DCIT, Chandigarh V. M/S Meltonics Industries (P) Ltd, Chandigarh

ITA 1121/CHANDI/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86197 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-02-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 05-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Depreciation; Income from undisclosed sources; Source of fund; Question of law; Deemed dividend
• Section: 115JB; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 1121/CHD/2013 ASSESSMENT YEAR: 2010-11 THE DCIT, CIRCLE 4(1), VS M/S METLONICS IND USTRIES (P) LTD. CHANDIGARH CHANDIGARH PAN NO.AACCM2009A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH RESPONDENT BY : SHRI ANIL BATRA DATE OF HEARING : 18.02.2015 DATE OF PRONOUNCEMENT : 13.03.2015 ORDER PER T.R.SOOD, A.M. THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 16.09.2013 OF CIT(A) CHANDIGARH. 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSE SSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. THE LD. CIT (A) HAS ERRED IN LAW AND IN FACTS IN DELETING THE ADDITIONS OF RS,1.8 CRORES MADE U/S 68 BY OBSERVING THAT WHEN THERE WAS NO CREDIT TO THE BANK ACCOUNT OF THE APPELLANT COMP ANY, WHICH APPEARS TO BE THE CASE HERE, THERE CANNOT BE ANY QUESTION OF A PPLICATION OF SECTION 68 OF THE ACT, WHEREAS SCHEDULE 'D' TO THE BALANCE SHE ET AS ON 31.03.2013 AS WELL AS ANNEXURE-IV [PARAGRAPH 24 (A)] TO THE FORM NO. 3CD (STATING AUDIT REPORT) SHOWING PARTICULAR OF EACH LOAN OR DEPOSIT IN AN AMOUNT EXCEEDING THE LIMIT SPECIFIED IN SECTION 269 SS TAKEN OR ACCEPTED DURING THE YEAR CLEARLY MENTIONED THAT THE LOAN A MOUNT OF RS. 18,00,000/- HAS BEEN TAKEN BY THE 'A1 FROM MS, HARB INDER KAUR AND 2 ASSESSEE HAS ALSO SUBMITTED CONFIRMATORY LETTER FRO M THE ALLEGED CREDITOR CERTIFYING THAT SHE HAD ADVANCED RS. 1,80,00,000/- TO THE ASSESSEE. 3. THE LD. CIT (A) HAS ERRED IN LAW AND IN FACTS IN DELETING THE ADDITIONS OF RS. 1.8 CRORES MADE U/S 68 BY ACCEPTI NG THE PLEA OF THE ASSESSEE THAT THE AMOUNT OF CREDITOR I.E. RS. 1.8 C RORES WAS SHOWN IN THE BALANCE SHEET UNDER THE HEAD 'CHEQUE PENDING FOR RE ALIZATION/ ENCASHMENT' WHEN THE TOTAL AMOUNT APPEARING IN THE AUDITED BALANCE SHEET SCHEDULE *F' CURRENT ASSETS, LOANS & ADVANCES AS ON 31.03.2010 OF THE ASSESSEE UNDER THIS HEAD IS RS. 86,18,786.62 ONLY AND AS PER LEDGER OF THE ALLEGED CREDITOR IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE THE AMOUNT OF RS. 1,80,00, 000/- HAS BEEN RAISED ON 31.03.2010 THROUGH SINGLE CHEQUE NO. 513501. 4. THE LD. CIT (A) HAS ERRED IN LAW AND IN FACTS I N DELETING THE ADDITIONS OF RS. 1.8 CORES MADE U/S 68 WHEN THE AS SESSEE HAS FAILED TO BRING ON RECORD ANY EVIDENCE TO PROVE THE CREDI T WORTHINESS AND GENUINENESS OF THE TRANSACTION OF THE SAID CREDITO R. 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT ASSESSEE HAS TAKEN VARIOUS LOAN S FROM DIRECTOR AND THEIR RELATIVES. DURING ENQUIRIES IN RESPECT OF THESE LO ANS, IT WAS FURTHER NOTICED THAT IN CASE OF ONE INDIVIDUAL NAMELY MRS HARBINDER KAUR WH O WAS WIFE OF THE DIRECTOR HAD ADVANCED A SUM OF RS. 1.80 CRORES TO THE COMPAN Y. THE RETURN OF INCOME FILED BY MRS HARBINDER KAUR DEPICTED THAT GROSS RECEIPTS FROM BUSINESS WERE RS. 1,06,542/-, OTHER SOURCES RS. 3000/- AND AGRICULTUR AL INCOME RS. 3,15,000/- TOTALING RS. 4,24,545/-. THEREFORE, ASSESSEE WAS A SKED TO EXPLAIN HOW MRS HARBIDNER KAUR COULD ADVANCE SUCH HUGE AMOUNT TO TH E COMPANY WHEN SHE DID NOT HAVE COMMENSURATE SOURCES OF INCOME. IN RESPONS E, AN UNDERTAKING FROM MRS HARBINDER KAUR CLAIMING THAT SHE HAD MADE PAYMENT F ROM HER CANARA BANK ACCOUNT NO. 2400101001501 ON 31.3.2010 WAS MADE. I T WAS FURTHER EXPLAINED THAT SAID AMOUNT WAS GIVEN BY HER ON 31.3.2010 AND TAKEN BACK ON 1.4.2010 AND, THEREFORE, IT WAS ONLY A PAPER TRANSACTION. THE ASS ESSING OFFICER AFTER EXAMINATION OF THESE SUBMISSIONS OBSERVED THAT IT W AS MERELY AN AFTER THOUGHT. HE 3 ALSO OBSERVED THAT ASSESSEE HAS FAILED TO PROVE TH E CREDITWORTHINESS OF THE DEPOSITOR. HOWEVER, SINCE THE ASSESSEE HAS SHOWN T HIS TRANSACTION IN THE BOOKS OF ACCOUNT AND CREATED A LIABILITY ON THE SAME AND HAD ALSO GIVEN EFFECT ON THE ASSET SIDE IN THE FIXED ASSETS AND CLOSING STOCK ETC. OF THE COMPANY, THE ASSESSING OFFICER OBSERVED THAT IF IT WAS A PAPER TRANSACTION THEN IT WAS A MANIPULATION OF THE ACCOUNT WHICH IS BEST KNOWN TO THE ASSESSEE. IN ANY CASE THE PROVISION OF SECTION 68 IS CLEARLY APPLICABLE AND, THEREFORE, HE ADDED A SUM OF THE INCOME TO THE ASSESSEE. 4. THE LD. CIT(A) HAS NOT PRODUCED THE SUBMISSIONS MADE BEFORE HIM AND HAS DECIDED THE ISSUE VIDE PARAS 4 & 5 IN FAVOUR OF THE ASSESSEE WHICH IS ARE UNDER:- 4. IT IS ALSO NOTICED THAT THE AMOUNT WAS SHOWN UN DER THE HEAD 'CHEQUE PENDING REALIZATION / ENCASHMENT' IN THE RE LEVANT SCHEDULE OF THE BALANCE SHEET. THUS, IN REALITY, THE SAID AMOUNT OF RS. 1,80,00,000/- WAS NEVER RECEIVED BY THE APPELLANT COMPANY. THE ASSESS ING OFFICER DID NOT ACCEPT THE EXPLANATION OF THE APPELLANT IN THE ASSE SSMENT PROCEEDINGS, FIRSTLY ON THE GROUND THAT THE TRANSACTION COULD NO T BE VERIFIED/ AUTHENTICATED AND SUCH A DOCUMENT CAN ALWAYS BE CRE ATED AT ANY STAGE. SECONDLY, THE SUBMISSION REGARDING PAPER TRANSACTIO N WAS MADE BY THE APPELLANT ONLY AFTER BEING CONFRONTED REGARDING THE SOURCE OF FUNDS. 5. THE SIMPLE POINT INVOLVED IN THIS CASE IS WHETH ER THE AMOUNT OF RS. 1,80,00,000/- WAS CREDITED TO THE BANK ACCOUNT OF T HE APPELLANT OR NOT. IF THERE WAS NO CREDIT TO THE BANK ACCOUNT OF THE APPE LLANT COMPANY, WHICH APPEARS TO BE THE CASE HERE, THERE CANNOT BE ANY QU ESTION OF APPLICATION OF SECTION 68 OF THE ACT. SECTION 68 APPLIES ONLY WHEN A SUM IS FOUND CREDITED IN THE BOOKS (WHICH IN THIS CASE WOULD IMPLY THE BA NK ACCOUNT) OF AN ASSESSEE. IF THERE IS NO CREDIT ENTRY IN THE BANK A CCOUNT, HOW CAN SECTION 68 BE INVOKED? I MAY ALSO ADD THAT IF THE AMOUNT WO ULD HAVE BEEN CREDITED TO THE BANK ACCOUNT OF THE APPELLANT, THE SOURCE OF THE CREDIT WOULD HAVE STOOD EXPLAINED, IT HAVING BEEN TRANSFER RED FROM THE BANK ACCOUNT OF THE DIRECTOR AND EVEN IN THAT CASE, NO A CTION COULD HAVE BEEN TAKEN IN THE CASE OF THE APPELLANT, THE ADDITION MA DE BY THE ASSESSING OFFICER IS ACCORDINGLY DELETED. GROUNDS OF APPEAL T AKEN BY THE APPELLANT ARE ALLOWED. 5. BEFORE US LD. DR SUBMITTED THAT ASSESSEE HAD REC EIVED A LOAN AND THE ENTRY FOR THE SAME WAS MADE IN THE BOOKS OF ACCOUNT . HE FURTHER SUBMITTED THAT REQUIREMENT OF SECTION 68 VERY CLEARLY MANDATES THA T IF ASSESSEE FAILS TO GIVE 4 SATISFACTORY EXPLANATION IN RESPECT OF ANY SUM FOU ND CREDITED IN THE BOOKS THEN SUCH SUM CAN BE CHARGED TO INCOME TAX AS INCOME OF THE ASSESSEE, THEREFORE, WHAT IS REQUIRED TO BE PROVED BEFORE CHARGING A PARTICUL AR AMOUNT TO TAX IS THAT SUCH SUM WAS FOUND TO BE CREDITED IN THE BOOKS OF ACCOUN T. THE LD. CIT(A) IS MISDIRECTED HIMSELF BY OBSERVING THAT REQUIREMENT O F SECTION 68 COULD BE INVOKED IF THE AMOUNT IS FOUND CREDITED TO THE BANK ACCOUNT OF THE ASSESSEE. IN THIS REGARD HE STRONGLY RELIED ON THE DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S SRI BALAMURUGAN TEXTILE PROCESSING LTD. VS THE ACIT IN ITA NO. 1859/MDS/2007 ORDER DATED 5.12.2008. HE CARRIED US THROUGH VARIOUS PARAGRAPHS OF THIS ORDER AND ALSO POINTED OUT THAT IN THAT DEC ISION MEANING OF CREDIT HAS BEEN DISCUSSED IN DETAIL BY MAKING REFERENCE TO VAR IOUS DECISIONS OF HON'BLE SUPREME COURT. FURTHER, A REFERENCE HAS ALSO BEEN MADE TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT V BEST AN D COMPANY (PRIVATE) LTD 60 ITR 11 WHEREIN IT WAS HELD THAT IF SOME INFORMATION IS AVAILABLE WITH THE ASSESSEE AND THE SAME IS NOT BROUGHT FORWARD BEFORE THE AUTH ORITIES, THEN SUCH AUTHORITIES WOULD HAVE RIGHT TO TAKE AN ADVERSE INFERENCE. THER EFORE, IF ASSESSEE HAS MANIPULATED THE ACCOUNTS, ASSESSEE SHOULD THEM COME FORWARD WITH THE CLEAR INTENTION THAT IT WAS NOT IN THE NATURE OF MANIPULA TION. THE ASSESSEE CANNOT ESCAPE FROM THIS BURDEN BY SIMPLY SHOWING THAT IT IS A CAS E OF PAPER TRANSACTION. 6. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE S UBMITTED THAT IN THIS CASE ADMITTEDLY THE CHEQUE RECEIVED FROM MRS HARBINDER K AUR WAS NEVER ENCASHED BY THE ASSESSEE COMPANY. SIMPLY BECAUSE THERE IS AN E NTRY OF A SUM CREDITED IN THE BOOKS OF ACCOUNT WILL NOT ATTRACT THE PROVISIONS OF SECTION 68. ACCORDING TO HIM, SECTION 68 CAN BE INVOKED IF THE REAL FUNDS HAVE MO VED TO THE ACCOUNTS OF THE ASSESSEE. IN THIS REGARD, HE RELIED ON THE OBSERVAT IONS MADE BY THE JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS MAHENDRA KUMAR AGRAWAL 23 TAXMAN.COM 285. HE FURTHER SUBMITTED THAT SIMPLY BECAUSE THE ASSESSEE HAS DONE SOME WINDOW DRESSING IN THE ACCOUNT WILL NOT FASTEN THE LIABILITY ON THE ASSESSEE AND IN 5 THIS REGARD HE STRONGLY RELIED ON THE DECISION OF H ON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT V KUSUM PRODUCTS LTD 361 ITR 632(CA L.). 7. IN ANY CASE IF FUNDS HAVE NOT MOVED TO THE COMPA NY AND NO REAL MONEY HAS COME TO THE COMPANY, THE SAME CANNOT BE CONSTRU ED AS INCOME BECAUSE OF THE THEORY THAT ONLY REAL INCOME CAN BE SUBJECTED TO TA X. IN THIS REGARD HE RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CI T VS SHOORJI VALLABHDAS & CO. 46 ITR 144 (SC) AND CIT VS KERALA STATE DRUGS & PHARMACEUTICALS LTD., 192 ITR 1 (KER). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. WE FIND THAT IDENTICAL ISSUE WAS CROPPED UP BEFORE THE CHENNAI B ENCH OF THE TRIBUNAL IN THE CASE OF M/S SRI BALAMURUGAN TEXTILE PROCESSING LTD. VS ACIT IN ITA NO. 1859/MDS/2007 FOR ASSESSMENT YEAR 2004-05 ORDER DAT ED 5.12.2008. IN THAT CASE WHILE VERIFYING THE SUNDRY CREDITORS IT WAS NOTICED THAT THERE WAS DIFFERENCE TO THE TUNE OF RS. 2,44,96,054/- IN RESPECT OF TWO CREDITO RS NAMELY SRI GANESH TRADERS, RAJAPALAYAM AND M/S RAKSHAS ENTERPRISES, COIMBATOR E. IN RESPECT TO THE QUERY ON THIS ISSUE IT WAS EXPLAINED THAT COMPANY USED TO SETTLE THE AMOUNT OUTSTANDING TOWARDS PURCHASES EITHER THROUGH LETTER OF CREDIT O R CHEQUE.. IN THE CASE OF M/S RAKSHAS ENTERPRISES AND SHI GANESH TRADERS THE REA SON FOR DIFFERENCE OF RS. 1,42,96,054/- AND RS. 1,02,00,000/- RESPECTIVELY WA S THAT OTHER HOLDING COMPANY M/S SRI KANNAPIRAN MILLS LTD ISSUED LETTER OF CREDI T TO THE PARTY ON BEHALF OF OUR COMPANY UNDER THE PRESUMPTION THAT THE PURCHASES WE RE MADE TO OUR COMPANY. LATER IT WAS FOUND THAT LETTER OF CREDITS WERE ONLY FOR PURCHASES MADE FROM SHI KANNAPIRAM MILLS LTD. THIS IS PURELY AN ERROR ON MI STAKEN IDENTITY. THE ASSESSING OFFICER VERIFIED THIS POSITION AND NOTED THAT THE ASSESSEE COMPANY WAS NOT ENJOYING ANY CREDIT FACILITIES WITH ANY OF ITS BANKERS. WHEN THE ASSESSEE WAS AGAIN CONFRONTED WITH THIS POSITION, ,IT WAS SUBMIT TED THAT ASSESSEE-COMPANY HAS PASSED WRONG ENTRIES ON 31.3.2004 AND DEBITED THE H OLDING COMPANY SHRI 6 KANNAPIRAN LTD. AND CREDITED THE AMOUNT TO TWO CRED ITOR. IT WAS FURTHER SUBMITTED THAT ENTRIES HAVE ALREADY BEEN REVERSED ON 30.4.200 4. IT WAS EXPLAINED THAT FACT OF THE WRONG ENTRY WOULD BE ENTRY WOULD BE OVERSTATEME NT OF LIABILITY TO PURCHASE PARTIES AND UNDERSTATEMENT OF LIABILITY TO THE HOLD ING COMPANY. THE A.O. FURTHER NOTICED THAT M/S RAKSHA'S ENTERPRISES AND SRI GANES H TRADERS HAD SENT THE STATEMENT OF ACCOUNTS OF THE HOLDING COMPANY ALSO A ND TOTAL LIABILITY TOWARDS PURCHASES MADE BY BOTH HOLDING AND SUBSIDIARY COMPA NY WAS ALSO NOT RECONCILED WITH THE BALANCE SHOWN BY THESE TWO FIRMS. HE ALSO NOTED THAT THE AUDITORS HAVE NOT MADE ANY QUANTIFICATION IN THE ACCOUNTS OF THE ASSESSES OR THE HOLDING COMPANY FOR THE YEARS ENDED 31.3.2004 AND 31.3.2005 . THE ASSESSEE-COMPANY WAS ALSO ASKED TO FILE DETAILS OF DATE-WISE PURCHAS ES, OTHER EXPENSES INCURRED AND DATE-WISE PAYMENTS AND ALSO TO RECONCILE LIABILITY OF BOTH THE HOLDING COMPANY AND SUBSIDIARY COMPANY AND IN RESPONSE TO THIS, NO CONVINCING RECONCILIATION STATEMENT WAS FILED. IN THIS BACKGROUND, THE A.O, F INALLY OBSERVED AS UNDER:- 'TAKING INTO CONSIDERATION ALL THE ABOVE MENTIONED FACTS, IT IS PROVED BEYOND THAT DOUBT THE ASSESSEE DID NOT OFFER ANY SA TISFACTORY EXPLANATION FOR THE DIFFERENCE IN THE SUNDRY CREDITORS SHOWN ON THE LIABILITY SIDE OF THE BALANCE SHEET. THAT MEANS TO THAT EXTENT THE ASSET SIDE OF THE BALANCE SHEET IS ALSO WRONG SINCE THERE IS BALANCING ENTRY IN THE ASSET SIDE. THE ASSESSEE COMPANY REPRESENTED THAT THERE IS NO VARIATION ON T HE ASSET SIDE. THIS CLEARLY SHOWS THAT ASSESSEE HAS INVESTED IN ASSETS OUT OF UNACCOUNTED INCOME DURING THE PREVIOUS YEAR RELEVANT TO ASSESSM ENT YEAR 2004-05. HENCE THE DIFFERENCE AMOUNT IN LIABILITIES OF RS.2, 44,96,054/- IS TREATED AS UNACCOUNTED INCOME OF THE ASSESSEE AND ADDED TO TAX ABLE INCOME OF THE ASSESSEE'. 9. THE ABOVE ADDITION WAS CONFIRMED BY LD. CIT(A). 10. WHEN THE ISSUE TRAVELLED TO THE TRIBUNAL, DETAI LED SUBMISSIONS WERE MADE BY BOTH THE PARTIES AND ISSUE WAS DECIDED VIDE PARA S 11 TO 20 WHICH ARE AS UNDER:- 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREF ULLY IN THE LIGHT OF THE MATERIAL ON RECORD AS WELL AS THE DECISIONS CIT ED BY THE PARTIES. WE FIND THAT THE A.O. MADE INVESTIGATIONS IN RESPECT O F SUNDRY CREDITORS. HE FOUND THAT THERE WAS A DIFFERENCE TO THE TUNE OF RS . 2,44,96,054/-. ADMITTEDLY, THIS DIFFERENCE AROSE IN RESPECT OF TWO CREDITORS, NAMELY, M/S 7 SRI GANESH TRADERS AND M/S RAKSHAS ENTERPRISES. TH E ACTUAL CREDIT BALANCE IN TWO CASES WAS RS. 3,59,553/- AND RS. 47, 45,614/-. IT WAS FURTHER NOT DISPUTED BEFORE US THAT THESE ACCOUNTS WERE CREDITED BY A SUM OF RS. 1,02,00,000/- AND RS. 1,42,96,054/- AND CORR ESPONDING DEBIT WAS GIVEN TO THE HEAD OFFICE. INITIALLY, IT WAS SUBMITT ED BEFORE THE A.O. THAT LIABILITY AROSE ON ACCOUNT OF OUTSTANDING PURCHASE AMOUNT SETTLED THROUGH LETTER OF CREDIT LIMITS WITH BANKS. THEN, IT WAS SU BMITTED THAT IT WAS A CASE OF JOURNAL ENTRY ONLY AND COULD NOT BE TREATED AS U NEXPLAINED CASH CREDIT. THOUGH THERE IS LOT OF DISCUSSION IN THE ASSESSMENT ORDER AND FURTHER DETAILED DISCUSSIONS THAT AUDITORS HAD NOT POINTED OUT THIS MISTAKE IN THE ASSESSEES BALANCE SHEET OR IN THE HOLDING COMPANY S BALANCE SHEET, BUT WE ARE NOT GOING INTO THOSE DETAILS BECAUSE IF THE AUDITOR HAS DEFAULTED AND THAT THE DEFAULT WOULD COME UNDER THE COMPANIES ACT AND NOT UNDER THE INCOME-TAX ACT. HOWEVER, THE FACT REMAINS THAT CREDITORS HAVE FLATLY REFUSED THAT THEY HAD LENT THESE EXTRA AMOUNTS TOTA LING TO RS. 2,44,96,054/. SECTION 68 READS AS UNDER:- 68 . WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF A N ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESS ING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. 12. A READING OF THE ABOVE SECTION CLEARLY SHOWS TH AT WHENEVER ANY SUM IS FOUND CREDITED IN THE BOOKS AND IF THE ASSES SEE OFFERS NO EXPLANATION OR EXPLANATION OFFERED BY HIM IS IN THE OPINION OF ASSESSING OFFICER IS NOT SATISFACTORY, THEN SUCH SUM IS REQUI RED TO BE CHARGED TO INCOME TAX. REGARDING THE APPLICABILITY OF THIS PRO VISION, PLETHORA OF CASE LAW IS AVAILABLE AND BY NOW IT IS SETTLED POSITION THAT ONUS OF PROVING CREDIT ENTRY ALWAYS LIES ON THE ASSESSEE. IT IS ALS O WELL SETTLED THAT THE ASSESSEE IS REQUIRED TO PROVE BASICALLY THREE INGRE DIENTS, NAMELY, (1) IDENTITY OF CREDITORS, (2) GENUINENESS OF TRANSACTI ON, AND (3) CAPACITY OF CREDITORS. IN THE CASE BEFORE US, ONLY THING PROVED BY THE ASSESSEE IS IDENTITY BECAUSE OTHER TWO PARTIES HAVE REFUSED THA T THEY HAVE LENT ANY SUM TO THE EXTENT OF RS. 1,02,00,000/- BY M/S SRI G ANESH TRADERS AND RS. 1,42,96,054/- BY M/S RAKSHAS ENTERPRISES. 13. THE MAIN THRUST OF ARGUMENT BEFORE US WAS THAT IT WAS A CASE OF WRONG JOURNAL ENTRY AND THEREFORE, SECTION 68 ITSEL F WAS NOT ATTRACTED. WE ARE NOT IMPRESSED BY THIS ARGUMENT BECAUSE SECTION 68 AS REPRODUCED ABOVE DOES NOT DISTINGUISH BETWEEN JOURNAL ENTRY AN D CASH ENTRY. WHAT IS REQUIRED FOR THE PURPOSE OF SECTION 68 IS ANY SUM FOUND TO BE CREDITED. 14. WE HAVE CAREFULLY GONE THROUGH THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. PANDIAN DISTRIBUTO RS 259 ITR 428 (MAD.) ON WHICH THE LEARNED COUNSEL FOR THE ASSESSEE PLACE D HEAVY RELIANCE. IN THAT CASE, THE ASSESSEE WAS A FIRM OF TWO PARTNERS, NAMELY, ONE P. THIAGARAJAN AND ANOTHER K.L. SRI HARI. THE BUSINESS OF THE FIRM COMMENCED FROM 16TH JULY, 1981 AND EVEN BEFORE THE COMMENCEMENT OF 8 THE FIRM, ON MAY 16, 1981, ONE OF THE PARTNERS OF T HE FIRM VIZ. P. THIAGARAJAN HAD PAID A SUM OF RS. 30,000/- AS LICEN SE FEE FOR WAREHOUSE AND DEPOTS UNDER THE STATE EXCISE RULES TO THE STAT E GOVERNMENT AND HAD DEPOSITED ANOTHER SUM OF RS. 30,000/- AS A WHOLESAL E SECURITY DEPOSIT WITH THE STATE GOVERNMENT. THE QUESTION AROSE WHETHER TH E SUM OF RS. 60,000/- CREDITED TO THE ACCOUNT OF P. THIAGARAJAN AND TREAT ED AS HIS CAPITAL CONTRIBUTION SHOULD BE TREATED AS UNDISCLOSED INCOM E OF THE FIRM. THE TRIBUNAL FOUND THAT EVEN BEFORE THE COMMENCEMENT OF THE BUSINESS OF THE FIRM ON JULY 16, 1981, P. THIAGARAJAN HAD PAID RS. 60,000/- AS SECURITY DEPOSIT AND LICENSE FEE WITH THE GOVERNMENT WHICH W AS GIVEN CREDIT IN HIS CAPITAL ACCOUNT. THE TRIBUNAL FURTHER HELD THAT IT WAS NOT A CASE OF CASH CREDIT AT ALL AND PROVISIONS OF SECTION 68 ARE NOT ATTRACTED. THE TRIBUNAL, THEREFORE, HELD THAT THE SUM AMOUNTING TO RS. 60,00 0/- CANNOT BE TREATED AS UNDISCLOSED INCOME OF THE FIRM AS P. THIAGARAJAN HAD GIVEN A STATEMENT THAT THE SAID AMOUNT WAS GIVEN BY HIM EVEN BEFORE T HE COMMENCEMENT OF THE BUSINESS OF THE FIRM FOR THE PURPOSE OF CARRYIN G ON THE BUSINESS. ON THESE FACTS, HONBLE HIGH COURT HELD AS FOLLOWS:- WE FIND THAT THE APPELLATE TRIBUNAL HAS ARRIVED A T THE CONCLUSION THAT THE SUM OF RS. 60,000 WAS NOT THE U NDISCLOSED INCOME OF THE FIRM ON THE BASIS OF THE MATERIALS AV AILABLE ON RECORD AND ON THE BASIS OF THE STATEMENT OF THIAGARAJAN, W HICH WAS BELIEVED AND ACCEPTED BY THE TRIBUNAL, WE ARE, THER EFORE, OF THE VIEW THAT THE FINDING RECORDED BY THE TRIBUNAL ON T HE BASIS OF THE MATERIAL IS A PURE FINDING OF FACT AND DOES NOT CAL L FOR ANY INTERFERENCE BY THIS COURT. WE DO NOT FIND ANY QUES TION OF LAW THAT ARISES OUT OF THE ORDER OF THE TRIBUNAL. ACCORDINGL Y, WE ANSWER THE QUESTION OF LAW REFERRED TO US IN FAVOUR OF THE ASS ESSEE AND AGAINST THE REVENUE. 15. FROM THE ABOVE, IT BECOMES CLEAR THAT HONBLE H IGH COURT HAS NOT LAID DOWN ANY RATIO AND SIMPLY CONFIRMED THE DECISI ON OF THE TRIBUNAL ON THE BASIS THAT NO SUBSTANTIAL QUESTION OF LAW WAS I NVOLVED. SINCE THE DETAILED FACTS HAVE NOT BEEN NOTED BY THE HONBLE H IGH COURT, WE ARE OF VIEW THAT THE TRIBUNAL MUST HAVE DECIDED THIS CASE ON THE BASIS OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T V. BHARAT ENGINEERING AND CONSTRUCTION CO. (1972) 83 ITR 187 (SC) WHERE SOME CREDIT ENTRIES WERE FOUND IN THE FIRST YEAR OF BUSI NESS AND HONBLE SUPREME COURT HAS HELD AS UNDER:- HELD, THAT THE INFERENCE DRAWN FROM THE FACTS PROV ED WAS A QUESTION OF FACT AND THE TRIBUNALS FINDING ON THAT QUESTION WAS FINAL. A CONSTRUCTION COMPANY TOOK TIME TO EARN PRO FITS AND IT COULD NOT HAVE EARNED A HUGE PROFIT WITH A FEW DAYS AFTER THE COMMENCEMENT OF ITS BUSINESS. HENCE, IT WAS REASONA BLE TO ASSUME THAT THE CASH CREDIT ENTRIES REPRESENTED CAPITAL RE CEIPTS THOUGH FOR ONE REASON OR ANOTHER THE ASSESSEE HAD NOT COME OUT WITH THE TRUE STORY AS REGARDS THE SOURCE OF THE RECEIPT. 9 16. FROM THE ABOVE, IT IS CLEAR THAT THERE IS NO PO SSIBILITY FOR A FIRM TO EARN ANY UNDISCLOSED INCOME BEFORE THE BUSINESS IS STARTED AND THAT IS WHY, THE TRIBUNAL TOOK THE DECISION BECAUSE AMOUNTS WERE ENTERED IN THE BOOKS AT THE COMMENCEMENT OF THE BUSINESS. THEREFOR E, THE ABOVE DECISION IS TOTALLY CORRECT. BUT, WE ARE UNABLE TO FIND ANY RATIO THAT SECTION 68 IS NOT APPLICABLE IN THE CASE OF JOURNAL ENTRIES. 17. WE ARE ALSO UNABLE TO AGREE WITH THE REASONING GIVEN BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THE LIGHT OF TH E DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SREE LEKHA BANERJEE V. CIT (SUPRA). IN THAT CASE, FOLLOWING FACTS WERE INVOLVED:- THE ASSESSEE,WHO WAS A COLLIERY PROPRIETOR AND A C OAL RAISING CONTRACTOR, HAD ENCASHED ON JANUARY 22,1946, HIGH D ENOMINATION NOTES OF THE VALUE OF RS. 51,000. IN HIS APPLICATIO N UNDER THE ORDINANCE FOR ENCASHMENT OF THE NOTES HE HAD STATED THAT FOR THE PURPOSE OF CONDUCTING HIS BUSINESS AND MAKING PAYME NT OT LABOUR WHICH WAS TO THE TUNE OF RS. 30,000 TO RS. 40,000 E VERY WEEK. HIS EXPLANATION BEFORE THE INCOME-TAX OFFICER THAT THE HIGH DENOMINATION NOTES FORMED PART OF THE CASH BALANCE AT HIS HEAD- OFFICE WAS REJECTED BY THE INCOME-TAX OFFICER ON TH E GROUNDS: (1) THAT THERE WAS A DISCREPANCY IN THE STATEMENTS FILE D BY THE ASSESSEE TO PROVE THE AMOUNT WHICH THE ASSESSEE CLA IMED WAS THE CASH ON HAND; (2) THAT ALTHOUGH HIS BUSINESS WAS LA RGE AND THE WITHDRAWALS FROM THE ACCOUNTS WHICH HE HAD IN VARIO US BANKS WERE LARGE AND FREQUENT, THE ASSESSEE HAD NOT MAINTAINED A CENTRAL ACCOUNT SHOWING WITHDRAWALS FROM THE BANKS AND REMI TTANCES MADE TO HIS VARIOUS BUSINESS: (3) THAT NONE OF THE BOOKS MAINTAINED BY THE ASSESSEE AND PRODUCED BY HIM CONT AINED A BANK ACCOUNT; (4) THAT THERE WAS NO ACCOUNT OF THE PERSO NAL EXPENSES OF THE ASSESSEE; AND (5) THAT HE FAILED TO SHOW WHY HE KEPT LARGE SUMS ON HAND AT ONE PLACE WHEN AT EACH OF THE PLACES WHE RE WORK WAS CARRIED ON THERE WERE BANKS WITH WHICH HE HAD ACCOU NTS. THE APPELLATE ASSISTANT COMMISSIONER FURTHER FOUND THAT THE ASSESSEE HAD WITHDRAWN A SUM OF RS. 45,000 ON THE DAY ON WHI CH THE HIGH DENOMINATION NOTES WERE ENCASHED AND A FURTHER SUM OF RS. 6,005 A FEW DAYS LATER AND NEITHER SUM HAD BEEN UTILIZED BY THE ASSESSEE. THE SUM OF RS. 51,000 WAS BROUGHT TO TAX AS INCOME FROM UNDISCLOSED SORUCES. ON THE BASIS OF ABOVE FACTS, IT WAS HELD AS UNDER:- HELD, ON THE FACTS, THAT THERE WERE MATERIAL TO SH OW THAT THE SUM OF RS. 51,000 DID NOT FORM PART OF THE CASH BALANCE OF THE ASSESSEE AND THE SOURCE OF THE MONEY NOT HAVING BEEN SATISFA CTORILY PROVED THE DEPARTMENT WAS JUSTIFIED IN HOLDING IT TO BE AS SESSABLE INCOME OF THE ASSESSEE FROM SOME UNDISCLOSED SOURCE. 10 18. THUS IT IS CLEAR FROM THE ABOVE DECISION THAT H ONBLE COURT ULTIMATELY HELD THAT ONUS WAS ON THE ASSESSEE TO PR OVE SATISFACTORILY THE SOURCE OF MONEY AND IF THE SAME WAS NOT PROVED, THE N ADDITION COULD BE MAINTAINED ULTIMATELY ON ACCOUNT OF NON-EXPLANATION OF SOURCES FOR ENCASHMENT OF HIGH DENOMINATION NOTES. SIMILARLY, I N THE CASE OF CIT V. P. MOHANAKALA (SUPRA), THE HONBLE APEX COURT MADE FOL LOWING OBSERVATIONS:- A BARE READING OF SECTION 68 OF THE INCOME-TAX AC T, 1961, SUGGESTS THAT (I) THERE HAS TO BE CREDIT OF AMOUNTS IN THE BOOKS MAINTAINED BY THE ASSESSEE; (II) SUCH CREDIT HAS TO BE A SUM OF MONEY DURING THE PREVIOUS YEAR; AND (III) EITHER (A ) THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE O F SUCH CREDITS FOUND IN THE BOOKS OR (B) THE EXPLANATION OFFERED B Y THE ASSESSEE, IN THE OPINION OF THE ASSESSING OFFICER, IS NOT SAT ISFACTORY. IT IS ONLY THEN THAT THE SUM SO CREDITED MAY BE CHARGED TO INC OME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THE E XPRESSION THE ASSESSEE OFFERS NO EXPLANATION MEANS THE ASSESSEE OFFERS NO PROPER, REASONABLE AND ACCEPTABLE EXPLANATION AS RE GARDS THE SUMS FOUND CREDITED IN THE BOOKS MAINTAINED BY THE ASSESSEE. THE OPINION OF THE ASSESSING OFFICER FOR NOT ACCEPTING THE EXPLANATION OFFERED BY THE ASSESSEE AS NOT SATISFACTORY IS REQU IRED TO BE BASED ON PROPER APPRECIATION OF MATERIAL AND OTHER ATTEND ING CIRCUMSTANCES AVAILABLE ON THE RECORD. THE OPINION OF THE ASSESSING OFFICER IS REQUIRED TO BE FORMED OBJECTIV ELY WITH REFERENCE TO THE MATERIAL ON RECORD. APPLICATION OF MIND IS THE SINE QUA NON FOR FORMING THE OPINION. IN CASES WHERE THE EXPLANATION OFFERED BY THE ASSES SEE ABOUT THE NATURE AND SOURCE OF THE SUMS FOUND CREDI TED IN THE BOOKS IS NOT SATISFACTORY THERE IS, PRIMA FACIE EVI DENCE AGAINST THE ASSESSEE, VIZ., THE RECEIPT OF MONEY. THE BURDEN IS ON THE ASSESSEE TO REBUT THE SAME, AND, IF HE FAILS TO REBUT IT, IT CAN BE HELD AGAINST THE ASSESSEE THAT IT WAS A RECEIPT OF AN INCOME NAT UE. 19. ON THE BASIS OF ABOVE OBSERVATIONS, IT WAS HELD THAT THE ASSESSEE WAS NOT ABLE PROVE SATISFACTORILY THE RECEIPT OF GI FTS AND THEREFORE, SAME WERE ADDED TO THE INCOME OF THE ASSESSEE. IN THIS C ASE, HONBLE SUPREME COURT MADE FURTHER OBSERVATION AT PAGES 285 AND 286 WHICH ARE AS UNDER:- THE QUESTION IS WHAT IS THE TRUE NATURE AND SCOPE OF SECTION 68 OF THE ACT? WHEN AND IN WHAT CIRCUMSTANCES WOULD SECTI ON 68 OF THE ACT COME INTO PLAY? A BARE READING OF SECTION 68 SU GGESTS THAT THERE HAS TO BE CREDIT OF AMOUNTS IN THE BOOKS MAIN TAINED BY AN ASSESSEE; SUCH CREDIT HAS TO BE OF A SUM DURING THE PREVIOUS YEAR; AND THE ASSESSES OFFER NO EXPLANATION ABOUT THE NAT URE AND SOURCE OF SUCH CREDIT FOUND IN THE BOOKS; OR THE EXPLANATI ON OFFERED BY THE ASSESSES IN THE OPINION OF THE ASSESSING OFFICER IS NOT SATISFACTORY, 11 IT IS ONLY THEN THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSES OF THAT PREVIOUS YEAR. T HE EXPRESSION THE ASSESSES OFFER NO EXPLANATION MEANS WHERE THE ASSESSES OFFER NO PROPER, REASONABLE, AND ACCEPTABLE EXPLANATION A S REGARDS THE SUMS FOUND CREDITED IN THE BOOKS MAINTAINED BY THE ASSESSES. IT IS TRUE THE OPINION OF THE ASSESSING OFFICER FOR NOT A CCEPTING THE EXPLANATION OFFERED BY THE ASSESSES AS NOT SATISFAC TORY IS REQUIRED TO BE BASED ON PROPER APPRECIATION OF MATERIAL AND OTHER ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD. THE OPINION OF T HE ASSESSING OFFICER IS REQUIRED TO BE FORMED OBJECTIVELY WITH R EFERENCE TO THE MATERIAL AVAILABLE ON RECORD. APPLICATION OF MIND I S THE SINE QUA NON FOR FORMING THE OPINION. IN SUMATI DAYAL V. CIT (1995) 214 ITR 801 (SC); (1 955) SUPP 2 SCC 453 THIS COURT HELD: IN ALL CASES IN WHICH AS RECEIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES ON THE DEPARTMENT TO PROVE THAT IT IS WITHIN THE TAXING PROVISION AND IF A RECEIPT IS IN THE NATURE OF INCOME, THE BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUSE IT FALLS WITHIN EXEMPTION PROVIDED BY THE ACT LIES UPON THE ASSESSE E. BUT, IN VIEW OF SECTION 68 OF THE ACT, WHERE ANY SUM IS FOUND CR EDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR THE SAM E MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASS ESSEE ABOUT THE NATURE AND SOURCE THEREOF IS, IN THE OPINION OF THE ASSESSING OFFICER, NOT SATISFACTORY. IN SUCH A CASE THERE IS, PRIMA FACIE, EVIDENCE AGAINST THE ASSESSEE, VIZ, THE RECEIPT OF MONEY, AND IF HE FAILS TO REBUT, THE SAID EVIDENCE BEING UNREBUTTED, CAN BE USED AGAINST HIM BY HOLDING THAT IT WAS A RECEIPT OF AN INCOME NATURE. IN THAT CASE THE AMOUNT WAS CREDITED IN THE CAPITAL ACCOUNT IN THE BOOKS AND THE ASSESSEE OFFERED HER EXPLANATION ABOU T THE SAID RECEIPT BEING HER WINNINGS FROM HORSE RACES. THE EX PLANATION WAS NOT ACCEPTED. THERE WAS NO DISPUTE THAT THE AMOUNT WAS RECEIVED BY THE ASSESSEE FORM VARIOUS RACE CLUBS ON THE BASI S OF WINNING TICKETS PRESENTED BY HER. THIS COURT BASED ON THE M ATERIAL AVAILABLE ON RECORD FOUND THAT AN INFERENCE ABOUT SUCH A PURC HASE HAS TO BE DRAWN ON THE BASIS OF THE CIRCUMSTANCES AVAILABLE O N RECORD INASMUCH AS NO DIRECT EVIDENCE BOUT SUCH PURCHASE W OULD BE RARELY AVAILABLE. THIS COURT ACCORDINGLY UPHELD THE MAJORITY OPINION OF THE SETTLEMENT COMMISSION BASED ON SURRO UNDING CIRCUMSTANCES AND APPLYING THE TEST OF HUMAN PROBAB ILITIES. THIS AUTHORITATIVE PRONOUNCEMENT IN OUR CONSIDERED OPINI ON IS THE COMPLETE ANSWER TO REJECT THE SUBMISSIONS MADE BY T HE LEARNED SENIOR COUNSEL ON BEHALF OF THE RESPONDENTS. THUS, IT IS CLEAR THAT WHILE DECIDING AN ISSUE, IT IS VERY IMPORTANT TO KEEP THE HUMAN PROBABILITIES IN MIND. 12 19. IN THE CASE BEFORE US, NO EXPLANATION IS FORTHC OMING WHY THIS WRONG ENTRY WAS MADE BY THE SUBSIDIARY COMPANY. IT IS FURTHER NOT CLARIFIED WHY IDENTICAL ENTRY HAS BEEN MADE BY THE HOLDING COMPANY BY DEBITING ASSESSEE AND CREDITING WHICH ACCOUNTS, WE DO NOT KNOW. BUT, MOST PROBABLY, LETTERS OF CREDIT ACCOUNTS WHICH MEANS TH E LIABILITY FROM BANK HAS BEEN OVERSTATED IN THE CASE OF HOLDING COMPANY. THESE FACTS ARE NOT CLEAR. IN THIS REGARD, WE FIND FORCE IN THE SUBMISS ION OF THE LEARNED D.R. THAT UNLESS AND UNTIL THE ASSESSEE COMES FORWARD WI TH THE FACTS WHICH ARE KNOWN ONLY TO THE ASSESSEE, ADVERSE INFERENCE CAN A LWLAYS BE TAKEN. THE OBSERVATIONS OF HONBLE SUPREME COURT INTEREST EH C ASE OF CIT V. BEST AND COMPANY. (P.) LTD. (SUPRA) RELIED ON BY THE LEA RNED D.R. ARE IMPORTANT, WHICH ARE AS UNDER:- THE SUPREME COURT DID NOT LAY DOWN IN COMMISSIONE R OF INCOME TAX V. CHARI AND CHARI LTD. (1965) 57 ITR 400 (SC) THAT THE BURDEN ON THE REVENUE TO ESTABLISH THAT AN INCOME W AS TAXABLE WAS IMMUTABLE IN THE SENSE THAT IT NEVER SHIFTED TO THE ASSESSEE. WHEN SUFFICIENT EVIDENCE, EITHER DIRECT OR CIRCUMSTANTIA L, IN RESPECT IF ITS CONTENTION WAS DISCLOSED BY THE REVENUE, ON ADVERSE INFERENCE COULD BE DRAWN AGAINST THE ASSESSEE IF HE FAILED TO PUT BEFORE THE DEPARTMENT MATERIAL WHICH WAS IN HIS EXCLUSIVE POSS ESSION. WHILE THE INCOME-TAX AUTHORITIES HAVE TO GATHER THE RELEVANT MATERIAL TO ESTABLISH THAT THE COMPENSATION GIVEN F OR THE LOSS OF AGENCY WAS A TAXABLE INCOME, ADVERSE INFERENCE COUL D BE DRAWN AGAINST THE ASSESSEE IF HE HAD SUPPRESSED DOCUMENTS AND EVIDENCE, WHICH WERE EXCLUSIVELY WITHIN HIS KNOWLEDGE OR KEEP ING. 20. AS FAR AS DECISION REGARDING NATURE OF ENTRIES IN THE CASE OF KEDARNATH JUTE MFG.CO. LTD. V. CIT (1971)(82 ITR 36 3) (SC), IT IS TOTALLY OUT OF CONTEXT IN THE CIRCUMSTANCES BEFORE US, BECA USE ADDITION HAS BEEN MADE UNDER SECTION 68 AGAINST A CREDIT ENTRY. ONCE A CREDIT ENTRY IS MADE IN THE BOOKS FOR ANY SUM OF MONEY, THEN THERE IS NO CONFUSION REGARDING THE INTERPRETATION OF THE ENTRY. SIMILARLY, THE DEC ISION REGARDING REAL INCOME THEORY GIVEN BY HONBLE APEX COURT IS AGAIN IN THE CASE OF CIT V. SHOORJI VALLABHDAS AND COMPANY. (SUPRA) IS OUT OF C ONTEXT BECAUSE SECTION 68 CLEARLY ENACTS THAT ANY SUM FOUND CREDIT ED, WHICH IS NOT EXPLAINED PROPERLY, HAS TO BE TREATED INCOME OF THE ASSESSEE. IN THESE CIRCUMSTANCES, WE FIND NOTHING WRONG WITH THE ORDER OF THE CIT(APPEALS). 21. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED 11. FROM THE ABOVE ORDER AND DISCUSSION, IT BECOME ABSOLUTELY CLEAR THAT SECTION 68 WOULD GET INVOKED THE MOVEMENT THE ENTRY FOR CREDIT OF A SUM IS MADE IN THE BOOKS OF ACCOUNT. THE LD. CIT(A) TOTALLY MIS DIRECTED HIMSELF TO THE EXTENT AND MEANING OF SECTION 68 BY OBSERVING THAT THIS SE CTION CAN BE INVOKED ONLY WHEN THE MONEY IS CREDITED IN THE BANK ACCOUNT. PER USAL OF THE SECTION WHICH HAS 13 BEEN REPRODUCED IN THE ABOVE DECISION CLEARLY SHOWS THAT PROVISION CAN BE INVOKED ONCE A CREDIT IS MADE IN THE BOOKS OF ACCOU NT. THEREFORE, IN OUR OPINION THE ADDITION HAS BEEN CORRECTLY MADE BY THE ASSESSI NG OFFICER. 12. THE LD. COUNSEL OF THE ASSESSEE HAD ALSO STRONG LY RELIED ON CERTAIN OBSERVATION OF JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS MAHENDRA KUMAR AGARWAL 23 TAXMANN.COM 285 (JAIPUR TRIB). HE PARTICULARLY RELIED ON THE OBSERVATION MADE AT PARA 35 THAT IN S. 68 THE WORDS USED ARE WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE. IN THIS CONNECTION THE WORD SUM IS OF PARAMOUNT IMPORTANCE. THE WORDS ANY SUM CA NNOT BE TAKEN AS PARALLEL TO ANY ENTRY. THE PROVISIONS OF S. 68 ARE DEEMING PR OVISIONS AND THEREFORE, ONUS IS ON THE DEPARTMENT TO PROVE THAT ANY SUM WAS CREDITE D TO THE BOOKS OF THE ASSESSEE. THE ABOVE OBSERVATION HAVE BEEN MADE IN THE CONTEXT OF FACTS OF THIS CASE AND IN OUR OPINION THE FACTS ARE TOTALLY DISTI NGUISHABLE. IN ANY CASE, THESE OBSERVATIONS ARE QUITE CONTRADICTORY TO THE OBSERVA TIONS MADE BY HON'BLE SUPREME COURT IN THE CASE OF SREE LEKHA BANERJEE V. CIT (SUPRA) AND CIT V. P. MOHANAKALA (SUPRA) WHICH HAVE BEEN DISCUSSED IN DET AIL ABOVE. THEREFORE, WE FIND NO FORCE IN THIS CONTENTION. 13. THE LD. COUNSEL FOR THE ASSESSEE HAD VEHEMENTLY ARGUED THAT ASSESSEE HAS NOT ACTUALLY RECEIVED THE MONEY AND IT WAS ONLY A P APER TRANSACTION. HOWEVER, NO FURTHER DETAILS HAVE BEEN GIVEN WHY THIS PAPER TRAN SACTIONS WERE CARRIED OUT BY THE ASSESSEE. IN THE ABOVE DECISION OF CHENNAI BENCH OF THE TRIBUNAL ALSO, THIS ISSUE HAS BEEN DISCUSSED IN PARAS 19 & 20. THE HON'BLE S UPREME COURT HAS CLEARLY OBSERVED IN THE CASE OF CIT V BEST AND CO. (P.) L TD 60 ITR 11 THAT IF SOME INFORMATION WAS IN THE POSSESSION OF ASSESSEE THEN IT IS ONLY THE ASSESSEE WHO CAN DISCLOSE SUCH INFORMATION AND REVENUE AUTHORITIES W OULD HAVE THE RIGHT TO TAKE ADVERSE INFERENCE IN THE ABSENCE OF REASONS GIVEN F OR HIDDEN INFORMATION. THE EXACT OBSERVATIONS HAVE BEEN NOTED IN PARA 19 OF TH E ORDER OF THE TRIBUNAL IN THE CASE OF M/S SRI BALAMURUGAN TEXTILE PROCESSING LTD. VS ACIT (SUPRA). THEREFORE, 14 UNLESS AND UNTIL THE ASSESSEE IS READY TO EXPLAIN WHY PAPER ENTRIES WERE MADE IN THE BOOKS OF ACCOUNT, NO COGNIZANCE CAN BE TAKEN OF THIS CONTENTION AND SECTION 68 HAS TO BE INVOKED ONCE A SUM IS FOUND TO BE CRED ITED. 14. ONE MORE CONTENTION WAS MADE THAT UNLESS AND UN TIL THE REAL INCOME COME TO THE ASSESSEE, THE ASSESSEE CANNOT FASTEN WITH A LIABILITY. GENERALLY SPEAKING THERE IS NO DOUBT THAT IT IS ONLY THE REAL INCOME W HICH CAN BE TAXED BUT THIS THEORY HAS TO BE UNDERSTOOD SUBJECT TO SOME LIMITATIONS. C OMMENTING ON THESE LIMITATIONS, THE LD. AUTHOR SHRI S. RAJARATNAM IN T HE COMMENTARY OF LAW OF INCOME TAX BY SAMPAT IYENGARS VOLUME 1, (11TH EDIT ION) HAS OBSERVED AT PAGE 343 AS UNDER:- 5. RESERVATIONS ON REAL INCOME THEORY. - WHETHER ACCRUAL OF INCOME HAS TAKEN PLACE OR NOT, MUST BE JUDGED ON THE PRINCIPLE OF THE REAL INCOME THEORY. AFTER ACCRUAL, NON-CHARGING OF TAX ON THE S AME BECAUSE OF CERTAIN CONDUCT BASED ON THE IPSE DIXIT OF A PARTICULAR ASS ESSEE CANNOT BE ACCEPTED. IN DETERMINING THE QUESTION WHETHER IT IS HYPOTHETICAL INCOME OR WHETHER REAL INCOME HAS MATERIALIZED OR NOT, VARIOU S FACTORS WILL HAVE TO BE TAKEN INTO ACCOUNT. IT WOULD BE DIFFICULT AND IM PROPER TO EXTEND THE CONCEPT OF REAL INCOME TO ALL CASES DEPENDING UPON THE SELF-SERVING STATEMENT OF THE ASSESSEE. WHAT HAS REALLY ACCRUED TO THE ASSESSEE HAS TO BE FOUND OUT AND WHAT HAS ACCRUED MUST BE CONSIDERE D FROM THE POINT OF VIEW OR REAL INCOME TAKING THE PROBABILITY OR IMPRO BABILITY OF REALIZATION IN A REALISTIC MANNER, BUT ONCE ACCRUAL TAKES PLACE , ON THE CONDUCT OF THE PARTIES SUBSEQUENT TO THE YEAR OF CLOSING, AN INCOM E WHICH HAS BEEN ACCRUED CANNOT BE MADE NO INCOME. THE ABOVE POSITION CAN BE UNDERSTOOD VERY CLEARLY B Y REFERRING TO VARIOUS PROVISIONS OF THE ACT. FOR EXAMPLE U/S 22 WHICH DEA LS WITH THE INCOME FORM HOUSE PROPERTY, INCOME HAS TO BE DETERMINED AS PER SECTION 23. SECTION 23 CLEARLY PRESCRIBES THE METHOD OF DETERMINATION OF T HE ANNUAL VALUE AND READS AS UNDER:- 23. (1) FOR THE PURPOSES OF SECTION 22 , THE ANNUAL VALUE OF ANY PROPERTY SHALL BE DEEMED TO BE (A) THE SUM FOR WHICH THE PROPERTY MIGHT REASONABLY BE EXPECTED TO LET FROM YEAR TO YEAR; OR 15 (B) WHERE THE PROPERTY OR ANY PART OF THE PROPERTY IS LET AND THE ACTUAL RENT RECEIVED OR RECEIVABLE BY THE OWNER IN RESPECT THEREOF IS IN EXCESS OF THE SUM REFERRED TO IN CLAUSE (A), THE AMOUNT SO RECEIVED OR RECEIVABLE; OR. THE ABOVE SECTION HAS BEEN INTERPRETED BY VARIOUS A UTHORITIES TO MEAN THAT EVEN IF HOUSE PROPERTY IS NOT LET OUT, EVEN THEN THE RENT W HICH A PARTICULAR OWNER MIGHT HAVE RECEIVED IS REQUIRED TO BE TAXED AS NOTIONAL I NCOME. IN THIS REGARD, REFERENCE MADE BY MADE TO THE CASES OF SULTAN BROS. PR. LTD. V. CIT, (1964) 51 ITR 353 (SC); JAMNADAS PRABHUDAS V. CIT, (1951)20 ITR 160(B OM); D.M. VAKIL V. CIT, (1946) 14 ITR 298, 302(BOM); CIT V. BIMAN BEHARI SH AW, SHEBAIT, (1968) 68 ITR 815 (CAL); SRI SRI RADHA GOVINDA JEW V. CIT, (1 972) 84 ITR 150, 156 (CAL); CIT V. GANGA PROPERTIES LTD., (1970) 77 ITR 637, 64 7 (CAL); LIQUIDATOR, MAHMUDABAD PROPERTIES LTD. V. CIT, (1972) 83 ITR 47 0 (CAL), AFFIRMED, (1980) 124 ITR 31 (SC). THEREFORE, IF PARTICULAR ITEM OF INCOME IS TAXABLE BECAUSE OF SOME SPECIFIC PROVISION THEN SAME CANNOT BE HELD TO BE NOT TAXABLE ON THE BASIS OF REAL INCOME THEORY. 15. SIMILARLY U/S 2(22)(E) DEEMED DIVIDENDS ARE SUB JECT TO TAX. THIS SECTION PROVIDES THAT IF A LOANS IS GIVEN BY A COMPANY TO I TS SUBSTANTIAL SHARE HOLDER I.E. A SHARE HOLDING MORE THAN 10% OF THE SHARE HOLDING OU T OF THE ACCUMULATED PROFITS, THEN SUCH LOAN WOULD BE TREATED AS DEEMED DIVIDEND I.E INCOME OF THE ASSESSEE. NORMALLY, A LOAN CANNOT BE TREATED AS INCOME BUT BE CAUSE OF THIS DEEMING PROVISION IN A PARTICULAR SET OF CIRCUMSTANCES, THE LOAN MAY ALSO BE TREATED AS INCOME. ONE MORE EXAMPLE CAN BE GIVEN IN TERMS OF M AT PROVISION CONTAINED IN CHAPTER XXB WHICH DEALS WITH COMPANIES WHERE THERE MAY BE BOOK PROFIT BUT TAXABLE PROFITS AS PER PROVISIONS OF THE ACT ARE NE GATIVE. THIS MAY HAPPEN BECAUSE OF HIGHER PROVISION OF DEPRECIATION OR WEIGHTED DED UCTIONS SUCH AS FOR SCIENTIFIC EXPENDITURE. THESE COMPANIES WERE KNOWN AS ZERO TAX COMPANIES AND TO PLUG THIS LOOPHOLE THE MAT PROVISIONS WERE INCORPORATED BY VA RIOUS SECTIONS SUCH AS 115J, 115JA, 115JAA AND 115JB ETC. THROUGH SUCH PROVISION S EVEN IF TAXABLE INCOME 16 IS NOT THERE, THE BOOK PROFITS ARE TAXED TO INCOME TAX BY WAY OF THESE DEEMING PROVISIONS. THEREFORE, IT IS CLEAR THAT MERELY BECA USE REAL INCOME IS NOT ACCRUED TO A PARTICULAR PERSON WILL NOT MAKE A SPECIFIC ITEM E XEMPT BECAUSE OF THIS THEORY IF THE CLEAR PROVISION IS THERE. OTHERWISE, FOR EXAMPL E THE LOAN TAKEN BY A SHARE HOLDER IS NOT INCOME IN THE COMMERCIAL SENSE BUT IS TAXABLE U/S 2(22)(E) IN SOME CIRCUMSTANCES. THEREFORE, WHEREVER A SPECIFIC PROVI SION IS THERE TO TAX A PARTICULAR ITEM OF INCOME IS THERE, THEN SUCH PROVISION CANNOT BE RENDERED MEANINGLESS ON THE BASIS OF REAL INCOME THEORY. ON THE BASIS OF TH IS DISCUSSION, WE ARE OF THE OPINION THAT SECTION 68 CANNOT BE RENDERED MEANINGL ESS SIMPLY ON THE BASIS OF REAL INCOME THEORY. 16. IN VIEW OF THE ABOVE LEGAL POSITION, WE SET ASI DE THE ORDER OF LD. CIT(A) AND RESTORE THAT OF ASSESSING OFFICER. 17. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.03.2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 13 TH MARCH, 2015 RKK COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR