TMI Blog1978 (3) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Income-tax Officer, one Vidyanand Sureka appeared before the Income-tax Officer on the 11 th December, 1967, on behalf of Sureka jute Co. He claimed to be the proprietor of the concern and stated that his books had been seized by the income-tax department on the 17th November, 1965. It was ascertained from departmental records that the said Vidyanand Sureka had made a confession on the 9th September, 1966, to the effect that his loan transactions were not genuine and that he was only a name-lender. It was also noted that in the books of account of Sureka Jute Co., the sources of payments made by third parties were not ascertainable as the entire debit side of the cash book was kept blank and no dates were given. No one appeared on behalf of Rain Kumar Chotaria in spite of summons issued. On examination of the income-tax file of the said party it was found that the firm had been closed after the death of the proprietor, Ram Kumar Chotaria, and in the assessment year in question it had not filed profit and loss account or balance-sheet and that its assessment had been completed under section 144 of the Income-tax Act, 1961. The previous assessment of the firm for the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was contended on behalf of the assessee in the appeal that the assessee had discharged its burden with regard to each of the said credits. It was contended further that Sureka Jute Co. had furnished confirmatory letter and had also admitted the fact of the advancement of the loan to the assessee. A general confession before the income-tax department, it was submitted, could not be used against the assessee. It was further submitted that it was beyond the power of the assessee to prove the source of the amounts in the hands of its creditors. Vidyanand Sureka in fact had made a voluntary disclosure before the Commissioner of Income-tax in his letter dated 28th November, 1967, that he had an income of Rs. 1,29,920. The Tribunal, after considering the facts and circumstances, held that the assessee had not discharged its burden with regard to the credit in the name of Sureka Jute Co. The Tribunal took note of the of fact that Vidyanand Sureka had initially confessed that his loan transactions were not genuine. When he appeared before the income-tax Officer for the first time in the assessment proceedings of the assessee, he made a non-committal statement and did not categorically acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tum of loans or advances and had also produced their books of account. Their income-tax assessment files were available. The primary burden on the assessee to explain the cash credits in its books of account was, therefore, duly discharged and, thereafter, it was for the revenue to disprove the genuineness of the loans. In support of his contentions Mr. Pal cited several decisions as follows : (a) Sreelekha Banerjee v. Commissioner of Income-tax [1963] 49 ITR 112 (SC). In this case, additions were made to the income of the assessee following the encashment of high denomination notes. The question before the Supreme Court was whether there was any material on record on which the Tribunal could come to the conclusion that the nature of the source from which the assessee derived the said high denomination notes remained unexplained. In answering the question, the Supreme Court observed as follows : " It seems to us that the correct approach to questions of this kind is this. If there is an entry in the account books of the assessee which shows the receipt of a sum on conversion of high denomination notes tendered for conversion by the assessee himself, it is necessary for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows : " When cash credits appear in the accounts of an assessee, whether in his own name or in the name of third parties, the Income-tax Officer is entitled to satisfy himself as to the true nature and source of the amounts entered therein and if after investigation or inquiry he is satisfied that there is no satisfactory explanation as to the said entries, he would be entitled to regard them as representing the undisclosed income of the assessee. When these credit entries stand in the name of the assessee himself, the burden is undoubtedly on him to prove satisfactorily the nature and source of these entries and to show that they do not constitute a part of his business income liable to tax. When, however, entries stand not in the assessee's own name, but in the name of third parties, there has been some divergence of opinion expressed as to the question of the burden of proof. In Radhakrishna Behari Lal v. Commissioner of Income-tax [1954] 26 ITR 344, the Patna High Court held that though when the cash credits stood in the assessee's name the burden of proof was upon him to show that the receipts were not of an income nature, the position was different in regard to sums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of the Income-tax Act, 1961. After considering the decisions of other High Courts it observed as follows : " If the credit entry stands in the names of the assessee's wife and children, or in the name of any other near relation, or an employee of the assessee, the burden lies on the assessee, though the entry is not in his own name, to explain satisfactorily the nature and source of that entry. But, if the entry stands not in the name of any such person having a close relation or connection with the assessee, but in the name of an independent party, the burden will still lie upon him to establish the identity 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Appellate Assistant Commissioner found his evidence unsatisfactory and dismissed the assessee's appeal. The Tribunal also dismissed the further appeal of the assessee. On a reference, one of the questions agitated before this court was whether in the facts and circumstances of the case the said deposit could be treated as the income of the assessee. This court rejected the contentions of the assessee and observed as follows : " 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 evidence falsifying the assessee's case. It cannot be true that any possible explanation which an assessee puts forth for clarifying the source and nature of a cash receipt must have to be accepted by the income-tax department nor can it be lawfully urged that the Income-tax Officer can arbitrarily reject the assessee's explanation. A dogmatic assertion on the part of either the assessee or the revenue authorities cannot determine the issue. Objectively it must be found out that the assessee's explanation suffers from inherent infirmity or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not open to this court to disturb the finding in a reference under section 66(1). " On the question, as framed, our enquiry is confined and limited to ascertain whether there was any material before the Tribunal to sustain the additions. The question is not before us whether on the basis of the available evidence the conclusion of the Tribunal was perverse or unreasonable. Nor is it the question before us whether the Tribunal failed to consider or appreciate material evidence and proceeded on the basis of irrelevant and extraneous matters. In the case of each of the alleged creditors it appears to us that there was some material before the Tribunal to reject the case of the assessee. In the case of Sureka Jute Company such materials were, (a) initial confession of Sureka that his transaction was not genuine ; (b) his non-committal statement before the Income-tax Officer in the proceedings for assessment in the instant case ; and (c) the unsatisfactory nature of his books of account as noted by the Tribunal. In the case of Ram Kumar Chotaria relevant evidence is that at the material time his assessable income was negligible and that his profit and loss accounts and balance- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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