TMI Blog1997 (6) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced his own money in the guise of loan from Shri Murlidhar. The AO also intimated the assessee that Shri Murlidhar was a Havala broker having no capacity to advance the loan in question. The assessee filed a written reply on22nd May, 1991challenging the validity of notice under s. 148 and stating that there were no omission or failure on the part of the assessee in disclosing any material facts, which were the same as at the time when the assessment was originally completed. The assessee also urged in the reply that in case the creditor had taken loans from sources not considered as plausible, action should have been taken in his hands and not in the case of the assessee under s. 148. The assessee relied on the decisions in Bibi Guru Darshan Kaur vs. CIT (1964) 51 ITR 1 (Punj) and E.M. Muthappa Chettiar vs. CIT (1964) 53 ITR 642 (Mad). The AO, however, did not accept the above explanation by observing that the assessee had failed to disclose the capacity of Shri Murlidhar, proprietor of M/s M.D. Enterprises. 2.2. On first appeal, the learned counsel for the assessee challenged the initiation of proceedings under s. 147(a). He submitted that the assessee had taken due care at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ross-examination it was revealed that he was a broker assessed to tax in Ward No. 4(7),New Delhi. Shri Murlidhar had stated that for advancing loan of Rs. 2,50,000 he had taken loan from Shri Krishan Dass of Rs.1.10,000 from Miss Esha Gupta of Rs. 50,000 from Miss Cheena Gupta of Rs. 8,000 and that the said loans were by cheque. He further noted that the AO had observed that Shri Murlidhar was assessed at a meagre income just marginally above the taxable limit. The AO had also observed that Shri Krishan Dass was being assessed upto the asst. yr. 1985-86 on share income and was assessed to income-tax from asst. yr. 1978-79 to 1988-89 at nominal income not exceeding Rs. 31,000. The AO has also observed that Shri Krishan Dass was assessed on income marginally higher than the exemption limit and whatever he had accumulated was lying in deposits with Shilp Spinners (P) Ltd. and M/s Nathu Lal Syam Sunder. The AO had further observed that there was a deposit of Rs. 95,000 in the account of Shri Krishan Dass, the source of which was not explained. The AO had thus held that the amount advance by Shri Krishan Dass was nothing but the assessee s own money. With reference to the loans from thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvanced an amount of Rs. 8,000 from her bank account and that she drew a salary of Rs. 10,400 from Gupta Enterprises and had income of Rs. 8,590 from interest. The learned counsel further reiterated that the sources of loan obtained by Shri Murlidhar from the above parties were thus fully proved. He also pointed out that Shri Murlidhar was not related to the assessee directly or indirectly or the partners of the assessee-firm. He also pointed out that the examination of bank account of Shri Murlidhar would rule out the concept of Havala business since bulk of the money introduced in the bank remained invested throughout the year which was contrary to the nature of Havala entries. The learned CIT(A) considered these submissions and observed that though Shri Murlidhar had filed a confirmation letter and had accepted the advancement of loan to the assessee, the same was not sufficient for discharge of onus under s. 68. He further observed that the sources of deposit in his accounts were not proved particularly when it was seen that he had been assessed at an income marginally above the exemption limit. The learned CIT(A) ultimately concluded that the capacity of Shri Murlidhar to adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that in the said case it was subsequently found that the managing director of the company, from whom loan was supposed to have been taken, had made a confession to the effect that the company was only a name lender and had never advanced any loans to any person and this was accepted in the assessments of the company. In the circumstances, the Hon ble Supreme Court had held that the subsequent information was definite, specific and reliable and notice for reassessment was valid. The learned counsel submitted that in the instant case this situation was entirely different as the assessee had disclosed all the primary facts and Shri Murlidhar had filed affidavit and confirmed the loan of Rs. 2,50,000. The learned counsel further referred to the decision of the Hon ble Delhi High Court in the case of Nawabganj Sugar Mills Ltd. Ors. vs. CIT (1980) 17 CTR (Del) 194 : (1980) 123 ITR 287 (Del) for the proposition that there is distinction between falsity of information and non-furnishing of the information. In the said case the ITO had allowed the deduction claimed by the assessee in relation to the commissions paid to Gokul Nagar Co. and he had accepted the disclosure by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to the effect that he was a name lender. The learned counsel submitted that in the present case the proprietor of M/s M.D. Enterprises, i.e., Shri Murlidhar had confirmed the loan and had not denied the making of the loan. 3.1. The learned counsel, thereafter invited our attention to p. 5 of the paper book, wherein it is mentioned in the reply that confirmation from Shri Murlidhar as also the GIR number and the ward where his assessment is regularly made, was obtained and furnished before the AO before completing the original assessment. He further invited our attention to p. 62 of the paper book, where a copy of the account with CBI Bank is placed. He submitted that the loan was taken on26th Sept., 1987and that the accounting period of the assessee ended on10th Nov., 1987and that if at all the addition was to be made on this account it should be in the year in which the loan has surfaced. He further, submitted that it was not the duty of the assessee to establish credit-worthiness of the creditors of the deposits. He also submitted that the creditors of the deposit i.e., Shri Murlidhar had not been examined. In view of the foregoing the learned counsel submitted that the reo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to various pages of the paper book where the statement of income in respect of Smt. Bhagwati Devi, who had advanced loans to M/s M.D. Enterprises of Rs. 1,52,200 the pay-in-slip in the case of M/s H.D. Enterprises showing deposits by cheque of Rs. 2,50,000, the affidavit of Shri Murlidhar confirming the receipt of loan of Rs. 2,50,000 from Shri Krishan Dass, Miss Esha Gupta, Miss Chhena Gupta and Smt. Uma Gupta and advancing the loan of Rs. 2,50,000 to the assessee are placed at pp. 64-65 of the paper book are placed. He further invited our attention to the reply filed by the assessee before the learned CIT(A). He submitted that the tax authorities have not brought anything on record to show that the taking of loan was a colourable device adopted by the assessee to conceal its income. He submitted that the tax authorities have proceeded on assumptions and conjectures on the basis of information received from Asstt. CIT (Invigilation) and have treated the amount of loan advanced by Shri Murlidhar to the assessee as income of the assessee without bringing any material on record to establish that the income really belongs to the assessee. 4. The learned Departmental Representativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot his money and that he was only a name lender and doing Havala transactions. The tax authorities have not held that the material facts relating to the loan advanced by Shri Murlidhar, proprietor of M/s M.D. Enterprises and other evidence furnished by the assessee in relation to said loan were false, so as to attract reopening of assessment. We feel that plea of the learned counsel that reopening of assessment in such circumstances is bad in law has merit in view of the decisions in (1993) 112 CTR (All) 193 : (1993) 202 ITR 978 (All) and (1993) 113 CTR (SC) 436 : (1993) 203 ITR 456 (SC). The plea of learned counsel gets further support from the decision in (1983) 35 CTR (Del) 414 : (1983) 142 ITR 487 (Del), wherein a distinction has been drawn between the falsity of material facts disclosed by the assessee and erroneous inferences which may be drawn by the AO from those facts which are otherwise full and true. We may also refer to the observations made in the decision in 41 ITR at p. 220 that once all primary facts are before the AO, he requires no further assistance by way of disclosure and that it is for him to decide what inferences of facts or legal inferences are to be reason ..... X X X X Extracts X X X X X X X X Extracts X X X X
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