Income Tax Appellate Tribunal - Agra
Umesh Electricals, Agra vs Assessee on 25 February, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH, AGRA
BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND
SHRI H.S. SIDHU, JUDICIAL MEMBER
ITA No.231/Agr/2006
Asstt. Year : 2000-01
M/s Umesh Electricals, vs. Asstt. Commissioner of Income Tax-I,
23, Mahavir Market, Agra.
Chhipitola, Agra.
(PAN : AABFU 5228 M)
(Appellant) (Respondent)
Appellant by : None
Respondent by : Shri Vinod Kumar, Jr. D.R.
ORDER
PER P.K. BANSAL, A.M.:
In this case the difference arose between the Members of the Division Bench hearing this appeal. Therefore, the matter was referred to the opinion of the ld. Third Member. The ld. Third Member has agreed with the view of the ld. Judicial Member by holding that under the given facts and circumstances of the case, the impugned cash credit of ` 1,50,000/- is genuine. Therefore, in view of the majority decision, the assessee's appeal is allowed.
2. In the result, appeal of the assessee is allowed.
(Order pronounced in the open Court on 25.02.2011.).
Sd/- Sd/-
(H.S. SIDHU) (P.K. BANSAL)
Judicial Member Accountant Member
Place: Agra
Date: 25th February, 2011
2
PBN/*
Copy of the order forwarded to:
1. Appellant
2. Respondent By Order
3. CIT concerned
4. CIT (Appeals) concerned
5. DR, ITAT, Agra Bench, Agra
6. Guard File Assistant Registrar
Income-tax Appellate Tribunal, Agra
True Copy
3
IN THE INCOME TAX APPELLATE TRIBUNAL,
AGRA BENCH, AGRA
BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER
(AS THIRD MEMBER)
ITA No. 231/Agra/2006
Asstt. Year : 2000-01
M/s. Umesh Electricals, vs. Asstt. C.I.T.-I, Agra.
23, Mahavir Market,
Chhipitola, Agra
(PAN - AABFU 5228 M)
(Appellant) (Respondent)
For Appellant : S/Shri Prakash Narain & S.N. Bansal, Advocates.
For Respondent : Shri Vinod Kumar, Jr. D.R.
ORDER
Following question on difference of opinion between the learned Accountant Member and the learned Judicial Member has been referred to me by Hon'ble President u/s. 254(4) of the Income-tax Act for my opinion :
"Whether, in the given facts and circumstances of the case, the impugned cash credit of Rs.1.5 lacs is genuine or not?
2. The facts as gathered from the record and the orders of both the Members are that the assessee has taken loan of Rs.1,50,000/- from M/s. Om Prakash Haresh Chand & Co. vide draft No.045754 dated 06.08.1999 on Canara Bank. When the Assessing Officer asked to prove the genuineness of the cash credit, the assessee submitted the confirmation of Om Prakash Haresh Chand & Co. alongwith their Permanent Account Number, copy of the bank statement of M/s.
Om Prakash Haresh Chand in Canara Bank as well as copy of cash book. The Assessing Officer noted that M/s. Om Prakash Haresh Chand has deposited cash of Rs.1,50,000/- in Canara Bank on 06.08.1999 itself, out of which demand draft in favour of the assessee was made. The Assessing Officer added the sum of Rs.1,50,000/- u/s. 68 of the Act holding that the assessee has 4 introduced his own unaccounted money in the name of the aforesaid creditor. When the matter went before the CIT(A), the CIT(A) confirmed the order of the Assessing Officer holding that the assessee has not been able to establish the creditworthiness of the creditor. When further appeal traveled to Tribunal, the learned Judicial Member allowed the appeal of the assessee and deleted the addition of Rs.1,50,000/- holding that the amount of Rs.1,50,000/- cannot be regarded to be an unexplained cash credit. While deleting the addition he observed as under :
"The assessee has also explained the source of this loan. At page 8 of' assessee's paper book, a confirmation directly sent to the AO by Shri Haresh Chand Agarwal, on behalf of the creditor is self explanatory, in which it has been stated that his statement was recorded by AO on 18.10.2005 and showed his inability to again appear in compliance of notice issued u/s. 131 and vide letter dated 29.10.2005 he has confirmed the advancement of impugned loan and also produced a copy of cash book, a copy of ledger account, a copy of bank statement and acknowledgement of his return filed before the department. A copy of accounts of the assessee in the books of the creditor is enclosed at PB-9 in which PA Number of the creditor has also been given. The only reason that an amount of Rs.l.5 lacs was deposited in cash, out of which DD was purchased for the same amount on the same day or the next day, cannot alone prove that the assessee had deposited his unaccounted money to purchase a draft through cash creditor's account. Something more is required to establish that the assessee has played such a trick to convert his black money into white. But to my knowledge, there is no such evidence, from which the adverse finding of the department can be approved. A copy of ledger, placed at PB 11 to 20, also clearly expresses the intention of the cash creditor. The cash creditor is an Income-tax assessee and has clearly explained and confirmed the transaction of loan and the receipt of interest having been received by him. The department has taken no action in the next year relating to receipt of interest in the hands of M/s. Om Prakash Haresh Chand, which was allowed while making assessment u/s. 143(3) in that case. Simply because a cash amount was deposited in the bank of the cash creditor and a draft was purchased, would not take the case out of the sphere of genuinity. The cash creditor has explained that the amount which was deposited in the bank came through withdrawals from his cash book which is evident from pages Nos. 9 to 20 of his paper book. The Hon'ble Jurisdictional High Court in the case of CIT vs. M/s. Rajesh Dal Mill Kosi Kalan, Mathura, in like circumstances and under almost identical facts has held that when in the cash book of the creditor small sums are found but later on large amounts are shown, it may create a suspicion in the mind of the ITO, but this cannot be a proof of malpractice and when the transactions were made through bank draft and the creditor was an income-tax payee and sufficient funds were available with the creditor to finance the loan, 5 such type of suspicion cannot over ride the overwhelming positive evidences. A copy of this decision dated 22.09.2006 was filed on record. Therefore, by following the jurisdictional High Court decision and in view of the overwhelming evidences available on record to confirm the identity and creditworthiness of the creditor as well as genuineness of the transaction, the loan amount of Rs.1.5 lacs cannot be treated as unexplained and, therefore, has to be deleted from the hands of the assessee."
3. The learned Accountant Member did not agree with the learned Judicial Member and he was of the view of dismissing the appeal of the assessee. While holding so, he observed as under :
"4.4 In the present case, as we observe, even the capacity stands unexplained, as the necessary details, i.e., of the cash available with the creditor, could not be furnished. The creditor has stated to have lent money to the assessee out of borrowed money, details of which could not be furnished in spite of being afforded proper opportunity for the same, including in the remand proceedings and the appellate proceedings. The calling of the details of the availability of cash with the creditor, or of the person(s) (sources), from whom cash stood generated by it, would not, it may be clarified, amount to calling for the source of the source, inasmuch as the amount under question admittedly does not belong to the creditor but represents his borrowings. The requisition, thus, only attempts to verify the source of the funds, or, examining the credit on the capacity aspect of the credit, as also its genuineness. The source of the money, which finds its way into the assessee's account, thus, is clearly not explained, with the creditor's account becoming the channel through which the money stands routed (also refer: CIT v. Biju Patnaik, 160 ITR 674 (SC)). It must be appreciated that section 68 is itself a rule of evidence, statutorily cast, providing for the credit as appearing in the assessee's books, where not satisfactorily explained with reference to its nature and source, as its income, and only on the premise that the assessee is the beneficiary of the said sum, so that that itself is an evidence against it (refer: Sumati Dayal v. ClT, 214 ITR 801 (SC)). The onus on the assessee in the present case has thus definitely not been discharged, both with regard to the capacity of the creditor and the genuineness of the transaction. We decide accordingly.
4.4 The assessee has before us relied on the decisions in the case of Nemi Chand Kothari v. CIT, 264 ITR 254 (Gauhati) and Rohini Builders v. Dy. ClT, 256 ITR 360 (Guj). In this regard, we may clarify that we have only applied the trite law, as explained by the Hon'ble Apex Court per a host of case law, as under, to the facts of the case, so that we do not consider it necessary to discuss and distinguish the case law 'relied upon', which would only be rendered in the facts and the circumstances of the respective cases, and which were even 6 otherwise neither taken us through by the ld. A.R. during hearing nor its reliance/applicability exhibited/pleaded:
A. Govinda Rajulu Mudaliar v. ClT, 34 ITR 807 (SC) Sreelekha Banerjee & Others v. CIT, 49 ITR 112 (SC) Kalekhan Mohammed Hanif v. CIT, 50 ITR 1 (SC) ClT v. Durga Prasad More, 82 ITR 540 (SC) ClT v. Biju Patnaik (supra) Sumati Dayal v. ClT (supra) CIT vs. P. Mohanakala & Others, 291 ITR 278 (SC) In fact, the ld. CIT(A) has himself relied upon several decisions, which stand neither met nor even adverted to by the assessee during hearing, even as it impugns his order, as was also the case qua the order by the Tribunal in the case of Shyam Radios v. ITO (supra) also relied upon by the ld. CIT(A):
Nanak Chandra Laxman Das vs. CIT, 140 ITR 151 (All) CIT vs. United Commercial & Industrial Co. Pvt. Ltd., 187 ITR 596 (Cal) CIT vs. Precision Finance Pvt. Ltd., 208 ITR 465 (Cal) K Sadhukhan & Sons Pvt. Ltd. vs. CIT, 239 ITR 77 (Cal) Oceanic Products Exporting Co. vs. CIT (supra) R.B. Mittal vs. CIT, 246 ITR 283 (A.P.)
5. In view of the foregoing, we find no infirmity whatsoever in the findings by the Revenue, so that the same stand endorsed, and correspondingly, no merit in the assessee's case, so that the same does not find our favour.
6. In the result, the assessee's appeal is dismissed."
4. The case was fixed for hearing from time to time, but the adjournment was sought by the learned DR on the one pretext or the other. Even the adjournment application was sent through the Inspector who was not authorized to sign the adjournment application. Ultimately on 15.10.2010, the case was finally adjourned for 16.12.2010 with the condition that in case any of the parties seeks adjournment, a cost of Rs.5000/- will be imposed on the party seeking adjournment. But still on 16.12.2010, the learned DR again moved an adjournment application with the reason that he is holding charge of six ranges of Agra and, therefore, he cannot appear before the Tribunal. The case was finally adjourned from 16.12.2010 to 03.01.2011 and the 7 learned Sr. DR was asked to explain why a cost of Rs.5000/- be not imposed on the department.
On 03.01.2011 again Shri Manas Mahrotra, learned Sr. DR moved an application for adjournment repeating the same plea that he is holding charges of three ranges situated at Agra, Jhansi and Firozabad and in order to attend some urgent work, he is presently at Jhansi and, therefore, he requested for the adjournment. When I was rejecting the adjournment application by imposing a cost of Rs.5000/-, in the meantime, other learned DR, Mr. Vinod Kumar appeared for the department and accordingly, the case was heard and the question referred to me was disposed of.
5. The learned AR before me vehemently argued that only question is whether the cash credit of Rs.1,50,000/- received by the assessee is genuine or not. According to the learned Accountant Member, cash credit is not explained while according to the learned Judicial Member, the cash credit was duly explained. The learned AR carried me to page 5 para 16 of the assessment order and pointed out that the assessee produced the confirmation from Om Prakash Haresh Chand from whom the assessee has received a sum of Rs.1,50,000/- vide draft No. 045754 dated 06.08.1999. The Assessing Officer noted that Om Prakash Haresh Chand has deposited a cash of Rs.1,50,000/- in his Canara Bank account on 06.08.1999 prior to making of the draft in favour of the assessee. The assessee has submitted confirmation of Om Prakash Haresh Chand alongwith PAN for which attention was drawn to page No. 1 of the paper book. He also submitted the copy of PAN Card of the lender, copy of bank statement and pointed out that the lender is an Income-tax assessee. Copy of assessee's account is available at page 9. It was also pointed out that even though the assessee has not to prove the sources of source, but still the assessee has submitted copy of cash book of lender from 22.05.1999 to 20.08.1999 for 8 which my attention was drawn at page 11 to 22 of the paper book. Referring to page 19, it was pointed out that the sum of Rs.1,50,000/- was deposited by the lender out of cash in hand available in his cash book. It was pointed out that there was opening cash in hand amounting to Rs.1,56,748/- which was brought forward from 22.07.99 . Even it was pointed out that on 15.07.1999 also, there was a cash in hand of Rs.1,23,748/-. The Assessing Officer has totally ignored this vital evidence. Learned Judicial Member has duly taken the cognizance of this evidence and deleted the addition made by the Assessing Officer. Referring to the decision of the learned Accountant Member, it was pointed out that the learned Accountant Member while deciding the issue against the assessee in para 4.4 of his order, relied on the decision of Hon'ble Supreme Court in the case of CIT vs. Biju Patnaik, 160 ITR 674 (SC). This decision is not at all applicable to the facts of the case of assessee. The only question in this decision relates to whether the question of law arises from the order of Tribunal or not. Similarly, it was pointed out that the facts involved in the case of Sumati Dayal v. CIT, 214 ITR 801 (SC) were also different and it does not relate to prove the sources of source. There was no finding given in the judgment that the assessee has to prove source of sources. The decision of Rohini Builders vs. DCIT, 256 ITR 360 (Guj), has clearly laid down that the assessee has not to prove the source of sources. The assessee has proved the identity of creditor. The amount was received by draft and the party has duly confirmed that he has advanced loan to the assessee. Thus, the assessee has discharged the onus which lay on him. It was vehemently contended that other decisions referred to are not applicable to the facts of the case. The case of the assessee is duly covered by the decision of the jurisdictional High Court in the case of CIT vs. Johrimal Goel, 147 Taxman 448 (All.), copy of which was provided to me, in which the Jurisdictional High court has categorically held that the assessee cannot be asked to prove the source of sources or origin of a deposit. My attention was 9 also drawn towards the decision in the case of Kulbir Singh vs. ACIT, ITAT, Agra Third Member Bench (copy filed), in which it was held that once the assessee has furnished the confirmation of all the creditors, there affidavits and passbooks, all creditors being assessed to tax and identified and having furnished proof of source of cash and all transactions having been conducted through banking channels, cash credits were rightly accepted by the Assessing Officer as genuine. Thus, it was contended that the decision of learned Judicial Member is in accordance with law.
6. The learned DR, on the other hand, relied upon the decision of learned Accountant Member.
7. I have carefully considered the rival submissions and perused the material on record. I have also gone through the case law as relied on by the learned AR before us. In order to appreciate the contentions urged before me, it would be appropriate to reproduce the provisions of section 68 of the Act:
"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 reading of the aforesaid section, it is apparently clear that this section lays down rule of evidence that when 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 of such credit found in the books of the assessee, or the explanation offered by the assessee, in the opinion of 10 the AO is not satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.
8. Before charging the credit as the income of the assessee, the AO has to form an opinion. This opinion is subjective, but it has to be judicious and based on material on record. An opinion is an inference of facts from observed facts. It is not an impression. It is a conviction based on appraisal of evidence on record. In V.L.S. Finance Ltd. v CIT (2000) 246 ITR 707, the Hon'ble Delhi High Court observed as under:
" 'Opinion' means something more than more retailing of gossip or hearsay; it means judgment or belief, that is, a belief or a conviction resulting from what one thinks on a particular question. It means: judgment or belief based on grounds short of proof. If a man is to form an opinion and his opinion is to govern, he must form it himself on such reasons and grounds as seem good to him."
Thus, before the AO forms an opinion, he must consider the material before him. He has before him the material submitted by the assessee while giving an explanation, then he must collect his own material as an enquiry officer, weigh the two materials and as a quasi-judicial authority form an opinion as to whether explanation furnished by the assessee is satisfactory or not. If the AO does not apply his mind in examining the documents furnished by the assessee and does not find any substantive error in them nor he collects any material by exercising powers under Income-tax Act, then the claim of the assessee can not be straightway rejected. If he does, it would be a violation of principles of natural justice and provisions of section 68.
9. The expression "the assessee offers no explanation" means where the assessee offers no proper, reasonable and acceptable explanation as regards the sum found credited in the books of account maintained by the assessee. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory must be based on proper appreciation of the material 11 and other surrounding circumstances available on record. The opinion of the AO is to be based on appreciation of the material on record.
10. The word "may" used in section 68 provides discretion to the AO. In general the word "may" is an auxiliary verb clarifying the meaning of another verb of expressing an ability, contingency, possibility or probability. When used in a statute in its ordinary sense the word is permissive and not mandatory. But where certain conditions are provided in the statute and on the fulfillment thereof a duty is cast on the authority concerned to take an action, then on fulfillment of those conditions the word "may" take the character of "shall" and then it becomes mandatory. In section 68, we find that there are no such conditions on the fulfillment of which the AO is duty bound to make the addition. The word "may" denotes the discretion of the AO that he can make an addition or cannot make an addition. The Hon'ble Supreme Court in the case of CIT v Smt. P K Noorjahan 237 ITR 570 (SC) while dealing with the word "may" in section 69 observed, as under:
"In the corresponding clause of the Bill which was introduced in Parliament, while inserting section 69 in the Income-tax Act, 1961, the word "shall" had been used but during the course of consideration of the Bill and on the recommendation of the Select Committee, the said word was substituted by the word "may". This clearly indicates that the intention of Parliament in enacting section 69 was to confer a discretion on the Income-tax Officer in the matter of treating the source of investment which has not been satisfactorily explained by the assessee as the income of the assessee and the Income-tax Officer is not obliged to treat such source of investment as income in every case where the explanation offered by the assessee is found to be not satisfactory. The question whether the source of the investment should be treated as income or not under section 69 has to be considered in the light of the facts of each case. In other words, a discretion has been conferred on the Income-tax Officer under section 69 of the Act to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping in view the facts and circumstances of the particular case."12
11 In the case before me the person M/s Om Prakash Haresh Chand from whom the loans have been received by the assessee amounting to Rs.150000 vide draft no.045754 dt.6.8.99 drawn on Canara Bank Belan Ganj Agra is income-tax assessee. He is having PAN Numbers. The confirmation from this person was filed. The amounts have been received through banking channel. Xerox copy of the bank statement of account of the lender was also filed. M/s Om Parkash Haresh Chand has deposited a sum of Rs.150000/- in its bank account on 6.8.99 before the draft no.045754 was taken by issuing a cheque No.522129 dt. 6.8.99. The assessee has submitted a copy of cash book of M./s Om Parkash Haresh Chand available at page 11 to 20 of the paper book. Cash book clearly shows opening balance of the cash in hand of Rs.1,26,748.50 as on 16.06.1999 and on 06.08.1999 the opening balance was Rs.1,56,748.50 after the assessee has shown withdrawal of Rs.6000/- from Canara Bank and Rs. 27,000/- from Punjab National Bank. On 06.08.1999, M/s. Om Prakash Haresh Chand, as per cash book, have received a sum of Rs.17,250/- from Navin Goel and has also deposited a sum of Rs.1,50,000/- in Canara Bank Belanganj Branch, Agra and accordingly withdrawn a sum of Rs.1,50,150 - Rs.1,50,000/- by way of draft No.045754 and Rs.150/- as bank charges leaving cash in hand of Rs.6,748/-. M/s. Om Prakash Haresh Chand is a regular assessee having permanent account number, which is available on the confirmation. M/s. Om Prakash Haresh Chand has deposited the cash on 06.08.1999, does not mean that the assessee has not proved the genuineness of the transaction. The assessee by filing the copy of the cash book of M/s. Om Prakash Haresh Chand has discharged the onus and even proved the source of sources which he is not obliged to prove. The assessee has duly explained in respect of the deposit and the circumstances under which the deposits were received. The identity of the persons is not beyond the doubt. The source of cash was duly explained. The identity and capacity of the creditors was duly established. The AO only 13 doubted the genuineness of the transactions. Under these facts in my opinion, the amount received by the assessee from M/s. Om Prakash Haresh Chand cannot be regarded to be unexplained one.
12. I have gone through the decision in the case of CIT vs. Biju Patnaik, 160 ITR 674. The facts involved in this case were that the assessee had claimed deduction in respect of payment of interest on loan taken from Kalinga Foundation Trust for the assessment year 1962-63 to 1964-
65. The Assessing Officer asked the assessee to produce the evidence and to prove (i) that the cash credits in the name of the Trust were genuine, and (ii) that 39000 shares of Kalinga Tubes Ltd. standing in the names of certain persons, were not really his own investments. The cash credit was claimed by the assessee to be loans from the Trust. The Trust was formed in 1947 and it was claimed that it collected large amount of donations over a decade and had kept all the money collected by it with the Maharaja of Sonepur without earning interest. The amount was not deposited in bank. The evidence of the persons who had collected the donations was given but the respondent did not produce evidence as to who were the persons from whom the money was collected, how the money was received or how it was invested. The Assessing Officer after making enquiries took the view that Kalinga Foundation Trust did not exist and even if it existed it had no funds; and that the name of the Trust was used as a camouflage by the respondent to put through his unaccounted money and treated the cash credit as income of the assessee from undisclosed sources. Similarly, after the decision of Supreme Court in the case of S.P. Jain vs. Kalinga Tubes Ltd. (1965) 35 Comp Cas 351 (SC), the ITO also held that the 39000 shares acquired in the name of seven persons with moneys advanced in the name of the Trust actually belonged to the assessee, the holders being benamidars and brought to tax the dividends on those 14 shares in the hands of the assessee. The Income-tax Officer referred to the financial incapacity of one of them who was not assessed to tax as an individual and who had never filed his wealth-tax return to hold shares worth Rs.2.5 lacs to 7.5 lacs. When the matter traveled to the Tribunal, the Tribunal held that the trust was comprised of and under the effective control of persons of public repute and held that the investments made by the Trust with the assessee's group of industries or with the assessee were from its own resources and funds and, therefore, the cash credits, income from interest, dividend etc. should be excluded. The Tribunal as well as High Court rejected the application of the department for a reference. When the matter went before the Hon'ble Supreme Court, the Hon'ble Court held that the two basis questions were whether the donations collected by the Trust were genuine and whether the Department could rely upon the large amount of material collected by the Department subsequent to the decision of the Supreme Court in Jain's case. The identity and creditworthiness of the donors had not been established and the large amounts received as donations by the Trust were for over a decade lying as cash without being invested anywhere. The question whether the moneys were raised by the Trust as donations from various people or not was not considered by the Tribunal in its proper perspective. In not appreciating the basic question or discussing the evidence in respect thereof, there was non- consideration of a relevant factor on a factual aspect and the question whether the Tribunal's decision was perverse in the sense that no man instructed properly in law could have acted as the Tribunal did and whether there was ignoring of material and relevant facts in considering this aspect arose out of the order of the Tribunal. Ignoring the point as to who made the donations and what was their capacity to make the donations which was a vital fact, gave rise to the question of law.
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13. This case in my opinion is not applicable to the facts of the case before me. In the case before me, the identity of the lender is not denied even by the department. The lender is an income tax assessee and is being regularly assessed to Income-tax. In the case before the Supreme Court, the identity and creditworthiness of the donors were not established, but in the case before me, the assessee has duly produced evidence regarding the cash in hand available with the lender in his regular books out of which the lender has deposited the money in his bank account.
14. Coming to the case of Sumati Dayal vs. CIT, 214 ITR 801 (SC), I noted that in this case the Hon'ble Supreme Court has held that in view of section 68 of the Income-tax Act, 1961, where any sum is found credited in the books of the assessee for any previous year it may be charged to income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such a case thee is, prima facie, evidence against the assessee, viz., the receipt of money, and if he fails to rebut the said evidence, it can be used against him by holding that it was a receipt of an income nature. While considering the explanation of the assessee, the Department cannot, however, act unreasonably. In this case, during the assessment year 1971-72, the assessee claimed that she received a total amount of Rs.3,11,831/- by way of race winnings in jackpots and treble events in races at turf clubs in Bangalore, Madras and Hyderabad. The said amount was shown by the assessee in the capital account in her books. For the assessment year 1972-73, she claimed receipts of Rs.93500/- as race winnings in two jackpots at Bangalore and Madras and the said amount was credited in the capital account in the books. The Assessing Officer included these amounts as income from other sources and assessed them. The AAC confirmed the addition. The matter went to Settlement Commission who by a 16 majority held that the explanation of the assessee was not genuine due to the reasons (i) that the assessee's knowledge of racing was very meager, (ii) that a jackpot is a stake of five events in a single day and one can believe a regular and experienced punter clearing a jackpot occasionally but the claim of the assessee of having won a number of jackpots in three or four seasons not merely at one place but at three different centres, namely Madras, Bangalore and Hyderabad appeared, prim facie, to be wild and contrary to statistical theories and experience of frequencies and probabilities, (iii) The assessee's books did not show any drawings on race days or on the immediately receding days for the purchase of jackpot combination tickets, which entailed sizable amounts varying generally between Rs.2,000/- and Rs.3,000/-, (iv) the assessee's capital account was credited with the gross amount without showing any expenses and purchases of tickets or for losses, (v) in view of the exceptional luck claimed to have been enjoyed by the assessee, her loss of interest in races from 1972 was very significant. The Settlement Commission took the view that one would not lose interest in race from 1972 and income yielding activities merely because the income from that source become chargeable to tax. When the matter went before the Supreme Court, it dismissed the appeal of the assessee. From the facts of this case, it is apparent that this case does not relate to the case where the assessee has taken loan from any parties but it is a case where the assessee himself has shown the income from a particular source and income shown by the assessee was not found to be genuine. This case, in my opinion, will not assist the Revenue.
15. In the case of DCIT vs. Rohini Builders 256 ITR 360 (Guj.), the facts are that during the assessment year under consideration, the assessee had taken loans from various parties and during the course of assessment proceedings, the assessee had furnished the loan confirmations giving full addresses, GIR numbers/permanent account numbers etc. of all the depositors. The 17 Assessing Officer issued summons to some of the creditors and also conducted inquiries into the genuineness or otherwise of the loans taken by the assessee. Ultimately, the Assessing Officer made an addition of Rs.12,85,000/- to the returned income of the assessee, which was confirmed by the CIT(A). On further appeal, the Tribunal held that the phraseology of section 68 of the Act was clear that the Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year, that the legislative mandate is not in terms of the words "shall be charged to income-tax as the income of the assessee of that previous years", that the unsatisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as income of the assessee. The Tribunal found that the assessee had discharged the initial onus which lay on it in terms of section 68 by proving the identity of the creditors by giving their complete addresses, GIR numbers/Permanent Account Numbers and the copies of assessment orders wherever readily available, that it had also proved the capacity of the creditors by showing that the amounts were received by the assessee by account payee cheques drawn from bank accounts of the creditors and the assessee was not expected to prove the genuineness of the cash deposited in the bank accounts of those creditors because under law the assessee can be asked to prove the source of the credits in its books of account but not the source of the source. Thus, taking into consideration the totality of the facts and circumstances of the case, and, in particular the fact that the Assessing Officer had not disallowed the interest claimed/paid in relation to these credits in the assessment year under consideration or even in the subsequent years, and tax had been deducted at source out of the interest paid/credited to the creditors, the Tribunal held that the Departmental authorities were not justified in making the addition of Rs.12,85,000/-. The Hon'ble High Court dismissed the appeal of the Department. Hon'ble Supreme Court also 18 dismissed the Special Leave Petition. This decision clearly lays down the proposition that the assessee is not required to prove the source of source. The assessee can be asked only to prove the source of the credit. This decision, in my opinion, is clearly applicable to the facts of the case before me. The assessee in the case before me has duly discharged his onus by filing the confirmation, address, permanent account number and the copy of bank account of the creditor. Even though the assessee was not required to prove the source of source but still the assessee in the case before me has filed the copy of cash book of the lender from which it is apparent that the lender was having the cash in hand on the date when he has deposited the amount in his bank account.
16. I have also gone through the decision in the case of CIT vs. Johrimal Goel, 147 Taxman 448 (All.) In this case, the Assessing Officer found two deposits in the books of account of assessee in the name of his daughters. The Assessing Officer asked the assessee to explain these deposits. The assessee explained that the amounts were paid by the two ladies through cheque and that both of them had been assessed to tax under the Amnesty Scheme. The Assessing Officer was of the view that the assessee had introduced his black money by filing voluntary returns of his daughters and, therefore, added the amounts as his income under section 68. The CIT(A) took the view that the two ladies credited the amount in their bank account in March, 1986. Therefore, if the Assessing Officer was of the view that the ladies did not have any independent source of income and the two bank accounts actually belonged to the assessee then proper course for the Assessing Officer was to add entire amounts of deposits in their bank accounts in the hands of the assessee and the provisions of section 69 would have been attracted and the correct assessment year would have been 1986-87 and not the relevant assessment year 19 1987-88. The Tribunal confirmed the order of CIT(A). When the matter went before the High Court, the High Court held as under :-
"Under section 68 if any sum is found credited in the books of account of the assessee 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. Therefore, what has to be enquired into by the assessing authority is about the nature and source of the deposit. If the explanation with regard to nature and source is found unsatisfactory, only then the amount so credited may be treated as income. In the instant case, the assessee offered the explanation both about the nature and source of the money. It was explained that the money was deposited by the two ladies, which they had deposited after withdrawing from their bank account. The Commissioner (Appeals) and the Tribunal had found that the assessee had discharged his burden in proving the source of the money, which had flew from the bank account. It was further held that in addition to the source of money from the bank account, both the ladies were the income-tax assessees and assessed to tax under the Amnesty Scheme and the amount deposited in their bank account was as a result of their disclosure of income under the Amnesty Scheme. The Commissioner (Appeals) AND THE Tribunal found the explanation satisfactory and, accordingly, deleted the addition. It was not a case where the assessee claimed any immunity from tax on account of the disclosure of income by the two ladies. It was a case where the assessee was asked to explain the deposits in his books of account about the nature and source, which the assessee had explained. The assessing Authority had not accepted the explanation but the Commissioner(appeals) and the Tribunal had accepted the explanation. The finding of the Tribunal was a finding of fact in that regard and it was not shown that the finding recorded by the Tribunal was perverse.
Various courts have held that the assessee has to prove three conditions :
(1) identity of the creditor (2)capacity of such creditor to advance money, and (3) genuineness of the transactions. If all the aforesaid three conditions are proved, the burden would shift on the revenue to prove that the amount belonged to the assessee. It has been held by the various High Courts that the assessee cannot be asked to prove the source of source or the origin of deposit.
Under the Amnesty scheme, the new tax payers were allowed to declare their income for various years and their returns were allowed to be accepted without any charge of penalty and interest. It appeared that both the ladies had filed returns under the Amnesty Scheme declaring certain income and as a result of such declaration, savings had been deposited in the bank account which had been subsequently paid to the assessee. There was no dispute that the income-tax 20 returns under the Amnesty Scheme in the case of both the ladies had been accepted.
Further, there was no error in the order of the Tribunal where the Tribunal held that in case the amount deposited in the bank account of those two ladies were to be treated as the amount belonging to the assessee and the deposits made by the assessee, then it would be a case of investment made by the assessee in the name of those two ladies and the provision of section 69 would apply and not section 68 and for that purpose the financial year would be relevant and then such investment might be deemed to be the income of the assessee of such financial year which would fall in the assessment year 1986-87 and not 1987-88. Section 68 applies when the amount is found deposited in the books of account of an assessee and not in third party. Deposit in the account of bank would amount to investment and section 69 would apply and not section 68."
In my opinion, the case of the assessee is duly covered by the decision of Jurisdictional High Court which I am bound to follow and on the basis of this decision itself, the addition of cash credit of Rs.1,50,000/- has to be treated as explained one.
17. I have also gone through the decision of Third Member in the case of Kulbir Singh vs. ACIT, 124 TTJ (Agra)(TM) 1, as relied upon by the learned AR. This decision relates to the question whether the proceedings taken u/s. 263 were justified or not. Although the facts involed in this case also relate to the acceptance of cash credit u/s. 68 to be genuine by the Assessing Officer, but treated as erroneous by the Commissioner of Income-tax by invoking the provisions of section 263. This decision since relates to the question of applicability of provision of section 263, in my opinion, will not be applicable to the facts of the case. In this decision, the Third Member has agreed with the order of learned Judicial Member who has come to the conclusion that in the light of the decision of Supreme Court in the case of Malabar Industrial Co. Ltd.243 ITR 83 (SC) and the decision of Hon'ble Bombay High Court in the case of CIT vs. Gabriel India Ltd., 203 ITR 108 (Bom.), the order of CIT u/s. 263 cannot be sustained. 21
18. I have also gone through the decision in the case of CIT vs. Rajesh Dal Mill, Mathura in Reference No. 12 of 1994 dated 22.09.2006, copy of which available on record, wherein, the Hon'ble Allahabad High Court has held as under :-
"We have heard Shri R.K. Upadhyaya, learned standing counsel appearing on behalf of the Revenue and Sri Krishna Agarwal, learned counsel for the applicant.
Learned standing counsel submitted that even though the creditors were genuine and the income tax payees and the deposits were made through bank draft, they did not have sufficient funds to give the amount in question to the assessee and it was only to utilize the unaccounted money of the assessee. The submission is misconceived. The Commissioner of Income Tax (Appeals) as well as the Tribunal has recorded categorical findings of fact that the creditors were income tax payees and the transactions were made by way of bank drafts. Sufficient funds were available with the creditors to finance loan which findings cannot be questioned in the present reference. In this view of the matter, we are of the considered opinion that the Tribunal was right in deleting the addition in question."
19. In the case of CIT v Pragati Co-operative Bank Ltd. (2005) 278 ITR 170 (Guj), the Hon'ble court held as under:
"Held, that it was apparent that the assessee had furnished the details which would discharge the onus which lay on the assessee considering the fact that the deposits were mad by third parties, viz., customers of the bank. It was nobody's case that the deposits were made either by the directors of the assessee-bank or any of the relatives of the directors. The activities of the assessee-bank were regulated by the provisions of the Banking Regulation Act, 1949, and the guidelines issued by the Reserve Bank of India. This was apart from the fact that under the provisions of section 80P of the Act the entire income from banking activities was exempt in the hands of the assessee, a co-operative bank. Thus there could exist no reason for the assessee-bank to indulge in any activity which would yield undisclosed income. The Tribunal was right in deleting the addition of Rs.1,80,95,811 in respect of fixed deposits and Rs.21,71,500 in respect of interest."
20. In the case of Murlidhar Lahorimal v CIT (2006) 280 ITR 512 (Guj), the Hon'ble High Court while explaining the scope of section 68, has held as under:
22
"Held, that the Tribunal failed to note the fact that the identity of the donor was established, the donor having appeared in person before the AO, the genuineness of the transaction was established, not only by the receipt of the bank draft, but also by the fact of the transaction having borne gift tax once the assessment was framed. The primary onus which rested within the assessee, thus, stood discharged. Therefore, if the Revenue was not satisfied with the source of the funds in the hands of the donor, it was up to the Revenue to take appropriate action. The Tribunal considered the motivation for making the gift which was not relevant. The addition of Rs.50,000 was not justified."
21. In the instant case, the Assessing Officer without looking into the facts and bringing any evidence to the contrary rejected the explanation of the assessee. Section 68 nowhere empowers the Assessing Officer to reject each and every explanation of the assessee. The Assessing Officer is a quasi-judicial authority and he should form his opinion judiciously, not in an arbitrary manner. It appears that in this case the Revenue has just made the addition for the sake of making the addition u/s 68. The decisions of the Gujarat High Court as well as that of Allahabad High Courts as cited earlier are applicable to the facts of the case.
22. In view of my aforesaid discussion, I agree with the view taken by the learned Judicial Member that under the given facts and circumstances of the case, the impugned cash credit of Rs.1,50,000/- is genuine. Now, the matter will go to the regular Bench.
Sd/-
(P.K. BANSAL) Accountant Member Dated: 17th January, 2011 *aks/-