9911796707
TMI Blog1986 (2) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 (9) Rambhai Co. Rs. 10,000 (10) Vishanji Hemraj Rs. 10,000 (11) Pravinchandra Co. Rs. 10,000 (12) Tokershi K. Shah Rs. 10,000 (13) J.V. Shah Rs. 5,000 During the course of assessment proceedings, the ITO had enquired of the assessee to explain the nature and source of the aforesaid amounts. The assessee had stated before the ITO that the aforesaid loans were taken from the various parties through a broker M/s Narottam Co., Bombay, the loans were taken by account payee cheques only, the interest was paid to the aforesaid parties quarterly by account payee cheques only and that the amount alongwith interest was returned back to the aforesaid parties by account payee cheques only. It was also stated that all the aforesaid parties are taxpayers on the record of the Department at Bombay and that they are being regularly assessed by their respective ITOs. The assessee had also furnished the GIR/P.A. Nos. of the aforesaid parties to the ITO. It was, therefore, urged that since the aforesaid amount represented genuine loans taken by the assessee for its business, the interest paid thereon should be allowed as b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns is as under: (a) That the assessee being unknown to the said borrowers, had arranged the same through the financial brokers M/s Narottam and Co., Bombay. (b) That the said person who was proprietor of the said firm during relevant period was assessed to Income-tax and was known to the assessee. (c) That all borrowing were made by the assessee through the said broker by cheques and all cheques were account payee cheques at the time of borrowings. (d) That the repayment is also made by cheques which were again account payee. (e) The interest as and when paid on every quarter was also paid by account payee cheques. (f) That all the parties were personally known to the said brokers who are paid brokerage for the arrangement made. (g) That the said parties were persons of means and were regularly lending moneys in Bazar out of their own means and/or by borrowings from others. (h) That the said broker was ready and willing to identify each of the said creditors. (i) That the normal procedure adopted for the purpose of such transactions is aptly stated by the said broker in his deposition given on 18th March, 1978 at Bombay. (v) That in view of cogent, cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in view of the evidence produced, initial burden stands discharged and in absence of any evidence brought on the record in rebuttal and the bank accounts and income-tax records of the said creditors having been purposely ignored and not scrutinised only with a view to make heavy additions in the case of the assessee, the entire approach adopted by your honour is prejudicial, unwarranted of facts and against established principles of natural justice and rule of evidence." Thereafter, the ITO referred the matter to the IAC for obtaining his directions under s. 144B of the Act. For this purpose, he sent his draft assessment order as well as the assessee's objections for the IAC's consideration. The IAC also gave an opportunity to the assessee to make its submissions regarding the proposed addition/disallowance. The assessee reiterated its contentions which were recorded in its written objections to the draft assessment order and urged that since it had discharged the initial burden which lay upon it, no addition disallowance could be made as was proposed by the ITO in his draft assessment order. The IAC, however, did not accept the assessee's contentions in respect of the aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conclusion that the IT authorities were fully justified in treating Rs. 1,25,000 as assessee's income by invoking the provisions of s. 68 of the Act and in disallowing the assessee's claim for interest paid to the aforesaid parties. 7. Being aggrieved by the orders of the Commissioner(Appeals), the assessee has come up in appeal before the Tribunal. The ld. counsel for the assessee vehemently argued that since the assessee had discharged the initial onus which lay upon it, the IT authorities were not justified in disbelieving the assessee's explanation regarding the nature and source of Rs. 1,25,000 and in disallowing the assessee's claim for deduction of interest paid to the aforesaid parties. In this connection, he invited our attention to para-(V) of the written objections filed by the assessee in respect of draft assessment order (reproduced above) and highlighted the fact that on the proper appreciation thereof, Rs. 1,25,000 cannot be treated as the income of the assessee. According to the ld. counsel for the assessee, since the Revenue is not in a position to assess the aforesaid parties or probe in respect of the aforesaid amount, it added Rs. 1,25,000 in the total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oulat Ram Rawatmull 87 ITR 349 (SC) and Sarogi Credit Corporation vs. CIT (1980) 19 CTR (SC) 360 : (1976) 103 ITR 344 (Pat). 8. The learned representative for the Department, on the other hand, strongly relied on the orders of the IT authorities and justified their action. He also took us through the statement recorded by the ITO of the aforesaid parties as well as the ITO's report submitted to the Commissioner (Appeals) with a view to impress upon us that they were all doing hawala business. According to the learned representative for the Department, none of the aforesaid parties had credit worthiness to advance loans to the assessee. He, therefore, submitted that since the assessee had failed to discharge the onus which lay upon it, the IT authorities were fully justified in treating Rs. 1,25,000 as income of the assessee by invoking the provisions of s. 68 of the Act and in disallowing the assessee's claim for deduction of interest alleged to have been paid to them. In support of his submissions, he relied on the decision in the case of Anraj Narain Dass vs. CIT (1951) 20 ITR 562 (Panj), Mahabir Pd. Munna Lal vs. CIT (1947) 15 ITR 393 (DB), G.M. Madappa vs. CIT (1948) 16 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no wonder in the statement made by the aforesaid parties that they did not know the assessee. We have come to this conclusion after considering the modus operandi by which the moneys were borrowed by the assessee through the broker. In our opinion, there is a ring of truth in the submissions made on behalf of the assessee that the loans taken by it from the aforesaid parties were genuine loans or in any event the amounts involved were not of the assessee but belonged to the aforesaid parties or the broker or some other parties other than the assessee, As the point involved in the present appeals has to be decided on the proper appreciation of the facts, already on record, we do not intend to deal with the various reported decisions cited at the Bar. Suffice it to say that all these decisions deal with the issue of burden of proof. On the appreciation of the material already brought on record in its proper perspective, we are fully satisfied that the assessee has clearly discharged the initial burden which lay upon it. In this view of the matter, the addition of Rs. 1,25,000 made by the IT authorities in the asst. yr. 1975-76 by invoking the provisions of s. 68 of the Act, cannot ..... 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