1996-VIL-08-ITAT-DEL
Equivalent Citation: ITD 060, 201,
Income Tax Appellate Tribunal DELHI
Date: 29.10.1996
PRAGATI CONSTRUCTION COMPANY.
Vs
INCOME-TAX OFFICER.
BENCH
Member(s) : B. S. SALUJA., R. M. MEHTA.
JUDGMENT
Per Mehta, A.M. --- This appeal is directed against the order-passed by the Commissioner of Income-tax (Appeals) raising for our consideration the solitary issue of an addition of Rs. 1,15,000 on account of three cash credits in the name of the following parties :
(i) Shri Rakesh Kumar Gupta Rs. 25.000
(ii) Shri Ramakant B. Banka Rs. 60,000
(iii) Shri Sushil Kumar Chiranjilal Rs. 30,000
2. The brief facts of the case are that the assessment in this case was originally completed under section 143(1), but set aside by the Commissioner under section 263 vide order dated 14-3-1986. In the course of the assessment proceedings pursuant to the set aside the Income-tax Officer took note of certain cash credits emanating from Bombay which included the three parties aforesaid. In addition to the aforesaid one more addition was made in a sum of Rs. 2,00,000 standing in the name of Shri Shanti Kumar Dalmia, but on further appeal, the Commissioner of Income-tax (Appeals) set aside the matter to the file of the Income-tax Officer asking him to make further investigation and decide the same on merits. This cash credit need not detain us any further.
3. In dealing with the three cash credits involved the discussion as per the assessment order revolves around the enquiry conducted by the Intelligence Wing of the Income-tax Department at Bombay. A copy of the report dated 21st March, 1986 signed by the Asstt. Director of Inspection (Investigation, Bombay) to the Assessing Officer was obtained from the Departmental Representative who argued the Revenue's case. In reverting back to the assessment order, the Income-tax Officer noted that Shri Rakesh Kumar Gupta had left Bombay as per the report of the Intelligence Wing and " his present address was not known ". In respect of Shri Ramakant B. Banka the address given by the assessee was found " to be incorrect." The third party, namely, Shri Sushil Kumar Chiranjilal was " not traceable " and " there was no such address existing in Bombay at Pedder Road ". The aforesaid position was pointed out to the assessee by the Income-tax Officer vide letter dated 1-5-1986 and the report of the D.D.I. was " shown " to it. In response to the said letter, the assessee stated that the addresses given by it were those where the aforesaid persons resided at the time of giving the loans. The aforesaid submissions did not find favour with the Income-tax Officer who proceeded to add the three amounts in question on the ground that these were not explained and represented assessee's income from undisclosed sources.
4. On further appeal before the Commissioner of Income-tax (Appeals), the assessee's counsel pointed out to the evidence which had already been placed on record in the form of confirmations, copies of accounts, particulars of permanent account numbers and income-tax ward, name of the bank in which the creditors had their account as also the source of investment. By reference to the aforesaid evidence the CIT (Appeals) noted as follows :
I. Shri Rakesh Kumar Gupta :
(i) That there was a difference in the signatures vis-a-vis reference to two separate documents which had been filed ;
(ii) That the alleged creditor had a meagre income of Rs. 10,000 to Rs. 12,000 per annum and it was quite impossible to save Rs. 25,000 to enable him to give a loan to the assessee at Delhi ;
(iii) That the alleged creditor had a bank account in the Union Bank of India, Malad (East Bombay) whereas the draft had been prepared and issued by the State Bank of Banaras, who were the bankers of the appellant at Delhi ; and
(iv) Shri Rakesh Kumar Gupta was not found at the address given by the Intelligence Wing of Bombay at the time of making the enquiry.
II. Shri Ramakant B. Banka :
(i) The address given by the assessee was found to be incorrect by the Intelligence Wing at Bombay ;
(ii) That the annual income of the alleged creditor was between Rs. 10,000 to Rs. 15,000 per annum for assessment years 1981-82 to 1984-85 whereas in the later years the same was around Rs. 18,000 ;
(iii) That it was not possible with the aforesaid meagre income to save a sum of Rs. 60,000 and advance the same to the assessee ; and
(iv) That the affidavit filed during the course of the appellate proceedings was not being entertained as it was a self-serving document which had not been filed before the Assessing Officer.
III. Shri Sushil Kumar Chiranjilal :
(i) He was not found traceable at the address given as per enquiry report of the Intelligence Wing ;
(ii) His annual income varied between Rs. 12,000 to Rs. 15,000 and this was not adequate for him to save Rs. 30,000 for advancing the same to the assessee ; and
(iii) That he had an account with the Union Bank of India, Malad (East Bombay) whereas the draft had been prepared and issued from the State Bank of Banaras.
5. On the basis of the aforesaid facts which were more or less common in respect of the three alleged cash credits, the Commissioner of Income-tax (Appeals) in the ultimate analysis concurred with the Income-tax Officer to confirm the additions in respect of the three cash credits. According to him it was not sufficient merely to file a confirmation and further the facts of the case revealed that the three persons in question did not have the capacity to advance the amounts in question. He also referred to the non-fulfilling of the other two conditions by the assessee, namely, proof regarding the identity of the creditors and the non-genuine nature of the transactions. In confirming the additions the CIT (Appeals) relied upon the decisions in Bharati (P.) Ltd. v. CIT [1978] III ITR 951 (Cal.), CIT v. W.J Walker & Co. [1979] 117 ITR 690 (Cal.), Sreelekha Banerjee v. CIT [1963] 49 ITR 112 (SC), Kale Khan Mohammad Hanif v. CIT [1963] 50 ITR 1 (SC) and CIT v. Biju Patnaik [1986] 160 ITR 674/26 Taxman 324 (SC).
6. It is in the aforesaid circumstances that the assessee is in appeal before the Tribunal. The learned counsel reiterated the arguments advanced before the tax authorities highlighting for consideration the following common facts in respect of the three cash credits :
(i) That the amounts had been repaid in August 1981, i.e., after a period of one year to all the three persons and that also by means of account-payee cheques. That interest had been paid regularly and tax deducted at source the payment once again by cheque ;
(ii) That the three persons in question had included in their respective returns the amount which they had received as interest from the assessee ;
(iii) That the loans had been taken in August 1980 whereas the enquiry by the Intelligence Wing of the Department took place in 1986 and the assessment order was passed on 25th March, 1988. That the Income-tax Officer had not made any independent enquiry, but had merely relied upon the report of the Intelligence Wing and the CIT (Appeals) had also confirmed the action of the Income-tax Officer without considering relevant evidence ;
(iv) That complete evidence had been filed in the form of confirmation, copy of account, particulars of income-tax ward and permanent account number, details of the bank account as also the details of the income-tax returns filed and demand notices issued where ever available by the Department pursuant to the completion of the assessments ;
(v) That the addresses given by the assessee as also by the creditors in their confirmations, etc., were those which the parties had furnished at the time of advancing the amounts and if later on they shifted, then the assessee could not be blamed or be expected to furnish the new addresses when there was no contact between it and the cash creditors. Without prejudice to the aforesaid the assessee had furnished during the course of the assessment proceedings the new addresses of two of the parties, namely, Shri Ramakant B. Banka and Shri Sushil Kumar Chiranjilal whereas in respect of the third, namely, Shri Rakesh Kumar Gupta, the new address was not known to the assessee ; and
(vi) That the Income-tax Officer should have once again made enquiries on the new addresses furnished by the assessee, but no such thing was done either by him or subsequently by the Commissioner of Income-tax (Appeals) since both of them squarely relied on the earlier report of the Intelligence Wing dated 21st March, 1986.
7. On the basis of the aforesaid submissions, the learned counsel urged that since the assessee had discharged the onus which lay on it to prove the three cash credits within the meaning of section 68 of the income-tax Act, the aggregate addition of Rs. 1, 15,000 be deleted. According to him, the assessee was not expected to do the impossible in proving the cash credits, more so, when the Department itself had not conducted relevant and proper enquiries through the Assessing Officer of the three persons concerned as they were assessees and particulars of their ward and permanent account number had been duly furnished. In support of the arguments, the learned counsel placed reliance on the following decisions :
(i) CIT v. Orissa Corpn. (P.) Ltd [1986] 159 ITR 78/25 Taxman 80F (SC) ;
(ii) Addl CIT v. Hanuman Agarwal [1985] 151 ITR 150/[1984] 17 Taxman 19 (Pat.) ;
(iii) Addl CIT v. Bahri Bros. (P.) Ltd [1985] 154 ITR 244/22 Taxman 3 (Pat.) ;
(iv) Devamani Atha v. CIT [1978] 112 ITR 837 (Ori.) ; and
(v) Udhavdas Kewalram v. CIT [1983] 140 ITR 392/[1982] 8 Taxman 185 (Bom.).
In addition to the aforesaid, the learned counsel filed a list of certain other decisions including those of the Hon'ble Supreme Court, High Courts and one of the Tribunal. We do not find it necessary to mention the citations in the present order, but we would like to specifically mention that these have duly been taken into account in deciding the present appeal.
8. The learned Departmental Representative, on the other hand, strongly supported the orders passed by the tax authorities and the subsequent arguments advanced by him were a reiteration of the reasons recorded by the said authorities in making and confirming the impugned addition.
9. In his short reply the learned counsel once again asserted that the new addresses of two of the creditors had been given to the Income-tax Officer and thereafter to the Commissioner of Income-tax (Appeals), but no action had been taken by them. It was also stated before us that the other cash credits which had been obtained by the assessee stood accepted and a specific reference was made to the addition of Rs. 2,00,000 in the name of Shri Shanti Kumar Dalmia and which according to the learned counsel had been accepted by the Income-tax Officer himself after the set aside by the Commissioner of Income-tax (Appeals).
10. We have examined the rival submissions and have also perused the material on record to which our attention was invited during the course of the hearing. The decisions cited at the bar have also been considered. It is not disputed by the Revenue that basic evidence in the form of confirmations, copies of accounts, particulars of Income-tax ward and permanent account number, details of bank account, copies of tax returns and demand notices, etc. (the last in the cases of Shri Ramakant B. Banka and Shri Sushil Kumar Chiranjilal) have been duly filed. Even the factual assertion on the part of the assessee's counsel that refund of principal amount and interest is by account payee cheques is not contradicted by the learned Departmental Representative.
11. It is also not disputed that other than the " enquiry " conducted by the Intelligence Wing at Bombay no other verification was done by the Income-tax Officer vis-a-vis the material/evidence placed on the record by the assessee.
12. Taking up for consideration the question of addresses the report of the Intelligence Wing mentioned the following :
" (1) Ramesh Kumar Gupta, Sudha Chawl, Room No. 2, Ramjiwas, Querry Road, Malad (East), Bombay ;
(2) Ramakant, Maharashtra Colony, Gorai Road, Borivili (West), Bombay ;
(3) Sushil Kumar Chiranjilal, 2nd Floor, Malad Co-op. Housing Society, Pedder Road, Malad, South Bombay."
13. As against this, the following is noted from the facts and evidence placed on record :
(i) Ramakant B. Banka's last known address is given as 1/13, Santa Nagar Near Mahindra & Mahindra Kandiwali (East) Bombay 400 110 ;
(ii) Sushil Kumar Chiranjilal's address reiterated as 8/14, 2nd Floor, Malad Co-op. Housing Society, Poddar Park, Malad (East), Bombay -- 400 064.
14. It is apparent that in the case of Sushil Kumar Chiranjilal, the report of the Intelligence Wing mentioned " Pedder Road " whereas the name given was " Poddar Park ". Another address of this creditor was given as " Farid Nagar, Mangat Ram Petrol Pump, Bhandup, Bombay ".
15. There is nothing on the record to show that the Department made an attempt to contact the aforesaid two persons at these new addresses, which are stated to have been provided in the course of the assessment proceedings.
16. Then again the loans are purported to have been taken in August 1980 and returned in August 1981, but the enquiry of the Intelligence Wing at Bombay was conducted in March 1986 and the assessment was completed two years later in March 1988, but no attempt was made by the Income-tax Officer to verify or cross check the evidence/material placed on record by the assessee. It is an accepted fact that all the three creditors were tax assessees and the Income-tax Officer could have made a reference to his counterpart concerned, but no such thing seems to have been done.
17. The assessee placed on record ample evidence which the Income-tax Officer did not care to test by bringing on record anything in rebuttal. The enquiry through the Intelligence Wing at the most created a suspicion as also the other fact that the drafts were obtained from one single bank which was not where the creditors had their bank accounts, but this in our opinion, was not good enough for making an addition. The Income-tax Officer should have taken the enquiry to its logical conclusion since suspicion however strong could not take the place of evidence.
18. In our opinion, the argument of the learned counsel is valid when he contends that onus or degree of proof must be reasonable and an assessee cannot be expected to do the impossible. Similarly, an assessee cannot be asked to go back to the Income-tax Officer to enable the latter to conduct enquiries after a lapse of many years when the entire complex of the case has changed and there is an initial failure on the part of the Income-tax Officer to conduct such enquiries in the first stage of the proceedings. On the facts of the present case we have to observe that such enquiries were not conducted by the income-tax Officer initially and the entire case proceeded on suspicion although the assessee had placed on record adequate material which could not be rejected without placing anything on record in rebuttal by the Revenue. It is a very plausible explanation on the facts of the present case that the assessee did not know the whereabouts of the depositors after so many years specially when the amounts are stated to have been paid back. In allowing the benefit of doubt to the assessee, we delete the aggregate addition of Rs. 1,15,000 which in our opinion had been wrongly sustained by the Commissioner of Income-tax (Appeals). The case law relied upon by the learned counsel adequately supports his arguments as would be apparent from the following :
Orissa Corpn. (P.) Ltd. 's case.
19. In the aforesaid case, the assessee placed on record basic evidence with a view to discharge its onus, but the Income-tax Officer treated three cash credits aggregating Rs. 1,50,000 as unexplained. A penalty of Rs. 50,000 under section 271(1)(c) was also imposed. Another relevant fact is that the Income-tax Officer on the request of the assessee issued summons under section 131 to the creditors which were returned unserved with the remark " left ".
20. On the basis of the aforesaid facts, the Hon'ble Supreme Court confirmed the judgment of the Orissa High Court which in turn had affirtned the view taken by the Tribunal cancelling the penalty. In doing so, their Lordships observed as under :
" In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further."
Bahri Bros. (P.) Ltd's case.
21. In this case also there were two deposits of Rs. 10,000 each in the books of the assessee and it was submitted that the amounts had been received by account-payee cheques and also re-paid by the same mode. To the same effect were the submissions in respect of the interest paid as also the brokerage. Letters addressed to the parties concerned for confirmation of the deposits came back with the postal remark " addressee left ". The Income-tax Officer added the amount as income from undisclosed sources and disallowed the interest on the same. Before the Tribunal a certificate from the bank was also produced and accepting the assessee's contention the Tribunal deleted the addition of Rs. 20,000.
22. On the matter travelling to the Hon'ble High Court at the instance of the Revenue, their Lordships confirmed the view taken by the Tribunal, observing in the process as under :
" The assessee was asked to explain the nature and the source of the deposit and the assessee filed details of loans stating the nature and the mode of transactions. In the instant case, the transactions were completed through account payee cheques. The creditors gave the amount in question to the assessee by account payee cheques which were encashed by the assessee through his own bank. Not only this, the assessee has also submitted the copy of a certificate of the bank to the effect that the cheques in question, given by the creditors, were honoured in favour of the assessee. Even the brokerage-amount on the transaction was also paid through cheques. When the assessee disclosed the names of the creditors and the names of the banks on which the cheques were drawn, the assessee discharged the primary onus and the assessee not only disclosed the identity of the creditors but also the source of income. Then the onus shifted on the Department to verify. The creditors were having bank accounts. Hence, not that they were known only to the bank but they were introduced by a third person to the bank. In view of these facts, it could not be said that the creditors were fictitious persons. As I have already held above that the assessee discharged his primary onus and the onus shifted upon the Department, the Department, on getting materials in hand could proceed to verify whether the creditors were genuine or not. They could also examine the other transactions of the creditors in their respective bank accounts and could have also examined the person who introduced them to the bank and such an examination/verification would have given a correct picture and then if any adverse material was available, the same could have been passed on to the assessee. In my opinion, the assessee having discharged the primary onus, the Department without resorting to verification, could not add the amount as income from undisclosed sources."
23. Lastly, we would refer to the order passed by the Commissioner of Income-tax (Appeals) in the assessee's own case when he proceeded to cancel the penalty levied under section 271(1)(c) by the Income-tax Officer with reference to the addition of Rs. 1, 15,000. The penalty was cancelled on the following grounds :
"I have heard the arguments of the AR and gone through the material on record. I feel this is not a case where penalty under section 271(1)(c) can be levied. It has to be noted in this case that all the three parties were assessed to tax. That means that they were identifiable and their details were available in the records of the Department. The assessment itself was completed after 8 years. The assessee cannot be said to be responsible if these persons have shifted to some other addresses after such a gap of time. The AR has correctly pointed out that they have not been held as ' Hawala Dealers ', even when 15 years have passed. The Hon'ble Supreme Court in the case of CIT v. Orissa Corpn. (P.) Ltd held that " the initial onus placed on the appellant gets shifted, the addition, if any, can be made in their cases and not in the case of the appellant ". If this is the position regarding additions, the question of levy of penalty for concealment does not arise."
24. The parties have not brought anything to our notice which would show that a second appeal has been filed by the Revenue against the decision of the Commissioner of Income-tax (Appeals) cancelling the penalty.
25. In the result, the appeal is allowed
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