Income Tax Appellate Tribunal - Jodhpur
Deputy Commissioner Of Income Tax vs Smt. Archna Devi on 12 May, 2004
Equivalent citations: (2004)84TTJ(JODH)467
ORDER
Joginder Pall, A.M.
1. These are cross-appeals : one filed by the Revenue and another filed by the assessee against the order of CIT(A), Jodhpur, for the asst. yr. 1994-95. Since the issues raised in both the appeals arise from the same order of CIT(A), these were heard together and are being disposed of by this consolidated order for the sake of convenience.
2. First we take up Revenue's appeal, The only grievance of the Revenue is that the CIT(A) was not justified in deleting the additions of Rs. 22,075 and Rs. 4,000 made by the AO. Briefly stated, the facts of the case are that the AO noticed that the assessee had shown agricultural income of Rs. 75,607. During the course of assessment proceedings, the AO called upon the assessee to explain the genuineness of agricultural income. The assessee explained that she owned 40 bighas of land which was given to Smt. Jyoti Devi, mother-in-law of the assessee on 'Batai' (crop-sharing) and the agricultural income was earned from such agricultural land. It was also submitted that the assessee also. derived rent of Rs. 4,000 for giving land for pasture (cattle grazing). However, the AO noted that sale bills of agricultural produce did not indicate the name of the person from whom such produce had been purchased. He also noted that 'Raida' crop was not grown in the months of January and February and, therefore, no sale thereof was possible during these months as shown in the bills. Considering the extent of land owned by the assessee and possible crop grown for one year, the AO accepted part of agricultural income and held that the amount of Rs. 22,075 was not agricultural income of the assessee and the same represented unaccounted income of the assessee shown in the garb of agricultural income. He further rejected the assessee's submission in respect of rental income from giving land for use as pasture and made an addition of Rs. 4,000 on this account.
3. Being aggrieved, the assessee carried the matter in appeal before the CIT(A). It was contended before the CIT(A) that the AO has made, both the additions' on the basis of surmises and conjectures. It was submitted that the AO was wrong in assuming that the assessee had sold agricultural produce grown only in financial year 1992-93. In fact, the assessee had also sold such produce grown in the financial year 1991-92. It was also submitted that as per certificate issued by the Agriculture Department, the AO had accepted the agricultural produce @ 13.50 qtls. per hectare or 216 kgs. Applying the same yardstick, the agricultural produce sold by the assessee accounted for agricultural income shown in the return. It was also submitted that the assessee had earned a sum of Rs. 4,000 from giving agricultural land for pasture. Thus, it was submitted, that no additions were called for on both counts. Accepting the contentions of the assessee and taking note of the fact that the impugned additions have been made only on the basis of assumptions and presumptions and also there being no contrary material available with the Department, the learned CIT(A) deleted the additions. The Revenue is aggrieved by the order of the CIT(A). Hence, these appeals before us.
4. The learned Departmental Representative heavily relied on the orders of the authorities below.
5. The learned counsel for the assessee, on the other hand, heavily relied on the order of the CIT(A). He submitted that both the additions were rightly deleted by the CIT(A).
6. We have heard both the parties and carefully considered the rival submissions with reference to facts, evidence and material on record. From the facts discussed above, it is obvious that it is not in dispute that the assessee owned 40 bighas of land. Inquiries made by the AO further revealed that Smt. Jyoti Devi also confirmed having taken the land of the assessee on 'Batai'. The only reason given by the AO for making the impugned addition is that the assessee could have sold the produce only for one year and not for two years. However, the AO could have verified from the assessment records whether the assessee had shown similar income in the return filed for the earlier assessment years or not. There is no material brought on record to controvert the finding of the learned CIT(A) that the assessee had sold the agricultural produce relating to two assessment years. Similarly, there is no material on record to show that the assessee had not earned rental income for giving the land for pasture. In the light of these facts, we are of the opinion that the CIT(A) was justified in deleting the impugned additions for the reason that such additions were made on the basis of assumptions and presumptions. We, therefore, do not find any justification to interfere with the order of the CIT(A). The same is upheld and all the grounds of appeal of the Revenue are rejected.
7. We now take up the assessee's appeal, The only effective issue raised in the assessee's appeal is that the CIT(A) was not justified in sustaining an addition of Rs. 80,000 made on account of unexplained cash credit in the name of one Sri Lumba Ram. The facts, briefly stated are that during the course of assessment proceedings, the AO observed a credit of Rs. 80,000 in the name of one Shri Lumba Ram. He further observed that the assessee claimed to have received a sum of Rs. 40,000, each by way of two pay orders of bank. However, there was a substantial gap between the sale of produce and amounts given to the assessee. He further observed that the assessee had borrowed substantial amount from Smt. Jyoti Devi on which interest of Rs. 30,512 had been paid in the accounting year under reference. Still Shri Lumba Ram owed a sum of Rs. 1,10,000 to Smt. Jyoti Devi. He observed that Shri Lumba Ram was a man of ordinary means living in a 'Kachha house' and nobody would advance a sum of Rs. 80,000 to daughter-in-law i.e., the assessee without charging any interest when Shri Lumba Ram was paying huge interest to the mother-in-law of the assessee. He also observed that out of the amount of Rs. 80,000, a sum of Rs. 40,000 was returned after a period of two years. He also observed that all the transactions shown in the name of Shri Lumba Ram indicated that he was merely used as a tool by the family members for obtaining accommodation entries. He based his finding for the reason that after the amount was returned and deposited in the bank account the same was immediately withdrawn by Shri Lumba Ram. Thus, the AO made an addition of Rs. 80,000 under Section 68 of the Act as unexplained credit.
8. Being aggrieved, the assessee carried the matter in appeal before the CIT(A). It was submitted before the learned CIT(A) that the assessee had filed an affidavit of Shri Lumba Ram who confirmed having given such loan to the assessee, Shri Lumba Ram was also produced before the AO who confirmed having given such loan. It was also submitted that the repayment of the loan was made by cheques. Further, bills for sale of agricultural crop by Shri Lumba Ram were also produced before the AO which indicated that he had substantial agricultural income. Thus, it was contended that the assessee has discharged the onus in proving the genuineness of the credit and, therefore, no addition on this account was called for. However, these submissions did not find favour with the learned CIT(A) who upheld the addition by recording following finding in para 13 of the impugned order:
"I have considered the submissions of the learned counsel in this regard very carefully that the AO was not justified in making this addition of Rs. 80,000 as unexplained deposit in the name of Shri Lumba Ram as Sh. Lumba Ram is genuine person had sufficient source of income to make payment to the appellant. I have also seen the detailed reasoning given by the AO for making addition on account of unexplained deposit in the name of Sh. Lumbaram. After due consideration of the matter, I hold that the AO was justified in making the addition of Rs. 80,000 on account of unexplained deposit in the name of Sh. Lumba Ram because appellant could not prove satisfactorily the genuineness of the deposit in the name of Sh. Lumba Ram. There is an apparent gap in the date on which there was alleged sale of agricultural produce by Sh, Lumba Ram in Pali and the date on which Sh. Lumba Ram had allegedly purchased the bank draft/orders amounting to Rs. 80,000. From the perusal of the bank account it is seen there is an immediate withdrawal of the deposit made in such bank a/c. I also fail to understand that why Sh. Lumba Ram had not deposited the sale proceeds of agricultural produce in his bank a/c when he has maintained such a bank a/c. In my view, Shri Lumba Ram was not in a position to advance a sum of Rs. 80,000 to the appellant. Shri Lumba Ram failed to give reliable evidence that he had that much of amount on the date when he had purchased bank pay orders in favour of the appellant. Accordingly, I hold that the AO was justified in making this addition on account of unexplained deposit because appellant could only prove the identity of the depositor but the creditworthiness and the genuineness of the transactions with the depositor are not established. I, therefore, uphold the action of the AO."
The assessee is aggrieved by the order of CIT(A), Hence, this appeal before us.
9. The learned Authorised Representative of the assessee, Shri N.R. Mertia reiterated the submissions which were made before the authorities below. He also drew our attention to pp. 1 to 5 of the paper book which is a copy of written submissions of the assessee made before the CIT(A). He further drew our attention to a copy of the affidavit of Shri Lumba Ram placed at p. 1 of the paper book, where he confirmed having advanced loan of Rs. 80,000 to the assessee. He further drew our attention to pp. 6 to 8 of the paper book which is a typed copy where he confirmed having given loan of Rs. 80,000 to the assessee out of his agricultural income. He further drew our attention to pp. 10 to 13 of the paper book which are copies of bills showing sale produce of agricultural produce by Shri Lumba Ram. He further submitted that the assessee had returned the loan by cheques which were deposited in the bank account of Shri Lumba Ram. Thus, it was submitted that the assessee had discharged the onus in proving the identity of the creditor, creditworthiness of the creditor and genuineness of the transactions. He further relied on the following judgments in support of his submissions that no addition was called for :
(i) Sarogi Credit Corporation v. CIT (1975) 103 ITR 344 (Pat):
Where the High Court has held that in a case where credit appears in the name of third parties and the same is accepted by respective parties, the assessee could be said to have discharged the onus in proving the genuineness of the creditor.
(ii) Nemi Chand Kothari v. CIT (2003) 264 ITR 254 (Gau):
Where it was held that in a case where identity of the creditor is established and assessee received the amount by way of cheque, it could be presumed that the assessee has proved the creditworthiness of the creditor.
(iii) CIT v. Heeralal Chaganlal (2002) 257 ITR 281 (Raj):
In this case the Tribunal had recorded a finding that identity of the creditor had been established and he had also confirmed the loan. On these facts, the Tribunal deleted the addition and the High Court held that this was a finding of fact recorded by the Tribunal which did not warrant any interference by the High Court.
(iv) M.M. Woollens v. Asstt. CIT 20 Taxation 142 (Jp)(Trib):
Where the Tribunal had held that in a case where the identity of a creditor is established and the creditor also affirmed having advanced the amount and the payment is made by crossed cheque, addition under Section 68 of the Act was not called for.
(v) Orient Trading Co. Ltd v. CIT (1963) 49 ITR 723 (Bom):
Where the High Court has held that in a case where the assessee satisfies the AO as to the identity of the third party and furnishes evidence which would show that the entry is not fictitious, the initial burden can be said to have been discharged by the assessee. The assessee cannot be asked to explain the source of source of the credits in the hands of the creditor.
(vi) Mansinghka Brothers (P) Ltd. v. CIT (1984) 147 ITR 361 (Raj):
Where the High Court has held that while considering the assessability for applicability of any beneficial provision or interpretation of facts or inference to be drawn for facts, if two views are possible then that view should be taken which may be beneficial to the assessee.
Thus, he contended that the order of the learned. CIT(A) should be set aside and the impugned addition deleted.
10. The learned Departmental Representative, Shri D.R. Zala, on the other hand, heavily relied on the orders of the authorities below. He submitted that in case of cash credits, the onus is entirely on the assessee to establish the identity of the creditor, creditworthiness of the creditor and genuineness of the transaction. He submitted that in this case, the facts brought on record, show that Shri Lumba Ram had taken huge loan from Smt. Jyoti Devi, mother-in-law of the assessee whom the assessee had paid interest of Rs. 30,500 in the assessment year under reference. He submitted that the person who was paying such a huge interest would not keep substantial amount with the assessee without charging any interest. He further submitted that there was a substantial time gap between the sale proceeds of agricultural produce and when the amounts were given to the assessee. Therefore, it cannot be said that the assessee had advanced the impugned amount out of his agricultural income. He further submitted that Shri Lumba Ram had bank a/c with Marwar Rural Bank, Pali. However, the amounts in question were not advanced out of bank account. Rather the amount was given by way of pay orders got made at Jodhpur. Further, he submitted that when the amount was returned to Shri Lumba Ram, the same was deposited in his bank account and immediately withdrawn. Thus, he contended that the assessee failed to prove the creditworthiness of Shri Lumba Ram and the genuineness of the transactions for which the addition was rightly made and sustained by the CIT(A).
11. We have heard both the parties at some length and given our thoughtful consideration to the rival submissions. We have also examined the facts, evidence and material placed on record. We have also referred to the relevant pages of the paper book to which our attention has been drawn. From the facts discussed above, it is obvious that the. assessee had filed an affidavit of Shri Lumba Ram placed at p. 1 of the paper book wherein he confirmed having advanced a loan of Rs. 80,000 to the assessee by way of two pay orders. He further stated that the said amount had been advanced out of sale proceeds of agriculture and income from cattle. A copy of the statement of Shri Lumba Ram recorded by the AO is also placed at pp. 2 to 5 of the paper book. Shri Lumba Ram confirmed having given loan of Rs. 80,000. He also submitted that the assessee returned Rs. 40,000 within two months and remaining Rs. 40,000 after two and half years. In reply to question No. 13, Shri Lumba Ram stated that he owned 175 bighas of land and in good season agricultural produce was about 150 bags. His statement also shows that he owns one tractor. He also confirmed regular transactions of deposits arid borrowings with the family of the assessee. Page 9 of the paper book further shows that during the course of assessment proceedings, the assessee had filed copies of bills and vouchers indicating substantial sale of agricultural produce. A copy of bank account of Shri Lumba Ram with Marwar Gramin Bank, Pali, is also at pp. 15 and 16 of the paper book. But the same shows that the amount in question was returned by the assessee by cheques which was deposited in his bank account. It is, no doubt, true that Shri Lumba Ram had borrowed an amount of Rs. 1,50,000 from Smt. Jyoti Devi, mother-in-law of the assessee on interest for purchase of vehicle being used in dairy business. He also paid interest of Rs. 30,500 on the amount borrowed. In case of cash credit it is a trite law that the onus is on the assessee to establish identity of the creditor, creditworthiness of the creditor and genuineness of the transaction. Reliance in this regard is placed on the judgment of Calcutta High Court in the case of Shanker Industries v. CIT (1978) 114 ITR 689 (Cal). The same view, has been expressed by the Hon'ble Supreme Court in the case of A. Govindarajulu Mudaliar v. CIT (1958) 34 ITR 807 (SC). The Hon'ble Supreme Court has held that whether a receipt is to be treated as income or not must depend very largely on the facts and circumstances of each case. This issue was also considered by the Hon'ble Supreme Court in the case of Sumati Dayal v. CIT (1995) 214 ITR 801 (SC). Their Lordships of apex Court held that in all cases in which the receipt is sought to be taxed as income, the burden lies on the Department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within the exemption provided by the Act lies upon the assessee in view of the provisions of Section 68 of the Act. However, the authority concerned may decide the issue as to whether, the cash credit are explained or not after considering the surrounding circumstances and applying the test of human probabilities. Thus, the settled position of law is that the onus is on the assessee to prove the source and genuineness of said credits.
12. Now the main point in this case is whether on the basis, of evidence and material placed on record, it could be held that the assessee has discharged the onus in establishing the identity of the creditor, the creditworthiness of the creditor and genuineness of the transaction. Now, in this case, the identity of the creditor is not disputed by the Revenue. However, the Revenue has doubted the creditworthiness and genuineness of the transaction. But the evidence placed on record shows that Shri Lumba Ram owned substantial land measuring 175 bighas. He claimed agricultural produce of 150 bags per good season, The sale bills produced before the AO also show that he had substantial receipts from sale of agricultural produce. The Revenue has not made inquiries to question genuineness of the sale bills. In the light of evidence brought on record we are of the opinion that even the creditworthiness of the creditor has been established. In any case, no material has been placed on record to show that Shri Lumba Ram was not a man of means. The very fact that he had taken loan of Rs. 1,50,000 from the mother-in-law of the assessee on which interest of Rs. 30,000 was paid does not mean that he was not a man of means. Thus, the assessee could be said to have discharged the onus in proving the creditworthiness of the creditor. As regards the genuineness of the transaction, Shri Lumba Ram has confirmed the same in his statement and also in the affidavit. We also notice that even in the past, the assessee had taken a loan of Rs. 30,000 which was returned to Shri Lumba Ram. The same was also accepted to be genuine by the AO. Thus, in the light of such evidence, we are of the opinion that even the genuineness of the transaction with the assessee stands established. We are, therefore, of the opinion that the CIT(A) was not justified in sustaining the impugned addition. We set aside the order of CIT(A) and delete the impugned addition. Accordingly, all the grounds of appeal of the assessee are allowed.
13. In the result, while appeal of the Revenue is dismissed, the appeal filed by the assessee allowed.