TMI Blog1995 (3) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... year ended on 4-11-1983. The assessee filed first return declaring nil income. But, however subsequently a series of revised returns were filed. A revised return was filed on 30-9-1986, describing it as an Amnesty return. In this return, an income of Rs. 1,11,272 was disclosed but, the Assessing Officer completed the assessment on 31-3-1987 under section 143(3) determining the assessee's income at Rs. 15,57,580. The above-mentioned sum includes addition of Rs. 14,12,081 which is the main addition. During the course of assessment, the Assessing Officer started investigation by way of correspondence with the Sales-tax Department and with the Registrar of Firms in connection with certain enquiries relating to M/s. Balaji Scrap Traders, Begum Bazar, Hyderabad, a proprietary concern dealing in scrap and which had business dealings with the assessee. The Assessing Officer found that the assessee had purchased iron steel scrap to the extent of Rs. 68,38,478 which included purchases to the extent of Rs. 56,42,058 from Hindustan Ship Yard, Visakhapatnam. During the accounting year relevant to the year under appeal, the assessee had sold scrap for a value of Rs. 17,63,803 which included sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s fixed at Rs. 2,52,057 and in view of the above stated facts, the Assessing Officer held that it was imperative that M/s. Balaji Scrap Traders would not have effected purchases to the extent of Rs. 15,25,664 from the assessee. Subsequently, after the above enquiries the Assessing Officer summoned Sri Prahladrai of Balaji Scrap Traders on 29-3-1986 as per the address supplied by Sri Mohan Lal, partner of the assessee-firm. These summons could not be served by the Notice Server as no such person was available in the given address. The Assessing Officer also issued summons to Sri Mohanlal and Sri Rajendra Kumar, partners of the firm. On that day, Sri Mohanlal did not comply but, Sri Rajendra Kumar complied and sought for adjournment. Ultimately, on 7-11-1986, Sri Rajendra Kumar appeared before the Assessing Officer from whom a statement was recorded. In his deposition, Sri Rajendra Kumar stated that M/s. Balaji Scrap Traders, M/s. Dhanalakshmi Steel Re-rolling Mills, etc., were the major parties and the statement of Sri Rajendra Kumar revealed that he was not the sole person who looks after purchases and sales of scrap, etc., but Mr. Mohanlal and also the Munim also at times look aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Prahladrai to the assessee-firm when he disclosed a turnover of Rs. 1 lakh only, it was stated as under :--- " I did not disclose the entire turnover to the Sales-tax authorities and from out of my unaccounted money, I lent Rs. 14 lakhs to Dhanalakshmi Steel Re-rolling Mills. As Dhanalakshmi people did not give any sale bills, when I received the material I was also not issuing any sale-bills to my customers and the entire transactions were unaccounted. " In this background, the Assessing Officer was not satisfied with the explanation offered by Sri Prahladrai and added entire amount of Rs. 14,12,081 as income of the assessee-firm for the year under appeal which was introduced in the name of Balaji Scrap Traders. 4. The assessee challenged the addition before the CIT(Appeals) and on appeal, the CIT(Appeals) has deleted the same by an order dated 24-2-1988 with the following observation :--- " As regards the alternative claim of the appellant that there is no justification for the addition of Rs. 14,12,081, I find that there is considerable force in the appellant's submission that it is uncalled for. The report of the ITI, notwithstanding, it is an undisputed fact that M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the addition of Rs. 14,12,081 as unexplained cash credit, even granting that this sum could also be regarded as unexplained advance or cash credit, it is not well established that there is no onus to prove source of source and origin of origin. Courts have held that the fact that the assessee was unable to satisfy the authorities as to the source from which the depositor had derived money cannot be used against the assessee CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC), Tolaram Daga v. CIT [1966] 59 ITR 632 (Assam), Sarogi Credit Corporation v. CIT [1976] 103 ITR 344 (Pat.). 8.3 In the case of CIT v. Daulatram Rawatmull [1973] 87 ITR 349. The Supreme Court held that the fact the depositor had not been able to give satisfactory explanation regarding the source of deposit would not be decisive even of the matter as to whether the depositor was or was not the owner of the amount, that a person could still be held to be the owner of a sum of money even though the explanation furnished by him regarding the source of that money was found to be incorrect, and that from the simple fact that explanation regarding the source of the money had been found to be false, it would be a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther submitted that the books of account of the assessee have been accepted when scrap purchases and sales are done, then there is no question of making any addition by the Assessing Officer as he has done in the present case. It is further submitted that the assessee has discharged its onus and therefore the additions are not called for and in this connection the learned AR of the assessee relied on the following case-laws : (i) Sree Shanmugar Mills Ltd. v. CIT [1974] 96 ITR 411 (Mad.) (ii) S.N. Namasivayam Chettiar v. CIT [1960] 38 ITR 579 (SC) (iii) MD Umer v. CIT [1975] 101 ITR 525 at 528 (Pat.) (iv) CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 at 350 351 (SC) and (v) Sukhdayal Rambilas v. CIT [1982] 136 ITR 414 at 4l5 (Bom.). The learned AR of the assessee further relied on the following Sales-tax cases : (i) Dy. Commissioner of Commercial Taxes v. Manohar Bros. [1962] 13 STC 686 (Mad.) (ii) Carona Sahu Co. (P.) Ltd. v. Collector of Sales-tax [1962] 13 STC 693 (Mah.) (iii) A.D.M. Stores v. Commissioner of Sales-tax [1966] 18 STC 305 (Punj.) (iv) Arvind Mills Ltd. v. State of Gujarat [1966] 18 STC 311 (Guj.) (v) Ram Pal Madan Gopal v. Punjab State [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lable on record and inclined to agree with the findings of the Assessing Officer and submissions made by the learned DR. In this connection, we may extract section 68 of Income-tax Act which is as follows :--- " 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 Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. " The above section clearly shows that any sum found credited in the books of an assessee maintained for a previous year may be charged to income-tax as the income of the assessee of that previous year, if (a) the assessee offers no explanation about the nature and source of such sum, or (b) the explanation offered by him is, in the opinion of Assessing Officer, not satisfactory. 9. As a matter of fact, section 68 is a statutory recognition of what was previously established by judicial decisions under 1922 Income-tax Act to the effect that where certain sums of money were claimed by the assessee to have been borrowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 928 (Cal.) (8) R. Dalmia v. CIT [1978] 113 ITR 522 (Delhi) and CIT v. Ishwar Dass Sharma [1986] 158 ITR 168 (Delhi) (9) Nanak Chandra Laxman Das's case (10) B. Abdul Qadir v. CIT [1964] 52 ITR 364 (Mad.). In this connection, we may mention that by now, it is well settled that the burden of proving the source of a cash credit is on the assessee. The Hon'ble Supreme Court in the case of Sreelekha Banerjee, has held that when a cash credit entry appears in the assessee's books of account in an accounting year, the assessee has a legal obligation to explain the nature and source of such credit. 13. In this connection, it is also worth noting the findings of the Supreme Court in the case of Kale Khan Mohammad Hanif and A.P. High Court's decision in the case of CIT v. Krishna Mining Co. [1972] 83 ITR 860 wherein their Lordships have held that if the assessee offers an explanation about the cash credit, the Assessing Officer can put the assessee to proof of his explanation and if the assessee fails to tender evidence or burkes an enquiry, then the Assessing Officer is justified in rejecting the explanation and holding that the income is from an undisclosed source. The Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the creditworthiness of the creditor and genuineness of the transaction. In the instant case, no evidence worth the name has been produced to support the assessee's case, and the effect of non-production of documentary evidence of corroborative value is to draw an adverse inference against the assessee and the revenue has done exactly the same in the facts and the circumstances of the case. 15. We may also mention the findings of their Lordships of Delhi High Court in the case of Kulwant Kaur, that section 68 contemplates a factual explanation and not a purely a legal argument without any statement of fact. In the instant case, the learned authorised representative of the assessee relied on the decisions of the Sales-tax cases which have been mentioned in the foregoing paras, but they are not at all helpful in deciding the issue in question of this nature. He has not been able to forward any factual explanation. Section 68 of the Income-tax Act is peculiar by itself and there is no parallel provision in the Sales-tax Act on which the AR of the assessee heavily relied. Therefore, the Sales-tax cases relied by the learned AR are irrelevant and out of place in the present context. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amine their creditworthiness. If this statement of the creditor is given the credence then section 68 will have to be omitted from the statute as no additions under that section can be made, which can be sustained. In this connection, we may usefully take extract from the Hon'ble Supreme Court's decision in the case of CIT v. Durga Prasad More [1971] 82 ITR 540 which is as follows--at page 546 of the decision : "Science has not yet invented any instrument to test the reliability of the evidence placed before a court or Tribunal. Therefore, the Courts and Tribunals have to judge the evidence before them by applying the test of human probabilities. Human minds may differ as to the reliability of a piece of evidence. But in that sphere the decision of the final fact finding authority is made conclusive law." The above observation of the Hon'ble Supreme Court if viewed from the available facts of the present case narrated above, will clearly go to show that the assessee and the creditor have failed to discharge their respective duties. The evidences produced by them are scant and rather we should state that they are no evidences at all to decide the issue in question. Firstly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Thus the creditworthiness and genuineness of the transaction which are the primary requirements have not been established to consider the credit/deposit as genuine. Therefore, the authorities have drawn inferences against the assessee which a reasonable person can draw in the facts and the circumstances of the case. The revenue has not rejected the explanation merely on surmises and conjectures, but with sufficient material of case laws to support their conclusions which is apparent from the discussions in the foregoing paras. Therefore, we have no hesitation in upholding the findings of the Assessing Officer that the cash credits/deposits in the books of the assessee are the "deemed income" of the assessee from some "undisclosed sources" in terms of section 68 of Income-tax Act. 19. In the result, the CIT(Appeals)'s findings are reversed on this issue. 20. The second and last issue is regarding the CIT(Appeals)'s decision in deleting the amount of Rs. 52,167 which was paid to Shri Thangavelu. The Assessing Officer added the same in question with the following observations : " An amount of Rs. 52,167.50 ps. is debited to the Profit and Loss A/c as being incurred at Vizag S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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