TMI Blog2000 (10) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... 30,055 and Rs. 27,852 for the assessment years under appeal in its returns of income. The ITO completed the original assessments under section 143(3) on Rs. 37,905 for the assessment year 1974-75 on 30-7-1976 and on Rs. 31,989 for the assessment year 1975-76 also on 30-7-1976. The ITO held a view that there was failure on the part of the assessee to disclose whole and true income for the previous years relevant to the assessment years under appeal and, therefore, he issued notices to the assessee under section 148 of the Income-tax Act. He completed the reassessments under section 147(a) of the Income-tax Act on 18-3-1987 and determined the total income of Rs. 38,88,240 for the assessment year 1974-75 and Rs. 7,73,130 for the assessment year 1975-76. He made additions of Rs. 38,56,334 and Rs. 7,41,144 respectively for the assessment years under appeal by way of income from other sources. The ITO gave reasons in his re-assessment orders to make these additions that the loan creditor M/s. Jethmull Bhojraj denied the portion of the loan transaction as shown by the assessee in its books of account. He also have a reason that Shri D.D. Sukhani, proprietor of M/s. Jethmull Bhojraj filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment on the basis of the statement recorded by him but without producing books of account maintained by Shri D.D. Sukhani regarding the transactions at Gangtok. From the evidence recorded by him the ITO concluded that the oral evidence of Shri D.D. Sukhani was more preferable than books of account of the assessee produced before him and the assessee's statement. He held that Shri D.D. Sukhani did not advance a sum of Rs. 20,18,000 after 11-4-1973 and the assessee's did not mentioned about a sum of Rs. 15 lacs in his books of account. The ITO noted in the re-assessment that from the books of account produced before him it was very much clear that a further loan of Rs. 20,18,000 was received from Shri D.D. Sukhani on different dates and the repayment of Rs. 15 lacs was noted in the account books. The said documents were maintained in the regular course of business and in fact, the same were accepted during the course of original assessment. From the certificate issued by the Bank of Baroda to M/s. Jethmull Bhojraj, the ITO concluded that the said firm maintained a bank account in which cheques were encashed. He refused to accept that Shri D.D. Sukhani's statement was not support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bhojraj on 18-4-1973. He did not agree with the statement of Shri D.D. Sukhani. He stated that he had no choice for making payment by cheque when the demand was made to make in cash. He also made the payments earlier by cheque. Mr. Misra has arranged loans for him. Thus the assessee's account books in which the entries of repayment of loan of Rs. 15 lacs and the entries of raising loan, his own statement and confirmatory letter is the evidence on record on the assessee's side. There is a statement of Shri D.D. Sukhani on the other hand which made the ITO to disbelieve the repayment of loan of Rs. 15 lacs and raising another loan of Rs. 20,18,000 from M/s. Jethmull Bhojraj. However, the pertinent fact which can be noted here is that Shri D.D. Sukhani promised to produce his account books to clarify the disputed point of repayment of loan of Rs. 15 lacs and raising another loan of Rs. 20,18,000, but he did not produce the account books before the ITO. The ITO merely believed the statement of Shri D.D. Sukhani on the one hand and disbelieved the account books, confirmatory letter and the statement of the assessee on the other hand. This is how the additions were made and the CIT(A) co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sukhani was, of course, cross-examined to a great extent, but his oral cross-examination could not be done by the assessee regarding his books of account because the books of account were not produced. In this view of the matter, it 'Can be said that Shri D.D Sukhani's cross-examination remained inconclusive. Production of bank statement and his affidavit were the secondary piece of evidence. The primary piece of evidence was the books of account. When the primary piece of evidence was not made available for cross-examination, the secondary piece of evidence cannot take place of primary piece of evidence. It would be more so because the additions were made on the basis of oral evidence of Shri D.D. Sukhani. 9. Shri Sen also contended that the ITO has discharged the onus cast on him and the appraisal of the evidence on record would prove that the ITO did his best. About 20 questions were put to Shri D.D. Sukhani in his cross-examination and from the said cross-examination Shri Sen contended that the ITO has fulfilled his duties and there is no scope to blame him that he did not fulfil his duties. If this is to be taken as correct then Shri Sen's second contention that the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rected, He has also pointed out the commentary from 'Income Tax Law by Chaturvedi Pithisaria, Vol. 2, 3rd edition, page 1899 on the point of ingredients of the assessee's onus. He has urged that it is necessary for the assessee to prove the transaction which results in a cash in its books of account. Such proof includes proof of identity of the creditors, the capacity of such creditors to advance money and lastly the genuineness of the transaction. These things must be proved prima facie by the ass essee and only after the assessee has adduced to establish the prima facie case the aforesaid onus lies on the department. Merely establishing the identity of the creditor is not enough. Mere filing of confirmatory letter also does not discharge the onus that lies on the assessee. 12. In the instant appeals, the assessee was having monetary transactions with M/s. Jethmull Bhojraj since long. There was a running account between them. The assessee was making repayment of the old loans and raising new loans from M/s. Jethmull Bhojraj. Shri D.D. Sukhani was a proprietor of M/s. Jethmull Bhojraj. The firm of M/s. Jethmull Bhojraj was advancing huge loans to different parties. The said Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so has drawn our attention that the creditor Shri D.D. Sukhani had stated that the interest was not charged and, therefore, the CIT(A) was not correct to allow the deduction of interest. The creditor had stated that he did not advance the loan itself, but the CIT(A) deleted the addition. On finding of the facts that the assessee's version of raising a loan from the creditor M/s. Jethmull Bhojraj and repayment of the same with interest was found to be correct. Therefore, it would be incorrect to say that the CIT(A) has allowed interest because the creditor did not charge the same. 15. The learned representative for the assessee Shri Samir Chakraborty in his reply has pointed out that the assessee had challenged before the CIT(A) the re-opening of the assessment under section 147(a) of the Income-tax Act. According to him, if the CIT(A) has not given a specific finding on the said point and the assessee should not be blamed for the same. He has further pointed out that the ITO did not discuss the entire evidence of both the sides but the CIT(A) has discussed the same. Shri D.D. Sukhani admitted that he used to go to Darjeeling and Gangtok where his branch offices were situated abou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question of raising a presumption against the assessee does not arise. He has cited the judgment of the Supreme Court in the case of CIT v. Orissa Corporation (P.) Ltd. [1986] 159 ITR 78/25 Taxman 80F wherein it is held that it was in the knowledge of the ITO that the creditor was an income-tax assessee. Shri Chakraborty pointed out that the account books were in his possession and control. The assessee could do nothing unless he produced them for cross-examination. He has also cited the judgment of the Allahabad High Court in the case of Addl. CIT v. Radhey Shyam Jagdish Prasad [1979] 117 ITR 186/1 Taxman 31 wherein the Allahabad High Court has held that the Tribunal was right in holding that the assessee was denied an opportunity to justify the cash payment. 17. According to Shri Chakraborty, the learned representative for the assessee, procedural error is a substantial error. According to him, the ITO should not have rejected the evidence of the assessee on one hand and accepted the oral evidence of the creditor on the other without production of the books of account. 18. We have examined the facts. We have considered the arguments advanced on behalf of both the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld go to prove that there are two versions on record-one by Shri D.D. Sukhani and the other by the assessee. The version of the assessee is supported by his books of account and the version of Shri D.D. Sukhani is supported by bank certificate which is filed on record that the cash transactions were going on between M/s. Jethmull Bhojraj and the assessee. Therefore, the bank certificate was not expected to reflect all the transactions between the parties. Cumulative effect of the evidence would go to prove that the ITO has forcibly made the additions by re-opening the assessment. The additions require to be deleted on merits with the additions on account of interest. 21. In the result, the assessee succeeds. The revenue fails and the I.T. appeals are dismissed. 22. The W.T. Appeals are consequential because of making additions on account of income from undisclosed sources and rejection of payment of interest. The said additions are added as an asset. If the additions are deleted then the net wealth for the assessment years under appeal has to be reduced. However, Shri Sen has pointed out section 2(m) of the W.T. Act on the point of debt owed and, therefore, it is to be included ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire debit and credit entries amounting to Rs. 38,56,334 were not proved. This came to be added as income from undisclosed source for the assessment year 1974-75. The ITO relied on the affidavit filed by Shri D.D. Sukhani wherein the transaction as recorded in the books of account of the assessee was denied. Shri D.D. Sukhani was examined by the ITO on 10-2-1982 and during the course of cross-examination, he confirmed the affidavit filed by him before the ITO, Darjeeling. He confirmed the statement mentioned in his affidavit that out of opening balance of Rs. 16,09,089 due from the assessee, only a sum of Rs. 15,00,000 was received by him from the assessee and there was no further transactions thereafter and he did not charge any interest. He agreed to produce the books of account kept by him at Gangtok. Thereafter, we find that the creditor neither produced the books of account nor the assessee insisted upon the production of the same as material evidence of the cash credit. On these facts, the ITO concluded that the cash credits recorded in the books of account of the assessee remained unexplained. The CIT(A) deleted the addition for the assessment year 1974-75. Similarly, fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... davit filed by the creditor, the assessee should be given a chance to establish the genuineness of the cash credit by other circumstantial evidence. For these reasons, I am of the opinion that the matter should go back to the file of the ITO with a direction to reframe the issue in accordance with law with advertence to the observations made above. The assessee shall be given adequate opportunity to bring material and other corroborated evidence in support of the transaction. All the transactions appear to have been taken place in cash and the transaction to this extent cannot go unnoticed by the department merely relying on the books of account of the assessee. 28. All the assessments framed are, therefore, set aside for framing the issue afresh. The assessments in the Wealth-tax Appeal Nos. 351 and 352 (Cal.) of 1988 would also be set aside to be framed in the light of the assessments to be framed under the Income-tax Act. 29. In the result, the appeals are allowed for statistical purposes. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 As we have differed in our opinion, hence we have prepared the following points of difference of opinion for consideration of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aj during the period from 13-4-1973 to 6-3-1974. Interest amount of Rs. 3,38,334.45 to M/s. Jethmull Bhojraj was also recorded in the books of the assessee. The versions of the assessee in this regard had been accepted as the original assessment stage as mentioned above. However, during the course of the assessment proceedings (most probably in the case of Shri D.D. Sukhani himself), Shri Sukhani denied the portion of the above-mentioned transaction as claimed by the assessee. Shri Sukhani stated in a deposition given by him before the Income Tax Authorities that there was a credit balance in his favour of Rs. 16,09,089.33 as at the end of the accounting year corresponding to assessment year 1973-74. This figure is actually found to be tallying with the figure as per the books of the assessee also. Shri Sukhani, however, claimed and also filed an affidavit in this regard on 6-12-1976 to the effect that as against the aforesaid opening balance of Rs. 16,09,089.33, he had received an amount of Rs. 15,00,000 from the assessee and that thereafter there was no further transaction between him and the assessee. On the basis of the above submissions of Shri D.D. Sukhani accompanied with hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of supporting his alleged claim that a sum of Rs. 15,00,000 had been received by him and furthermore that he had not made a further advance of Rs. 20.18 lakhs to the assessee. The Assessing Officer furthermore discusses that on the other hand, the assessee produced his books of account which were duly examined by the Assessing Officer and were found to tally with the claims of the assessee. It is also stated that certificates issued by Bank of Baroda were produced by the assessee before the Assessing Officer which clearly showed that transactions between the two parties took place even after the date, which, according to Shri Sukhani, was the last date of such transactions. The Assessing Officer, however, did not accept the contentions of the assessee. He discusses in this connection that the assessee himself had shown re-payment of loan to the extent of Rs. 10,13,000 in the confirmation filed during the course of the original assessment, whereas, Shri Sukhani had alleged that he had received a total amount of Rs. 15,00,000 during the year. The Assessing Officer thus finally held that the entries passed in the books of account of the assessee could not be relied upon, inasmuch a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,600. The CIT(A) furthermore discusses that confirmation letters in respect of all the transactions, wherever required, had been filed by the assessee and books of account had also been produced and examined by the ITO at the original assessment stage. The CIT(A) states in this connection that the ITO had accepted the genuineness of the loans and also the transactions recorded in the books of the assessee after examining all the relevant evidences as well as the books of account of the assessee. The CIT(A), thereafter refers to the details of the depositions made by Shri Sukhani before the Assessing Officer under section 131 of the Act CIT(A) points out that in reply to question No. 4, Shri Sukhani stated that his younger son Shri Dhanesh Sukhani used to look after his business at Gangtok and that Shri D.D. Sukhani himself used to visit Gangtok and Darjeeling only for about 3/4 months in a year. The CIT(A) has inferred that this fact shows that Shri D.D. Sukhani could not possibly have been very familiar with the entire details of the business activities being carried on at Gangtok. The CIT(A) also refers to the statement made by Shri D.D. Sukhani that he had received back an amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change Place, Calcutta showing clear evidences of transaction between M/s. Jethmull Bhojraj, Gangtok and the assessee, on 19-1-1976 and 28-1-1976. The CIT(A) has thus been of the opinion that as against the documentary evidences produced by the assessee like his books of account, confirmatory letters and also the Bank statements as mentioned above, the verbal evidence of Shri D.D. Sukhani, and that too not fully subjected to cross-examination and totally from his memory without reference to any written document cannot at all be accepted. In that view, the Ld. CIT(A) deleted the entire additions for assessment year 1974-75. In this connection, he also relied on the order passed by his predecessor for assessment year 1976-77 in favour of the assessee. So far as the assessment year 1975-76 is again concerned, the CIT(A) deleted the disallowance in respect of the claim of interest payment. 6. When the matter came up before the Tribunal, arguments, as discussed by us above, were put forward by both the sides. The brother Judicial Member was of the opinion that the CIT(A) has been correct in relying on the documentary evidences produced by the assessee in preference to the verbal denia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the stage of the hearing of the appeals before me, the ld. D.R. contends that the assessee has not explained as to what happened to the credits in the subsequent years and how then were shown in the books of account of the assessee. He also points out the express denial by the creditor himself and argues that the genuineness of the transactions does not stand proved. On the other hand, the Ld. counsel for the assessee points out that the entire matter was thoroughly argued during the course of the Departmental appeal for assessment year 1976-77. He has relied on a judgment of the Gauhati High Court in the case of Khandelwal Constructions v. CIT [1997] 227 ITR 900 at page 904 to the effect that where no proper enquiry had been made by the Assessing Officer to ascertain whether the explanation submitted by the assessee was genuine, the amounts represented by credits are not assessable under section 68. Reliance has furthermore been placed by the ld. counsel for the assessee on a judgment of the Calcutta High Court in the case of Northern Bengal Jute Trading Ltd. . The. different aspects of discharge of the burden on the assessee and the Department regarding establishment of the genui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be considered as more reliable than the above-mentioned verbal evidences of Shri D.D. Sukhani, in support of which, there does not exist any documentary evidence and Shri Sukhani also could not perform his promise of getting his cross-examination completed and producing his books of account before the Assessing Officer. 10. Finally, the point at issue before me is whether the reliefs allowed by the CIT(A) should be upheld or the matter should be sent back to the Assessing Officer for the purpose of re-examination, There is no option for me to confirm the additions and disallowances, thereby reversing the orders of the Ld. CIT(A) fully. Although the brother, Accountant Member has made discussions to the effect that in absence of discharge of the onus resting with the assessee in a proper manner, the credit entries in his books are liable to be added back, ultimately, he has not ordered in that line. He has merely wanted to send the matters back to the file of the Assessing Officer for re-examination. It is known that not only Shri D.D. Sukhani but his son, who was looking after his business, have both expired. There appears to be nothing left of the business being carried on by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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