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TMI Blog1986 (3) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... d been credited in the names of the said four customers as money was due from the said customers on account of sugar delivered to them under Government permits. It was stated that on receipt of payments from the said four parties, the amount of loan had been repaid to M/s. Chandmal Pannalal on April 16 and 17, 1968. The Income-tax Officer called upon the assessee to produce the books of account of M/s. Chandmal Pannalal for examination under section 131 of the Income-tax Act. A representative of Chandmal Pannalal appeared before the Income-tax Officer on December 16, 1971, but did not produce the books of account. The case was thereafter adjourned but the books were not ultimately produced. The Income-tax Officer held that the transaction of the assessee with the said Chandmal Pannalal had not been proved to be genuine and that the said amount of Rs. 39,000 represented the assessee's income from undisclosed sources. The said amount was added to the total taxable income of the assessee. Similarly, in the next assessment year 1969-70, an amount aggregating Rs. 60,074 was found to have been credited in the names of five customers of the assessee. The Income-tax Officer called upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were in fact not received from the said nine customers, the Appellate Assistant Commissioner came to the conclusion that the entries in the books were false and fabricated. The Appellate Assistant Commissioner confirmed the orders of the Income-tax Officer except that for the second assessment year, the amount added was reduced by Rs. 39,000, on the ground that the latter amount was available from the earlier year for the purpose of reintroduction in the accounts. Being aggrieved, the assessee preferred a further appeal against the order of the Appellate Assistant Commissioner before the Income-tax Appellate Tribunal. It was contended before the Tribunal on behalf of the assessee that the assessee was in need of money for taking delivery of sugar under the Government permits and, therefore, the said loans were obtained by Chandra Nath Bhattacharjee, a partner of the assessee, and the amounts obtained on loan were credited in the accounts of the customers through Chandra Nath Bhattacharjee. The assessee was required to sell sugar to the very same customers against the Government permits and within a few days the assessee received the price of the sugar sold from the said custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to decide the actual transactions involved. The member noted that the case of the assessee throughout had been that the cash credit entries represented a loan transaction. He noted further that the said deposits had been shown in the books as loan transactions. Merely because the assessee had used wrong narration in making the entries, it could not be held that the transaction was something other than what was being contended. It was necessary to look at the entirety of the transaction to come to a correct conclusion. The third member accepted the case of the assessee and rejected that of the Department that the credit entries in the books were fictitious and, in fact, no money had been received by the assessee from its customers on the dates of the credit entries. It was held that, on the other hand, there was overwhelming evidence on record to suggest that loans had been received by the assessee from M/s. Chandmal Pannalal on the dates on which the credit entries had been made in the books and that the credit entries in dispute were relatable to the said loans. It was found that the Revenue had failed to adduce any evidence to the contrary. It that view of the matter, it was hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee's explanation that the cash credits actually represented loans advanced by M/s. Chandmal Pannalal was false ? " The above two questions have come up before us in Income-tax Reference No. 100 of 1981. At the instance of the parties, the two references have been heard together. The learned advocate for the Revenue reiterated at the hearing the contentions of the Revenue raised in the earlier proceedings. The learned advocate submitted, in particular, that in the instant case the books of account of the assessee stood self-condemned inasmuch as the assessee itself submitted and admitted that the entries therein were not correct. In that view, it was submitted that the explanation of the assessee that the amounts in dispute were obtained by way of loans from M/s. Chandmal Pannalal and introduced in the books of account of the assessee in the name of its customers through a partner of the assessee should have been rejected in limine. In any event, such an explanation, it was submitted was neither satisfactory nor reasonable. It was submitted further that the onus of explaining the cash credits in the accounts of the assessee, particularly when the entries were admitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was speculator and could have earned the undisclosed income in such business and in other illegal activities like smuggling. On appeal, the Tribunal held that apart from the interpolations, there was no other reason to suspect the genuineness of the account books which should have been accepted. Taking into consideration all circumstances, the Tribunal came to the conclusion that the assessee might be expected to possess by way of cash balance a portion of the amount shown to have received on account of encashment of high denomination notes and directed a part of the amount to be treated as undisclosed profits. On a reference, the High Court held that the onus of proving the source of the amount was on the assessee which the assessee did not discharge; the finding of the Tribunal on the basis of the evidence before it was a finding purely of fact and could not be disturbed in a reference. On a further appeal, the Supreme Court held that the Tribunal having accepted the books of account as genuine except for the interpolations and having accepted the explanation of the assessee for a part of the amount, the Tribunal was not justified in rejecting the balance. The Supreme Court he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee. In support of his explanation, the assessee produced a statement from the said firm recording that the loans in question were advanced by the associate firm in the names of the persons mentioned in the account books of the assessee. The explanation of the assessee was rejected by the Income-tax Officer but upheld by the Appellate Assistant Commissioner. The Tribunal set aside the order of the Appellate Assistant Commissioner. On a reference, it was held by this court that the mere production of letter from a third party admitting the credits as money advanced by the latter would not discharge the initial onus on the assessee to explain the cash credits which were prima facie evidence that they were the income of the assessee. It was held further that there were materials on the basis of which the Tribunal had come to a conclusion that the disputed cash credits were the income of the assessee and the High Court in its advisory jurisdiction in a reference would not interfere with such a conclusion. In the instant case, it cannot be disputed that the assessee had furnished evidence which cannot be held to be of no substance and on the basis of which two Members of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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