Income Tax Appellate Tribunal - Agra
Subash Dall Mill vs Assistant Commissioner Of Income-Tax ... on 26 November, 2001
Equivalent citations: [2002]257ITR115(AGRA)
ORDER
Keshaw Prasad, Accountant Member
1. The cross appeals have been directed by the assessee as well as by the Revenue against the order of the Commissioner of Income-tax (Appeals) dated September 3, 1993, pertaining to the assessment year 1986-87. For the sake of convenience, we will first take up the appeal directed by the assessee.
2. Though various grounds have been raised, all the grounds relate to the addition of Rs. 1 lakh representing loan from Ram Kumar Brij Kishore, Kosi, and interest thereon.
3. During the course of assessment proceedings, the Assessing Officer noted that the assessee has taken a loan of Rs. 1 lakh on February 25, 1986, from Ram Kumar Brij Kishore, Kosi. The confirmation letter was filed. The loan was obtained by account payee cheque. However, the Assessing Officer held that the confirmation certificate has been signed by some alleged authorised representative signatory and no source from where the loan was given, has been mentioned. He, therefore, treated the loan as non-genuine and brought the same to tax under Section 69A of the Act.
4. On appeal, the Commissioner of Income-tax (Appeals) confirmed the addition by observing that the bank statement of the creditor revealed a cash deposit of Rs. 50,000 on February 4, 1986, about which there was no explanation. He accordingly disallowed the deduction of interest also. The assessee is in appeal before us against the findings of the Commissioner of Income-tax (Appeals).
5. It is argued by learned counsel that the loan was obtained by account payee cheque. Confirmation from the creditor as well as copy of his accounts were furnished before the Assessing Officer. Copy of these have also been furnished at pages 23, 24 as well as 22 of the paper book. It was also stated that the repayment of loan was made by account payee cheque. The interest has also been paid by account payee cheque and the tax had also been deposited at source from such interest amount. It was further stated that the creditor was assessed to tax. It was also stated that the assessee maintains regular books of account. Copy of bank statement was also furnished in which there have been various deposits and withdrawal. While relying on the Supreme Court decision in the case of CIT v. Orissa Corporation P. Ltd. [1986] 159 ITR 78, learned counsel argued that the assessee has discharged its onus of proving the identity and credit worthiness of the creditor as well as genuineness of the transaction. By no piece of evidence, the Revenue has held that the loan was not genuine.
6. It was further argued that it appears that the loan was not treated as genuine because there were certain cash deposits in the bank account of the creditor before advancing the loan to the assessee. It was argued that it is settled law that in case there are certain, deposits in the account of the creditors, the issue could be examined in their hands and the assessee could not be asked to prove the source of such creditors. Asking source of such deposits will amount to asking the source of the source, which is not permitted under law. Reliance was placed on the decision of the Patna High Court in the case of Sarogi Credit Corporation v. CIT [1976] 103 ITR 344 and the decision of the Ahmedabad Bench of the Tribunal in the case of Rohini Builders v. Deputy CIT [2001] 117 Taxman-Mag 25 (Ahd). On the other hand, the learned Departmental Representative argued that the onus was on the assessee to prove the identity and credit worthiness of the creditor as well as the genuineness of the transaction. As the assessee has failed to do so, the Commissioner of Income-tax (Appeals) was justified in sustaining the addition.
7. We have considered the rival submissions. It is admitted position that the loan has been obtained by account payee cheque. Confirmation, copy of account as well as the bank statement of the creditor has also been furnished. The loan as well as interest have been repaid by account payee cheque. The tax has also been deducted at source. The creditor is also assessed to tax. Thus, the issue is squarely covered by the decision of the Supreme Court in the case of Orissa Corporation P. Ltd. [1986] 159 ITR 78. Respectfully following the same, we hold that no addition of cash credit was called for.
8. It appears that because there were certain cash deposits in the bank account of the creditor, the Commissioner of Income-tax (Appeals) felt that the asses-see has not been able to prove the credit worthiness of the creditor. Whether certain deposits in the bank account of the creditor will make the loan obtained by the assessee as non-genuine, was considered by the Patna High Court in the case of Sarogi Credit Corporation [1976] 103 ITR 344. After considering the whole facts, the court observed as under (headnote) :
"The Income-tax Officer's rejection, not of the explanation of the asses-see, but of the explanation regarding the source of income of the depositors, could not by itself lead to any inference regarding the non-genuine or fictitious character of the entries in the assessee's books of account."
9. The Assam High Court in the case of Tolaram Daga v. CIT [1966] 59 ITR 632 has held, as under :
"In the account of the firm deposit made by the party, the genuineness and regularity of the account has not been challenged, the accounts are relevant any prima facie proof of entry and the correctness thereof under Section 34 of the Evidence Act to require the firm to adduce the source of depositors from where the deposit was made could not require under the law."
10. The Supreme Court in the case of CIT v. Daulat Ram Rawat Mull [1973] 87 ITR 349 has considered similar issue. The Supreme Court held that in case a partner of the firm was not able to explain certain deposits in his name introduced in the firm, it cannot lead to a conclusion that the income belongs to the firm. The ratio of the Supreme Court squarely applies to the assessee's case. This issue was also considered by the Ahmedabad Bench of the Tribunal in the case of Rohini Builders v. Deputy CIT [2001] 117 Taxman-Mag 25 (Ahd). The Bench while deciding the issue observed as under (headnote) :
"In case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they had admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by treating cash deposits in their bank accounts as unexplained investments of those creditors under Section 69."
11. On the basis of the above judicial pronouncements, we hold that as the source of the source cannot be inquired by the Department.
12. Respectfully following the ratio laid down in the cases mentioned above, we hold that the addition sustained by the Commissioner of Income-tax (Appeals) was not justified and the same is deleted. Consequently, the Assessing Officer will allow interest deduction on such loan.
13. In the result, the appeal directed by the assessee is allowed.
14. Now, we will take up the appeal directed by the Revenue.
15. The first ground of appeal raised by the Revenue relates to the low yield of dall. The assessee is a manufacturer of dall. During the course of assessment proceedings, the Assessing Officer noted that the yield of dall declared by the assessee at 75,9 per cent. was low as compared to the yield of dall declared by Rajesh Dall Mills and Laxmi Dall Mills. Relying on the yield declared by the above two concerns, the Assessing Officer estimated the yield of dall at 78 per cent. and thereby made an addition of Rs. 62,000 on this account. On appeal, the Commissioner of Income-tax (Appeals) deleted the addition by observing that the yield of dall was competitive.
16. The Revenue is in appeal against the findings of the Commissioner of Income-tax (Appeals).
17. It is argued by the learned Departmental Representative that while allowing relief to the assessee, the Commissioner of Income-tax (Appeals) overlooked the yield of dall declared by the other concerns. As the Assessing Officer has given comparative cases, the Commissioner of Income-tax (Appeals) was not justified in deleting the addition.
18. On the other hand, learned counsel argued that the Assessing Officer has wrongly calculated the yield of dall. It was stated that in the case of Rajesh Dall Mill, the broken dall was also considered for yield. If in the assessee's case, broken dall is considered, the yield will be the same. It was also stated that there was search and seizure operation at the premises of the assessee on December 3, 1985, when no excess stock of dall was found. No excess cash was also found. Even the documents seized did not indicate any sales outside the books of account. It was also stated that day-to-day, books of account and yield of dall was checked by the Food and Civil Supplies Department of the State Government and no discrepancy was noted by them. The Commissioner of Income-tax (Appeals) was, therefore, justified in deleting the addition made by the Assessing Officer.
19. We have considered the rival submissions. It appears that while working out the yield of dall in the case of the assessee, the Assessing Officer did not consider the broken dall whereas in the case of Rajesh Dall Mills such broken dall was considered for yield. It was stated that after considering the broken dall, the yield came to 77.624 per cent. which was competitive with the yield of 78 per cent. declared in the case of Rajesh Dall Mills. Considering these facts, we hold that the Commissioner of Income-tax (Appeals) has rightly deleted the addition made by the Assessing Officer. While upholding his findings, we dismiss the ground of appeal raised by the Revenue.
20. Ground No. 2 relates to the deletion of the addition on account of excess kachari. In the manufacture of dall, the wastage in the shape of kachari is obtained. The assessee has claimed such kachari at 5.23 per cent. as compared to last year's kachari of 3.37 per cent. The Assessing Officer allowed deduction to the extent of two per cent. and added the amount representing excess kachari.
On appeal, the Commissioner of Income-tax (Appeals) by following his order in the case of Rajesh Dall Mills deleted the addition against which the Revenue is in appeal before us.
21. It is argued by the learned Departmental Representative that the assessee has claimed excess kachari and, therefore, the Assessing Officer was justified in making the addition. On the other hand, learned counsel while supporting the order of the Commissioner of Income-tax (Appeals) further stated that in the case of Rajesh Dall Mills, the Tribunal vide its order dated July 30, 2001, in I. T. A. No. 3810 Delhi of 1993 has held the kachari at 7.25 per cent. to be reasonable. Thus, the issue was covered by the order of the Tribunal and the Commissioner of Income-tax (Appeals) has rightly deleted the addition.
22. We have considered the rival submissions. In the case of Rajesh Dall Mills (supra), we have considered the issue of kachari, In that case, we had allowed the deduction of kachari to the extent of 7.25 per cent. As the kachari claimed by the assessee during the year is much lower, than what has been allowed by the Tribunal, we hold that the Commissioner of Income-tax (Appeals) has rightly deleted the addition made by the Assessing Officer. While upholding his findings, we dismiss the ground of appeal raised by the Revenue.
23. Ground No. 3 raised by the Revenue relates to the deletion of addition on account of batta khata. The Assessing Officer disallowed a sum of Rs. 7,850 debited in the batta khata. The Assessing Officer also observed that no evidence about the genuineness in regard to this batta khata was produced. On appeal, the Commissioner of Income-tax (Appeals) deleted the addition by observing that batta khata represented short receipt of the trading amounts. The correspondence in this behalf were also furnished. The Revenue is in appeal before us against the findings of the Commissioner of Income-tax (Appeals). While the learned Departmental Representative supported the order of the Assessing Officer, learned counsel supported the order of the Commissioner of Income-tax (Appeals).
24. We have considered the rival submissions. We find that the details of these batta khata was furnished before the Assessing Officer. Copy of accounts of the two parties, namely, Kumari Ram Munshi Ram and Ram Rich Pal Vijay Kumar, has also been furnished. Looking to these facts, it is established that the batta khata was short receipt of the sale consideration due to certain defects in the goods or weight, etc. The Commissioner of Income-tax (Appeals) was, therefore, justified in deleting the addition made by the Assessing Officer. While upholding his finding, we dismiss the ground of appeal raised by the Revenue.
25. In the result, the appeal directed by the Revenue is dismissed.