Orient Trading Co. Ltd. vs Commissioner Of Income-Tax (Central), ... on 30 August, 1962
It is rather strange that although the Assessing
Officer has treated the cash credits as non-genuine, he has not made any addition on
account of interest claimed/paid by the assessee in relation to those cash credits, which has
been claimed as business expenditure and has been allowed by the Assessing Officer. It is
also pertinent to note that in respect of some of the creditors the interest was credited to
their accounts/paid to them after deduction of tax at source and information to this
effect was given in the loan confirmation statements by those creditors filed by the
assessee before the Assessing Officer. Thus it is clear that the assessee had discharged
the initial onus which lays on it in terms of section 68 by proving the identity of the
creditors by giving their complete addresses, GIR numbers/permanent accounts numbers
and the copies of assessment orders wherever readily available. It has also proved the
capacity of the creditors by showing that the amounts were received by the assessee by
account payee cheques drawn from bank accounts of the creditors and the assessee is
not expected to prove the genuineness of the cash deposited in the bank accounts of
those creditors because under law the assessee can be asked to prove the source of the
credits in its books of account but not the source of the source as held by the Bombay
High Court in the case of Orient Trading Co. Ltd. v. CIT [1963] 49 ITR 723. The
genuineness of the transaction is proved by the fact that the payment to the assessee as
well as repayment of the loan by the assessee to the depositors is made by account
payee cheques and the interest is also paid by the assessee to the creditors by account
payee cheques. Merely because summons issued to some of the creditors could not be
served or they failed to attend before the Assessing Officer, cannot be a ground to treat
the loans taken by the assessee from those creditors as non-genuine in view of the
principles laid down by the Supreme Court in the case of Orissa Corporation [1986] 159
ITR 78.