9911796707
TMI Blog2005 (8) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Both the partners of the assessee firm contributed capital of Rs.5,000/- each and traded in spare-parts of diesel engines. The purchases were made from various parties of Rajkot, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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 According to him, the facts went to show that the amounts were withdrawn from the bank by four bearer cheques drawn on assessee's own account maintained with the bank.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 applicable in light of the affidavit tendered by Shri Mahendra Turakhia on February 25, 1980. A further alternative contention was that addition, if any, could be made only under Section 69 of the Act and not Section 68 of the Act; and for applicability of Section 69 of the Act, this was not the correct assessment year. He invited attent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k 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 cheque from M/s Economic Traders (Gujarat) Pvt. Ltd. to the extent of Rs.2,00,000/-, and by way of cheque from the assessee firm to the extent of Rs.50,000/-, the bank commission for issuance of draft was paid by M/s Economic Traders (Gujarat) Pvt. Ltd., by including the sum of Rs.60/- in the cheque issued by the said party. It has been found that, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 has made a noting in pencil as "(M. Turakhia)". The said counterfoil of the cheque had been seized from the residence of the other partner of the assessee firm, namely, Shri Suresh Dave. It is further found that, from the ledger of the bank reflecting the transactions of the account, against the aforesaid cheque and the entry relating thereto on the relevant date, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 elaborately dealt with by the Tribunal, do not indicate that the exercise of discretion by the Tribunal can be termed to be either unreasonable or capricious in any manner whatsoever. To the contrary, it is apparent that where the Tribunal found existence of doubtful circumstances on the basis of factors partly favouring the assessee, it has exercised discretion in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 found to be satisfactory, the sum so credited may be charged to tax as income of the assessee of the previous year. In the present case, on four different dates, the assessing officer found four different sums credited in the books. He, therefore, called upon the assessee to explain the nature and source of the said four credits. The assessee's basic explanation was that the amounts were rece ..... X X X X Extracts X X X X X X X X Extracts X X X X
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