2004-VIL-338-P&H-DT
Equivalent Citation: [2008] 300 ITR 12 (P&H)
PUNJAB AND HARYANA HIGH COURT
1 of 1998.
Date: 11.10.2004
MARU RAM MAKHAN LAL
Vs
COMMISSIONER OF INCOME-TAX
BENCH
G. S. SINGHVI and VIRENDER SINGH JJ.
JUDGMENT
The judgment of the court was delivered by
G.S. SINGHVI J.â 1. This is a petition by the assessee under section 256(2) the Income-tax Act, 1961 (for short "the Act"), for directing the Income-tax Appellate Tribunal, Delhi Bench "A", New Delhi (for short "the Tribunal"), to refer the following questions of law to this court for its opinion :
"(1) Whether, on the material on record, was the hon'ble Income-tax Appellate Tribunal was right in law in sustaining the addition of Rs. 38,518 being the credits in the account of Shri Dalip Singh as the income of the assessee?
(2) Whether, in view of the statement of Shri Dalip Singh duly confirming the credits in the books of the assessee could it be held that the Income-tax Appellate Tribunal was right and justified in law in sustaining the addition of Rs. 38,513 to be the income of the assessee when the creditworthiness of the creditor in question had not been disputed to be unsound?
(3) Whether, on the true and correct interpretation of the provisions of section 68 of the Income-tax Act, was the Income-tax Appellate Tribunal correct in law in sustaining the aforesaid amount as the income of the assessee for the instant assessment year?
(4) Whether, the order of the Income-tax Appellate Tribunal is not vitiated as it proceeded to sustain the addition based upon certain statements which were admittedly recorded behind the back of the assessee and had not been confronted to her on the mere assumption that the assessee had made no efforts to challenge the enquiries made from the village which was not confronted?
(5) Whether the Income-tax Appellate Tribunal was right in law in sustaining the additions in the account of Smt. Kamlesh w/o Shri Makhan Lal of Rs. 49,316 and of Smt. Krishna w/o Shri Ami Lal of Rs. 48,709?
(6) Whether, on the material on record. the Income-tax Appellate Tribunal was justified and right in law in ho that the credits aggregating to Rs. 98,025 had rightly been asses-ed as the income of the assessee from undisclosed sources?
(7) Whether the Income-tax Appellate Tribunal as rightly held that the investment made by the creditors, namely. Srnt. Kamlesh of Rs. 49,316 and Smt. Krishna of Rs. 48,709 was the income of the assessee liable to be assessed under section 68 of the Income-tax Act despite the fact that the said income was duly assessed as investment made by the creditors in their hands?
(8) Whether the addition of Rs. 98,025 sustained by the Income-tax Appellate Tribunal be held as justified in the hands of the assessee and liable to be assessed under section 68 of the Income-tax Act having regard to the fact that the investors have duly been assessed on the amount of credits granted as credits to the assessee firm?
(9) Whether the provisions of section 68 of the income-tax Act override the provisions of section 69 of the Income-tax Act and if not, whether the Income-tax Appellate Tribunal was justified in sustaining the addition of Rs. 98,025?
(10) Whether, having regard to the fact that the creditors in question were duly assessed under the Income-tax Act, was the Income- tax Appellate Tribunal justified in upholding the addition in the hands of the assessee and in doing so had not failed to appreciate that such persons had not been assessed under the voluntary disclosure scheme but under the regular provisions of the Income-tax Act, though returns were filed under the amnesty scheme?"
2.The assessee is engaged in the business of iron and steel. For the assessment year 1988-89, it filed a return declaring the total income of Rs. 45,530.The Officer did not accept the return and vide order dated March he assessed the taxable income of the assessee at Rs. 1, 93,450 by adding the credits appearing in the books in the accounts of Shri Dalip Smt. Kamlesh, wife of Shri Makhan Lal (partner) and Smt. Krishna, wife of Shri Ami Lal (partner) of the sums of Rs. 38,518, Rs. 49,316 and Rs 48,709, respectively. The Commissioner of Income-tax (Appeals), Faridabad (short "the CIT (A)"), dismissed the appeal filed by the assessee Confirmed the additions made by the Assessing Officer. The Tribunal not only dismissed the appeal filed by the assessee, but also the reference filed by it section 256(1) of the Act.
3.Shri Akshay Bhan, learned counsel for the assessee, argued that the Assessing Officer gravely erred in making the additions of the sums deposited by Shri Dalip Singh, Smt. Kamlesh and Smt. Krishna ignoring the fact that there was no dispute about their identity and the source of their income namely, agriculture. He argued that the pattern of deposits and the withdrawals made within the short period could not lead to an inference that deposits were not genuine. In support of his arguments, learned counsel relied on Parimisetti Seetharamamma v. CIT [1965] 57 ITR 532 (SC); CIT v. Ram Prasad Ram Bhagat [1987] 163 ITR 202 (Patna) ; Pushkar Narain Sarraf CIT [1990] 183 ITR 388 (All) ; CIT v. Kakkar Complex Steels Pvt. Ltd. [1996] 222 ITR 184 (P&H) and CIT v. Bedi and Co. P. Ltd. [1998] 230 ITR 580 (SC) and submitted that the Tribunal may be directed to refer above reproduced questions for the opinion of this court.
4. Shri Rajesh Bindal, learned counsel for the Revenue, emphasized that the assessee which was engaged in the business of the sale of iron and Steel did not have any occasion to accept the money from Shri Dalip Singh who was not even a resident of the village where the assessee was operating and argued that the Assessing Officer did not commit any error by making additions of the amounts shown in his credit. Shri Bindal then submitted that the amounts shown in the credits of Smt. Kamlesh and Krishna were not genuine. He further submitted that the findings recorded by the Tribunal are based on pure appreciation of evidence and no substantial questions of law arises for determination by this court. In support of his arguments, Shri Bindal relied on the judgments of Oceanic products Exporting Co. v. CIT [2000] 241 ITR 497 (Ker) ; R. B. Mittal v.CIT [2000] 246 ITR 283 (AP) and CIT v. Heeralal Chaganlal [2002] 257 ITR 281 (Raj).
5. We have given serious thought to the respective arguments and carefully perused the record. While upholding the additions made by the Assessing Officer with reference to the credits standing in the names of Shri Dalip Singh, Smt. Kamlesh and Smt. Krishna, the Tribunal observed as under
"There is no dispute in regard to the identity of the party as well as the source of income which is agricultural land in the aforesaid case. The main attack is on the genuineness of the credit which is to be seen in the background of the party as well as the factors which led to the rejection of the party's statement. Though when considered individually each lapse may not be significant yet the cumulative effect of all is a pointer to the fact that the credit is not genuine. The pattern of the deposits and withdrawals made within a short period of interval coupled with the fact that the amounts so deposited and withdrawn are reflected to the extent of paise also show that the same could not have been given as deposits by Shri Dalip Singh. As per the copy of account Shri Dalip Singh had initially deposited Rs. 5,864.80 which was withdrawn in full as such. There are other deposits made at Rs. 220 and Rs. 43.20 on other dates too. The withdrawals made are also to the same extent. No party woul4 travel from village to the assessee's place to deposit as small a sum as Rs. 243.20 and then also withdraw the same after a period of some months. This assumes significance when viewed in the light of the fact that the contents of the affidavit where the copy of account was given, were not read over to Shri Dalip Singh as admitted by him. Shri Dalip Singh is not aware of the amount outstanding at the end of the year. Initially, he denied having put any thumb impression on any affidavit and it is only at the suggestion of counsel that he admitted having done so. For acceptance of a cash credit it is not only enough that the creditworthiness of the party should be shown but also that, he had sufficient finds to advance on the date when the amount was given to the assessee. No evidence in this respect is on record. Taking an overall view of the facts we are of the considered view that the credit is not genuine and hence cannot be accepted. We would however accept the assessee's alternative plea that at best the peak of the amount should be added. We would, therefore, direct the Assessing Officer to allow relief on account of the peak of the credits for which the addition has been made in this caseâ¦.
The next additions pertain to Rs. 49,316 and Rs. 48,709 made on account of deposits of Smt. Kamlesh w/o. Shri Makhan Lal, a partner, and Smt. Krishna w/o. Shri Ami Lal, partner. Both the parties admitted of having advanced the amounts to the assessee-firm and their statements were also recorded by the Assessing Officer. The explanation rendered by them which was identical, was not accepted by the Assessing Officer as well as the learned Commissioner of Income-tax (Appeals) for the reasons as given in their orders. According to the learned authorized representative the identities of the parties were established their source of deposits were specified and in view of the fact that the deposits were made through cheques, there was no material with the Revenue authorities to reject the explanation as given. As per the arguments advanced the reliance was placed by the Revenue authorities on the enquiries made from the villages with were not confronted to the assessee. As such, the same could not be made use of for rejection of the explanation as given. Reliance was also placed on the order of the Income-tax Appellate Tribunal, Delhi Bench "D", in the case of Ram Kishan Dass Viresh Kumar, Rampur v.ITO ITA No. 4550/Delhi/89 for the assessment year 1987-88, for the proposition that where the creditors were the wives of the partners and had no apparent source of their own to deposit the money in the bank, the natural assumption is that it is their husbands who made the money available to them. Therefore, on that assumption the respective partners would have been the proper persons against whom the addition of the respective amounts should have been proposed. The learned Departmental representative, on the other hand, drew our attention to the various discrepancies as pointed out by the Revenue authorities in the statements of both the ladies highlighting certain facts which according to him were sufficient for rejection of the explanations. It was argued that since the parties were related to the partner of the firm, strict criteria is required to be adopted before the credits could be accepted as genuineâ¦
The identical statements of both the deponents when read with the material placed before the Assessing Officer in the form of the income-tax returns filed by them clearly show that the same cannot be accepted at their face value. Both the ladies are residents of a village, the population of which varies from 1000 to 1500. As per their statements they are in the receipt of earnings ranging from Rs. 10,000 to Rs. 15,000 per annum. Thus, between two of them, they earned Rs. 20,000 to Rs. 30,000 per annum. This is also from stitching, sewing and knitting in the village where scope is limited. If for the sake of argument the statement is to be accepted then as rightly pointed out by the learned Commissioner of Income-tax (Appeals), the capital as shown on March 31, 1987, of Smt. Kamlesh is much below the amount which should have been there. A per her own statement, she has been earning the income right from the year 1976 when she was married that in her return filed by Smt. Kamlesh. The amounts shown were in the form of gifts and cash from relatives friends, etc. The income derived from knitting and tailoring declares for the assessment year 1987-88 was only Rs. 10,000. Further more. The return had been filed under the amnesty scheme and that too on the date March 31, 1987. As per the statement, the amounts were first given to the ladies of village on interest and after receiving the same from them (names of few of them mentioned by her) it was deposited in the bank and then advanced to the firm. For this there is no evidence brought on record. A copy of the bank account on the other hand s that a sum of Rs. 40,050 was first deposited and then withdrawn immediately thereafter. Right from April 1, 1987, to September 21' there is no deposit in the bank then there appeared a sum of Rs. 13.900 which is followed by Rs. 1,100 on September 21, 1988. Subsequently, withdrawals were made for an amount of Rs. 15,000. If there are any with drawals thereafter, the statement is not before us. Similar is the case in regard to Smt. Krishna. Like Srnt. Kamlesh, she also mentioned the names of few ladies to whom the money was first given and after receiving the same from them, the amount was deposited in the bank. Her bank account also shows a deposit of Rs. 40,100 on April 1, 1987, which was subsequently withdrawn in the month of June 1987. The aforesaid bank account shows another deposit of Rs. 15000 again made in cash which is also withdrawn during the same month. Keeping in view the village background it is difficult to believe that the ladies could earn the income as stated and that too from stitching etc., in the village. In these circumstances, the fact that the amounts were given through cheques do not advance the case of the deponents. We would also like to mention that no efforts were made before the learned Commissioner of Income-tax (Appeals) to challenge the enquiries made from the village which were not confronted to the assessee. As to the reliance placed on the order of the Income-tax Appellate Tribunal, we find that the facts are distinguishable. In the aforesaid case, the parties were not summoned or required to be produced before the Assessing Officer and their affidavits remained uncontroverted. In the absence of complete facts available, it could not be said that the facts in the cited case are on all fours with those of the assessee. In view of the provisions of section 68 of the Act as the amounts find place in the books of the assessee, the additions made in the case of both the ladies are maintainable in its case which we uphold." (Underlining 'is ours).
6. In our opinion, the assessee had failed to discharge the burden which lay upon it to prove the genuineness of the credits shown in its account. Therefore, it is not possible to agree with learned counsel that the Assessing Officer had illegally made additions to the income of the assessee.
7. We are further of the view that the findings recorded by the Commissioner of Income-tax (Appeals) and the Tribunal are pure findings of fact and none of the questions raised by the assessee can be treated as questionof law requiring opinion of this court.
8. For the reasons mentioned above; the petition is dismissed.
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