TMI Blog1999 (7) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 on 29-3-1985 they denied the ownership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 guarantees to the bank for the finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 the IT Rules. As stated above, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors 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 is required to be made as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allness 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 learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 then discus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hokshi 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 learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Chokshi, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... fter 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 instanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chokshi 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted case 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, Therefore, it 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 particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y money. I don't know why the receipt is issued in my name. Q. 18. I am showing you the cash book of Skyjet page 78 dated 24-5-1983 which shows that you have received back the amount of Rs. 75,000 cash do you acknowledge this receipt? A. 18. No. As I have not deposited this money as 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 dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter I countersigned. In case of big payments the payment is made after Smt. Parulben signed or the approval received from her. Q. 28. Have you raised any loan for making deposits or extending further loans to Skyjet? Ans. I do not remember except I have already stated earlier. Q. 29. Have you raised any loan during last two years for Skyjet? Ans. As far as I remember I had not raised any loan 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the directions from Anilbhai, and that also as per directions from Mrugeshbhai through Parulben. Q. 10. From where Anilbhai Gandhi brought that cash from Parulben? Ans. Whenever Parulben use to come in our office, herself brought the cash and deposit the same with Gandhibhai. And some times Gandhibhai also use to go to Parulben's house and take the cash for deposit. Q. 11. At any time you have gone to Smt. Parulben'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 accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction with Parulben for cash. And all the cash transactions with Smt. Parulben was done through Shri Anilbhai Gandhi only as stated by me as per explanation. Q. 23. I show you for example a loan account of Miss P. V. Mehta, dated 14-8-1984 a voucher for Rs. 15,000. Was this voucher prepared by you? Ans. Yes, it was my handwriting. Q. 24. Rs. 15,000 cash given to P.V. Mehta shown in the above voucher, whether these cash is really given to Preetiben V. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he abovementioned money comes to Smt. Parulben? Ans. I have no idea. Q. 10. What are the works are supervised by Smt. Parulben? Ans. Smt. Parulben is in overall charge of the Skyjet Aviation (P.) Ltd. She does not come daily but on telephone or my message she keeps herself informed about the business of Skyjet. Q. 11. I am showing to Annexure A-32 which is Cash Collection Register for the year 1984-85. Which type of entries are made in this register? Ans. Receipts of cash in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mrs. Parulben M. Jaykrishan, but thereafter as directed by Chief Accountant, Shri Anil Gandhi, the name was changed by me. Q. 6. Whether the amount of Rs. 75, 000 was really received from Parulben? Ans. I do not know regarding this. Shri Anilbhai knows. Q. 7. After what time this changes takes place in receipt No. 142? Ans. I do not exactly remeber. But this changes perhaps have been made within a day or two. I have done this within a day or two. I have done this within a day or two after 8-4-1982. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e able to explain my account with A. Chokshi Co., C.A." On 19-2-1986, a question was put to her that whereas in her statement on 29-3-1985 she had stated that she was not aware of any account appearing in her name in the books of Skyjet Pvt. Ltd., subsequently she had signed the confirmation letter of the loan account appearing in her name is Skyjet book on 29-10-1985. Thus, there was a contradiction between the statement recorded on 29-3-1985 and her own account signed by her subsequently. To a question how she 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 havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -signed by Smt. Parulben her involvement was limited to the extent of signing the receipts only. Vide question No. 13, she was asked that by the end of 31-3-1983 she was holding 150 preference shares valued at Rs. 1,50,000, whereas in the balance-sheet of the assessee-company for the period ending 31-3-1984, these shares had been transferred in the name of Dhanpal J. Shah. She was asked to explain in what circumstances these shares had been transferred to his name and where the sale proceeds had been accounted by her (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- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he instructions of Smt. Parulben. A question was put to him with regard to the impugned loan account and an answer was elicited. Since both the question and the answer are important, they are extracted completely as under: "Q. 30. There is also a loan account in the Skyjet Aviation Pvt. Ltd. in your name for the period ending 31-3-1983. This loan account I am showing to you. This loan account has an opening balance of Rs. 1,13,494.82. Further the deposits have been made on 1.6; 3.6; 24.6; 19.7; 5.11; 30. 9; of Rs. 35,000; 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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. Amin. This is done as per instructions of Smt. Parulben." He also replied that generally and mostly the cash so received were deposited in the Bank. When questioned about the works supervised by Smt. Parulben, he replied that Smt. Parulben was in overall charge of Skyjet Aviation (P.) Ltd. she did not come daily and by message she kept himself informed about the business of Skyjet Aviation (P.) Ltd. 7. Smt. Parulben M. Jaykrishan, the President of assessee-company (M/s. Skyjet Aviation (P.) Ltd.) gave two affidavits, one on 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 account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, he derived dividend income, interest income prior to 1973-74 and he was assessed to income-tax since 1975-76 but he was not assessed to wealth-tax. He has four members in his family, i.e., himself, his wife, Smt. Anjana, son Rupak studying 2nd year B.Sc. and another son Swaroop studying in 9th class. He is the only earning member in his family. He says that he had maintained books and he had borrowed some amount and lent but unfortunately he could not maintain proper books of account for his profession regarding receipts and payments. 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 borro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : If suresh N. Patel, Munir V. Mehta, Preeti V. Mehta and Chandrakant S. Amin, Prashant Nayak comes to you of their own and asks you for loan without any assurance of Mrs. Parulben and also looking into their financial position, do you advance loans to them? A. 40: No, I will not give. 10. From the evidence on record, the Assessing Officer stated in this assessment order dated 31-3-1986 that the statements of Miss Preeti dated 29-3-1985 and 7-3-1986 confirmed only that she once again and categorically denied the ownership of the loan account 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to do any work unless he had got an interest in it. In such circumstances, when he borrows moneys from outside at 121/2%, he says that only 71/2% or so would be charged for the advances made by him. This conduct on the part of Shri Chokshi is very suspicious and leads to doubt in one's mind about the genuineness of the loans contracted from him and his capacity to contract loans also does not inspire confidence. Every person who worked in the assessee-company at that time categorically stated that he/she had obeyed the orders of Parul while maintaining 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of Rs. 1,00,000 on each of those dates from M/s. K. Chokshi Co. Therefore, the version that every deposited amount in the name of Preeti in the assessee-company's account must have come only from M/s. K. Chokshi Co. does not appear to be a true version. Admittedly, while advancing the loans, Shri Chokshi felt that it was an advance made not to Miss Preeti but to her aunty Mrs. Parulben. If that was so, what prevented the advances not being recorded in the name of Mrs. Parulben in the account books of the assessee-company. For what purpose her name was suppressed as appearing as a creditor of the assessee and why Miss Preeti was put forward as creditor for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see-company. This amount was stated to have been borrowed from Shri Dhanpal J. Shah. She admitted that she does not know where the shares are lying. Shri Dhanpal J. She was admitted as an additional Director of the assessee-company vide page A/65 of paper book. Ultimately, the preference shares of Rs. 1,50,000 which were hitherto standing in the name of Miss Preeti were transferred to the name of Shri Dhanpal J. Shah. Preeti was only getting Rs. 1,400 as monthly salary and she had no other means to advance such heavy amounts to the assessee-company. She had no financial capacity to float a company. It is not the case of the assessee that the creditors were pressing 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 Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee or having received any interest. The ITO examined the other two bankers at Madras without the presence of the assessee and they also denied having given loans to the assessee or having received any interest. The ITO added Rs. 1,35,000 as the assessee's income and disallowed the interest. The Tribunal upheld the ITO's order only in so far as the loan from one Multani banker, who was examined in the presence of the assessee, was concerned. As regards the other two bankers, the Tribunal felt that it was the responsibility of the department to have given the assessee an opportunity to cross-examine them. Under the circumstances, when the matter was taken in reference to 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 fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee-company. The ITO sought to assess this amount as the assessee's income from undisclosed sources and his action was upheld by the Tribunal on the following grounds: the lady is said to have received the amount in or about November 1962, but the money was alleged to have been invested only on 1st March, 1965, whereas the lady or the person who was looking after her interests was in the habit of keeping all monies invested. There was no explanation on behalf of the lady as to why this amount had remained uninvested for about 21/2 years. The sums were withdrawn at the time of the marriage of the lady, from the company where it was lying invested and the entire sum was not 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 assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed to have executed hundis in favour of the above Shroffs but he himself failed to get at least a receipt either from Preeti or Amin of having received from Shri Chokshi the hefty amounts borrowed from him. Further, the interest he used to pay to his creditors was 121/2%, whereas the interest he had collected from Preeti and Amin was only 71/2%. Neither any promissory note nor hundi papers were obtained either from Preeti or Amin in Shri Chokshi's favour. Further, Shri Chokshi did not maintain account books wherein the professional receipts were recorded. Therefore, the statement given by Shri Chokshi on oath is completely riddled with improbabilities and unnaturalities rendering his 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 assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of assessment to income-tax in which the question of benami arises is not of such a nature. What the Income-tax Officer primarily seeks to establish is not the benami nature of the transaction, but the source of the investment for the purchase of the property, whether it proceeded from the assessee or the persons in whose name the property is held. Being so, the prohibitions contained in sections 3 and 4 of the Act do not affect the consideration of this question including the question of benami which incidentally arises. The enquiry being mainly about the source of the investment, whether it was made by the assessee, the benami character of the acquisition of the property is 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company which goes to corroborate their statements. In the circumstances, the ratio of the above decision appears to be applicable to the facts on hand. 23. The next decision referred to was that of the Rajasthan High Court in Sohan Lal v. CIT [1995] 215 ITR 544. In that case, a cash credit entry of Rs. 35,000 was standing in the name of one of the partners of the assessee-firm. In May, 1978, he gave a statement that it was a havala entry. However, in December, 1978, he filed an affidavit confirming the credit entry. The question was whether the said amount was a genuine cash credit. In that connection, the Rajasthan High Court held at page 544 in the headnote as under:- "Held, that the burden 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no credible circumstantial evidence was brought forth which had the propensity to demolish the presumption raised on denial of the parties themselves. 26. The last decision cited is Poonjabhai Vanmali Sons v. ITO [1989] 33 TTJ (Ahd.) 91. In this case, the question involved was what sort of circumstantial evidence and what should be its nature and reliability to rebut the presumption of the falsity of the cash credit on the denial of the cash credit by the creditor himself. It was held that in order to discharge the assessee's burden under section 68, an assessee was required to offer explanation about nature and source of cash credit and thereafter burden shifted to the ITO which was subject to 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 explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
