TMI Blog1985 (10) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... th this one party, all transactions where the loan was for Rs. 2,500 or more were only hawala transactions ? 3. Whether the Tribunal is right in law in holding that the assessee has discharged the burden of proof with reference to Rs. 50,000 in the name of Seth Krishnadas Ramdas and is not the above finding wrong and unreasonable especially in view of 'the transactions admitted to be hawala by the creditor of the assessee examined by the Income-tax Officer' ? 4. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in allowing deduction of interest on hundi loans in the assessment year 1963-64 ? 5. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in allowing deduction of interest on hundi loans in the assessment year 1965-66 ? 6. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in allowing deduction of interest on hundi loans in the assessment year 1964-65 ? " In respect of the assessment year 1962-63, the relevant previous year ending on March 31, 1962, the Income-tax Officer noticed two credit entries among others for Rs. 25,000 each as loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n done by the Appellate Assistant Commissioner. In the result, we set aside the second order of remand made by the Appellate Assistant Commissioner and direct him to dispose of the appeal after receiving the remand report from the Income-tax Officer." Subsequently, the report of the Income-tax Officer, consequent upon the original order of remand (annexure E), was received by the Appellate Assistant Commissioner. On consideration of that report and after hearing the parties, the Appellate Assistant Commissioner by his order dated February 26, 1974 (annexure J), held as follows: " 4. In my opinion, the procedure regarding taking of evidence in this case has not been correctly done. The Income-tax Officer should call upon the appellant to produce the evidence in support of the entries made in the books of account of the appellant. The Income-tax Officer should also call upon the appellant to call his witnesses to prove the entries and after allowing the appellant to examine his own witness in accordance with the rules for examination of witness-in-chief as contained in sections 137 and 138 of the Indian Evidence Act should thereafter proceed to cross-examine such witnesses i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee because that creditor was examined in some other proceedings and the case of the assessee's loan was not in the mind of that Income-tax Officer. What the creditor says may be true or not. If it is true, the loan to the assessee is havala. But this material of deposit cannot be made use of. It is against the principles of natural justice. The assessee had no opportunity to cross-examine the creditor. Of course, under the principles of the Indian Evidence Act, his statement is now admissible in evidence because of his death. But then it is very weak evidence. So we do not attach any weight to the statement. The position cannot be now improved by remanding the case to the Income-tax Officer." The Tribunal has, in our view, cast the burden wrongly. It overlooked section 68 of the Income-tax Act, 1961. It erroneously ignored the importance and significance of the statement of the deceased, Ramdas. The returns submitted by the assessee in regard to the two entries in question had not been accepted by the Income-tax Officer. The burden was on the assessee to produce reliable evidence in support of the entries in his books of account. The entries showed that the total sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... til the assessee has submitted satisfactory explanation for the credit entries. In Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1, the Supreme Court states in answer to the question whether the burden of proving the source of cash credit is on the assessee (at p. 4) : " It seems to us that the answer to this question must be in the affirmative and that is how it was answered by the High Court. It is well established that the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the Income-tax Officer is entitled to treat it as taxable income., see Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC)." In Oriental Wire Industries (P.) Ltd. v. CIT [1981] 131 ITR 688, the Calcutta High Court says (at p. 691): " In a case like this where the alleged loan appeared in the books of account of the assessee, it is for him to prove that the transaction was genuine and that would entail production of evidence as to the, (i) source of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... call for the relevant books of account maintained by Ramdas or by his successors or partners or associates, as the case may be. He can examine or cross-examine the persons who maintained the books of account of Ramdas. It is open to him to avail of whatever evidence there is. It was for this purpose that a fresh opportunity was given to him by the Appellate Assistant Commissioner. The Tribunal has, in our view, erroneously cast the burden of proof on the Revenue. In the light of what is stated by us, we must now answer question No. I after recasting the same in the following words : " Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in setting aside the order of remand of the Appellate Assistant Commissioner whereby he directed the Income-tax Officer to make a fresh assessment in accordance with law and after affording the assessee a reasonable opportunity to examine and cross-examine witnesses in respect of the two entries of Rs. 25,000 each." We answer question No. 1, as so recast, in the negative, that is, in favour of the Revenue and against the assessee. In the light of our answer to question No. 1, we do not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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