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TMI Blog1997 (5) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... erved in the assessment order that the assessee had furnished confirmations of all the creditors who were being assessed to income-tax at Calcutta. However, a perusal showed that the deposits were unaccounted money of the partners. The creditors had given a common address at 10, Ezra Street, Calcutta, which was actually the office address of the Chartered Accountant of the whole group. The parents of the minors were also the creditors and had given their addresses as Maharani Road, Gaya. The Assessing Officer took a view that the Calcutta address had been given only to escape intense scrutiny. He also observed that from a perusal of the Income-tax Statements filed with the Return, it appeared that the creditors had no genuine source of income. He gave the following particulars in the assessment orders: Name of partners Source of income Amount (major source) Chandan Kumar Singh Petty gift Rs. 14,162 Ranjan Kumar Singh " Rs. 21,055 Shiwani Singh " Rs. 28,799 Gunjan Kumar Singh " Rs. 20,866 Kundan Kumar Singh Commission income (He is a college going student, other sources Rs. 17,000 (Appx.) age 20 years) Miss Shalini Petty gift Rs. 27,560 Unayan Kumar Singh " R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first assessments of the loan creditors had been completed long before the accounting year under consideration in case of the assessee. He, therefore, accepted the explanation regarding the source of deposits and deleted the addition of Rs. 1,25,000. 6A. The ld. D.R. for the assessee reiterated the reasons given in the assessment orders and emphasised that all the creditors were relatives of the partners and, therefore, the burden of proof on the assessee was higher than the burden in the case of the credits from third parties, as held by the Patna High Court in the case of Sarogi Credit Corpn. The assessee's burden extended to proving the nature and source of the entries. It was further submitted that filing of a return by the creditors was only prima facie evidence of the source of' income but not conclusive evidence. Reliance was placed on the decision of the Bombay Bench of the Tribunal in the case of IAC v. Indian Art Emporium [1994] 50 ITD 21 (TM). In reply to a query from the Bench whether the assessee had been confronted with the doubts and suspicions of the Assessing Officer, the ld. D.R. very fairly Submitted that the assessee had not been confronted. However, she subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e part of the Assessing Officer to verify the doubts either by examining the creditors or by looking at the assessment records of the creditors. He proceeded on conjectures and surmises only. 9. In this connection, the decision of the Hon'ble Supreme Court in the case of CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78/25 Taxman 80F is also relevant and was mentioned by the Bench in the Court. An extract from the decision is reproduced below : "In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has disch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lcutta, declaring in the verification part of the return that they all are resident of 10, Ezra Street, Calcutta and got their income-tax assessment finalised there ? 3. It is no concern of the territorial Assessing Officer at Calcutta to find out whether the assessee who filed his/her return before him is or is not a permanent resident of Calcutta but that of Gaya. But surely it is the duty of the Assessing Officer at Gaya assessing the firm which took loans from those minors and ladies to find out the truth as to how when the minor/ ladies are actually resident of and staying at Gaya with their respective parents/husband, filed Income-tax Returns showing their permanent residence at some place or locality in Calcutta. Such state of affairs do require a thorough probe and investigation and it is not mere doubt and suspicion which the Assessing Officer harboured in his mind. In my view, it is the actual and real truth; it is the veracity and bona fides of the transactions which require to been quired into and brought to surface. In addition to this, there are several queries which are required to be answered, viz., as to where the moneys were kept: who brought the cash from Calcu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment orders passed by the Assessing Officer at Calcutta. All these papers were perhaps filed only before the A/C and it is not known whether the same were filed before the Assessing Officer as I do not find any discussion in this regard in the assessment order though eloquently discussed by the A/C in the impugned order. According to me, those papers do not constitute sufficient proof of ladies and minors having explained sources ultimately leading to the conclusion that the burden stood discharged in terms of section 68 of the Act. In my view, I repeat, the same does not constitute valid, legal and reliable evidence establishing genuineness of loans nor on the basis of such papers it can be said or held lawfully that the burden is fully discharged by the assessee-firm. 6. The Assessing Officer is right in saying that those minors/ladies filed the returns at Calcutta though permanent residence of Gaya in order to avoid proper scrutiny and enquiry at Gaya. It is well-known common fact that very many assessees, in order to explain away sources of credit entries in respect of alleged loans file returns of minors and ladies at a places other than their actual residences particularly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 540 has observed that "science has not invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and Tribunals have to judge the evidence before them by applying the test of human probabilities. Now it is against human conduct and probability that minors/ladies who are permanent residents of Gaya went all the way to a far of place like Calcutta to earn income from money-lending, speculation and commission etc., filed their Income-tax Returns there and got their assessments completed for the past several years. Even if there is truth in such state of affairs, the same has to be enquired, probed and explored which the assessing Officer in this case has miserably failed. The Assessing Officer has been amply clothed by the Legislature under the various provisions of Income-tax Act, 1961 for conducting valid and proper enquiries under section 142 /143 of the Income-tax Act. He has also plenary powers of discovery and production of evidence, etc., as per the provisions of section 131 of the Act. This apart, the Assessing Officer has been vested with very wide powers in terms of sections 133A, 133B and 134 of the Act. All the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct the order passed by the Assessing Officer which is erroneous on account of lack of or improper enquiry being conducted by the Assessing Officer. This is precisely what has happened in this case. 12. My ld. Brother has taken support from the observations of their Lordships of the Hon'ble Supreme Court in the case of Orissa Corpn. (P.) Ltd. that if an Assessing Officer fails to pursue the matter further with the creditors after issuing summons, then no question of law arose from Tribunal's order holding that the burden stood discharged. In my view, these observations are limited to the facts and circumstances of that case and are not of universal application. Moreover, the facts before the Hon'ble Supreme Court in that case are at variance with the facts in the present case. In that case, the ITO after issuing summons under section 131 did not make any further enquiries and, therefore, such observations were made by their Lordships. In this case, no enquiry whatsoever has been made by the Assessing Officer and not a single creditor was examined by issuing summons under section 131 of the Act nor any type of private enquiries were conducted as laid down in section 142 as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries and for refraining fresh assessment as per law. In short, my view is that the Assessing Officer does not miss the bus. He still gets a chance. 14. From the foregoing discussions and reasons, I am of the view--- (a) that the assessment order is vitiated and has to be vacated and set aside owing to supervening illegalities and errors committed by the Assessing Officer in failing to conduct valid and proper enquiries into the loan transactions though empowered and authorised by law. (b) that the matter has to be restored to the file of the Assessing Officer with a direction to conduct valid And proper enquiry into the entire loan transactions amounting to Rs. 1.25 lacs and then to arrive at a fresh decision and reframe another assessment in accordance with law, but of course not without giving fair, proper and reasonable opportunity to the assessee-firm of being heard to state its case. I, therefore, hold so and order accordingly. 15. In the result, the appeal is disposed of accordingly with above directions. REFERENCE TO THE HON'BLE PRESIDENT, INCOME-TAX APPELLATE TRIBUNAL UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 As we have differed in our view in the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owards unsecured loans. Sources of these unsecured loans were gone into. Some of the unsecured loans amounting to Rs. 1.25 lakhs were shown to have been borrowed from 6 minors and also their fathers. The names of the minor creditors as well as the amounts said to have been borrowed from each of them were shown to have been as follows : (1) Chandani Singh (minor daughter of Rabindra Kumar Singh) Rs. 5,000 (2) Chandan Kumar Singh (minor son of Jitendra Kumar Singh) Rs. 17,000 (3) Ranjan Kumar Singh (son of Jitendra Kumar Singh Rs. 12,000 (4) Unayan Kumar Singh (minor son of Krishna Kumar) Rs. 23,000 (5) Kundan Kumar Singh (minor son of Krishna Kumar) Rs. 4,000 (6) Gunjan Kumar Singh (minor son of J.K. Singh) Rs. 11,000 The fathers of the minors, who are members of the AOP, were found to have introduced cash said to have been derived from their respective HUFs on the dates and amounts shown against each of them : Name Date Amount (1) K.K. Singh 23-9-85 Rs. 9,000 (2) -do- 31-3-86 Rs. 4,500 (3) Jaykumar Singh 21-12-85 Rs. 10,000 (4) -do- 31-3-86 Rs. 6,500 (5) Jitendra Kumar Singh 31-3-86 Rs. 11,000 (6) Rabindra Kumar Singh 31-3-86 Rs. 11,000 Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of details of the gifts and donors, it is presumed that they have been received from the family members. He found out that the rest of the family members have shown ludicrously low withdrawals. Their withdrawals totaled only to Rs. 49,800, whereas the total gifts in the names of the minors come to about more than Rs. 1.5 lakhs. The Assessing Officer also examined the computation of incomes filed along with the income-tax returns by the fathers of the minors who were assessed at Gaya. After examination, he gave a finding that they revealed attempts of capital formation. According to him, the said fact would be found out by the following two factors: (1) All the major creditors have shown income having been derived in earlier years from rental/speculation which are not supported by any evidence. (2) Major portion of the cash credits is made by giving account payee cheque. On examination of the Bank Pass Book, it is revealed that the accounts in the names of the major creditors were opened in UCO Bank on 19-9-85. All the accounts appear in a continuous Serial No. from 11785/6211790. From the above, it is concluded by the Assessing Officer that the whole exercise has been don ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other is always a question of fact and it would depend upon the facts and circumstances of each case. In a case of cash credits, the burden of establishing the truth of the cash credits always lies on the person who introduces the cash credit and who seeks a fact-finding authority to believe the truth of the cash credit. That means the burden of proof in its primary sense in the case of cash credits lay upon the assessee. However, in the secondary sense, the initial burden would be on the assessee and if he is able to produce adequate and sufficient material to discharge his burden, then the further burden to falsify the evidence let in by the assessee and ultimately to prove that the cash credits may not be true is on the revenue. 6. While examining the income-tax proceedings and also while weighing the evidence let in by the assessee, we should bear in mind that our evaluation of evidence should be just like in any civil proceeding as against in a criminal proceeding. Whereas in a criminal proceeding a fact must be proved beyond reasonable doubt, while in a civil proceeding such strict proof is not essential and what we should look for is preponderance of probabilities. Even in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, be for the assessee to explain further as to how or in what circumstances, the third party obtained the money and how or why he came to make an advance of the money as a loan to the assessee. Once such identity is established and the creditors, as in the instant case, have pledged their oath that they have advanced the amounts in question to the assessee the burden immediately shifts on the department to show as to why the assessee's case Could not be accepted and as to why it must be held that the entry, though purporting to be in the name of a third party, still represented the income of the assessee from a suppressed source." Thus, when the entry stands in the name of either the assessee or his near relation, the source of the money from which the creditor had lent the amount should also be established, whereas if the creditor is an outsider, the identity as well as the truth of the transaction would suffice to shift the burden from the assessee to the department. 6.1 In the second of the decisions in Anupam Udyog's case identifying two important departures from the law as it stood under the 1922 Act and the law as it stands after the 1961 Act, Their Lordships o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es from the racing clubs giving particulars of the crossed cheques for payment of the amounts for winning of jackpots, etc. The Hon'ble Supreme Court, ultimately deciding the case, held that the view of the Chairman of the Settlement Commission was superficial and they felt that the matter has to be considered in the light of human probabilities. According to their Lordships, the fact that the assessee possessed the winning ticket which was surrendered to the Race Club and in return she obtained a crossed cheque is a neutral circumstance. Even if she had purchased the winning ticket after the event, she would be having the winning ticket in her possession. 7. Now, there is-no question of disputing the ratios contained in the first two decisions which are very much relevant to be kept in mind before deciding the issue before us. Now, let us examine the facts of the case after duly keeping in mind the ratios of the above decisions. 8. Firstly, the assessee in this case is an Association of Persons but not any member constituting that AOP. In the accounting year in question, the AOP did not start its business at all. The Assessing Officer clearly found that there are neither sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld have gathered the income-tax statements of the minor children right from assessment year 1981-82 in order to falsify the version that they could not lend the amounts said to have been lent by them in assessment year 1986-87 to the assessee AOP. Under the circumstances relying upon the decision of the Hon'ble Supreme Court in Orissa Corpn. Ltd.'s case extracting portion of the said decision in the order and holding that under the facts and circumstances, the burden which lay upon the assessee was duly discharged as was found in the order of the learned Accountant Member, does not appear to be either wrong or unreasonable. On the other hand, I hold that the appreciation of evidence on record by the learned Accountant Member is on correct lines. 9. On the other hand, in the order of the learned Judicial Member, I found him observing that it is too curious and strange as to how those minors/ ladies/ relatives, who are, in fact, permanent residents of Gaya and staying with their respective parents/husbands came to file income-tax returns at Calcutta. However, the learned Judicial Member failed to find what exactly is the ultimate motive for these minors even in assessment year 1981 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o establish that the loans are genuine and that the assessee-firm discharged the legal onus which lay upon it." The reason as to why the returns filed for earlier years do not establish that the loans are genuine is not stated anywhere. So also the reason why confirmation letters should not be believed was also not given. The whole of para-5 in the learned Judicial Member's order appear to be a clear mis-appreciation of facts on record. The learned Judicial Member says that confirmation letters were not filed which is against the specific observation made by the Assessing Officer in his assessment order. If the learned Judicial Member wants to see the confirmation letters, he could have summoned the same from the assessment records. A reading of the learned Judicial Member's order at para-5 would show a misconception that the confirmatory letters, copies of statements of incomes accompanying the income-tax returns filed at Calcutta were filed before the CIT(Appeals) but not before the Assessing Officer. The learned Judicial Member further says that 'I do find any discussion in this regard in the assessment order though eloquently discussed by the A/C in the impugned order'. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... went all the way to a fat off place like Calcutta to earn income from money-lending, speculation, commission, etc., filed their income-tax returns there and got their assessments completed for the past several years. This conduct, no doubt, raises suspicion but however, strong the suspicion may be cannot supplant proof, There is definite evidence produced on behalf of the assessee that minors filed their returns in Calcutta even in assessment year 1981-82. which is long before the assessment year under consideration, and submitted their returns to the ITO at Calcutta. The ITO did not even say one word disbelieving the truth of the minors being assessed at Calcutta. Unless the strange behaviour and pattern adopted was found out for any ulterior motive and unless it was further found that the ulterior motive was achieved, the suspicious circumstances or facts found in the case cannot be read against the assessee. The learned Judicial Member, except stating that it is a strange human conduct to get the income of the minors assessed at Calcutta for the past several years nothing is found out as to for achieving what ulterior motive such strange behaviour is adopted. The learned Judicia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Accountant Member and I hold that his appreciation of evidence on record is perfectly justified and legally correct. What are justifiable reasons for a Tribunal to remand the case falls for my consideration in this respect. 10. In this connection, the Hon'ble High Court's decision in Maharani Kanak Kumarai Sahiba v. CIT [1955] 28 ITR 462 (Pat.) is felt instructive. The following is what is stated in the head-note of the decision: "Though section 33(4) has granted a very wide statutory discretion to the Income-tax Appellate Tribunal in disposing of an appeal, the discretion given under this section to the Income-tax Appellate Tribunal is a judicial discretion which must be exercised in accordance with legal principles, and not in an arbitrary or capricious manner and it must be exercised within the limit, to which in honest man competent to the discharge of his office ought to confine himself Where all evidence had been produced and the Assistant Commissioner had, after full investigation of the evidence and examination of the accounts, came to a definite finding in favour of the assessee, but the Appellate Tribunal remanded the case to the Income-tax Officer dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before me. The appreciation of evidence on record has nothing to do with the illegality of the proceedings. So also Kapurchand Shrimal's case is a case where an error had crept into the order of' the Tribunal. There is no question of any error in the order of the Tribunal at this stage. I am on the point of appreciating the evidence concerning the truth of the cash credits. Therefore, in my humble opinion, Karurchand Shrimal's case has no role to play. Similary, Rampyri Devi Saraogi's case and Smt. Tara Devi Aggarwal's case come into play when we want to judge whether there is any justification to invoke the revisionary powers under section 263. So also, after going through Smt. Pushpa Devi's case I find that it is not relevant. I am unable to agree with the learned Judicial Member's view that the assessment order is in any way vitiated and is liable to be vacated for any supervening illegalities and errors committed by the Assessing Officer. On the other hand, I find that valid and proper enquiries were also made by the Assessing Officer regarding the loan transactions and the assessee had let in sufficient evidence on record in support of the truth of the cash credits. I fully ag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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