1977-VIL-03-ITAT-

Equivalent Citation: TTJ 005, 297,

Income Tax Appellate Tribunal GAUHATI

Date: 15.12.1977

BHADARMAL HAZARIMAL.

Vs

INCOME TAX OFFICER.

BENCH

Member(s)  : T. N. C. Rangarajan., S. K. Chander.

JUDGMENT

3. The assessee appealed to the AAC who confirmed the re-assessment on the ground that there was no evidence to show the financial capacity of the creditors.

4. In the further appeal before us, it was first contended on behalf of the assessee that even the initiation of the re-assessment proceedings should be held to be invalid in view of the later judgment of the Supreme Court dt. 30th March, 1976 in the case of Lakhmani Mewal Das 1976 CTR (SC) 226 : 103 ITR 437 (SC). It was submitted that there was no live link between the material relied on by the ITO and the satisfaction recorded for the purpose of reopening the assessment. On the other hand, it was contended on behalf of the Revenue that this question was concluded by the judgment of the Gauhati High Court and, therefore, the assessee was precluded from agitating the question. After considering the submissions of both sides, we agree with the Revenue that we cannot allow the assessee to agitate before us the question of the validity of the initiation of the reassessment proceedings after the decision of the Hon’ble Gauhati High Court up-holding the notice issued under s. 48 of the Act. We, therefore, reject this contention of the assessee.

5. On the merits of the case, it was contended on behalf of the assessee that enough materials had been brought on record to discharge the prima facie burden which lay on the assessee in that even at the stage of original assessment the discharged hundis and the confirmation letters from the creditors had been produced. It was pointed out that the creditors were income-tax assessees and their file numbers also had been given. It was submitted that in the circumstances the assessee had identified the creditors who had also confirmed the transaction of the loans. Reliance was placed on the decision of the Calcutta Bench of the Tribunal in the case of Biswanath & Co. to show that one of the creditors had been accepted as credit worthy which contradicted the claim of the Department that these creditors were mere name lenders. It was submitted that the mere fact that the names of the creditors were found in a list of name lenders maintained by the Department was not sufficient to show that the transaction with the assessee was bogus and, therefore, the Department had not disproved the prima facie case established by the assessee. It was thus argued that the addition should be deleted.

6. On the other hand, it was contended on behalf of the Department that there was material to infer that the creditors were name lenders and without any sources of funds which could have been lent to the assessee. In the face of this evidence, it was submitted that the assessee had to produce the creditors and since the assessee failed to do so, it cannot be held that the alleged loans were satisfactorily proved. It was submitted that in the circumstances, the addition was properly made and should be upheld.

7. On a careful consideration of the rival submissions, we are of the opinion that the assessee is entitled to succeed. We are concerned with the question whether four cash credits found in the books of the assessee have been proved to be genuine loans taken from the alleged creditors. The assessee has produced confirmation letter from them and also their income tax file numbers as well as the discharged hundis. Therefore, prima facie the creditors have been identified and the transaction itself has been proved by the discharged negotiable instruments as well as the confirmation letters of the creditors. The prima facie proof was also accepted in the original assessment proceedings where the interest paid was allowed as business expenditure. However, the ITO has re-opened the assessment on the ground that these creditors were listed among the known name lenders. Apart from this solitary fact, no other material has been gathered by the Department to impugn any one of these four transactions of the assessee. Much is made of the fact that summons issued to the creditors came back unserved. But the fact remains that these creditors were income-tax assessees and their file numbers were also supplied by the assessees. In the circumstances, it is obvious that there is no evidence directly contradicting the claims of the assessee that these transactions were genuine loans. The tow facts, namely, that the creditors were known to be name lenders and that the summons were returned unserved may cast some suspicion but are not sufficient to disprove the case of the assessee. We are, therefore, satisfied that the addition of the said amount of Rs. 70,000 by rejecting the explanation of the assessee was not justified by the facts of the case. We, therefore, direct the addition to be deleted. The interest paid on the loans must also be allowed as was done in the original assessment order. We, accordingly, cancel the re-assessment order and restore the original assessment. The ITO is also authorised to amend the assessment of the partners as a consequence.

8. The appeal is allowed.

 

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