Income Tax Appellate Tribunal - Delhi
Ram Kumar Gupta vs Income-Tax Officer on 4 April, 1991
Equivalent citations: [1991]37ITD469(DELHI)
ORDER
J. Kathuria, Accountant Member
1. This appeal by the assessee for assessment year 1964-65 is directed against the order dated 30-10-1987 passed by the Commissioner of Income-tax (Appeals)-VII, New Delhi.
2. In all, the assessee has taken three grounds. The first ground is against the upholding of addition of Rs. 1,00,000 by non-acceptance of cash credit of M/s. Ram Gopa! Nand Kishore, Prop. M/s. Rang Behari Lai Atma Ram Goel. Ground No. 2 is against the confirmation of disallowance of interest of Rs. 6,990 paid to the aforesaid party on the cash credit of Rs. 1,00,000. Ground No. 3. though not arising out of the impugned order of the Commissioner of Income-tax (Appeals) challenges the validity of the order passed by the Income-tax Officer and states that the assessment order is time-barred.
3. Shri Pradeep Dinodia, learned counsel for the assessee, first argued ground No. 3. It was submitted that the assessee had not taken this ground before the Departmental authorities, but has taken the ground before the Tribunal. It was submitted that since the question of limitation goes to the root of the matter and does not require any investigation into fresh facts, the same may be admitted and adjudicated upon. Reliance in this regard was placed by the learned counsel on the Special Bench decision of the Tribunal in Indo Java & Co. v. IAC [1989] 30 ITD 161 (Delhi) and of Calcutta High Court in CIT v. Soorajmull Nagarmull [1990] 185 ITR 421.
4. The learned Departmental Representative opposed the admission of the additional ground.
5. We have carefully considered the submissions, since the question of limitation raised by the assessee goes to the root of the matter and no fresh investigation into facts is called for, we would admit ground No. 3 taken for the first time before the Tribunal. We shall now deal with the merits of the ground taken.
6. The original assessment in this case was completed on 31-3-1969 on total income of Rs. 3,03,576. Appellate Assistant Commissioner of Income-tax, 'N'-Range, New Delhi, vide his order dated 10-2-1982 set aside the assessment and directed the assessing officer to make a fresh assessment according to law in the light of the observations made by the first appellate authority. The learned Appellate Assistant Commissioner noted that Shri Ram Kumar Gupta, Prop. M/s. Delton Cable Co. (the assessee) had not been given opportunity to cross-examine the creditors and the Department could not utilise the information gathered on the back of the assessee. In the present proceedings, we are concerned with the cash credit of Rs. 1,00,000 in the name of M/s. Ram Gopal Nand Kishore, Prop. M/s. Rang Behari Lai Atma Ram Goel, the other credit of Rs, 10,000 having already been accepted as genuine by the assessing officer in fresh assessment dated 30-12-1981. The submission of the learned counsel was that in view of the provisions contained in Sub-section (2A) of Section 153 of the Income-tax Act, 1961, the fresh assessment should have been completed before the expiry of two years from the end of the financial year in which the order of the Appellate Assistant Commissioner was received by the Commissioner. It was, therefore, contended that as the learned AAC had set aside the assessment for assessment year 1964-65 on 10-2-1972, the fresh assessment could have been made up to 31-3-1974. Since the assessment order was passed on 30-12-1981, it was argued that the impugned assessment order was barred by limitation. Reliance in this regard was placed on the Madhya Pradesh High Court decision in Gulabchand Motilal v. CIT [1987] 34 Taxman 456. It was submitted that this was the only decision by any High Court on the issue and this may, therefore, be followed by the Tribunal.
7. The learned Departmental Representative, on the other hand, submitted that the plain reading of Section 153(2A) clearly showed that the limitation applied only in respect of fresh assessments made pursuant to certain orders mentioned in the subsection for assessment year 1971-72 and subsequent assessment years. It was vehemently argued that the assessment in question which pertained to assessment year 1964-65 was out of the purview of Section 153(2A) of the Act and, as such, the order was within time as no time-limit was applicable in this case.
8. We have minutely considered the submissions of the learned representatives of the parties. We agree with the learned Departmental Representative that on the plain reading of Sub-section (2A) of Section 153 of the Act, it is clear that the limitation is applicable only to assessment year 1971-72 and subsequent assessment years. We may mention that Sub-section (2A) of Section 153 was inserted by the Taxation Laws (Amendment) Act, 1970 with effect from 1-4-1971. The Central Board of Direct Taxes in the Explanatory note issued under Circular No. 56 dated 19-3-1971 clarified the position as under:-
Under the existing provisions of Section 153(3), such fresh assessments are not subject to any time limit. The time limit laid down under new Sub-section (2A) of Section 153 will be operative only in relation to assessments for the assessment year 1971-72 or any subsequent year.
9. In Kanga and Palkhivala's "The Law and Practice of Income-tax" 'Eighth Edition - Volume Fat page 1227 the distinguished authors have this to say regarding the applicability of Sub-section (2A):-
In relation to assessment years up to and including the assessment year 1970-71, there is no time limit for making a fresh assessment under Section 146 (now deleted) or in pursuance of an appellate or revisional order setting aside or cancelling an assessment. In relation to the assessment year 1971-72 and subsequent years, a fresh assessment in such cases has to be made within two years from the end of the financial year in which the order under Section 146 cancelling the best judgment assessment is passed by the AO or the appellate order of the CIT(A) or the Tribunal is received by the Commissioner or the revisional order is passed by the Commissioner.
10. The case of Gulabchand Motilal (supra) relied on by the learned counsel for the assessec also does not advance the case of the assessee and that decision is in an altogether different context. The facts of that case were that while framing assessment for the assessment year 1975-76 the Income-tax Officer made an addition of Rs. 95,000 to the income of the assessee on account of income from undisclosed sources. On appeal, the Commissioner of Income-tax (Appeals) held that the amount of income evaded by the assessee was Rs. 1,20,000. He, however, gave a finding thai the evaded amount did not refer only to assessment year 1975-76, but related to assessment years beginning with assessment year 1964-65. Commissioner of Income-tax (Appeals) directed the Income-tax Officer to initiate proceedings under Section 147 of the Act for assessment years 1964-65 to 1974-75. The assessments were re-opened by the assessing officer. The case which came up before the Madhya Pradesh High Court, however, related to assessment years 1971-72 to 1974-75 only. Thus, the controversy in that case was for assessment years 1971-72 to 1974-75. The Tribunal in that case had held that the provisions of Section (2A) of Section 153 of the Act were not attracted at all. The Madhya Pradesh High Court examined the relevant provisions and came to the conclusion that to give full effect to the fiction introduced by Explanation 2 to Section 153 and to the object for insertion of Sub-section (2A) in Section 153 of the Act, it must be held that where fresh assessment is being made for a particular assessment year, in pursuance of a finding or direction incorporated in an order under Section 250, Section 254, Section 263 or Section 264 passed in proceedings relating to another assessment year, then the fresh assessment would be deemed to have been made for the purposes of Section 150 and Section 153, in consequence of or to give effect to any finding or direction setting aside or cancelling the assessment for that particular year. It is against this background that the Hon'ble High Court held that the Tribunal was not right in holding that Section 153(2A) of the Act was not attracted in the instant case. It may be mentioned that the aforesaid decision of the Madhya Pradesh High Court is not an authority for the proposition that the provisions of Sub-section (2A) of Section 153 are attracted even in cases pertaining to assessment year 1970-71 and earlier years. The controversy in that case was confined to assessment years 1971-72 to 1974-75 and not to assessment year 1964-65 onwards as was submitted by the learned counsel for the assessce. Moreover, in the instant proceedings, we are not concerned with an order passed by the Departmental authorities in consequence of or to give effect to any direction or finding of the appellate authority in the proceedings relating to another assessment year. In the instant proceedings, the original order was passed on 31-3-1969. The learned Appellate Assistant Commissioner had set aside the assessment on 10-2-1972 and the fresh assessment, after affording the opportunity to the assessee for cross-examining the creditor, has been made on 30-12-1981. As no time limit was applicable in the instant case, the order passed by the assessing officer on 30-12-1981 was a valid order and was not barred by limitation. This ground of the assessee, therefore, fails.
11. Now we come to the other two grounds which are inter-linked. Briefly stated, the facts are these. The assessee showed a borrowing of Rs. 1,00,000 on 2-1-1963 in its books. The loan was shown to have been taken from M/s. Ram Gopal Nand Kishore, Prop. M/s. Rang Behari Lal Alma Ram Goel, against four pronotes of Rs. 25,000 each. This loan was shown to have been returned on 19-7-1965. The assessee filed confirmation from the creditor regarding the said loan. It was also pointed out by the assessee that the creditor was an Income-tax assessee. The assessing officer, however, came to know that the creditor in a statement dated 2-2-1970 on solemn affirmation before the Income-tax Officer, Shri A.K.K. Unni, 4th Addl. Hundi Circle, Bombay, had affirmed that he had lent names of various firms on charging nominal commission of 5 per cent. In his statement dated 21-10-1970 before the 4th Addl. Income-tax Officer, Hundi Circle, Bombay, the creditor had also categorically and specifically confirmed that he had lent his name to the present assessee during the Samvat year 2019-20 against charging of nominal commission. Shri B.K. Vartak, 2nd Addl. Income-tax Officer, Hundi Circle, against recorded the statement of the creditor on 31-3-1972 and Shri D.M. Harish, representative of the assessee cross-examined the creditor. In that statement and cross-examination, the creditor again affirmed that the money transactions with the assessee firm were not of a genuine nature, that he had never advanced any money to the assessee or received back any money from the assessee and that the transaction was a mere Havala or accommodation entry in which no money had passed whatsoever.
12. As the assessment involved an addition of more than Rs. 1,00,000, the assessing officer referred the matter to the Inspecting Assistant Commissioner under Section 144B of the Act. The learned IAC in his order under Section 144B noted the following facts of the transaction:-
(a) the alleged loan of Rs. one lakh was in cash in the books of the assessee firm and did not pass through bank account;
(b) the alleged payments of interest from time to time were also in cash;
(c) the alleged return of the loan was also in cash;
(d) the alleged lender had specifically and categorically confirmed even during the detailed cross-examination that no genuine money/loan was advanced to the assessee;
(e) he also affirmed that the alleged transaction with the assessee-firm was not genuine;
(f) there is no evidence with the assessee, how such a huge alleged cash loan was received in Delhi from Bombay. Similarly, there is no evidence or remittance of the interest in cash to Bombay at various occasions. There is further no satisfactory explanation for not conducting big money transactions through bank when both the parties had bank accounts and were living and carrying on business far away from each other;
(g) the assessee has failed to prove that the alleged lender did, in fact, lend the said amount to him;
(h) the explanation of the assessee is most unreasonable;
(i) the alleged lender was operating his admitted nefarious activities from a small cabin taken on Leave and Licence basis at Bombay ; and
(j) there was no bona fide transaction between the assessee and the alleged lender.
13. On the basis of the directions of the Inspecting Assistant Commissioner, the assessing officer added back a sum of Rs. 1,00,000 and also disallowed the interest claim of Rs. 6,990 on the aforesaid loan of Rs. 1,00,000. On appeal, the learned Commissioner of Income-tax (Appeals) also confirmed both the additions and held that though the assessee had proved the identity and creditworthiness of the creditor, the genuineness of the transaction had not been proved.
14. Shri Dinodia vehemently argued that the assessee had filed confirmations from the creditor as also the photostat copy of the discharged pronotcs. It was pointed out that it was a genuine loan which was received by the assessee, on which interest was paid to the creditor and that the loan in question was returned on 19-7-1965. It was submitted that the assessee did whatever was within his power to do and filed all the evidence which he possessed. It was submitted that if the creditor, for reasons best known to him, and for saving his own skin, was alleging that the loan in question was bogus, his statement in the light of the earlier confirmation should not be accepted at his face-value. It was submitted that the assessee had no control over the creditor, who had retracted his earlier statement. Relying on the Supreme Court decision in CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78 it was submitted that the assessee had discharged the primary onus cast on him and that nothing further remained to be done. It was submitted that the onus on the assessee could not be indefinite, for life. According to the learned counsel the burden cast on the assessee had been fully discharged. Relying on the decision dated 9-4-1973 of the Calcutta Bench of the Tribunal in the case of Sukhanand Aggarwal it was submitted that in respect of the addition made in that case on account of loan raised from the same creditor and on identical facts, the Tribunal had held that no addition could be made in the hands of the assessee.
15. The learned Departmental Representative, on the other hand, submitted that the question to be decided in this case was whether the transaction of loan of Rs. 1,00,000 was genuine or not. It was submitted that the person who allegedly gave the loan had consistently affirmed that no money had passed in this transaction and that only a Havala entry had passed. It was pointed out that in the face of the alleged lender's deposition, the assessee had not brought on record any evidence to show the genuineness of the transaction. It was, therefore, argued that the addition of Rs. 1,00,000 and the disallowance of interest thereon were properly made.
16. We have carefully considered the rival submissions and perused the material placed before us. In the case of Sukhanand Aggarwal (supra) in which the Tribunal passed the order on 9-4-1973, the Tribunal had given a finding that the identity of the creditor and his creditworthiness stood established. The question of genuineness of transaction does not appear to have been gone into by the Tribunal. It may also be mentioned that in that case the creditor's accounts had also been examined and it was found that these tallied with the entries in the assessee's accounts. In the instant case, however, the books of the creditor were reported to have been lost in transit and the entries appearing in the books of the assessee had, therefore, not been tallied with the entries appearing in the books of the creditor.
17. The Calcutta High Court in Shankar Industries v. CIT [1978] 114 ITR 689 in its judgment dated 21-3-1978 had laid down three tests. These are the identity of the creditor, the capacity of the creditor to advance the money and the genuineness of the transaction. According to the Hon'ble High Court these things must be proved prima facie by the assessee and only after the assessee has adduced evidence to establish prima facie the aforesaid, the onus shifts to the Department. When the creditor in the instant case himself says and says so consistently that he had given a mere accommodation entry to the assessee had that no money had passed, the genuineness of the transaction has not been proved. The onus was on the assessee to prove the genuineness of the transaction. We do not agree with the learned counsel for the assessee that the creditor retracted his earlier statement. We have gone through the statements of the creditor recorded on 2-2-1970, 21-10-1970, 16-2-1971 and 1-3-1972 (copies of which embellish the assessee's paper-book) and we find that nowhere has the creditor stated that the loan advanced to the assessee was genuine or that money had passed in the transactions.
18. The case of the Supreme Court in Orissa Corpn. (P.) Ltd. (supra) is also on different facts. In that case the assessee had given the names and addresses of the alleged creditors and it was in the knowledge of the Revenue that the said creditors were Income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under Section 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. There was no effort to pursue the so-called alleged creditors. In these circumstances the Supreme Court held that the assessee could not do anything further. In the present case, however, the assessee had somewhat discharged its primary burden by placing on Revenue's record copies of the confirmation letter and the pronotes. The assessee also submitted that the creditor was an income-tax assessee. If the Income-tax Officer had not purused the matter further on the basis of the evidence produced but merely disallowed the cash credit as bogus, the addition could be struck down legitimately. The assessing officer, however, has gone further and recorded the statements of the creditor, who has categorically stated on different occasions that no cash had passed in the transaction, that mere Havala entry was passed and that he was remunerated for the services rendered by him in this regard. In such a situation the assessee had to prove the genuineness of the cash credit. This has not been done by the assessee. The Supreme Court decision, therefore, does not apply in the instant case.
19. We have quoted in extenso certain other facts which have been mentioned by the Inspecting Assistant Commissioner in his order under Section 144B, which need not be repeated here. Having regard to the entire facts and circumstances of the case, it appears to us that the more copious the material disclosed, the more solid is the crust covering up the real facts. The confirmation letter and the photostat copies of the pronotes have, therefore, to be viewed in that background. Even in cases of accommodation entries such materials merely camouflage the real facts. We, therefore, hold that the assessee having failed to prove the genuineness of the transaction despite proper opportunity given by the assessing officer, the addition of Rs. 1,00,000 and the disallowance of interest of Rs. 6,990 were properly made by the assessing officer and properly upheld by the first appellate authority. These grounds are also rejected.
20. In the result, the appeal is dismissed.