Income Tax Appellate Tribunal - Delhi
Jagbir Singh vs Income-Tax Officer on 6 May, 1987
Equivalent citations: [1987]23ITD15(DELHI)
ORDER
V.P. Elhence, Judicial Member
1. This is an appeal filed by the assessee against the order dated 17-10-1985 of the learned Commissioner of Income-tax (Appeals) VI, New Delhi for the A.Y. 1979-80. The main point involved relates to the addition due to three cash credits held to be unexplained.
2. The assessee, an individual, is a goldsmith by profession who carries on business in the proprietary name of M/s. Jagjit Singh and Sons at 129, Moti Bazar, Delh-6. The assessee alleges to have borrowed an aggregate amount of Rs. 2,38,600 from eleven different persons on different dates during the assessment year in question, for the purchase of gold. The details of the three cash credits disputed in this appeal are as follows :-
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Sl. No. Name of the creditor Date Amount How Remarks
Rs. given
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1. Sardar Singh 20-5-78 55,000 Cash Assessee is the son of this cre-
ditor's sister-
in-law.
2. Paramjit Singh 20-5-78 52,300 Cash He is the asses-
see's maternal uncle.
3. Gurdeep Singh 30-5-78 5,000 Cash He is the as-
sessee's younger brother.
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All these cash creditors filed confirmatory letters and their affidavits before the ITO. The cash creditors Sardar Singh and Gurdeep Singh were examined before the ITO whereas the third one, Paramjit Singh was examined before the learned CIT(A). We now take the case of each cash creditor separately.
3. Sardar Singh claimed to have advanced Rs. 55,000 to the assessee out of his savings from agricultural income derived from 38-39 acres of land in village Jhundla, District Karnal jointly owned with his two sons Arvinder Pal Singh, Tejinder Pal Singh and their wives. He also owned house No. 141, Ashoka Colony Karnal in the joint names of himself and his sons. He also owned 4 acres of land in village Jhundla, District Karnal in his individual name. His eldest son Gurjit Singh carries on truck plying business at Ludhiana. The ITO disbelieved this cash credit. He observed that Sardar Singh could not tell the dates when the loan was advanced by him. The house had been purchased by him 12-13 years back in a dilapidated condition and its reconstruction is said to have continued till 31-12-82. So the ITO drew the inference that during all this time the entire savings of the family would have been invested in the constructions. Sardar Singh had stated that the assessee had repaid a part of the loan in instalments of Rs. 2,000 in cash whenever he came to Delhi and met the assessee. On the other hand the ITO noticed that the assessee's hooks of account showed repayments by bearer cheques of Punjab & Sind Bank, Fountain, Chandni Chowk, Delhi for Rs. 10,000, Rs. 12,000 and Rs. 10,000 on 23-9-78, 26-9-78 and 27-1-79 respectively. However the inquiries made by the ITO from the bank revealed that the first two cheques were encashed by the one Montu Prasad (the employee of the assessee). The ITO held that the entries in the assessee's books of account were nob genuine. He also held that this loan was not genuine.
4. The learned CIT(A) additionally observed that there was no evidence of savings; that no accounts of agricultural income had been maintained by this creditor and that no surplus from the agricultural income had been put in a bank account. He, therefore, confirmed this addition.
5. We have heard the learned representatives of both the sides in regard to this cash credit and have carefully gone through the papers on the record. In the affidavit dated 21-9-1984 Sardar Singh had deposed that he advanced the loan in question out of the sale of the crops from (i) M/s. Kallumal Om Prakash, Karnal, (ii) M/s. Munna Lal Kallumal, Karnal and (iii) M/s. Khazan Chand Faqir Chand. The assessee had filed certificates from all these parties showing sales of agricultural produce as follows :
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Sl. No. Name of the Commission Agent Date of Amount Period
Certificate Rs.
1. M/s. Kallumal Om Prakash, 9-7-84 29,612 17-5-78
Karnal 20-5-78
2. M/s. Munna Lal Kallumal, 9-8-84 16,712 1-5-78
Karnal 24-5-78
3. M/s. Khazan Chand Faquir - 27,000 1-5-78
Chand, Karnal
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The fact that Sardar Singh has not only land in his joint name but also in his individual name has not been belied. He stated in cross-examination that the net income was Rs. 1.5 lakhs. The land had 5 tubewells. The sale of the agricultural produce to the three commission agents referred to above was also corroborated by him,. He stated that although there was no bank account in his individual name but there was a joint account in the State Bank at Karnal in his and his sons' names. Though Sardar Singh stated that he did not remember the exact date of advancing the loan to the assessee he specifically stated in reply to question No. 21 by the ITO that the loan was given in 1978 in May-June. He stated that earlier he used to keep Rs. 60,000-Rs. 70,000 at home but now the money is deposited in the bank account. He said that Rs. 55,000 were paid to the assessee in lump sum when he came to the assessee and that interest was charged @ 12% p.a. He stated that the assessee had repaid Rs. 31,000 with interest up to 31-3-1981. The statement of the assessee was also recorded. He stated that the repayments had been made by him through bearer cheques during the A.Y. 1979-80 and that after 31-3-79 payments were not made by cheques but in cash instalments of Rs. 2,000 or so. Therefore, the statement of Sardar Singh on this point stands explained. He also stated Sarvshri Shiv Lal and Montu Prasad were his permanent employees and whenever he gave bearer cheques to Sardar Singh, those employees encashed the cheques. He clarified that the cheques issued were not account payee cheques. The assessee's statement therefore, accords with the inquiries which the ITO made from the Punjab and Sind Bank. While appreciating the oral evidence, one stray sentence here and one stray sentence there cannot be singled out to disbelieve the deponent's testimony. The statement is to be read as a whole. We find that the statement of Sardar Singh corroborates the assessee's case as well as his statement and documentary evidence in material particulars. The objections contained in the orders of the ITO and of the learned CIT (A) are all duly explained and reconciled and on the basis of the evidence on the record we are clearly of the view that the requisites of a genuine cash credit were established in regard to this credit and that the income-tax authorities were not justified in holding-otherwise. The addition of Rs. 55,000 will, therefore, be deleted and is deleted.
6. The next cash credit we take up is of Gurdeep Singh. The ITO noticed that he could not tell the exact date on which the loan was advanced. Regarding repayment of the loan the ITO noticed that whereas Gurdeep Singh denied any repayment, his copy of account filed by the assessee showed repayment of cash amounts of Rs. 2,000, Rs. 2,000 and Rs. 1,000 on 29-9-78, 4-10-78 and 9-10-78 respectively. The ITO, therefore, inferred that the loan was not genuine and that the repayment entries were bogus.
7. In appeal the learned CIT (A) confirmed the addition of this loan on the same grounds.
8. We have heard the learned representatives of both the sides in regard to this cash credit also. Gurdeep Singh is employed in the Punjab and Sind Bank at Rajendra Place, New Delhi since 1970. At the time of his statement (24-1-85) his salary was Rs. 3,000 whereas in 1978-79 it was Rs. 1,500 per month, During the period 1-4-78 to 31-3-79 he was posted at Moga & Allwal and had a savings bank account there. Though he stated in answer to question No. 5 from the ITO that he did not remember the exact date of giving the Joan to the assessee but he did state that he gave it somewhere towards the end of May 1979. He stated that the loan was given in cash at Delhi as he used to visit Delhi almost every month. Regarding the details he stated that he brought Rs. 2,000 from Punjab and Rs. 3,000 from the locker of his mother's almirah at Delhi where he kept his money. He also duly explained about cash gifts received by his children. So as the contradiction regarding the repayment of the loan is concerned no questions were asked from the assessee nor the contradiction was put to Gurdeep Singh. In our view the indentity and capacity of this creditor as well as the genuineness of the transaction of loan could not have been doubted on the basis of the evidence on the record. We are of the view that this cash credit was duly explained and established. We hold accordingly. This should be deleted from assessee's total income.
9. The third cash credit is of Paramjit Singh of Rs. 52,000. It was disbelieved by the ITO as he was not produced by the assessee.
10. The learned CIT (A) gave to the assessee an opportunity to produce this cash creditor as he could not be produced before the ITO because of disturbed conditions in Punjab. In his statement recorded on 22-7-1985 Paramjit Singh stated that he advanced the loan out of savings from agricultural income. He claimed to own 20 acres of land in his own name and 120 acres in the name of the joint family. He stated that he had sold wheat worth Rs, 67,000 to M/s. Gobind Ram Som Nath, Commission agents in May 1978 (Partners Som Nath and Suresh Kumar). Their certificate was filed by the assessee (paper No. 22). He also stated to have sold other crop also. According to him his approximate income in 1978 was Rs. 1,75,000. However the ITO, who was asked by the learned CIT (A) to give a remand report, could not verify the certificate issued by M/s. Gobind Ram Som Nath. He noticed some contradiction in the account of Paramjit Singh in the books of M/s. Gobind Ram Som Nath. The learned CIT (A) required the assessee to explain the same in the light of the ITO's report. However, even after obtaining a long adjournment the assessee expressed his inability to rebut the fresh copy of account received from ITO, A Ward, Karnal on the ground that the party was not now cooperating with him. The learned CIT (A) disbelieved this cash credit on the following grounds :-
(i) that the copy of the account of Paramjit Singh filed before the ITO had been signed by Suresh Kumar as the partner of M/s. Gobind Ram Som Nath whereas according to the report of the ITO Suresh Kumar was not a partner therein.
(ii) In the books of the assessee the loan was shown as repaid by cheques whereas the ITO noticed that the repayment was made in cash.
He held that the immediate source i.e., sale of wheat to M/s. Gobind Ram Som Nath had been belied. He, therefore, confirmed the addition.
11. In the appeal before us the assessee moved an application on 4-7-1986 under Rule 29 of the Income-tax Appellate Tribunal Rules, 1963, for admitting paper nos. 29 to 119 as additional evidence. The assessee submitted that those papers came in the assessee'a possession after the order of the learned CIT (A). It was also submitted that sufficient opportunity had not been given by the lower authorities to produce this evidence. Subsequently an affidavit was filed by the assessee in which it was explained-
(i) that Som Nath gave to the assessee the copy of the account, of Paramjit Singh for 1977-78 but refused to cooperate further saying that it is only if Paramjit Singh paid the money due that he could do anything in the matter ;
(ii) that this fact was orally told to the learned CIT (A) and it is only after the receipt of the impugned order of the learned CIT (A) that the additional evidence in question was handed over by Pararmjit Singh to him. On behalf of the assessee reliance was also placed on the following decisions on the question of reception of additional evidence at this stage by the Appellate Tribunal:-
(i) Velji Deoraj and Co. v. CIT [1968] 68 ITR 708 (Bom.) ;
(ii) Kali Charan Ram Chander v. CIT [1978] 112 ITR 405 (Cal.) ;
(iii) CIT v. Kum. Satya Setia [1983] 143 ITR 486 (MP).
The reception of additional evidence was opposed by the learned Departmental Representative on the basis of the written comments obtained from the ITO. In short it was submitted that there had been no denial of opportunity ; that the additional evidence amounted to the improvement of the assessee's case ; that it was not clear when the additional evidence was procured and that the additional evidence related to 1980-81 to 1985-86.
12. We have considered the rival submissions of both the sides as also the decisions referred to above. The additional evidence (paper nos. 29 to 119 of the assessee's paper book) consists of (i) accounts of various parties (including Paramjit Singh) with M/s. Gobind Ram Som Nath from 4-4-1977 and (ii) copies of vouchers of sales of Paramjit Singh on various dates. These evidences are relevant. There is no rebuttal of the assessee's deposition on affidavit that these documents were handed over by Paramjit Singh to the assessee after the receipt by the assessee of the impugned order of the learned CIT (A). The learned CIT (A) had recognised the fact that Paramjit Singh could not be produced before the ITO due to disturbances in Punjab. Further, the learned CIT (A) himself wanted the assessee to reconcile the contradiction in the account of Paramjit Singh in the books of M/s. Gobind Ram Som Nath as per ITO's report. The assessee had obtained adjournment for the purpose from the learned CIT (A) for the purpose but had expressed his inability thereafter as Paramjit Singh refused to cooperate. This has also been testified by him now on affidavit. Due to all these facts and circumstances therefore, we are of the view that this additional evidence should be admitted on the record in the interests of justice under Rule 29 aforesaid. However since the department should have the opportunity of verification and rebuttal of this evidence and of assessing its probative value in the factual setting, there is no alternative but to set aside the matter to the learned CIT (A) in regard to this cash credit for deciding it afresh in accordance with law after giving an opportunity of hearing to both the sides. It is, therefore, not necessary for us to consider this issue any further. We hold accordingly.
13. The last point relates to the charge of interest under Sections 139(8) and 217 amounting to Rs. 50,000 and Rs. 73,980 respectively on the basis of assessment made in pursuance of notice under Section 147/148. According to the assessee, an order passed in pursuance of a notice under Section 147 is not a regular assessment. The learned CIT (A) noticed that there is a divergence of opinion amongst the various High Courts on this point, there being no decision of the Hon'ble Delhi High Court which is the jurisdictional High Court. He also noticed that the assessee had been assessed for the first time under Section 143(3) read with Section 147 as no return had been filed by him originally and it is only in pursuance of the notice dated 19-12-80 that the return was filed by him on 22-3-1984 under Section 148. He, therefore, upheld the levy of interest.
14. Before us the learned counsel for the assessee referred to the decisions of the various High Courts on this point namely
(i) Gates Foam and Rubber Co. v. CIT [1973] 90 ITR 422 (Ker.);
(ii) P.A. Abdul Muthalif Rowther v. ITO [1976) 102 ITR 694 (Ker.);
(iii) Smt. Kamla Vati v. CIT [1978] 111 ITR 248 (Punj. and Har.) ;
(iv) CIT v. Smt. Jagjit Kaur [1980] 126 ITR 540 (All.);
(v) CIT v. Ganeshram Kayak [1981] 129 ITR 43 (Ori.);
(vi) Monohar Gidwany v. CIT [1983] 139 ITR 498 (Cal.);
(vii) D. Swarup, 1TO v. Gammon India Ltd. [1983] 141 ITR 841 (Bom.);
(viii) Charles D'Souza v. CIT [1984] 147 ITR 694 (Kar.); and
(ix) B. Babu and Co. v. Sixth ITO [1986] 26 Taxman 205 (Kar.).
He pointed out that the amendment made by the Taxation Laws (Amendment) Act, 1984 whereby an assessment made for the first time under Section 147 shall be regarded as a regular assessment, is only prospective w.e.f. 1-4-85. Lastly he submitted that in view of the divergence of opinions, the view favourable to the assessee had to be taken. In this regard he placed reliance on the decision of the Supreme Court in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192. On the other hand the learned departmental representative relied upon the orders of the income-tax authorities.
15. We have considered the rival submissions as also the decisions referred to above. The existence of a conflict of decisions on the point is not in dispute. It is also not in dispute that there is no specific decision of the Hon'ble Delhi High Court on this point. Therefore, the assessee is right in pointing out that the matter would be governed by the principle underlying the decision of the Supreme Court in the case of Vegetable Products Ltd. (supra) namely, that if the language of a taxing provision is ambiguous or capable of more meanings than one, then the court has to adopt that interpretation which favours the assessee. Another reason for taking this view is that Explanation 2 to Section 139(8) by which an assessment made for the first time Under Section 147 is regarded as a regular assessment, was substituted only with effect from 1-4-85 by the Taxation Laws (Amendment) Act, 1984 and not retrospectively. We are, therefore, of the view that on the facts of the present case the interest Under Section 139(8) or 217 could not be charged.
16. In the result this appeal is partly allowed.