Income Tax Appellate Tribunal - Kolkata
Income-Tax Officer vs A.C. Sarkar on 29 November, 1994
Equivalent citations: [1995]52ITD614(KOL)
ORDER
R. Acharya, Accountant Member
1. This appeal has been instituted by the department against the order of the CIT(A) for the assessment year 1987-88 on the following grounds :
1. That on the facts and in the circumstances of the case, the Learned Commissioner of Income Tax (Appeals) erred in holding that the assessee cannot be held to be the owner of the amount of Rs. 1,60,000 received by him from his wife and the Income Tax Officer is at liberty to take action in this respect in the hands of the assessee's wife and in that view deleting the addition of Rs. 1,60,000 made as assessee's income from the undisclosed sources.
2. That on the facts and in the circumstances of the case, the order of the Learned Commissioner of Income Tax (Appeals) be vacated and the order of the Income Tax Officer be restored.
2. While explaining the source of investment of Rs. 3,38,958 in house property at Delhi the assessee stated that he took a loan of Rs. 3,38,110 from his wife, Mrs. Aruna Sarkar. It was further explained that Mrs. Aruna Sarkar had advanced the loan of Rs. 1,92,480 and Rs. 1,60,000 to the assessee after taking loan from ITC and M/s Esskey Pictures International (EPC for short) respectively. The Assessing Officer (A.O.) requested the assessee to furnish the PA No. of EPC but the assessee failed to do so. The A.O. also issued a summon under Section 131 which was served on EPC fixing the case for hearing on 26-3-1990 but there was no compliance. Under these circumstances the A.O. treated the loan transaction with EPC as bogus and accordingly the amount of Rs. 1,60,000 alleged to have been advanced to the assessee by his wife is treated as assessee's income from undisclosed sources.
3. Before the CIT(A) the assessee submitted a copy of Mrs. Sarkar's statement of affairs, confirmation as to her accommodating loan of Rs. 3,38,110 to the assessee, copies of demand notice under Section 156 for assessment years 1983-84 and 1987-88 in her case and statement of account she had with EPC for financial years 1985-86 and 1986-87. On the basis of these documents it was submitted before the CIT(A) that in her assessment the sources of funds for advancing the loan of Rs. 3,38,110 to the assessee has been accepted in her hands. The CIT(A) considered the submissions made by the assessee and observed that as the assessee did not have any loan transaction with EPC he was not bound to furnish the PA No. of the aforesaid creditor and similarly he could not be held responsible for non-compliance of the above party to the summons issued by the A.O. According to CIT(A) the assessee has established the identity of the person from whom he received loan by furnishing the confirmation of loan transaction by the creditor and by proving that the wife is an existing income-tax and wealth-tax assessee as GIR No. is given in the confirmation. According to CIT(A) the assessee has also proved the creditworthiness of his wife and has discharged the onus by furnishing the statement of account, his wife had with EPC for financial years 1985-86 and 1986-87. According to him since the aforesaid statements have been accepted in the assessment of assessee's wife till the assessment year 1987-88 the assessee has discharged the onus of establishing the creditworthiness of his wife in so far as the amount of Rs. 1,60,000 is concerned. According to CIT(A) the assessee has also discharged the onus of establishing the genuineness of loan of Rs. 1,60,000 as the relevant confirmation in support of the loan transaction has been filed and, therefore, the onus had shifted to the A.O. to prove that the loan transaction under consideration was not genuine. The CIT(A) placed reliance on Madras High Court decision in the case of S. Hastimal v. CIT [1963] 49 ITR 273 wherein it was held that the loan debtor cannot be presumed to have special knowledge on the source of source or origin of origin of the loan received by him. He also relied on Assam High Court decision in the case of Tolaram Daga v. CIT[1966] 59 ITR 632 wherein it has been held that the fact that the assessee was unable to satisfy the authorities as to source from which his loan creditor derived the money lent to him cannot be used against the assessee. Accordingly the CIT(A) held that the assessee cannot be held responsible if particulars of creditor of his wife could not be furnished or aforesaid creditor failed to comply with the notices and, therefore, he deleted the addition of Rs. 1,60,000 as according to him the assessee cannot be treated to be the owner of the amount and the A.O. is at liberty to take action in this respect in the hands of the assessee's wife. Being aggrieved by this order of the CIT(A) the revenue has preferred this appeal to Tribunal.
4. The learned departmental representative (D.R.) relied on the order of A.O. and submitted that this is a loan taken by the assessee from his wife and, therefore, this case is altogether different from other cases in which relatives are not creditors. He further argued that in this case the assessee has established only the identity of the creditor. It was further contended by him that the assessee has completely failed to establish the creditworthiness of the creditor and genuineness of the transaction. In order to support his contention the learned D.R. placed reliance on the following decisions :
1. Shankar Industries v. CIT [1978] 114 ITR 689 (Cal.);
2. Jamnaprasad Kanhaiyalal v. CIT [1981] 130 ITR 244 (SC);
3. Oriental Wire Industries (P.) Ltd. v. CIT [1981] 131 ITR 688 (Cal.);
4. Addl. CIT v. A. L. N. Rao Charitable Trust [1976] 103 ITR 44 (Kar.).
Learned counsel for the assessee, on the other hand, filed paper book containing a letter of confirmation, statement of total income of Mrs. Aruna Sarkar for F.Y. 1986-87, statement of affairs of Mrs. Aruna Sarkar for financial year 1986-87, statement of net wealth of Mrs. Aruna Sarkar as at 31-3-1987, cash flow statement of Mrs. Aruna Sarkar for the financial year 1986-87 i.e., assessment year 1987-88, cash statement excluding bank drawings for financial year 1986-87, a copy of demand notice of Mrs. Aruna Sarkar for assessment years 1983-84 to 1986-87 under Amnesty Scheme and a copy of demand notice-cum-assessment order in the case of Mrs. Aruna Sarkar for assessment year 1987-88. The learned counsel for the assessee explained that the identity of the creditor is established on the basis of confirmation placed at p. 1 of the paper book in which GIR No. of the creditor is also given. He also invited our attention to pp. 9 & 10 which is a demand notice in the case of Mrs. Aruna Sarkar for the assessment year 1987-88 and submitted that this document proves the creditworthiness of the creditor. It was further argued that notice or summon were issued to Mr. D. Bansal, Proprietor of EPC and not to assessee. He also placed reliance on the order of CIT(A) and contended that since the identity of the creditor, creditworthiness of the creditor and genuineness of the transactions are established in this case the CIT(A) was justified in deleting the addition. In order to support his arguments and contentions the counsel for the assessee relied on the following decisions:
1. S. Hastimal's case (supra)
2. Tolaram Daga's case (supra)
3. CIT v. Orissa Corporation (P.) Ltd. [1986] 159 ITR 78 (SC).
5. We have carefully considered the rival contentions, relevant facts and materials placed on record. We have also gone through the case laws on which reliance has been placed by both the parties. We find that in this case only identity of the creditor is established by the assessee. The other two ingredients, i.e., creditworthiness of the creditor and the genuineness of the transaction have not been fully established by the assessee because the assessee and creditor have failed to furnish the following particulars and documentary evidences :
(i) There is no confirmation from EPC for advancing loan to Mrs. Aruna Sarkar;
(ii) Copy of account of the creditor with EPC is also not furnished;
(iii) The creditor has also not furnished copy of statement of affairs of assessee with her;
(iv) Mode of payment by creditor to assessee is not known except few drafts. Datewise and amountwise transaction of loan advanced to the assessee is not furnished;
(v) No copy of bank account is furnished by creditor;
(vi) How the assessee being a debtor is creditor of his wife, Mrs. Aruna Sarkar to the extent of Rs. 1,02,000 is not known and there is no reconciliation for the same;
(vii) The assessee has also not furnished copy of his bank account to prove the receipt of loan and payment of loan;
(viii) The assessee has also failed to furnish copy of statement of affairs with creditor to prove the debit and credit.
6. These evidences are of corroborative value and are within the reach of assessee, yet he has chosen not to furnish them. In view of this and in the absence of these evidence we cannot act on interested testimony of the assessee alone. The 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. Our view is duly supported by the Madras High Court decision in the case of CIT v. Krishnaveni Ammal [1986] 158 ITR 826. In this view of the matter the CIT(A) was apparently wrong in holding that the creditworthiness of the assessee and the genuineness of the transaction is proved and established by the assessee. In our opinion, just because the loan obtained by the creditor is accepted by the A.O. in her case, it does not mean that the loan advanced by the creditor to the assessee has been proved beyond doubt without establishing the mode of payment, date of payment, amount of payment, source and proof of payment and availability of fund, etc. Surprisingly in this case, no proof or evidence has been furnished to show that the creditor has received the loan from EPC and that the same loan has been advanced to the assessee and this fact has been accepted by the department in her case. In confirmation letter it is stated that a sum of Rs. 1,81,000 was advanced to the assessee by the creditor during the previous year relevant to this assessment year. But before the A.O. it was explained that a sum of Rs. 1,60,000 advanced to assessee was received from EPC. The difference of Rs. 21,000 was given on which date whether it was given by cheque or by cash and whether fund was available or not is not known. Moreover, mere confirmation is not enough to prove the genuineness of transaction. As the assessee has not furnished documentary evidence and proof, the primary onus is not fully discharged by the assessee.
7. The case laws on which reliance has been placed by the counsel of the assessee also do not help the cause of the assessee. The learned counsel for the assessee has placed reliance on Madras High Court decision in the case of S. Hastimal (supra) wherein it was held that after the lapse of decade an assessee should not be placed upon the rack and called upon to explain not merely origin and source of a capital construction but the origin of origin and source of source as well. It was further held that the inability of department to verify the explanation of the assessee is not sufficient cause for rejection. We find that in that case it was time lapse of decade but that is not the position in the instant case as the credit relates to previous year relevant to the assessment year 1987-88 and the assessment was completed on 29-3-1990. We also find that in the instant case it is not. the inability of the department but the assessee himself has not discharged full onus lying on him. In view of this, this case is distinguishable and the ratio of decision of Madras High Court is not applicable to the present case.
8. In the case of Orissa Corporation P. Ltd. (supra) the assessee produced confirmation and discharged hundies and gave particulars of creditors as assessee. Summon under Section 131 was issued but was returned with the remark 'left'. No further attempt was made to examine the sources of credit. It was held by the Supreme Court that Tribunal's findings that the assessee has discharged onus are based on evidence and no question of law arises. We notice that in the case of Orissa Corporation P. Ltd. (supra) all particulars of creditor were given while in the present case they are not furnished. In that case no further attempt was made to examine the source of credit but in the present case attempt was made by the A.O. to verify the credit by issuing summons to EPC. Moreover, as stated above in this case onus of proving the credit by explaining satisfactorily by producing evidence and witnesses was not discharged as it was done in the case of Orissa Corporation P. Ltd. (supra). As the facts and circumstances are different the decision of Supreme Court on which reliance is placed by the assessee's counsel is not applicable to the instant case.
9. Reliance is also placed on Assam High Court decision in the case of Tolaram Daga (supra) wherein it was held that to require the firm or the partners thereof to adduce proof of sources from which the deposit was made would be placing a burden on the firm which is not required or justified by law.
In the case of Tolaram Daga (supra) the deposit was in the name of wives of partners in the firm. But in the instant case the credit is in the hands of husband in the name of wife and there is no firm in between. In the case of Gumani Ram Siri Ram v. CIT [1975] 98 ITR 337 the Punjab and Haryana High Court has held that the onus of proving the source of any sum of money found to have been credited in the account of an assessee is on him and the assessee has to prove that the third party who is given the money was in a position to lend such sums and that he did in fact so lend to the assessee in order to satisfy the A.O. that the credit shown in the account books are genuine. Tolaram Daga's case on which reliance is placed by the assessee was distinguished by the Punjab & Haryana High Court in the case of Gumani Ram Siri Ram (supra) on following grounds :
(i) In that case the assessee stated that he did not know wherefrom his wife the depositor had received the amount;
(ii) The assessee-firm did not plead ignorance of the knowledge of the source from which the two ladies got the amount.
10. Since the facts of the instant case are similar to that of Gumani Ram Siri Ram (supra) the ratio of Assam High Court decision in Tolaram Daga's case (supra) cannot be made applicable to the facts of the present case, because in the instant case the assessee knew wherefrom his wife had received the amount and he did not plead ignorance of knowledge of the source from where his wife got the amount. In the case of Gomani Ram Siri Ram (supra) the question, whether on the facts and in the circumstances of this case it was for the assessee to prove the source from which the depositor got the money, referred to the High Court was answered in favour of the department and it was held that no question of wrong placing of onus arises in the case and no question of law arises out of the order of ITAT.
11. Thus we find that none of the decisions on which reliance is placed by the learned counsel for the assessee is applicable to the present case. On the other hand, we find that ratio of all the four decisions on which reliance has been placed by the learned D.R. are applicable to the present case. In the case of Shankar Industries (supra) the Calcutta High Court has held that identity of creditor, capacity of creditor to advance money and genuineness of transaction must be proved prima facie, by the assessee and only after the assessee has adduced evidence to established prima facie, the aforesaid, the onus shifts to the department. It was further held that where the assessee established only the identity of creditor and nothing more the cash credit can be treated as the income of the assessee from undisclosed sources. As the assessee has proved only identity of the creditor in the instant case the ratio of Calcutta High Court decision in the case of Shankar Industries is squarely applicable to the present case. In the case of Jamnaprasad Kanhaiyalal (supra) the Supreme Court held that the ITO was justified in treating the cash credit appearing in the books of accounts of the assessee as the assessee's income from undisclosed sources since the assessee failed to discharge the burden of proof placed upon it under Section 68 of Income-tax Act, 1961. Then in the case of Orient Wire Industries (P.) Ltd. (supra) as there was no evidence to show that the loan was actually given it was held that the amount of Rs. 20,000 was assessable as the income of the assessee from undisclosed sources. In the instant case also the assessee has failed to prove that the loan was actually advanced by the creditor and received by the assessee. The learned D.R. has also placed reliance on Patna High Court decision in the ease of Sarogi Credit Corporation v. CIT[1976] 103 ITR 344 wherein it was held that if the credit entry in the books of the assessee stands in the name of assessee or the assessee's wife and children or in the name of any other close relations or an employee of the assessee the burden lies on the assessee to explain satisfactorily the nature and source of the entry.
12. Since in this case the creditor is the wife of the assessee the onus was completely on the assessee to prove the creditworthiness of the creditor and genuineness of the transaction. Since the assessee has failed to discharge this onus the A.O. has rightly assessed a sum of Rs. 1,60,000 as the income from undisclosed sources. In this view of the matter we find that the finding of CIT(A) that as the assessee did not have any loan transaction with EPC, he was not bound to furnish the PA No. of the aforesaid creditor and similarly could not be held responsible for non-compliance of the above party to the summons issued by the A.O. is wrong finding and cannot be sustained as such. We have also perused all the statement of affairs, net wealth statement and demand notice under Section 156 and have come to the conclusion that the creditworthiness of the creditor is not proved and on the basis of these evidences it cannot be said that the creditor was having capacity to advance loan to the assessee to the extent of Rs. 3,38,110. The net wealth as at 31-3-1987 is shown as Rs. 90,670 and total income varied between Rs. 33,000 to Rs. 40,000. In the absence of required statements and copy of bank account availability of fund is also not proved.
13. Considering all the facts and circumstances of the case as well as for the reasons mentioned above we are of the opinion that the CIT(A) was not justified in deleting the addition of Rs. 1,60,000. His order, therefore, cannot be sustained in the eyes of law. We therefore hold that the assessee has failed to discharge the onus of proving the source of credit/loan received from his wife and has also failed to explain the same satisfactorily and, therefore, the A.O. has rightly treated the sum of Rs. 1,60,000 as unexplained cash credit and has correctly assessed as income from undisclosed sources. Accordingly, the order of the CIT(A) is reversed and that of the A.O. is restored.
14. In the result, the appeal is allowed.