9911796707
TMI Blog2006 (11) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... Taparia 15,000 60,000 Bankat Lal Nil 24,270 Pram Ram Rao Nil 4,800 Kuldeep Nil 1,100 Hariram 14,533 Nil Total 80,533 2,10,170 Noticing increase in the salary of Shri Rakesh Kumar and Surendra Kumar, the AO show caused the assessee. It was explained that in the last year salary was paid only for three months, whereas in this year it is paid for twelve months. The AO wanted the records of last year to verify this fact. When records were not produced on the pretext that these were not traceable, the AO held that the salary paid was excessive and thus disallowed a sum of Rs. 60,000 out of total salary payments. The learned CIT(A), on the contrary, deleted this addition. The Department has raised ground No. 1 in this regard. 3. We have heard the rival submissions and perused the relevant material on record. 4. It has been submitted by learned Departmental Representative in support of this ground that since the assessee was not able to establish the increase in salary to be justified, the AO has correctly made disallowance of Rs. 60,000 holding it to be unreasonable and excessive particularly when the same was paid to brothers. On the other hand after relying on the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re totally in agreement with the finding of learned CIT(A). The assessee has explained the total withdrawals at Rs. 32,000 for the entire year. The size of the family and the so-called living standard cannot be made (basis) for such additions. Consequently, we affirm the impugned finding after looking into the evidences placed at pp. 39, 40, 42 of assessee's paper book, where computation of income and capital accounts etc. are placed. This ground of appeal also cannot be allowed. 9. In ground No. 3, the Revenue has challenged the deletion of an addition of Rs. 5,99,585 made by the AO on account of unexplained cash credits and of Rs. 71,950 representing interest thereon. The facts of this ground are that on verification of balance sheet filed along with return of income it was noticed that the assessee had made deposits in the name of Smt. Sunita Devi, Rekha Devi, Uma Devi and Surendra Taparia during the relevant year. The assessee explained that these were trade credits. The copies of accounts of creditors were filed by the assessee, but the AO noted that they were not received by him. All these creditors are income-tax assessees and the AO has accepted the trading results and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such provision corresponding to the above in the IT Act, 1922. It would be pertinent to mention that Section 68 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. 15. 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 explanation offered by the assessee, is not, in the opinion of the AO satisfactory; then (e) The sum so credited may be charged to income-tax, as the income of the assessee of that previous year, in relation to which it is so found to have been credited. 16. Thus, it is clear from the above that the initial catchwords of this section are: (a) where any sum is found credited; (b) in the books of accounts of the assessee. 17. Section 68 comes into play immediately when an entry relating to a sum is found to have been credited in the books kept by the assessee. Meaning thereby, that the condition precedent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay or may not shift on the other party depending upon various factors, which we will be discussing in later 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 their trustworthiness can be, ipso facto, accepted as correct. 20. Therefore, a pass book of a bank cannot be treated as books of accounts 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 an agent of the customer nor can it be said that the banker maintains the pass book under the instructions of the customer [the assessee]. Therefore, a cash credit shown in assessee's pass book relevant to a particular previous year, but not represented in the cash book maintained by the assessee, does not attract the provisions of the Section 68. However, it may be a subject-matter of Section 69, which pertains to unexplained investment. 21. Likewise, the books of a firm cannot be said to be the books of the partner of the firm. In case of a firm, if cash credits are found in the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingenuinenity 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 genuinenity of the transaction(s) of a cash credit in question is cast upon the assessee. The case of CIT v. Precision Finance (P) Ltd. (1994) 121 CTR (Cal) 20 : (1994) 208 WR 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 the Hon'ble Calcutta High Court in the case of Shanker Industries v. CIT (1978) 114 ITR 689 (Cal), which is leading decision on this subject and invariably relied by the Department also requires the assessee to prove the above three ingredients. 25. The case of Roshan Di Hatti v. CIT 1977 CTR (SC) 280 : (1977) 107 ITR 938 (SC) is also often relied by the Revenue to plead that it is the assessee who wants the Department to accept a claim with regard to the genuinenity of a cash credit, has to prove the same in all conditions. But again this decision is misread in the sense as if the Hon'ble apex Court has held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 genuineness of the transaction, never shifts on the Department. The Hon'ble apex Court m 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. 28. The various other decisions shall be discussed hereinafter but before that it can be safely stated that the decisions of the Court rendered in the context of Section 68 are only guidelines, which can be properly applied to the given facts of a particular case and these do help to some extent to arrive at a just decision. But, none of the above decisions can completely help in deciding a particular transaction of deposit because the facts of two cases are never exactly identical. It is only that Court who is dealing with the given facts of a case, who has to winnow the chaff from the grain after taking guida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 decidendi. 32. The decision in the Precision Finance (P) Ltd. (supra) is always relied to deny the claim of the assessee that the payment through account payee cheque has been held as not sacrosanct and it cannot establish the transaction as genuine. 33. 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. 34. It is in the background of the above facts, it was held by the Hon'ble Calcutta High Court as above. 35. This decision is very much in the line of various other decisions on the subject and does not give any different finding from the others. 36. For a cash credit, two parties are required. The one is the assessee and the other is the cash creditor. No one can deposit his own money with himself in order to get benefit of Section 68 of the Act. Another person should have deposited a sum of money with the assessee. This 'another person' cannot be a fictitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 plying on the flute along with the big herd of sheep. When the villagers enquired from him he narrated that the God of Sea has given him all this fortune and has also asked me to tell my fellow villagers that he is waiting to give whatever they demanded from him. Without thinking even for a spur of moment all the young villagers ran towards sea and jumped into the deep sea. Obviously, all of them were dead and the cupid person played the trick which could befool the whole society and ended up in gain to himself and loss to society i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate 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 circumstances of that case. At the same time, the taxman has to act as 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 utilize 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 edge of a razor and at the same time he has to maintain a balance between what is right and what is wrong. He has to follow the laws of the land before he can preach the taxpayer to abide by the law. The taxman has to conduct himself in a way which is friendly to the taxpayer by showing that he is not an enemy but a friend. This friendly manner, if adopted by the taxman should also be shown to be so overtly as well as covertly. All the precedents simply guide the decision-maker in given facts of a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Section 131 of the Act has been introduced so that in case of any suspicion, the ITO or the authorities concerned may exercise the power of 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 capacity of the creditor to pay, by cross-examining him. 47. Hon'ble Judges of the Calcutta High Court in the case of C. Kant & Co. v. CIT (1980) 18 CTR (Cal) 164 : (1980) 126 ITR 63 (Cal) have held that in the case of cash credit entry it is necessary for the assessee to prove not only the identity of the creditors but also to prove the capacity of the creditors to advance the money and the genuineness of the transaction. If this case is read in its entirety it would be clearly revealed that the Judges did not want the assessee to do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. 49. 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 evasion of tax. Therefore, even the cash credits by near and dear relatives and the partners of the firm can be genuine. These are to be doubted to a certain limit and thereafter the doubts should not be perennial. 50. Keeping in view, the above legal position, when the assessee has amply established on record that all the creditors in question, whose position is depicted in the following chart, stand proved on record; Name Op. bal. Cr. during year In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffee etc. for which no vouchers were produced. The AO disallowed Rs. 5,000 and learned CIT(A) reduced it to Rs. 2,000. 54. The assessee showed an expenditure of Rs. 42,675 under the head travelling expenses as against Rs. 20,634 in the last year. Vouchers for an expenditure of Rs. 33,290 were available. The AO disallowed Rs. 8,000, the learned CIT(A) reduced the same to Rs. 4,000. 55. As regards shop rent, the assessee claimed the same at Rs. 26,920. The AO disallowed Rs. 14,520 considering it to be not belonging to the assessee. The learned CIT(A) also confirmed the same. 56. After hearing rival submissions, we are of the considered opinion that there is no fallacy in the findings of learned CIT(A) in confirming additions of Rs. 2,000 out of shop expenses and Rs. 4,000 out of travelling expenses, for want of proper vouchers. These disallowances (of) expenses are not on higher side. 57. Insofar the payment of rent is concerned, it has been argued by learned Authorised Representative that the rent claimed in respect of shop Nos. B-1 and B-2 have been utilized by the assessee during this year as M/s Taparia Enterprises had not performed any business in this year. It is claimed th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
