Bombay High Court
Ramkumar Jalan vs Income Tax Officer. on 12 December, 1995
Equivalent citations: (1996)56TTJ(MUMBAI)545
ORDER
I. S. VERMA, J. M. :
All these five appeals are by the assessee against the consolidated order of the CIT(A), dt. 31st March, 1986, common for all these periods. In the memorandum of appeal, the assessee has taken as much as 21 grounds. As the ground Nos. (6) to (21) were not pressed during the hearing, so it is not necessary to reproduce them. The amounts of cash credits as per grounds of appeal for the asst. yr. 1976-77 are Rs. 25.49 lakhs; asst. yr. 1977-78 Rs. 119.00 lakhs; asst. yr. 1978-79 Rs. 113.00 lakhs; asst. yr. 1979-80 Rs. 36.00 lakhs and asst. yr. 1980-81 - Rs. 15.00 lakhs, but while reproducing the grounds, only the figure of Rs. 25.49 lakhs for the asst. yr. 1976-77 (as a sample) has been mentioned. Ground Nos. (1) to (5) are as under :
1. The CIT(A) erred in holding that the appellant had not established its case that the source of the sum of Rs. 25.49 lakhs was "Lohia Agricultural Farm" (LAF).
2. The CIT(A) ought to have held that once the appellant had established that LAF had a large income 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 appellants 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 appellants 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 assessees books appearing in all these years in the name of one creditor, namely, "Lohiya Agricultural Farm", hereinafter mentioned as LAF. So all these appeals are decided by this common order for the sake of convenience. The CIT(A) has also passed a consolidated order for all these years.
3. The brief facts of the case are as under :
The assessee is a partnership firm constituted by the following partners :
(i) Shri Tolaram Jalan
(ii) Shri Amarchand Jalan
(iii) Shri Mohanlal Jalan
(iv) Smt. Rukmanidevi Jalan
(v) Shri Champalal Jalan
(vi) Shri Lokanath Jalan
(vii) Shri Laltaprasad Goenka
4. All the partners of the assessee-firm were partners in the capacity of Kartas of the respective HUFs in the firm LAF in whose name credit appears in the books of account of the assessee.
5. Returns of income for all these years were furnished as under :
Asst. yr.
Date of furnishing return 1976-77 22nd Jan., 1977 1977-78 16th Nov., 1977 1978-79 30th Sept., 1978 1979-80 20th Dec., 1979 1980-81 27th Jan., 1981 1981-82 25th Feb., 1982 The ITO noticed the following cash credits in the assessees books of account which were in the name of creditor named LAF :
Asst. yr.
Total cash credits in the books of M/s Ramkumar Jalan - Name of creditor LAF 1976-77 25.49 lakhs 1977-78 119.00 lakhs 1978-79 113.00 lakhs 1979-80 36.00 lakhs 1980-81 15.00 lakhs Rs. 308.49 lakhs Assessments for asst. yrs. 1976-77 and 1977-78 were completed by the ITO wherein the cash credits of Rs. 25.49 lakhs and Rs. 119.00 lakhs were added in the assessees income for the asst. yrs. 1976-77 and 1977-78 respectively. These assessments were set aside by the CIT(A) vide his order dt. 30th March, 1983, in CIT(A)-C-I-AP/208 & 209/82-83 because the assessee had pleaded that it was not given a proper opportunity. While setting aside the assessment order, for these years, the learned CIT(A) had observed in para Nos. 5 and 6 of his order as under :
"2.2. After briefly discussing the stand of the ITO and the submissions made by the assessee before the ITO it was noted by me in para 5 of my order dt. 30th March, 1983, as under :
5. The long and short of it is that the ITO does not want to give any credit for 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) 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 ITO is entitled to draw the inference that the receipts are of an assessable nature [A. Govindarajulu Mudaliar vs. CIT (1958) 34 ITR 807, 810 (SC)]. The onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the ITO is entitled to treat it as taxable income [Khale Khan Mohamed Hanif vs. CIT (1963) 50 ITR 1, 4(SC)]. Ingredients of assessees onus. It is necessary for the assessee to prove prima facie the transaction which results in cash credit in his books of account. Such proof includes proof of the identity of his creditor, the capacity of such creditor to advance the money and, lastly, the genuineness of the transaction. These things must be proved prima facie by the assessee and only after the assessee has adduced evidence to establish prima facie the aforesaid, the onus shifts on the Department. Merely establishing the identity of the creditor is not enough [Shankar Industries vs. CIT (1978) 114 ITR 689 (Cal), C. Kant & Co. vs. CIT (1980) 126 ITR 63 (Cal); Prakash Textile Agency vs. CIT (1980) 121 ITR 890 (Cal); Oriental Hire Industries P. Ltd. vs. CIT (1981) 131 ITR 688 (Cal)]. The Bombay High Court in the case of Velji Deoraj & Co. vs. CIT (1968) 68 ITR 708 (Bom) has held that the assessees duty to prove that an unexplained credit entry in his account books does not represent undisclosed income is not discharged by merely showing that the entry appears in the account of a third party and that the party in whose name the amount is credited is not fictitious party but a real party. He has to prove further that the entry made in the account books is a genuine entry. Again the Bombay High Court in the case of Lata Mangeshkar vs. CIT (1973) 88 ITR 336 (Bom) has observed as under at p. 346 :
"The other argument advanced was that once the assessee indicate reasonably a source to which the amount of Rs. 95,000 could well be attributed, the assessee had discharged the burden of proof on her and it was for the Department, thereafter, to show how the amount could not have come as it did from the solicitor. The argument amounts merely to saying this that if a person comes 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 assessees 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 assessee-firm in the individual capacity and in creditor-firm in the capacity of a Karta of his HUF and consequently, addressed the following notices/letters.
Notices/letters issued to :
M/s Ramkumar Jalan Shri Tolaram Jalan M/s Lohia Agrl. Farm Notice dt. 6th Sept., 1983 Summons dt. 18th July., 1983 Summons dt. 18th Aug., 1983 Letter dt. 22nd Sept., 1983 (1979-80 to 1981-82) Summons dt. 31st Aug., 1983 Letter dt. 22nd Sept., 1993 Letter dt. 5th Oct., 1983 Letter dt. 22nd Sept., 1983 Letter dt. 5th Oct., 1983 Notice dt. 20th Oct., 1983 Letter dt. 5th Oct., 1983 Letter dt. 24th Oct., 1983 Notice dt. 3rd Nov., 1983 Letter dt. 13th Oct., 1983 Letter dt. 3rd Nov., 1983 Notice dt. 18th Nov., 1983 Letter dt. 19th Oct., 1983 Letter dt. 5th Dec., 1983 Letter dt. 28th Nov., 1983 Letter dt. 7th Nov., 1983 Letter dt. 5th Dec., 1983 Letter dt. 9th Nov., 1983 Letter dt. 18th Jan., 1984 Letter dt. 17th Jan., 1984
8. When the assessee was called upon to explain the genuineness of the cash credits in various years appearing in assessees books in the name of M/s LAF, it was stated by the assessee that it had received these amounts in cash from the firm styled as M/s LAF, which according to it, was deriving income from agriculture. It was further submitted that the firm of M/s LAF was constituted by the following persons :
Sl. No. Name of partner Share in profit/loss of the firm
1.
Shri Uma Shankar Lohia 1/8
2. Shri Lokanath Jalan 7/64
3. Shri Tolaram Jalan 7/64
4. Smt. Rukminidevi Jalan 7/64
5. Sri Amar Chand Jalan 7/64
6. Sri Champalal Jalan 7/64
7. Sri Dharam Chand Jalan 7/64
8. Sri Mohanlal Jalan 7/64
9. Sri Laltaprasad Goenka 7/64 It was further submitted by the assessee that all the Jalans, i.e., partners at Sl. Nos. 2 to 8 were partners in their capacity as Karta of their HUFs.
9. On one side, during the appellate proceedings for the asst. yrs. 1976-77 and 1977-78, the assessees grievance was that it was not allowed a proper opportunity, but it was strange enough that during the course 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 assessees 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 creditors 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 assessees notice, but still no evidence, whatsoever, was filed by the assessee, except the old plea that the existence of agricultural income with the creditor should be accepted on the basis of voluntary disclosure petition.
10. After labouring hard, the ITO considered the cash credits in all these years appearing in the name of M/s LAF as assessees concealed income by holding as under :
"It is settled that the onus is on the assessee to explain the nature and source of cash credits, whether they appear in assessees account or in the account of a third party. The assessee, in spite of numerous opportunities, has not discharged its onus. The assessees explanation that the cash credits represent agricultural income received from M/s LAF is not supported by any material or evidence. The assessee, inspite of specific requisition, failed to produce the books of account of LAF although all the partners of the assessee-firm are partners of LAF. The IT records of LAF also do not show that advances therefrom have been made to assessee-firm. The assessee was repeatedly required to furnish the following :
1. Books of account of LAF of the relevant period.
2. Details of the land under the possession and cultivation separately by LAF during the relevant period.
3. Area of the land of LAF, if any, acquired by the U.P. Govt. during ceiling proceedings.
4. Name and quantity of the produce obtained.
5. Name and address of parties to whom the produce was sold along with price.
6. Evidence of transportation of produce from farm to buyers.
These evidence have not been made available to me. In order to verify whether a farm which could produce income of several lakhs per year existed at the place, I had undertaken a visit to Baharaich and had requested the assessee to show the land owned, possessed and cultivated under the name and style of LAF and also to prove his contention that his land can yield income attributed to it. The assessee spurned the offer. The assessee has been harping upon a settlement arrived at with the Department in 1975 under VDS wherein it appears that it was accepted that the assessee was deriving agricultural income from LAF upto and including 1972 only. It was explained to the assessee that there is no res judicata and estoppel to income-tax proceedings. The assessee inspite of everything has chosen not to substantiate the cash credits 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 ITOs order, the assessee came in appeal before the CIT(A). The CIT(A) after considering the assessees submissions thread by thread, confirmed the ITOs order. From the ITOs 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) Evidence relating to transportation of the produce, if say, from the farm to the place where the produce had been sold by LAF.
The ITO had further informed the assessee as under :
"I have gone through the papers of VDS-cum-Settlement... I do not find any material therein to support your contention that you were owning/possessing/cultivating 1100 acres of land under LAF."
Therefore, the assessee was called upon to produce evidence to prove that LAF owned/possessed/cultivated agricultural land and that it derived very substantial agricultural income as claimed by it and as claimed by the assessee. The ITO had very clearly told the assessee as under :
"Mere contention that such evidence was produced before CIT at the time of VDS shall not be acceptable as each assessment year is self-contained and independent unit of assessment."
(B) The assessee, however, did not produce the required evidence. The ITO, however, was informed by the assessee as also by LAF and Sri Tolaram Jalan that LAF was not maintaining any account books. It was asserted by the assessee that in 1974-75 detailed investigation had been made by the Department by holding camps at Baharaich; U.P. where agricultural lands of LAF were situated. It was stated that several persons including (i) Shri Jaswantrai Pandey, (ii) Shri Brijlal Yadav, (iii) Sri Radheysham Shivnarayan, and (iv) Sri Parasuram had been examined and as per their evidence it was proved (a) that 2000 acres of land had been allotted to Shri Uma Shankar Lohia for farming, (b) that the lands were situated in Distt. Baharaich (in villages Majhao, Gangapur, Bhojia and Siwri Mulmul), and (c) that the entire land was under cultivation. It was stated by the assessee that it had produced :
(a) Khataumirs in respect of 322.050 acres, 41.685 acres and 325.215 acres of land in Villages Majhao in the name of Shri Uma Shankar Lohia;
(b) Khataumirs in respect of 161.485 acres of land in the village Gangapur in the name of Shri Jagannath Lohia, and
(c) Khataumi of lands admeasuring 75 acres in Idjhao.
It was also claimed that it had produced other copies of Khatausis which was under farm. It was also claimed that 41 acres of land belonging to Gram Sabha was in the adverse possession of the Farm. It was stated that the farm was having tubewells and was irrigated. It was stated that the farm was using tractors, fertilisers and improved 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. 2000 Rs. 22 lacs X 2 44.00 lacs 167.75 lacs Less : Expenses for development 70.00 lacs 97.75 lacs It was pointed out by the assessee that an amount of Rs. 97.75 lacs was not taxed as it was treated as the net agricultural income derived by the LAF from the beginning of 1951 upto the end of 1972. It was stated by the assessee that in the circumstances, it was not necessary for the Department to call upon the assessee to prove the capacity of the Farm to produce agricultural income in subsequent years as the issue stood settled and the Department was already having evidence that the Farm was of 2000 acres and that the average income per year per acre was Rs. 5,000. It was requested by the assessee that the Department should follow the basis laid down by the CIT during VDS-cum-settlement. It may, however, be noted that the assessee did not produce any evidence before the ITO.
(C) The ITO under his letter dt. 20th Oct., 1983, requested the assessee to produce the details called for by him under his letter dt. 6th Sept., 1983. It was pointed out by the ITO that each year was an independent and self-contained unit of assessment and that facts were likely to change from year to year. The ITO, therefore, wanted the assesses to produce the land record regarding the land possessed/cultivated by LAF. The assessee was also asked to produce evidence regarding irrigation and mechanisation of the Farm and evidence for purchase of fertilisers and improved seeds. The assessee under its letter dt. 9th Nov., 1983, repeated the contentions and submissions made by it earlier. However, it did not produce any evidence before the ITO.
9. Since the assessee was not producing any evidence, the ITO decided to go to Baharaich for making on-the-spot enquiries in the matter. He wrote to the assessee and enquired of it as to when it would be convenient for it to produce evidence at Baharaich. The assessee wrote back to the ITO (under its letter dt. 11th Nov., 1983) that the Farm was closed down in 1982 and since they did not have any connection with the Farm, no useful purpose would be served by the assessees going to Baharaich. On the receipt of the assessees letter dt. 11th Nov., 1983, the ITO addressed a letter 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, if carried out, may result in losses also. Therefore, you have to prove by adducing sufficient evidence that the alleged income from the farm was in fact not agricultural receipt from the farm. No evidence of these facts has been produced before me either in respect of conducting the agricultural operations or proving the fact that so much of the income was earned by the farm so far....."
"..... Time and again, I have been told that evidence has been produced before the CIT, the AAC and before my predecessor and on the basis of such evidence only, the Departmental authorities have agreed to accept the agricultural income from M/s LAF. You must be aware that it is not so. It is needless to emphasise again that there is no res judicata in the income-tax proceedings and I have given you ample opportunities to produce the same before me. You have not produced before me any evidence whatsoever and I am compelling you to produce the same again and again. In case you want to rely on the evidence, if any, produced by you under VDS-cum-settlement, please note that no harm shall be caused to you, if you produce the same before me for the purposes of letting me accept your claim...."
"... You are aware that every year is a separate and independent unit of assessment. Therefore, I had already given you an opportunity to produce any evidence whatsoever in your favour at Baharaich by my letter dt. 3rd Nov., 1983, served on you as 8th Nov., 1983. However, you have, by your letter dt. 11th Nov., 1983, received in my office on 14th Nov., 1983, mentioned that no purpose will be served by your going there since you no longer have any connection with the farm. However, I am visiting Baharaich personally.
Therefore, once again I am giving you another opportunity in case you want to avail of it at Baharaich and I want you to show me the land owned, possessed and cultivated by you during the year under consideration..."
(D) As there was response from the assessee to ITOs letter dt. 18th Nov., 1983, the ITO addressed a reminder to the assessee on 28th Nov., 1983. On receipt of this letter the assessee under its letter dt. 1st Dec., 1983, invited the attention of the ITO "to all the correspondence, documents and evidences" on ITOs record. The ITO thereafter informed the assessee under his letter dt. 5th Dec., 1983, that he was going to camp at Baharaich from 9th Dec., 1983, to 16th Dec., 1983, and requested the assessee to produce evidence in respect of assessees 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 papers relating to the consolidation proceedings which were taken place in the villages of Rajhao and Gangapur, Paragana Baharampur, Tehsil Numpara, Distt. Baharaich, during 1975 to 1980. The consolidation proceedings information are compiled by the Revenue authorities in Form No. CH 2A, a copy whereof is being sent to you along with this letter. This record clearly shows that the land owned, possessed and cultivated by you was nowhere near 2000 acres as was your claim. It also shows that most of the land was under adverse possession and the total land belonging to Lohias as per this record is 227.54 acres, the details whereof are as under :
S.No. Name of village In the name of Total acres
1.
Majhao Shri Shyamsunder Shri Nirkunj 196.60 Shri U. S. Lohia 30.94
2. Gangapur Shri Jagannath
3. Bhojia Any of Lohias Nil
4. Simri Mulmul Any of Lohias Nil It is further ascertained that part of the above land in village Majhao belonging to Uma Shankar Lohia was sold as under :
Acres Rs.
Sri Liladhar 3,444 4,600.00 Sri Bhavani Shankar 4,431 6,600.00 Sri Yashwantram 5,000 7,500.00 Sri Gulab 4,050 6,100.00 Sri Lalbahadur 3,628 4,000.00 Sri Ramadhar 2,504 3,800.00 The copy of the letter from the officer of Sadham Sahakari Samiti is enclosed for your ready reference in this respect.
The consolidation proceedings leave no doubt that practically the entire land was in the adverse possession. You are hereby given an opportunity to rebut this evidence. You are once again asked to substantiate the cash credit entries appearing in the name of LAF/Jalan HUF Amanat Account in your books....."
(E) Even after the receipt of ITOs letter dt. 18th Jan., 1984, the assessee did not produce any evidence before the ITO. It only reiterated its earlier stand under its letter dt. 16th Feb., 1984. With regard to the evidence gathered by the ITO from the Revenue authorities (according to which the total land belonging to Lohia was only 227.54 acres) and regarding the sale of land belonging to Uma Shankar Lohia for recovery of a few thousand rupees not a word has been stated by the assessee in its letter dt. 16th Feb., 1984.
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 assessees 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 assessees 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 could be said that decision made by the CIT was not correct. It was further stated that the ITO Sec. IX(Central), Bombay, under his letter dt. 2nd March, 1973, had informed LAF as under :
"Your contention is absolutely incorrect and the Department has not agreed at all for determining the agricultural income after December, 1975. Your argument is, therefore, incorrect to say that the Department has allowed you Rs. 22 lakhs income after 1975."
The above noted observations of the ITO, it was stated, proved beyond doubt that there was an agreement between the assessee and the Department according to which the agricultural income of LAF had to be taken at Rs. 22 lacs per annum for calendar years 1973, 1974 and 1975. It was stated that the agricultural lands which were yielding income of Rs. 22 lacs per annum upto December, 1975 were yielding higher income subsequently and that the ITO had grievously erred in holding that LAF was not deriving any income from agriculture after 1972. It was stated that on the basis of the evidence on record, the ITO ought to have held that the assessee had satisfactorily proved the nature and source of cash credits appearing in the books of the assessee in the "LAF A/c." Consequently, it was stated that the ITO ought not to have made any addition under s. 68 of the IT Act. Shri Rakesh Khandelwal relied heavily on the statements recorded by the ITO of the following and the settlement arrived at by the assessee with Department in December, 1975.
(i) Shri Radheshyam Shivnarayan (Statement recorded on 20th Sept., 1974)
(ii) Shri Basudeo Prasad (Statement recorded on 26th Sept., 1974)
(iii) Shri Brijlal Yadav (Statement recorded on 27th Sept., 1974)
(iv) Shri Parasuram (Statement recorded on 27th Sept., 1974)
(v) Shri Jasvantrai Pande (Statement recorded on 28th Sept., 1974) It was stated that since the nature and source of credits appearing in the "LAF A/c" has been satisfactorily proved by the assessee there was no justification for the additions made by the ITO of Rs. 308.49 lacs in asst. yrs. 1976-77 to 1980-81."
13. We have heard the learned counsel for the assessee as well as the Departmental Representative. The learned counsel for the assessee, after heavily relying on the so-called Note on disclosure in Jalans cases appearing at pg. 621 to 635 - special reference made to Para No. 3.6 at page 627 (page 7 of the note) and Statement 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 LAFs land holdings and agricultural income; the CIT had, while accepting the disclosure made by Jalans 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 disclosure in Jalans cases" (Para No. 3.6 at page Nos. 6 to 7) and Statement C (at pages 6.3 and 4 of the assessees paper book), he submitted that the ITO should have accepted the existence of land holdings with creditor LAF, should have accepted the availability of agricultural income in the hands of creditor LAF s. 5,000 per acre for 500 acre because in 1971-72 the CIT had determined the yearly agricultural income in the hands of LAF s. 2,000 per acre; and should have accepted the genuineness of the transactions for the asst. yrs. 1976-77 to 1980-81 also. In other words, the submissions of the learned counsel of the assessee was that once the CIT had accepted the existence of land holdings, availability of agricultural income at the rates varying Rs. 100 to Rs. 2,000 per year during the years 1951 to 1972, so the ITO should have, on the basis of CITs acceptance of disclosure petition, accepted the assessees theory that during the periods relevant to asst. yrs. 1976-77 to 1981-82 the creditor LAF was having yearly agricultural income s. 5,000 per acre from Rs. 500 acre of land and, therefore, LAF was well in a position to advance a loan of Rs. 25,49,000, Rs. 1,19,00,000, ..... Rs. 1,13,00,000, Rs. 36,00,000, Rs. 15,00,000 to the assessee during the previous year relevant to asst. yrs. 1976-77, 1977-78, 1978-79, 1979-80, 1980-81 respectively.
He further submitted that by making the CIT to accept creditworthiness of LAF and land holdings in the hands of LAF upto the year 1972, the assessee has discharged its onus required under s. 68 of the IT Act, 1961 (hereinafter called the Act), and therefore, the lower authorities either should have followed the findings of the CIT arrived at while accepting disclosure petition of Jalans family or should have brought material on record in support of their findings that during the periods relevant to asst. yrs. 1976-77 to 1980-81 and 1981-82, the creditor LAF was not in a capacity to advance the loans under reference. He further submitted that after rejecting assessees explanation it was Departments onus to prove that the cash credits in the assessees books for all these six years appearing in the name of creditor LAF were the assessees income for the relevant years.
He further submitted that identity of the creditor LAF, which was a partnership firm, as well as capacity was established by the existence of returns of income furnished by the creditor LAF before the same ITO. As regards to genuineness of the transaction, he submitted that copy of creditors account in assessees books and acceptance of availability of agricultural income in the hands of LAF till the year 1972 by the CIT proves creditors 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 Jalans 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) 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 (iv) Sri Brijlal Yadav.
15. The learned Departmental Representative, on the other hand, submitted as under :
He disputed the assessees theory of non-availability of creditors books of account, because according to him it was unbelievable that a person claiming to have crores of agricultural income was keeping the books of account in the fields itself.
On the contrary, he submitted that the creditor, during the periods relevant to assessment years under appeal had neither any agricultural farm nor any agricultural income and the plea of books having been destroyed was a made up story. He strengthened his conclusion with the further submissions that inspite of nine detailed notices to the assessee, nine detailed summons and notices to Sri Tolaram Jalan who was the managing partner of the creditor LAF as well as partner in assessees firm and six notices to creditor LAF, none of them has filed any documentary evidence, whatsoever, which may establish/prove that during the periods under appeal the creditor was having any agricultural land, had cultivated any crop, had got any produce or had sold any produce and where and to whom. In spite of specific requirements made by the ITO, none of the above-mentioned three parties have produced any other sort of evidence which may satisfy the three ingredients such as identity of the creditor, capacity of the creditor and genuineness of the transactions. He further submitted that failure on the part of the assessee to submit even a simple confirmation from the creditor, to file any evidence regarding as to who were managing the farm, from where and whom the inputs were purchased, where and to whom the agricultural produce was sold and also the failure to produce any kind of evidence which could establish the LAF ownership of agricultural land measuring 500 and 1100 acres of cultivable and fertile agricultural land, clearly proves beyond any doubt that the LAF was either not having any agricultural land or, if having, it was either not cultivated or if cultivated, there was no produce and hence, no agricultural income. He further submitted that had the creditor, who was not an outsider, because the partners were common (sic - had) any land holding or agricultural income then it was not difficult to procure evidence from the Government records or commission agents record. In view of these facts and after relying on the 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 assessees income under s. 68 of the Act.
Contradicting the assessees counsels 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 Jalans cases, statement C to it, and ITOs letter (page No. 618, 627 and 634 of assessees paper book), 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 findings of AO and CIT(A). In response to submissions of the assessees counsel that the creditors identity and capacity was established by the present creditors returns of income for all these years before the same ITO, the learned Departmental Representative drew our attention to page No. 14 of the ITOs order wherein the contents/details of creditors return for the asst. yrs. 1975-76 to 1982-83 have been detailed (as under), and from these details he submitted that their being no P&L a/c and balance sheet attached to them and the relevant income columns having being left blank, there was nothing in these returns as to how much was the agricultural income. Had there been any income, the creditor instead of writing the words "not necessary as there is no other income other than agricultural income" should have mentioned the figure/quantum of agricultural income. He further submitted that none of these returns was filed voluntarily and none of creditors partners had declared their share of agricultural income in personal returns of income. According to him, none of these returns prove the existence of agricultural income with the creditor in any of these years and, therefore, concluded that the non est returns, without any P&L a/c and balance sheet and without showing the quantum of agricultural income in the relevant columns do not support the assessees theory that these returns prove identity as well as capacity of creditor LAF.
The learned Departmental Representative further submitted that by simply producing creditors account from assessees own books, the assessee cannot be said to have established the genuineness of the transaction. As regards to applicability of res judicata he submitted that it is not applicable to income-tax matters because every assessment year is an independent and separate assessment year and the authorities have right to take a different view. Referring to the present case he submitted that there was no question of any res judicata, because the assessee had not furnished any evidence of any nature and his reliance on disclosure matter was absolutely irrelevant, more so, when there was nothing in those documents which may prove the assessees interpretation. Concluding his submissions, the learned Departmental Representative submitted that :
(i) The assessee has not discharged his primary onus required under s. 68 of the 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 assessees 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 assessees 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 availability of agricultural income in the hands of the creditor by accepting the fact that, because availability of agricultural income upto year 1972 in the hands of the creditor was accepted by the CIT during disclosure made by Jalans family, so the availability of agricultural income in the hands of the creditor during the periods relevant to asst. yrs. 1976-77 to 1980-81 should also be accepted -even without any evidence regarding ownership of land, details of crops cultivated, quantum of produce, evidence for purchase of inputs and evidence for sale of produce by the creditor, produced by the assessee or the creditor.
(b) Were the Revenue authorities barred from asking necessary evidence for genuineness of the cash credits in the assessees books appearing during the years relevant to asst. yrs. 1976-77 to 1981-82 by applicability of doctrine of res judicata.
(v) Whether, where the assessee has failed to discharge its primary onus to prove identity of the creditor, capacity of the creditor and genuineness of the transaction, the Revenue authorities are entitled to consider the unexplained cash credit as assessees income.
17. The aforesaid questions have been formed by us to facilitate the decision on each and every submission of the parties because whole of the arguments revolve around the genuineness of the cash credits, assessees onus and applicability of doctrine of res judicata.
18. Before going to the questions, we would like to record that the assessee has taken as much as 21 grounds of appeal out of which grounds No. 7 to 21 were not pressed at the time of hearing, whereas ground Nos. 1 to 6, which relate to the genuineness of the cash credits were pressed with the consolidated arguments detailed above and, therefore, these grounds are decided on the basis of consolidated arguments.
19. We now proceed to analyse the provisions of s. 68, its requirements, assessees onus and rights of the Revenue authorities and, therefore, first of all consider it necessary to reproduce the provisions of s. 68.
"Sec. 68 : Cash credits. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the (Assessing Officer), satisfactory, the sum so credited may be charged to income-tax 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 Honble Punjab and Haryana High Court had occasion to analyse the requirements of provisions of s. 68 in case of Todar Mall vs. CIT (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 to collect further material. The Honble Allahabad High Court in the case of Nanak Chandra Laxman Das vs. CIT (1983) 140 ITR 151 (All) had occasion to consider the provisions of s. 68 and as per headnote, extracted below held as under :
"Sec. 68 of the IT Act, 1961, gives a statutory recognition to the principle that cash credits which are not satisfactorily explained may be assessed as income."
Language used in s. 68 of the Act further leads one to conclude that, where any sum is found credited in the books of the assessee the initial onus is on the assessee to offer an explanation of the nature and source of a cash credit. If the explanation is not found satisfactory or reasonable, the ITO can treat such money as the assessees income from undisclosed sources. It is not necessary for the ITO to locate the exact source of the credits. The assessee can prove the genuineness of the credits by establishing from some plausible evidence the identity of the creditor and his creditworthiness.
Irrespective of the fact that a credit entry is in the name of a third party, the burden lies upon the assessee to explain the credit entry. In certain circumstances the onus might shift to the ITO. For instance, if the assessee succeeds in showing that entries regarding cash credits in a third partys account are genuine and the sums were in fact received from a third party as loans or deposits, he has discharged the onus and in such a case it will be for the third party to explain the source of the moneys and that cannot be charged as assessees income in the absence of any material to indicate that they belong to the assessee.
Provisions of s. 68, if further analysed, make it abundantly clear that it is the assessee who is to prove the source and nature of a receipt and if the assessee fails to prove the same to the satisfaction of the ITO, then ITO is entitled to treat it as taxable income.
There is ample 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 AO is entitled to draw the inference that the receipts are of an assessable nature [A. Govindarajulu Mudaliar vs. CIT (1958) 34 ITR 807 (SC)]. The onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability 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 assessees books of account in an accounting year, the assessee has a legal obligation to explain the nature and source of such credit [See 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. Krishna Mining Co. (1972) 83 ITR 860; A. Govindarajulu Mudaliar vs. CIT (1958) 34 ITR 807-810 (SC)].
According to provisions of s. 68 it is necessary for the assessee to prove prima facie the transaction which results in a cash credit in his books of account. Such proof includes proof of the identity of his creditor, the capacity of such creditor to advance the money and, lastly, the genuineness of the transaction. These things must be proved prima facie by the assessee, and only after the assessee has adduced evidence to establish prima facie the aforesaid, the onus shifts on the Department. Merely establishing the identity of the creditor is not enough [Shankar Industries vs. CIT (1978) 114 ITR 689 (Cal); C. Kant & Co. vs. CIT (1980) 126 ITR 63 (Cal); Prakash Textile Agency vs. CIT (1980) 121 ITR 890 (Cal); Oriental Wire Industries (P) Ltd. vs. CIT (1981) 131 ITR 688 (Cal)].
It is, therefore, clear that the primary onus is on the assessee to provide identity of the creditor, capacity of the creditor and genuineness of the transaction.
The aforesaid proposition of law are further supported by the decisions of Honble Supreme Court and various High Courts and listed below :
(1) Sreelekha Banerjee & Ors. vs. CIT (supra).
(2) A. Govindarajulu Mudaliar vs. CIT (supra).
(3) Manak Chandra Laxman Dass vs. CIT (supra).
(4) Anraj Narain Dass vs. CIT (1951) 20 ITR 562 (Punj) (5) A. D. Jayaveerapandia Nadar vs. CIT (1964) 54 ITR 401 (Mad) (6) Gumani Ram Diri Ram vs. CIT 1975 98 ITR 337 (P&H) (7) Sat Parkash Ram Niranjan vs. CIT (1975) 100 ITR 130 (Punj) (8) Roshan Di Hatti vs. CIT (1977) 107 ITR 938 (SC) (9) Velji Deoraj & Co. vs. CIT (1966) 60 ITR 708 (Bom) (10) C. Kant & Co. vs. CIT (supra) (11) Hari Chand Virender Paul vs. CIT (1983) 140 ITR 148 (P&H) (12) CIT vs. S. Kamaraja Pandian (1984) 150 ITR 703 (Mad) (13) Smt. Sakti Rani Roy vs. CIT (1978) 115 ITR 722 (Cal).
To shift the onus from the assessee to the Department, it is necessary that there should be sufficient evidence to prove that the assessee has prima facie established all the three ingredients of s. 68, otherwise the onus still remains on the assessee. Lord Hansworth M. R. in Stoney vs. Eastbourne R. D. Council (1927) 1 Ch. 367 observed, "...... there can only be sufficient evidence 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 (Gumani Ram Siri Ram vs. CIT (supra), distinguishing Tola Ram Daga vs. CIT (supra). 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) This onus will shift to the Department only if the aforesaid three ingredients are satisfied.
(c) That if the person fails to satisfy the aforesaid three ingredients of s. 68 then the AO is entitled to consider the amount of cash credit in the books of the assessee as assessees income from undisclosed sources.
20. We now proceed to examine the submissions of the counsel for the assessee in the light of above-mentioned facts and principles of law;
(i) The first contention of the assessees counsel is that the availability of agricultural income in the hands of LAF till the year 1972 having been accepted by the CIT while considering disclosure petition of Jalans family decided in 1975, the availability of agricultural income with LAF in the years 1975-76 to 1980-81 relevant to asst. yrs. 1976-77 to 1981-82 must also be accepted by the Department.
After having gone through the so-called note on disclosure in Jalans cases (Para No. 3.6 and Statement C at p. No. 621 to 628 & 634 of the assessees paper book) reproduced below, as well as contents of page No. 618 of assessees paper book, we are of the opinion that there is nothing in these documents which may prove, even remotely, that the creditor LAF had any agricultural income during the periods relevant to asst. yrs. 1976-77 to 1981-82. Before parting with this aspect, we consider it necessary to reproduce the relevant extracts from the documents relied upon by the assessees counsel.
EXTRACT FROM NOTE ON DISCLOSURE IN JALANS CASES :
(Page Nos. 621, 627-628 & 634) "EXHIBIT - I"
PARA NO. 3.6.
This was the main important issue. The detailed discussion by the IAC with the assessee could not result in any agreed figures regarding the three important aspects to be considered in this regard, namely,
(a) 200 acres of (sic) were held by (sic) as per allotment in the year 1951 by the Dy. Commissioner as per evidence filed (placed on record)
(b) All were ready for cultivation from 1951, and
(c) The income was about Rs. 5,000 per acre.
After discussion with the assessee, the CIT fixed the amount available for set off, after considering the investment of Rs. 70,00,000 at Rs. 97,75,000. The detailed working shown in Annexure E to this report. It was also pointed out at that time to the assessee that suitable action should be taken by him in regard to wealth-tax payable in regard to these agricultural estates (whose value will be estimated on the basis of income fixed) and the amounts 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, you have produced a certified copy of Khatuni in respect of the lands in the name of Sri Uma Shankar Lohia of village Majjan. I have deputed my inspector to obtain a copy of the Khatuni from the same office from which you have obtained by me (sic) clearly shows that Shri Uma Shankar Lohia was having the following lands in vill. Majjan in Fasli year 1366 i.e., Calendar year 1988. These lands are shown according to classification from the Khatauni Muhal register maintained in the Collector office as under :
Classification of land Total acres of land in name of Uma Shankar Lohia.
Class I Nil Class II 322.050 Class III Nil Class IV 41.685 Total 363.735 Thus, Shri Uma Shankar Lohia was having 363.735 acres of land in the Majhaon village. This is also clear from the certified copy filed by you in para a and c.
In para b of your letter, you state that you have filed a certified copy of khatani in respect of 416.020 and 367.24 acres of land in village Majhaon. It is seen that you have not properly read the certified copy obtained by you. This certified copy submitted by you does not show any land in the name of Shri U. S. Lohia. This certified copy is simply a total acreage of land of Class I to Class IV as per the Khatauni register of Majhaon village, 367.240 acres of land mentioned by you in para b of your letter is also not of Uma Shankar of land which is already included in the total of 418.020 acres. It is, therefore, your claim of para b in respect of 418.020 and 367.240 acres of land in village Majhaon is absolutely incorrect.
In para d, e, f & g the certified copy given by you is found correct.
In para h you have stated that the certified copy of Khatauni in respect of 325.215 acres of land in the name of Shri Uma Shankar Lohia is exclusive of 158.465 acres of land is also incorrect. Because as per the certified copy of the total land in the name of Shri U. S. Lohia is shown at 325.215 acres of land, which is inclusive of 158.465 acres of ceiling land. This has also been clarified by Shri Basudev Prasad Srivastav, who was cross-examined by you yesterday. A certified copy of village Majhaon has been obtained by me for Fasli year 1366 of which you can take inspection, and if you still dispute that issue of 418.020 and 367.240 acres of land stated 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 Collectors 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 assessees 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 submissions. We, therefore, have no hesitation in holding that there is nothing either in the letter alleged to have been written by ITO from his camp office at Bahraich (U.P.) on 26th Sept., 1975 (page No. 618) or in so-called "Note on disclosure in Jalans cases (p. No. 621 to 634) which may prove or even suggest that the creditor LAF had any agricultural land or agricultural income sufficient to advance the cash credits under appeal during the periods relevant to asst. yrs. 1976-77 to 1980-81.
Inspite of the fact that there was nothing in the so-called disclosure petition which could support the assessees plea, the ITO laboured hard and held a camp office at Bahraich. As there was no cooperation from the assessees side, so the ITO himself collected the material which has been narrated at p. 11 of his order in the following form :
"I visited Baharaich personally as planned and intimated to the assessee. Nobody attended from assessees side and it was clear that the assessee was not interested in giving any evidence whatsoever. It was noticed that Revenue authorities have taken up consolidation proceedings in villages Majhao and Gangapur during 1975-80 and had maintained consolidation khasara in the form CH 2A. These records show various details including ownership and possession in respect of every plot of land in these villages. The assessee had completely failed to provide me any evidence relating to the possession of agricultural land belonging to other by LAF. On the other hand, it was noticed that there was certain acres of land in villages Majhao and Gangapur only in the names of the Shankar Lohia, Shyamsunder Lohia, Jagannath Lohia and others. More than 95% of such land was under the adverse possession of the other villagers since years, whose names appeared in consolidation kasara.
It was also ascertained that part of the land belonging to Uma Shankar Lohia was sold for loan taken by him from Sadhan Sahakari Samiti which he could not discharge. The loan amounted to only few thousand rupees.
The finding of these facts left no doubt that LAF was not possessing any land in the relevant period for cultivation. In the light of these findings, therefore, I issued a further notice dt. 18th Jan., 1984, detailing all the finds and copy of the consolidation khasara and a letter from office of Sadhan Sahakari Samity was also enclosed and again an opportunity was given to the assessee to 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 assessees counsel is, therefore, rejected.
21. The assessees next contention that the authorities below were bound to follow the CITs findings in disclosure petition is also of no merit because the documents at page Nos. 618 or 621 to 634 bears neither the signature of any authority i.e., ITO or CIT nor these have been certified by the assessee or his counsel and, therefore, we could have ignored them without taking cognisance, but we have taken note of the same only in the interest of justice and still have found that there is nothing in these documents which may prove the assessees point of view.
As regards to the applicability of decisions relied upon by the assessee, we are of the opinion that the facts and circumstances of the assessees case being different from the facts and circumstances of the cases relied upon, so much so that the assessee present before us has not furnished any kind of evidence all along, beginning from the stage of AO till the Tribunal. So, none of these cases supports assessees submissions.
As regards to reliance on the statement of 4 persons, we think that the CIT(A) has very elaborately discussed the evidentiary value of the same and has rightly held that none of them supports the assessees case.
22. The next contention was that the creditor LAF had furnished its returns of income for all these assessment years and, therefore, that was sufficient evidence to prove creditors capacity.
To decide this issue, we would like to refer to p. 14 and 15 of ITOs order, wherein he had, after detailing the facts and contents of LAFs returns, had clearly noted that the returns were invalid, because the income columns were left blank, instead of disclosing net agricultural income, the words "not necessary as there is no other income other than agricultural income" were mentioned, no P&L a/c or balance sheet or any other information was furnished for any of the assessment years under appeal. The position of returns of income of LAF was as under :
Asst. yr.
Date of filing Voluntary or otherwise Quantum of agricultural income shown 1975-76 30-3-1978 In response to notice under ss. 139(2) & 148 Not mentioned 1976-77 Not filed inspite of letter issued in this respect.
1977-78 9-1-1980 Not filed voluntarily Not mentioned 1978-79 2-12-1980 In response to notice under s. 139(2) and letter 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 assessees 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 assessees counsel was that the existence of creditors account in assessees books amply confirms the genuineness of the transaction. To decide this issue, it is necessary to reproduce the alleged creditors copy of account appearing at page No. 553 of the assessees paper book, on which the assessees counsel had heavily relied.
M/S RAMKUMAR JALAN IN THE BOOKS OF M/S JALAN TRADING CO.
ACCOUNT OF "M/S LOHIA AGRICULTURAL FARM" (i.e., LAF) Asst. yr.
Amount Opening balance Add : Cash receipts 25,49,000.00 Less : Transfer by journal Prakash Cotton Mills 34,101.81 Jalan Hindu Undivided Family Amanat A/c 25,14,898.10 Closing Balance 25,49,000.00 After having gone through the copy of account, which is not signed either by the assessee or his counsel, we are constrained to hold that this unauthenticated piece of paper in no way -factually or legally supports the assessees plea, because in absence of any confirmation from the creditor and capacity of the creditor having not been established, how the creditors account in assessees book confirms the genuineness of the transaction is beyond our imagination; the assessee has, therefore, failed to prove the genuineness of the transaction also.
24. The next plea of the assessees counsel was that if at all the Department was of the view that the cash credits in assessees books were not genuine and consequently wanted to consider the same as assessees income, then it was for the Department to prove the same to be assessees income and as the authorities have not brought any evidence on record so, they were not justified in taxing the same as assessees income.
After having considered the submissions from both sides and various decisions, we are of the view that the submissions of the assessees counsel have no force. The Honble Supreme Court in case of A. Govindarajulu Mudaliar vs. CIT (supra) while considering taxing of cash credits in absence of any deeming provisions in IT Act, 1922, held that :
(i) where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the AO is entitled to draw the inference that the receipts are of an assessable nature.
(ii) That the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability 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 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 Honble 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 Honble Allahabad High Court in case of Nanak Chandra Laxman Dass vs. CIT (supra) 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 statutory recognition to the principle that cash credits which are not satisfactorily explained may be assessed as income.
Where any sum is found credited in the books of the assessee the initial onus is on the assessee to offer an explanation of the nature and source of cash credit. If the explanation is not found satisfactory or reasonable, the ITO can treat such money as the assessees income from undisclosed sources. It is not necessary for the ITO to locate the exact source of the credits. The assessee can prove the genuineness of the credits by establishing from some plausible evidence the identity of the creditor and his creditworthiness.
Irrespective of the fact that the credit entry is in the name of a third party, the burden lies upon the assessee to explain the credit entry. In certain circumstances the onus might shift to the ITO. For instance, if the assessee succeeds in showing that entries regarding cash credits in a third partys account are genuine and the sums were in fact received from the third party as loans or deposits, he has discharged the onus and in such a case it will be for the third party to explain the source of the moneys and that cannot be charged as assessees income in the absence of any material to indicate that they belong to the assessee."
Respectfully following the decisions (supra) we have no hesitation to hold that once the assessee fails to offer an explanation relating to the genuineness of the cash credit or explanation is found to be unsatisfactory by the AO, then under s. 68 of the Act the AO is entitled to consider the cash credit as assessees taxable income from undisclosed sources. In the present case, the assessee has not filed any evidence to prove the genuineness of the cash credits and, therefore, the lower authorities were justified in considering the same assessees income.
Presuming that the onus was on the ITO to bring some material on record for proving that the cash credits appearing in the assessees books in the name of LAF were not genuine, we find from the orders of the ITO that he had collected sufficient material, result of which was that the creditor LAF was found to be having no agricultural land and/or there was no income from agriculture during the relevant periods. The findings of the ITO have been already reproduced at p. 28. As these findings were not rebutted, so the material and information brought on record by the ITO were also sufficient to hold that the cash credits in assessees books were not genuine.
25. The next contention of the assessees 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 there should be finality of litigation. The basic principle of doctrine of res judicata is that the cause of action for the second suit or action being merged in the judgment of first, it does not any more survive, but as far as applicability of doctrine of res judicata or estoppel to the Income-tax matters is concerned, it is now settled law that these have no application to decisions of IT authorities so as to preclude the determination of a question in a previous assessment order from being reopened in proceedings relating to in a subsequent assessment year and reasons are :
(i) That the IT authority including the Appellate Tribunal are not Courts; and
(ii) that the purpose and the subject-matters of the proceedings in a subsequent year are not the same as those in a previous year.
The Honble Supreme Court in the case of New Jegangir Vakil Mills Co. Ltd. vs. CIT (1963) 49 ITR (SC) 137, has held that :
"In matters of taxation there can be no question of res judicata. The decision given by an ITO for one assessment year cannot affect or bind his decision for another year. Generally, the doctrine of res judicata or estoppel by record does not apply to such decisions."
In view of the settled law on this point and respectfully following the aforesaid decision of apex Court, we hold that the doctrine of res judicata or estoppel was not applicable to the facts and circumstances of the case and at least as far as the right of the AO to investigate the genuineness of the cash credits appearing in assessees books for the asst. yrs. 1976-77 to 1980-81 is concerned, these doctrines were not applicable. We, therefore, hold the action of the lower authorities to be in accordance with law and valid.
Even otherwise, if for the sake of arguments, it is presumed that these doctrines were applicable to the assessees case, then also the assessee is not to get any relief, because, as discussed and concluded in the foregoing paras, there was nothing in the so-called "Note on disclosure in Jalans cases", which can be said to be any evidence relating to genuineness of the cash credits appearing in assessees books for the periods relevant to the asst. yrs. 1976-77 to 1980-81. The assessees this contention, therefore, also fails.
26. In addition to the aforesaid conclusions which have been arrived at on the basis of material available before us, we would like to mention that the assessees 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 assessees 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 assessees 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 assessees 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 assessees income from undisclosed sources in the relevant assessment years.
26.1. The counsel for the assessee did not argue grounds at sl. Nos. 7 to 21 and therefore, they are dismissed.
27. In the result, we confirm the decisions of the AO as well as of the CIT(A) and assessees all the six appeals for the asst. yrs. 1976-77 to 1980-81 are dismissed.