TMI Blog2008 (1) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Tribunals have to Judge the evidence before them by applying the test of human probabilities. In Sumati Dayal vs. CIT [ 1995 (3) TMI 3 - SUPREME COURT] held that in such cases, a superficial approach to the problem should be eschewed and the matter has to be considered in the light of human probabilities and further that any transaction about which direct evidence is rarely available should be inferred on the basis of the circumstances available on the record. In that case, the majority opinion of the settlement Commission was approved as it was taken after considering the surrounding circumstances and applying the test of human probabilities. These principles apply to the present case where the documentary evidence prima facie supports the assessee's case but a closer look at the same in the light of the surrounding circumstances and applying the test of human probabilities reveal that the documentary evidence cannot be accepted. The learned CIT(A), with respect, did not approach the case from this angle and seems to have been guided merely by the documentary evidence. In this, he fell into an error. He ought to have given a wholesome treatment to the case taking int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the first seven persons which aggregated to Rs. 10 lacs. We shall examine each loan in some detail a little later; for the present, suffice to note that the AO found certain common features in the loans taken from these seven persons. These were that all the seven persons named above were stated to be the relatives of the assessee, that they were taken at the same time, that no interest was paid on the loans and that, significantly, just before the amounts were advanced by these seven persons to the assessee there were cash deposits in their bank accounts. It is to be noted that the loans from these seven persons were taken through account payee demand drafts. The creditors had confirmed the loans. They were all agriculturists and in some cases, the Khasra Girdwari and others evidence were adduced in support of their land holdings. It was explained by the assessee that no interest was paid on the loans because they were all taken from relatives. The assessee also furnished copies of the bank accounts of the creditors. It would appear that some of the creditors appeared before the AO and their statements were recorded by him. The AO however took the view that the creditors did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) The assessee has produced a few bills/contract notes available with the creditors to show sale of agricultural produce. Further, the Revenue records show that the creditors were capable of giving the loans. (viii) The fact that the creditors were able to make drafts in favour of the assessee in a short span of time was not conclusive against the assessee, as held by the Jaipur Bench of the Tribunal in the case of V. Karva vs. ITO. (ix) As held by the Bombay High Court in CIT vs. Bhaichand H. Gandhi (1983) 141 ITR 67 (Bom), the bank passbook cannot be treated as books of account of the assessee and, therefore, s. 68 cannot apply. On these findings, the CIT(A) deleted the addition. 4. The Revenue is in appeal. Mr. Gill, the learned senior Departmental Representative contended that there were tell-tale indications present uniformly in the case of all the creditors and surrounding circumstances to show that despite the documentation, the credits were not genuine. He drew our attention to the fact that all the loans were taken at the same time, that they did not carry any interest and that there were cash deposits in the bank accounts of the creditors just before demand drafts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posited in the bank accounts of the creditors before the issue of the demand drafts and had found that they were not in the handwriting of the assessee. According to the learned representative of the assessee, all these facts proved that the loans were genuine. He also filed copies of the statements of three creditors, namely, (i) Balraj Singh son of Hari Singh, (ii) Rajpal son of Hari Chand and (iii) Sushil Kumar, as also copies of the remand report dt. 24th Nov., 2004 filed by the AO before the CIT(A). In addition, he filed written submissions dt. 22nd Nov., 2007 and read out the same before us. He has also filed copies of the paying-in slips to show that they were not in the assessee's handwriting. Besides these evidence and arguments, the learned representative of the assessee also relied on the judgment of the Bombay High Court in CIT vs. Bhaichand Gandhi and contended that since the assessee was not maintaining any books of account no addition can be made under s. 68 of the Act on the basis of the entries in the bank statements of the creditors, which cannot be considered as the books of account of the assessee. 6. We have carefully considered the facts and the rival conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 13,70,424 and that left a balance of Rs. 1,25,950 sometime in April, 1999. In January, 2001, he was left with the balance of only Rs. 4,365. On 18th Jan., 2001, there was a cash deposit of Rs. 2 lacs in the account taking the total balance available to Rs. 2,04,365. It is out of this that the amount of Rs. 2 lacs was advanced to the assessee on 20th Jan., 2001 by demand draft. The debit on this date is Rs. 2,00,400. the amount of Rs. 400 being the commission on the draft. 8. Hari Singh-Rs. 2,00,000: He was not produced before the AO on the ground that he was 80 years old and was represented by his son, Balraj Singh. Proof of landholding was adduced. No bank statement of Hari Singh was filed. He did not adduce the details of the sources from which he advanced the monies to the assessee. In the paper book, however, the bank account copy is placed at pp. 64-65 from which it is seen that right from September, 1997 he has been maintaining only a small balance, the maximum being Rs. 8,226 on 16th Jan., 1998. The transactions are far and few in between from September, 1997, when the account was opened, till January, 2001; there are less than 20 deposits/withdrawals. All of a sudden, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar to the facts relating to the credit in the name of Rajpal Singh. The cash deposit of Rs. 55,000 is immediately before the issue of the draft in favour of the assessee. In this case also, certain bills for sale of agriculture produce in August, October and November, 2000 for Rs. 93,841 were produced but, as in the case of Rajpal Singh, the AO refused to accept that the proceeds in cash would have been kept by the creditor in his house for several months before depositing the same in the bank. 13. Balraj Singh-Rs. 2,00,000: He also appeared before the AO under s. 131 and produced his bank statement which shows cash deposit of Rs. 2,00,400 on 16th Jan., 2001 and issue of draft on the same day in favour of the assessee. The bank statement shows no cash deposit before this date. As in the cases of Rajpal Singh and Sushil Kumar, the cash deposit was stated to be out of sale proceeds of agriculture produce and bills issued by the creditors for Rs. 1,32,483 in the months of October and November, 2000 were produced before the AO. The AO, as in the cases of Sushil Kumar and Rajpal Singh, did not accept the claim that the sale proceeds were kept in cash for two months before being dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cing bills for the sale of agricultural produce by the creditors but, in our opinion, the AO has rightly refuted the attempt by saying that in view of the huge time gap between the dates of the bills and the actual deposit of the cash, the claim that the cash represented sale proceeds of agriculture cannot be accepted. In our view also, the assessee's explanation cannot be accepted as it runs counter to the human probabilities and the normal course of human conduct. Thirdly, and this is very important, in a few cases, the cash deposits include even the commission payable for the drafts. For instance, in the case of Hari Singh, the cash deposit on 16th Jan., 2001 was of the amount of Rs. 2,00,500 which included the commission of Rs. 480 payable for the issue of the draft. The debit in the bank account on the same date is of Rs. 2,00,480. Similarly, in the case of Balraj Singh, the cash deposited in his account on 16th Jan., 2001 was Rs. 2,00,400, the extra Rs. 400 being deposited to cover the draft charges of Rs. 360. The debit in the account was of Rs. 2,00,360. Fourthly, the close proximity between the dates of the cash deposit and the issue of the drafts in some cases both are on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... representative of the assessee as to whether he can explain how the compensation received in the financial years 1997-98 and 1998-99 was available with Hari Chand, in January, 2001. He could not give any answer to our query. In fact, his bank account shows that even before April, 1999 the balance stood only at Rs. 1,25,950. Even this balance was reduced to Rs. 8,259 by the end of 1999. Thereafter, there was a cash deposit of Rs. 40,000 in June, 2000 which was withdrawn in December, 2000, bringing the balance to Rs. 4,365 on 5th Dec., 2000. Thereafter, there is the cash deposit of Rs. 2 lacs on 15th Jan., 2001 which constituted the source for the loan of Rs. 2 lacs to the assessee by issue of draft on 20th Jan., 2001. Thus, the compensation stated to have been received by Hari Chand for land acquisition did not constitute the source for the loans allegedly given to the assessee. The other submission of the learned representative of the assessee that the loans were all repaid in August, 2004 does not advance the assessee's case. The repayment of the loans is an independent transaction and it does not affect in any way the question whether the original receipts of the monies were genu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be books of account of the assessee. No doubt, s. 68 refers to amounts credited in the books of account of the assessee but s. 68 is not exhaustive of the additions that can be made by the AO. Where it is seen that the assessee is in receipt of monies, then notwithstanding that he does not maintain books of account in which such monies are recorded, it is his burden, when called upon, to point out the nature and source of the money and if his explanation in this behalf is not found satisfactory it is open to the AO to add the same as his income. For this purpose, it is not necessary for the AO to rely on s. 68 of the Act. This aspect of the matter has been considered by the Delhi Bench of the Tribunal in the case of ITO vs. Ramesh Chand Garg (ITA No. 4622/Del/2003, dt. 13th April, 2007), to which one of us (the Vice President) was party, in the following words: "That apart, s. 68, in our humble opinion, is not exhaustive of the additions to be made by the AO of amounts received by the assessee. If that were to be so, any assessee by simply not maintaining books of account can seek to escape taxation of monies received by him for which he has no explanation regarding the nature an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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