Income Tax Appellate Tribunal - Ahmedabad
Income Tax Officer vs Skyjet Aviation (P) Ltd. on 19 July, 1999
Equivalent citations: [1999]71ITD95(AHD)
ORDER
B.L. Chhibber, A. M. These cross appeals arise out of the order of the Commissioner (Appeals)-I, Ahmedabad. We first take up the revenue's appeal (ITA No. 11 85/Ahd. / 1987):
2. The first ground raised by the revenue reads as under :-
"The learned Commissioner (Appeals) has erred in law and on facts in deleting the disclosed deemed income introduced as cash credits of Rs. 7,81,620 and Rs. 2,83,494 in the names of Miss Preeti V. Mehta and Shri C.S. Amin respectively and admitting fresh evidence in the form of affidavit of Smt. Parulben M. Jayakrishan in violation of rule 46A of the Income Tax Rules."
3. The assessee is a Limited Company engaged in the business of acting as an IATA approved Travel Agents with its Head Office situated at Ahmedabad and three branches situated at Bombay, Baroda and Gandhinagar.
4. Miss Preeti V. Mehta and Mr. C.S. Amin were the equal 50 per cent partners of the firm of M/s. Skyjet since its inception in 1978. Both of them were working partners and carried on this business of Travel Agency. In April, 1979 the assessee-company was floated by Miss. Preeti V. Mehta and Mr. C.S. Amin and both of them were signatories to the Memorandum of Association and Articles of Association of the company. The business of the firm was taken over by the company and both of them were the promoters and the first Directors of the company as it is evident from the Memorandum of Association and Articles of Association. Miss Preeti V. Mehta was the first chairman of the company and the Board of Directors conducted the business of the company since its inception as Chairman for a considerable time. Miss Preeti V. Mehta and Mr. C.S. Amin were authorised by the board to operate the bank accounts of the company vide resolution dated 24-4-1979. Everything went on well till search was carried out at the business premises of the assessee-company. During the course of search statements of Miss Preeti V. Mehta and Mr. C.S. Amin were recorded. In the books of the company loan accounts of both Miss Preeti V. Mehta and C.S. Amin stood recorded but in the statement on oath on 29-3-1985 they denied the ownership of the loan accounts. A second statement of Miss Preeti V. Mehta was recorded on 7-3-1986. The learned Income Tax Officer after citing few extracts of the statements of Miss. Preeti V. Mehta and Mr. C.S. Amin, came to the conclusion in the last part of main para 6 of the assessment order as under :-
"From the statement of Miss Preeti V. Mehta dated 29-3-1985 and 7-3-1986 statement of Shri Hasmukh Dinmanikant dated 29-3-1985 and Shri Anil S. Gandhi on 29-3-1985 and the statement of Shri Bhatt on 29-3-1985 it is clear beyond doubt, that these persons were acting on the pure instruction of Mrs. Parulben M. Jayakrishan. Their statements also made evidently clear that Smt. Parulben was in complete control of the affairs of the company in all respects. Miss Preeti V. Mehta is a salary earning employee of Skyjet Aviation Pvt. Ltd and she is getting a salary of Rs. 1400 p.m. She has no ostensible sources of income and it is proved beyond doubt that she has no capacity to raise finances to the magnitude of lakhs of rupees from outside. As such it is very clear that funds deposited in the name of Miss Preeti V. Mehta do not belong to her. The assessee-company also has not produced any evidence to support that the loan credited in her account were genuine. Thus on the basis of these statements recorded on oath and also on the basis of financial capabilities of Miss Preeti V. Mehta is not the real owner of the loan account appearing in her name and the credits to the tune of Rs. 8,81,620 during the year do not belong to her. The same has to be held as income of the assessee-company as income from undisclosed sources."
On identical grounds, another addition of Rs. 2,83,494 being the loan account in the name of Mr. C.S. Amin was made to be the income of the assessee-company.
5. The matter came in appeal before the Commissioner (Appeals). Detailed submissions were made before the Commissioner (Appeals) which have been reproduced by her in the order verbatim. The attention of the learned Commissioner (Appeals) was drawn to plethora of evidence filed before the learned Income Tax Officer i.e., statements of Miss Preeti V. Mehta, Anil S. Gandhi, Smt. Parulben M. Jay, Krishna, affidavit of Smt. Parulben Jay Krishna, copies of accounts of Miss Preeti V. Mehta in the books of the company. It was contended before the Commissioner (Appeals) that the confirmations of Miss Preeti V. Mehta and Mr. C.S. Amin as regards their accounts in the books of the assessee-company and her concurrence to having signed the said statements and other vouchers and transactions of the company and their statements conclusively proved that the money had been borrowed in their/her name under their knowledge and with their full acquisitions, as being the Directors of the company, and credited in the books of account of the company as loans from them. The learned Commissioner (Appeals) after going through the written submissions and the evidence on record held the borrowings in the names of Miss Preeti V. Mehta and Mr. C.S. Amin as quite genuine and accepted the same as loans borrowed by them. In so doing in her order at page 5 and onwards she gave detailed narration of the modality and conduct of Miss Preeti V. Mehta and Mr. C.S. Amin and their association with the assessee-company their concurrence for the money having been borrowed in their names and with their knowledge by way of various depositions, their actual participation in the conduct of the management of the affairs of the company, Miss Preeti V. Mehta herself being the founder Chairman of the company her actual operations of all the bank accounts of the company her offering personal guarantees to the bank for the finances raised, attending to the functions of the company law requirements, signing the annual accounts, preparation of Directors' Report etc. The learned Commissioner (Appeals) further relied on the documentary evidence put forth by the assessee-company in the form of affidavit of Smt. Parulben M. Jay Krishna who confirmed that the loans were arranged at her instance copies of accounts of Miss Preeti V. Mehta and Mr. C.S. Amin duly confirmed by them, copies of account of financier K. Chokshi & Co., statement of Mr. Kiran Chokshi, copy of proforma receipt and payment account of Miss Preeti V. Mehta for the money borrowed by her in her name from M/s. K. Chokshi. & Co. and others. The learned Commissioner (Appeals) also relied heavily on the annexures filed with the letter dated 12-1-1987 to show her conduct and accepted the credits in the name of Miss Preeti V. Mehta as genuine observing inter alia as under :-
"Mere negation by Miss Preeti V. Mehta of the transactions, as argued by the learned Income Tax Officer, as above against a host of documentary evidences including those in her own handwriting accepted in her statements, oath etc. prove more of her attitude of hostility and an attitude of denial rather than admitting of the facts."
Similarly on identical grounds, she held the credit of Rs. 2,83,494 in the name of Mr. C.S. Amin as genuine and accordingly deleted the credits of Rs. 7,81,620 and Rs. 2,83,494.
6. Shri B.R. Meena, learned department Representative heavily relied upon the order of the Income Tax Officer.
He submitted that both Miss Preeti V. Mehta and Mr. C.S. Amin were not persons of means and were not in a position to advance loans to huge amounts like Rs. 7,81,620 and Rs. 2,83,494. According to the learned department Representative both were petty employees of the company and they had not the capacity to advance huge loans. He heavily relied upon the statements of Miss Preeti V. Mehta and Mr. C.S. Amin recorded during the course of search where they had denied having advanced the loans to the assessee company.
7. Shri J.P. Shah, learned counsel for the assessee took us through the paper book which contains documents, evidence/evidence furnished before the Income Tax Officer and the learned Commissioner (Appeals). The learned counsel submits that after perusing the relevant evidence the learned Commissioner (Appeals) has lightly held that the two credits are genuine. The learned counsel further submits that no fresh evidence was furnished before the learned Commissioner (Appeals) as contended in the grounds of appeal by the revenue because the affidavit of Smt. Parulben M. Jayakrishna was filed before the learned Income Tax Officer and the Income Tax Officer did not bring any evidence on record to rebut the contents of the affidavit. The learned counsel further submits that both Miss Preeti V. Mehta and Shri C.S. Amin being Executive Directors of the company were deeply involved in the affairs of he company and in this regard he drew our attention to the various documents/vouchers statements etc. signed by them. He further drew our attention to the certified copies of account, of Kiran K. Chokshi and Shri Bhaveshkumar Shroff who had confirmed having advanced the loans to Preeti V. Mehta and Shri C.S. Amin at the instance of Parulben M. Jayakrishna. The learned counsel for the assessee submitted that the source of deposits having been proved beyond any shadow of doubt, there is no justification for treating the two deposits as assessee's income from undisclosed sources.
8. We have considered the rival submissions and perused the facts on record. At the outset we must state that while deciding the appeal, the Commissioner (Appeals) did not entertain any fresh evidence in violation of rule 46A of the Income Tax Rules. As stated above, the affidavit of Parulben M. Jayakrishna was filed before the learned Income Tax Officer and this fact has been confirmed by the departmental Representative by placing before us a letter dated 3-3-1994 from the present Income Tax Officer Shri. D.B. Rajput which reads as under :-
"With reference to the above this is to inform that the affidavits in question are filed on record. Therefore, the affidavits had been filed by the assessee during the course of assessment proceedings for assessment year 1983-84 before the then assessing officer."
On the merits of the case, we agree with the conclusion of the learned Commissioner (Appeals) who has taken pains to write a detailed order after going through the plethora of evidence brought before her. It is established that both Miss Preeti V. Mehta and Shri C.S. Amin were Executive Directors of the company and were capable to borrow. Both of them borrowed from K. Chokshi & Co. and both had confirmed the borrowings which is evident from the various documents referred to supra and relied upon by the Commissioner (Appeals). It is also proved beyond any shadow of doubt that the borrowings were made with the influence of Smt. Parulben M. Jayakrishna who was president of the company and whose sworn affidavit dated 21-3-1986 was filed before the Income Tax Officer. The said affidavit is also accompanied by duly attested copies of accounts of Miss Preeti Mehta and Mr. C.S. Amin. No effort has been made by the Income Tax Officer to controvert the contents of this sworn affidavit. It is now well-settled law that if no effort is made to controvert the contents of the affidavit, the same have to be accepted as true, Mehta Parikh & Co. v. CIT (1956) 30 ITR 181 (SC). We further noted that Mr. Kiran Chokshi who is a practising advocate has duly confirmed that he had advanced loan to Miss Preeti V. Mehta and Shri C.S. Amin. He is an income-tax payer. He further confirmed that in turn he had borrowed from Bhaveshkumar Shroff and duly certified copy of his account with K Chokshi & Co. is also on record. Thus the source of deposits stands explained. Though not necessary, even the source of source also stands explained. It is also on record that Kiran Chokshi was obliged by the family of Parulben M. Jayakrishan and, therefore borrowed money from Bhaveshkumar Shroff. Smt. Parulben M. Jayakrishan herself could not directly raise the loan because of family reason, she being wife of well known industrialist. In the face of above, mere negation by two creditors during the course of search proceedings perhaps to save their own skin, should not lead to the conclusion that the credits are not genuine. Under these circumstances we uphold the finding of the Commissioner (Appeals) and dismiss this ground.
9. Ground No. 2 reads as under :
"The learned Commissioner (Appeals) has also erred in law and on facts in deleting Rs. 60,000 included by the Income Tax Officer as income from undisclosed sources, by admitting fresh evidence in violation of rule 46A."
During the course of assessment proceedings the Income Tax Officer noted a deposit of Rs. 60,000 in the name of "Paldi Jain Sangh". He called upon the assessee to furnish confirmation from the said party. Since no confirmation was filed before the Income Tax Officer he treated the same as assessee's income from undisclosed sources: On appeal, the learned Commissioner (Appeals) deleted the addition observing as under :-
"The assessee-company at this stage has endeavoured to get the confirmation of as many as 60/70 per cent of the persons travelling in group in the name of Paldi Jain Sangh. It has been shown that tickets are issued against this money and, therefore, question of treating this as undisclosed source of income does not arise. No addition, therefore, is required to be made as income from undisclosed sources. I, therefore, direct that the addition under this head for a sum of Rs 60,000 should be deleted in full and the explanation rendered by the appellant company being quite reasonable and satisfactory the same should be accepted to explain the nature and source of this amount. The appellant company gets a relief of Rs. 60,000."
10. From the above remarks of the Commissioner (Appeals) it is noted that confirmations of as many as 60 to 70 persons were filed before her. These were examined by the Commissioner (Appeals) in the presence of the Income Tax Officer during the course of appellate proceedings. Under these circumstances we do not find any merit in the revenue's contention that fresh evidence was admitted in violation of rule 46A. We accordingly dismiss this ground:
11. Ground No. 3 reads as under :
"The learned Commissioner (Appeals) has also erred in law and on facts in deleting disallowance of interest payment of Rs. 10, 155.
This ground is consequential in nature. Since we have upheld the genuineness of the two credits referred to in ground No. 1 supra, we hold that the Commissioner (Appeals) is justified in deleting interest of Rs. 10,155 on these credits. This ground also fails and is dismissed."
12. The last grievance of the revenue is that the Commissioner (Appeals) has further erred in law and on facts in deleting Rs. 16,000 included by the Income Tax Officer as income from undisclosed sources. The Income Tax Officer noted a sum of Rs. 16,000 credited in the names of Gokul Jayakrishna and Munjal Jayakrishna minor sons of Smt. Parulben Jayakrishna. It was submitted before him that the amounts had come out of personal savings and pin money of Gokul and Munjal minor sons of Parulben Jayakrishan. The Income Tax Officer was not satisfied with the explanation furnished and he treated the amount of Rs. 16,000 as assessee's income from undisclosed sources. On appeal, the Commissioner (Appeals) held as under:
"Looking to the status of the family and the sum of money involved, I am inclined to agree that the money has come from and out of personal savings and pin money/gifts etc. received on auspicious occasions and looking to the smallness of the sum the reasonableness of the explanation rendered, I delete the addition of Rs. 16,000 as cash credit."
13. After hearing both the parties, we do not find any ground for interference. it is common knowledge that in Hindu Society minor children do get pin money and gifts etc. On auspicious occasions and looking to the smallness of the amounts and the status of the assessee the Commissioner (Appeals) has rightly deleted the addition of Rs. 16,000. Her finding is accordingly confirmed.
14. Now we take up the assessee's appeal (ITA No. 1032/Ahd./ 1987):
15. The first ground raised by the assessee is that the Commissioner (Appeals) has erred in confirming the addition of Rs. 1,05,263 made by way of adoption of net profit on gross profits. As stated above, the assessee-company carries on business of acting IATA approval Travel Agents. The Income Tax Officer while framing assessment order arrived at a conclusion that the operating results disclosed by the assessee-company were not acceptable on the ground that the expenses were unreasonably high. In this connection he referred to the salary payments to different employees, telephone and telegrams expenses of Rs. 85,468. He compared the case of the assessee with that of M/s. Goodwind Travels who had shown better results. He, therefore, estimated the assessee's net profit at the rate of 20 per cent of its receipt of Rs. 5,26,370 which worked out to Rs. 1,05,263 and added the same to the income of the assessee.
16. On appeal, the Commissioner (Appeals) confirmed the addition.
17. Shri J. P. Shah, the learned counsel for the assessee submitted that the assessee is a Limited company, had maintained regular books of account which are duly audited and the learned Income Tax Officer has not pointed out any specific defect in the books of account regularly maintained by the assessee. He submitted that there is no justification for comparing the case of the assessee to a partnership firm carrying on Travel Agency business. The learned counsel further submitted that there is no justification for comparing salary payments of the assessee, a limited company, managed through the professionals to that of a partnership firm wherein there are two branches and two partners actively associated with the day to day conduct of the affairs of the business and coming to a conclusion that the salary payments are unreasonably high without pointing any in genuine, bogus or irregular payments. Similarly thereis no justification to compare telephone and telex expenses, travelling expenses and other expenses. He, therefore, concluded that the impugned addition merits deletion. The learned departmental Representative heavily relied upon the orders of the authorities below.
18. We have considered the rival submissions and perused the facts on record. lt is a case of a limited company which has maintained regular books of account which have been duly audited by the auditors. Ever since the inception of the company assessment orders were framed on the basis of book results and they were accepted. This year the Income Tax Officer except simply saying that the expenses under certain heads were excessive, has not brought any material on record to reject the account version of the assessee-company. He has not invoked the provisions of section 145(1). In our opinion the results of the assessee-company cannot be compared with those of a partnership concern viz. M/s. Goodwind Travels because the assessee-company is managed by highly paid professionals whereas M/s. Goodwind Travel is a partnership firm wherein there are two branches and two partners actively associated with the day-to-day conduct of the affairs of the business. The assessee-company is engaged in service sector and quality of service may differ from Travel Agency to Travel Agency. As stated above, the assessee has maintained regular books of account and even during the course of search no incriminating document was found connected with operating results. The learned Income Tax Officer has not brought any material on record to prove that the expenses claimed under the head 'Salaries", "Telephone, telex and travelling expenses" were not incurred or were bogus. In the absence of any defects having been noticed in the books of account, regularly maintained during the course of business, we hold that the addition made is uncalled for. We accordingly delete the impugned addition. This ground accordingly succeeds.
19. The next grievance of the assessee is with regard to the two cash credits of Rs. 60,000 and Rs. 40,000 in the name of Miss Preeti V. Mehta. Before the Commissioner (Appeals) evidence was produced for the first time and she held that the Income Tax Officer had right to look into this evidence to ascertain its veracity and reliability of the deposits and accordingly she restored the matter back to the Income Tax Officer. We do not find any infirmity in the directions of the Commissioner (Appeals) and accordingly uphold the same. This ground accordingly fails and is dismissed.
20. In the result the revenue's appeal is dismissed and the assessee's appeal is allowed in part.
Phool Singh, J. M. I have the privilege of going through the order recorded by my learned brother, Shri B.L. Chhibber, Accountant Member and then discussing the same with him but I regret my inability to agree with his views on ground No. 1 in the appeal of the revenue in Income Tax Officer v. Skyjet Aviation (P.) Ltd. (ITA No. 11 85/Ahd./ 1987) for assessment year 1983-84. I, therefore, proceed to write this separate order.
2. Ground No. 1 of ITA No. 11 85/Ahd./ 1987 of revenue is as follows:-
"The learned Commissioner (Appeals) has erred in law and on facts in deleting the disclosed deemed income introduced as Cash Credits of Rs. 7,81,620 and Rs. 2,83,494 in the names of Miss Preeti V. Mehta and Shri C.S. Amin respectively admitting fresh evidence in the form of affidavit of Smt. Parulben M. Jayakrishna in violation of rule 46A of the Income Tax Rules."
A perusal of the above ground shall reveal that it consists of two parts as one is relating to the additions of Rs. 7,81,620 and Rs. 2,83,494 standing in the names of Miss Preeti V. Mehta (hereinafter referred to as Miss Preeti and C.S. Amin respectively by the concerned Income Tax Officer which were subsequently deleted by the learned Commissioner (Appeals) and the other limb of this ground is relating to the admission of fresh evidence in the form of affidavit of Smt. Parulben M. Jayakrishan by Commissioner (Appeals) in violation of rule 46A of the Income Tax Rules. So far as the latter part of the ground is concerned, it stands disposed of against the revenue in view of the admission made by the learned departmental Representative himself who placed before us a letter dated 3-3-1994 from the present Income Tax Officer, Shri D.B. Rajput mentioning that the said affidavit of Smt. Parulben M. Jayakrishan was available in the file during the course of assessment proceedings for assessment year 1983-84 and this point has been discussed by my learned Brother in para 8 of the order and I do agree with that finding subject to this addition that in para 4.5 of the assessment order it is clearly mentioned by the assessing officer that he had refused to admit the affidavit of Smt. Parulben M. Jayakrishan. Accordingly this part of the ground is dismissed.
3. Now the next material point relates to deletion of two amounts of cash credits of Rs. 7,81,620 and Rs. 2,83,494 appearing in the names of Miss Preeti and C.S. Amin respectively in the account books of assessee and which were added to the total income of the assessee by assessing officer. Undisputed facts are that Miss Preeti and C.S. Amin allegedly have started business of Travel Agency in the name of Skyjet Aviation (P.) Ltd. since 1978 being partners of equal shares. In April, 1979 the assessee-company was floated by Miss Preeti and C.S. Amin and the business of the firm was taken by the company. There was a search and seizure operation under section 132 of the Income Tax Act in the case of assessee during 22-3-1985 to 29-3-1985 in which books of account pertaining to the assessment years 1982-83 to 1985-86 were seized. During the seizure operation statements of several employees and executives of the assessee were recorded including that of Miss Preeti, C.S. Amin, Hasmukh Dinmanikant, Shailesh R. Bhatt and Anil S. Gandhi. During assessment proceedings for the year under consideration, the Income Tax Officer observed from the books of account of the company that there existed to an account in the name of Miss Preeti showing a deposit of Rs. 8,81,620 made in cash on various dates. In the same way the books of account of the company had another loan account in the name of C.S. Amin containing different deposits on different dates in the year under consideration totalling Rs. 2,83,494. However, the assessing officer that during the search and seizure operation both Miss Preeti and C.S. Amin in their statements recorded on 29-3-1985, have denied any concern with the cash credits appearing in their names in the books of account. The stand of both of them was that they were simply employees of the company drawing a very meagre salary per month and they had been working on the instructions on Mrs. Parulben M. Jayakrishan and they had signed all the documents at the behest of Smt. Parulben M. Jayakrishan only. The assessing officer considered the statements of these employees and also gave thoughtful consideration to the attending circumstances and reached at the conclusion that these amounts of cash credits do not belong to the persons in whose names these are standing in the account of the assessee but the same was the income of the assessee-company from undisclosed sources of the year and accordingly added Rs. 8,81,620 standing in the name of Miss Preeti and Rs. 2,83,494 in the name of C.S. Amin as total income of the assessee-company from undisclosed sources. The assessee preferrerd appeal against this addition and the learned Commissioner (Appeals) vide the impugned order bifurcated the amount of Rs. 8,81,620 standing in the name of Miss Preeti in the books of account into two parts. The amount of Rs. 1 lakh which has shown to have borrowed by that lady from Vaghela Natubhai Nanubha and Vaghela Bhachubha Natubha, was restored to the Income Tax Officer as certain fresh piece of evidence in the shape of affidavit was received by the Commissioner (Appeals) at her livel, required verification. The remaining amount of Rs. 7,81,620 in the name of Miss Preeti and Rs. 2,83,494 standing in the name of C.S. Amin were deleted by Commissioner (Appeals) after treating the explanation of the assessee as satisfactory about the sources of these cash credits. The revenue has assailed this very finding of the Commissioner (Appeals) through this appeal along with other grounds.
4. The learned departmental Representative has placed reliance on the order of the assessing officer and submitted further that assessee was not able to give out the source of cash credit and whatever explanation has come on record was not to be treated as sufficient for explaining the cash credits appearing in the names of Miss Preeti and C.S. Amin who were employees of the company and not in position to advance any amounts. Further the theory of the assessee that the amount standing in the names of these two directors/ employees of the company were procured by Smt. Parulben M. Jayakrishan for the benefit of the company from Kiran S. Chokshi is neither believable nor probable in the circumstances of the company as also Mr. Kiran S. Chokshi was not in position to lend so huge amount to these persons and the theory that said Kiran S. Chokshi also borrowed from one J. Bhaveshkumar Shroff HUF was also not proved on record. In other words, as argued by learned departmental Representative the sources of the cash credits were not proved to the hilt while onus was on the assessee-company. The learned departmental Representative, further pointed out that first appellate authority was not justified to place reliance on the documents of the assessee-company on which the statement of Miss Preeti was quite specific that she had signed all documents as she was working under the thumb of Smt. Parulben M. Jayakrishan. Contrary to it the contention of the learned counsel for assessee is that Miss Preeti and C.S. Amin have been the partners of M/s. Skyjet since its inception in 1978 and they carried on the business of Travel Agency having 5096 share in the said firm. In April, 1979 the assessee-company was floated by Miss Preeti and C.S. Amin by taking over the firm business and they alone have full control. over the business of that company. To prove this contention, the learned counsel for assessee pointed out to the letter dated 12-1-1987 submitted by assessee-company to the learned Commissioner (Appeals) explaining the cash credits of Miss Preeti and C.S. Amin, the Xerox copy of which is appearing on pp. 1 to 11 of the paper book on ITA No. 1185 /Ahd / 1987. The extracts of these have been quoted by the learned Commissioner (Appeals) in order under appeal also at pp. 8 to 15. The learned counsel took us through the memorandum of association of the company, articles of association of the company which were duly signed by Miss Preeti and C.S. Amin, copies of different resolutions passed in the several meetings of Board of Directors from time to time and in one Miss Preeti was elected as chairman and in another she was authorised to have negotiations with various parties for obtaining loans and to open bank A/c. Balance-sheet was approved and signed by Smt. Parulben M. Jayakrishan and Miss Preeti and was adopted in the board meeting. Miss Preeti was signing on cheques and counterfoils of those cheques are appearing on the pp. A-31 to A-60 of the paper book. The learned counsel further pointed out that Miss Preeti and C.S. Amin were attending all the meetings of the Board of Directors and even they were authorised to sign the share certificates. Miss Preeti was authorised to take all decisions for development of the business of the company. She has executed guarantees to different banks and even involved in financial management of the company. The Board of Directors vide their resolution dated 7-12-1981 approved the borrowings made from the Directors of the company and further decided for negotiations for finance with one Cobal Investment Company Ltd., so that the money standing in the names of Directors be returned. According to the learned counsel for assessee it shows that Miss Preeti was fully alive about the cash credits standing in the names of directors including herself and that of C.S. Amin and now she along with C.S. Amin cannot be allowed to resile from their own admissions in challenging the very cash credits standing in their names.
5. To prove the authenticity of the cash credits the learned counsel for assessee added further that copies of statement of accounts of Miss Preeti and C.S. Amin as appearing in the books of the company were duly confirmed by both of them. In the same way copy of balance sheet of the company and copy of proforma receipt and payment A/c of Miss Preeti for the money borrowed from Mr. Kiran S. Chokshi were also gone through by her. Even Miss Preeti and C.S. Amin in their statements have admitted authenticity of these documents. According to the learned counsel these two directors got terrified of the search and seizure operations which forced them to resale from their own admissions.
6. The next plea of the learned counsel for the assessee was that Kiran S. Chokshi has admitted lending of the amount standing in the names of Preeti and C.S. Amin. Copy of Statement of income of Kiran S. Chokshi for assessment year 1983-84 was also referred to along with copy of its assessment order and revised statement of total income of Kiran S. Chokshi for assessment year 1983-84 which are on pp. A- 178 to A- 181 of the paper look. These documents show that Kiran S. Chokshi has shown the said lendings of the amount in his statement of income and also shown the interests received thereupon. He further pointed out that not only the assessee-company has further shown that Kiran S. Chokshi had borrowed that amount from J. Bhaveshkumar Shroff but copy of account of J. Bhaveshkumar Shroff in the books of Kiran S. Chokshi, copy of balance sheet of J. Bhaveshkumar Shroff for S.Y. 2038 & 2039 have been filed in this context which are appearing at pp. A-183 to A. 195 of paper book. The learned counsel concluded by pointing out that the onus which was on the assessee to prove the sources of the cash credits was not only discharged but the assessee has gone few steps further by showing the source of sources and in such circumstances the learned Commissioner (Appeals) was fully justified in deleting the unwanted addition made by the Income Tax Officer. The learned counsel also placed reliance on the reasoning of the case of S. H. Kastimal v. CIT (1963) 49 ITR 273 (Mad.) in which it was opined by their Lordships that if an explanation as to the sources of cash credit is adduced by the assessee then it is upto the department to verify the authenticity of that explanation and in case transactions are quite old then the assessee is to be given benefit and should not be called upon to adduce evidence. In the same way the case of Sarogi Credit Corpn. v. CIT (I976) 103 ITR 344 (Pat.) was referred to in which it was observed that it is not for the assessee to explain further as to how or in what circumstances the third party obtained the money, how or why he came to make an advance of the money as a loan to the assessee.
7. After going through the material placed before us and after giving the thoughtful consideration to the submissions of the representatives of the parties, it will be relevant to point out that the facts so far as from the very inception of the assessee-company are concerned, are admitted. No doubt Miss Preeti and C.S. Amin started business in the name of M/s. Skyjet Aviation (P.) Ltd. which was taken over by the assessee-company which came into existence in 1979 and Miss Preeti and C.S. Amin were directors thereof. However, it is also an important fact that Miss Preeti and C.S. Amin in their statements have admitted to be the employees of the assessee-company and other sister concern respectively drawing a petty sum as salary. The assessing officer has given out the salary being drawn by both of these employees/ directors and the assessee-company is not in a position to controvert this fact that these two persons were not employees. That apart, nothing is on record to prove that these two petty employees were able to start such a business at their own. Once they are taken as the employees of the assessee-company and sister concern the onus comes to the assessee-company to explain satisfactorily the nature and sources of those cash credits appearing in the names of the employees. In this connection, reference to the observations of their Lordships in the case of Sarogi Credit Corpn. (supra) even relied by the learned counsel for assessee are quoted as under :-
"Held, that if the credit entry in the books of the assessee stands in the name of the assessee or assessee's wife and children, or in the name of any other close relation or an employee of the assessee, the burden lies on the assessee to explain satisfactorily the nature and source of the entry.
But if the entry does not stand in the name of any such person having a close relation or connection with the assessee, but in the name of an independent party, the burden will still lie on him to establish the identity of that party and to satisfy the Income Tax Officer that the entry is real and not fictitious. Once the identity of the third party is established before the Income Tax Officer and other such evidence are prima facie placed before him pointing to the fact that the entry is not fictitious, the initial burden lying on the assessee can be said to have been duly discharged by him." (Emphasis her italised in print supplied) On the basis of these observations 1 have to scrutinise whether the assessee has been able to explain satisfactorily the nature and sources of the entry or not.
8. I have referred to above that Miss Preeti and C.S. Amin have denied any concern with the cash credit and it is also not the case of these employees or that of the assessee-company that these two persons were in any way in a position to lend such huge amounts to the assessee-company. The statements of Anil S. Gandhi, Accountant of the assessee-company at the relevant time and that of Shailesh R. Bhatt who was also looking after the preparation of the receipts in the accounts section of the assessee-company have been quoted in detail by the learned assessing officer and the cumulative conclusion on perusal of statements of Miss Preeti, C.S. Amin, Anil S. Gandhi and that of Shailesh R. Bhatt is that amount of cash credits standing in the names of Miss Preeti and C.S. Amin did not belong to them as both of them were low paid salaried employees and further they were not in a position to lend such huge amount. When the assessee-company was caught in such a situation, it came with an explanation that both Miss Preeti and C.S. Amin were directors of the company and they were expected to borrow the amount for the business of the company from outside and Smt. Parulben M. Jaykrishan came to their rescue in arranging the said cash credits from one Kiran S. Chokshi who was a Chartered Accountant and that amount which was borrowed from Kiran S. Chokshi was credited in the names of Miss Preeti and C.S. Amin. To explain this, the learned counsel for assessee-company has invited our attention to the statement of income of Kiran S. Chokshi for assessment year 1983-84 and revised statement of total income for the same year filed by Kiran S. Chokshi and copy of assessment order. Now the question comes before us is - whether the theory of assessee-company that the money standing in the names of Miss Preeti and C.S. Amin as cash credits was actually the same money which was given by Kiran S. Chokshi or not ?
9. To appreciate the explanation of assessee it will be in the fitness of things to refer as to the legal position about the cash credits and on that I am referring the case of Shankar Industries v. CIT (I978) 114 ITR 689 (Cal.) in which their Lordships of Hon'ble Calcutta High Court after discussing the case of Orient Trading Co. Ltd. v. CIT (1963) 49 ITR 723 and that of Sarogi Credit Corpn. (supra) laid down that it is necessary for the assessee to prove the identity of creditors, capacity of creditor to advance money and genuineness of transaction. Mere proof of identity of creditor is not sufficient. This has been followed by the same High Court in subsequent cases Prakash Textile Agency v. CIT(I980) 121 ITR 890/4 Taxman 323, C. Kant & Co. v. CIT(1980) 126 ITR 63/(1981) 5 Taxman 64 and Oriental Wire Industries (P.) Ltd. v. CIT(1981) 131 ITR 688.
10. Now on the basis of above legal preposition 1 have again to examine the genuineness of the transactions of loans allegedly given by Kiran S. Chokshi to Miss Preeti and C.S. Amin as has come in the explanation and for that we have to see whether he was capable to land such huge amounts to these two persons and whether the transactions are genuine or not. At the very outset it may be pointed out that Miss Preeti and C.S. Amin have denied to have borrowed any amount from Kiran S. Chokshi or even entering into any loan transaction with him. Their explanation is that they have signed on the relevant documents relating to this transaction at the instance of Parulben M. Jaykrishan. who was the main person on behalf of this transaction, as money did not pass through them. On this point again statement of these two persons is getting corroboration from the statement of Shailesh R. Bhatt and Anil S. Gandhi. However, we have to examine the transaction again keeping in view that the alleged borrowers of the amount, Miss Preeti and C.S. Amin have completely denied the borrowings from Kiran S. Chokshi. In this connection an important aspect of the matter is that Kiran S. Chokshi has been examined during the course of survey under section 133 of the Act on 27-2-1986 and copy of the statement is on record. He is income-tax practitioner and assessed to income-tax since 1975-76. He has admitted to have maintained books of account of some amount which he had borrowed and lent but strangely enough he did not maintain books of account for this provisional income while this money lending is not his business. When probed further, Kiran S. Chokshi had admitted to have maintained cash book-cum-ledger for assessment year 1981-82, 1982-83, 1983-84 and no account book for financial years 1984-85 and 1985-86. He further admitted that he had been borrowing money from different persons and giving friendly loan to different persons including to the assess-company. He had admitted further that amount of loan appearing in the names of Miss Preeti and C.S. Amin was given by him at the instance of Parulben M. Jaykrishan. He also opined that he did not know Miss Preeti or C.S. Amin. So far as the money lending was concerned, he admitted not to have obtained any receipt for any body else to whom he had lent the money. When asked about his source of such huge money then he admitted that the amounts so advanced did not belong to him but he had taken on loan from S/ Shri J. Bhaveshkumar and Mukundrai Amrutlal Shroff HUF. The sequence of the replies given by him indicated that he had borrowed money from J. Bhaveshkumar and Mukundrai Amrutlal Shroff HUF and advanced to different persons. Naturally it was expected from him to explain the interest out of these transactions. He simply tried to say that it was only a friendly gesture but his statement did not appear to be believable even probable one. This conclusion is based on the facts and circumstances also.
11. A perusal of statement of income for assessment year 1983-84 filed by Kiran S. Chokshi shall show that he has not shown the interest income for assessment year 1983-84 but simply has shown his income at Rs. 16,810 and filed revised income showing the interest income received from Miss Preeti and C.S. Amin to the extent of Rs. 23,811 under voluntary disclosure scheme and this income from interest shows that he had been charging interests @ 7 per cent from Miss Preeti and C.S. Amin. Contrary to it this Kiran S. Chowkshi had paid interest to J. Bhaveshkumar and Mukundrai Amrutlal Shroff HUF @ 12 per cent. This clears the whole of the picture. The truth comes out indicating that theory of Kiran S. Chowkshi is not believable at all because a man getting funds from one person @ 12 per cent interest will not be lending that amount at lesser rate of interests and that of 796 even to his close friends howsoever close friendship may be existing between such person and his debtors. When assessee and Kiran S. Chokshi were caught in this situation they tried to wriggle out by making another bid by way of an award of common friend regarding payment of interests and this award is appearing at pp. 196 to 197 of the paper book and one Dhanpal J. Shah acting as arbitrator between Kiran Chokshi and Mrs. Parulben M. Jaykrishan concluded that interest rate will be 12 per cent.
The date of this award being 16-4-1984 is quite interesting. I am not able to follow as to how a man like status of Chartered Accountant or I.T.P. as is Kiran. S. Chokshi, will be borrowing money from third party (a) 12 per cent and will be lending to Miss Preeti and C.S. Amin and others simply at the instructions of one lady with whom he had no closeness except that she is the sister of his friend and that too without settling the rate of interest. Strangely enough no receipt for payment of the amount to Miss Preeti and C.S. Amin was obtained for Kiran S. Chokshi gave any receipt to his creditors for loan. This circumstance clearly goes to show that the whole theory of the assessee-company that money was advanced by Kiran S. Chokshi to Miss Preeti and C.S. Amin is without any basis or force.
12. Leaving aside it as the case of the assessee-company and that of Kiran S. Chokshi is that Kiran Chokshi was not in a position to lend such huge amount and he had borrowed the amount from J. Bhaveshkumar and Mukundrai Amrutlal Shroff HUF the assessee was expected to bring on record the sufficient evidence to prove that J. Bhaveshkumar and Mukundrai Amrutlal Shroff HUF actually lent the amount to Kiran Chokshi to enable him to lend the amount to assessee-company through its two directors but on record we have only papers pp. A- 186 to A- 195 copy of accounts of Kiran Chokshi in the books of J. Bhaveshkumar and Mukundrai Amrutlal Shroff HUF and copy of balance sheet of J. Bliaveshkumar for S.Y. 2038 and 2039. These two persons must be income-tax payees and assessee was expected to file other documents to support that in their statement of income for assessment year 1981-82 onwards, they have shown the money lent to Kiran S. Chokshi but it has also not been done. It was not done simply on the pretext that assessee was not expected to prove source of sources after placing reliance on the reasonings laid down in the case of Sarogi Credit Corpn. (supra) wherein it is mentioned that assessee was not to explain further as to how or in what circumstances the third party obtained the money or how or why he came to make an advance of the money as loan to the assessee. This reasoning will be applicable in the cases where assessee had asserted to have obtained loan from a particular individual but in the case in hand it was admitted case that cash credits are appearing in the names of employees of the assessee-company and assessee-company was under obligation to discharge the onus by explaining satisfactorily the nature and sources of the entry. In this case the main source to be explained by the assessee was that of J. Bhaveshkumar and Mukundrai Amrutlal Shroff HUF as admittedly the cash credits were in the name of Preeti and C.S. Amin but undisputedly they were not owners of those cash credits and the theory that they borrowed from Kiran S. Chokshi. Even if it is taken as true it did not help the assessee as Kiran S. Chokshi is not owner of that amount of cash credit but he allegedly borrowed from above referred to two persons and thus the evidence which should have come from the side of the assessee was that of J. Bhaveshkumar and Mukundrai Amrutlal Shroff HUF. The evidence on this point as discussed above cannot be treated as sufficient to prove the nature and sources of the cash credits.
13. On the basis of the above discussions the result is that in view of the law as discussed to above, the assessee-company has not been able to prove the identity of the cash creditors as amounts of cash credits appearing in the names of Miss Preeti and C.S. Amin are not their amount. The explanation is that Kiran S. Chokshi lent this amount to these two persons but Kiran S. Chokshi is not capable to lend such huge amount and admittedly he had allegedly borrowed from certain other persons and no satisfactory evidence obtained from those creditors had come on record. So identity and capability of creditors remained unproved. Further these credits scrutinized in detail failed to qualify the test of genuineness. The learned Income Tax Officer was justified in treating these cash credits as undisclosed income of the assessee placing reliance on the testimony of Miss Preeti, C.S. Amin, Anil S. Gandhi and Shailesh R. Bhatt and on the basis of circumstances which lead to the only conclusion that assessee could not prove the nature of these cash credits satisfactorily. Accordingly this ground of the revenue is to be allowed and order of the learned Commissioner (Appeals) deleting the cash credits of Rs. 7,81,620 and Rs. 2,83,494 is hereby set aside and that of Income Tax Officer is confirmed.
14. So far as the other grounds of the appeal of revenue and the grounds of assessee's appeal for the same assessment year are concerned, I am in full agreement with the conclusion arrived at by my brother, Shri B.L. Chhibber, Accountant Member and endorse the same.
ORDER UNDER SECTION 255(4) OF THE INCOME TAX ACT, 1961 B.L. Chhibber A. M. As we have a difference of opinion on the following point, we refer the case to the President as provided under section 255(4) of the Income Tax Act, 1961 :
"Whether, on the facts and in the circumstances of the case, the learned Commissioner (Appeals) has erred in deleting cash credits of Rs. 7,81,620 and Rs. 2,83,494 in the names of Miss Preeti V. Mehta and Shri C.S. Amin respectively."
THIRD MEMBER ORDER These appeals were heard by a Division Bench at Ahmedabad, since there was a cleavage of opinion between the learned Accountant Member and the learned Judicial Member, they referred their difference of opinion to the President under section 255(4) of the Income Tax Act, 1961, and it is as follows :-
"Whether, on the facts and in the circumstances of the case, the learned Commissioner (Appeals) has erred in deleting cash credits of Rs. 7,81,620 and Rs. 2,83,494 in the names of Miss Preeti V. Mehta and Shri C.S. Amin respectively ?"
The facts are correctly stated in the order of the learned Judicial Member, Therefore, it is enough even if I state the facts in a sketchy manner.
2. Skyjet Aviation Pvt. Ltd. (hereinafter referred to as the assessee) was originally a firm of two partners, namely, Ms. Preeti V. Mehta (hereinafter referred to as "Preeti) and Shri C.S. Amin (hereinafter referred to as "Amin") having 50 per cent share each and they began carrying on business of travel agency. On 23-4-1979, the assessee-company, which is a private limited company, was floated. Certificate of incorporation and Memorandum & Articles of Association of the assessee-company are furnished at pp. A/30 to A/46 of the paper compilation filed on behalf of the assessee. Preeti was elected as Chairman of the Board of Directors on 24-4-1979 as per the resolution dated 24-4-1979, copy of which is furnished at page A/50. Preeti held 2 shares, whereas Amin held one share in the company. The Annual Report for April, 1982, which is provided at pp. A/66 to A/78, was signed by Ms. Parul M. Jaykrishna as well as Preeti as Directors. The balance-sheet ending with 31-3-1982 is found furnished at pp. A/71 to A/72. Though under the head "Unsecured Loan" a sum of Rs. 2,48,003 was stated to be obtained as loans from Directors, the particulars of the Directors from whom the loans were obtained were not noted. For assessment year 1982-83, the Annual Report is furnished at pp. A/79 to A/91. In the balance sheet, the unsecured loans obtained from the Directors were stated to be Rs. 1,09,948. At page, while furnishing the groupings of directors loans, a sum of Rs. 2,48,002.76 appearing in the balance-sheet pertaining to accounting year 1981-82 is stated to be under the column 'Unsecured Loan', the particulars of which are as under :
(1) Preeti V. Mehta (Director) Rs.
1,34,307.94 (2) C.S. Amin (Director) Rs.
1,13,494.82 (3) Others Rs.
200.00 Total Rs.
2,48,002.76 Say:
Rs.
2,48,003
3. There was a search and seizure operation conducted under section 132 of the Act in the case of the assessee during 22-3-1985 to 29-3-1985 in which books of account pertaining to the assessment years 1982-83 to 1985-86 were seized. During the seizure operation, statement of several employees and executives, of the assessee were recorded including that of Miss Preeti, C.S. Amin, Hasmukh Dinmanikant, Shailesh R. Bhatt and Anil S. Gandhi. During the assessment proceedings for the assessment year 1983-84, the Income Tax Officer observed that from the books of account of the company there existed loan account in the name of Miss Preeti showing a deposit of Rs. 8,81,620 made in cash on various dates. In the same way, the books of account of the company had another loan account in the name of C.S. Amin showing that on different dates different amounts were advanced during the accounting year and which totalled to Rs. 2,83,494.
During the search and seizure operation, Preeti as well as Amin were examined and their statements on oath were recorded on 29-3-1985. Some of the important questions and answers given to them by Preeti are essential to be extracted hereunder thus:
Q. 17.
I am showing you Receipt No. 142 dated 8-4-1982 by which you have deposited in your name by cash Rs. 75,000 in Skyjet. Please explain the source of money.
A. 17.
I have not deposited any cash with Skyjet. The amount of Rs. 75,000 is not my money. I don't know why the receipt is issued in my name.
Q. 18.
I am showing you the cash book of of Skyjet page 78 dated 24-5-1983 which shows that you have received back the amount of Rs. 75,000 cash do you acknowledge this receipt?
A. 18.
No. As I have not deposited this money as repIy in question No. 17. The question of receiving back the money does not arise.
Q.19.
Have you given any loan to anybody or borrowed money from anybody ?
A.19.
I have given loan of Rs. 25,000 to my father in his business. The payment was made by cheque. I have not received the amount back. He has not passed on any receipt to me. I don't remember whether I have given any loan to anybody. I have borrowed from Mr. Dhanpal Shah Rs. 1,40,000 approximately who is my uncle who is doing the business in the name of Chaise Product. This amount was received by me in cash or cheque. I don't exactly remember. However, this amount was deposited in Skyjet in the year 1978 when it was partnership firm.
Q.20.
Did you get the receipt from Skyjet for this amount ?
A.20.
I don't remember.
Q.21.
To whom you have given this amount in skyjet ?
A. 21.
I don't remember.
Q.22.
I am showing the receipt dated 14-8-1984 for Rs. 15,000 by which you have received Rs. 15,000 cash you already denied in answer to question No. 18 having any deposit on the answer to question No. 19 by which having any loan account with Skyjet. Then how you have received the amount and where you have utilized?
A. 22.
I admit that the receipt is signed by me on a revenue stamp. It also bears my signature on the revenue stamp as "Received Payment" and I also admit that I have countersigned the receipt/ voucher as Director on 19-11-1984. I do not remember anything in receipt of cash.
Q. 23.
I am showing you Vr. No. 543 dated 27-7-1984 for Rs. 7,100 which shows cash paid to P.V. Mehta by debiting P.V. Mehta loan account who has received this amount as the voucher is not signed by anybody ?
A. 23.
I don't know.
Q. 24.
I am showing you the receipt No. 2186 dated 9-11-1983 by which you have paid cash Rs. 1,00,000 (one lakh) marked loan account The receipt is issued in your name Miss P.V. Mehta and another receipt No. 2269 dated 23-11-1983 for Rs. 1,65,000 cash marked loan account with a same description as above. Please explain the source of the cash and to whom the cash belongs which is deposited in Skyjet.?
A. 24.
I have not deposited the cash. I don't know who has deposited the cash in my name and 1 don't know to whom it belongs Q.25.
Which are the Registers of the Skyjet being maintained by you ?
Ans.
1.
2.
3.
4.
International
-do-
-do-
-do-
Booking Register.
Passenger Register Refund Register Airline Payment Register.
Ans.
The above registers are maintained by me. I also prepare bills in respect of international passengers.
Q. 26.
What are the other books of account, bills and vouchers of Skyjet maintained by you or verified by you ?
Ans.
No books of account or bills other than international booking is prepared or checked by me. Some of the vouchers are countersigned by me as per the directions of Smt. Parul M. Jaikrishna.
Q. 27.
Which types of vouchers are countersigned by you and what are the things verified by you ?
Ans.
Normally the vouchers associated with international bookings and petty cash vouchers less than one thousand rupees are signed by me. Before countersigning the vouchers the nature of the expenses and the necessity are verified. Except for few cases the payments are made after I countersigned. In case of big payments the payment is made after Smt. Parulben signed or the approval received from her.
Q. 28.
Have you raised any loan for making deposits or extending further loans to Skyjet ?
Ans.
I don not remember except I have already stated earlier.
Q. 29.
Have you raised any loan during last two years for Skyjet ?
Ans.
As far as I remember I had not raised any loan for Skyjet during last two years.
Q.30.
Have you given any loan to Skyjet during last two years ?
Ans.
I have not given any loans to Skyjet during last two years.
Q.31.
Have you taken any money from M/s. Skyjet for giving loan to anybody ?
Ans.
As far as I remember I have not taken any loan or money from M/s. Skyjet for during last two/three years.
Q.32.
I am showing you ledger-Z of Skyjet for 1983-84. On page No. 7, there is an account under the heading Miss Preeti V. Mehta loan account In this account lot of money have been credited and debited. What have you to say about this? Are you awarded this account?
Ans.
I cannot say anything about this account. I am not aware of this account.
Q. 33.
In this account it is seen that on 9-11-1983 cash of Rs. 1,00,000 was given by you to M/s. Skyjet. What you have to say about it?
Ans.
I have not given the money to M/s Skyjet on 9-11-1983.
Q.34.
I am showing you receipt No. 2186 dated 9-11-1988 according to which the Skyjet had received Rs. One lakh cash from you on that day. Have you received the copy of the receipt?
Ans.
No. I have not received any receipt.
Q. 35.
Who is maintaining the receipt book?
Ans.
The cashier Shri Avinash Thakkar is maintaining the receipt book.
On the same day, i.e. , 29-2-1985, Shri Hasmukh Dinmanikant, who, at that time worked as cashier, was examined and the questions put and answers given thereunder were recorded at pp. 9, 10, 11 and 12 of paper book (Question 1 to Question 25 and their answers) are as under :
Q. 1.
What are you doing at present?
Ans.
At present I am an accounts clerk, since Dec. 1984 with M/s Parcek Agency, Spectrum Commercial Centre, Balapur Road, Ahmedabad.
Q. 2.
What were you doing before 1984 ?
Ans.
Previously, I was working as accountant in Skyjet Private Ltd., Roopali Building, Lal Darwaja, Ahmedabad, since 18-5-1981.
Q. 3.
What is your duty in Skyjet Pvt. Ltd. ?
Ans.
My duty in Skyjet Aviation Pvt. Ltd. is to handle cash, to write bank pass book, to write petty cash book and to write collection register.
Q.4.
When you are collecting cash, are you giving cash receipt at that time?
Ans.
Yes.
Q. 5.
When you have empowered duty to give receipt on cash, then what extent the power to take cash and give receipt ?
Ans.
I remember to have received a sum up to Rs. 1,50,000 but I had the power to give receipt to receive the cash any amount.
Q. 6.
When you are giving cash receipt in Skyjet Aviation Ltd. at that time you are counting cash, yourself ?
Ans.
Yes, after counting the cash, I use to give receipt.
Q. 7.
In whose name you were given the receipt for the cash receiving ?
Ans.
I was issued receipt in the name which was given by my accountant Shri Anil Gandhi.
Q. 8.
Who was coming to you to deposit the money ?
Ans.
I was preparing the receipt in the name which was directed by Shri Anil Gandhi. I was preparing the receipt in the name of as directed by him.
Q. 9.
Are you knowing that Shri Anilbhai Gandhi to deposit cash, where he has bringing ?
Ans.
As and when Shri Anilbhai Gandhi came to deposit cash before me that cash was brought from Parulben from Mrugeshbhai and handed over to me. And receipt will be prepared as per the directions from Anilbhai, and that also as per directions from Mrugeshbhai through Parulben.
Q. 10.
From where Anilbhai Gandhi brought that cash from Parulben ?
Ans.
Whenever Parulben use to come in our office, herself brought the cash and deposit the same with Gandhibhai. And some times Gandhibhai also use to go to Parulben's house and take the cash for deposit.
Q. 11.
At any time you have gone to Smt. Parulben's house to take cash ?
Ans.
So far as my remembrance, I had gone to Parulben's house to take cash only for once.
Q. 12.
When you have gone to Parulben's house to take cash for deposit, in whose name receipt will be prepared as stated by Parulben ?
Ans.
No. She has not told me to prepare receipt for anybody's name but afterwards she had directed through Anilbhai Gandhi.
Q. 13.
Do you remember under whose names you have prepared the receipts as directed by Shri Anil Gandhi ?
Ans.
Mostly the receipts were prepared in the following names, so far my remembrance.
Preetiben Mehta, Ahmedabad.
Skyways, Ahmedabad.
Lucky Laboratory, Kalol.
Q. 14.
Whether the cash received in the abovenamed persons were deposited in the above persons account ?
Ans.
Yes.
Q.15.
I show you the receipt No. 618, dated 24-5-1983 for Rs. 75,000 with your signature and stamped issued from Skyjet Aviation Pvt. Ltd. for Lucky Laboratories. You explain regarding this receipts in connection with the above matter ?
Ans.
On seeing this receipt I can say that it was written by me. The signature on that receipt is also mine. And I had received the cash. But now I do not remember that this cash is received from Smt. Parulben or Shri Anil Gandhi. But I had prepared the receipt in the name of Lucky Laboratories as directed by Sh. Anil Gandhi.
Q.16.
I show you the page of the cash book dated 24-5-1983 of Skyjet Aviation Pvt. Ltd. in which receipt No. 618, for Rs. 75,000 cash deposited in the name of P.V. Mehta and whereas in the receipt prepared by you to the same number shows 'from Lucky Laboratories' what is your explanation for the above ?
Ans.
On seeing page of this cash book, I can say that this is not written by me. But if it seen that the original name written on cash book page was rubbed out and written Miss P. V. Mehta Loan Account "I do not know regarding these changes".
Q. 17.
I show you the receipt No. 2186, dated 9-11-1983 issued for Skyjet Aviation Pvt. Ltd. Can you say it is under whose handwriting and what is written in it.
Ans.
On seeing receipt I can say that it is my hand writing and according to that Rs. 1,00,000 cash was received from Miss Preeti V. Mehta on 9-11-1983.
Q. 18.
Who has given this cash to you ?
Ans.
Shri Anil Gandhi has given this cash to me.
Q. 19.
Had, Miss P. V. Mehta given any cash to you at any time for deposit ?
Ans.
No. Q. 20.
Had you given any cash to Miss Preeti V. Mehta against her Loan account ?
Ans.
No. No cash at any time had been given against her loan account.
Q. 21 The cash received against Miss Preeti V. Mehta's loan account and cash which has given to her. Can you say from whom it was received and to whom it was given ?
Ans.
The cash which was received for deposit against the loan account of Miss Preeti V. Mehta was received from Shri Anil Gandhi only and cash which was given to her also, received from Anil Gandhi only.
Q .22.
Had you received any cash from Parulben Mrugeshbhai or whether any cash given to her. Give the details for the same ?
Ans.
As stated above only once I had gone to her house and received the cash. Except that I had never made any transaction with Parulben for cash. And all the cash transactions with Smt. Parulben was done through Shri Anilbhai Gandhi only as stated by me as per explanation.
Q. 23.
I show you for example a loan account of Miss P. V. Mehta, dated 14-8-1984 a voucher for Rs. 15,000. Was this voucher prepared by you ?
Ans.
Yes, it was my handwriting.
Q. 24.
Rs. 15,000 cash given to P.V. Mehta shown in the above voucher, whether these cash is really given to Preetiben V. Mehta by you ?
Ans.
As stated earlier, no cash at any time is given to P.V. Mehta means Preetiben Mehta. Therefore, this Rs. 15,000 cash is also to Anilbhai Gandhi by me, so far as my remembrance.
Q. 25.
The reply given by you for the above voucher are the same reply for loan account 'Other vouchers' for P.V. Mehta means Miss Preeti V. Mehta ? Or whether you want to say anything else ?
Ans.
The reply is the same, for the voucher which were prepared in the name of Preeti V. Mehta. I do not want to say anything more.
Similarly, on the same day, Shri. Anil S. Gandhi gave a statement on oath. The Important questions and answers given thereunder are the following:
Q. 2.
Who looks after the cash transactions of M/s. Skyjet ?
Ans.
As far as payment and expenses are concerned cash transactions are attended by the cashier Shri Avinash Thakkar. However, the cash transactions of loan accounts of Miss Preetiben Mehta and Shri Chandrakant S. Amin are concerned I am handling the cash transactions.
Q. 3.
In reply to Question No. 2 you had stated that you are looking after the cash transactions of loan accounts of Miss Preeti V. Mehta and Shri Chandrakant S. Amin. From whom do you receive the cash and to whom you give cash which are recorded in the books of Skyjet ?
Ans.
I am receiving the cash from Preetiben V. Mehta or Smt. Parulben. The instructions for writing the books of a/c. regarding loan accounts of the above persons are given by Smt. Parulben M. Jaykrishan. The same procedure IS followed for payment also.
Q. 4.
Have you received cash personally from Smt. Parulben or have you given cash personally to Smt. Parulben ?
Ans.
I have never received or given cash personally to Smt. Parulben. It is done through any member of the staff who is going and coming from her house.
Q. 5.
When such cash comes or goes to Smt. Parulben do you receive any instructions from her for the purpose of recording the same in the books of account ?
Ans.
Yes. I receive instructions from Parulben as to in which account the transactions are to he recorded.
Q. 6.
Do you receive cash personally from Miss Preetiben V. Mehta or give cash personally to her in any loan account ?
Ans.
For the last one year have never given or received cash from Miss Preetiben V. Mehta. Before that she was also giving and receiving cash from me personally. However even that time the instructions for recording the cash transactions in books of account were given by Smt. Parulben.
Q. 7.
What were the instructions of Smt. Parulben about recording of the transactions in the books of account ?
Ans.
She has always given oral instructions according to which cash which had come from her and given to her were recorded under the names of Miss Preetiben V. Mehta, Chandrakant S. Amin and three other persons. Mostly such amounts are recorded in the name of Miss Preetiben V. Mehta and Chandrakant S. Amin. This is done as per instructions of Smt. Parulben.
Q. 8.
What do you do with the cash so received ?
Ans.
Generally and mostly the cash so received have been deposited in the Bank.
Q.9.
Do you have any idea as to from where the abovementioned money comes to Smt. Parulben ?
Ans.
I have no idea.
Q. 10.
What are the works are supervised by Smt. Parulben ?
Ans.
Smt. Parulben is in overall charge of the Skyjet Aviation (P) Ltd. She does not come daily but on telephone or my message she keeps herself informed about the business of Skyjet.
Q.11.
I am showing to Annexure A-32 which is Cash Collection Register for the year 1984-85. Which type of entries are made in this register ?
Ans.
Receipts of cash in the Skyjet are recorded in this register. The register is written by the cashier. The entries are made under my instructions.
Q.12.
I am showing page No. 70 of Annexure A-32. According to this, on 6-11-1984 cash of Rs. 30,000 was received from Shri A.K Shah and cash of Rs. 25,000 was received from K.T. Patel. Subsequently on 7-11-1984 cash of Rs. 15,000 was received from Shfi A.K Patel. Who are these three persons and where from the money come ?
Ans.
I do not know the above persons. The cash has been received from Smt. Parulben who might have received from the above persons.
Q.13.
Has the payments of the above receipts been made. If so to whom ?
Ans.
As far as I remember the payment has been made and the cash was sent to Smt. Parulben for making payments to the parties.
Q.14.
Who is Shri Munir V. Mehta ?
Ans.
Shri Munir V. Mehta is the brother of Miss Preetiben V. Mehta. Formerly he was director of M/s. Skyjet.
Q.15.
Do you know Lucky Lab. ? What type of transactions are there between Lucky Lab. and Skyjet ?
Ans.
Yes. It is a Private Limited Co. and Shri Chandrakant S. Amin is one of the Directors of the said company and the same is situated at Kalon. Sometimes Lucky Lab. gives loan to Skyjet by cash and cheques.
Similarly. another statement was recorded under section 132 from Shri Shailesh Bhatt, who was primarily concerned with collection of dues from parties and he was also looking after the preparation of receipts etc. in the accounts department of the company whenever any person from the accounts was on leave. The questions put and answers given to them are furnished at pp. 15 and 16 of the Income Tax Officer's order dated 31-3-1986 as under:
Q.1.
What work were you doing in Skyjet Aviation Pvt. Ltd. during April 1982 ?
Ans.
Mainly I was doing the work of collection of company dues and sometimes if somebody was not present in accounts section, I was issuing receipts.
Q. 2.
I am showing you receipt No. 142 dated 8-4-1982, prepared for Skyjet Aviation Pvt. Ltd. What it shows ? And whose signature in it ?
Ans.
In reply to the above question, I can say that this receipt is under my handwriting and the signature on the revenue stamp is mine, that receipt is for Rs. 75,000 and the receipt is prepared for cash received from Miss Preeti V. Mehta.
Q. 3.
Whether you have received Rs. 75,000 cash from Miss Preeti V. Mehta on 8-4-1982 ?
Ans.
I do not know regarding this. This cash amount was not directly received. I have not seen the cash amount also and not counted also. But have prepared this receipt as directed by my Chief Accountant, Shri Anilabhai Gandhi.
Q. 4.
I am showing the receipt No. 142 again to you, after seeing you tell me whether the name of Miss Preeti V. Mehta is written or not and there was another name which was erased by ink ? This erasure was made by you ?
Ans.
Yes. I have made erasure and I have written Miss Preeti V. Mehta on it.
Q. 5.
Whose name was originally written on receipt. You tell me after seeing this receipt ? Why that name was erased ?
Ans.
On seeing the receipt it is understood that originally the name written is Mrs. Parulben M. Jaykrishan, but thereafter as directed by Chief Accountant, Shri Anil Gandhi, the name was changed by me.
Q.6.
Whether the amount of Rs. 75, 000 was really received from Parulben ?
Ans.
I do not know regarding this, Shri Anilbhai knows.
Q. 7.
After what time this changes takes place in receipt No. 142 ?
Ans.
I do not exactly remember. But this changes perhaps have been made within a day or two. I have done this within a day or two after 8-4-1982.
Q.8.
How many receipts have you prepared in the name of Parulben M. Jaykrishan and Miss Preeti V. Mehta ?
Ans.
I might have not prepared of similar nature, I can say like this way.
Q.9.
If you have prepared receipt for money received at that time, whether you have received cash amount at that time ?
Ans.
I have not received any cash amount at any time from Miss Preeti V. Mehta or Parulben. But if any receipt, if prepared by under the handwriting of mine, then it was prepared under the instructions of our Chief Accountant Shri Anil S. Gandhi because that not my job as cashier. But as stated above accidentally, I have prepared receipts only in the absence of somebody in the accounts department. I was preparing the receipt for the collection received from customers".
4. Miss Preeti was examined on the date of search and seizure operation, i.e., on 29-3-1985, and also on 3-6-1985, 19-2-1986, 7-3-1986 and 12-11-1986 also. We have already extracted questions put to her and answers given by her on 29-3-1985. With reference to receipt No. 0898, dated 7-7-1982, she was asked a question where from she got Rs. 70,000 which she purported to have paid to Skyjet on 7-7-1982 and what was the source and where she had accounted for. In answer, she gave that there was an account in her name named "Preeti V. Mehta Loan Account", as she, was niece of Smt. Parulben - her mother's sister (Mosi). Actually, this was not her money but borrowed in her name arid at the same time credited and debited in her name. The same fact applied to all her transactions. Another question was asked with reference to the contents of page No. 48 which was seized as item No. A-74 which showed that she had received Rs. 20,000 cash on 11 -2-1984. A question was put as to how she would explain this transaction, for which she answered as follows :
"Whenever Smt. Parulben told me to sign the voucher, I used to sign it as I have full faith in her and it used to be signed by Smt. Parulben or Chief Accountant. I did not receive any cash or credited any cash in this account. All the vouchers, which show the money, receipt by me in my loan account and cash paid by me in this account was all done by Smt. Parulben M. I was not aware of the transactions which were going on in my said account (as mentioned above). Some receipts are not even singed by me. But the facts are same for which Smt. Parulben M. Jaykrishna is responsible for the same."
A question was put whether she could explain the copy of her account with K. Chokshi & Co., C. As., for which she answered the following :
I will not be able to explain the account and I was not aware about this account. But after this Skyjet Office, seal was opened and when I was questioned about my account with Skyjet of which I was not aware. Smt. Parulben M. Jaykrishna sent me a xerox copy of my account with K. Chokshi & Co., C.A. I was not aware of this account till Smt. Parulben sent me the xerox copy she told me that she had opened account in my name without my knowledge and about which I was not aware. Only Smt. Parulben M. will be able to explain my account with A. Chokshi & Co., C.A."
On 19-2-1986, a question was put to her that whereas in her statement on 29-3-1985 she had stated that she was not aware of any account appearing in her name in the books of Skyjet Pvt. Ltd., subsequently she had signed the confirmation letter of the loan account appearing in her name is Skyjet book on 29-10-1985. Thus, there was a contradiction between the statement recorded on 29-3-1985 and her own account signed by her subsequently. To a question how she was going to reconcile these two statements, she answered that she could simply say that whatever she had done had been done at the instance of Smt. Parulben in whom she had full trust, she being her aunty. In her statement on 29-3-1985, Question No. 4 was put to her after showing her account in the books of Skyjet (P) Ltd. for the financial year 1982-83 in which the opening balance was noted at Rs. 1,34,507 and deposits had been made in that account totling to Rs. 8,81,620 serially from 1 to 27. To a question whether she made these deposits in her account, she answered 'no'. Question No. 5 put to her again showing the account wherein withdrawals on various dates having serial Nos. 1 to 43 and she was asked whether on withdrawals she received cash. In reply, she stated that these withdrawals had not been made by her. In answer to another question, she stated that she was a director to the assessee-company from its very inception and the ledger books of financial years 1981-82, 1982-83 and 1983-84 were shown to her and she was asked when she had denied deposits as well as withdrawals in this account, how did she give the confirmation of the accounts when she knew that she had not made any deposits or withdrawals and how did she sign these accounts and give confirmations, for which she answered that she had signed at the instructions of Smt. Parulben. In question No. 9, she was asked whether she signed any receipts while withdrawing the amounts. She answered that first of all she did not make any withdrawals, and if any papers had been signed by her, it should be taken that she had signed at the instructions of Smt. Parulben. Another question was asked whether Smt. Parulben at any time informed her that money was being borrowed and account was being maintained in her name. She answered that when she was not aware of her account in Skyjet and about other accounts, the question of knowing did not arise. Question No. 25 was asked whether did she at any time pay any amount by way of interest to Shri Kiran S. Chokshi. In answer whereof, she stated that as per instructions of Smt. Parulben she had signed a cheque in the name of Shri Kiran Chokshi but she had no idea for what it was. Vide question No. 26, she was asked why did she issue a cheque to Shri Kiran Chokshi when she did not know the purpose of issuing the cheque and who was going to compensate the loss in lieu of issuing the cheque. The answer given by her was that Smt. Parulben gave her the cheque, the amount of which she did not remember, which she deposited in her account as per her instructions and issued a cheque in favour of Shri Kiran Chokshi as per her instructions. With reference to file No. A/74 being Annexure 'A' to the Panchnama dated 29-3-1985 containing various receipts signed by Preeti in token of amounts received, a question was asked that when she was denying the loan amount why she had signed on these receipts. The reply was that as already stated several times, previously, it as per Smt. Parulben's instructions, and as all the receipts had been countersigned by Smt. Parulben her involvement was limited to the extent of signing the receipts only. Vide question No. 13, she was asked that by the end of 31-3-1983 she was holding 150 preference shares valued at Rs. 1,50,000, whereas in the balance-sheet of the assessee-company for the period ending 31-3-1984, these shares had been transferred in the name of Dhanpal J. Shah. She was asked to explain in what circumstances these shares had been transferred to his name and where the sale proceeds had been accounted by her (Preeti). She answered :
"Earlier I have already informed the department that Mrs. Parulben has taken my signatures on various bank papers, blank transfer share forms. Probably Mrs. Parulben might have used Blank signed transfer forms for this transfer. However I received a request from Shri Dhanpal J. Shah on 31-3-1986 enclosing therewith two shares transfer forms dated 18-3-1986 No. 174335 and 174331 duly filed in instructions by Shri Anil Gandhi the then Chief Accountant of the Skyjet Aviation Pvt. Ltd. which clearly indicates that no transfer has taken place till that date. Further a request was received from the company enclosing two transfer forms were dated 31-4-1986 to requesting me to sign the transfer forms. Again these transfer forms were filled in by Shri Anil Gandhi in his own hand writing indicating my ownership of above 150 preference shares and 2 equity shares. I am submitting all these transfer forms (xerox copies) along with letter from Shri Dhanpal J. Shah for your ready reference. So I believe that no transfer has taken place till today. I am really amazed that these had been transferred in 1984. Thus the transfer is without my knowledge and consent, the question of sale proceeds does not arise so far as I am concerned".
Preeti had stated that she was not an income-tax assessee nor she was assessed to wealth-tax. She had no fixed deposits in any bank nor having any fixed deposits. She might be having 5 to 10 tolas of personal jewellery.
5. Now, it may be stated that Shri C.S. Amin, another director of the assessee-company, in whose name there was deposit found recorded in the books of the assessee-company, was examined on 7-3-1986. He admitted that he was one of the directors of the assessee-company. He had not received any sitting fees also so far from all five companies in which he was a director. Held 8 shares of Rs. 1,000 each totalling to Rs. 8,000 in Avanti Agencies (P) Ltd. and a question was put to him whether these shares were in his possession. He answered in the negative and further stated that the shares had been arranged by Smt. Parulben and the possession of the shares was also with Smt. Parulben. Question No. 13 was put to him and answer elicited and they are as follows:
"Q. 13. If it is not your deposits then who has deposited in your Account?
Ans. Since I am income tax payer and I am filing returns regularly, I might have shown these amounts in my return but these amounts have been arranged by Mrs. Parulben Jaykrishan and they have taken my signature on vouchers and which I have given my signature in good faith."
In answer to a question whether he had taken loans from others for investing in companies, he said he had not raised any loans. When questioned whether he knew Mr. Kiran Chokshi, he said 'yes', and to another question whether he approached him for obtaining loan, he replied in the negative. When questioned whether he knew that an account was being maintained by Mr. Kiran Chokshi in his name, the answer given was that Mr. Chokshi was maintaining an account in his name at the instructions of Smt. Parulben. A question was put to him with regard to the impugned loan account and an answer was elicited. Since both the question and the answer are important, they are extracted completely as under:
"Q. 30.
There is also a loan account in the Skyjet Aviation Pvt. Ltd. in your name for the period ending 31-3-1983. This loan account I am showing to you. This loan account has an opening balance of Rs. 1,13,494.82. Further the deposits have been made on 16; 3.6; 24.6; 19.7; 5.11; 30.9; of Rs. 35,000; Rs. 60,000, Rs. 30,000; Rs. 1,50,000; and Rs. 8,494. Do you claim owner of the amount ?
Ans.
I do not claim ownership of this amount as already sated in answer to Q. No. 12 in respect of Avanti Agencies Pvt. Ltd.
Q. 31.
If it is not your deposits, then who has deposited in your account?
Ans.
My answer is same as I have answered for the Question No. 13. Regarding withdrawals mentioned at SI. No. 1 to 9 of the loan account, my answer is same as in the case of Avanti Agencies Pvt. Ltd. (all Questions). The statement has been given voluntarily, without any pressure."
6. One of the persons examined on 29-3-1985 under section 132 was Shri Anil S. Gandhi, who was the head of the account deptt. and attending authorisation of the vouchers for payments, secretarial work i.e., company law matters, labour, provident fund and working for the sister concerns' of M/s. Skyjet. To the question who looked after the cash transactions of the assessee-company, he answered that as far as payments and expenses were concerned, cash transactions were attended by the cashier, Shri Avinash Thakkar. However, the cash transactions of loan accounts of Miss Preeti Mehta and Shri Chandrakant S. Amin were concerned, he was handling the cash transactions. With reference to the cash transactions of loan accounts of Preeti and Amin, a question was put to him as to from whom did he receive cash or from whom he gave the cash which were recorded in the books of the assessee-company. He answered that he was receiving the cash from Smt. Parulben or Miss Preeti. The instructions for writing the books of account regarding loan accounts of the above persons were given by Smt. Parulben. The same procedure was followed for payment also. He also replied that Smt. Parulben never received or given cash personally. It was done through any of the members of the staff who was going and coming from her house, and a question was asked whether he was receiving any instructions from her for the purpose of recording the same in the books of account. He answered that he had received instructions from Smt. Parulben as to in which account the transactions were to be recorded. When a question was put whether he received cash personally from Preeti, or he gave cash personally to her in any loan account. He answered that for the last one year he had never given or received cash from Preeti. Before that, she was also giving and receiving cash from him personally. However, even at that time, the instructions for recording the cash transactions in the books of account were given through Smt. Parulben. Then came the important question No. 7 and the answer given thereunder as under :
"7. What were the instructions of Smt. Parulben about recording of the transactions in the books of account ?
Ans. She has always given oral instructions according to which cash which had come from her and given to her were recorded under the names of Miss Preetiben V. Mehta, Chandrakant S. Amin and three other persons. Mostly such amounts are recorded in the name of Miss Preetiben V. Mehta and Chandrakant S. Amin. This is done as per instructions of Smt. Parulben."
He also replied that generally and mostly the cash so received were deposited in the Bank. When questioned about the works supervised by Smt. Parulben, he replied that Smt. Parulben was in overall charge of Skyjet Aviation (P) Ltd. she did not come daily and by message she kept himself informed about the business of Skyjet Aviation (P) Ltd.
7. Smt. Parulben M. Jaykrishan, the President of assessee-company (M/s. Skyjet Aviation (P) Ltd.) gave two affidavits, one on 21-3-1986 and another on 30-1-1989. It is, no doubt, true that she does not appear to have been cross-examined. Therefore, let me examine the contents of her affidavits. The first affidavit is dated 21-3-1986. She states that she is the President of M/s. Skyjet Aviation (P) Ltd. and has been so for the last several years. She is also looking after another concern by name M/s. Skyways in her capacity as a Trustee of G.M. Beneficiary Trust, which is a proprietary concern. In para 2 of the affidavit, she admitted that she arranged finance of the above two concerns from time to time. In para 3, she states that moneys lent to these concerns during the accounting year relevant to assessment year 1983-84 by a friend Shri Kiran S. Chokshi at her instance are as follows. They had been credited in the books of above concerns as per my instructions :
(A) In the books of Skyjet Aviation Pvt. Ltd.
(i) Account in the name of the then Director Miss Preeti V. Mehta as per Annexure A.
(ii) Account in the name of the then Director Mr. C.S. Amin as per Annexure B. (B) In the books of Skyways -
(i) Accounts in the name of Miss Preeti V. Mehta, as per Annexure 'C'.
In para 7 of her affidavit, she states that the above moneys were the same as had been advanced by the said Shri Kiran Chokshi. Annexure A is captioned as "Miss Preeti V. Mehta Loan Account - F. Y. 1982-83 assessment year 1983-84". Annexure B is "C.S. Amin Loan Account for F.Y. 1982-83 assessment year 1983-84" in the books of M/s. Skyjet Aviation (P) Ltd.
8. In the first of her affidavits, Smt. Parulben claimed to have arranged finances, inter alia, for the assessee-company for the assessment year 1983-84 in para 3 thereof. But, when we come to her affidavit dated 30-1-1989, her version was improved. In her affidavit, she states that she is the President of M/s. Skyjet Aviation (P) Ltd. since last several years and she is, looking after the finances of the said company and she arranged finance from various concerns. In para 2 of her affidavit, she states that regarding the sum of money borrowed for this concern during the accounting years 1982-83 and 1983-84 she managed the same mainly from M/s. Kiran Chokshi & Co. and in addition thereto she also managed funds through Mr. Baldevbhai A. Patel who happens to have relations and acquaintance with her in-laws and the amounts so borrowed through him had been credited from time to time in the books of M/s. Skyjet Aviation (P) Ltd. in the accounts of or in the name of the then Directors Miss Preeti and another Mr. C.S. Amin as per the accounts mentioned as per Annexures A and B. Therefore, it is clear that the amounts found mentioned as borrowals either in Preeti's account or Mr. Amin's account were nothing but the arranged finances by Smt. Parulben.
9. Now, let me see the statement on oath of Shri Kiranbhai S. Chokshi, proprietor of Chokshi & Co. who was examined under section 133A of the Income Tax Act, 1961, on 27-2-1986. He stated that he is an income-tax practitioner. Besides professional income, he derived dividend income, interest income prior to 1973-74 and he was assessed to income-tax since 1975-76 but he was not assessed to wealth-tax. He has four members in his family, i.e., himself, his wife, Smt. Anjana, son Rupak studying 2nd year B. Sc. and another son Swaroop studying in 9th class. He is the only earning member in his family. He says that he had maintained books and he had borrowed some amount and lent but unfortunately he could not maintain proper books of account for his profession regarding receipts and payments. He maintained cash books-cum-ledger for financial years 1981-82, 1982-83 and 1983-84 which were in respect of money borrowed and lent but they did not contain anything about his professional receipts and expenses. For the financial years 1984-85 and 1985-86, he has to prepare and write the books of account. He is not doing any money lending business but he had borrowed money from different persons and given to different persons as friendly loans during financial year 1981-82 till date. When he was asked to give details of borrowings and loans, he submitted relevant copies of accounts for financial years 1982-83 and 1983-84 in respect of money borrowed and lent and he has furnished xerox copies of his account from the books of J. Bhaveshkumar Shroff for the period S.Y. 2037, 2038, 2039 and 2040. When asked what was the security he obtained from the persons to whom he lent the money, he replied that against borrowings he had not offered any security but he had signed hundi papers for each of the transactions of borrowing from M/s. J. Bhaveshkumar Shroff and Mukundrai Amirutlal Shroff HUF. So far as lending is concerned, he had not taken any security from the persons to whom he had lent. For the question whether he had obtained any receipts as a token of having given loans to persons, he replied that he had obtained no receipts from any person to whom he had lent the money and he had also not given any receipt for the loan repayment. Vide Question No. 14, he was asked as to why he had not obtained receipts while giving loans and also giving receipts while taking loans, especially when he had signed hundi papers in favour of Shroff, and by doing this was he not harming his interest as the transactions done by him had no protection as far as interest was concerned. The answer given is very interesting and is as follows :
"These loans which I have given to the persons as per the instruction of one Smt. Parul Mrugesh Harivallabdas and as per her verbal assurance these loans are advanced. These loan amounts were not physically given to these people but these amounts were handed over to the persons nominated by Mrs. Parul. Secondly even at the time of advancing loans I was not aware that to whose name I am advancing money but information from Mrs. Parul I used to come to know that these amounts were given to so and so persons. Hence I have not taken and given receipt for money lent and repayment. Further my personal interest is concerned, I was fully assured by Parulben that in case of non-repayment of loan she will be held responsible or make good the losses.' A question was asked as to whether there were any files containing correspondence with his creditors and debtors. He answered that he has got one file. But, to a further question as to where the file was, he answered that it was misplaced in 1985 at his office. Apart from the above, there was no other correspondence available with him about the above transaction. Question No. 40 and the answer given are very important and they are as follows :
"Q. 40: If Suresh N. Patel, Munir V. Mehta, Preeti V. Mehta and Chandrakant S. Amin, Prashant Nayak come to you of their own and ask you for loan without any assurance of Mrs. Parulben and also looking into their financial position, do you advance loans to them ?
A. 40: No, I will not give.
10. From the evidence on record, the assessing officer stated in this assessment order dated 31-3-1986 that the statements of Miss Preeti dated 29-3-1985 and 7-3-1986 confirmed only that she once again and categorically denied the ownership of the loan account appearing in the books of the assessee-company entry by entry. Similarly, she also denied the withdrawals from the account entry by entry. She confirmed that she only took a loan of Rs. 1,40,000 from Shri Dhanpal J. Shah, who is her maternal uncle, which was invested by way of share capital in the assessee-company in the year 1978. Subsequently, she stated that she had advanced a loan of Rs. 25,000 to her father from her savings and apart from this she had not indulged in taking loans or giving loans to others. She further categorically stated that she was signing the papers and other documents in connection with the affairs of the company on the instructions of Mrs. Parulben who is her aunty.
Her role was limited to signing of papers and carrying the instructions of Mrs. Parulben. Further, apart from the statement of Miss Preeti, the statements of Hasmukh Dinmanikant dated 29-3-1985, Anil S. Gandhi dated 29-3-1985 and the statement of Shri S. Bhatt dated 29-3-1985, it is clear beyond doubt that these persons were acting on the clear instructions of Mrs. Parulben M. Jaykrishan and their statements made evidently clear that Mrs. Parulben was in complete control of the affairs of the company in all respects. Miss Preeti was only a salaried employee in the assessee-company and she was getting a salary of Rs. 1400 p.m. She had no other ostensible sources of income and it is proved beyond doubt that she had no capacity to raise loans to the magnitude of lakhs of rupees from outside. As such, according to the assessing officer, it is very clear that the funds deposited in the name of Miss Preeti did not belong to her. The assessee-company did not produce any evidence to support that the loans credited in her account were genuine and, therefore, having regard to her financial capabilities, she could not held to be the real owner of the loan account appearing in her name in which the credit disclosed was Rs. 8,81,620 during the year and it should be held to be income of the assessee-company from undisclosed sources.
11. The capacity of the loan creditor is one of the main ingredients to prove a cash credit. In this case, both the loan creditors, Preeti and Amin, denied having borrowed funds from M/s. K. Chokshi & Co. Shri Kiran Chokshi himself categorically stated that having regard to the resources of Miss Preeti and Amin, he would not have lent any money whatsoever to them had they approached him for loan independently without the consent of Mrs. Parulben. Further, Mrs. Parulben herself filed two affidavits in which she clearly admitted that she had arranged finances to the assessee-company and Shri Kiran Chokshi was her friend. It was not the claim of Shri Chokshi that he used to advance his own moneys but he used to borrow from one Shroff after duly executing hundis undertaking to repay with interest at. 12 per cent. It is very strange to note that even without getting receipt he used to advance moneys at the bidding of Mrs. Parulben. Further, Shri Chokshi is a chartered accountant and he is expected to do any work unless he had got an interest in it. In such circumstances, when he borrows moneys from outside at 12 per cent, he says that only 7 per cent or so would be charged for the advances made by him. This conduct on the part of Shri Chokshi is very suspicious and leads to doubt in one's mind about the genuineness of the loans contracted from him and his capacity to contract loans also does not inspire confidence. Every person who worked in the assessee-company at that time categorically stated that he/she had obeyed the orders of Parul while maintaining accounts or making entries in the books of account and they never had any dealings with Miss Preeti or Amin. Preeti's loan account was maintained by the assessee-company. So also, her ledger account was also maintained in the books of account of M/s. K. Chokshi & Co. The claim of the assessee was that whatever advances that were found in the name of Miss Preeti in the books of account of the assessee-company were borrowed from M/s. K. Chokshi & Co. However, this version does not appear to be completely correct. Preetis account was maintained as per Annexure A to the affidavit of Mrs. Parulben and it is appearing at page 23 of the departmental paper book. Similarly, C.S. Amin's loan account was appended as Annexure B to Mrs. Parulben's affidavit and it is appearing page 21 of the departmental paper book. The ledger account of Preeti in the books of account of M/s. K. Chokshi & Co. relating to assessment year 1983-84 was provided at page A/ 112 of the assessee's paper book. The ledger account of Preeti in assessee-company's accounts vis-a-vis her borrowals from M/s. K. Chokshi & Co. are provided in the table below opposite to each other for easy comparison and drawing easy inference :
Preetis loan account in the books of Skyjet Aviation (P.) Ltd. (See Annexure A to Mrs. Parulbens affidavit) Account of Preeti in the books of Kiran S. Chokshi Opening balance Opening balance 1-4-82 Rs. 1,34,507.94 1-4-82 Rs. 4,60,000 22-4-82 Rs. 13,635.00 22-4-82 Rs. 15,000 17-7-82 Rs. 50,000.00 17-7-82 Rs. 25,000 1-1-83 Rs. 5,000.00 1-1-83 Rs. 1,00,000 25-2-83 Rs. 6,000.00 16-2-83 Rs. 1,00,000 3-3-83 Rs. 1,000.00 3-3-83 Rs.1,00,000 A comparison of the above accounts would show how the case put forward by the assessee that the amounts credited in Preeti's account in the assessee-company's books all came from the borrowals of M/s. K. Chokshi & Co. is not 100 per cent correct. If the contention of the assessee was true, on 22-4-1982, whereas the borrowal was Rs. 15,000, the amount deposited was Rs. 13,635. Further, on 17-7-1982, in her account in the assessee's books was a hefty deposit of Rs. 50,000, whereas the amount borrowed from M/s. & Chokshi & Co. was only Rs. 25,000, which is half the amount of deposit. However, if one compares the lendings and borrowings on 1-3-1983, 25-2-1983 and 3-3-1983, the entries give out a strange picture. One gets a doubt when Miss Preeti wanted to deposit a mere Rs. 5000, why should she borrow a heavy amount like Rs. 1,00,000 on that day from M/s. Chokshi & Co. Similarly, when on 25-2-1983 she wanted to deposit only Rs. 6,000 and on 3-3-1983 she wanted to deposit a mere Rs. 1000, why should she borrow a heavy amount of Rs. 1,00,000 on each of those dates from M/s. K. Chokshi & Co. Therefore, the version that every deposited amount in the name of Preeti in the assessee-company's account must have come only from M/s. K. Chokshi & Co. does not appear to be a true version. Admittedly, while advancing the loans, Shri Chokshi felt that it was an advance made not to Miss Preeti but to her aunty Mrs. Parulben. If that was so, what prevented the advances not being recorded in the name of Mrs. Parulben in the account books of the assessee-company. For what purpose her name was suppressed as appearing as a creditor of the assessee and why Miss Preeti was put forward as creditor for name sake. No explanation in this regard was forthcoming from any quarter whatsoever. Similarly, even with regard to Shri C.S. Amin, his explanation was not forthcoming even though the admitted position was that at the bidding of Mrs. Parulben, M/s. Chokshi & Co. advanced similar amounts to Shri C.S. Amin and Shri Amin was recorded as creditor in the books of account of the assessee-company instead of Mrs. Parulben. The two affidavits filed by Mrs. Parulben are quite in accord with the bulk of other evidence on record and none of her affirmations in her affidavits comes in conflict with the other material evidence on record and, therefore, the argument that in spite of her filing affidavits she was not summoned and cross examined with reference to her affirmations in the affidavits does not destroy the case of the revenue in any case. Further, Mrs. Parulben was a director of the assessee-company from 1984 onwards and she is the chief spokes-person about the affairs of the assessee-company. Therefore, the question is whether her affidavits can be given more weight than the affidavits of the assessee itself. In my humble opinion, Mrs. Parulben represents the assessee-company. The interest of the assessee company is her interest and, therefore, her affidavits cannot be given more weight than the affidavits filed by the party to the proceedings itself which is self-serving. Even with reference to the signing of the balance sheet dated 31-3-1981, the resolution of the Board of Directors on 29-6-1981 given at page A/51 would show the following :
"Resolved that the Balance Sheet as at 31-3-1981 and Profit & Loss Account of the Company for the year ended on 31-3-1981 be and are hereby adopted and the same be signed by Smt. Parul M. Jaykrishna and Miss Preeti V. Mehta".
It is significant that an annual report for 1981-82 was signed by Mrs. Parulben and Miss Preeti as directors. Preeti's account in the assessee-company's books is provided at pp. A/ 124,125 & 126. If one goes through this account, it will be clear that on very many days borrowals in varying amounts were recorded to have been received from K. Chokshi & Co. Thus, it is not as if M/s. Chokshi & Co. was not shown as direct lender to the assessee-company but was always shown as having advanced moneys to Miss Preeti. If this is the real state of affairs, what prevented the assessee-company to record M/s. Chokshi & Co. as its creditor directly instead of recording Miss Preeti who received moneys from Shri Chokshi in order to advance to the assessee. No rational explanation is offered or any justification found as an answer to this question. There are 105 equity .shares in the company. Out of them, two shares only were held by Miss Preeti or by Shri C.S. Amin. The rest of the shares were held by Mrs. Parulben and her group. A sum of Rs. 1,50,000 was invested by Miss Preeti in the preference shares of the assessee-company. This amount was stated to have been borrowed from Shri Dhanpal J. Shah. She admitted that she does not know where the shares are lying. Shri Dhanpal J. She was admitted as an additional Director of the assessee-company vide page A/65 of paper book. Ultimately, the preference shares of Rs. 1,50,000 which were hitherto standing in the name of Miss Preeti were transferred to the name of Shri Dhanpal J. Shah. Preeti was only getting Rs. 1,400 as monthly salary and she had no other means to advance such heavy amounts to the assessee-company. She had no financial capacity to float a company. It is not the case of the assessee that the creditors were pressing for payment of the amounts due to them. There is absolutely no reservation while coming to the conclusion that Preeti is no other than a benamidar of Mrs. Parulben. Therefore, in my opinion, the bulk of evidence on record would establish that the so-called creditors have no capacity to lend the amounts shown against each of them. They are mere benamidars of Mrs. Parulben. Whatever signatures Miss Preeti and C.S. Amin subscribed they did at the dictates of Mrs. Parulben and all the staff of the assessee-company obeyed Mrs. Parulben as their real boss including Miss Preeti and C.S. Amin. Further, the proof of the transactions was also not established.
12. In Shankar Industries's case (supra), the ingredients essential to be proved to accept the genuineness of the cash credits standing in the names of third parties are stated to be as under :
"It is necessary for the assessee to prove prima facie the transaction which results in a cash credit in his books of account. Such proof includes proof of the identity of his creditor, the capacity of such creditor to advance the money and, lastly, the genuineness of the transaction. 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. Where the assessee establishes only the identity of the creditor and nothing more, the cash credits can be treated as the income of the assessee from undisclosed sources."
This decision was cited on behalf of the revenue.
13. In Orient Trading Co. Ltd.'s case (supra), the requirements of burden of proof of cash credits are given as under as per the headnote of the decision :
"When cash credits appear in the accounts of the assessee whether in his own name or in the name of third parties, the Income Tax Officer is entitled to satisfy himself as to the true nature and sources of the amounts entered therein, and if after investigation or inquiry he is satisfied that there is no satisfactory explanation as to those entries, he would be entitled to regard them as representing the undisclosed income of the assessee.
If the credit entries stand in the name of the assessee himself the burden is undoubtedly on him to prove satisfactorily the nature and source of those entries and to show that they do not constitute a part of his income liable to tax.
In this case, the explanation of the assessee is not satisfactory.
14. In CIT v. CP. Adam (1976) 105 ITR 465 (Ker.) the facts are that in the accounts of the assessee credits were found entered in favour of three Multani bankers of Rs. 45,000 each and also a debit entry of Rs. 23,672 as having been paid to them towards interest. The Income Tax Officer issued notices to all the three bankers. Two of them were not served. However, one of them appeared and was examined in the presence of the assessee and cross examined. He denied having given any loan to the assessee or having received any interest. The Income Tax Officer examined the other two bankers at Madras without the presence of the assessee and they also denied having given loans to the assessee or having received any interest. The Income Tax Officer added Rs. 1,35,000 as the assessee's income and disallowed the interest. The Tribunal upheld the Income Tax Officer's order only in so far as the loan from one Multani banker, who was examined in the presence of the assessee, was concerned. As regards the other two bankers, the Tribunal felt that it was the responsibility of the department to have given the assessee an opportunity to cross-examine them. Under the circumstances, when the matter was taken in reference to the High Court, the Hon'ble Kerala High Court held the following:
"Held, that it is well-established that the onus of proving the source and nature of any money received by the assessee is upon him. In the present case, the assessee made no attempts to produce the witnesses whom he wanted to cross-examine apart from merely asking the department to issue fresh summons. The officer refused to issue fresh summons because, according to him, there was no purpose in issuing summons over and over again after the first summons had been returned unserved. In the circumstances, it could not be said that the assessee was denied a reasonable opportunity of adducing evidence. The officer could not be said to have acted in violation of the principles of natural justice. In the circumstances, he was entitled to draw an inference that the receipts were of an assessable nature.
The Tribunal, having disbelived the assessee's version in regard to his borrowing from V, had no evidence to accept his version in respect of his borrowings from the other two bankers which also arose in identical circumstances. The only reason given by the Tribunal was that, though they were examined by the officer, they had not been produced for cross-examination by the assessee. The finding of the Tribunal in regard to these borrowings was unsupported by any evidence. The Tribunal erred in setting aside the orders of the department."
In this case also, the type of credit entries made in favour of Preeti and Amin was one and the same, The source of income wherefrom they had obtained moneys even according to the affidavits filed by Mrs. Parulben was one and the same mode. Miss Preeti as well as Amin denied having lent any sums to the company and denied about the existence of any credit entries in their names. It was never their case that either they lent the amounts or they were capable of lending the amounts. Miss Preeti stated that she borrowed in order to finance her father. Under the circumstances, the ratio of the above Kerala High Court decision fully supports the case of the revenue.
15. The next decision relied upon by the revenue is the Calcutta High Court decision in Oriental Wire Industries (P) Ltd.s case (supra). The facts as well as the decision of the Hon'ble High Court thereon are fully contained in the headnote of the decision found at page 688 which is as follows :
"Where an alleged loan appears in the books of the assessee it is for him to prove that the transaction was genuine and that would entail the production of evidence as to (i) the source of the loan, (ii) the capacity of the person who is supposed to have given the loan, and (iii) also that the loan was in fact given by the person concerned on the date mentioned.
There was a deposit of Rs. 20,000 in the books of the assessee-company as on 1-3-1965, in the name of N, wife of A, the brother of one of the directors of the assessee-company. The Income Tax Officer sought to assess this amount as the assessee's income from undisclosed sources and his action was upheld by the Tribunal on the following grounds : the lady is said to have received the amount in or about November 1962, but the money was alleged to have been invested only on 1-3-1965, whereas the lady or the person who was looking after her interests was in the habit of keeping all monies invested. There was no explanation on behalf of the lady as to why this amount had remained uninvested for about 2 years. The sums were withdrawn at the time of the marriage of the lady, from the company where it was lying invested and the entire sum was not withdrawn at the same time. There was no evidence to show that the loan was actually given. There was also no evidence to show that the amount was lying uninvested with the lady. On a reference:
Held, that the conclusion arrived at by the tribunal was not perverse in law. The amount of Rs. 20,000 was assessable as the income of the assessee from undisclosed sources."
16. In CIT v. W. J. Walker & Co. (1979) 117 ITR 690 is again a decision of the Calcutta High Court. In that case, which relates to assessment year 1964-65, the Income Tax Officer called upon the assessee to explain a cash credit of Rs. 50,000 found as a loan from a party and the assessee produced a confirmation letter from the party but the party's clerk deposed that the party had not given the loan. The officer also perused the income-tax returns of the party, and having satisfied with the creditworthiness of the party, held that the loan was not genuine.
17. Another decision cited for the revenue was Bharati (P) Ltd v. CIT (1978) 111 ITR 951 (Cal). In that case, the confirmatory letters produced from the so-called creditors were all perused and when notices were sought to be served, they returned back unserved. In that case, the Hon'ble High Court held that mere filing of confirmatory letters did not discharge the onus that lay on the assessee and, therefore, the finding of the Income Tax Officer that the loans represented the concealed income of the assessee was justified.
18. Another decision cited for the revenue was CIT v. Krishnaveniammal (1986) 158 ITR 826 (Mad.) for the proposition that law of evidence mandates that if the best evidence is not placed before the court, an adverse inference can be drawn as against the person who ought to have produced it. In that case, the Multani bankers statements were produced in support of the cash credits which appeared to have been obtained from them. However, even though crossed cheques were available they were not produced and, therefore, the finding of the revenue that the cash credits would be held to be bogus and liable to be added in the hands of the assessee was held justified by the Hon'ble Madras High Court.
19. The next decision cited by the departmental Representative was B. Viswanathiah & Co. v. CIT (1993) 201 ITR 53 (Mad). In that case, the finding given with regard to the genuineness of the cash credits depended upon whether the Tribunal examined the explanation regarding the disputed amount on all aspects or not and also after the explanations were all examined the probability or improbability of the assessee having been able to command funds as claimed was pronounced upon by the Tribunal or not.
19.1 Here, in this case also, it is not the case of the assessee that K. Chokshi & Co. by itself was capable of advancing the moneys. They themselves appear to have borrowed from M/s. J. Bhaveshkumar Shroff and Mukundrai Amrutlal Shroff HUF. Shri Chokshi claimed to have executed hundis in favour of the above Shroffs but he himself failed to get at least a receipt either from Preeti or Amin of having received from Shri Chokshi the hefty amounts borrowed from him. Further, the interest he used to pay to his creditors was 12 per cent, whereas the interest he had collected from Preeti and Amin was only 7 per cent. Neither any promissory note nor hundi papers were obtained either from Preeti or Amin in Shri Chokshi's favour. Further, Shri Chokshi did not maintain account books wherein the professional receipts were recorded. Therefore, the statement given by Shri Chokshi on oath is completely riddled with improbabilities and unnaturalities rendering his full evidence as unbelievable.
20. Another decision cited was Bhojraj Kishanchand v. CIT(1994) 209 ITR 500 (Bom). The facts as well as the decision thereon are appearing in the headnote of the said decision at page 501 as under :
"In a reference under section 256 of the Income Tax Act, 1961, it is not open to the High Court to embark upon a reappraisal of the evidence. Even the question of sufficiency of evidence cannot be gone into in a reference under section 256 (see p. 507c).
The assessee was a partner in a Bombay firm. In 1963, the firm was raided by the Enforcement Directorate. During the course of the search, a typed copy of the balance sheet concerning the proprietary business of the assessee at Hong Kong, carried on in the name of K, was seized by the Enforcement Directorate. The balance sheet pertaining to the Hong Kong business of the assessee prepared on the instructions of the assessee as on 31-3-1959, disclosed a sum of 3,57,000 Hong Kong dollars credited to his capital account. Reassessment proceedings were initiated. The assessee explained that the amount of Hong Kong dollars 3,57,000 in fact represented unpaid price of goods and two loans. The Income Tax Officer passed the assessment order for the assessment year 1959-60 by treating the sum of 3,57,000 Hong Kong dollars, i.e., Rs. 2,85,600 being the equivalent amount thereof, as the income of the assessee from undisclosed sources. This was confirmed by the Tribunal. On a reference :
Held, that the copy of the balance sheet as on 31-3-1959, concerning the proprietary business of the assessee at Hong Kong carried on in the name of K seized by the Enforcement Directorate constituted relevant material on the subject against the assessee. The explanation given by the assessee contained several improbabilities and missing links and was not supported by reliable documentary or other evidence. The view taken by the Tribunal was a reasonably possible view and was supported by material on record."
21. The next decision cited by the revenue was CIT v. K.M Mahim (1995) 213 ITR 820 (Ker). This is a decision rendered under the Wealth Tax Act, but mainly sections 3 and 4 of the Benami Transactions (Prohibition) Act, 1988, fell for interpretation before the Hon'ble Kerala High Court in that decision. The Kerala High Court held that for the purpose of determination of the ancillary question and determining the tax liability under the Income Tax Act, sections 3 and 4 of the Benami Transactions (Prohibition) Act, 1988, do not come in the way giving their judgment on that point. Their Lordships held the following :
"What sections 3 and 4 of the Banami Transactions (Prohibition) Act, 1988, interdict is the setting up of a claim of benami in any suit, claim or action between the person claiming to be the real owner of the property, and the benamidars. A proceeding for the purpose of assessment to income-tax in which the question of benami arises is not of such a nature. What the Income Tax Officer primarily seeks to establish is not the benami nature of the transaction, but the source of the investment for the purchase of the property, whether it proceeded from the assessee or the persons in whose name the property is held. Being so, the prohibitions contained in sections 3 and 4 of the Act do not affect the consideration of this question including the question of benami which incidentally arises. The enquiry being mainly about the source of the investment, whether it was made by the assessee, the benami character of the acquisition of the property is only subsidiary, and any finding thereon is only incidental, so long as the source of funds is the assessee. This is apart from the fact that sections 3 and 4 do not bar such an enquiry in an income-tax assessment".
22. The next decision cited before me was Jash Bhai F. Patel v. CIT(1982) 136 ITR 799 (Punj. & Har). In the facts of that case, while completing the assessment proceedings for assessment year 1964-65, the accounting period ending with 17-10-1963, the assessee-firm filed the return of income. In the course of assessment proceedings, the Income Tax Officer noticed certain cash credits in the account books of the assessee. The total of the cash credits thus entered from six creditors was Rs. 1,26,000. Confirmatory letters were produced from the parties to prove the genuineness of the cash credits. The Income Tax Officer accepted these items as genuine and computed the assessment. One of the cash creditors was one Shri Mohandas, proprietor of M/s. Mohandas Ghanshamdas, Amritsar. He gave a statement on 22-3-1968 before Shri J. S. Gill, Income Tax Officer, Dist. II(IX), Amritsar, to the effect that all the loans in the name of M/s. Mohandas Ghanshamdas were bogus. In his statement, it was stated that the entire hundi business done by him under the name of M/s. Mohandas Ghanshamdas since its inception up to the assessment year 1967-68, when he ceased to do the business, was completely bogus. None of the hundi loans that may appear in any party's account and claimed by him as advanced by him under the name, M/s. Mohandas Ghanshamdas, was genuine. No loan was advanced in any instance. Only he lent his name to be used by the parties concerned for bringing into their accounts their own secretive and unaccounted money in the guise of hundi loans taken from him (M/s. Mohandas Ghanshamdas). The question was whether the entries in the books of account of the assessee were false entries and whether penalty could be levied under section 271(1)(c). The Hon'ble Punjab & Haryana High Court held the following in the headnote at page 800 :
"Where the proprietor of a money-lending concern himself makes a statement that the loans alleged to have been advanced by his firm to various concerns were all bogus it is open to the Tribunal to act on such a statement and infer that the assessee-firm failed to prove the genuineness of the cash credits of the amounts shown as loans taken from the money-lending concern".
Here, in this case, both Preeti as well as Amin clearly stated that none of the amounts standing in their names in the books of the assessee-company belonged to them and they had not lent those amount. The question is whether their statements can be believed. No circumstantial evidence of enmity was alleged between them on the one hand and Smt. Parulben, on the other hand, even in the affidavits of Mrs. Parulben. Further, there is bulky evidence of the staff working in the company which goes to corroborate their statements. In the circumstances, the ratio of the above decision appears to be applicable to the facts on hand.
23. The next decision referred to was that of the Rajasthan High Court in Sohan LaI v. CIT(1995) 215 ITR 544. In that case, a cash credit entry of Rs. 35,000 was standing in the name of one of the partners of the assessee firm. In May, 1978, he gave a statement that it was a havala entry. However, in December, 1978, he filed an affidavit confirming the credit entry. The question was whether the said amount was a genuine cash credit. In that connection, the Rajasthan High Court held at page 544 in the headnote as under:-
'Held, that the burden to prove that the entry existing in the books of account was not genuine had to be discharged by the revenue and it was discharged by way of statement of M recorded in May, 1978, and the onus shifted to the assessee. The entire evidence produced by the assessee had been considered. The finding which had been recorded was supported by a number of reasons given by the Appellate Assistant Commissioner and that order had been upheld. The genuineness of a credit is a question of fact and on the facts it could not be said that there was any convincing material on record to establish the genuineness of the cash credit".
In this case also, on the date of the search, specific statement was given by Preeti as well as C.S. Amin stating that the amounts standing in their names in the books of account of the assessee were not lent by them. The cashier, the accountant and all other persons concerned with the accounts of the assessee-company appeared to be quite subservient to Mrs. Parulben rather than to either Preeti or Amin. Preeti and Amin were not persons of any considerable means. Even according to Mrs. Parulben, the amounts standing against these two persons were arranged by her. Her authority in the assessee-company's affairs was effective that she could dictate which particular amount was to be credited against whose name and this factor was admitted by Shri Chokshi. Shri Chokshi categorically stated that he would have refused to lend any amount either to Preeti or Amin but he lent the amounts only because of Mrs. Parulben and her oral directions.
24. Another decision cited was Bharat Oxygen v. Income Tax Officer (1986) 26 TTJ (All.) 484. In the books of the assessee-firm, certain deposits were existing and it was said to be a deposit made by one of the partners of the firm in the name of his brother. The Income Tax Officer examined the partner who denied to have made any such deposit. The Income Tax Officer made an addition of the said amount. The addition was said to have been rightly made and it was also held that the assessee failed to discharge their judicial onus of proving the cash credit. It is significant to note that the persons in whose names the deposit was made were not even summoned and examined and an argument was advanced the proceedings were vitiated for that reason only. However, the Tribunal held against such contention.
25. Another decision was one reported in Nebhandas & Sons v. Income Tax Officer (1980) 9 TTJ (Jp.) 167. In that case also, the creditor in whose name an entry was existing in the books denied having lent any amount. It was held that this raised a presumption that the cash credit entry was not genuine but, if other circumstances pointed out that the statement of the creditor was not correct, addition should not be made.
25.1 Here, in the facts of the present case, this decision was cited on behalf of the assessee. In our opinion, this does not apply inasmuch as no credible circumstantial evidence was brought forth which had the propensity to demolish the presumption raised on denial of the parties themselves.
26. The last decision cited is Poonjabhai Vanmali & Sons v. Income Tax Officer (1989) 33 TTJ (Ahd.) 91. in this case, the question involved was what sort of circumstantial evidence and what should be its nature and reliability to rebut the presumption of the falsity of the cash credit on the denial of the cash credit by the creditor himself. It was held that in order to discharge the assessee's burden under section 68, an assessee was required to offer explanation about nature and source of cash credit and thereafter burden shifted to the Income Tax Officer which was subject to satisfaction of Income Tax Officer which was required to be made under the section. However, it should be a satisfaction of a man of ordinary prudence. If explanation offered by the assessee probabilised the existence of facts which must prove the genuineness of the cash credit in dispute in due course or on the nature of things, the assessee might be said to have offered a satisfactory explanation. At the same time, an assessee could not get himself rid of his burden by offering any sort of explanation which might suit him. Explanation should be reasonable, probabilising the happening of the things in the manner told or averred by the assessee. The Income Tax Officer in the present case brought circumstances which fatally damaged the capacity of depositors to advance amount to assessee and, therefore, he was right in rejecting the explanation offered by the assessee. It was held that the addition under section 68 was justified.
27. In the facts of this case, the source of a source is sought to be adduced or furnished through the examination of Shri K. Chokshi. However, he is a person, though a chartered accountant, who did not maintain books of account recording even his professional income which he is obliged to do under the rules and the sections of the Income Tax Act. Further, it is not his case that the money advanced was his own. His version was that he borrowed it from some agriculturist clients and lent it. So also, his version was that he had borrowed from moneylender after executing hundis agreeing to pay interest at 12 per cent, whereas he used to charge only 7 to 8 per cent from Preeti which is quite unnatural and unbelievable against natural course of human conduct and it is not a conduct exhibited by a person who generally consults his own interest, being a professional man himself. Therefore., his version is riddled with improbabilities, unnaturalities and against the nature of human conduct and cannot be believed. The agriculturist clients from whom he is said to have borrowed amounts are not income-tax assessees and they did not maintain any account books. Thus, the bulky evidence which mostly contained the statement recorded by the authorities itself would disprove the genuineness of the cash credits. I, therefore, hold, completely agreeing with the learned Judicial Member, Shri Phool Singh, that the learned Commissioner (Appeals) erred in deleting the cash credits of Rs. 7,81,620 and Rs. 2,83,494 in the names of Miss Preeti V. Mehta and Shri C.S. Amin respectively. The learned Accountant Member, in para 8 of his order stated, it is established that both Miss Preeti and Shri C.S. Amin were Executive Directors of the company and were capable to borrow. Both of them borrowed from M/s. K Chokshi & Co. and both had confirmed the borrowings which is evident from the various documents referred to supra. This finding is against the version put forward by Mrs. Parulben in her affidavits and also the clear evidence given by Shri K Chokshi examined on oath. I am not on the question whether the Executive Directors (Miss Preeti and Shri C.S. Amin) were capable of borrowing. Even if their capacity to borrow is taken into consideration, they have not got any substantial means to borrow a sum of Rs. 7,81,620 by Preeti and Rs. 2,83,494 by Shri C.S. Amin. This finding is against the bulk of evidence on record tendered by the assessee itself and, therefore, I do not concur with the said finding of the learned Accountant Member.
28. This matter should now go back to the Division Bench to decide the issue about the genuineness of the cash credits in view of the majority decision under section 255(4) of the Act.