9911796707
TMI Blog1999 (7) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... he firm of M/s. Skyjet since its inception in 1978. Both of them were working partners and carried on this business of Travel Agency. In April, 1979 the assessee-company was floated by Miss. Preeti V. Mehta and Mr. C.S. Amin and both of them were signatories to the Memorandum of Association and Articles of Association of the company. The business of the firm was taken over by the company and both of them were the promoters and the first Directors of the company as it is evident from the Memorandum of Association and Articles of Association. Miss Preeti V. Mehta was the first Chairman of the company and the Board of Directors conducted the business of the company since its inception as Chairman for a considerable time. Miss Preeti V. Mehta and Mr. C.S. Amin were authorised by the board to operate the bank accounts of the company vide resolution dated 24-4-1979. Everything went on well till search was carried out at the business premises of the assessee-company. During the course of search statements of Miss Preeti V. Mehta and Mr. C.S. Amin were recorded. In the books of the company loan accounts of both Miss Preeti V. Mehta and C.S. Amin stood recorded but in the statement on oath ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the books of the assessee-company and her concurrence to having signed the said statements and other vouchers and transactions of the company and their statements conclusively proved that the money had been borrowed in their/her name under their knowledge and with their full acquisitions, as being the Directors of the company, and credited in the books of account of the company as loans from them. The learned CIT(A) after going through the written submissions and the evidence on record held the borrowings in the names of Miss Preeti V. Mehta and Mr. C.S. Amin as quite genuine and accepted the same as loans borrowed by them. In so doing in her order at page 5 and onwards she gave detailed narration of the modality and conduct of Miss Preeti V. Mehta and Mr. C.S. Amin and their association with the assessee-company their concurrence for the money having been borrowed in their names and with their knowledge by way of various depositions, their actual participation in the conduct of the management of the affairs of the company, Miss Preeti V. Mehta herself being the founder Chairman of the company her actual operations of all the bank accounts of the company her offering personal gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) as contended in the grounds of appeal by the Revenue because the affidavit of Smt. Parulben M. Jayakrishna was filed before the learned ITO and the ITO did not bring any evidence on record to rebut the contents of the affidavit. The learned counsel further submits that both Miss Preeti V. Mehta and Shri C.S. Amin being Executive Directors of the company were deeply involved in the affairs of he company and in this regard he drew our attention to the various documents/vouchers statements etc. signed by them. He further drew our attention to the certified copies of accounts of Kiran K. Chokshi and Shri Bhaveshkumar Shroff who had confirmed having advanced the loans to Preeti V. Mehta and Shri C.S. Amin at the instance of Parulben M. Jayakrishna. The learned counsel for the assessee submitted that the source of deposits having been proved beyond any shadow of doubt, there is no justification for treating the two deposits as assessee's income from undisclosed sources. 8. We have considered the rival submissions and perused the facts on record. At the outset we must state that while deciding the appeal, the CIT(A) did not entertain any fresh evidence in violation of rule 46A of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove, mere negation by two creditors during the course of search proceedings perhaps to save their own skin, should not lead to the conclusion that the credits are not genuine. Under these circumstances we uphold the finding of the CIT(A) and dismiss this ground. 9. Ground No. 2 reads as under: "The learned CIT(A) has also erred in law and on facts in deleting Rs. 60,000 included by the ITO as income from undisclosed sources, by admitting fresh evidence in violation of rule 46A." During the course of assessment proceedings the ITO noted a deposit of Rs. 60,000 in the name of "Paldi Jain Sangh". He called upon the assessee to furnish confirmation from the said party. Since no confirmation was filed before the ITO he treated the same as assessee's income from undisclosed sources: On appeal, the learned CIT(A) deleted the addition observing as under:- "The assessee-company at this stage has endeavoured to get the confirmation of as many as 60/70% of the persons travelling in group in the name of Paldi Jain Sangh. It has been shown that tickets are issued against this money and therefore question of treating this as undisclosed source of income does not arise. No addition therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... looking to the smallness of the amounts and the status of the assessee the CIT(A) has rightly deleted the addition of Rs. 16,000. Her finding is accordingly confirmed. 14. Now we take up the assessee's appeal (ITA No. 1032/Ahd./1987): 15. The first ground raised by the assessee is that the CIT(A) has erred in confirming the addition of Rs. 1,05,263 made by way of adoption of net profit on gross profits. As stated above, the assessee-company carries on business of acting IATA approval Travel Agents. The ITO while framing assessment order arrived at a conclusion that the operating results disclosed by the assessee-company were not acceptable on the ground that the expenses were unreasonably high. In this connection he referred to the salary payments to different employees, telephone and telegrams expenses of Rs. 85,468. He compared the case of the assessee with that of M/s. Goodwind Travels who had shown better results. He, therefore, estimated the assessee's net profit at the rate of 20% of its receipt of Rs. 5,26,370 which worked out to Rs. 1,05,263 and added the same to the income of the assessee. 16. On appeal, the CIT(A) confirmed the addition. 17. Shri J.P. Shah, the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any material on record to prove that the expenses claimed under the head "Salaries", "Telephone, telex and travelling expenses" were not incurred or were bogus. In the absence of any defects having been noticed in the books of account, regularly maintained during the course of business, we hold that the addition made is uncalled for. We accordingly delete the impugned addition. This ground accordingly succeeds. 19. The next grievance of the assessee is with regard to the two cash credits of Rs. 60,000 and Rs. 40,000 in the name of Miss Preeti V. Mehta. Before the CIT(A) evidence was produced for the first time and she held that the ITO had right to look into this evidence to ascertain its veracity and reliability of the deposits and accordingly she restored the matter back to the ITO. We do not find any infirmity in the directions of the CIT(A) and accordingly uphold the same. This ground accordingly fails and is dismissed. 20. In the result the revenue's appeal is dismissed and the assessee's appeal is allowed in part. Per Shri Phool Singh, Judicial Member-I have the privilege of going through the order recorded by my learned brother, Shri B.L. Chhibber, Accountant Member and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 1978 being partners of equal shares. In April, 1979 the assessee-company was floated by Miss Preeti and C.S. Amin and the business of the firm was taken by the company. There was a search and seizure operation under section 132 of the IT Act in the case of assessee during 22-3-1985 to 29-3-1985 in which books of account pertaining to the assessment years 1982-83 to 1985-86 were seized. During the seizure operation statements of several employees and executives of the assessee were recorded including that of Miss Preeti, C.S. Amin, Hasmukh Dinmanikant, Shailesh R. Bhatt and Anil S. Gandhi. During assessment proceedings for the year under consideration, the ITO observed from the books of account of the company that there existed to an account in the name of Miss Preeti showing a deposit of Rs. 8,81,620 made in cash on various dates. In the same way the books of account of the company had another loan account in the name of C.S. Amin containing different deposits on different dates in the year under consideration totalling Rs. 2,83,494. However, the Assessing Officer that during the search and seizure operation both Miss Preeti and C.S. Amin in their statements recorded on 29-3-1985 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. Chokshi is neither believable nor probable in the circumstances of the company as also Mr. Kiran S. Chokshi was not in position to lend so huge amount to these persons and the theory that said Kiran S. Chokshi also borrowed from one J. Bhaveshkumar Shroff HUF was also not proved on record. In other words, as argued by learned D.R. the sources of the cash credits were not proved to the hilt while onus was on the assessee-company. The learned D.R. further pointed out that first appellate authority was not justified to place reliance on the documents of the assessee-company on which the statement of Miss Preeti was quite specific that she had signed all documents as she was working under the thumb of Smt. Parulben M. Jayakrishan. Contrary to it the contention of the learned counsel for assessee is that Miss Preeti and C.S. Amin have been the partners of M/s. Skyjet since its inception in 1978 and they carried on the business of Travel Agency having 50% share in the said firm. In April, 1979 the assessee-company was floated by Miss Preeti and C.S. Amin by taking over the firm business and they alone have full control over the business of that company. To prove this contention, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipt and payment a/c. of Miss Preeti for the money borrowed from Mr. Kiran S. Chokshi were also gone through by her. Even Miss Preeti and C.S. Amin in their statements have admitted authenticity of these documents. According to the learned counsel these two directors got terrified of the search and seizure operations which forced them to resale from their own admissions. 6. The next plea of the learned counsel for the assessee was that Kiran S. Chokshi has admitted lending of the amount standing in the names of Preeti and C.S. Amin. Copy of Statement of income of Kiran S. Chokshi for assessment year 1983-84 was also referred to along with copy of its assessment order and revised statement of total income of Kiran S. Chokshi for assessment year 1983-84 which are on pp. A-178 to A-181 of the paper look. These documents show that Kiran S. Chokshi has shown the said lendings of the amount in his statement of income and also shown the interests received thereupon. He further pointed out that not only the assessee-company has further shown that Kiran S. Chokshi had borrowed that amount from J. Bhaveshkuamar Shroff but copy of a/c. of J. Bhaveshkumar Shroff in the books of Kiran S. Choksh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-company and sister concern the onus comes to the assessee-company to explain satisfactorily the nature and sources of those cash credits appearing in the names of the employees. In this connection, reference to the observations of their Lordships in the case of Sarogi Credit Corpn. even relied by the learned counsel for assessee are quoted as under:- "Held, that if the credit entry in the books of the assessee stands in the name of the assessee or assessee's wife and children, or in the name of any other close relation or an employee of the assessee, the burden lies on the assessee to explain satisfactorily the nature and source of the entry. But if the entry does not stand 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 on him to establish the identity of that party and to satisfy the ITO that the entry is real and not fictitious. Once the identity of the third party is established before the ITO 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r discussing the case of Orient Trading Co. Ltd. v. CIT [1963] 49 ITR 723 and that of Sarogi Credit Corpn. laid down that it is necessary for the assessee to prove the identity of creditors, capacity of creditor to advance money and genuineness of transaction. Mere proof of identity of creditor is not sufficient. This has been followed by the same High Court in subsequent cases Prakash Textile Agency v. CIT [1980] 121 ITR 890, C. Kant & Co. v. CIT [1980] 126 ITR 63 and Oriental Wire Industries (P.) Ltd. v. CIT [1981] 131 ITR 688. 10. Now on the basis of above legal preposition I have again to examine the genuineness of the transactions of loans allegedly given by Kiran S. Chokshi to Miss Preeti and C.S. Amin as has come in the explanation and for that we have to see whether he was capable to land such huge amounts to these two persons and whether the transactions are genuine or not. At the very outset it may be pointed out that Miss Preeti and C.S. Amin have denied to have borrowed any amount from Kiran S. Chokshi or even entering into any loan transaction with him. Their explanation is that they have signed on the relevant documents relating to this transaction at the instance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hi shall show that he has not shown the interest income for assessment year 1983-84 but simply has shown his income at Rs. 16,810 and filed revised income showing the interest income received from Miss Preeti and C.S. Amin to the extent of Rs. 23,811 under voluntary disclosure scheme and this income from interest shows that he had been charging interests @ 7% from Miss Preeti and C.S. Amin. Contrary to it this Kiran S. Chowkshi had paid interest to J. Bhaveshkumar and Mukundrai Amrutlal Shroff HUF @ 12%. This clears the whole of the picture. The truth comes out indicating that theory of Kiran S. Chowkshi is not believable at all because a man getting funds from one person @ 12% interest will not be lending that amount at lesser rate of interests and that of 7% even to his close friends howsoever close friendship may be existing between such person and his debtors. When assessee and Kiran S. Chokshi were caught in this situation they tried to wriggle out by making another bid by way of an award of common friend regarding payment of interests and this award is appearing at pp. 196 to 197 of the paper book and one Dhanpal J. Shah acting as arbitrator between Kiran Chokshi and Mrs. Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se that cash credits are appearing in the names of employees of the assessee-company and assessee-company was under obligation to discharge the onus by explaining satisfactorily the nature and sources of the entry. In this case the main source to be explained by the assessee was that of J. Bhaveshkumar and Mukundrai Amrutlal Shroff HUF as admittedly the cash credits were in the name of Preeti and C.S. Amin but undisputedly they were not owners of those cash credits and the theory that they borrowed from Kiran S. Chokshi. Even if it is taken as true it did not help the assessee as Kiran S. Chokshi is not owner of that amount of cash credit but he allegedly borrowed from above referred to two persons and thus the evidence which should have come from the side of the assessee was that of J. Bhaveshkumar and Mukundrai Amrutlal Shroff HUF. The evidence on this point as discussed above cannot be treated as sufficient to prove the nature and sources of the cash credits. 13. On the basis of the above discussions the result is that in view of the law as discussed to above, the assessee-company has not been able to prove the identity of the cash creditors as amounts of cash credits appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is enough even if I state the facts in a sketchy manner. 2. Skyjet Aviation Pvt. Ltd. (the assessee herein) was originally a firm of two partners, namely, Ms. Preeti V. Mehta (hereinafter referred to as "Preeti") and Shri C.S. Amin (hereinafter referred to as "Amin") having 50% share each and they began carrying on business of travel agency. On 23-4-1979, the assessee-company, which is a private limited company, was floated. Certificate of incorporation and Memorandum & Articles of Association of the assessee-company are furnished at pp. A/30 to A/46 of the paper compilation filed on behalf of the assessee. Preeti was elected as Chairman of the Board of Directors on 24-4-1979 as per the Resolution dated 24-4-1979, copy of which is furnished at page A/50. Preeti held 2 shares, whereas Amin held one share in the company. The Annual Report for April, 1982, which is provided at pp. A/66 to A/78, was signed by Ms. Parul M. Jaykrishna as well as Preeti as Directors. The balance-sheet ending with 31-3-1982 is found furnished at pp. A/71 to A/72. Though under the head "Unsecured Loan" a sum of Rs. 2,48,003 was stated to be obtained as loans from Directors, the particulars of the Directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply in question No. 17. The question of receiving back the money does not arise. Q. 19. Have you given any loan to anybody or borrowed money from anybody? A. 19. I have given loan of Rs. 25,000 to my father in his business. The payment was made by cheque. I have not received the amount back. He has not passed on any receipt to me. I don't remember whether I have given any loan to anybody. I have borrowed from Mr. Dhanpal Shah Rs. 1,40,000 approximately who is my uncle who is doing the business in the name of Chaise Product. This amount was received by me in cash or cheque. I don't exactly remember. However, this amount was deposited in Skyjet in the year 1978 when it was partnership firm. Q. 20. Did you get the receipt from Skyjet for this amount? A. 20. I don't remember. Q. 21. To whom you have given this amount in skyjet? A. 21. I don't remember. Q. 22. I am showing the receipt dated 14-8-1984 for Rs. 15,000 by which you have received Rs. 15,000 cash you already denied in answer to question No. 18 having any deposit on the answer to question No. 19 by which having any loan a/c. with Skyjet. Then how you have received the amount and where you have utilized? A. 22. I adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oan for Skyjet during last two years. Q. 30. Have you given any loan to Skyjet during last two years? Ans. I have not given any loans to Skyjet during last two years. Q. 31. Have you taken any money from M/s. Skyjet for giving loan to anybody? Ans. As far as I remember I have not taken any loan or money from M/s. Skyjet during last two/three years. Q. 32. I am showing you ledger-Z of Skyjet for 1983-84. On page No. 7, there is an account under the heading Miss Preeti V. Mehta loan a/c. In this a/c. lot of money have been credited and debited. What have you to say about this? Are you aware of this a/c.? Ans. I cannot say anything about this account. I am not aware of this account. Q. 33. In this account it is seen that on 9-11-1983 cash of Rs. 1,00,000 was given by you to M/s. Skyjet. What you have to say about it? Ans. I have not given the money to M/s. Skyjet on 9-11-1983. Q. 34. I am showing you receipt No. 2186 dated 9-11-1988 according to which the Skyjet had received Rs. one lakh cash from you on that day. Have you received the copy of the receipt? Ans. No. I have not received any receipt. Q. 35. Who is maintaining the receipt book? Ans. The cashier Shri Avinash Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's house to take cash? Ans. So far as my remembrance, I had gone to Parulben's house to take cash only for once. Q. 12. When you have gone to Parulben's house to take cash for deposit, in whose name receipt will be prepared as stated by Parulben? Ans. No. She has not told me to prepare receipt for anybody's name but afterwards she had directed through Anilbhai Gandhi. Q. 13. Do you remember under whose names you have prepared the receipts as directed by Shri Anil Gandhi? Ans. Mostly the receipts were prepared in the following names, so far my remembrance. (i) Preetiben Mehta, Ahmedabad. (ii) Skyways, Ahmedabad. (iii) Lucky Laboratory, Kalol. Q. 14. Whether the cash received in the abovenamed persons were deposited in the above persons account? Ans. Yes. Q. 15. I show you the receipt No. 618, dated 24-5-1983 for Rs. 75,000 with your signature and stamped issued from Skyjet Aviation Pvt. Ltd. for Lucky Laboratories. You explain regarding this receipts in connection with the above matter? Ans. On seeing this receipt I can say that it was written by me. The signature on that receipt is also mine. And I had received the cash. But now I do not remember that this cash is recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Mehta by you? Ans. As stated earlier, no cash at any time is given to P.V. Mehta means Preetiben Mehta. Therefore, this Rs. 15,000 cash is also to Anilbhai Gandhi by me, so far as my remembrance. Q. 25. The reply given by you for the above voucher are the same reply for loan account 'Other vouchers' for P.V. Mehta means Miss Preeti V. Mehta? Or whether you want to say anything else? Ans. The reply is the same, for the voucher which were prepared in the name of Preeti V. Mehta. I do not want to say anything more. Similarly, on the same day, Shri Anil S. Gandhi gave a statement on oath. The Important questions and answers given thereunder are the following: Q. 2. Who looks after the cash transactions of M/s. Skyjet? Ans. As far as payment and expenses are concerned cash transactions are attended by the cashier Shri Avinash Thakkar. However, the cash transactions of loan accounts of Miss Preetiben Mehta and Shri Chandrakant S. Amin are concerned I am handling the cash transactions. Q. 3. In reply to Question No. 2 you had stated that you are looking after the cash transactions of loan accounts of Miss Preeti V. Mehta and Shri Chandrakant S. Amin. From whom do you receive the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Skyjet are recorded in this register. The register is written by the cashier. The entries are made under my instructions. Q. 12. I am showing page No. 70 of Annexure A-32. According to this, on 6-11-1984 cash of Rs. 30,000 was received from Shri A.K. Shah and cash of Rs. 25,000 was received from K.T. Patel. Subsequently on 7-11-1984 cash of Rs. 15,000 was received from Shri A.K. Patel. Who are these three persons and where from the money come? Ans. I do not know the above persons. The cash has been received from Smt. Parulben who might have received from the above persons. Q. 13. Has the payments of the above receipts been made. If so to whom? Ans. As far as I remember the payment has been made and the cash was sent to Smt. Parulben for making payments to the parties. Q. 14. Who is Shri Munir V. Mehta? Ans. Shri Munir V. Mehta is the brother of Miss Preetiben V. Mehta. Formerly he was director of M/s. Skyjet. Q. 15. Do you know Lucky Lab.? What type of transactions are there between Lucky Lab. and Skyjet? Ans. Yes. It is a Private Limited Co. and Shri Chandrakant S. Amin is one of the Directors of the said company and the same is situated at Kalon. Sometimes Lucky Lab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Q. 8. How many receipts have you prepared in the name of Parulben M. Jaykrishan and Miss Preeti V. Mehta? Ans. I might have not prepared of similar nature, I can say like this way. Q. 9. If you have prepared receipt for money received at that time, whether you have received cash amount at that time? Ans. I have not received any cash amount at any time from Miss Preeti V. Mehta or Parulben. But if any receipt, if prepared by under the handwriting of mine, then it was prepared under the instructions of our Chief Accountant Shri Anil S. Gandhi because that not my job as cashier. But as stated above accidentally, I have prepared receipts only in the absence of somebody in the Accounts Department. I was preparing the receipt for the collection received from customers". 4. Miss Preeti was examined on the date of search and seizure operation, i.e., on 29-3-1985, and also on 3-6-1985, 19-2-1986, 7-3-1986 and 12-11-1986 also. We have already extracted questions put to her and answers given by her on 29-3-1985. With reference to receipt No. 0898, dated 7-7-1982, she was asked a question where from she got Rs. 70,000 which she purported to have paid to Skyjet on 7-7-1982 and what was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was going to reconcile these two statements, she answered that she could simply say that whatever she had done had been done at the instance of Smt. Parulben in whom she had full trust, she being her aunty. In her statement on 29-3-1985, Question No. 4 was put to her after showing her account in the books of Skyjet (P.) Ltd. for the financial year 1982-83 in which the opening balance was noted at Rs. 1,34,507 and deposits had been made in that account totling to Rs. 8,81,620 serially from 1 to 27. To a question whether she made these deposits in her account, she answered 'no'. Question No. 5 put to her again showing the account wherein withdrawals on various dates having serial Nos. 1 to 43 and she was asked whether on withdrawals she received cash. In reply, she stated that these withdrawals had not been made by her. In answer to another question, she stated that she was a director to the assessee-company from its very inception and the ledger books of financial years 1981-82, 1982-83 and 1983-84 were shown to her and she was asked when she had denied deposits as well as withdrawals in this account, how did she give the confirmation of the accounts when she knew that she had not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er (Preeti). She answered: "Earlier I have already informed the department that Mrs. Parulben has taken my signatures on various Bank Papers, Blank Transfer Share Forms. Probably Mrs. Parulben might have used Blank signed transfer forms for this transfer. However I received a request from Shri Dhanpal J. Shah on 31-3-1986 enclosing therewith two shares transfer forms dated 18-3-1986 No. 174335 and 174331 duly filed in instructions by Shri Anil Gandhi the then Chief Accountant of the Skyjet Aviation Pvt. Ltd. Which clearly indicates that no transfer has taken place till that date. Further a request was received from the company enclosing two transfer forms were dated 31-4-1986 to requesting me to sign the transfer forms. Again these transfer forms were filled in by Shri Anil Gandhi in his own hand writing indicating my ownership of above 150 preference shares and 2 equity shares. I am submitting all these transfer forms (xerox copies) along with letter from Shri Dhanpal J. Shah for your ready reference. So I believe that no transfer has taken place till today. I am really amazed that these had been transferred in 1984. Thus the transfer is without my knowledge and consent, the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0; Rs. 60,000, Rs. 30,000; Rs. 1,50,000; and Rs. 8,494. Do you claim owner of the amount? Ans. I do not claim ownership of this amount as already sated in answer to Q. No. 12 in respect of Avanti Agencies Pvt. Ltd. Q. 31. If it is not your deposits, then who has deposited in your account? Ans. My answer is same as I have answered for the Question No. 13. Regarding withdrawals mentioned at Sl. No. 1 to 9 of the loan account, my answer is same as in the case of Avanti Agencies Pvt. Ltd. (all Questions). The statement has been given voluntarily, without any pressure." 6. One of the persons examined on 29-3-1985 under section 132 was Shri Anil S. Gandhi, who was the head of the A/c. Deptt. and attending authorisation of the vouchers for payments, Secretarial work i.e., Company Law matters, labour, P.F. and working for the sister concerns of M/s. Skyjet. To the question who looked after the cash transactions of the assessee-company, he answered that as far as payments and expenses were concerned, cash transactions were attended by the cashier, Shri Avinash Thakkar. However, the cash transactions of loan accounts of Miss Preeti Mehta and Shri Chandrakant S. Amin were concerned, he wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 21-3-1986 and another on 30-1-1989. It is, no doubt, true that she does not appear to have been cross-examined. Therefore, let me examine the contents of her affidavits. The first affidavit is dated 21-3-1986. She states that she is the President of M/s. Skyjet Aviation (P.) Ltd. and has been so for the last several years. She is also looking after another concern by name M/s. Skyways in her capacity as a Trustee of G.M. Beneficiary Trust, which is a proprietary concern. In para 2 of the affidavit, she admitted that she arranged finance of the above two concerns from time to time. In para 3, she states that moneys lent to these concerns during the accounting year relevant to assessment year 1983-84 by a friend Shri Kiran S. Chokshi at her instance are as follows. They had been credited in the books of above concerns as per my instructions: (A) In the books of Skyjet Aviation Pvt. Ltd. (i) Account in the name of the then Director Miss Preeti V. Mehta as per Annexure 'A'. (ii) Account in the name of the then Director Mr. C.S. Amin as per Annexure 'B'. (B) In the books of Skyways- (1) Accounts in the name of Miss Preeti V. Mehta, as per Annexure 'C'. In para 7 of her affidavit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He maintained cash books cum ledger for financial years 1981-82, 1982-83 and 1983-84 which were in respect of money borrowed and lent but they did not contain anything about his professional receipts and expenses. For the financial years 1984-85 and 1985-86, he has to prepare and write the books of account. He is not doing any money lending business but he had borrowed money from different persons and given to different persons as friendly loans during financial year 1981-82 till date. When he was asked to give details of borrowings and loans, he submitted relevant copies of accounts for financial years 1982-83 and 1983-84 in respect of money borrowed and lent and he has furnished xerox copies of his account from the books of J. Bhaveshkumar Shroff for the period S.Y. 2037, 2038, 2039 and 2040. When asked what was the security he obtained from the persons to whom he lent the money, he replied that against borrowings he had not offered any security but he had signed hundi papers for each of the transactions of borrowing from M/s. J. Bhaveshkumar Shroff and Mukundrai Amrutlal Shroff HUF. So far as lending is concerned, he had not taken any security from the persons to whom he had le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt appearing in the books of the assessee-company entry by entry. Similarly, she also denied the withdrawals from the account entry by entry. She confirmed that she only took a loan of Rs. 1,40,000 from Shri Dhanpal J. Shah, who is her maternal uncle, which was invested by way of share capital in the assessee-company in the year 1978. Subsequently, she stated that she had advanced a loan of Rs. 25,000 to her father from her savings and apart from this she had not indulged in taking loans or giving loans to others. She further categorically stated that she was signing the papers and other documents in connection with the affairs of the company on the instructions of Mrs. Parulben who is her aunty. Her role was limited to signing of papers and carrying the instructions of Mrs. Parulben. Further, apart from the statement of Miss Preeti, the statements of Hasmukh Dinmanikant dated 29-3-1985, Anil S. Gandhi dated 29-3-1985 and the statement of Shri S. Bhatt dated 29-3-1985, it is clear beyond doubt that these persons were acting on the clear instructions of Mrs. Parulben M. Jaykrishan and their statements made evidently clear that Mrs. Parulben was in complete control of the affairs o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintaining accounts or making entries in the books of account and they never had any dealings with Miss Preeti or Amin. Preeti's loan account was maintained by the assessee-company. So also, her ledger account was also maintained in the books of account of M/s. K. Chokshi & Co. The claim of the assessee was that whatever advances that were found in the name of Miss Preeti in the books of account of the assessee-company were borrowed from M/s. K. Chokshi & Co. However, this version does not appear to be completely correct. Preeti's account was maintained as per Annexure 'A' to the affidavit of Mrs. Parulben and it is appearing at page 23 of the departmental paper book. Similarly, C.S. Amin's loan account was appended as Annexure 'B' to Mrs. Parulben's affidavit and it is appearing page 21 of the departmental paper book. The ledger account of Preeti in the books of account of M/s. K. Chokshi & Co. relating to assessment year 1983-84 was provided at page A/112 of the assessee's paper book. The ledger account of Preeti in assessee-company's accounts vis-a-vis her borrowals from M/s. K. Chokshi & Co. are provided in the table below opposite to each other for easy comparison and drawing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name sake. No explanation in this regard was forthcoming from any quarter whatsoever. Similarly, even with regard to Shri C.S. Amin, his explanation was not forthcoming even though the admitted position was that at the bidding of Mrs. Parulben, M/s. Chokshi & Co. advanced similar amounts to Shri C.S. Amin and Shri Amin was recorded as creditor in the books of account of the assessee- company instead of Mrs. Parulben. The two affidavits filed by Mrs. Parulben are quite in accord with the bulk of other evidence on record and none of her affirmations in her affidavits comes in conflict with the other material evidence on record and, therefore, the argument that in spite of her filing affidavits she was not summoned and cross examined with reference to her affirmations in the affidavits does not destroy the case of the revenue in any case. Further, Mrs. Parulben was a director of the assessee-company from 1984 onwards and she is the chief spokes-person about the affairs of the assessee-company. Therefore, the question is whether her affidavits can be given more weight than the affidavits of the assessee itself. In my humble opinion, Mrs. Parulben represents the assessee- company. The i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for payment of the amounts due to them. There is absolutely no reservation while coming to the conclusion that Preeti is no other than a benamidar of Mrs. Parulben. Therefore, in my opinion, the bulk of evidence on record would establish that the so- called creditors have no capacity to lend the amounts shown against each of them. They are mere benamidars of Mrs. Parulben. Whatever signatures Miss Preeti and C.S. Amin subscribed they did at the dictates of Mrs. Parulben and all the staff of the assessee-company obeyed Mrs. Parulben as their real boss including Miss Preeti and C.S. Amin. Further, the proof of the transactions was also not established. 12. In Shankar Industries' case, the ingredients essential to be proved to accept the genuineness of the cash credits standing in the names of third parties are stated to be as under:- "It is necessary for the assessee to prove prima facie the transaction which results in a cash credit in his books of account. Such proof includes proof of the identity of his creditor, the capacity of such creditor to advance the money and, lastly, the genuineness of the transaction. These things must be proved prima facie by the assessee and only aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court, the Hon'ble Kerala High Court held the following: "Held, that it is well-established that the onus of proving the source and nature of any money received by the assessee is upon him. In the present case, the assessee made no attempts to produce the witnesses whom he wanted to cross-examine, apart from merely asking the department to issue fresh summons. The officer refused to issue fresh summons because, according to him, there was no purpose in issuing summons over and over again after the first summons had been returned unserved. In the circumstances, it could not be said that the assessee was denied a reasonable opportunity of adducing evidence. The officer could not be said to have acted in violation of the principles of natural justice. In the circumstances, he was entitled to draw an inference that the receipts were of an assessable nature. The Tribunal, having disbelieved the assessee's version in regard to his borrowing from V, had no evidence to accept his version in respect of his borrowings from the other two bankers which also arose in identical circumstances. The only reason given by the Tribunal was that, though they were examined by the officer, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t withdrawn at the same time. There was no evidence to show that the loan was actually given. There was also no evidence to show that the amount was lying uninvested with the lady. On a reference: Held, that the conclusion arrived at by the Tribunal was not perverse in law. The amount of Rs. 20,000 was assessable as the income of the assessee from undisclosed sources." 16. In CIT v. W.J. Walker & Co. [1979] 117 ITR 690 is again a decision of the Calcutta High Court. In that case, which relates to assessment year 1964-65, the ITO called upon the assessee to explain a cash credit of Rs. 50,000 found as a loan from a party and the assessee produced a confirmation letter from the party but the party's clerk deposed that the party had not given the loan. The officer also perused the income- tax returns of the party, and having satisfied with the creditworthiness of the party, held that the loan was not genuine. 17. Another decision cited for the revenue was Bharati P. Ltd. v. CIT [1978] 111 ITR 951 (Cal.). In that case, the confirmatory letters produced from the so-called creditors were all perused and when notices were sought to be served, they returned back unserved. In that case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is full evidence as unbelievable. 20. Another decision cited was Bhojraj Kishanchand v. CIT [1994] 209 ITR 500/73 Taxman 602 (Bom.). The facts as well as the decision thereon are appearing in the headnote of the said decision at page 501 as under: "In a reference under section 256 of the Income-tax Act, 1961, it is not open to the High Court to embark upon a reappraisal of the evidence. Even the question of sufficiency of evidence cannot be gone into in a reference under section 256. The assessee was a partner in a Bombay firm. In 1963, the firm was raided by the Enforcement Directorate. During the course of the search, a typed copy of the balance sheet concerning the proprietary business of the assessee at Hong Kong, carried on in the name of K, was seized by the Enforcement Directorate. The balance sheet pertaining to the Hong Kong business of the assessee prepared on the instructions of the assessee as on March 31, 1959, disclosed a sum of 3,57,000 Hong Kong dollars credited to his capital account. Reassessment proceedings were initiated. The assessee explained that the amount of Hong Kong dollars 3,57,000 in fact represented unpaid price of goods and two loans. The Income- t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only subsidiary, and any finding thereon is only incidental, so long as the source of funds is the assessee. This is apart from the fact that sections 3 and 4 do not bar such an enquiry in an income-tax assessment". 22. The next decision cited before me was Jash Bhai F. Patel v. CIT [1982] 136 ITR 799/[1981] 5 Taxman 73 (Punj. & Har.). In the facts of that case, while completing the assessment proceedings for assessment year 1964-65, the accounting period ending with October 17, 1963, the assessee-firm filed the return of income. In the course of assessment proceedings, the ITO noticed certain cash credits in the account books of the assessee. The total of the cash credits thus entered from six creditors was Rs. 1,26,000. Confirmatory letters were produced from the parties to prove the genuineness of the cash credits. The ITO accepted these items as genuine and computed the assessment. One of the cash creditors was one Shri Mohandas, proprietor of M/s. Mohandas Ghanshamdas, Amritsar. He gave a statement on 22-3-1968 before Shri J.S. Gill ITO, Dist. II(IX), Amritsar, to the effect that all the loans in the name of M/s. Mohandas Ghanshamdas were bogus. In his statement, it was state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urden to prove that the entry existing in the books of account was not genuine had to be discharged by the Revenue and it was discharged by way of statement of M recorded in May, 1978, and the onus shifted to the assessee. The entire evidence produced by the assessee had been considered. The finding which had been recorded was supported by a number of reasons given by the Appellate Assistant Commissioner and that order had been upheld. The genuineness of a credit is a question of fact and on the facts it could not be said that there was any convincing material on record to establish the genuineness of the cash credit". In this case also, on the date of the search, specific statement was given by Preeti as well as C.S. Amin stating that the amounts standing in their names in the books of account of the assessee were not lent by them. The cashier, the accountant and all other persons concerned with the accounts of the assessee-company appeared to be quite subservient to Mrs. Parulben rather than to either Preeti or Amin. Preeti and Amin were not persons of any considerable means. Even according to Mrs. Parulben, the amounts standing against these two persons were arranged by her. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfaction of ITO which was required to be made under the section. However, it should be a satisfaction of a man of ordinary prudence. If explanation offered by the assessee probabilised the existence of facts which must prove the genuineness of the cash credit in dispute in due course or on the nature of things, the assessee might be said to have offered a satisfactory explanation. At the same time, an assessee could not get himself rid of his burden by offering any sort of explanation which might suit him. Explanation should be reasonable, probabilising the happening of the things in the manner told or averred by the assessee. The ITO in the present case brought circumstances which fatally damaged the capacity of depositors to advance amount to assessee and, therefore, he was right in rejecting the explanation offered by the assessee. It was held that the addition under section 68 was justified. 27. In the facts of this case, the source of a source is sought to be adduced or furnished through the examination of Shri K. Chokshi. However, he is a person, though a chartered accountant, who did not maintain books of account recording even his professional income which he is oblige ..... X X X X Extracts X X X X X X X X Extracts X X X X
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