1. Cash credits of Rs. 48,000 in the names of three persons have been treated by the ITO in the A.Y. 1981-82 as income from other sources and the said addition has been confirmed in appeal by the CIT(A). Hence, this second appeal by the assessee.
2. Relevant facts are these. Smt. Bilkishbai and Smt. Jubedabai are wives of Shri Asgarali and Shri Sajjad Hussain respectively who are brothers inter se. Smt. Jubedabai is sister of wife of the assessee, Shri Ali Hussain. This is how the assessee Shri Ali Hussain is related to the cash creditors, Smt. Bilkishbai and Smt. Jubedabai. There is another cash creditor Smt. Hussaina Bai who is not directly related to the assessee, but families of Shri Ali Hussain and Smt. Hussainabai are friendly with each other. A firm in the name and style of Malwa Lime & Stone Mart was constituted of which out of 11 partners the assessee, Shri Ali Hussain and the cash creditors, Smt. Bilkishbai and Smt.
Jubedabai were partners. The assessee gave loan of Rs. 20,000 to each of Smt. Bilkishbai and Smt. Jubedabai on the same dates and of the same amounts as detailed below:- The said amounts were deposited in the names of these two ladies with the firm M/s. Malwa Lime & Stone Mart, possibly as their capital contribution. The said loan of Rs. 20,000 by each of the two ladies was repaid to the assessee on 7-11 -1980. The question arose before the ITO as to the source of getting Rs. 20,000 by each of the two ladies on 7-11-1980. Yet there was a credit of Rs. 3,000 on 28-7-1980 in the account of Smt. Jubedabai which was repaid by the assessee to Smt.
Jubedabai on 23-8-1980. The ITO required the assessee to explain the said cash credit of Rs. 3,000 in the name of Smt. Jubedabai. There was debit balance of Rs. 5,000 in the account of Smt. Hussainabai. Smt.
Hussainabai paid off that amount to the assessee on 7-4-1980. The ITO required the assessee to establish the source of Rs. 5,000, which Smt.
Hussainabai paid.
3. It was explained by the assessee that the two brothers, namely, Shri Asgar Ali and Shri Sajjad Hussain, husbands of Smt. Bilkishbai and Smt.
Jubedabai, respectively, had business adventure in Quwait and each of them had opened Non-resident External Account jointly with his wife with the Bank of Baroda in which accounts the amounts remitted by them from Quwait were credited. The account of Shri Asgar Ali and Smt.
Bilkishbai showed withdrawals as under: - The account of Shri Sajjad Hussain and Smt. Jubedabai showed withdrawals as under:- It was explained by the assessee in his letter dated 8-2-1984 that the said payments of Rs. 20,000 by Smt. Bilkishbai and of Rs. 23,000 by Smt. Jubedabai were supported by withdrawals from the said bank accounts. Affidavits of Smt. Bilkishbai and of Smt. Jubedabai each dated 22-2-1984 were also filed in support of the explanation. Further, in the said letter dated 8-2-1984 the explanation as to credit of Rs. 5000 in the name of Smt. Hussainabai was given as under :- Her husband Shri Mohd. Hussain is a partner in M/s. Ibrahim Kala Bhai. She has given Rs. 5000 loan out of her capital.
Affidavit of Smt. Hussainabai dated 22-2-1984 was also filed. It was submitted before the I AC that Smt. Hussainabai was ill and as such was unable to appear before him.
4. The ITO was not satisfied with the explanation of the assessee. He in the draft assessment order proposed addition of these Rs. 48,000 which proposal has been approved by the IAC. The IAC himself examined Smt. Bilkishbai and Smt. Jubedabai on 31-7-1984. The ITO thus made addition of Rs. 48,000 to the income of the assessee. The assessment order as to the addition of Rs. 48,000 has been confirmed in appeal by the CIT(A). It has been held in short by the CIT(A) that the assessee could not prove nexus between the credits of Rs. 20,000 and Rs. 23,000 in the names of Smt. Bilkishbai and Smt. Jubedabai and the withdrawals made by them from their non-resident external accounts. As to the credit of Rs. 5000 in the name of Smt. Hussainabai the CIT(A) endorsed the order of the IAC holding that the assessee could not establish creditworthiness of Rs. 5000 of Smt. Hussainabai.
5. Now it is contended by the learned counsel for the assessee that affidavits and the statements of Smt. Bilkishbai and Smt. Jubedabai supported by the withdrawals from the non-resident external accounts were unjustifiably rejected by e tax authorities below. According to him, the tax authorities below beca i e too technical in appreciating the evidence on record inasmuch as that they expected the payments by these two ladies to the assessee by cheque only or within a period of few days only from the dates of withdrawal from the bank. It is also his contention that payments by the two ladies were made to the assessee according to their convenience and the situation then obtaining. Further, it is contended by him that it was mere suspicion that the amounts withdrawn by the two ladies from the bank were spent away or invested otherwise than paid to the assessee. As to the credit of Rs. 5000 in the name of Smt. Hussainabai it is contended by him that the explanation of the assessee was completely mis apprehended by the tax authorities below.
6. Learned Departmental Representative, on the other hand, vehemently opposed the appeals. It is pointed out by him that Smt. Bilkishbai withdrew Rs. 20,000 on 22-8-1980 and again withdrew Rs. 20,000 on 9-10-1980 in cash and similarly Smt. Jubedabai withdrew Rs. 20,000 on 22-8-1980. His contention is that these withdrawals could not possibly be for making investment in Malwa Lime & Stone Mart or for making payment to the assessee. Had each of these two ladies Rs. 20,000 in cash on 22-8-1980 or even on 3-9-1980, each of them would not have required to borrow from the assessee Rs. 5000 on each of the dates 3-9-1980,6-9-1980, 17-9-1980 and 2-10-1980 for investment in M/s. Malwa Lime & Stone Mart. Thus, according to him, the two ladies did not have sufficient cash balance till 2-10-1980 (on which date Rs. 5000 were borrowed by each of them from the assessee) otherwise they would not have borrowed from the assessee. The withdrawal of Rs. 20,000 on 9-10-1980 by Smt. Bilkishbai, the learned Departmental Representative argued, could not have been applied for payment to the assessee on 7-11-1980 since the lady would not have allowed so much cash to remain at home for such a long time. He also pointed out that there were huge cash balances in the NRE accounts of these two ladies and, therefore, it was not necessary for them to borrow from the assessee for capital contribution to M/s. Malwa Lime & Stone Mart. The genuineness of the transactions is also attacked by him on the ground that for making payment to the assessee the amounts could have been easily withdrawn by the account payee cheques in favour of the assessee and that not having been done throws serious doubt on the genuineness of the transaction.
He referred to the order of the IAC wherein it has been held that Smt.
Bilkishbai had travelled by air for Haj along with her husband and sister-in-law in about October 1980. Thus, according to him, most of the withdrawals by Smt. Bilkishbai must have been spent in that travel and she had no sufficient funds for paying to the assessee. His contention in brief is that the assessee failed to prove credit worthiness and genuineness of the transactions. As to the credit in the name of Smt. Hussainabai, it is contended by him that she was not produced for cross-examination before the ITO and the IAC and the assessee failed to establish her creditworthiness and so also the genuineness of the transaction. In support he placed reliance upon the following : (ii) Krishna Industrial Corpn. (P.) Ltd. v. CIT [1979] 119 ITR 656 (All.), (v) Sat Parkash Ram Naranjan v. CIT [1975] 100 ITR 130 (Punj. & Har.).
7.I have minutely considered the respective submissions of the parties.
At the outset it may be stated that the above credits in the names of three ladies have been misapprehended by the tax authorities below as cash credits. Section 68 of the Income-tax Act, 1961 reads as under :- 68. Cash Credits.-Where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.
Credit of any sum in the books of an assessee in order to be cash credit within the meaning of Section 68 should be capable of being treated as his capital or income. Each and every cash credit in the account books of an assessee does not fall within the ambit of Section 68. In this connection, following observations of Hon'ble Mr. Justice Sabyasachi Mukharji (as then he was) in Sikri & Co. (P.) Ltd. v. CIT [1977] 106 ITR 682 (688)(Cal.) need to be noticed :- Section 68 of the Income-tax Act, 1961, is a statutory recognition of what was previously established by the judicial decisions under the Indian Income-tax Act, 1922, namely, that where certain sums of money were claimed by the assessee to have been borrowed from certain persons, it was for the assessee to prove by cogent and proper evidence that these were genuine loans.
Thus, Section 68 is a safeguard against introduction of any amount in the account books under the protest of borrowing from certain persons, In the instant case, there is no cash credit as such. The assessee had lent Rs. 20,000 to each of the two ladies Smt. Hussainabai and Smt.
Jubedabai on 3-9-1980, 6-9-1980, 17-9-1980 and 2-10-1980 and each of them returned Rs. 20,000 to the assessee on 7-11-1980. Thus, the receipt of Rs. 20,000 by the assessee from each of these two ladies was against the loan advanced by him to the ladies and by no stretch of imagination it could be treated as cash credit. The assessee first parted with Rs. 40,000 and thereafter he received Rs. 40,000. It is not a case of borrowing at all; it is not a case of introduction of any amount by the assessee in the account books. The assessee, therefore, cannot be called upon to explain the creditworthiness of Smt.
Bilkishbai and Smt. Jubedabai. Similar is the case of repayment of Rs. 5000 to the assessee by Smt. Hussainabai.
8. The assessee is required to explain cash credit of Rs. 3000 on 28-7-1980 in the name of Smt. Jubedabai which was returned to her by the assessee on 23-8-1980. Several withdrawals by Smt. Jubedabai from NRE account sufficiently explain creditworthiness of Smt. Jubedabai to the extent of Rs. 3000.
9. Even if it is assumed that the entire amount of Rs. 48,000 was in the shape of cash credits, several withdrawals made by Smt. Bilkishbai and Smt. Jubedabai from their NRE accounts explain their creditworthiness. The tax authorities below have not doubted the identity of all the three ladies. They have equally no doubt the NRE accounts held by Smt. Bilkishbai and Smt. Jubedabai jointly with their respective husbands. Thus, there is prima facie evidence of these two ladies having credit-worthiness to the extent of Rs. 20,000 and Rs. 23,000 respectively. The onus probandi which lay on the assessee to establish identity and creditworthiness of the creditors and genuineness of the transactions has been thus discharged by the assessee. In this connection, following excerpt from CIT v. Sahibganj Electric Cables (P.) Ltd. [1978] 115 ITR 408 (414) (Cal.) needs attention:- On behalf of the revenue it was contended that the assessee has not discharged the onus.In considering this contention, it may be relevant to remind ourselves of the observations of Lord Hansworth M.R. In the case of Stoney v. Eastbourne R.D. Council L1927] 1 Ch 367 at page 397 as follows : It appears to me that there can only be sufficient evidence to shift the onus from one side to the other if the evidence is sufficiently prima facie to establish the case of the party on whom the onus lies. It is not merely a question of weighting feathers on the one side or the other side and on saying that if there were two feathers on one side and one on the other that would be sufficient to shift the onus. What is meant is, that in the first instance, the party on whom the onus lies must prove his case sufficiently to justify a judgment in his favour if there is no other evidence.
10. I have thoroughly examined the evidence on record and find that the assessee established the genuineness of the cash credits. Observations of the tax authorities below to the effect that the ladies might have spent away the withdrawals from the bank otherwise than in making payments to the assessee are not supported by sufficient evidence and, therefore, the Department cannot claim that the evidence adduced by the assessee has been rebutted. Learned counsel for the assessee rightly pointed out that Smt. Bilkishbai had gone on Haj on 9-9-1981 as per pilgrim pass and copy of air ticket (vide pages 42 to 50 of the paper book). In view of these facts, the learned counsel for the assessee appears correct in his argument that there has been some misunderstanding to Smt. Bilkishbai in stating the year 1980 in her deposition. However, even it be taken that Smt. Bilkishbai had gone on Haj in or about October 1980, her statement should be taken as a whole, namely that the air tickets were brought by her husband, i.e., to say she did not spend on the air tickets. It is too much to say as to why these two ladies took loan of Rs. 20,000 each from the assessee when there was enough cash balance in their NRE accounts and each of them had withdrawn Rs. 20,000 from their accounts on 28-8-1980. It is not possible for one to explain with minutest details as to how he arranges his financial affairs but the fact remains that the two ladies had withdrawn Rs. 20,000 each from their accounts on 22-8-1980. The payment of Rs. 20,000 by each of them on7-ll-1980 to the assessee can, therefore, be co-related with the said withdrawals. Smt. Bilkishbai had further withdrawn Rs. 20,000 on 9-10-1980. That also co-related with the payment of Rs. 20,000 to the assessee on 7-11 -1980. Earlier withdrawals by Smt. Jubedabai do explain her credit worthiness of Rs. 3000. Thus, I find that the assessee fully established credit worthiness and genuineness of the transactions regarding credits of Rs. 20,000 and Rs. 23,000 in the accounts of Smt. Bilkishbai and Smt.
Jubedabai.
11. Coming to the credits in the name of Smt. Hussainabai I find that the explanation of the assessee has been distarted by the ITO. The explanation of the assessee was simple, namely, that husband of Smt.
Hussainabai was a partner in the firm and she had given Rs. 5000 to the assessee out of her capital. Such explanation of the assessee was construed by the ITO to mean that husband of Smt. Hussainabai had withdrawn Rs. 5000 from the firm. He went to the extent of tracing the account of Smt. Hussainabai and her husband in that firm and found that there was no withdrawal of Rs. 5000 by any of them from the said firm.
It was never the contention of the assessee that Rs. 5000 were withdrawn either by Smt. Hussainabai or by her husband from that firm.
The IAC and so also the CIT(A) took the facts in the same light as were construed by the ITO. Obviously they have fallen into error. No doubt, the assessee should have produced Smt. Hussainabai for cross-examination, as contended by the learned Departmental Representative, taking support from the case of Nanak Chandra Laxman Das (supra). But in the instant case when the IAC required to produce Smt. Hussainabai, she was ill. She could have been examined on commission, but instead the assessee has been condemned.