TMI Blog2006 (1) TMI 450X X X X Extracts X X X X X X X X Extracts X X X X ..... ut appreciating the fact that the Assessing Officer has rightly made the addition as the assessee could not explain the sources of the creditors. 3.On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition of Rs. 1,04,379 on account of cash loans along with interest holding that the onus cast upon the assessee has been discharged by filing confirmation letters when in fact the assessee could not produce the loan creditors to prove that they have advanced the loans." 2. In this case, search operation was conducted in January 1992. The assessee-firm is engaged in the business of financing and investment in shares. During the course of search statement of Shri Laxmichand Jivraj Gosar was recorded. He is a partner in the firm with 30 per cent share. The premises located at G-6 Balakrishna Apartment, Chipunkar Road, Ram Nagar, Dombivli(E) which is the head office of another group concern M/s. Shah Enterprises in which also Shri Laxmichand was partner, 1131 files containing the records of clients of M/s. Gosar Co. were found. Substantial amount was advanced by these clients to concern of Doda/Gosar Emp. The assessee-firm is also a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of all creditors except one. Summons were served in all cases except two cases. Out of those upon whom summons were served, only three persons responded. 6. The Assessing Officer vide his office note in the assessment order has mentioned that summons have been issued to those from whom cash has been borrowed and to those from whom money above Rs. 20,000 has been taken by cheques. 7. There are two categories of loans. One is the loans taken in the name of nine persons amounting to Rs. 1,33,000 in cash; interest thereon amounts to Rs. 4,901 as under : Sr. No. Name of the person Amt. of loan Rs. Amt. of Int. Rs. 1. Shri Hemchand Jessang Gada, Bapat Marg, Dombivli (E) 15,000 1,000 2. Shri Vasant Laxman Patel, Thane 15,000 1,000 3. Dr. Kaushik R. Gada, Tilak Road, Dombivli(E) 15,000 4. Shri Pandurang Raghunath Kane (HUF), Ayre Road, Dombivli(E) 15,000 795 5. Navin Shviji Veera (HUF) Station Road, Dom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11,000 Dombivli 29,000 660 40,000 13. Pushpa Vallabhji Gosar, 50,000 2,246 Dombivli 20,000 70,000 14. Rupen Zaverchand Gada, Dombivli 30,000 1,100 15. Hemali Laxmichand Chheda, Dombivli 20,000 660 16. Atul M. Gala, Dombivli 30,000 760 17. Virendra Dedhia, Dombivli 25,000 633 Sr. No. Name of the person Amt. of loan Amt. of Int. (1) (2) (3) (4) 18. Shankar Baban Tambe, Dombivli 50,000 1,875 19. Amrutlal Gosar Nagda, Dombivli 55,000 843 20. T. Badrinarayan, Dombivli (E) 67,000 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of person at Sr. Nos. 7, 8, 10, 16, 17 and 20 were seized from the premises of the group firm in which assessee was also a partner. The Assessing Officer inferred from such seizure of bank pass books that the amounts brought into the books of account in the name of various loan creditors belonged to the assessee. He then treated the sum of Rs. 9,32,000 and interest thereon of Rs. 50,763 totalling to Rs. 9,82,763 as deemed income under section 68. He gave credit of disclosure of Rs. 6 lakhs and added the sum of Rs. 3,82,763. 8. The CIT(A) deleted the addition of Rs. 6 lakhs by observing as under: "I have gone through the submissions of the learned counsel and after going through the assessment order and the case-laws, relied upon by him. I find that apart from the statement of appellant recorded under section 132(4), at the time of search, the Assessing Officer has not brought on record any other material to show that the said addition is warranted. Further find that the Assessing Officer has held in the subsequent paragraphs that the loan of Rs. 9,32,000 raised by the appellant are non-genuine but while making the addition on that count, he has given credit to an amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not bogus credits/loans and where there is a retraction, then statement under section 132(4) cannot be used against the assessee. 9. Regarding addition of Rs. 1,15,000 and interest thereon of Rs. 4,901 the CIT(A) deleted the addition by observing as under : "I have carefully considered the submissions made by the learned counsel and after going through the assessment order, I am inclined to agree that the appellant has discharged the primary onus cast upon it under section 68 of the Income-tax Act. I also agree with the learned counsel that even though the loans are in cash, they are admittedly within the permissible limit of law, namely, that they are below Rs. 20,000 each, hence, the same cannot be held as non-genuine. I am supported by the observations of the I.T.A.T., Pune Bench, Pune, in the case of Income-tax Officer v. Suresh Kalmade, cited supra, wherein it has been held that "Once the identity of the third party is established before the Income-tax Officer and other such evidences which are prima facie placed before him pointing to the fact that the entry is not fictitious, the initial burden lying on the assessee can be said to have been duly discharged." I fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned, I find that the Assessing Officer is of the opinion that these persons did not have a capacity to advance the loan, however, before coming to this conclusion, I feel the Assessing Officer should have given an opportunity of being heard to the appellant to rebut this conclusion and to cross examine the parties or to lead any other evidence in support of this claim. This addition of Rs. 60,000 representing the loans from two persons and the interest disallowance of Rs. 2,870 relating to the same is restored to the file of the Assessing Officer. So far as the loans from 19 persons aggregating to Rs. 7,92,000 are concerned, for the detailed reasons given by me, in appeal No. PN/CIT(A)-I.KLN/AC-1(1)/Tr-464/93-94 dated 26th October, 1993 in the case of M/s. Rushabh Finance Investment Co., Dombivli, and as per the decisions of Honourable Supreme Court and High Court referred to above. I hold that the said additions are not correct in the facts and circumstances of the case. This addition of Rs. 7,92,000 alongwith the disallowance of interest amounting to Rs. 41,212 is hereby deleted." 12. The brief findings of the learned CIT(A) while deleting the addition are that : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer for such enquiries/opportunities. 14. On the other hand learned AR submitted that ( i )He had filed confirmatory letters from all the creditors. ( ii )They are assessed to tax. ( iii )Money was received by account payee cheques. ( iv )The declaration was retracted because it was given under duress. ( v )In the statement no particular specific name of the creditor was given. ( vi )The Assessing Officer could not establish that parties are not genuine. ( vii )The Assessing Officer had accepted the retraction, as he had made independent enquiries. No addition can be made merely on the basis of statement without any further evidence or material in that regard. ( viii )No unaccounted cash/asset were found in the hands of the firm in the search. ( ix )The statement should be read as a whole. He relied on Glass Lime Equipments Co. Ltd. v. CIT [2002] 253 ITR 454 (Guj.) and 71 ITD 295, Pune ITAT. ( x )No addition can be made merely on the basis of statement. He relied on CIT v. Shri Ramdas Motor Transport [1999] 238 ITR 177 (AP), Pushpa Vihar v. Asstt. CIT [1994] 48 TTJ (Bom.) 389. ( xi )The assessee had discharged the initial burden. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee might be able to prove and the authorities concerned may be satisfied with the evidence furnished by the assessee but that does not lead to the inference in all cases either in the same year or in subsequent years or in the case of other assessees that onus is deemed to have been discharged as required under section 68. The Tribunal was satisfied on the facts of those cases viz. Rushab Finance Investment Co. ( supra ), Dhirajlal D. Goshar s ( supra ) and Expresso Investments for the assessment year 1992-93. But it cannot be said that facts are identical and, therefore, onus is deemed to have been discharged in the present case. 16. It is important for the decision on the issue, to highlight the facts, which are peculiar and specific to this case and to this assessment year. For this, we take a note of the statement of Shri Laxmichand Jivraj Gosar recorded on 17-1-1992. It is as under : "Statement under section 132(4) of the Income-tax Act, 1961. Statement of Shri Laxmichand Jivraj Gosar, Son of Shri Jivraj Leeladhar Gosar aged 30 years occupation business, resident of 10 Shree Madhanath Apartment, Dr. Rajendra Prasad Road, Dombivli (E) recorded under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime, it is not possible to pin point such assessees, which are not genuine. But myself Shri Bhagwanji Gosar, Amarchand Gada, Chandrakant Gosar, Dhiraj Gosar and Ramesh Gada had discussed the extent of non-genuine loans in the group of firms and Pvt. Ltd. companies with which we all are associated and we, thus, arrived at a certain figure. Accordingly, we had given a declaration before the ADIT, Thane as stated above on 16-1-1992. I hereby confirm the said declaration scheme. Q. No. 5: Can you specify the non-genuine loan transactions in respect of which you have made a declaration of Rs. 12,00,000 as mentioned above? Ans: It is not possible to specify non-genuine loan transactions at this stage as the books of account from which such information can be taken are already seized on 10-1-1992 by your officials and so are not available here right now. Q. No. 6 : Please state in what form the amount of declaration is lying in the firm M/s. Expresso Investments? Ans: The amount of declaration is lying in the form of loans taken by the firm M/s. Expresso Investments from various parties which are not either genuine or may not be able to confirm the loans. Q. No. 7 I am explainin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cealed therefrom. The statement has been given voluntarily and no coercion or threat was exercised on me by the authorised officer. Signature of Panchas Signature of the officer recording the statement (with name designation) Signature of the deponent (with name and position) 1. 1. 2. 2. 17. From the above statement, following facts are extracted : 1.Shri Laxmichand Jivraj is a partner in the assessee-firm as well as M/s. Shah Enterprises, at whose address the search was carried out and where the statement was recorded under section 132(4). 2.1031 files containing record of income-tax proceedings pertaining to assessee s clients (including creditors) were bound. 3.spot enquiries into some of these clients revealed to the authorised officer that either these parties are not in existence or the addresses were fictitious. 4.Some of the clients also denied to have advanced any money to Gosar/Doda Group. 5.These files were found to contain bank pass books, cheque books and pay-in-slips of respective clients. In some case some signed blank cheques were also found. 6.Shri Laxmichand Jivraj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the onus on the Assessing Officer to establish that parties are not genuine. So far as acceptance of retraction is concerned, we are of the view that this submission is not acceptable because once return is filed by the assessee not declaring the undisclosed income under section 132(4), the Assessing Officer is duty bound to carry enquiries on the basis of material found in the search. Merely because Assessing Officer has carried out independent enquiries after the search and after filing of return of income does not lead to the inference that retraction has been accepted by the Assessing Officer. In fact, the Assessing Officer had exercised his power to summon the parties and many of them have not turned back and not honoured the summons. It is the duty of the assessee to file correct particulars and also assist the Assessing Officer in service of the summons. It was also duty of the assessee to explain how and why bank pass books, cheque books and signed blank cheques were found with the assessee in respect of those cases whose loans are appearing in the books of assessee, particularly, those mentioned at Sl. Nos. 7, 8, 10, 16, 17 20 in the second category of loans referred a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch report was made by the group for 11 months till return was filed or till 22 months when clarificatory letter was submitted. It is enough to prove that there was no real/unreal pressure or coercion. It was clearly an afterthought so as to support the alleged retraction or non-disclosure of undisclosed income in the return. Whenever such an event takes place like duress/pressure etc., the witnesses can also be brought forward to support the allegation. Nothing of this sort has been attempted in this case. Thus, the conduct of the assessee clearly shows that pressure or duress is only an afterthought just to support retraction. In fact, there is no real retraction, it is only non-declaration of income in the return. Whether loans are genuine or not, it is in personal knowledge of the assessee and no third party can be privy to these accommodation entries. Once after consultation with his brothers and partners, Shri Laxmichand Jivraj came to the conclusion that certain loans are not genuine, he is to be believed. This belief is not coming out of thin air. It is based on documentary evidence found in the search. Pay-in-slips, blank signed cheques, cheque books cannot lie with assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 115 of the Evidence Act also incorporates a statutory principle of common law that a person alleging contradictory facts should not be heard. If the assessee had not made the said declaration, or statement, the departmental authorities could have continued enquiries and could have investigated the entire matter on the basis of various documents seized during the course of search like blank cheques with bank pass books etc. By making the disclosure of Rs. 12.00 lakh being non-genuine loans, the assessee effectively prevented the department from carrying out its further investigation by making them to believe that Rs. 12.00 lakh is the unaccounted money. By seeking to retract, the assessee wants itself to be placed at an advantageous position at a point of time when he was before giving statement under section 132(4). However, with passage of time, the evidence which the department could have collected may no longer available; they might be manipulated, fabricated or destroyed. Further, the power of ADI to investigate is far wide and intense as compared to the power of Assessing Officer. By making the declaration before the ADI and admitting concealment and thereafter retractin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iest available opportunity. Here the time is the essence. It is the deciding factor. The delay is the life support to the belief that whatever is stated is true. More delay affirms such belief. Inordinate delay in retraction establishes, that it was a truth and nothing else but truth. This is when substantive evidence was found in the search that some loans are not genuine. And revenue is on a solid wicket to tax those loans. When there is evidence found and there is also an admission under section 132(4) given on oath, then no amount of bald retraction, quickly or delayed, can make a turn around. In the present case the delay in retraction was inordinate. There was no explanation for delay. What he stated 11 months after filing the return, he could have stated next day of the search. There was no need for consultation if whole thing was false. As a matter of fact it was not. Therefore, entire set of submissions relating to retraction deserves to be rejected. 23. We derive support from various judicial pronouncements. In Surjit Singh Chhabra v. UOI [1997] 1 SCC 508/509, it was held that custom officers are not police officer and the confession made before them, though retra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso binding and can form the sole basis for assessment if they are not effectively retracted. Effective retraction is possible in two situations. First situation is where it is not voluntarily made. A statement, however, cannot be said to be involuntarily made merely because it is subsequently sought to be retracted. It is also to be remembered that the law of evidence presumes regularity and correctness of the official actions unless proved otherwise and hence the said principle will also govern the statement recorded by a public official and this is more particularly so when it is recorded in pursuance of the statutory provisions of law. The provisions of sub-section (4) of section 132 also create rebuttable presumption in favour of the statements recorded thereunder and authorize their use in evidence in any proceeding under the Income-tax Act. The burden is, therefore, squarely on the person who alleges that the statement was not made voluntarily to prove that it was involuntarily made or made under coercion or undue influence or that it was made under mistaken belief or was obtained by fraud or misrepresentation. Mere allegation will not suffice. Second situation is where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act. Explanation : For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act." 25. The Explanation to sub-section (4) was introduced by Finance Act, 1987 with effect from 1-4-1989 and is clarificatory in nature because it starts with "for removal of doubts". It provides that examination of any persons may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also on any related matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch materials in our opinion fall within the ambit of the words "other valuable articles or things". Therefore, the statement under section 132(4) could validly be recorded. Accordingly it is not possible for us to sustain the reasons given by the CIT(A) for deleting the sum of Rs. 6 lakhs. 28. We further find that CIT(A) deleted the addition of Rs. 1 lakh for the reasons ( i ) that onus on assessee was discharged as identity of creditors were established and ( ii ) genuineness was proved by the confirmation as well as balance sheets and income-tax particulars of creditors. We are unable to uphold her order for the reasons given hereafter. It is settled legal position that onus is on assessee to prove ( i ) identity of cash creditors ( ii ) capacity of the creditor and ( iii ) genuineness of the transaction ( 49 ITR 112 SC). Therefore, merely the fact that identity is proved, the cash credit cannot be held to be genuine. The assessee must also prove the other conditions. Mere filing of confirmation letter is not sufficient even after confirmation letter, he is within his right to ask the assessee to produce the creditor with evidence to prove their capacity or genuineness of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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