TMI Blog2008 (7) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of the assessee was the income of the assessee when there are no corresponding entries in the books of the assessee? 2. If the reply to the above question is in the affirmative, whether the Tribunal was right in law in not allowing the deduction of the said amount as the cost of purchase or as allowable expenditure?" 2. The brief facts giving rise to the present reference are that during the course of assessment proceedings for assessment year 1987-88, the Assessing Officer called for the copy of account of the assessee as appearing in the books of Gujarat Mineral Development Corporation (GMDC) and compared with the copy of account of assessee. The Assessing Officer observed that certain drafts allegedly sent to GMDC by the assessee totaling to Rs.1,92,161 had not been accounted for in the books of the assessee but the entries in respect thereof appeared in the account of the assessee in the books of GMDC. The assessee replied that the accounts of GMDC could not be reliable and the assessee had not sent the above drafts. The Assessing Officer was not satisfied with the explanation furnished by the assessee and he made the impugned addition of Rs.1,92,161. 3. Being agg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Share Balaji Minerals directly who might have sent the drafts to GMDC on assessee's behalf. The assessee paid the sum by cheques to these parties. Thus, simply because GMDC is a State Government undertaking, it does not mean that the proper entries had been made in its books of accounts. He relied on the decision of the Apex Court in the case of CBI v. V. C. Shukla [1998] 3 S.C.C. 410 wherein it is held that entries in books of accounts shall not alone be sufficient evidence to charge any person with liability. Entries even if relevant are only corroborative evidence. Independent evidence as to trustworthiness of those entries are necessary to fasten liability. He has further submitted that burden is on the revenue to prove that the assessee has made unexplained expenditure and simply on the basis of the entries found in the books of accounts of GMDC, it cannot be said that the said burden has been discharged by the revenue. In support of his submissions, he relied on the decision of the Hon'ble Supreme Court in the case of Kishinchand Chellaram v. CIT [1980] 125 ITR 713 and the decision of the Calcutta High Court in the case of Bimal Kumar Damani v. CIT [2003] 261 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal. In support of her submissions, she relied on the decisions in the case of (1) Selvakumar v. CIT [1992] 193 ITR 470 (Ker), (2) Kanhiayalal v. CIT [1998] 234 ITR 566 (Raj), (3) Mrs. Rama Sinha v. CIT [2002] 256 ITR 481 (P H), (4) CIT v. Chunnilal Premraj and Co. [2005] 272 ITR 578 (MP). Based on the aforesaid decisions, she has urged that the addition made by the Assessing Officer and confirmed by the Commissioner of Income-tax (Appeals) as well as Tribunal is required to be upheld. 10. As far as alternative contention is concerned, Mrs. Bhatt has submitted that the revenue authorities have rightly held that the assessee has failed to prove that the alleged expenditure was incurred by the assessee for business purposes and hence, the provisions of Section 69C for taking benefit of deduction as business expenditure under Section 37 of the Act cannot be invoked. 11. She has further submitted that the source of income not being known, such deemed income will not fall even under the head 'Income from other sources' and hence, the corresponding deductions which are applicable to the income under any of heads, will not be attracted in the case of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollected further details to justify the addition made by him. The Assessing Officer was, however, of the view that the onus to prove the source of income is on the assessee and hence, he has not made any further inquiry in the matter. It was sought to be justified on the ground that Section 8 read with Section 106 of the Indian Evidence Act, 1872 states that any fact is relevant and when a fact is substantially within the knowledge of any person, burden of proving that fact is upon him. The learned CIT (Appeals) as well as the Tribunal are also of the view that the burden is on the assessee to prove the source of the said demand drafts. This stand of the revenue is, however, contrary to the decision of the Hon'ble Supreme Court in the case of Kishinchand Chellaram v. CIT [1980] 125 ITR 713. In that case, the assessee had an office in Bombay and one in Madras. On receiving information that a sum of Rs.1,07,350 was remitted by the assessee by two telegraphic transfers from Madras to Bombay through a bank, the ITO wrote two letters to the manger of the bank dated January 14 and February 10, 1955, making inquiries about the remittance. These two letters were neither disclosed to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N, another employee, received it at Bombay. From this, it did not follow that the remittance was made at Madras and received at Bombay on behalf of the assessee. The burden was on the department to show that the money belonged to the assessee by bringing proper evidence on record and the assessee could not be expected to call T and N in evidence to help the department to discharge the burden that lay upon it. The Apex Court, therefore, held that there was no evidence on the basis of which the Tribunal could come to the finding that the sum of Rs.1,07,350 was remitted by the assessee and that it represented the undisclosed income of the assessee. 15. The above decision of the Apex Court would certainly help the assessee. The burden is on the department to show that the amount of demand drafts found to be credited in the assessee's account from the books of accounts of GMDC, belonged to the assessee, by bringing proper evidence on record and the assessee could not be expected to explain the source of income or to call responsible officers of GMDC or bank to discharge the burden that lay upon the department. We could have remitted this matter to the Income-Tax Officer to make fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed upon by the revenue are not on the point involved in the present reference and hence, they would not render much assistance to the revenue. 20. So far as alternative contention is concerned, we are at pains to observe that the Tribunal has very cursorily dealt with the alternative contention of the assessee. If it is presumed that the payments by demand drafts were made by the assessee to GMDC, then as a natural corollary, further presumption could have been drawn that the said payments were made for purchases of raw materials like coal, lignite etc. It is an admitted position that the assessee was purchasing raw materials from GMDC and various payments were made by the assessee which were duly reflected in the books of accounts of GMDC. The Tribunal has rejected this contention only on the ground that in absence of any evidence, it cannot be presumed that the payments were made for business purposes. There is no relationship other than the business relationship between the assessee and GMDC. The Assessing Officer could have asked GMDC as to on what count, the said payments were made by the assessee. As a matter of fact, it has come on record that in lieu of the said paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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