Bombay High Court
Malabar Oil Marketing Co. vs Asstt. Cit on 1 September, 2003
Equivalent citations: (2004)91TTJ(MUMBAI)348
ORDER
G.C. Gupta, J.M. This appeal by the assessee for the assessment year 1991-92 is directed against the order of the Commissioner (Appeals).
2. The ground of appeal Nos. 1 and 2 are regarding the addition of Rs. 8 lacs on account of credit entries under section 68 of the Act confirmed by the Commissioner (Appeals). The learned counsel for the assessee argued that the assessee has unsecured loans of over Rs. 3 crores during the relevant period pertaining to 105 parties. The assessee was able to secure confirmations from 103 creditors. But the assessee could not procure the confirmations from the remaining two parties for the reason that these parties were out of town. The learned counsel for the assessee argued that the credits were genuine and the amount of loan was received per account payee cheque and were paid per account payee cheque only. The assessee had in its letter dated 14-12-1993 to the assessing officer has explained that the assessee is trying to get the confirmation from two creditors, namely, Shri S.L. Sawant and Shri Krishna Shah. The learned counsel for the assessee argued that before the Commissioner (Appeals), the assessee produced the confirmation from Shri S.L. Sawant regarding his credit entry of Rs. 5 lacs but the Commissioner (Appeals) refused to admit it for no valid reason. The learned counsel for the assessee argued that the Commissioner (Appeals) has rejected the confirmation letter sought to be filed before him in contravention of rule 46A of the IT Rules, 1962. The learned departmental Representative argued that ample opportunity was given to the assessee to file confirmation which the assessee failed to avail and merely because the creditors number is more than 100 is no excuse for not filing the confirmation letter. He argued that the onus is on the assessee to prove that the loan amounts are genuine.
3. We have considered the rival submissions carefully. We find that the total amount of unsecured loans is over Rs. 3 crores pertaining to 105 creditors. The assessee has filed confirmations from 103 parties and has explained before the assessing officer that it could not file the confirmation from the remaining two parties, namely, Shri S.L. Sawant and Mr. Krishna Shah for the reason that they are out of town. The assessee has received and repaid the loan amounts of these two parties per account payee cheques. The assessee vide its letter dated 14-12-1993, addressed to the assessing officer has explained that it is trying to get the confirmation letter from these two creditors which will be submitted shortly. Before the Commissioner (Appeals), the assessee produced the confirmations from Shri S.L. Sawant, but the same was not admitted as additional evidence by the Commissioner (Appeals). The case of the department is that ample opportunity was given to the assessee by the assessing officer to produce confirmations from these two parties. On a careful consideration of the entire controversy on this issue, we find that it is the overall conduct of the assessee which is to be considered before deciding the admissibility of the additional evidence in the case. Out of 105 creditors, the assessee was able to secure and file the confirmations from 103 parties. The confirmation of Shri S.L. Sawant was sought to be filed before the Commissioner (Appeals) by the assessee. The assessee has tried to explain before the assessing officer that the confirmations from the two creditors could not be produced since these two creditors were out of town. Considering all the facts and circumstances of the case we hold that in the interest of justice the assessee should be allowed opportunity to file evidence in support of its plea regarding the genuineness of the two credit entries, added by the revenue in the hands of the assessee. In this view of the matter we set aside the issue to the file of the assessing officer with directions to decide the issue afresh on merits in accordance with law after allowing adequate opportunity to the assessee to lead evidence regarding the two credit entries. We order accordingly.
4. The ground of appeal No. 3 is regarding addition of Rs. 30 lacs made by the assessing officer on account of receipts unrecorded in the books of accounts on the basis of notings on the loose papers. The learned counsel for the assessee argued that during the search operations on the premises of the sister concern of the assessee, namely, M/s Raj Oil Mill certain loose papers were found and seized. Out of these loose papers seized by the revenue, notings on one loose paper was stated by M/s Raj Oil Mill as pertaining to the assessee- company. He argued that during the course of search no question was asked by the revenue officers. He argued that for the first time after a gap of nearly four years from the date of search, the assessee was asked to explain the notings on the said loose paper. The learned counsel for the assessee argued that the loose paper is having no heading and does not mention that whether the amount is receipt or payment, any sales or purchase or quantity, etc. He argued that the notings were only of expected amounts and the assessee has received all amounts from its sister concern M/s Raj Oil Mills per account payee cheques only. He argued that the actual amount received from M/s Raj Oil Mill per account payee cheque is more than the expected receipts in the notings on the loose paper found by the department. He relied on the decision of the Hon'ble Bombay High Court in CIT v. C.J. Shah & Co. (2000) 246 ITR 671 (Bom), of the Tribunal in the case of S.P. Goel v. Dy. CIT (2002) 82 ITD 85 (Mum)(TM) and in the case of S.K Gupta v. Dy. CIT (1999) 63 TTJ (Del) 532.
5. The learned departmental Representative has opposed the arguments of the learned counsel for the assessee. The learned departmental Representative argued that the onus is on the assessee to prove the nature and the genuinity of the entries noted on the loose paper. He argued that although there is no heading on the loose paper and whether it is receipt or payment of amount is not clear but still it is for the assessee to explain that these entries are accounted for. He argued that the receipt is dated 18th June and 19th June whereas the payment is dated 15th June which is not payable since payment should precede the receipt thereof. He argued that some amount on the notings has been admitted by the assessee itself and in fact all the entries on the loose paper represent actual receipts of the assessee. He argued that the decision in S.P. Goel's case (supra) cited by the assessee is distinguishable since in the case of the assessee there is a corroborative evidence which was absent in the case in S.P. Goel's case (supra).
6. We have considered the rival submissions carefully and have also gone through the copy of loose paper seized by the department, a copy of which is filed by the assessee in the compilation before us. We find that out of the four columns in the loose paper, the entries in col. Nos. 2 and 4 have been tallied and accepted by the assessing officer. We find that the expected receints from M/s Raj Oil Mills and others as per the col. Nos. I and 3 of the loose paper was Rs. 30 lacs and the figure of actual receipts from the parties is more at Rs. 34,13,036. The mode of receipt from these parties are per account payee cheques of various banks. A complete chart of these payments vis-a-vis expected receipts from the various parties along with cheque numbers are given on p. 2 of the written submissions filed by the assessee before the Commissioner (Appeals). We find that the actual receipts of amount being more than the expected amount, no case for addition is made out by the revenue. We find that the assessing officer while making the addition in the hands of the assessee on the basis of the loose paper seized in search operations on the sister concern, has observed, "Thus, it is quite possible that entries which are claimed to be the expected recoveries were also the actual recoveries which the assessee has not recorded in the books of accounts." This observation of the assessing officer while making the addition in the hands of the assessee, shows that the assessing officer himself is not sure that these entries on the loose paper are not the expected recoveries of the assessee. It seems that the addition has been made merely on account of some possibility. We find that no questions regarding these entries were asked during the course of search. The loose paper is not having any heading and it did not mention that whether the amount is a receipt or payment or whether it is in lacs or thousands, etc. All payments received by the assessee are per account payee cheques. We find that the addition has been made in this case only on the basis of some possibility and presumptions and the addition is not based on any material on record. We find that there is no corroborative evidence in this case to hold that the assessee has received these amounts and these amounts are not mere expected recoveries. There is no material on record to suggest that the assessee has in fact received these amounts written on the loose paper, apart from and in addition to the amount received by the assessee per account payee cheques and entered in its account books by the assessee. It is settled law that mere notings on the loose paper without any corroborative evidence, cannot be assessed as "income" in the hands of the assessee. The case law cited by the assessee also supports the case of the assessee. In the facts and circumstances of the case we hold that there being no material on record to suggest that the assessee has received any amount apart from the amounts received by it per account payee cheques, no case for addition on this account is made out by the revenue, In this view of the matter we delete the addition made and the ground of appeal No. 3 of the assessee is allowed.
7. In the result, the appeal of the assessee is allowed for statistical purposes.