Rajasthan High Court - Jaipur
Gem Palace vs Commissioner Of Income-Tax on 10 July, 1986
JUDGMENT I.S. Israni, J.
1. This is a reference application under Section 256(2) of the Income-tax Act. 1961 (hereinafter referred to as "the Act"), arising out of the order of the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, in I.T.A. No. 239/JP/1983 dated July 16, 1984, in respect of the assessment year 1979-80.
2. The reference application preferred by the petitioner under Section 256(1) of the Act was rejected by the learned Tribunal, vide its order dated November 21, 1984. Hence, this application.
3. The petitioner is a partnership firm carrying on the business of jewellery. It maintains the account books on the mercantile system which have been produced before the tax authorities from time to time. The income-tax assessments for various assessment years including the year in question have been made on the basis of profit and loss account, balance-sheet and other records maintained and produced before the tax authorities. It is stated that in the course of its business, the petitioner firm received a sum of Rs. 15,000 by cash on October 21, 1978, as loan from Shri Santosh Kumar Sethi, residing at 26, Station Road, Giridih (Bihar), who is said to be a native resident of Rajasthan and a person known to the partners of the assessee-firm and not a relative of any of the partners of the assessee-firm. On receipt of the amount, the impugned amount was credited by the petitioner firm to the account of Santosh Kumar Sethi in its books of accounts which are regularly and properly maintained from day to day. The amount was received on October 21, 1978, and the accounting year of the petitioner firm ends on Diwali which was to fall on October 30, 1978, therefore, no interest was credited to the account of the depositor in the relevant assessment. For the succeeding year, interest was credited. A copy of the account of the depositor as existing in the books of account of the petitioner firm has been reproduced in the application. It has been further stated that interest on the deposit amount was credited for the assessment years 1980-81, 1981-82, 1982-83 and 1983-84 at Rs. 1,800, 1,800, 1,800 and Rs. 950, respectively. The tax was also deducted at source. The depositor was paid a sum of Rs. 3,240 by cheque dated November 28, 1981, on Canara Bank. A sum of Rs. 16,755 remained payable at the close of the accounting year relevant to the assessment year 1983-84.
4. In the course of assessment proceedings, the petitioner firm was required to prove the deposit of Rs. 15,000 by Shri Santosh Kumar Sethi on October 21, 1978. A confirmation was filed in which it was stated that the depositor had applied for permanent account number which is annexure-A. The depositor also admitted the deposit and sent a copy of the (sic) assessment year 1979-80. Independent verification was made by the Income-tax Officer, Giridih. A copy of the letter of the depositor to the Income-tax Officer, Jaipur, along with the copy of the assessment order has been marked as annexure-B. However, the Income-tax Officer, Jaipur, was of the view that as the confirmation was unattested, signed by one Shri Santosh Kumar Sethi in Hindi and the reply given, vide letter dated December 21, 1981, in English by S. K. Jain and another letter dated January 22, 1982, was not signed by Shri S. K. Jain and there being no affidavit of the depositor, his identity had not been proved. He, accordingly, treated this amount of Rs. 15,000 as unexplained and assessed it as income from undisclosed sources in the hands of the petitioner firm, vide the assessment order dated January 30, 1982. Being aggrieved, an appeal was preferred before the Commissioner of Income-tax (Appeals), Rajasthan, Jaipur, who confirmed the addition and rejected the claim of the petitioner, vide his order dated January 21, 1983. The petitioner thereafter preferred a second appeal before the Income-tax Appellate Tribunal, Jaipur. The Tribunal, though it accepted that Santosh Kumar is the same person who is shown as S. K. Sethi in the petitioner's account books, from the facts and material on record including the assessment order of the creditor, held that it was difficult to hold that the assessee has discharged the onus on it to prove the creditworthiness of the said creditor, more so when it is doubtful. Learned Tribunal, therefore, sustained the addition and dismissed the appeal of the petitioner. A reference application under Section 256(1) of the Act was filed formulating 8 questions of law as arising out of the order of the Tribunal with a request that the same may be referred to the High Court for its opinion. This application was dismissed by the learned Tribunal, vide its order dated November 21, 1984.
5. Learned counsel, Shri Ranka, appearing on behalf of the applicant, has pointed out that even though the Income-tax Appellate Tribunal accepted that Shri Santosh Kumar Jain is the same person who has been shown as S. K. Sethi in the books of the assessee, yet the learned Tribunal erred in holding that the assessee had not discharged the onus on it to prove the creditworthiness of the said creditor. It has been urged that since the person depositing the amount has been identified and the depositor is the assessee in Bihar and in his account books, the depositor has shown to have deposited Rs. 15,000 with the applicant assessee-firm it cannot be said by any stretch of imagination that the assessee-firm has failed to discharge the onus tinder Section 68 of the Act. It has been stressed that the depositor is not related to any of the partners of the firm and, therefore, this is another reason why the deposit should have been accepted by the Income-tax Officer, Jaipur, while assessing the assessee-firm in the relevant year. It has also been pointed out that the Income-tax Officer, Giridih (Bihar), has also taxed the depositor by holding the amount of Rs. 15,000 to be his income from undisclosed sources and on the same amount of Rs. 15,000, the assessee-firm is also being taxed by the Income-tax Officer, Jaipur, as income from "undisclosed sources". Therefore, this double taxation on the same amount by two Income-tax Officers is not warranted in law and is against the canons of justice.
6. Mr. Surolia, on behalf of the Revenue, has supported the order of the learned Tribunal and stressed that the Income-tax Officer, Giridih (Bihar), in the absence of any satisfactory explanation from the creditor, treated the said amount as income from undisclosed sources and the appeal against the said order before the Appellate Assistant Commissioner was still pending. He has also stressed that the signature in Hindi by S. K. Sethi also creates doubt and no affidavit has been filed. Before the Income-tax Officer, Giridih, it was stated by the creditor that this amount was received from tuition. However, no receipts from tuition were available from further investigation. Therefore, the amount was treated as income of the creditor-assessee from undisclosed sources and was added to his income. This, according to learned counsel, shows that the petitioner firm had shown his own amount to the credit of the depositor and this amount has been rightly taken to be the income of the firm from undisclosed sources. He has stressed that the point of doubletaxation was being raised for the first time in this court and, therefore, the applicant was estopped from raising it now when it was not raised earlier.
7. We have heard the rival contentions of both the parties and have gone through the various documents on record. Taking the last item first, it is evident from the assessment order of the Income-tax Officer (annexure-D) at para. 6, in which it has been mentioned that the assessee had stressed that "the amount of Rs. 15,000 cannot be taxed once again in the hands of the assessee". This shows that this point was raised even before the learned Income-tax Officer. In this case, the person who deposited the amount of Rs. 15,000 has been identified and more so, is an assessee of the Income-tax Officer, Giridih. In his account books also, it has been shown that the amount of Rs. 15,000 has been deposited with the applicant firm. However, the Income-tax Officer, Giridih, did not accept the source of Rs. 15,000 disclosed by Santosh Kumar Sethi and held that this amount was income from undisclosed sources. He did not reject the contentions of Shri Sethi that the amount was deposited with M/s. Gem Palace, the applicant firm. Taking it to be income from undisclosed sources, it was added in his income and he was made to pay tax on the same. This leads to only one conclusion that the depositor was held to own Rs. 15,000 and he was made to pay tax on the same. However, the Income-tax Officer, Jaipur, did not accept the entry in the account books of the assessee-firm showing deposit of Rs. 15,000 by Santosh Kumar Sethi and treated it as income of the assessee-firm from undisclosed sources and taxed the same accordingly. On the one hand, the Income-tax Officer, Giridih, has held the amount of Rs. 15,000 to be income from undisclosed sources of Santosh Kumar Sethi and, on the other hand, the Income-tax Officer, Jaipur, has treated this amount to be income from undisclosed sources of the applicant assessee-firm. This certainly, prima facie, looks to be contradictory in itself and in this way Santosh Kumar Sethi has been made to pay the tax on the amount of Rs. 15,000 by the Income-tax Officer, Giridih, and the applicant assessee-firm has also been made to pay the tax on the same amount of Rs. 15,000 at Jaipur. This shows that the same amount of Rs. 15,000 has been taxed twice ; once by the Income-tax Officer, Giridih, and again by the Income-tax Officer, Jaipur. Our attention has been drawn by learned counsel for the applicant to Fakhri Automobiles v. CIT [1980] 126 ITR 417 (Raj). This was a case where the assessee-firm carried on the business of petrol, diesel, kerosene, etc., at Banswara. In its cash book, a sum of Rs. 14,025.75 was shown against the purchase price of 18,000 litres of diesel. In respect of the purchase, the firm did not obtain the purchase voucher, but a partner of the firm filed an affidavit confirming the transaction. The Income-tax Officer assessed Rs. 14,025.75 to be income from undisclosed sources. The Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. The Tribunal also upheld the order of the Appellate Assistant Commissioner as it considered improbable the purchase of 18,000 litres in one single day in a small place like Banswara. It was held by this court that this was an assumption on the part of the Tribunal that Banswara being a small town, such large quantity of diesel would not be available in one day. This consideration was held to be conjectural and that there was no direct nexus between the conclusion of fact and the primary fact upon which that conclusion is based. In the present case, there is not only other evidence on record, but even the Income-tax Officer, Giridih, has held that Rs. 15,000 belonged to the depositor. Therefore, there was direct evidence accepted by the Income-tax Officer, Giridih, to show that the amount was deposited by Santosh Kumar Sethi with the assessee-firm. Amar Kumari v. CIT [1979] 120 ITR 747 (Raj), is a case in which the assessee purchased a plot of land for Rs. 45,000. The Income-tax Officer in his assessment order found that the asses-see had invested Rs. 81,000 in the purchase and the investment of Rs. 45,000 was disclosed in the same deed and that a sum of Rs. 36,000 represented her income from undisclosed sources. In doing so, the Income-tax Officer relied upon the order under Section 55A passed in the case of the vendor. The Appellate Assistant Commissioner reduced the amount of unexplained investment to Rs. 23,400 which was confirmed by the Tribunal. An application under Section 256(1) of the Act was dismissed by the Tribunal. On an application under Section 256(2), it was held by this court that the case involved matters relating to the proper interpretation of the provisions of Sections 52(2), 55A and 69B of the Act. In the case of Asharam Saboo & Sons v. CIT [1986] 157 ITR 117 (MP), it was held that whether, on the facts, the Tribunal found that the registration could or could not be refused to a firm in view of Sections 184 and 185 of the Act and whether an inference that a firm is genuine or not could or could not be drawn are questions of law and fact fit for reference to the High Court.
8. Learned counsel for the Revenue has drawn our attention to the case of Pioneer Trading Syndicate v. CIT [1979] 120 ITR 5 (All) [FB] and Manilal Gafoorbhai Shah v. CIT [1974] 95 ITR 624 (Guj). These cases relate to voluntary disclosures and are not relevant to the facts of this case. Learned counsel has also drawn our attention to the case of Oriental Wire Industries (P.) Ltd. v. CIT [1981] 131 ITR 688 (Cal), which was a case of a loan shown in the books of the assessee-firm where no proper explanation regarding the source of loan could be given by the assessee. Loans were shown to be received from the wife and brother of the directors of the assessee-company. Therefore, it was held that the said loans were income from undisclosed sources of the assessee-firm. Evidently, this ruling is also not applicable to the facts of this case. We are, therefore, of the opinion that the following questions of law arise for consideration of this court:
"1. Whether, on the facts and in the circumstances of the case and in view of the material and evidence on record, the learned Tribunal was right in law in holding that the assessee has failed to discharge its onus under Section 68 of the Act to prove the creditworthiness of Shri S. K. Sethi alias Santosh Kumar Jain of Giridih (Bihar) ?
2. Whether the learned Tribunal had material to hold that the deposit of Rs. 15,000 by Shri S. K. Sethi alias Santosh Kumar Jain is ingenuine, remains unexplained and is undisclosed income of the assessee-firm ?"
9. The Tribunal is, therefore, directed to draw up a statement of case and refer the above questions of law as arising from its order dated July 16, 1984, and refer the same for the opinion of this court.
Dave, J.
10. I agree.