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TMI Blog2005 (8) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case, the Tribunal was right in rejecting the assessee's contention that the amount could be taxed if at all only in assessment year 1975-76 on financial year basis as unexplained investment u/s 69 of the Act ?" 2. The assessment year is 1976-77 and the relevant accounting period is Samvat Year 2031. The assessing officer framed an assessment under Section 147 read with Section 143(3) of the Act on March 31, 1980 making addition of Rs.4,75,000/- as unexplained cash credit under Section 68 of the Act. The addition of Rs.4,75,000/- is in respect of four amounts credited in the books of the assessee on four different dates from November 28, 1974 to March 3, 1975 for cash stated to have been received from Syndicate Bank against four bearer cheques drawn by the assessee firm. The firm comprised of two partners, both having equal shares in the profits and losses. It is an undisputed fact that both the partners were whole-time employees of one group, popularly known as Vora Group of Rajkot. A concern named Economic Traders is the main entity of Group with allied concerns like Economic Traders (Gujarat) Pvt. Ltd., Delta Engineering, Cima Industries, Ferrous Engineers etc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med. The revenue is in reference against deletion of addition to the tune of Rs.2,00,000/-, while the assessee is in reference in respect of addition amounting to Rs.2,75,000/- relatable to other two cheques. 5. Mr. J.P. Shah, the learned advocate appearing on behalf of the assessee submitted that Section 68 of the Act was only in relation to the credit entry. In other words, the submission was that Section 68 could not be invoked on the basis of how the amount represented by the credit entry is utilized by an assessee. According to him, the facts went to show that the amounts were withdrawn from the bank by four bearer cheques drawn on assessee's own account maintained with the bank. That in these circumstances, according to him, the assessee had discharged onus of showing the source of the credit. That the amount having come from the bank account of the assessee, there would be no occasion to doubt the genuineness of the transaction or the identity of the person, and that was not even the case of the revenue. He, therefore, submitted that Section 68 was not applicable in light of the facts and evidence on record. Alternatively, it was submitted that the said provision was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive dates, the amount shown against each one of the four cheques was appropriately shown credited in the cash book with corresponding entry appearing in the bank book. The Tribunal, while dealing with the basic issue, has posed for itself a question as to whether the assessee firm may be regarded as having actually obtained cash from Syndicate Bank on four different dates against the bearer cheques drawn and presented to the bank; or whether the Department is correct in contending that the four cheques were not utilized by the assessee firm for obtaining cash, but were utilized for purchasing drafts, in the names of two Turakhia brothers, of the amounts represented by the cheques or higher amounts. 9. In relation to the first cheque dated November 28, 1974 for a sum of Rs.50,000/-, it has been found by the Tribunal that a draft for a sum of Rs.2,50,000/- was obtained from that very bank on the same day i.e. November 28, 1974 in the name of Shri Jayant Turakhia. For purchase of the said draft, a cheque for a sum of Rs.2,00,060/- was issued by M/s Economic Traders (Gujarat) Pvt. Ltd. The consideration for the total amount of the draft issued by the bank, thus, came by way of a ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... findings recorded by the Tribunal, except for the fact that the token number is different, and that the draft was for a sum of Rs.2,00,000/-. The balance amount of consideration for purchase of draft, namely, Rs.50,000/- has come from some other source. Therefore, applying the same analogy as in case of the first cheque, the Tribunal has deleted this addition. 14. In relation to the third cheque dated February 17, 1975 for a sum of Rs.1,50,000/-, it is found by the Tribunal that a draft of exactly the same amount i.e. Rs.1,50,000/- was obtained favouring Shri Mahendra Turakhia payable at Bombay. It is further found by the Tribunal that, on the reverse of the cheque, there is a noting to the effect that "DD" on Bombay" and the noting is initialled by the Manager / Officer of the Bank. It has further been recorded that the draft application form mentions the cheque number i.e. 443106, which is the cheque issued by the assessee, and also assessee's account number i.e. Current Account No.170. That the said draft application form also bears a rubber stamp mentioning "transfer". Furthermore, on the counterfoil of the cheque, one of the partners of the assessee firm, Shri J.B. Mehta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd recording of facts is concerned. 17. During the course of hearing, the learned advocate on behalf of the assessee invited attention to a decision of the Apex Court in the case of CIT v. Smt. P.K.Noorjahan, [1999] 237 ITR 570, to submit that it has been laid down by the Apex Court that when section uses the word "may", it clearly indicates that the intention of the parliament was to confer a discretion on the assessing officer in the matter of treating the cash credit which has not been satisfactorily explained as income of the assessee and the assessing officer is not obliged to treat the same as income in every case where the explanation offered by an assessee is found to be not satisfactory. There can be no dispute as to the proposition laid down by the Apex Court. The only question that would arise is as to whether the discretion has been rightly exercised in the factual matrix and the evidence on record. Once the authority is vested with a discretion, all that is required to be ascertained is as to whether the discretion has been exercised in a reasonable manner i.e. not capriciously or unreasonably. The facts which have been noted hereinbefore, and which are more el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would result in miscarriage of justice. 20. Coming to the last contention regarding applicability of Section 69 of the Act rather than Section 68 of the Act, it has been found by the Tribunal that the addition has been made in relation to the entries of credit for relevant amounts standing in the cash book. To meet with the assessee's explanation that the amounts were withdrawn by four bearer cheques, the revenue has pointed out that the relevant amounts were not received by the assessee in cash from the bank, but stood diverted and were used for purchase of drafts. Therefore, this aspect was merely an argument raised by the revenue in support of its stand that the entries reflecting cash credits appearing in the cash book remained unproved. 21. The contention on behalf of the assessee that, for purposes of invoking Section 68 of the Act, only the credit side of the books had to be taken into consideration loses sight of the fact that, it is the starting point for inquiry. The section provides that where any sum is found credited in the books of an assessee and the assessee offers no explanation or the explanation offered as to nature and source of such credits is not foun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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