TMI Blog2005 (2) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... unting years relevant to the assessment years 1989-90, 1990-91 and 1991-92?" Note: In the second question, the Tribunal had wrongly mentioned the assessment years '1990-91, 1991-92 and 1992-93' instead of 1989-90, 1990-91 and 1991-92. This typographical mistake has been corrected with the consent of both counsel. Additional questions for the assessment year 1990-91 "(3) Whether the Income-tax Appellate Tribunal was justified in holding that reference to the DVO under section 131(1)(d) can be made only during the pendency of assessment proceedings and neither earlier nor subsequent? (4) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in rejecting the valuation report of the DVO and directing the Assessing Officer to make the addition as per the valuation made by the approved valuer?" Re. Question No. (1): Section 68 of the Income-tax Act, 1961 ("the Act" for short), provides that where any sum is found credited in the books of an assessee, for which the assessee offers no explanation about the nature and source, or the explanation offered is not satisfactory in the opinion of the Assessing Officer, the amount so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t/advance. Further, as the lessee/tenant will always be available for verification as he will be in occupation of the premises, the fact whether he has paid the deposit or not can be easily verifiable. Therefore, in regard to deposits from tenants, it is sufficient if the assessee proves the identity of the tenant and the genuineness of the transaction under which the deposit is made. It will not be necessary for the assessee to prove the capacity of the tenant to make the deposit/ advance. It is a well known fact that when persons take premises on rent, invariably they will organise the funds required to pay an advance or deposit. In Orient Trading Co. Ltd. vs. CIT [1963] 49 ITR 723, a Division Bench of the Bombay High Court enunciated the position thus: "When, however, in a case where the entry stands in the name of the third party, the assessee satisfies the Income-tax Officer as to the identity of the third party and also supplies such other evidence which will show, prima facie, that the entry is not fictitious, the initial burden which lies on him can be said to have been discharged by him. It will not, thereafter, be for the assessee to explain further how or in what cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the depositors. He held that the tenants/depositors had credited cash to their accounts either on the date of issue of cheques or only a few days earlier to the issue of the cheques to the assessee; and that showed that the depositors had apparently helped the assessee by depositing the assessee's funds to their account and then issuing cheques to the assessee by way of deposit, for the tenancies. Therefore, he added Rs. 2,95,000, Rs. 1,05,000 and Rs. 85,000, respectively as unexplained income under section 68 of the Act. On appeal, the Commissioner of Income-tax (Appeals) granted relief only to an extent of Rs. 25,000 in regard to the assessment year 1989-90 and Rs. 60,000 in regard to the assessment year 1991-92 and confirmed the addition of the balance of Rs. 2,70,000 for the assessment year 1989-90, Rs. l,05,000 for the assessment year 1990-91 and Rs. 25,000 for the assessment year 1991-92. In further appeal by the assessee and the appeal by the Revenue, the Income-tax Appellate Tribunal (for short, "the Tribunal") in a common order recorded the following findings of fact: (a) that deposits were received by the assessee by cheques; (b) that the assessee had produced confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, find that the onus of proof under section 68 has been discharged by the assessee, and the burden shifted to the Revenue. The Revenue has not shown that the deposits were really funds of the assessee. Even if the Assessing Officer has some doubt about the capacity of the tenant, at best, that would be a good ground for taking action against the tenant and not against the assessee. However, we find that in regard to one tenant (Sanjay Enterprises), who is said to have paid a deposit of Rs. 40,000 (Rs. 20,000 + Rs. 20,000), there was absolutely no documentary evidence. Neither the bank statements establishing the payments, nor any confirmation by the tenant were furnished. In the absence of any kind of evidence, the Assessing Officer and the appellate authority were justified in holding that the assessee had failed to prove that the transaction was genuine. We find that the Tribunal has not given any reason to disagree with the finding of fact recorded by the Assessing Officer and the appellate authority, nor assigned any reason to hold the transaction relating to Rs. 40,000 as genuine. We agree that the said sum of Rs. 40,000 will have to be added to the income of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had produced the valuation report from a Government approved valuer showing the entire cost of construction as Rs. 8,50,000, the Tribunal directed the Assessing Officer to adopt the cost of construction of the entire commercial complex at Rs. 8,50,000 and make corresponding addition in the hands of the assessee. The Revenue does not dispute that the Assessing Officer had issued a commission to the DVO under section 131(1)(d) of the Act to value the premises on November 29, 1989, long prior to the commencement of assessment proceedings relating to the assessment year 1990-91. Section 131(1) of the Act provides that the Assessing Officer shall have the same powers as are vested in a court under the Code of Civil Procedure, 1908, when trying a suit, in respect of the matters enumerated including issue of commission. What is significant is use of the words "when trying a suit". A court can issue a commission only during the pendency of the suit. As the powers vested in the Assessing Officer are the same powers as are vested in a court, it follows that the Assessing Officer can issue a commission only if a proceeding is pending before him. The Bombay High Court in Jamnadas Madhavj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tually pending and not one completed and concluded." In Rina Sen v. CIT [1999] 235 ITR 219 the Patna High Court held as follows (placitum) (headnote): "The existence of a pending proceeding is a condition precedent and sina qua non for the exercise of power under section 131(1) of the Income-tax Act, 1961. The words 'notwithstanding that no proceeding with respect to such person or class of persons are pending' occurring in sub-section (1A) of section 131 leave no room for doubt that while the authorities specified under section 131(1A) of the Act are empowered to take action if there is 'reason to suspect' that any income has been concealed or is likely to be concealed by any person or class of persons even though no proceeding with respect to such person or class of persons is pending before him or any other income-tax authority, the authorities specified in section 131(1) of the Act can do so only if a proceeding is pending before them. The proceeding within the meaning of section 131(1) of the Act must, therefore, be an independent proceeding pending from before and it is only in connection with that proceeding that commission can be issued." We respectfully agree with th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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