TMI Blog1978 (7) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the ITO was wrong in treating the said sum as income, of the assessee. The AAC rejected such contention and confirmed the assessment. The assessee preferred a further appeal to the Income-tax Appellate Tribunal and contended that it had discharged its onus of proving the of the said loan also the existence of the creditor. A confirmatory letter from the creditor had been filed before the ITO, the creditor was and income-tax assesee and had responded to the summons under s. 131 of the Act. The loan received on the 16th September, 1964, had been repaid in two instalments of Rs. 50,000 each on the 15th April and the 30th April, 1965, respectively, in cash and Rs. 5,412.50 being interest thereon had been paid by an account payee cheque on the 25th May, 1965. The creditor could not produce its books of account as they were seized by the I.T. department. At the instance of the assessee, the Tribunal caused the books of account of the creditor in the custody of the I.T. department to be produced before it and examined Vidyanand Sureka, the proprietor of Sureka Jute Co., the creditor. Vidyanand Sureka stated before the Tribunal that he was a partner of Daluram Gaganmal and the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion represented by the entry. The assessee was not required to establish the source or the sources, that is, the source where from the loan was advanced by the creditor. Even if the explanation of the creditor as to his source was not accepted, the same could not be held to be the income of the assessee as there was no direct nexus between the two. Dr. Pal also contended that the assessee had established the identity of the creditor, who was an income-tax assessee, who admitted the transaction and it was established from his evidence that he had capacity to advance the loan on the 16th September, 1964. The creditor also explained why the payment of interest was entered in the accounts and the loan was not so entered. Dr. Pal submitted that the assessee discharged its onus of proving the genuineness of the loan. In support of his contentions Dr. Pal cited the following decisions : CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC). In this case, the question before the Supreme Court was whether the amount of a fixed deposit receipt in a bank in the name of one Biswanath, a son of a partner of the assessee, on the security whereof the assessee obtained overdraft, could be trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent party, the burden will still lie upon him to establish the identify of that party and to satisfy the Income-tax Officer that the entry is real and not fictitious. Once the identity of the third party is established before the Income-tax Officer and other such evidence are prima facie placed before him pointing to the fact that the entry is not fictitious, the initial burden lying on the assessee can be said to have been duly discharged by him. It will not, therefore, be for the assessee to explain further as to how or in what circumstances the third party obtained the money and how or why he came to make an advance of the money as a loan to the assessee. Once such identity is established and the creditors, as in the instant case, have pledged their oath that they have advanced the amounts in question to the assessee, the burden immediately shifts on to the department to show as to why the assessee's case could not be accepted and as to why it must be held that the entry, though purporting to be in the name of a third party, still represented the income of the assessee from a suppressed source. And, in order to arrive at such a conclusion, even the department has to be in posses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case where the entry stands in the name of the third party, the assessee satisfies the Income-tax Officer as to the identity of the third party and also supplies such other evidence which will show, prima facie, that the entry is not fictitious, the initial burden which lies on him can be said to have been discharged by him. It will not, thereafter, be for the assessee to explain further how or in what circumstances the third party obtained money and how or why he came to make a deposit of the same with the assessee. The burden will then shift on to the department to show why the assessee's case cannot be accepted and why it must be held that the entry, though purporting to be in the name of a third party, still represents the income of the assessee from a suppressed source. In order to arrive at such a conclusion, however, the department has to be in possession of sufficient and adequate material." Tolaram Daga v. ClT [1966] 59 ITR 632 (Assam). In this case a sum of Rs. 10,000 and Rs. 719 as interest thereon was shown as credited in the name of the wife of the assessee in the books of account of the firm of M/s. Motilal Inderchand in which the assessee was a partner. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could come to such conclusion. Mr. Sengupta contended that none of the primary facts found by the Tribunal has been challenged but only the ultimate conclusion was challenged. Mr. Sengupta urged that the Tribunal had found the following facts, viz., (i) interest had been shown to be paid by cheque to give a colour of genuineness to the transaction ; (ii) assertion by Vidyanand Sureka that he had lent Rs. 1,00,000 to the assessee was not corroborated by the entries in his books and the reasons given for not recording the same were not accepted; (iii) the maximum capital (taking the higher of the figures mentioned) available to Sureka could only be about Rs. 1.5 lakhs and it did not follow that the entire capital was available for making the advance to the assessee; and that creditworthiness of the creditor had not been established; (iv) nor had the assessee proved the source of the credit. Mr. Sengupta submitted that in the books of Vidyanand Sureka produced before the Tribunal neither the payment of Rs. 1 lakh nor its repayment were recorded but significantly the interest allegedly paid by an account payee cheque was recorded. Admittedly, Sureka had no other books. He is alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on materials available to the authority to come to an independent and unbiased finding as to the genuineness of the transaction. It is true that the tax authority is not entitled to reject the assessee's case summarily or arbitrarily or without sufficient reason. It is true that the authority's duty is to examine all the materials carefully and objectively. But if it is found that the authority concerned after careful consideration of all relevant materials has come to the conclusion that the assessee's case of a loan from a third party cannot be accepted, it is not open to this court to disturb the finding in a reference under sec. 66(1). " (b) Another unreported decision of this court in Income-tax Reference No. 238 of 1970 intituled Basdeo Agarwalla v. C1T[1980] 121 ITR 901 (infra), where also this court laid down a similar principle. (c) Sriram Jhabarmull (Kalimpong) Ltd. v. CIT [1967] 64 ITR 314 (Cal). The following observations were made by this court : " It is not correct to say that as soon as the initial burden of proof on the part of the assessee is discharged, the Income-tax Officer is not entitled to reject the assessee's explanation without some other positive e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following observations of the Supreme Court in this case: " Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and tribunals have to judge the evidence before them by applying the test of human probabilities. Human minds may differ as to the reliability of a piece of evidence. But in that sphere the decision of the final fact-finding authority is made conclusive by law." We are of the opinion that the question in the present reference is wide enough so as to enable us to go into the question as to whether the assessee ad established all the ingredients necessary to prove or substantiate the genuineness of the loan and whether the finding of the Tribunal was perverse. We agree with Mr. Sengupta that the decision in CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC) has no application to the facts and circumstances of this case. So far as this court is concerned the law on cash credits is now well settled by several decisions of this court in Knitting Machineries Syndicate (India) Pvt. Ltd. (ITR No. 20 of 1967 dated 6-9-1972), Basdeo Agarwalla [1980] 121 ITR 901 (infra), Sriram Jhabarmul ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
