TMI Blog1983 (9) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... sclosed sources and computed the total income of the assessee at Rs. 1,27,000. On appeal by the assessee before the AAC, the assessment order was set aside with a direction that an opportunity should be given to the assessee to explain the hundi transactions. Subsequently, the ITO gave a number of opportunities to the assessee to establish that the transactions reflected in the account books are true and genuine. The assessee wrote a letter on February 18, 1971, stating that the hundi transactions were true and genuine and should be accepted. However, the assessee was required to produce the bankers and their books of account for examination. The assessee was also informed that in the event of the assessee experiencing difficulty in producing the creditors by himself, their personal appearance could be enforced by the issue of summons under s. 131 of the I.T. Act, 1961 (hereinafter referred to as "the Act"), for examination as witnesses on behalf of the assessee. Accordingly, summons were issued to all the five bankers to their addresses. Except for the summons issued to one Paramanand Kishindas, the others were all returned undelivered with the endorsement " not known ". Paraman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, a cheque had been issued to the assessee on December 16, 1964, on Galada Bank Limited, on which day there was a credit balance of only Rs. 190.35. In the case of that banker also, it transpired that a sum of Rs. 20,000 had been deposited in cash on December 17, 1964, and the cheque was encashed on December 18, 1964. The repayment stated to have been made by the assessee to this banker on March 16, 1965, was not credited to any bank account of that banker, but the cheque had been directly encashed on March 16, 1965, and it was found that this banker had closed his account with Galada Bank Limited as early as December 28, 1964. Besides, the statement of Paramanand Kishindas dated February 7, 1972, indicated that the sum of Rs. 20,000 had been paid by the assessee to him in cash to enable him ostensibly to issue a cheque for Rs. 20,000 as loan and that the cheque issued towards repayment had not been encashed by him. An affidavit filed sworn to by finance broker, Chaturbhuj Chabaria, on July 19, 1969, disclosed that he had arranged for the loans for the assessee from the bankers and all the loans had been paid by cheques and had also been repaid by the assessee by cheques whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etion of the addition of Rs. 70,000. By a separate order on a petition filed by the assessee, the Tribunal also deleted the addition of Rs. 4,050, being the interest stated to have been paid by the assessee on the hundi loans. At the instance of the Revenue, the following two questions have been referred for the opinion of this court: " (1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in deleting the entire hundi credits addition of Rs. 70,000 made by the Income-tax Officer for the assessment year 1965-66, in the light of section 68 of the Income-tax Act, 1961 ? (2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in deleting the addition of Rs. 4,050 made by the Income-tax Officer representing interest alleged to have been paid on hundi loans for the assessment year 1965-66 ? " The learned counsel for the Revenue contended that the Tribunal had not borne in mind the requirements of s. 68 of the Act and had misdirected itself in law in proceeding to hold that the mere entries in the books of account would be sufficient to establish the genuineness of the transactions, when there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred is, whether the deletion of the hundi credits is right. The deletion by the Tribunal was based on the finding arrived at by it with reference to the truth and genuineness of the loans on the materials placed before it. If that finding is not supported by the materials or is perverse or opposed to the materials or is not a reasonable one to be arrived at on the facts and circumstances, then the deletion cannot be sustained. Thus, in dealing with the question of the propriety of the deletion, these related aspects have also to be considered. We are of the view that question No. 1 as framed is wide enough to include the question whether on the materials the view taken by the Tribunal regarding deletion was a reasonable one on the facts and in the circumstances. We, therefore, proceed to consider the questions referred bearing in mind the aforesaid aspect as well. We may briefly refer to s. 68 of the Act which runs as under: "Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Income-tax Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credits in the names of third parties, it was held that the assessee has to prove the transaction which results in a cash credit in his accounts and such proof would include proof of the identity of his creditor, the capacity of such creditor to advance the money and the genuineness of the transaction and only after these things are established by the assessee by adducing evidence in support thereof, the onus shifts to the Department and that where the assessee merely establishes the identity of the creditor and nothing more, the cash credits can be treated as the income of the assessee from undisclosed sources. Again, in Kant Co. v. CIT [1980] 126 ITR 63 (Cal), the principles laid down in Shankar Industries v. CIT [1978] 114 ITR 689(Cal), were reiterated. Bearing the aforesaid principles in mind, we proceed to examine briefly the materials and also the finding arrived at on those materials by the Tribunal. The assessee claimed that there were five creditors who had advanced hundi loans to him. All of them were summoned but only one of them, namely, Paramanand Kishindas, was available. There was no other material from which it could be established that there were four creditor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeds to state : " The fact that a deposit of Rs. 20,000 is found in their accounts itself is proof that this amount was available with them for issue of the cheque to the assessee. Who has put the deposit to enable them to issue the cheque is a question on which it is the bankers who should be in the know of things. If it was really the assessee's money, a banker dealing in hawala transaction would not have hesitated to say that the money had come from the assessee. In fact, in the case of Paramanand Kishindas, we find discreet silence on the part of the banker in that regard. " This approach of the Tribunal is plainly erroneous as a mere entry in the account books with reference to the availability of funds is no proof of either the identity of the creditor or his capacity for advancing the amount or even the genuineness of the hundi loans as pointed out by the decisions referred to earlier. In addition, the Tribunal states that it is within the knowledge of the bankers as to who deposited these amounts in their accounts. Even assuming that that is correct, there is no material in this regard to disclose such knowledge in respect of four of the bankers and the statement of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther stated by him that these amounts were repaid by the assessee by cheques drawn in favour of the bankers through him and the cheques were encashed by the bankers through their respective banks. However, in the course of his examination on July 25, 1973, the deponent to the affidavit was obliged to admit that the receipt of the commission was not accounted for in his account books (jokam book). He was also positive that he did not maintain any book other than the jokam book in respect of the hundi loans arranged by him on behalf of the assessee. The Tribunal was fully aware of the conflicting versions given by the broker in the affidavit and in the course of his later examination. If the Tribunal had wanted to accept the earlier affidavit, it could have said so. Otherwise, it was open to the Tribunal to have relied on the later statement of the broker to conclude that the hundi transactions were put through the broker as claimed by him. Unfortunately, the Tribunal has not done either, but has stated that the contradiction does not take away the veracity of the question. In the absence of rejection by the Tribunal of either the affidavit of the broker or his statement, the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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