TMI Blog2005 (7) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... of this appeal. The appellant has challenged the findings of lower authorities by taking legal as well as on factual grounds. We will deal first with the ground on merits and thereafter the other grounds will be dealt with. 3. The main issue on merits in this case is with regard to cash credits, which were noticed by the AO while going through the balance sheet filed along with the return. The assessee had shown credits of Rs. 9,84,237 in the accounts of head office at Amet and Rs. 65,37,101 in the branch office at Udaipur. It was claimed by the assessee that the credits of Rs. 1,21,976 and Rs. 47,50,263 pertaining to the head office and the branch office, respectively, were old and had been shown in the asst. yr. 1995-96. The assessee filed confirmations in respect of these credits and also claimed that all these creditors were assessed to tax and that these credits had been received either through cheque or bank drafts only. While making a payment of interest to these creditors, the assessee also claimed to have deducted TDS. The AO, however, required the assessee to produce all these cash creditors before him in person. The assessee produced Sh. Dasrath, Sh. Gopal Mantri, Sh. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax as the income of the assessee of that previous year." 7. The subject of cash credit has assumed ominous overtures, over the years. This subject has been one of the major areas of litigation in taxation. To understand this subject one needs to know about the alpha and the omega of the law relating to cash credits, starting with its legislative history upto its development in this cyber era, step by step, in order to understand this subject threadbare. 8. The provision relating to cash credit was brought on the statute book for the first time in the IT Act, 1961, by Act No. 43 of 1961, as s. 68. There was no such provision corresponding to the above in the IT Act, 1922. It would be pertinent to mention that s. 6.8 is a new section, which is a culmination of a series of judicial pronouncements under the provisions of the old Act of 1922, on the issues relating to cash credit. 9. This section can be comprehended in a better way by dividing it into the following ingredients (parts): (a) Where any sum is found credited in the books of the assessee; (b) maintained for any previous year; (c) and the assessee offers no explanation about its nature and source; or (d) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whenever they refer to a matter into which the Court has to enquire, but such statements shall not be sufficient evidence to charge any person with liability unless established as per law. 13. It is a, well-settled principle of law that when a person (litigant) claims a fact to be true, this is he who has to prove that fact. In other words, when a person wants the Court to believe that a fact is true, a preliminary onus is cast upon him to prima facie prove that fact. This onus is said to have been discharged in case he (the assessee) establishes his claim prima facie. Thereafter, the onus may or may not shift on the other party depending upon various factors, which will be discussed in latter paras. It follows from the above, as a natural corollary, that even correct and authentic entry in the books of accounts cannot without independent evidence of its trustworthiness can be, ipso facto, accepted as correct. 14. Therefore, a pass book of a bank cannot be treated as a book of account of the assessee because this is provided by the banker, which is given to its customer and is only a copy of the customer's account in the books maintained by the bank. The bank does not act as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s various Courts have drawn their receptive 'lines' in the given facts of their respective cases. But, it would not be out of place to mention that there cannot be straight-jacket formula, which can fit into the facts of a given case and whereby it can be decided whether a credit is genuine or not. It depends on the facts and circumstances of a given case and the Court(s) dealing with the same has to find out the true colour of the impugned transaction. 18. The various Courts have given their verdicts with regard to the genuinity or ingenuinity of the cash credits involved in the cases they were dealing with in their own way. The gist of most of such decisions is that the onus to establish the identity and the creditworthiness of the creditor(s) and the genuinity of the transaction(s) of a cash credit in question, is cast upon the assessee. The case of CIT vs. Precision Finance (P) Ltd. (1994) 121 CTR (Cal) 20 : (1994) 208 ITR 465 (Cal), in which it has been held that by now it is a trite law that the onus to prove the above three ingredients is cast upon the assessee and again the decision of Hon'ble Calcutta High Court in the case of Shankar Industries vs. CIT (1978) 114 ITR 68 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was exempt from taxation under the provisions of the Act. In the absence of such proof, the Revenue is entitled to treat it as taxable income. To put it differently, where the nature and source of a receipt, whether it be of money or of other property, cannot 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." 21. The Hon'ble Supreme Court has not given a verdict that the burden which is initially cast on the assessee to prima facie establish the relevant cash credit by establishing the identity, the creditworthiness of the creditor and the genuinity of the transaction never shifts on the Department. The Hon'ble apex Court in the above decision has held that in case the above three requirements are not established by the assessee, in that case no further burden lies on the Revenue to show that the income is from any particular source. Otherwise also, the facts of that case are very peculiar. 22. The various other decisions shall be discussed hereinafter but before that it can be safely stated that the decisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the identity of the depositor is very much established or is obvious and as such, not doubted by the Department. In that eventuality, a payment having been received through account payee cheque becomes sacrosanct. This is what exactly has been stated by the Hon'ble Calcutta High Court. 25. Unfortunately, the decisions are read in a hurry and in isolation because we are living in a fast moving society. Only the headnotes of a decision which are usually drafted by publishers, etc., according to their understanding of the matter, are perused by concerned persons, which many a times carry wrong meaning of a decision. The decision has to be read in its entirety to arrive at a correct ratio descendai. 26. The decision in the Precesion (P) Ltd. is always relied to deny the claim of the assessee that the payment through account payee cheque has been held as not a sacrosanct and it cannot establish the transaction as genuine. 27. With due respect, it is stated that this is not the gist of the above decision. The decision has to be read in its entirety, along with the facts of the given case. 28. It is in the background of the above facts, it was held by the Hon'ble Calcutta High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the day with drink and dine and was tide (tied) with a tree nearby a seashore covering his face with some canvass cloths. After the dawn, the villagers would come in inebriated condition and beating the drums and signing the songs in a procession. Thereafter, some young men would untie his hands and throw him in the sea after tying a heavy stone with his legs. 33. During the day time, a young shepherd can (came) around along with his big herd of sheep. He was not aware of what was happening with the condemned man. The young shepherd enquired from the condemned person as to what has happened with him. After inquiring something from the young shepherd, the prisoner replied that the villagers want to give him a lot of money after the sunset, but he is not greedy. He thereafter enquired from the young shepherd in case you want money you can come in my place. The young shepherd without thinking much readily agreed to swap. The prisoner went away with the herd of sheep and the villagers threw the poor young shepherd after attaching a big boulder with his legs in the deep sea. The next morning, the naughty man came towards the village playing on the flute along with the big herd of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y face of it would seem as if it is the best solution. But, this type of reasoning is not required while dealing with certain important questions of facts. 39. A combined gist of above story is that there cannot be any fixed rule or a straight-jacket or a chemical formula, which can be said to be a sure-shot test to judge the genuinity of a cash credit. This story tells that an unscrupulous or dishonest assessee who has no respect for law can play any tricks to evade payment of tax and can relate concocted stories which seems to be plausible and reasonable on the face of its. Therefore, it is for the taxman to discern the truth in the given facts and the circumstances of that case. At the same time, the taxman has to act as an ordinary prudent man instead of posing as a super human being and trying to prove himself as a numero uno. He has to strike a balance while conducting himself with the taxpayers, by remembering the taxpayer is a respectable citizen and he contributes a lot towards the coffers of the Government, who in turn utilise this fund for the benefit and the welfare of the people at large. Therefore, the task of a taxman is very important because he has to walk on an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40. When the Hon'ble Judges of the Patna High Court in the case of Addl. CIT vs. Hanuman Agarwal (1984) 40 CTR (Pat) 15 : (1985) 151 ITR 150 (Pat) held that it can never be within the exclusive knowledge of debtor to know the sources of income of the creditor, once he is supplied the credits that he wants, he is satisfied. Once, he has furnished the true identity, the correct address and the correct GIR number of the creditor, he fulfils his obligations under the Act. The assessee is not supposed to know the capacity of the money-lender or the cash creditor. This fact is within the exclusive domain of the creditor. It is for that specific purpose that s. 131 of the Act has been introduced so that in case of any suspicion, the ITO or the authorities concern may exercise the power of a civil Court under that provision and call upon the creditor concerned to prove his capacity to pay and the genuineness of the transaction. Once, the ITO is satisfied that the creditor is not telling the truth, it has been left open to the assessee to discharge his subsequent onus of proving the genuineness of the transaction and the capacity of the creditor to pay, by cross-examining him. 41. Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished to be genuine, can it be a valid cash credit. The answer is 'No'. What follows from the above is that it is the overall commonsense and average prudence of the taxman, who is dealing with the facts of a particular case, which can decide the genuinity of the transaction, of course, which includes all the above three ingredients. In the same manner, there may be cases, where the deposit was not through account payee cheque, no confirmation was even filed, but the entries are found recorded both in the books of the creditor and the assessee, and both of them are assessed with the same AO, who is having command over the records of both of them, he can immediately accept the cash credit, as genuine. There is no need to even ask for any evidence, in this regard, any further, for that matter. That is why unlimited powers have been given by the precincts of this section and other sections of this Act to ascertain the veracity of a fact. 43. In a nutshell, it can be stated that the AO has to find out as to whether the deposit/gift/cash credit is a result of any collusion, is a result of any dubious device employed by the assessee, is a result of any subterfuge, which is aimed at eva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded by the AO, the repayment of the loan was made through cheque No. 530139 on 21st Jan., 1998, copy of account confirmation for asst. yr. 1998-99 was also filed. In the light of the above, it has been submitted that whatever was possible for the assessee, it has produced all the relevant evidence on record. The factum of loan has been proved and the repayment of the same along with the interest has been proved. The identity of the creditor is of course not in dispute. The AO has doubted this deposit on the basis of few instances with regard to repayment was in cash or through cheque, the names of persons with whom the money of the creditor was deposited during intervening period, etc. 46. The learned Departmental Representative has vehemently relied on the orders of learned AO and learned CIT(A) and read over the same in the open Court. 47. We have cogitated the above facts in the light of our reasonings which are discussed in detail in the foregoing paragraphs. 48. The undisputed facts with regard to the deposit of Rs. 1,00,000 by the creditor, Sh. Ajay Murdiya, are that this creditor has accepted the factum of deposit and the factum of the receipt of his loan amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is identical, mutates mutandis. 50. We have rushed through the facts of other cash creditors and it was found that the payments were made in all these cases either through bank drafts or cheques, all are income-tax assessee's, confirmations of account of the creditor have been given, repayment were made through cheques and in the case of Sh. Gopal Mantri, Sh. Dashrath Kishore Vijay, their statements were recorded. We may however, make it clear that the cash credits along with their interest in relation to only five of the cash creditors, namely, Sh. Ajay Murdiya, Sh. Gopal Mantri, Sh. Dashrath Kishore Vijay, Sh. Anil Khandelwal and Smt. Pushpa Gandhi, totalling to Rs. 5,50,000 as loan amount and) Rs. 59,630 being interest thereon, are only in dispute before us. The remaining cash creditors as are mentioned in the facts as above, are not in dispute before us. From our detailed discussion in relation to s. 68, now it becomes clear that when the loan/deposit/credit was received by account payee cheque or draft, the repayment was also through cheque or draft along with interest, confirmations were filed, in many of the cases statements of the cash creditors were also recorded, even t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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