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TMI Blog1981 (11) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... rned ITO examined these books and took necessary extracts from the cash book. It was found by the ITO from these extracts that the creditor-firm credited in their cash book in the names of parties who had already admitted that loans appearing in their respective books of accounts in the name of the creditor-firm were their own funds. The ITO also found some discrepancy with regard to the date of one of the credit entries. In the above circumstances, the ITO again issued a summons under s. 131 on May 19, 1967, to the creditor-firm requesting it to produce its books of account and ledger and the bank statement for the period from April 1, 1962, to March 31, 1965. The said documents were, however, not produced by the creditor-firm. The ITO, by his letter dated February 28, 1968, requested the assessee to produce the creditor with its books of account of March 5, 1968. In reply to the said letter, the assessee sent a letter dated March 5, 1968, stating that it had already filed a copy of the accounts of the lending firm as also a certificate from it and that one of the partners of the creditor-firm appeared before the ITO with the books of accounts. The assessee also filed an affidavit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts in the regular course of business and got receipts showing the repayment of the money. The cash book and ledger of the creditor-firm were produced by one of its partners before the ITO on September 6, 1966, who examined the books and took extracts from them. According to the Tribunal, the assessee company could be required to prove the source of the loan but not the source of that source. The Tribunal also accepted the affidavit of Shri Bhudharmal Khaitan who had also appeared before the ITO with the books of account of the lending firm on an earlier occasion. The Tribunal perused the assessment orders on the creditor-firm for the assessment years from 1960-61 to 1963-64. From those assessment orders, certain conclusions were drawn by the Tribunal, viz., (i) that the lending-firm had been doing business in jute and money-lending for a long number of years on substantial scale ; (ii) it had been assessed on sufficiently large amounts ; (iii) that each partner of that firm had a large carry forward capital. On a consideration of the entire evidence, the Tribunal was of the view that the creditor was a genuine party and the entries were also genuine. Regarding the enquiries ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the consideration of the above points, the relevant principles derived from decided cages appear to be that when the assessee claimed that he had borrowed money from a third party, the initial onus lies on the assessee to establish: (a) the existence of the party; (b) the ability of the third party to advance moneys ; and (c) that prima facie the loan is genuine one. The assessee, by proving these facts discharges the onus upon him. But that does not prevent the authority concerned to probe further into the matter and investigate the case on materials available to the authority to come to an independent and unbiased finding as to the genuineness of the transaction. It is true, that the tax authority is not entitled to reject the assessee's case, summarily or arbitrarily or without sufficient reason. It is true, that the authorities' duty is to examine all materials carefully and objectively. But, if it is found that the authority concerned, after a careful consideration of all materials, has come to the conclusion that the assessee's case of loans from a third party cannot be accepted, it is not open to this court to disturb the findings in a reference under s. 66 of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment orders of the creditor for 1960-61 to 1963-64, and upon a consideration of the same and other materials before it was of the view that creditors' capacity to lend money and the genuineness of the transaction were proved. The assessee's representative furnished copies of the assessment orders of the creditors for the years 1960-61 to 1963-64 to the AAC, and they were also before the Tribunal. The assessment order for 1963-64, would show that the creditor was mainly doing name-lending business at the relevant period. It appears that, while drawing various conclusions from the said assessment orders, the Tribunal overlooked and/or failed to consider the aspect of name-lending as will appear from p. 42 of the paper book. The Tribunal also overlooked the fact, that the creditor was mainly carrying on business of name-lending at the relevant time and that the name-lending and money-lending businesses are mutually exclusive. As the Tribunal overlooked and/or ignored the aspect of the business of name-lending of the creditor it misdirected itself in holding that the credit-worthiness of the creditor was proved. It was argued on behalf of the Department that the Tribunal ignore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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