TMI Blog1983 (1) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... , the petitioner was I required to file a copy of the cash credits and squared up accounts along with confirmatory letters from the creditors showing specifically the districts in which those creditors were being ad. It was also required to supply the information of sales and purchases above Rs. 20,000 and the details of closing stock and basic valuation of the same. The petitioner claims to have supplied this information, which, according to it, was scrutinised by the ITO and at the time of partial discussion of the case on April 21, 1966, the latter tick-marked the balance-sheet in red ink giving reference to the pages on which the relevant documents (confirmation slips and copy of the accounts of each particular creditor) were to be found. Similarly, the copy of the balance-sheet was tick-marked by the ITO and is Ex. P-1. The case, however, was adjourned to May 21, 1966. On that day, the petitioner agreed to the addition of an amount of Rs. 1,500 to his income though that amount had been shown as credit in the account books of the petitioner. The petitioner claims to have filed some more confirmation letters relating to some of its creditors on August 31, 1966. Finding no reliab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the individual items even though the case had been discussed with the assessee on April 21, 1966, and again on May 21, 1966. Apart from the letters of confirmation, there was no other evidence before the ITO regarding these cash credits supporting the book version of the assessee. The total income of the assessee was fixed at Rs. 82,581 mainly on the basis of the return and without holding any enquiry into the genuineness of cash credits and these entries were accepted only on their face value. In support of this stand, reliance is placed on a confidential note recorded by the ITO for further action by the Department and the relevant part of the same reads as follows : "There were credit balances in the names of the following parties which have been accepted because all the creditors have been income-tax payers and the confirmation letters have been filed. Send their copies of account to the ITOs concerned for necessary verification at their end. " Towards the end of 1969, certain classified information was received by the I.T. Dept. from the Central Excise and Customs Dept. revealing that there was a substantial bogus hundi racket and hawala dealing prevalent amongst the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the observation that " even otherwise the same were clearly covered by the ratio of three D. B. judgments of this court in Kirpa Ram Ramji Dass v. ITO [1982] 135 ITR 68, Frontier Trading Co. v. P. N. Chaudhry, ITO [1982] 136 ITR 503 and Jash Bhai F. Patel v. CIT [1982] 136 ITR 799 ". Learned counsel, however, claimed that still later D. B. judgment of this court in Jai Singh v. CIT [1982] 136 ITR 895, fully supports his claim. As a result of this submission of the learned counsel, I have examined that judgment and find that the facts in the case on hand are more akin to the facts in Kirpa Ram's case [1982] 135 ITR 68 (P H), rather than the facts in Jai Singh's case [1982] 136 ITR 895 (P H). No doubt, this judgment is based on the ratio of two Supreme Court judgments in ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 and ITO v. Madnani Engineering Works Ltd. [1979] 118 ITR 1, and the judgment in Kirpa Ram's case [1982] 135 ITR 68 (P H), has also been considered but while distinguishing this judgment the Bench, after referring to the observations made in Kirpa Ram's case [1982] 135 ITR 68 (P H), has observed as follows : "The above observations would show that there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ening the assessment could not be sustained. To bring out the similarity of facts in, Kirpa Ram's case [1982] 135 ITR 68 (P H), to the case on hand, and to show the hollowness of the argument of the petitioner, I deem it necessary to make a reference to these observations of the Bench (p. 74): " In order to appreciate the contention, we are presuming for argument's sake, that the entries regarding the loan of a sum of Rs. 95,000 are false. On the other hand, the assessee claimed that he had taken the said loans. In other words, he did not receive any monetary advances but he told the ITO that they were his creditors. We may presume that even though the assessee received no money as loans, yet all the formalities were observed and the hundis were executed and discharged. Since no money passed between the parties on any occasion, the discharged hundis represented sham transactions. In other words, the hundis and other records produced by the assessee should tend to show as if certain transactions had taken place but, in reality, the transactions never took place. In such a case, the discharged hundis and the other entries cannot be taken as evidence of facts. They are merely pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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