TMI Blog1995 (12) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... come from its agricultural farm and this should have been accepted by the Administrative CIT after proper and full enquiry, it was not open to the ITO in a subsequent year to take a contrary view and/or in any event the burden was on the ITO to establish by evidence that income was not available from the LAF. 3. The CIT(A) failed to appreciate that an assessee is not required to establish the same facts year after year. 4. The CIT(A) erred in confirming the addition of Rs. 25.49 lakhs to your appellant's income for the asst. yr. 1976-77. On the facts and circumstances of the case, your appellant says and submits that the said sum of Rs. 25.49 lakhs does not represent its income and consequently, the CIT(A) erred in including the same in its total income. 5. The CIT(A) ought to have held that the said sum of Rs. 25.49 lakhs is not your appellant's income and ought to have been deleted. 2. As the counsel for the assessee, inspite of arguing all of the 5 grounds separately has advanced consolidated arguments and the issue involved for all these appeals being taxability of cash credit in the assessee's books appearing in all these years in the name of one creditor, namely, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agricultural income of 'LAF' whereas the assessee insists that without production of any evidence in this regard in view of the disclosures made by Jalans under the Voluntary Disclosure Scheme of 1975, the ITO should give credit for agricultural income of Rs. 22 lacs per annum.....' 2.3. Thereafter in para 6 of my order I had explained that "the onus of proving the sources of a sum of money found to have been received by the assessee is on him". Para 6 of my order dt. 30th March, 1983, reads as— '6. The various decisions of the Courts in very clear terms laid down that under s. 68 any sum found credits in the books of an assessee maintained for a previous year may be charged to income-tax as the income of the assessee of that previous year, if— (i) the assessee offers no explanation about the nature and source of such sum or, (ii) the explanation offered by him is, in the opinion of the ITO, not satisfactory. [Todar Mal vs. CIT 1977 CTR (P H) 174 : (1977) 106 ITR 619 (P H)]. There is sample authority for the proposition that where an assessee fails to prove satisfactorily the source and nature of a certain amount of cash received during the accounting year, the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes and says that he paid a certain amount to the assessee, the assessee has completely discharged the burden of proving the source of the amount. In our opinion, we cannot entertain such an argument for the simple reason that it is not enough to show that a person says that he paid the money but it must be shown from where the money actually came, i.e., the source. That has not been established in this case." 6. By the time, the ITO took the said set assessments for the asst. yrs. 1976-77 and 1977-78, the returns for asst. yrs. 1978-79 to 1980-81 had also been furnished and, therefore, the ITO took all the six assessments together and all the notices/letters of enquiry as well as the assessee's replies were for all these years. 7. As there were cash credits in all these assessment years in the name of M/s LAF, details of which have been given in para 5 above, the ITO proceeded to investigate/verify the genuineness of the same as required under s. 68 of the IT Act. Before completing the assessment, the ITO tried his best to get some information or evidence from the assessee as well as from the creditor and managing partner of the creditor Mr. Tolaram Jalan who was partner in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of fresh assessment proceedings for those two years and assessment proceedings for rest of the assessment years, though the ITO gave as many as 9 opportunities to the assessee, 9 opportunities to partner Sri Tolaram Jalan and 6 opportunities to the creditor M/s LAF, but not a single piece of evidence relating to the cash credits appearing in the name of LAF in all these years was furnished. The assessee's only plea before the ITO was that during the course of its disclosure made under the Voluntary Disclosure Scheme of 1975, in which the disclosure was made upto the asst. yr. 1972-73, the assessee had established that M/s LAF was having agricultural income in lakhs of rupees and, therefore, the Department should accept that finding in all the subsequent years. As the assessee was not coming out with any sort of evidence relating to the cash credits in all these years appearing in the name of M/s LAF the ITO made detailed investigations himself by visiting the place where the creditor's agricultural farm was stated to be maintained and the information/material collected by the ITO during his visit to the creditors, farm site where he held camp office, was brought in assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts appearing in his books with any material or evidence. It has, therefore, to be held that there is no satisfactory explanation for the source of cash credits amounting to Rs. 25,49,000 appearing in the books of the assessee-firm. These amounts are accordingly added to the total income as concealed income of the assessee-firm." 11. Aggrieved with the ITO's order, the assessee came in appeal before the CIT(A). The CIT(A) after considering the assessee's submissions thread by thread, confirmed the ITO's order. From the ITO's order and order of the CIT(A), the facts which were not disputed by the assessee before the Tribunal are summarised as under: (A) "The ITO under his letter dt. 6th Sept., 1983, had called upon the assessee to produce the following: (i) The books of accounts of LAF. (ii) Details of land under possession/cultivation of LAF during the relevant period. (iii) Area of land, if any, acquired by the Govt. under the U.P. Land Ceiling Act. (iv) Details of produce obtained from the agricultural operations including the name of the produce and the quantity. (v) Names and addresses of parties by whom the agricultural produce had been sold. (vi) Eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oved seeds and was raising 3 crops a year. It was stated that the produce was taken to different Mandis by rail and road. The ITO was told that an amount of Rs. 70 lacs had been spent for the development of the farm in the initial stages. It was stated that the witnesses were persons of repute and that the average income of the farm was Rs. 4,000 to Rs. 5,000 per acre per year. The ITO was told by the assessee that the Department had accepted during VDS-cum- Settlement of 1975 that the farm had spent Rs. 70 lacs for development and that the income derived from the farm upto 1972 was as under: Years Acres available for cultivation x Income per year per acre Income per year x No. of years Gross income Rs. 1951-55 500 acres x Rs. 100 Rs. 50,000 x 5 2.5 lacs 1956-60 1000 acres x Rs. 500 Rs. 5 lacs x 5 25.00 lacs 1961-65 1100 acres x Rs. 750 Rs.8.2 lacs x 5 45.25 lacs 1966-70 1100 acres x Rs.1000 Rs. 11 lacs x 5 55.00 lacs 1971-72 1100 acres x Rs.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter to the assessee on 18th Nov., 1983. In this letter it was pointed out by the ITO that Sri Tolaram Jalan, a partner of the assessee-firm, was admittedly managing the affairs of the Farm and that in spite of his direct connection and association with the Farm no evidence had been led regarding the income earned by the Farm. Apart from mentioning certain aspects of the matter which had been mentioned by him in his earlier letters, it was pointed out by the ITO that though the settlement had been made in Dec., 1975, under the VD Scheme, the assessee had been given credit for income upto 1972 only because LAF had been closed down all its operations after 1972. In this letter the ITO had further stated as under: "You are very well aware that regular Khasra and Khatawani are maintained by the District Revenue authorities giving whole and full particulars of the above requirements of mine besides giving other information. None of such evidence has been produced by you before me so far. The existence of farm land and earning of income by conducting agricultural operations are two distinct facts and can be proved by separate evidence alone. You are aware that agricultural operations, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 16th Dec., 1983, and requested the assessee to produce evidence in respect of assessee's 'claim of agricultural land and agricultural income belonging to M/s LAF'. The assessee did not attend before the ITO at Baharaich nor did it produce any evidence before him there. After his return from Baharaich, the ITO addressed a letter dt. 18th Jan., 1984, to the assessee wherein it was stated by him as under: ".....I had informed you that I would like to camp at Baharaich so that you could show me the land owned, possessed and cultivated under the name and style of M/s LAF. You have chosen not to avail of the opportunity." ".....I had planned to camp at Baharaich from 9th Dec., 1983, to 16th Dec., 1983, so that you had all the opportunity to adduce evidence relating to your claim that huge incomes have been earned by you from year to year from M/s LAF and I could verify the veracity of the same first hand. As intimated to you, I camped at Baharaich, C/o ITO, Income-tax Office, Baharaich, but there was no appearance by you or by your authorised representative. I also took this occasion to go through the Revenue records maintained by the Revenue authorities, particularly the pape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It may be stated that the ITO was simultaneously writing letters to and making enquiries from the assessee, LAF and/or Shri Tolaram Jalan has produced any evidence before the ITO. As no evidence was produced before the ITO, he has held that the assessee had not been able to prove the nature and source of cash credits appearing in the books of the assessee in the LAF a/c. Therefore, he has brought to tax the cash credits appearing in the 'LAF A/c' as income of the assessee from undisclosed sources under s. 68 of the Act. 12. The assessee's contention before the CIT(A) remained the same as was before the ITO. The main ground of the assessee was that in the voluntary disclosure petition under the VD Scheme which was upto the year 1972, the CIT after having gathered information through the ITO by sending the ITO on tour to the site of LAF in 1974 and 1975 had accepted that LAF was having agricultural income of Rs. 22 lacs per annum. So it was no more open for the ITO to ask for evidence in connection with cash credits appearing in assessee's books for the asst. yrs. 1976-77 to 1980-81. It was also submitted that there is no iota of evidence on record on the basis of which it cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 'C' at page No. 634 alleged to have been prepared by the ITO Sec. IX(Central), Bombay, on 21st Jan., 1976, as well as page No. 618 alleged to be a letter written by ITO from his camp office at Baharaich (U.P.), advanced his arguments as under. 14. The learned counsel for the assessee, therefore, submitted that in 1974 and 1975 when the CIT had deputed one of his ITOs to make on the spot enquiry regarding LAF's land holdings and agricultural income; the CIT had, while accepting the disclosure made by Jalan's family, accepted the existence of land holdings with the creditor LAF, availability of agricultural income in the hands of LAF and the genuineness of the then loans given by LAF. He further submitted that though the aforesaid three facts were accepted to be in existence till the year 1971-72, but because the enquiries were conducted by the CIT in the years 1974 and 1975, so the existence of land holdings with the creditor LAF, availability of agricultural income with LAF and genuineness of loans given by LAF will be deemed to have accepted for the years 1974 and 1975 also as well as for the subsequent years upto 1981. Deriving strength from the so-called "Note on disclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the transaction, he submitted that copy of creditor's account in assessee's books and acceptance of availability of agricultural income in the hands of LAF till the year 1972 by the CIT proves creditor's capacity as well as genuineness of the transactions relating to cash credits during the periods relevant to asst. yrs. 1976-77 to 1980-81. The another ground for attacking the action of the lower authorities was that the authorities below were precluded from taking a decision contrary to the findings of the CIT arrived at while accepting disclosure made by Jalan's family because of the doctrine of res judicata. Reliance was placed on the following decisions: (i) Parimisetti Seotharamamma vs. CIT (1965) 57 ITR 532 (SC) (ii) S. Hastimal vs. CIT (1963) 49 ITR 273 (Mad) (iii) Orient Trading Co. Ltd. vs. CIT (1963) 49 ITR 723 (Bom) (iv) Tolaram Daga vs. CIT (1966) 59 ITR 632 (Assam) (v) CIT vs. Orissa Corpn. P. Ltd. (1986) 52 CTR (SC) 138 : (1986) 159 ITR 78 (SC). To strengthen his plea, the learned counsel for the assessee further relied on the statement of the 4 persons, namely—(i) Sri Jasvantrai Pande; (ii) Sri Radheshyam Shivnarayan; (iii) Sri Parasuram and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the lower authorities he submitted that the assessee has not discharged its primary onus required under s. 68 of the Act and none of its three ingredients have been proved. He, therefore, submitted that lower authorities were right in considering the amount of cash credits as assessee's income under s. 68 of the Act. Contradicting the assessee's counsel's submissions that all the three ingredients of s. 68 of the Act were established during the course of disclosure proceedings, the learned Departmental Representative referring to para Nos. 3.6 of note on disclosure in Jalan's cases, statement 'C' to it, and ITO's letter, submitted that firstly these documents have no evidentiary value as none has been signed either by ITO or by CIT and even otherwise there is nothing in these documents, which may establish that the creditor LAF had crores of agricultural income during the years 1975-76 to 1979-80 relevant to asst. yrs. 1976-77 to 1980-81. According to him, these documents, at the most would have been relevant upto the year 1972 because, in Statement 'C', the availability of agricultural income with LAF was found to be only upto the year 1972. He further relied on the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. (ii) No evidence has been furnished, which may indicate or prove that during the periods relevant to asst. yrs. 1976-77 to 1981- 82, the creditor had any income from agriculture. (iii) 'Res judicata' is not applicable. He further concluded his submissions by relying on findings of the lower authorities, which were not disputed or contradicted at any stage of the proceedings including hearing before the Tribunal. In reply to submissions of learned Departmental Representative the assessee's counsel reiterated its old submissions. 16. We have considered the submissions of both the parties and gone through the records available before us and have come to the conclusion that for the disposal of these appeals, the questions to be decided by the Tribunal are as under: (i) What are the requirements and ingredients of s. 68 of the Act, which the assessee in these appeals was to satisfy? (ii) Was it assessee's onus to first prima facie satisfy the requirements/ingredients of s. 68? (iii) Can the assessee, on the basis of material before the Tribunal, be said to have discharged its primary onus, (iv) (a) Whether the Revenue authorities were bound to accept the ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the income of the assessee of that previous year." From the language used in s. 68 it is noticed that any sum found credited in the books of an assessee maintained for a previous year may be charged to income-tax as the income of the assessee of that previous year, if— (i) the assessee offers no explanation about the nature and source of such sum, or (ii) the explanation offered by him is, in the opinion of the AO, not satisfactory. The Hon'ble Punjab and Haryana High Court had occasion to analyse the requirements of provisions of s. 68 in case of Todar Mall vs. CIT 1977 CTR (P H) 174 : (1977) 106 ITR 619 (P H) and held as under: "Head Notes" "In view of s. 68 of the IT Act, 1961, where any sum is found credited in the books of an assessee and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not satisfactory, the sum so credited may be charged to income-tax as the income of the assessee without further proof." Sec. 68, therefore, gives a statutory recognition to the principle that the cash credits which are not satisfactorily explained may be assessed as income and it is not necessary for the ITO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of Act. In the absence of such proof, the AO is entitled to treat it as taxable income [Kale Khan Mohammed Hanif vs. CIT (1963) 50 ITR 1, 4 (SC)]. As regards to burden, it is now well settled law that the burden of proving the source of a cash credit is on the assessee. When a cash credit entry appears in the assessee's books of account in an accounting year, the assessee has a legal obligation to explain the nature and source of such credit [Sreelekha Banerjee vs. CIT (1963) 49 ITR 112, 117 (SC)]. If the assessee offers an explanation about the cash credit, the IT Department can put the assessee to proof of his explanation, and if the assessee fails to tender evidence or burkes an enquiry, then the AO is justified in rejecting the explanation and holding that the income is from an undisclosed source. The AO is not required to specify or prove what that source is, which from the nature of the case must be known only to the assessee [Seth Kalekhan Md. Hanif vs. CIT (1958) 34 ITR 669, 673, 674 (MP) affirmed (1963) 50 ITR 1 (SC); CIT vs. Kris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to shift the onus from one side to the other if the evidence is sufficiently prima facie to establish the case of the party on whom the onus lies. It is not merely a question of weighing feathers on the one side or the other, and on saying that if there were two feathers on one side and one on the other, that would be sufficient to shift the onus. What is meant, is, that in the first instance, the party on whom the onus lies must prove his case sufficiently to justify a judgment in his favour if there is no other evidence." When, however, in a case where the entry stands in the name of an independent third party, the burden will still lie upon the assessee to establish the identity of the said party, and to satisfy the AO that the entry is real and not fictitious (Gumni Ram Siri Ram vs. CIT, distinguishing Tola Ram Daga vs. CIT. From the above-mentioned provisions of law and various authorities it is settled law: (a) that the primary onus to prove the genuineness of a cash credit appearing in the books of a person is upon that person, which can be discharged by prima facie proving the identity of the creditor, capacity of the creditor and genuineness of the transaction. (b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available for year after 1972. The assessee said that he would take suitable action. STATEMENT 'C' Agricultural income : . . . 1951-55 500 x 100 = 50,000 x 5 = 2,50,000 1955-60 1,000 x 500 = 5,00,000 x 5 = 25,00,000 1961-65 1,100 x 750 = 8,25,000 x 5 = 41,25,000 1966-70 1,100 x 1000 = 11,00,000 x 5 = 55,00,000 1971-72 1,100 x 2000 = 22,00,000 x 2 = 44,00,000 . . . 1,67,75,000 Less : Expenses for development of the Farm 70,00,000 . . . Rs.97,75,000 EXTRACT FROM DOCUMENT AT PAGE NO. 618 NO. CENTRAL/IK/F.D.I/75-76 Office of the ITO, Sec. IX Central Rg. II, Bombay Camp At : Bahraich (U.P.) Dated Sept. 26, 1976. M/s. Loknath Tolaram, 135, Modys Street, Fort, Bombay Camp at Bahraich (U.P.) Sir, Please refer to your letter dt. 25th Sept., 1975. Shri Basudevi Prasad Srivastav have attended and he was cross-examined by you. He has given his own reasons as he could not bring the records from Tehsil Office, Manpara. During his cross-examination, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by you in para 'b' of your letter, you are requested to accompany my Inspector to the office of the Collector, from where you have obtained the certified copy and make yourself sure that whatever I have stated is correct. Yours faithfully, sd/- ITO, Sec. IX (Cent), Bombay." From the contents of document at page 618 the only fact which stands proved is that in Fasli year 1366 i.e., calendar year 1958 Sh. Uma Shankar Lohia, as per Khatauni Muhal register maintained in Collector's office, had only 363.735 acres of land, whereas the note relating to disclosure petition, at the most, confirms that the creditor LAF had agricultural income till the year 1972. There is nothing in these documents which may prove or even suggest that the creditor LAF had any agricultural land or any agricultural income during the periods relevant to asst. yrs. 1976-77 to 1980-81. Consequently, the presumption arrived at by the assessee's counsel that these documents confirm the availability of agricultural land and agricultural income sufficient to advance amounts of cash credits in various years detailed herein-before is absolutely unfounded and cannot in any way be taken as supportive to his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o prove independently for every assessment year the following facts: 1. Description and quantity of crops marketed by LAF, 2. Name and address of buyer, price it fetched, expenditure incurred on cultivation of crops. Besides the above, I also insisted that the members of Lohia family who assisted in the running of the farm and the manager and other employees of the farm should be produced before me. The reply of the assessee by letter dt. 16th Feb., 1984, was that they should not be approached regarding the matter of LAF which is a separate entity whose existence and capacity to lend the money has been accepted by the Department in the past. It was also claimed that there is no change in the situation since the acceptance of the income from the farm by the Department during VDS-cum-Settlement of 1975." As these findings were never disputed by the assessee, so we are in agreement with the ITO that during the period relevant to asst. yrs. 1976-77 to 1980-81, the creditor had no agricultural land and or at least had no income from agriculture so as to advance the cash credits under appeal. Submission of assessee's counsel is, therefore, rejected. 21. The assessee's next co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereon Not mentioned 1979-80 30-8-1983 In response to notice under s. 148 Not mentioned 1980-81 30-8-1983 In response to notice under s. 148 Not mentioned 1981-82 30-8-1983 In response to notice under s. 148 Not mentioned 1982-83 16-11-1983 In response to notice under s. 148 Not mentioned. These facts were not rebutted by the assessee's counsel during the hearing before us. After having considered the evidentiary value and contents of these returns we are unable to deviate from the findings of the lower authorities that the returns of income of LAF were not only invalid and non est, but also confirm that the LAF had no agricultural income at all, because had it any income then the same would have been definitely shown in the relevant columns. We, therefore, hold that the returns of income filed by the creditor LAF do in no way establish any of the three ingredients of s. 68 of the Act. 23. The next submission of the assessee's counsel was that the existence of creditor's account in assessee's books amply confirms the genuineness of the transaction. To decide this issue, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the AO is entitled to treat it as taxable income. The aforesaid two authorities of the apex Court still hold good and as a matter of fact, s. 68 of the Act has given a statutory recognition of what was previously established by judicial decisions (as supra) under the 1922 Act. The Hon'ble High Court of Calcutta had occasion to consider the scope of provisions of s. 68 in case of Sikri Co. (P) Ltd. vs. CIT (1977) 106 ITR 682 (Cal), at page No. 688 and has held: "Sec. 68 of the IT Act, 1961, is a statutory recognition of what was previously established by the judicial decisions under the Indian IT Act, 1922, namely, that where certain sums of money were claimed by the assessee to have been borrowed from certain persons, it was for the assessee to prove by cogent and proper evidence that these were genuine loans." The Hon'ble Allahabad High Court in case of Nanak Chandra Laxman Dass vs. CIT had also occasion to consider the scope of s. 68 of the Act and, as per headnote, held as under: "Sec. 68 of the IT Act, 1961, gives a st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n brought on record by the ITO were also sufficient to hold that the cash credits in assessee's books were not genuine. 25. The next contention of the assessee's counsel was that due to applicability of doctrine of res judicata, the AO as well as CIT(A) were not justified in deviating from findings of CIT relating to the availability of agricultural income in the hands of LAF. The learned Departmental Representative on the other hand has submitted that doctrine of res judicata do not apply to the income-tax matters. We have considered the submissions from both sides as well as law. "Sec. 11 of the CPC (V of 1908) provides that no Court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim litigating under the same title, in a Court competent to try such subsequent suit or the suit in which such issues has been subsequently raised, and has been heard and finally decided by such Courts." The doctrine of res judicata rests on the principle that one should not be vexed twice for the same course and that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mention that the assessee's conduct all along the proceedings was never cooperative, so much so that during the course of hearing before us, the Tribunal offered an opportunity to the assessee's counsel to show from records any kind of evidence which could prove that the creditor LAF owned agricultural land, had carried on agricultural activities during the period relevant to assessment years under appeal. The Tribunal further inquired about the nature of crop cultivated, quantity of produce and evidence for having sold the produce. But the assessee's counsel in spite of availing this opportunity also, reiterated his old submissions that genuineness of cash credits should be accepted on the basis of findings of CIT in so-called disclosure petition. As the assessee's counsel failed to avail of the last offered opportunity to show any kind of evidence relating to cash credits under appeal, we hold that no evidence of any kind, which the assessee was under obligation to produce for proving the genuineness of the cash credits under appeal was ever filed, and, therefore, the CIT(A) as well as the ITO were justified in considering the amount of cash credits as assessee's income from und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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