TMI Blog1995 (6) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... of the directions of the Commissioner of Income-tax (Appeals) in his order dated 24-3-1988, the Assessing Officer passed a fresh assessment order under section 143(3)/250 on 20-1-1989 determining the total income at Rs. 36,55,170. This assessment also was set aside by the CIT (Appeals) by his order dated 29-1-1990. The CIT (Appeals) directed the Assessing Officer to frame a fresh assessment by observing as under : " I would direct the Assessing Officer to consider the appellant's explanations, details and evidence in respect of drafts/cash deposit and give proper, just and fair finding. While so doing he must bear in mind the appellant's handicap that the records were destroyed in the riots of November 1984. In view of this he must consider in a just and fair manner the probability of the explanation that the drafts/cash deposits were out of the realisation from the sundry debtors, bank withdrawals, cash transfers, etc. In this connection, he will examine the subsequent balance-sheet, company's net assets, the investments and acquisitions of the Directors of the company, etc. An analysis of these factors along with the other relevant factors would help the Assessing Officer to ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , namely 1981-82, the assessee suddenly had a realisation from sundry debtors amounting to Rs. 18,00,763. The Assessing Officer further observed that in view of the fact that the books of account have been burnt and the inability of the assessee to produce any detail regarding the drafts deposited except by way of an explanation that the same were realisations from sundry debtors, no other verifiable details had been filed. He opined that one of the explanations for this can be that 'properly' the sales were not being accounted for in the books of the assessee and the same were being directly deposited in various bank accounts. He held that drafts deposited in the Bank of Tokyo as per List I reproduced in the assessment order, for which no explanation was forthcoming, were actually undisclosed sales of the assessee. Accordingly, he treated the same as income of the assessee under section 68 of the Income-tax Act, 1961 for the assessment year under consideration. 6. In the said assessment order dated 13-1-1992 he disallowed an amount of Rs. 98,532 by observing as under : " In the details of various expenses filed, the assessee has claimed payment of interest out of which Rs. 98 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to examine the question of burnt books of account. He noted that when the first assessment order was passed on 8-10-1984, the handicap of books having been burnt was not there and that the assessee had ample time and opportunity to have placed its card openly before the Assessing Officer for drawing the proper inference and that this was not done. He referred to the copy of the police Report filed by the assessee before the Assessing Officer and copy of letter dated 15-11-1984 sent to the Station House Officer, Moti Nagar Police Station and observed that in them there was no reference of destruction of cash book and other account books. He further observed that copy of the F.I.R., as registered in the "Rojnamcha" was never filed before the Assessing Officer. He also referred to the assessee's letter dated 3-10-1985 wherein it was mentioned that the partywise details of sundry debtors outstanding as on 30-6-1978 based on the party's ledger for that year are being compiled and the same shall be furnished as soon as possible. He concluded from the said letter that it was unfortunate that till date such party-wise details of persons paying Rs. 18 lakhs and odd had never been furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not acceptable. in support of his reasoning he referred to the Kanga and Palkhivala's " The Law and Practice of Income Tax " page 864 of Eighth Edition, Volume-I, wherein it was stated that the cash credits may be assessed either as business profits or as income from other sources. 14. He also observed that the records showed that assessee was given numerous opportunities to put forth its case. 15. He further held that the Assessing Officer has followed the CBDT's Instruction No. 1659 faithfully and the same was evident from the office note recorded by the Assessing Officer himself and the fact that addition of only Rs. 15.59 lakhs was maintained in the assessment order dated 13-1-1992 as against the addition of Rs. 34 lakhs approximately, in the earlier two assessment orders dated 8-10-1984 and 20-1-1989, for which no explanation was forthcoming although the assessee was in possession of party ledger etc. He also held that nowhere the said Instruction No. 1659 laid down that the accounts as presented should be accepted and that it only stipulated that after verification of the relevant facts and also keeping in view the past history, the assessment should be completed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the handicap of the cash book stated to have been destroyed in riots would not entitle the acceptance of the credit because even the evidence which was in the possession of the assessee in the form of party ledger which was promised to be made available was never delivered. If either before the Assessing Officer or before the CIT (Appeals) the assessee had made endeavours or efforts to make the supporting evidence available for the drafts founds credited in the bank, a liberal and sympathetic view was always possible in view of the Instruction of the CBDT. But in the absence of evidence and based on a mere statement, it is not possible to accept the surfacing of huge deposits in the bank except for a credit of Rs. 17,845 on 28-11-1979 with a narration "drafts of Rs. 17,845 is from S.P.S.". It appears to be the credit in the name of Sardar Puran Singh who happens to be the Managing Director of the assessee company and this amount is found reflected in his copy of account. Thus, considering the facts of the case and also keeping in view the Instruction of the CBDT, the CIT (Appeals) held that it was not possible to allow any further benefit to the assessee. He gave a relief of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said judgment the assessing authority was bound to examine each individual transaction. For this case law reference may be made to page 568 of paper book No. 6. The credits are taken from the bank pass books and not from the books of account of the assessee. Bank pass book is not a book maintained by the assessee as per the judgment of the Bombay High Court in the case of CIT v. Bhaichand H. Gandhi [1983] 141 ITR 67. The Tribunal in the case of Kishan Chand Sobhraj Mal v. ACIT [1992] 41 ITD 109 following the judgment of the Bombay High Court in the case of CIT v. Bhai Chand H. Gandhi's case held that there is no justification formaking any additions on the basis of entries found in the books of account which did not belong to the assessee. There is no evidence whatsoever with the Department to prove that the amount of Rs. 15,59,845 are undisclosed sales of the assessee. Even assuming, but not conceding, that there were any sales, section 68 cannot apply as sales constitute business activity, income from which cannot be brought to tax as income from other sources. Further, the Assessing Officer has brought to tax the entire alleged gross sales of Rs. 15,59,845. If at all any addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that the impugned deposits are the realisation of the sale proceeds against sales not disclosed in the past years in the books of account. (page 538 of paper book No. 5). Same is the finding in the assessment order passed under section 143(3)/250 dated 20-1-1989 (see page 549 of paper book No. 5). Contrary to these findings by the earlier Assessing Officers, the present Assessing Officer who passed the assessment order on 13-1-1992 held that these were the receipts from the suppressed sales during the year ending 30-6-1980. Such contrary findings by the concerned authorities vitiate the order. The taxation authorities cannot go on changing their mind from time to time and cannot be allowed to create uncertainty in the realm of taxation. 6 ELT 756 Guj. (sic) (see page 577 of paper book No. 6). Further, departure from earlier conclusion without explanation is vitiated. Please see 209 ITR 433 (sic). When they themselves were not sure about the correct factual position, any addition made is not sustainable under the law. It is settled law that benefit of doubt is the right of the assessee and the onus to prove lies on the Department. As laid down by the Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the tenability, probability and acceptability of the explanations. These specific directions were completely ignored by the Assessing officer when he passed the assessment order dated 13-1-1992. These directions given by the CIT (Appeals) cannot be ignored by the Assessing officer as laid down by the Bombay High Court in the case of Smt. Mukundkumari v. K.V.S. Namoondari, 17th ITO [1979] 118 ITR 433. The judgment of the Supreme Court in AIR 1984 SC at page 897 (sic) is also to the same effect. The assessee filed an affidavit dated 10-2-1992 before the CIT (Appeals) which was not considered at all by him. The assessee filed another affidavit dated 17-3-1993 before the Tribunal. No counter-affidavit was filed by the revenue. Hence, the averments made by the assessee are not controverted and should be deemed to be admitted by the doctrine of non-traverse as laid down by the Delhi High Court in the case of Ganesh Rolling Mills v. Union of India 45 ELT 407. This judgment can be seen at page 87 of the paper book No. 1. A statement reconciling the sales of Rs. 2,03,103 during the year ending 30-6-1980 was filed before the Assessing Officer. This can be seen at page 147 of paper book N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1980 relevant for the assessment year 1981-82. CBDT's instruction No. 1659 is not an instruction to be blindly followed by the Assessing Officer. The assessee cannot say that it will not produce its books of account and yet claim the following of the said Instruction. The assessee cannot claim that directions issued by the CIT (Appeals) in the remand order were not followed. Directions issued by the CIT (Appeals) at para 23 of the appellate order dated 29-1-1990 are nothing but extension of section 68 to the assessee's case. The instructions of the CIT (Appeals) were fully and completely followed. Cash credits added under section 68 cannot be treated as income from the business. An explanation of the assessee cannot be equated with evidence whether it is in the form of an affidavit or otherwise. Affidavits cannot be always accepted when other factors are there. Affidavits need not always be accepted as correct as laid down by the Allahabad High Court in the case of Sri Krishna v. CIT[1983] 142 ITR 618. The list of persons from whom the drafts were received was not filed before the Assessing Officer to avoid proper probe. Acceptance of sundry debtors at lesser figures in the subsequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessment as directed by the CIT (Appeals) in para 23 of his appellate order dated 29-1-1990. The CIT (Appeals) is bound by the findings of his coordinate authority. He cannot go beyond the findings given by his predecessors. Reliance is placed on the decision of the Tribunal in ITO v. Ram Prasad [1984] 101 TD 96 (All.).The judgment of the Supreme Court in the case of Jasraj Indersingh v. Hemraj Multanchand AIR 1977 SC 1011 is also to the same effect. This judgment can be seen at page 423 of paper book No. 3. The CIT (Appeals) in his appellate order dated 31-1-1994 has made out a new case without giving any opportunity to the assessee. Section 68 is a fictional provision. It should be construed strictly. The marginal note of section 68 reads as "cash credits". The marginal note can be relied upon to show what the section deals with as laid down by the Supreme Court in the case of K.P. Varghese v. ITO [1981] 131 ITR 597. The head of income is not mentioned in section 68. It was nobody's case that no evidence was filed by the assessee before the revenue. The directions of the CIT (Appeals) contained in para 21 of the order dated 29-1-1990 were not properly carried out. No mistake ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50,000 31-7-1979 30,000 1-8-1979 70,000 For the following, the Assessing Officer did not state whether vouchers were produced or not: Date Amount Remarks (Rs.) 17-12-1979 1,25,000 1,00,000 29-2-1980 1,50,000 26-3-1980 50,000 3-5-1980 50,000 31-5-1980 25,000 25,000 28-6-1980 17,000 75,000 50,000 So it cannot be said by the Assessing Officer in page 5 of the assessment order dated 13-1-1992 that " in view of ....... inability of the assessee to produce any details regarding drafts deposited ". Further the Assessing Officer has confused himself regarding the pay-in-slips produced by the assessee before him. The "pay-in-slips" cannot be termed as "vouchers". The word "voucher" is a misnomer for the "pay-in-slip". Voucher is a receipt issued by the recipient to the payer. The pay-in-slip contains two portions --- counterfoil retained by the account holder and the main portion given to the bank along with the draft deposited. The main portion of the pay-in-slip contains the following co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be allowed to create uncertainty in the realm of taxation [6 ELT 756 Guj. (sic)]. Departure from earlier conclusion without explanation is vitiated. When the taxing authorities themselves were not sure about the correct factual position, any addition made is not sustainable under the law. it is settled law that benefit of doubt is the right of the assessee. [29 STC 695 (sic)]. 22. The assessee has filed reconciliation statement of sundry debtors from 1-7-1979 to 30-6-1980 (page 135 of paper book No. 1). In the said statement Rs. 18,00,763 was shown as realisation from the debtors during the year ended 30-6-1980. The Assessing Officer after comparing the figures of realisation from the debtors in the assessment years 1982-83, 1983-84 and 1984-85 concluded that it was unlikely that for the assessment year 1981-82 the assessee suddenly had realisation from sundry debtors of about Rs. 18 lakhs. This is only a suspicion of the Assessing Officer. Suspicion, however, grave, cannot take the place of proof. The assessee's plea of realisation of Rs. 18,00,763 from the sundry debtors in the year ended 30-6-1980 cannot be rejected on the ground that realisations in the later assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is to be added in the total income of the assessee towards the profit element embedded in the alleged unaccounted sales, it can only be assessed under the head "Income from business"and not as "Income from other sources" as has been done by the Assessing Officer. 27. The assessee has got carried forward losses of preceding assessment years viz., assessment years 1977-78 to 1980-81 aggregating to Rs. 21,61,703 as per order under section 154 dated 31-7-1992 placed at page 48 of the paper book No. 1. Hence there is no tax advantage to the assessee, if the assessee were to suppress the sales to the extent of Rs. 15,59,845. No prudent businessman would allow so much amount to go as unaccounted when he can easily afford to have it accounted for without paying even a rupee towards income-tax. To indulge in such unaccounted sales in such circumstances is against common human behaviour. When there is no tax advantage, the sustained addition of Rs. 15,42 000 has to be deleted as per the judgment of the Calcutta-High Court in the case of Western Estates. 28. The Assessing Officer accepted the plea of the assessee that books of account had been burnt in the riots of November 1984. Please ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31. His observation at the end of the para 25 that "In view of the appellant's counsel's letter dated 3-10-1985 mentioned earlier it has to be held that the appellant was not justified in withholding the list of debtors on various dates," is also misleading. How can he expect the assessee to give the list of debtors on various dates [Emphasis supplied] --- on the basis of party's ledger for the year ending 30-6-1978? How can he expect the assessee to give lists of sundry debtors as on 30-6-1979 and 30-6-1980 based on the party's ledger for the year ending 30-6-1978? This shows the lack of understanding on the part of the CIT (Appeals). 32. Again in para 31 he observes "although the assessee was in possession of party's ledger etc." which ledger he is referring to ? Probably he has in his mind party's ledger for the year ending 30-6-1978. 33. Again he harps in para 34 "even the evidence which was in the possession of the appellant in the form of party's ledger which was promised to be made available was never delivered". What the assessee referred to in letter dated 30-10-1985 is party's ledger for the year ending 30-6-1978 and not for the year ending 30-6-1980. 34. The observa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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