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TMI Blog1977 (12) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... rged hundies and confirmation letter before the ITO in the original assessments. The ITO stated that though the assessee has produced hundies duly countersigned after payment, but these loans are not free from doubts. Accordingly, he added Rs. 21,000 and Rs. 5,000 as income of the assessee from other sources. 2. The assessee went in appeal before the AAC and the AAC on the argument of the assessee, stated that the ITO did not assign the reasons which led him to draw the inference that the loans were not free from doubts. The AAC found that the ITO did not make prima facie case that these loans were bogus or fictitious. He further observed that it appears that he made the additions simply because it had been found in some other cases that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rakash Gupta (ITR No. 16119 of 1965-66, ITAT, Calcutta Bench). The assessee further submitted that under s. 67 of the Indian Evidence Act, it was not mandatory on the part of the debtor to produce the creditor. It was, therefore, argued that the ITO s observation had no basis in law and the addition made on this basis should be deleted. The assessee relied in 26 ITR 344 and 103 ITR 344. It was vehemently urged that the appellant had discharged his onus to the hilt. On the contrary the Department had absolutely failed to gather any sufficient material evidence for making the aforesaid additions. Lastly it was submitted that whether a hundi banker was black listed or not had hardly any bearing on the assessment of a case and a reference to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e suspicion remarked that the loans are not free from doubts and, therefore, he added the amounts as income of the assessee. However, the matter was set aside by the AAC in July 1966 for verification of loans. The ITO was not conscious about the file and he took up the matter only in 1974 after 8 years from the date when the assessment was set aside by the AAC. The ITO s only objection in readding the amount is that the signature of the creditor was not verified. No doubt after a lapse of about 12 years the creditor was not available but the ITO could have verified the signature of the creditor by referring the matter to the file of the creditor which was mentioned on the confirmatory letter. No effort was made by the ITO to proceed to veri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the file number of the creditors. It appears from the record that the ITO did not refer either to the creditor or to the aAO when he completed the original assessment. The matter was set aside by the AAC in July 1966. However, the matter was only taken up for re-assessment by the ITO in 1974. By the time the ITO took up matter about 13 years rolled out. The ITO wanted the presence of the creditor to verify the signature. The ITO ignored the file number and the address given by the assessee in the confirmatory letters and the ITO did not proceed to verify the genuineness of the loans either through addressing a letter to the creditor or referring the matter to the AO. The record of the revenue in this respect was referred to and it was fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re set aside in 1966 whereas the ITO took up the matter in 1974. The burden on the assessee was very heavy in the sense that the creditor was not available at the address from which he did business with the assessee in 1962. The ITO took inordinate delay in proceeding with the matter and thereby evidence available to the assessee was destroyed in the sense that the creditor was not available for verification. The Supreme Court in this connection has observed in 106 ITR page 1 at page 10: "It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and therefore, the loans could not be taken as genuine. On the other hand, from the orders of the authorities below, it is clear that they simply added the amount being prejudiced by the fact that the creditor s name appeared in the circular of the Directorate. Thus, it would not be fair if the addition is maintained on mere suspicion without any verification. It is relevant to mention that the loan in the name of Pahlajrai Bhagwandas had been admitted to be genuine loan by the Calcutta Bench of the Tribunal in the case of ITO vs. Sri Om Prakash Gutpa; The Tribunal has observed: "In the instant case the assessee filed the confirmatory letters and the bankers in these confirmatory letters have given their respective GIR numbers also. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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