations along with G.I.R. numbers of the creditors. Later, however, when banks' statements, balance-sheet and income-tax assessment orders were filed before the CIT(A), the Assessing Officer did not evidently go through the same even when specifically required by the AAC and instead insisted on physical presence of the creditors for examination. 5.8 The Revenue is right in submitting that the best evidence ought to have been adduced by the assessee. According to the assessee, it had, in fact, done so by providing the confirmations along with GIR numbers of the parties. In other words, the assessee produced the evidence it had and what it could. It, therefore, discharged the initial onus as cast under s. 68 of the Act. Thereafter, it was for the Assessing Officer to have carried out necessary verification and proving further, if warranted. The Assessing Officer did nothing of the sort and instead insisted on physical presence of the parties. This was permissible only where the parties were not assessed to income-tax or the documents furnished by them required further elucidation after proper application of mind thereon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer was, therefore, in error in making the impugned addition under s. 68 of the Act. The ratio of the Supreme Court in Biju Patnaik's case, cited supra is not applicable to the facts of the case. In that case, the creditor was a Trust which was not an income-tax assessee and the deposit was made in cash. The donors to the Trust were anonymous and it was such moneys which were deposited by the Trust. On enquiry and probing, it was established that the Trust never existed. There was further evidence to show that the Trust was a cover and income of the Trust floated back to Biju Patnaik. As is clear, there is not even remote resemblance between facts of that case and those of the assessee herein. The Revenue has also relied upon a Supreme Court judgment in Chuhar Mal's case cited supra, wherein the Principles of Law of Evidence applicable to income-tax proceedings were discussed. Possession of watches by Churhar Mal at the time of their seizure by Customs was deemed to be income of Chur Mal under s. 69A of the Act. The Hon'ble Supreme Court held that principles of Evidence Act would apply to income-tax proceedings and that only the rigours of the Rule of Evidence we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re left with the question of validity of the action of authorities below in adding the sums under s. 69 also. Sec. 69 of the IT Act reads as below: "69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfacrory, the value of the investments may be deemed to be the income of the assessee of such financial year." 5.13 As is seen, the ingredients of this section are that the assessee ought to have made investment which are not recorded in its books and the assessee offers no explanation to the nature and source thereof or the explanation offered is not satisfactory in the opinion of the Assessing Officer. In such circumstances, the value of investment is to be treated as deemed income of the assessee. In the case of the assessee, however, the amounts which stand in the names of 11 different parties have been construed as investment by the Revenue. But this ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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