Appeal Details
Counselvise Citation
[2019] 117 COUNSELVISE.COM (IT) 0633 (ITAT-AGRA)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 year(s) 9 month(s) 10 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
16-05-2019
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
DB
Next Hearing Date
29-05-2013
Assessment Year
2006-2007
Appeal Filed On
06-08-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.385/AGRA/2012 ASSESSMENT YEAR: 2006-07 M/S BHARAT EXPLOSIVES LIMITED VS. ASSTT. COMMISS IONER OF INCOME TAX, 2 ND FLOOR, INDRAPRAKASH BUILDING, CIRCLE-6, JHANSI. 21, BARAKHAMBA ROAD, NEW DELHI. (PAN : AAACB 8495 M). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.M. MEHTA, ADVOCATE RESPONDENT BY : SHRI WASEEM ARSHAD, SR. D.R. DATE OF HEARING : 29.05.2013 DATE OF PRONOUNCEMENT : 09.07.2013 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 15.03.2012 PASSED BY THE LD. CIT(A)-II, AGRA FOR THE ASSESSMEN T YEAR 2006-07 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 2 ITA NO.385/AGRA/2012 A.Y. 2006-07 1. THE CIT(A) ERRED BOTH ON FACTS AND IN LAW IN SU STAINING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F FIXED DEPOSITS TO THE EXTENT OF RS.53,82,000/- ALLOWING A RELIEF ONLY TO THE EXTENT OF RS.2,53,000/-. 2. THE CIT(A) AS ALSO THE ASSESSING OFFICER FAILED TO CONSIDER THE EVIDENCE PLACED ON RECORD ALONG WITH DETAILED WRITT EN SUBMISSIONS RESULTING THEREBY IN MISCARRIAGE OF JUSTICE. 3. THE ASSESSING OFFICER IN FACT DID NOT COMPLY WIT H THE SPECIFIC DIRECTIONS GIVEN BY THE CIT(A) AND NEITHER DID HE A LLOW ANY OPPORTUNITY TO THE ASSESSEE IN THE PROCEEDINGS ON R EMAND BUT DRAWING AN ADVERSE INFERENCE. 4. WITHOUT PREJUDICE TO THE AFORESAID GROUNDS THE C IT(A) ERRED IN NOT DECIDING THE ALTERNATIVE CLAIM OF THE APPELLANT TO THE EFFECT THAT THE ADDITION OF RS.56,35,000/- INCLUDED OPENING BALANCE S AGGREGATING RS.2,12,000/- AND WHICH OTHERWISE COULD NOT BE ADDE D U/S 68 OF THE I.T. ACT,. 5. THE APPELLANT RESERVES TO ITSELF, THE RIGHT TO A DD, ALTER, AMEND, SUBSTITUTE, WITHDRAW AND/OR ANY GROUND(S) OF APPEAL ON OR BEFORE THE DATE OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT THE ASSESSEE HAS BORROWED MONEY T HROUGH FIXED DEPOSITS RS.2,64,34,000/-. THE A.O. ASKED THE ASSESSEE TO F URNISH THE CONFIRMATION IN ALL CASES. SEPARATE LETTERS TO EACH DEPOSITOR ON THE A DDRESSES AS INFORMED BY THE ASSESSEE WERE ISSUED BUT CONFIRMATIONS WERE RECEIVE D IN FEW CASES AND FDRS TO THE EXTENT OF RS.56,35,000/- WERE REMAINED UNCONFIRMED, LIST OF WHICH HAS BEEN GIVEN BY THE A.O. IN HIS ORDER IN PARAGRAPH NO.2.3. THE A.O., IN ABSENCE OF PROOF 3 ITA NO.385/AGRA/2012 A.Y. 2006-07 REGARDING CREDITWORTHINESS OF THE CREDITORS AND GEN UINENESS OF THE TRANSACTIONS, MADE ADDITION OF RS.56,35,000/- UNDER SECTION 68 OF THE ACT. 4. THE CIT(A) HAS ALLOWED RELIEF OF RS.2,53,000/- A ND CONFIRMED THE ADDITION FOR THE BALANCE AMOUNT. BEFORE THE CIT(A), IT WAS CONTENDED BY THE ASSESSEE THAT THE FACT OF NON-REPLY OF CONFIRMATION FROM DEPOSITO RS WAS NOT CONFRONTED TO THE ASSESSEE IN VIEW OF THE FACT THE CIT(A) FORWARDED T HE ASSESSEES SUBMISSION TO THE A.O. FOR COMMENTS. THE A.O. SUBMITTED HIS REPORT O N 06.09.2010. THE A.O.S REMAND REPORT HAS BEEN REPRODUCED BY THE CIT(A) AT PAGE NOS.3 TO 6 OF HIS ORDER. AFTER CONSIDERING THE ASSESSEES SUBMISSION AND REM AND REPORT OF THE A.O., THE CIT(A) HELD AS UNDER :- (PAGE NO.6) 3.4 I HAVE CONSIDERED THE RIVAL CONTENTIONS AND FI ND THAT EVEN AFTER THE MATTER WAS REMANDED TO THE AO, THE ASSESSEE FAI LED TO SUBMIT CONFIRMATIONS EXCEPT IN 10 CASES WHICH ARE AS UNDER :- ANIL KUMAR RS.13,000 ANIL KUMAR RS.10,000 PUSHPA RANDEV RS.50,000 SONIA RANDEV RS.50,000 USHA KUMARI RS.35,000 USHA KUMARI RS.15,000 KANTI PRASAD RS.25,000 KANTI PRASAD RS.25,000 SANJEEV GUPTA RS.10,000 SANJEEV GUPTA RS.20,000/- TOTAL RS.2,53,000 4 ITA NO.385/AGRA/2012 A.Y. 2006-07 I AM CONSCIOUS OF THE FACT THAT THE APPELLANT IS A LIMITED COMPANY AND IT HAD INVITED DEPOSITS FROM THE PUBLIC AT LARGE. BUT, STILL, IT HAS TO PROVE THE IDENTITY OF THE DEPOSITO R AND GENUINENESS OF THE TRANSACTION WHICH THE ASSESSEE HAS FAILED TO DO . THUS, THE ASSESSEE GETS RELIEF OF RS.2,53,000/- AND THE REST OF THE AD DITION IS CONFIRMED. 5. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS TAKEN FIXED DEPOSIT AS PER THE SCHEME UNDER THE COMPANIES (ACCEPTANCE OF DEPOSITS) RULES, 1975. THE LD. AUTHORISED REPRESENTATIVE DRE W OUR ATTENTION ON PAGE NOS.86 & 87 OF THE PAPER BOOK WHERE DETAILS OF SCHEME HAVE BEEN PLACED. LD. AUTHORISED REPRESENTATIVE DREW OUR ATTENTION ON PAGE NO.6 OF A SSESSEES PAPER BOOK WHERE COPY OF AUDITORS REPORT HAS BEEN PLACED. LD. AUTH ORISED REPRESENTATIVE POINTED OUT CLAUSE 6 OF AUDITORS REPORT AND SUBMITTED THAT AS PER AUDITORS OBSERVATION THE ASSESSEE COMPANY DID NOT ACCEPT ANY DEPOSIT FROM PU BLIC DURING THE YEAR UNDER CONSIDERATION. THEREFORE, THE PROVISIONS OF SECTIO N 58A, 58AA OR ANY OTHER RELEVANT PROVISIONS OF COMPANIES ACT, 1956 AND RULE S FRAMED THEREUNDER WERE NOT APPLICABLE. LD. AUTHORISED REPRESENTATIVE FURTHER SUBMITTED WITH REFERENCE TO PAGE NO.14 OF ASSESSEES PAPER BOOK WHERE SCHEDULE OF UNSECURED LOANS HAS BEEN PLACED. LD. AUTHORISED REPRESENTATIVE POINTED OUT THAT THE UNSECURED LOAN FOR THE YEAR ENDED 2005 WAS RS.265.97 LACS WHICH HAVE BEEN SLIGHTLY REDUCED TO RS.264.34 LACS AT THE YEAR ENDED 2006 I.E. THE YEAR UNDER CONSIDERATION. LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THESE SUPP ORT TO THE FACT THAT THE AMOUNT 5 ITA NO.385/AGRA/2012 A.Y. 2006-07 WAS NOT RECEIVED IN THE YEAR UNDER CONSIDERATION. LD. AUTHORISED REPRESENTATIVE DREW OUR ATTENTION TO PAGE NO.2 WHERE COPY OF SUBMI SSION MADE BEFORE THE CIT(A) VIDE LETTER DATED 04.03.2010 HAS BEEN PLACED. LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT IT WAS EXPLAINED BEFORE THE CIT(A) T HAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY HAVING IN ITS BOOKS APPROXIMATELY 4 59 FDR ACCOUNTS AGGREGATING RS.2,64,34,000/-. HE FURTHER SUBMITTED THAT THERE WAS FIXED DEPOSIT SCHEME WHICH WAS OPEN TO PUBLIC AT LARGE. THE AMOUNTS WERE RECE IVED THROUGH BANKING CHANNEL AND ASSESSEE HAS TO ACCEPT THE PARTICULARS GIVEN IN THE APPLICATION FORM AS CORRECT. IT WAS FURTHER SUBMITTED THAT THE ADDRESS OF THE DE POSITORS WERE NOT DOUBTED AS PER RECORD OF THE ASSESSEE BUT CASE OF THE A.O IS THAT HE DID NOT RECEIVE ANY RESPONSE OR LETTERS SENT CAME BACK UN-SERVED, HE DID NOT CONFRO NT THE ASSESSEE OR MAKE ANY FURTHER EFFORT TO CONTACT THE DEPOSITORS BY ISSUING SUMMON UNDER SECTION 131 OF THE ACT. IN THE ABSENCE OF ALL THESE, THE ASSESSEE CAN NOT BE HELD LIABLE FOR ADDITION UNDER SECTION 68. IT IS ALSO SUBMISSION OF THE LD. AUTHORISED REPRESENTATIVE THAT THESE FIXED DEPOSITS WERE THROUGH BROKERAGE AND THE ASSESSEE HAS PAID BROKERAGE OF RS.4,00,000//-. LD. AUTHORISED REPRESENTATIVE SUBM ITTED THAT THE ASSESSEE HAS SUBMITTED COMPLETE DETAILS OF THESE DEPOSITORS INCL UDING FDR NUMBERS, NAMES AND ADDRESSES, SCHEME OF FDR, AMOUNT, MATURITY DATE AND MATURITY AMOUNT ETC. THESE DETAILS HAVE BEEN PLACED AT PAGE NOS.89 TO 154 OF T HE ASSESSEES PAPER BOOK. LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESS EE VIDE LETTER DATED 14.12.2010 6 ITA NO.385/AGRA/2012 A.Y. 2006-07 SUBMITTED BEFORE THE CIT(A) THAT THE CONFIRMATIONS IN RESPECT OF FIXED DEPOSITS HAVE NOT BEEN RECEIVED TILL DATE SINCE THE MATTER W AS A FEW YEARS OLD AND MOST OF THE DEPOSITORS HAVE TAKEN REFUNDS. HOWEVER, THE AS SESSEE SUBMITTED BEFORE THE CIT(A) THAT STILL THE ASSESSEE IS MAKING EFFORTS TO CONTACT THEM BUT THE NUMBER IS QUITE LONG AND THE MATTER IS TIME CONSUMING. IT WA S ALSO SUBMITTED THAT ALL DEPOSITS HAVE COME UNDER THE FIXED DEPOSIT SCHEME OF THE COM PANY AND NONE OF THE FIXED DEPOSIT HOLDERS ARE PERSONALLY KNOWN TO THE COMPANY . IT WAS SUBMITTED THAT ALL THE PAYMENTS WERE BY ACCOUNT PAYEE CHEQUES AND EVEN THE INTEREST PAYMENTS WERE IN THE SAME MODE. LD. AUTHORISED REPRESENTATIVE SUBMI TTED THAT REMAND REPORT FURNISHED BY THE A.O. HAS BEEN PLACED AT PAGE NO.15 6 & 157 OF THE PAPER BOOK. THE ASSESSEE HAS REPLIED TO THE REMAND REPORT VIDE LETTER DATED 10.11.2010 OF WHICH COPY IS PLACED AT PAGE NOS.158 & 159 OF ASSESSEES PAPER BOOK. LD. AUTHORISED REPRESENTATIVE WHILE CONCLUDING HIS SUBMISSION SUBM ITTED THAT THE ASSESSEE IN SUPPORT OF ITS ARGUMENTS HAD PRODUCED VOLUMINOUS DE TAILS IN RESPECT OF THE FDRS SUCH AS COPIES OF APPLICATION FORMS, COPIES OF FDRS . WHICH WERE RENEWED, CANCELLED FDRS. AS ALSO EVIDENCE SHOWING THE MODE BY WHICH THE AMOUNTS WERE RECEIVED AS ALSO THE MODE OF REPAYMENT IS BY ACCOUN T PAYEE CHEQUES. THESE DOCUMENTS CONTAINED COMPLETE NAMES AND ADDRESSES OF THE DEPOSITORS. 7 ITA NO.385/AGRA/2012 A.Y. 2006-07 6. LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT IN ADDITION TO THE MAIN ARGUMENTS, THE ALTERNATE CONTENTIONS ARE THAT THE F DRS. TO THE EXTENT OF RS.29,84,000/- HAVE BEEN RECEIVED IN THE EARLIER A. YS. AND RENEWED IN THE PREVIOUS YEAR RELEVANT TO YEAR UNDER APPEAL. IN OTHER WORDS , THIS CANNOT BE TERMED AS FRESH DEPOSITS INVITING THE APPLICABILITY OF SECTION 68 O F THE ACT. LD. AUTHORISED REPRESENTATIVE, IN THIS REGARD, DREW OUR ATTENTION ON A CHART WHICH HAS BEEN PLACED ON RECORD. 7. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED TH AT DURING THE ASSESSMENT PROCEEDINGS THE A.O. ISSUED LETTERS TO DEPOSITORS O N THE ADDRESS GIVEN BY THE ASSESSEE, BUT CONFIRMATIONS WERE RECEIVED ONLY IN F EW CASES. HE FURTHER SUBMITTED THAT THE A.O. HAS GIVEN A COMPLETE LIST OF THE PART IES FROM WHOM CONFIRMATION WAS NOT RECEIVED IN PARAGRAPH NO.2.3 OF HIS ORDER. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT IN ABSENCE OF PROOF REGARDIN G CREDITWORTHINESS OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION, THE A. O. MADE THE ADDITION INVOKING SECTION 68 OF THE ACT. THE LD. DEPARTMENTAL REPRES ENTATIVE SUBMITTED THAT THE ASSESSEE WAS NOT CO-OPERATING WITH THE DEPARTMENT A ND EVERY TIME SEEKING ADJOURNMENT. LD. DEPARTMENTAL REPRESENTATIVE SUBMI TTED THAT THE A.O. IN HIS ORDER AS WELL AS IN REMAND REPORT BEFORE THE CIT(A) SUBMITTED THAT THE ASSESSEE WAS SPECIFICALLY ASKED TO SUBMIT PROOF REGARDING CR EDITWORTHINESS OF THE CREDITORS 8 ITA NO.385/AGRA/2012 A.Y. 2006-07 AND GENUINENESS OF THE TRANSACTIONS VIDE QUERY DATE D 30.05.2008, PARAGRAPH NO.5. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT IN PARA NO.5, THE A.O. ASKED THE ASSESSEE TO FILE CONFIRMATION OF ALL UNSECURED LOANS/CREDITORS/LENDERS/DEPOSITORS WITH EVIDENCE OF THEIR IDENTITY, PAN, ADDRESS OF TH E A.O. WITH WHOM THEY HAVE FILED THEIR RETURN OF INCOME AND COPIES OF THE RETU RN OF INCOME FILED ALONG WITH ENCLOSING DOCUMENT IN SUPPORT OF THEIR CREDITWORTHI NESS. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT BEFORE THE CIT(A), TH E A.O. IN HIS REMAND REPORT CLEARLY STATED THAT THE ASSESSEE HAS FAILED TO FURN ISH ANY PROOF REGARDING CREDITWORTHINESS OF THE CREDITORS/DEPOSITORS NEITHE R AT THE TIME OF ASSESSMENT PROCEEDING NOR AT THE TIME OF REMAND PROCEEDINGS. 8. AS REGARDS CONTENTION OF THE ASSESSEE REGARDING NON-ISSUANCE OF NOTICE UNDER SECTION 131 BY THE A.O., THE LD. DEPARTMENTAL REPRE SENTATIVE SUBMITTED THAT THE CREDITORS WERE SHOWN IN THE BOOKS OF THE ASSESSEE A ND IT IS ESTABLISHED DUTY OF THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE CREDI TOR BY SUBMITTING THE EVIDENCE. THE LD. DEPARTMENTAL REPETITIVE SUBMITTED THAT IN S PITE OF SUFFICIENT OPPORTUNITY PROVIDED TO THE ASSESSEE, THE ASSESSEE HAS FAILED T O DISCHARGE BURDEN OF PROOF AS REQUIRED UNDER SECTION 68 OF THE ACT. THE LD. DEPA RTMENTAL REPRESENTATIVE SUBMITTED THAT IN THIS REGARD, THE ONUS IS ON THE A SSESSEE TO ESTABLISH THAT SOME RECEIVED OR CREDITED IS NOT INCOME OF THE ASSESSEE OR IF IT IS INCOME OF THE ASSESSEE, 9 ITA NO.385/AGRA/2012 A.Y. 2006-07 THEN IT IS TO ESTABLISH THAT THE INCOME WAS NOT TAX ABLE. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT EVEN BEFORE INSERTION OF SECTION 68, THE LAW WAS, AS REPORTED IN VARIOUS JUDGEMENTS INCLUDING ROSHAN DI HATTI VS. CIT (1977) 107 ITR 938 (SC) AND KALE KHAN MOHAMMAD HANIF VS. CIT (1963 ) 50 ITR 1 (SC) THAT WHERE THE ASSESSEE CREDITED AN AMOUNT, THE ASSESSEE IS TO ESTABLISH THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION . 9. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBM ITTED THAT THE EXPRESSION USED IN SECTION 68 IS VERY WIDE AND IT COVERS ALL C REDITS INCLUDING LOAN, RECEIPTS FIXED DEPOSITS AND OTHERS. LD. DEPARTMENTAL REPRES ENTATIVE SUBMITTED THAT IN THE CASE UNDER CONSIDERATION SINCE THE ASSESSEE HAS ACC EPTED FIXED DEPOSITS, THEREFORE, IT IS SQUARELY COVERED BY SECTION 68 OF THE ACT. L D. DEPARTMENTAL REPRESENTATIVE IN SUPPORT OF HIS CONTENTION RELIED UPON AN ORDER OF I .T.A.T., AMRITSAR BENCH IN THE CASE OF DEVENDER SINGH VS. ACIT, 104 ITD 325. LD. DEPARTMENTAL REPRESENTATIVE HAS ALSO RELIED UPON ANOTHER DECISION OF I.T.A.T., HYDERABAD BENCH IN THE CASE OF PARAS COLLINS DISTILLERS VS. ITO, 130 ITD 114 (HYD) AND SUBMITTED THAT EVEN IF THE CREDIT IS IN CAPITAL ACCOUNT OF THE PARTNER AND THE SAME IS NOT SATISFACTORILY EXPLAINED, THE DEEMING FICTION CREATED BY SECTION 6 8 IS APPLICABLE. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THUS THE RE IS NO DISTINCTION BETWEEN THE CAPITAL CONTRIBUTION AND FIXED DEPOSIT. THE SU BSTANCE IS THAT THERE IS A CREDIT IN 10 ITA NO.385/AGRA/2012 A.Y. 2006-07 THE BOOKS OF ACCOUNT OF THE ASSESSEE. LD. DEPARTME NTAL REPRESENTATIVE SUBMITTED THAT IT IS IMMATERIAL WHETHER SUCH CREDIT IS IN THE BOOKS OF ACCOUNT OF AN INDIVIDUAL, PARTNERSHIP FIRM. OR COMPANY MAY BE PRIVATE OR PUBL IC LIMITED. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT SECTION 68 IS SQUAREL Y COVERED FOR A COMPANY ACCEPTING FIXED DEPOSITS. LD. DEPARTMENTAL REPRESE NTATIVE SUBMITTED THAT THE CIT(A) HAS FAIRLY CONSIDERED THE CONFIRMATION RECEI VED AND ACCORDINGLY RELIEF OF RS.2,53,000/- WAS GRANTED. LD. DEPARTMENTAL REPRES ENTATIVE SUBMITTED THAT THE ORDER OF CIT(A) IS MOST REASONABLE ORDER AS HE CONF IRMED THE ADDITION MADE BY THE A.O. TO THE EXTENT WHERE THE ASSESSEE EVEN FAILED T O FURNISH CONFIRMATION FROM THE CREDITORS. THUS, THE ASSESSEE HAS FAILED TO ESTABL ISH THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION WHEREIN THE CIT( A) HAS CONFIRMED THE ADDITION. AS REGARDS THE CONTENTION OF THE LD. AUTHORISED REP RESENTATIVE THAT THERE ARE CERTAIN FIXED DEPOSITS WHICH WERE RENEWED DURING THE YEAR U NDER CONSIDERATION IS NOT LIABLE TO BE ADDED. THE LD. DEPARTMENTAL REPRESENT ATIVE SUBMITTED THAT THE REVENUE AUTHORITIES DID NOT GET OCCASION TO VERIFY THIS CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE, SUCH SUBMISSION OF THE L D. AUTHORISED REPRESENTATIVE IS SUBJECT TO VERIFICATION. HE ACCORDINGLY SUBMITTED THAT THE MATTER MAY BE SENT BACK TO THE FILE OF A.O. FOR NECESSARY VERIFICATION. 11 ITA NO.385/AGRA/2012 A.Y. 2006-07 10. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. THE ADDITION WAS MADE BY THE A.O. UNDER SECTION 68, THEREFORE, TO EXAMINE THE ISSUE, WE WOULD LIKE TO REPRODUCE THE RELEVANT SECT ION 68 OF THE ACT AS UNDER :- 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN 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 [ASSES SING] OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR : [ PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTER ESTED), AND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION MONEY , SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEVER NAME C ALLED, ANY EXPLANATION OFFERED BY SUCH ASSESSEE-COMPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNLESS (A) THE PERSON, BEING A RESIDENT IN WHOSE NAME SUCH CRE DIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS A N EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED ; AND (B) SUCH EXPLANATION IN THE OPINION OF THE ASSESSING OF FICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IF THE PERSON, IN WHOSE NAME THE SUM REFERRED TO THEREIN IS RECORDED, IS A VENTURE CAPITAL FUND OR A VENTURE CA PITAL COMPANY AS REFERRED TO IN CLAUSE ( 23FB ) OF SECTION 10 . ] 11. FOR BETTER APPRECIATING THE ISSUE UNDER CONSIDE RATION, WE WOULD LIKE TO GO THROUGH THE RELEVANT SCHEME OF THE ACT. IN THIS RE GARD, WE NOTICED THAT A WIDELY PREVALENT METHOD ADOPTED BY ASSESSEES TO EMPLOY IN THEIR BUSINESS THEIR CONCEALED PROFITS WHILE YET CONTINUING TO CONCEAL THEIR NATUR E, WAS THE INTRODUCTION INTO THE BOOKS OF SUMS OF MONEY SHOWN AS HAVING BEEN LENT TO THEM OR DEPOSITED WITH THEM 12 ITA NO.385/AGRA/2012 A.Y. 2006-07 BY A THIRD PARTY, OR SOMETIMES AS THEIR OWN CAPITAL CONTRIBUTION FROM CAPITAL RESOURCES. ABSTRACTION OF PROFITS FROM BUSINESS COU LD HAVE BEEN MADE EARLIER BY INFLATING EXPENDITURE OR BY UNDERSTATING RECEIPTS O R BY A COMBINATION OF BOTH. WHEN LIQUID RESOURCES AS PER BOOKS THUS GET CRIPPLE D, AND FUNDS ARE NEEDED FOR THE BUSINESS, THE ABSTRACTED PROFIT WOULD BE BROUGHT IN TO THE BUSINESS IN THE SHAPE OF LOAN OR CAPITAL BY THE DEVICE AFORESAID. SOMETIMES, THE CREDIT ENTRY INTRODUCING THE MONEY IS CANCELLED BY A CORRESPONDING DEBIT ENTRYS HOWING THE ALLEGED LOAN AS REPAIDEITHER IN THE SAME ACCOUNTING YEAR OR IN A S UBSEQUENT ACCOUNTING YEAR, WHEN THE NEED FOR THE MONEYS HAS ABATED AND THE MON EYS CAN BE WITHDRAWN. WHERE THE CANCELLATION OCCURS IN THE SAME ACCOUNTIN G YEAR, THE ALLEGED LIABILITY WILL NOT APPEAR IN THE BALANCE SHEET OF THE BUSINES S AND WILL ESCAPE ASSESSMENT UNLESS THERE IS A VERY CLOSE SCRUTINY AND COPIES OF ALL ACCOUNTS ARE OBTAINED BY THE OFFICER. 12. THE GROUP OF SIX SECTIONS STARTING FROM SECTION 68 TO SECTION 69D HAS BEEN INTRODUCED INTO THE TAXING ENACTMENT STEP BY STEP I N ORDER TO PLUG LOOPHOLES AND IN ORDER TO PLACE CERTAIN SITUATIONS BEYOND DOUBT EVEN THOUGH THERE WERE JUDICIAL DECISIONS COVERING SOME OF THE ASPECTS. FOR EXAMPLE , EVEN LONG PRIOR TO THE INTRODUCTION OF SECTION 68 IN THE STATUTE BOOK, COU RTS HAD HELD THAT WHERE ANY AMOUNTS WERE FOUND CREDITED IN THE BOOKS OF AN ASSE SSEE IN A PREVIOUS YEAR AND THE 13 ITA NO.385/AGRA/2012 A.Y. 2006-07 ASSESSEE OFFERED NO EXPLANATION ABOUT THE NATURE AN D SOURCE THEREOF OR THE EXPLANATION OFFERED WAS, IN THE OPINION OF THE ASSE SSING OFFICER, NOT SATISFACTORY, THE SUMS SO CREDITED COULD BE CHARGED TO INCOME-TAX AS INCOME OF THE ASSESSEE OF THE RELEVANT PREVIOUS YEAR. THIS PRINCIPLE WAS APPR OVED BY THE SUPREME COURT IN THE CASES OF GOVINDARAJULA MUDALIAR V CIT,(1958) 34 ITR 807(SC ), LAKHMICHAND BAIJNATH V. CIT,(1959) 35 ITR 416 (SC) AND. JAMNAPR ASAD V KANHIYALAL V CIT (1981) 130 ITR 244 (SC) AND OTHER CASES. NOW, SECTION 68 ENACTS A DEEMING PROVISION WHICH APPLIES IN SUCH CASES. IN EFFECT, T HIS SECTION IS ONLY A STATUTORY RECOGNITION OF WHAT WAS THE STATE OF LAW EVEN PRIOR TO ENACTMENT OF THE 1961 ACT, I.E. OF A PRINCIPLE WHICH HAD BEEN CLEARLY ADUMBRAT ED IN JUDICIAL DECISIONS. IT HAS BEEN SAID THAT IN SECTION 68 OF THE ACT, A GOLDEN R ULE OF EVIDENCE, WHICH IS NOT IN DISPUTE, HAS BEEN ENACTED: IF ANY SUM IS FOUND CRED ITED IN THE BOOKS OF AN ASSESSEE THE ONUS IS ON HIM TO EXPLAIN THE SAID ENTRY BUT IF HE FAILS TO DO THAT, IT WILL BE OPEN TO THE INCOME-TAX AUTHORITIES TO FASTEN HIM WITH LI ABILITY TO TAX ON ACCOUNT OF THE UNEXPLAINED ENTRY ON THE FOOTING THAT THE ENTRY REP RESENTS TAXABLE INCOME. EVEN BEFORE SECTION 68 WAS ENACTED THIS RULE OF EVIDENCE WAS APPLICABLE, AS IS CLEAR FROM KALE KHAN MOHAMMAD HANIF V CIT (1963) 50 ITR 1 (SC ), CIT V DEVI PRASAD VISHWANATH PRASAD (1969) 72 ITR 194 (SC) MUNSHI RAM V CIT (1980) 126 ITR 663 (P&H)AND NANAK CHANDRA LAXMAN DAS V CIT (1983 ) 140 ITR 151 (ALL). 14 ITA NO.385/AGRA/2012 A.Y. 2006-07 13. WHERE THE MATTER CONCERNS EVENTS THAT TOOK PLAC E BEFORE 1 ST APRIL, 1962 (THE DATE OF THE COMING INTO FORCE OF THE 1962 ACT), THE SUM REPRESENTED BY THE ENTRY SHALL BE REGARDED AS THE INCOME OF THE FINANCIAL YE AR IN WHICH THAT ENTRY APPEARS AND THE FINANCIAL YEAR WOULD BE THE PREVIOUS YEAR. THE SETTLED LAW UNDER THE 1922 ACT WAS THAT THE ONLY POSSIBLE WAY IN WHICH INCOME FROM UNDISCLOSED SOURCES COULD BE ASSESSED OR REASSESSED WAS TO MAKE THE ASS ESSMENT ON THE BASIS THAT THE PREVIOUS YEAR FOR SUCH INCOME WAS THE ORDINARY FINA NCIAL YEAR. SECTION 68 OF THE 1961 ACT MAKES A DEPARTURE ON THIS POINT IN RESPECT OF AMOUNTS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE. THE SECTION PROVIDES THA T WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE FOR ANY PREVIO US YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATIS FACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSES SEE OF THAT PREVIOUS YEAR. THIS SECTION HAS APPLICATION WHERE ANY SUM IS FOUND CRED ITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR. IF THE AMOUNT CRE DITED IN THE BOOKS OF THE ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR IS NOT TH E BUSINESS INCOME OF THE ASSESSEE BUT IS HELD TO BE INCOME FROM UNDISCLOSED SOURCES, THE INCOME SO DISCOVERED WILL, UNDER SECTION 68, BE DEEMED TO BE THE INCOME OF THAT PREVIOUS YEAR FOR WHICH THE ACCOUNTS WERE MAINTAINED. THE PO SITION IN THIS RESPECT UNDER THE 1922 ACT WAS DIFFERENT AS SUCH INCOME FROM UNDISCLO SED SOURCES UNDER THAT ACT 15 ITA NO.385/AGRA/2012 A.Y. 2006-07 COULD BE ASSESSED ONLY ON THE BASIS THAT THE PREVIO US YEAR FOR SUCH INCOME WAS THE RELEVANT FINANCIAL YEAR. THAT THE EFFECT OF SECTION 68 IS THAT, STATUTORILY, A SUM WHICH IS FOUND CREDITED IN THE BOOKS OF THE ASSESSE ES MAINTAINED FOR ANY PREVIOUS YEAR IN RESPECT OF WHICH EITHER THE ASSESSEE OFFERS NO EXPLANATION OR THE EXPLANATION OFFERED BY HIM IS NOT ACCEPTED BY THE ASSESSING OFF ICER IS TO BE CHARGED TO INCOME- TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. ACCORDINGLY, SECTION 68 HAS BEEN HELD TO BE A CHARGING PROVISION INSOFAR AS THE PARTICULAR SUM, WHICH IS THE SUBJECT OF LEGISLATION, IS CONCERNED. 14. THIS SECTION 68 OF THE ACT COMES INTO OPERATION ONLY ON SATISFYING THE CONDITIONS THAT THE ASSESSEE MAINTAINS ACCOUNT BOOK S; AND A CREDIT ENTRY OCCURS IN SUCH BOOKS. THE SECTION DOES NOT MAKE ANY DISTINCT ION BETWEEN COMMERCIAL LOANS AND NON-COMMERCIAL LOANS OR BETWEEN AMOUNTS CREDITE D TO AN ACCOUNT OF A THIRD PARTY AND THOSE CREDITED TO THE ASSESSEES OWN CAPI TAL ACCOUNT. WHERE SUCH CREDITS OCCUR, THE SECTION ENACTS THAT THE ASSESSEE SHOULD EXPLAIN TO THE ASSESSING OFFICER SATISFACTORILY THE NATURE AND SOURCE OF THE SUM SO CREDITED, AND ESTABLISH THAT THE SUM IN QUESTION IS NOT HIS INCOME. IF HE DOES NOT O FFER ANY EXPLANATION, SUCH SUM MAY BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE . EQUALLY, IT COULD BE SO INCLUDED IF THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT SATISFACTORY. IN VIEW OF SECTION 68 OF THE 1961 ACT, IT HAS BEEN HELD, AN AR GUMENT THAT SOME MORE EVIDENCE 16 ITA NO.385/AGRA/2012 A.Y. 2006-07 IS NECESSARY, TO HOLD THAT THE AMOUNT FOUND CREDITE D IN THE BOOKS OF THE ASSESSEE IS THE INCOME OF THE ASSESSEE THAN THE FACT THAT THE A SSESSEE HAS NOT BEEN ABLE TO EXPLAIN THE CASH CREDIT IS NO LONGER SUSTAINABLE. T HE SAME PRINCIPLE APPLIES ALSO WHERE THE ASSESSEE HAS MADE DEPOSITS OR INVESTMENTS OUTSIDE THE BOOKS OR WHERE HE POSSESSES HUGE COST IN THE FORM, SAY, OF DEMOLISHED BANK NOTES OR INCURS HUGE EXPENDITURE AND IS UNABLE TO EXPLAIN THEM SATISFACT ORILY. SUCH CASES ARE NOW GOVERNED BY THE PROVISIONS OF SECTIONS 69 TO 69C 15. IT HAS BEEN CONSISTENTLY BEEN LAID DOWN THAT WH EN AN ASSESSEE CLAIMS THAT HE HAD BORROWED MONEY FROM A THIRD PARTY, THE INITIAL ONUS LIES ON THE ASSESSEE TO ESTABLISH (A) THE IDENTITY OF THE THIRD PARTY; (B) THE ABILITY OF THE THIRD PARTY TO ADVANCE MONEYS; AND (C) PRIMA FACIE THAT THE LOAN IS A GENUINE ONE. 16. IF THE ASSESSEE ESTABLISHES THE AFORESAID THREE PRE-CONDITIONS, IT WOULD BE FOR THE DEPARTMENT TO DISPROVE THE SAME. WHERE THERE AR E A NUMBER OF CREDITORS OF SIMILAR NATURE, THE ASSESSEE HAS TO DISCHARGE HIS B URDEN FOR ALL OF THEM. THE ASSESSEE BY PROVING THESE FACTS DISCHARGES THE ONUS UPON HIM BUT DOES NOT PREVENT THE AUTHORITY CONCERNED FROM PROBING FURTHER INTO T HE MATTER AND UNBIASED FINDING AS TO THE GENUINENESS OF THE TRANSACTION. IT IS TRU E THAT THE ASSESSING AUTHORITY IS NOT ENTITLED TO REJECT THE ASSESSEES CASE SUMMARILY OR ARBITRARILY OR WITHOUT SUFFICIENT 17 ITA NO.385/AGRA/2012 A.Y. 2006-07 REASON. IT IS ALSO TRUE THAT THE DUTY OF THE ASSESS ING AUTHORITY IS TO EXAMINE THE MATERIALS AVAILABLE CAREFULLY AND OBJECTIVELY. 17. TO FURTHER APPRECIATE THE SCHEME OF THE ACT, WE WOULD LIKE TO REFER CERTAIN JUDICIAL PRONOUNCEMENTS WHICH ARE AS UNDER:- 17.1 ORIENTAL WIRE INDUSTRIES (P.) LTD. VS. COMMISSIONE R OF INCOME TAX[1981] 131 ITR 688 (CAL.). THE COURT HELD THAT IN A CASE LIKE THIS WHERE THE ALLEGED LOAN APPEARED IN THE BOOKS OF ACCOUNT OF TH E ASSESSEE, IT IS FOR HIM TO PROVE THAT THE TRANSACTION WAS GENUINE AND THAT WOULD ENT AIL PRODUCTION OF EVIDENCE AS TO THE, (I) SOURCE OF THE LOAN, (II) CAPACITY OF THE P ERSON WHO IS SUPPOSED TO HAVE GIVEN THE LOAN, AND (III) ALSO THE EVIDENCE ABOUT THE FAC T THAT THE LOAN WAS IN FACT GIVEN BY THE PERSON CONCERNED ON THE DATE MENTIONED. 17.2 BHARATI (P) LTD. VS. COMMISSIONER OF INCOME-TAX [1 978] 111 ITR 951 (CAL.). THE BRIEF FACTS OF THIS CASE WERE IN THE COURSE O F THE ASSESSMENT PROCEEDINGS, THE ITO FOUND THAT THE ASSESSEE HAD SH OWN CERTAIN AMOUNT AS LOAN IN ITS BOOKS, TAKEN FROM TWO PARTIES. THE ASSESSEE PRO DUCED THE ALLEGED CONFIRMATORY LETTERS FROM THOSE PARTIES BEFORE THE ITO IN SUPPOR T OF THOSE TWO LOANS. THE ITO SERVED NOTICES UNDER SECTION 131 ON THE ALLEGED CRE DITORS BUT THOSE NOTICES CAME 18 ITA NO.385/AGRA/2012 A.Y. 2006-07 BACK UN SERVED. THE ITO WAS NOT SATISFIED WITH THE GENUINENESS OF THOSE LOANS AND ACCORDINGLY, HE TREATED THEM AS THE ASSESSEES INCO ME FROM UNDISCLOSED SOURCES. THE APPEAL FILED BY THE ASSESSEE WAS DISMISSED BY T HE AAC. THE TRIBUNAL FOUND THAT THERE WAS NO MATERIAL ON RECORD TO ESTABLISH T HE IDENTITY OF THE CREDITORS AND DISMISSED THE ASSESSEES APPEAL HOLDING THAT MERE F ILING OF THE CONFIRMATORY LETTERS DO NOT DISCHARGE THE ONUS THAT LAY ON THE ASSESSEE . ON REFERENCE, THE HIGH COURT HELD THAT THE TRIBUNAL HAD TAKEN ALL RELEVANT FACTS INTO CONSIDERATION AS APPEARED FROM ITS ORDER INCLUDING THE MATERIALS ON THE RECOR D AND HAD ARRIVED AT THE AFORESAID CONCLUSION. IT DID NOT APPEAR TO BE UNREASONABLE OR PERVERSE . 17.3 PRAKASH TEXTILE AGENCY VS. COMMISSIONER OF INCOME- TAX 121 ITR 890[1980] 4 TAXMAN 323 (CAL.). THE BRIEF FACTS OF THIS CASE WERE THAT IN THE ASSESSMENT FOR THE ASSESSMENT YEAR 1965-1966, THE I TO SUMMONED, UNDER SECTION 131, A CREDITOR WHO HAD ALLEGEDLY ADVANCED TO THE A SSESSEE-FIRM A LOAN OF RS. 1 LAKH ON 16-9-1964. WHILE THE CREDITOR CONFIRMED IN WRITING ABOUT THE SAID LOAN, HE FAILED TO PRODUCE RELEVANT ACCOUNT BOOKS AS THEY WE RE SEIZED BY THE INCOME-TAX DEPARTMENT. THE ITO, THEREFORE, ADDED THE SUM IN TH E ASSESSEE'S INCOME AS INCOME FROM UNDISCLOSED SOURCES. THIS WAS UPHELD BY THE AA C. ON SECOND APPEAL TO THE APPELLATE TRIBUNAL THE ASSESSEE CONTENDED, INTER AL IA, ( I) THAT THE CREDITOR, AN INCOME-TAX ASSESSEE, HAD DULY CONFIRMED THE LOAN WH ICH HAD BEEN DULY REPAID IN 19 ITA NO.385/AGRA/2012 A.Y. 2006-07 CASH (IN TWO INSTALLMENTS OF RS. 50,000 EACH ON 15- 4-1965 AND 30-4-1965) AND ALONG WITH THE INTEREST OF RS. 5,412 DUE THEREON BY AN ACCOUNT PAYEE CHEQUE ON 25- 5-1965; (II ) THAT THE CREDITOR COULD NOT PRODUCE H IS ACCOUNT BOOKS AS THEY WERE SEIZED BY THE INCOME-TAX DEPARTMENT; AND (III ) THA T IT HAD, THUS, DISCHARGED ITS ONUS OF PROVING THE GENUINENESS OF THE LOAN AS ALSO THE EXISTENCE OF THE CREDITOR. THE TRIBUNAL EXAMINED THE CREDITOR AND HIS ACCOUNT BOOKS REQUISITIONED FROM THE INCOME-TAX DEPARTMENT. IT FOUND THAT, ALTHOUGH SEVE RAL CASH TRANSACTIONS WERE RECORDED IN HIS BOOKS, NEITHER THE SAID LOAN NOR IT S REPAYMENT BY IT WERE RECORDED THEREIN. IT DISBELIEVED THE CREDITOR'S EXPLANATION AND EVIDENCE AS TO THE SOURCE OF THE ALLEGED LOAN AND SUSTAINED THE ADDITION, HOLDIN G (I) THAT THE PAYMENT OF INTEREST BY CHEQUE WAS RECORDED IN HIS BOOKS TO GIVE A COLOU R OF GENUINENESS TO THE TRANSACTION; AND (II) THAT THE CREDITOR WAS NOT IN A POSITION TO ADVANCE THE LOAN. ON REFERENCE, THE ASSESSEE REITERATED, INTER ALIA, (I) THAT ITS ONLY BURDEN WAS TO ESTABLISH (A) IDENTITY OF THE CREDITOR, AND (B) THE GENUINENESS TO THE TRANSACTION REPRESENTED BY THE ENTRY; (II) THAT IT WAS NOT REQU IRED TO ESTABLISH THE SOURCE OF THE LOAN ADVANCED BY THE CREDITOR AND EVEN IF THE LATTE R'S EXPLANATION AS TO HIS INCOME WAS NOT ACCEPTED, THE SAME COULD NOT BE HELD TO BE ITS INCOME AS THERE WAS NO DIRECT NEXUS BETWEEN THE TWO; AND (III) THAT THE C REDITOR HAD DULY EXPLAINED TO THE 20 ITA NO.385/AGRA/2012 A.Y. 2006-07 TRIBUNAL THE REASONS FOR RECORDING IN THE BOOKS THE PAYMENT OF INTEREST AND NOT THE LOAN. THE HIGH COURT HELD THAT THE QUESTION IN THE PRESEN T REFERENCE WAS WIDE ENOUGH SO AS TO ENABLE THE HIGH COURT TO GO INTO TH E QUESTION AS TO WHETHER THE ASSESSEE HAD ESTABLISHED ALL THE INGREDIENTS NECESS ARY TO PROVE OR SUBSTANTIATE THE GENUINENESS OF THE LOAN AND WHETHER THE FINDING OF THE TRIBUNAL WAS PERVERSE. IT IS NECESSARY FOR THE ASSESSEE TO PROVE, PRIMA FACIE, T HE TRANSACTION WHICH RESULTS IN CASH CREDIT IN HIS BOOKS OF ACCOUNT. SUCH PROOF INC LUDES (I) PROOF OF THE IDENTITY OF HIS CREDITOR; (II) THE CAPACITY OF SUCH CREDITOR TO ADVANCE THE MONEY; AND (III) THE GENUINENESS OF THE TRANSACTION. AFTER THE ASSESSEE HAD ADDUCED EVIDENCE TO ESTABLISH THE SAID INGREDIENTS OF PROOF, THE ONUS S HIFTS ON THE DEPARTMENT.. ON A CONSIDERATION OF ALL FACTS AND MATERIALS BEFORE IT, THE TRIBUNAL CONCLUDED THAT, FROM THE RESOURCES AVAILABLE TO HIM, THE CREDITOR WAS NO T IN A POSITION TO ADVANCE RS. 1 LAKH TO THE ASSESSEE AND HIS CREDIT WORTHINESS WAS NOT ESTABLISHED AND THUS THE ASSESSEE HAD NOT PROVED THE SOURCE OF THE SAID CRED IT. THOUGH THE ASSESSEE HAD ESTABLISHED THE EXISTENCE AND IDENTITY OF THE CREDI TOR, YET IT HAD FAILED TO ESTABLISH THE ABILITY OF THE CREDITOR TO ADVANCE THE SAID LOA N OR THE GENUINENESS OF THE TRANSACTION. THEREFORE, IT COULD NOT BE SAID THAT T HERE WAS NO MATERIAL OR EVIDENCE TO SUPPORT THE INFERENCE OR CONCLUSION OF THE TRIBU NAL THAT THE IMPUGNED SUM OF RS. 21 ITA NO.385/AGRA/2012 A.Y. 2006-07 1 LAKH REPRESENTED THE ASSESSEE'S INCOME FROM UNDIS CLOSED SOURCES, NOR THE SAME COULD BE SAID TO BE PERVERSE. 17.4 SHANKAR INDUSTRIES VS. COMMISSIONER OF INCOME-TAX [1978] 114 ITR 689 (CAL.). THE BRIEF FACTS OF THE CASE ARE THAT CERTAIN CASH C REDITS WERE FOUND IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN THE NAMES OF VA RIOUS PARTIES, INCLUDING THOSE OF 'A' B AND C. IN PURSUANCE OF A SUMMONS ISSUED B Y THE ITO ONE 'V' APPEARED BEFORE THE ITO ON BEHALF OF 'A' AND CLAIMED TO BE T HE PROPRIETOR OF THE CONCERN AND STATED THAT HIS BOOKS HAD BEEN SEIZED BY THE INCOME -TAX DEPARTMENT. 'V' LATER MADE A CONFESSION TO THE EFFECT THAT HIS LOAN TRANSACTIO NS WERE NOT GENUINE AND THAT HE WAS ONLY A NAME-LENDER. NO ONE APPEARED ON BEHALF O F 'B' IN SPITE OF SUMMONS ISSUED. ON EXAMINATION OF THE INCOME-TAX FILE OF TH E SAID PARTY, IT WAS FOUND THAT THE FIRM HAD BEEN CLOSED AFTER THE DEATH OF THE PRO PRIETOR 'B' AND IN THE ASSESSMENT YEAR IN QUESTION IT HAD NOT FILED PROFIT AND LOSS A CCOUNT OR BALANCE SHEET AND THAT ITS ASSESSMENT HAD BEEN COMPLETED UNDER SECTION 144. IT WAS ALSO FOUND THAT A SIMILAR LOAN ALLEGED TO HAVE BEEN ADVANCED BY 'B' TO ANOTHE R CONCERN HAD BEEN HELD TO BE SPURIOUS. NO CONFIRMATION LETTER WAS FURNISHED ON B EHALF OF 'C' AND NO ONE APPEARED FOR THE FIRM BEFORE THE ITO. ON THESE FACT S, THE ITO HELD THAT THE SOURCE OF THE CREDIT APPEARING IN THE NAME OF 'A' WAS NOT PROVED. HE ALSO HELD THAT 'B' WAS NOT IN A POSITION TO ADVANCE LOAN TO THE ASSESSEE. HE BROUGHT THE AMOUNTS ALLEGED TO 22 ITA NO.385/AGRA/2012 A.Y. 2006-07 HAVE BEEN ADVANCED BY 'A' 'B' AND 'C', AMONGST OTHE RS, TO TAX AS THE ASSESSEE'S INCOME FROM UNDISCLOSED SOURCES. ON APPEAL, THE AAC CONFIRMED THE ADDITIONS BEING THE CREDITS IN THE NAMES OF 'A', AND 'B'. HE, HOWEVER, DIRECTED THAT 'C' SHOULD BE EXAMINED BY THE ITO. PURSUANT TO SUCH DIRECTIONS ONE 'E' APPEARED BEFORE THE ITO AND CLAIMED TO BE THE KARTA OF 'C', A HUF. IN H IS DEPOSITION GIVEN BEFORE THE ITO, HE STATED THAT THE SAID HUF HAD ADVANCED THE S UM TO THE ASSESSEE AND SAID AMOUNT WAS ADVANCED OUT OF THE AUGMENTED CASH BALAN CE. THE AAC CONCLUDED THAT THE SOURCE OF THE LOAN TO THE FAMILY WAS NOT PROVED AND HELD THAT THIS PARTY DID NOT HAVE SUFFICIENT CASH TO ADVANCE THE LOAN TO THE ASS ESSEE. THE AAC THUS, UPHELD THE ADDITION MADE BY THE ITO IN RESPECT OF THIS ITEM AL SO. ON FURTHER APPEAL, THE TRIBUNAL CONFIRMED THE SAID ADDITIONS .ON REFERENCE THE HIGH COURT HELD THAT IN THE CASE OF EACH OF THE ALLEGED CREDITORS IT APPEARED T HAT THERE WAS SOME MATERIAL BEFORE THE TRIBUNAL TO REJECT THE CASE OF THE ASSES SEE. IN THE CASE OF 'A' SUCH MATERIALS WERE, (A) INITIAL CONFESSION OF 'V' THAT HIS TRANSACTION WAS NOT GENUINE; (B) HIS NON-COMMITTAL STATEMENT BEFORE THE ITO IN THE P ROCEEDINGS FOR ASSESSMENT AND (C) THE UNSATISFACTORY NATURE OF HIS BOOKS OF ACCOU NT AS NOTED BY THE TRIBUNAL. IN THE CASE OF 'B', RELEVANT EVIDENCE WAS THAT AT T HE MATERIAL TIME HIS ASSESSABLE INCOME WAS NEGLIGIBLE AND THAT HIS PROFI T AND LOSS ACCOUNTS AND BALANCE- SHEETS WERE NOT AVAILABLE. SO FAR AS 'C' WAS CONCER NED, IT WAS BROUGHT OUT IN 23 ITA NO.385/AGRA/2012 A.Y. 2006-07 EVIDENCE THAT INITIAL CASH BALANCE AVAILABLE WITH T HE FIRM WAS NOT SUFFICIENT TO JUSTIFY THE LOAN ADVANCED. IT WAS ALSO FOUND THAT T HIS CREDITOR DID NOT FILE ANY LETTER OF CONFIRMATION AT THE INITIAL STAGE AND PRODUCED H IS BOOKS OF ACCOUNT MUCH LATER. THE LAW ON THIS POINT IS NOW WELL SETTLED. IT IS NE CESSARY FOR THE ASSESSEE TO PROVE PRIMA FACIE THE TRANSACTION WHICH RESULTS IN A CASH CREDIT IN HIS BOOKS OF ACCOUNT. SUCH PROOF INCLUDES PROOF OF THE IDENTITY OF HIS CR EDITOR, THE CAPACITY OF SUCH CREDITOR TO ADVANCE THE MONEY AND, LASTLY, THE GENU INENESS OF THE TRANSACTION. THESE FINDINGS MUST BE PROVED PRIMA FACIE BY THE ASSESSEE AND ONLY AFTER THE ASSESSEE HAD ADDUCED EVIDENCE TO ESTABLISH PRIMA FACIE THE AFORE SAID, THE ONUS SHIFTS ON THE DEPARTMENT. IN THE INSTANT CASE, IT SEEMED THAT THE ASSESSEE ESTABLISHED ONLY THE IDENTITY OF THE CREDITOR AND NOTHING MORE. THE COUR T HELD THAT FOR THE ABOVE REASONS AND IN VIEW OF THE QUESTION AS FRAMED, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE DECISION OF THE TRIBUNAL THAT THE ADVANCE BY 'A', 'B' AND 'C' WAS THE INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCE WAS BASED ON ANY MATERIAL. TRIBUNAL WAS JUSTIFIED IN TREATING CASH CREDITS AS ASSESSEE'S INCOME FROM UNDISCLOSED SOURCES. 17.5 COMMISSIONER OF INCOME-TAX VS. K.M. MAHIM [1995] 8 1 TAXMAN 222 (KER.). THE COURT HELD THAT AS REGARDS ADDITION OF RS. 20,0 00 REPRESENTING ALLEGED LOAN TAKEN BY THE ASSESSEE FROM MK AND MM, THERE W AS NO REASON TO DISTURB THE 24 ITA NO.385/AGRA/2012 A.Y. 2006-07 FINDING OF THE TRIBUNAL THAT THERE WAS NO MATERIAL TO SHOW THAT THE TWO PERSONS HAD NECESSARY RESOURCES TO MAKE AN ADVANCE OF RS. 10,00 0 EACH TO THE ASSESSEE. APART FROM THE CONFIRMATORY LETTERS, NO OTHER EVIDENCE WAS PRODUCED BY THE ASSESSEE ON WHOM THE BURDEN LAY TO ESTABLISH THAT THESE TWO PER SONS WERE MEN OF MEANS OR THAT THEY HAD SUFFICIENT RESOURCES WITH THEM TO MAKE ADV ANCES TO THE ASSESSEE. BEING ESSENTIALLY A QUESTION OF FACT ON WHICH THE TRIBUNA L HAD RENDERED A DECISION ON THE MATERIALS AVAILABLE, THERE WAS NO WAY TO INTERFERE WITH THE DECISION OF THE TRIBUNAL HENCE, THE TRIBUNAL WAS JUSTIFIED IN RESTORING THE ADDITION DELETED BY THE AAC. 17.6 COMMISSIONER OF INCOME-TAX VS. PRECISION FINANCE ( P.) LTD.208 ITR 465 [1995] 82 TAXMAN 31 (CAL.). THE FACTS OF THE CASE ARE THAT THE ASSESSEE- COMPANY WAS DOING THE BUSINESS OF LOAN FINANCING. I N COURSE OF THE ASSESSMENT FOR THE ASSESSMENT YEAR 1978-79, THE ASSESSING OFFICER FOUND SEVERAL CASH CREDITS IN THE ASSESSEE'S BOOKS OF ACCOUNT FOR WHICH THE ASSES SEE GAVE THE INCOME-TAX FILE NUMBERS OF THE CREDITORS. ON INVESTIGATION, IT WAS FOUND THAT EXCEPT IN TWO CASES EITHER THE FILES DID NOT EXIST AS PER DETAILS FURNI SHED BY THE ASSESSEE OR THE RECORDS DID NOT TALLY WITH THE DETAILS MENTIONED BY THE ASS ESSEE. THE ASSESSING OFFICER, THEREFORE, MADE AN ADDITION OF RS.4,45,000 AS CASH CREDITS AND ALSO DISALLOWED INTEREST RELATABLE TO THOSE LOANS FOR THE ASSESSMEN T YEAR 1978-79. FOR THE ASSESSMENT YEAR 1979-80, HE MADE SIMILAR ADDITION A S INCOME FROM OTHER SOURCES 25 ITA NO.385/AGRA/2012 A.Y. 2006-07 AS THE ASSESSING OFFICER FOUND SIMILAR DEFECTS IN R ESPECT OF CASH CREDITS. HE ALSO ADDED INTEREST RELATABLE TO THOSE FICTITIOUS LOANS. ON SECOND APPEAL, THE TRIBUNAL HELD THAT THE ASSESSEE-COMPANY HAD PROVED THE IDENT ITY OF THE CREDITORS AND THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSAC TIONS SHOULD HAVE BEEN FOUND OUT BY THE ITO BY MAKING INVESTIGATION FROM THEIR B ANK ACCOUNTS BECAUSE OF THE ACCOUNT PAYEE CHEQUES BEING ISSUED AND OTHER RELATE D EVIDENCE. THE ASSESSING OFFICER WAS DIRECTED TO TRACE THE FILES OF THE CRED ITORS. IT FURTHER HELD THAT SINCE ALL THE TRANSACTIONS WERE MADE BY ACCOUNT PAYEE CHEQUES THE ASSESSING OFFICER SHOULD HAVE VERIFIED THE BANK ACCOUNTS OF CREDITORS AND IN THE ABSENCE OF VERIFICATION OF THE ACCOUNTS IT SHOULD BE HELD THAT THE CREDITWORTH INESS AND GENUINENESS OF THE TRANSACTIONS HAD BEEN ESTABLISHED. THEREFORE, THE T RIBUNAL DELETED THE ADDITIONS. ON REFERENCE THE HIGH COURT HELD THAT IT WAS FOR THE A SSESSEE TO PROVE THE IDENTITY OF THE CREDITORS, THEIR CREDITWORTHINESS AND THE GENUINENE SS OF THE TRANSACTIONS. ON THE FACTS OF THIS CASE, THE TRIBUNAL DID NOT TAKE INTO ACCOUNT ALL THESE INGREDIENTS WHICH HAD TO BE SATISFIED BY THE ASSESSEE. MERE FURNISHIN G OF THE PARTICULARS WAS NOT ENOUGH . THE ENQUIRY OF THE ITO REVEALED THAT EITHER THE ASSESSEE WAS NOT TRACEABLE OR THERE WAS NO SUCH FILE AND, ACCORDINGLY, THE FIR ST INGREDIENT AS TO THE IDENTITY OF THE CREDITORS HAD NOT BEEN ESTABLISHED. IF THE IDEN TITY OF THE CREDITORS HAD NOT BEEN ESTABLISHED, CONSEQUENTLY, THE QUESTION OF ESTABLIS HMENT OF THE GENUINENESS OF THE TRANSACTIONS OR THE CREDITWORTHINESS OF THE CREDITO RS DID NOT AND COULD NOT ARISE. 26 ITA NO.385/AGRA/2012 A.Y. 2006-07 THE TRIBUNAL DID NOT APPLY ITS MIND TO THE FACTS OF THIS PARTICULAR CASE AND PROCEEDED ON THE FOOTING THAT SINCE THE TRANSACTION S WERE THROUGH THE BANK ACCOUNT, IT WAS TO BE PRESUMED THAT THE TRANSACTIONS WERE GE NUINE. IT WAS NOT FOR THE ITO TO FIND OUT BY MAKING INVESTIGATION FROM THE BANK ACCO UNTS UNLESS THE ASSESSEE PROVED THE IDENTITY OF THE CREDITORS AND THEIR CRED ITWORTHINESS. MERE PAYMENT BY ACCOUNT PAYEE CHEQUE WAS NOT SACROSANCT NOR COULD IT MAKE A NON-GENUINE TRANSACTION GENUINE. THE COURT HELD THAT THE TRIBUN AL WAS NOT JUSTIFIED IN DELETING THE ADDITIONS OF UNEXPLAINED CASH CREDITS AND INTER EST THEREON. 17.7 C. KANT & CO. VS. COMMISSIONER OF INCOME-TAX, 126 ITR 63[1981] 5 TAXMAN 64 (CAL.). IN THIS CASE DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE ITO NOTICED CASH CREDITS AGGREGATING RS. 77,500 IN THE ASSESSEE-FIRM'S ACCOUNT BOOKS IN THE NAMES OF SIX PARTIES. IT ATTRIBUTED TO THESE LOANS OBTAINED FROM THE SAID PARTIES AND PRODUCED LETTERS OF CONFIRMATION. THE I TO, HOWEVER, ADDED THE SAME AS ITS INCOME FROM UNDISCLOSED SOURCES AND ALSO DISALL OWED THE INTEREST OF RS. 1,996 THEREON ON THE GROUNDS, INTER ALIA, (I) THAT THE CR EDITS WERE NOT VERIFIABLE AND THAT THE LETTERS OF CONFIRMATION ALONE DID NOT ESTABLISH THE GENUINENESS OF THE LOANS; AND (II) THAT THE CAPACITY OF THE ALLEGED CREDITORS TO ADVANCE THE LOANS WAS NOT PROVED. THE AAC AND THE TRIBUNAL SUSTAINED THE ITO'S ORDER. THE TRIBUNAL ALSO NEGATIVE ASSESSEE'S CONTENTION THAT SECTION 68 HAD NO APPLIC ATION IN THE CASE OF COMMERCIAL 27 ITA NO.385/AGRA/2012 A.Y. 2006-07 LOANS. THE COURT HELD THAT SECTION 68 DOES NOT MAKE ANY DISTINCTION BETWEEN COMMERCIAL AND NON-COMMERCIAL LOANS. IN THE CASE OF CASH CREDIT ENTRY, IT IS NECESSARY FOR THE ASSESSEE TO PROVE NOT ONLY THE ID ENTITY OF THE CREDITORS BUT ALSO TO PROVE THEIR CAPACITY TO ADVANCE MONEY AND GENUINENE SS OF THE TRANSACTIONS. THE COURT HELD THAT THE TRIBUNAL HAD MATERIAL ON RECORD TO REACH ITS CONCLUSION ON ACCOUNT OF THE ASSESSEE'S FAILURE TO DISCHARGE ITS ONUS OF PROOF. HENCE, ADDITION OF IMPUGNED CASH CREDIT AND DISALLOWANCE OF INTEREST T HEREON WAS JUSTIFIED IN COMPUTING THE TAXABLE INCOME. 17.8 NANAK CHANDRA LAXMAN DAS VS. COMMISSIONER OF INCOM E-TAX, 140 ITR 151[1982] 9 TAXMAN 252 (ALL.). THE BRIEF FACTS OF THIS CASE ARE THAT DURING ASSESSMENT, THE ITO FOUND CASH CREDITS IN THE BOOKS OF THE ASSES SEE-FIRM. THE ASSESSEE FILED CONFIRMATION LETTERS FROM THE CONCER NED CREDITORS BUT DID NOT PRODUCE THEM BEFORE THE ITO. THE ITO, RELYING ON SOME CONFE SSIONS MADE BY THESE CREDITORS IN WHICH THEY HAD DISOWNED THE ADVANCE OF THE IMPUGNED CASH CREDITS, ADDED THE AGGREGATE AMOUNT OF SUCH CREDITS TO THE A SSESSEE'S INCOME. ON APPEAL, THE AAC DIRECTED THE ITO TO MAKE THE ASSESSMENT AFR ESH AFTER ALLOWING THE ASSESSEE AN OPPORTUNITY TO CROSS-EXAMINE THESE PART IES AND ALSO TO PRODUCE SUCH EVIDENCE AS IT MAY LIKE. NOT SATISFIED WITH THE ORD ER OF THE AAC, THE ASSESSEE WENT IN APPEAL TO THE TRIBUNAL WHICH CALLED FOR A REMAND REPORT FROM THE ITO AND ON THE 28 ITA NO.385/AGRA/2012 A.Y. 2006-07 LATTER SUBMITTING THE REMAND REPORT, BOTH THE ASSES SEE AND THE REVENUE AGREED TO HAVE THE DECISION OF THE TRIBUNAL ON THE BASIS OF T HE MATERIAL ALREADY ON RECORD. THE TRIBUNAL SUSTAINED THE ADDITION (ONLY IN RESPEC T OF ONE PARTY) HOLDING THAT THE ONUS TO PROVE THE NATURE AND SOURCE OF CREDIT WAS U PON THE ASSESSEE AND THE FILING OF A MERE CONFIRMATION LETTER WOULD NOT AMOUNT TO S UFFICIENT DISCHARGE OF THE BURDEN PLACED UPON THE ASSESSEE. ON REFERENCE, THE ASSESSEE CHALLENGED THE TRIBUNAL' S ORDER BEFORE THE HIGH COURT ON THE GROUNDS (I) THAT THE TRIBUNAL WAS NOT JUSTIFIED IN REJECTING THE ASSESSEE'S EXPLANATION; AND (II) THAT THE TRIBUNAL' S DECISION WAS VITIATED ON ACCOUNT OF IRRELEVANT CONSIDERATIONS AND MIS-APPRECIATION O F LAW. THE COURT HELD THAT AFTER THE REMAND REPORT WAS RECEIVED, THE ASSESSEE AND TH E DEPARTMENT BOTH AGREED BEFORE THE TRIBUNAL THAT IT WAS NOT REQUIRED TO SEE WHAT MORE COULD HAVE BEEN DONE BY THE ITO OR THE ASSESSEE. THE TRIBUNAL WAS LEFT T O DECIDE THE MATTER ON THE BASIS OF THE MATERIAL ON RECORD. THE TRIBUNAL, THEREAFTER , DECIDED THE QUESTION OF THE GENUINENESS OF THIS LOAN ON THE BASIS OF THAT MATER IAL AND IT RIGHTLY HELD THAT MERE CONFIRMATION LETTER FROM THE ALLEGED CREDITOR COULD NOT HAVE BEEN TREATED AS SUFFICIENT EVIDENCE TO PROVE THE GENUINENESS OF THE LOAN. THUS, THE TRIBUNAL WAS NOT SWAYED BY ANY IRRELEVANT CONSIDERATION IN ARRIV ING AT THIS FINDING. IT WAS FURTHER HELD THAT UNDER SECTION 68 WHERE ANY SUM IS FOUND C REDITED IN THE BOOKS OF AN 29 ITA NO.385/AGRA/2012 A.Y. 2006-07 ASSESSEE, THE ASSESSEE IS REQUIRED TO OFFER AN EXPL ANATION ABOUT THE NATURE AND SOURCE THEREOF. IF THE EXPLANATION OFFERED BY HIM I S NOT CONSIDERED AS SATISFACTORY BY THE ITO, THE SUM SO CREDITED CAN BE TREATED AS T HE ASSESSEE'S INCOME FROM UNDISCLOSED SOURCES. IT IS NOT NECESSARY FOR THE IT O TO LOCATE THE EXACT SOURCE OF THE CREDITS. THE INITIAL ONUS IS ON THE ASSESSEE TO OFF ER AN EXPLANATION AND THAT EXPLANATION HAS TO BE TO THE SATISFACTION OF THE IT O. THE ASSESSEE HAS TO PROVE THAT THE CREDIT ENTRY IS GENUINE AND THAT FACT CAN BE PR OVED BY ESTABLISHING FROM SOME PLAUSIBLE EVIDENCE THE IDENTITY OF THE CREDITOR AND HIS CREDITWORTHINESS. IN THE INSTANT CASE, THE ONLY MATERIAL ON RECORD IN REGARD TO THE IMPUGNED TRANSACTION WAS THE SO-CALLED CONFIRMATION LETTER FROM THE CREDITOR . THAT ALONE COULD NOT HAVE SERVED THE PURPOSE. APART FROM THIS, THE ASSESSEE ITSELF FORECLOSED AN Y FURTHER ENQUIRY IN THE MATTER BY AGREEING TO THE DECISION O F THIS QUESTION ON THE BASIS OF THE MATERIAL ALREADY ON THE RECORD. THE FINDING OF THE TRIBUNAL IN THIS BEHALF WAS A PURE FINDING OF FACT. ACCORDINGLY, ON THE FACTS FOU ND BY THE TRIBUNAL, THE DISPUTED AMOUNT WAS RIGHTLY TREATED AS THE ASSESSEE'S INCOME FROM UNDISCLOSED SOURCES. 17.9 GUMANI RAM SIRI RAM VS. CIT, 98 ITR 337 (P&H) . IN THIS JUDGEMENT IT HAS BEEN HELD THAT PROVISION OF SECTION 68 APPLIES TO ALL CREDIT ENTRIES BUT THE LANGUAGE OF SECTION 68 SHOWS THAT IT IS GENERAL IN NATURE AND APPLIES TO ALL CREDIT 30 ITA NO.385/AGRA/2012 A.Y. 2006-07 ENTRIES IN WHOMSOEVER NAME THEY MAY STAND, THAT IS, WHETHER IN THE NAME OF THE ASSESSEE OR A THIRD PARTY. 17.10 ROSHAN DI HATTI VS. CIT (1977) 107 ITR 938 (SC) AN D KALE KHAN MOHAMMAD HANIF VS. CIT (1963) 50 ITR 1 (SC). IN THESE JUDGEMENTS THE APEX COURT HELD THAT LAW IS WELL-SETTLED THAT THE ONUS O F PROVING THE SOURCE OF A SUM OF MONEY FOUND TO HAVE BEEN RECEIVED BY AN ASSESSEE IS ON HIM. IT WAS FURTHER HELD THAT WHERE THE NATURE AND SOURCE OF A RECEIPT, WHET HER IT BE OF MONEY OR OTHER PROPERTY, CANNOT BE SATISFACTORILY EXPLAINED BY THE ASSESSEE, IT IS OPEN TO THE REVENUE TO HOLD THAT IT IS THE INCOME OF THE ASSESS EE AND NO FURTHER BURDEN LIES ON THE REVENUE TO SHOW THAT THE INCOME IS FROM ANY PAR TICULAR SOURCE . 17.11 ARAVALI TRADING CO. VS. ITO (2008) 220 CTR (RAJ.) 622. IN THIS CASE IT WAS HELD THAT NEITHER UNDER PROVISIONS OF SECTION 6 8 NOR ON GENERAL PRINCIPLE, IT CAN BE SAID THAT ONCE EXISTENCE OF PERSON IN WHOSE NAME CREDITS ARE FOUND IN BOOKS OF ASSESSEE IS PROVED, AND SUCH PERSONS OWN SUCH CREDI TS WITH THE ASSESSEE, STILL ASSESSEE IS TO FURTHER PROVE SOURCE FROM WHICH CRED ITORS COULD HAVE ACQUIRED MONEY TO BE DEPOSITED WITH HIM. 31 ITA NO.385/AGRA/2012 A.Y. 2006-07 17.12 KAMAL MOTORS VS. CIT (2003) 131 TAXMAN 155 (RAJ). IN THIS JUDGEMENT IT WAS HELD THAT THE ONUS IS ON THE ASSESSEE TO DISCHARGE THE ONUS THAT THE CASH CREDITOR IS A MAN OF MEANS TO ALLOW THE CASH CREDIT . THERE SHOULD BE IDENTIFICATION OF THE CREDITOR AND HE SHOULD BE A PERSON OF MEANS. WHEN THE CASH CREDITOR IS AN INCOME-TAX ASSESSEE, IT CANNOT BE SAID THAT HE IS N OT A MAN OF MEANS. 17.13 CIT VS. KORLAY TRADING CO. LTD (1998) 232 ITR 820 (CAL). IN THIS JUDGEMENT IT WAS HELD THAT WHERE, WITHOUT FILING CO NFIRMATION LETTER FROM THE CREDITOR, THE ASSESSEE MERELY MENTIONED THE INCOME- TAX FILE NUMBER OF CREDITOR, THE GENUINENESS OF THE CASH CREDIT CANNOT BE SAID TO HA VE BEEN PROVED BY THE ASSESSEE. 17.14 TODAR MAL VS. CIT, 106 ITR 619 (P&H) . IN THIS JUDGEMENT IT WAS HELD THAT IN VIEW OF SECTION 68 OF THE INCOME-TAX ACT, 1 961, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE AND THE ASSESS EE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OF FERED BY HIM IS NOT SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE WITHOUT FURTHER PROOF. 17.15 CIT VS. UNITED COMMERCIAL AND INDUSTRIAL CO. (P) LT D., 187 ITR 596 (CAL) . THE RELEVANT HEAD NOTE IS REPRODUCED UNDER :- 32 ITA NO.385/AGRA/2012 A.Y. 2006-07 THE PRIMARY ONUS LIES ON THE ASSESSEE TO PROVE THE NATURE AND SOURCE OF CREDITS IN ITS ACCOUNTS. IT IS NECESSARY FOR TH E ASSESSEE TO PROVE PRIMA FACIE THE IDENTITY OF HIS CREDITORS, THE CAPA CITY OF SUCH CREDITORS TO ADVANCE THE MONEY AND LASTLY THE GENUINENESS OF THE TRANSACTIONS. ONLY WHEN THESE THINGS ARE PROVED BY THE ASSESSEE P RIMA FACIE AND ONLY AFTER THE ASSESSEE HAS ADDUCED EVIDENCE TO EST ABLISH THE AFORESAID FACTS DOES THE ONUS SHIFT ON TO THE DEPAR TMENT. IT IS NOT ENOUGH TO ESTABLISH THE IDENTITY OF THE CREDITORS. MERE PRODUCTION OF THE CONFIRMATION LETTERS BEFORE THE INCOME-AX OFFIC ER WOULD NOT BY ITSELF PROVE THAT THE LOANS HAVE BEEN OBTAINED FROM THOSE LOAN CREDITORS OR THAT THEY HAVE CREDIT-WORTHINESS. HELD, THAT, IN THE INSTANT CASE, THE TRIBUNAL MISDI RECTED ITSELF IN HOLDING THAT THE TRANSACTIONS WERE GENUINE SIMPLY B ECAUSE SOME OF THE TRANSACTIONS WERE MADE BY CHEQUES. THE ASSESSEE HA D FAILED TO PROVE THE CREDIT-WORTHINESS OF THE ALLEGED LENDERS. A NU MBER OF OTHER ASSESSEES HAD ALSO ADMIRED THAT LOANS OBTAINED FROM THESE BANKERS AGAINST HUNDIS WERE NOT GENUINE AND SUCH HUNDI LOAN S REALLY REPRESENTED THEIR OWN CONCEALED INCOME. THE ASSESS EE HAD NOT DISCHARGED ITS BURDEN OF PROVING THAT THE LOANS IN QUESTION WERE GENUINE. 18. IN THE LIGHT OF ABOVE BACKGROUND OF DISCUSSION, IF WE CONSIDER THE FACTS OF THE CASE UNDER CONSIDERATION, WE FIND THAT THE ASSE SSEE IS A PUBLIC LIMITED COMPANY. THE ASSESSEE COMPANY BORROWED MONEY THROUG H FIXED DEPOSIT OF RS.2,64,34,000/- IN A SCHEME UNDER THE COMPANY (ACC EPTANCE OF DEPOSIT) RULE, 1975. THE CASE OF THE A.O. WAS THAT IN SPITE OF PR OVIDING REASONABLE OPPORTUNITY OF HEARING, THE ASSESSEE HAS FAILED TO PROVE REGARD ING CREDITWORTHINESS OF CREDITOR AND GENUINENESS OF TRANSACTION TO THE EXTENT OF RS. 56,35,000/-. THE A.O. ISSUED SEPARATE LETTERS TO EACH DEPOSITOR ON THE ADDRESS G IVEN BY THE ASSESSEE BUT 33 ITA NO.385/AGRA/2012 A.Y. 2006-07 CONFIRMATIONS WERE NOT RECEIVED IN RESPECT OF 231 D EPOSITORS AMOUNTING TO RS.56,35,000/-. HOWEVER, THE ASSESSEE WAS ABLE TO FURNISH CONFIRMATION OBTAINED FROM 10 DEPOSITORS FOR RS.2,53,000/- BEFORE THE CIT (A) BUT THE ASSESSEE FAILED TO EVEN FURNISH THE CONFIRMATION IN RESPECT OF REMAINI NG DEPOSITORS. 19. THE CONTENTION OF THE LD. AUTHORISED REPRESENTA TIVE WAS THAT THE ASSESSEE HAS BORROWED THE FUND IN THE FORM OF FIXED DEPOSIT UNDER A SCHEME. THE ASSESSEE IS A PUBLIC LIMITED COMPANY, THEREFORE, ADDITION UN DER SECTION 68 OF THE ACT IS NOT WARRANTED. ON CONSIDERATION, WE FIND THAT SECTION 68 DOES NOT MAKE ANY DISTINCTION BETWEEN PUBLIC LIMITED COMPANY AND OTHER ASSESSEE. SECTION 68 OF THE ACT CAME INTO OPERATION ON SATISFACTION OF TWO CONDITIONS TH AT THE ASSESSEE MAINTAINS BOOKS OF ACCOUNT AND CREDIT ENTRIES OCCURS IN SUCH BOOKS. IN THE CASE UNDER CONSIDERATION, THE ASSESSEE SATISFIED BOTH THE CONDITIONS THAT ASS ESSEE MAINTAINS BOOKS OF ACCOUNT AND CREDIT ENTRY OCCURS IN THE BOOKS OF ACCOUNT. T HE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF GUMANI RAM SIRI RAM VS. C IT, 98 ITR 337 (P&H) WHEREIN IT HAS BEEN HELD THAT PROVISION OF SECTION 68 APPLIES TO ALL CREDIT ENTRIES IN WHOMSOEVER NAME THEY MAY STAND. SIMILAR VIEW IS TA KEN BY HONBLE CALCUTTA HIGH COURT IN THE CASE OF C. KANT & COMPANY VS. CIT (SUPRA) WHEREIN IT HAS BEEN HELD THAT SECTION 68 OF THE ACT DOES NOT MAKE ANY D ISTINCTION BETWEEN COMMERCIAL AND NON-COMMERCIAL LOAN. THE HONBLE APEX COURT IN THE CASE OF ROSHAN DI HATTI 34 ITA NO.385/AGRA/2012 A.Y. 2006-07 VS. CIT (SUPRA) AND IN THE CASE OF KALE KHAN MOHAMM AD HANIF VS. CIT (SUPRA) HELD THAT WHERE THE NATURE AND SOURCE OF RECEIPT CA NNOT BE SATISFACTORILY EXPLAINED BY THE ASSESSEE, IT IS OPEN TO THE REVENUE TO HOLD THAT IT IS THE INCOME OF THE ASSESSEE AND NO FURTHER BURDEN LIES ON THE REVENUE TO SHOW THAT THE INCOME IS FROM ANY PARTICULAR SOURCE. THUS, EVEN BEFORE ENACTMENT OF SECTION 68 THAT WAS THE LAW. IN THE LIGHT OF ABOVE DISCUSSION, THE CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE DOES NOT HELP TO THE ASSESSEE. 20. THE OTHER CONTENTION OF THE ASSESSEE WAS THAT T HE ASSESSEE HAS FURNISHED VOLUMINOUS DETAILS IN THE FORM OF APPLICATION FORMS FOR FIXED DEPOSIT AND OTHERS OF DEPOSITOR ABOUT 459. THE ADDRESSES OF THE DEPOSITO RS WERE GIVEN BUT CONFIRMATION OF REMAINING DEPOSITORS COULD NOT BE FURNISHED AS T HE MATTER BECAME VERY OLD. THESE CONTENTIONS OF THE LD. AUTHORISED REPRESENTAT IVE ARE ALSO NOT SUPPORTING THE CASE OF THE ASSESSEE AS IN RESPECT OF SECTION 68 OF THE ACT IT IS SETTLED LAW THAT THE ASSESSEE IS TO PROVE IDENTITY, CAPACITY OF DEPOSITO R AND GENUINENESS OF THE TRANSACTION. A MERE FILING OF VOLUMINOUS DETAIL, WH ICH IS NOT PROVING AND PERTAINING TO CAPACITY OF DEPOSITOR AND GENUINENESS OF THE TRANSACTION, DOES NOT HELP TO THE ASSESSEE. IT IS ALSO CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE THAT THE TRANSACTIONS WERE THROUGH BANKING CHANNEL. THE ASSESSEE RECEIVED FIXED DEPOSIT THROUGH BANKS AND ALSO REPAID THROUGH BANKS . THE DEPOSITS WERE RECEIVED 35 ITA NO.385/AGRA/2012 A.Y. 2006-07 THROUGH BROKERS, THIS CONTENTION OF THE LD. AUTHORI SED REPRESENTATIVE IS ALSO NOT HELP THE ASSESSEE AS IN THIS REGARD, IT IS SETTLED LAW REGARDING SECTION 68 OF THE ACT THAT THE BURDEN IS ON THE ASSESSEE TO PROVE ALL THE THREE INGREDIENTS, I.E. IDENTITY, CAPACITY OF DEPOSITOR AND GENUINENESS OF THE TRANSA CTION. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF C. KANT AND COMPANY VS. CIT (SUPRA) HELD THAT IN RESPECT OF CREDIT ENTRY IT IS NECESSARY FOR THE ASS ESSEE TO PROVE NOT ONLY THE IDENTITY OF THE CREDITORS BUT ALSO TO PROVE THE CAPACITY OF THE CREDITORS, THE ADVANCE MONEY AND GENUINENESS OF THE TRANSACTIONS. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF KAMAL MOTOR VS. CIT 131 TAXMAN 155 (RAJ.). THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF BHAR TI (P) LTD. VS. CIT (SUPRA) HELD THAT MERE FILING OF THE CONFIRMATORY LETTERS W ILL NOT DISCHARGE THE ONUS THAT LIES ON THE ASSESSEE. IN THE CASE UNDER CONSIDERATION, THE ASSESSEE FAILED TO FURNISH EVEN CONFIRMATION OF THE DEPOSITORS FOR WHICH THE CIT(A) HAS SUSTAINED THE ADDITION. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. PRECISION FINANCE PVT. LTD. HELD THAT MERE PAYMENT BY ACCOUNT PAYEE CHEQUE WAS NOT SACROSANCT NOR COULD IT MAKE A NON-GENUINE TRANSACTION AS GENUINE. SIMILAR VIEW HAS BEEN TAKEN BY HONBLE CALCUTTA HIGH COURT IN ANOTHER CASE OF CIT VS. UNITED COMMERCIAL AND INDUSTRIAL COMPANY (P) LTD. (SUPRA) 36 ITA NO.385/AGRA/2012 A.Y. 2006-07 21. NOW WE COME TO THE ALTERNATE CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE THAT THE FIXED DEPOSITS WHICH WERE R ENEWED DURING THE YEAR, HE SUBMITTED THAT IN FACT THESE FIXED DEPOSITS WERE TA KEN IN EARLIER YEAR, THEREFORE, TO THAT EXTENT ADDITION IS NOT WARRANTED. THE ASSESSEE HAS FURNISHED A CHART OF SUCH 244 DEPOSITORS AMOUNTING TO RS.29,84,000/- WHICH HA S BEEN PLACED IN THE PAPER BOOK. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT THIS ALTERNATE CONTENTION OF LD. AUTHORISED REPRESENTATIVE IS SUBJ ECT TO VERIFICATION. THE ALTERNATE CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE IS ACCEPTABLE AS SECTION 68 REQUIRES THAT CREDIT MUST BE IN THE PREVIOUS YEAR AND NOT OF EARLIER YEAR FOR THE PURPOSE OF MAKING ADDITION IN THE INCOME SINCE RENEWAL OF FIXE D DEPOSITS ARE NOT CREDIT OF THIS YEAR, THEREFORE, ADDITION CANNOT BE MADE IN THE YEA R UNDER CONSIDERATION. HOWEVER, WE ALSO FIND FORCE IN THE SUBMISSION OF TH E LD. DEPARTMENTAL REPRESENTATIVE THAT REVENUE AUTHORITIES DID NOT GET OPPORTUNITY TO VERIFY THE ALTERNATE CONTENTION OF THE LD. AUTHORISED REPRESEN TATIVE. AFTER CONSIDERING THE FACTS OF THE CASE, WE THINK IT PROPER TO SEND BACK THE MATTER, TO THE EXTENT OF RS.29,84,000/- OF 244 DEPOSITORS OF WHICH CHART HAS BEEN GIVEN BY THE LD. AUTHORISED REPRESENTATIVE AND HAS BEEN PLACED IN TH E PAPER BOOK, TO THE FILE OF THE A.O. WITH DIRECTION TO VERIFY THE ALTERNATE CONTENT ION OF THE LD. AUTHORISED REPRESENTATIVE AND IF IT IS FOUND CORRECT, THE ADDI TION TO THE EXTENT OF RS.29,84,000/- OR THE OTHER AMOUNT WHICH WAS FOUND IN ACCORDANCE WITH THE 37 ITA NO.385/AGRA/2012 A.Y. 2006-07 CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE THA T SOME OF FIXED DEPOSITS WERE RENEWED, THEREFORE, NO CREDIT DURING THE YEAR, THE ADDITION TO THAT EXTENT MAY BE DELETED. ACCORDINGLY, WE ARE SENDING THE ISSUE BAC K TO THE FILE OF THE A.O. WITH THE LIMITED PURPOSE AS DISCUSSED ABOVE. 22. IN THE LIGHT OF ABOVE DISCUSSION, THE BALANCE A DDITION OF RS.23,98,000/- (RS.53,82,000.00 - RS.29,84,000.00) SUSTAINED BY TH E CIT(A) IS CONFIRMED AND MATTER PERTAINING TO ADDITION OF RS.29,84,000/- IS BEING SENT BACK TO THE FILE OF THE A.O. AS DISCUSSED ABOVE. 23. BEFORE PARTING FROM THE MATTER, WE WOULD LIKE T O PUT ON RECORD THAT VERY SINCERE EFFORTS HAVE BEEN TAKEN BY LD. DEPARTMENTAL REPRESENTATIVE IN THIS CASE. THE ASSESSEE HAS FURNISHED TWO VOLUMINOUS PAPER BOO KS OF 757 PAGES AND 332 PAGES. LD. DEPARTMENTAL REPRESENTATIVE HAS GONE TH ROUGH BOTH VOLUMINOUS PAPER BOOKS AND RECORDS OF THE DEPARTMENT AND VERY CONCIS ELY NARRATED THE FACTS AT THE TIME OF HEARING AND IN HIS ARGUMENTS. IT IS RELEVA NT TO RECORD THE FACT THAT SHRI WASEEM ARSHAD, LD. SR. DEPARTMENTAL REPETITIVE IS A LWAYS ASSISTING THE BENCH WHETHER THE MATTER IS OLD OR CURRENT ONE OR HAVING VOLUMINOUS PAPER BOOKS. HE NEVER SEEKS UNNECESSARY ADJOURNMENTS IN THE CASES W HICH ARE LISTED FOR HEARING. HE HAS ALSO GONE THROUGH THE RECORDS OF DEPARTMENT AND IN SOME OF THE CASES EVEN 38 ITA NO.385/AGRA/2012 A.Y. 2006-07 HE HAS PRODUCED THE RELEVANT RECORDS OF THE A.O. AN D CIT (A) BEFORE THE BENCH. IN THE CASE UNDER CONSIDERATION ALSO, THE HEARING WAS COMPLETED WITHIN A REASONABLE TIME ONLY DUE TO THE EFFORTS OF THE LD. DEPARTMENTA L REPRESENTATIVE. 24. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY
