G.S. Singhvi, J.
1. In this petition filed under Section 256(2) of the IT Act, 1961 (for short, 'the Act'), the assessee has prayed for issuance of a direction to the Income-tax Appellate Tribunal, Delhi Bench 'E', New Delhi (for short, 'the Tribunal') to make a reference of the following questions of law for the opinion of this Court :
'(1) Whether the Tribunal has not misdirected itself in law in not deleting the addition of Rs. 60,000 representing the credits in the account of Smt. Bimla Devi as also the addition of Rs. 29,135 being the alleged profit earned on the sale and purchase of sarson, disregarding that Smt. Bimla Devi has been assessed on the income derived from the purchase and sale of sarson and further the credit in the books of the assessee represented the purchase price of sarson i.e., investment made by Smt. Bimla Devi ?
2. Whether, in sustaining the aforesaid additions of Rs. 60,000 and Rs. 29,135 has not the Tribunal misdirected itself in law in holding that the burden lay upon the assessee to explain the source of investment made by Smt. Bimla Devi in the purchase and sale of sarson ?
3. Whether the Tribunal has not misdirected itself in law in holding that the facts of the present case are distinguishable with the facts of the case of M/s Ramjasmal Nathuram and thus not following its order passed in the case of M/s Ramjasmal Nathuram wherein under identical circumstances similar additions have been deleted ?
4. Whether the findings of the learned Tribunal of sustaining the additions of Rs. 60,000 and Rs. 29,135 is not vitiated in law in the light of the finding that the certain inquiries made through the Inspector had not been confronted to the assessee ?
5. Whether the finding of the learned Tribunal that Smt. Bimla Devi has failed to justify the accumulation of funds and the facts stated by the lady regarding accumulation of funds was mutually contradictory is not vitiated in law as the same are contrary to material on record and in any case were sufficient to sustain the addition in the hands of the assessee-firm ?
6. Whether the learned Tribunal was correct in law in upholding the additions of Rs. 60,000 and Rs. 29,135 even after holding that the alleged inquiries conducted by the AO through an Inspector have not been confronted to the assesses ?
7. Whether the learned Tribunal was correct in law in holding that non-confrontation of the inquiries conducted by the AO through the Inspector though not confronted to the assessee, do not adversely affect the conclusion derived by it ?
8. Whether there was any material with the learned Tribunal to come to a conclusion that the alleged colourable device of alleged capital formation is the brain child of a common intelligent mind and does not represent real transactions according to the test of normal human probability ?
9. Whether order of the learned Tribunal is not vitiated in law in not deciding the argument as to on whom the burden lie to prove the alleged Benami nature of transactions ?
10. Whether the learned Tribunal has not misdirected itself in law in holding that the burden to prove the capacity of Shri Prabhu Dayal to make a gift of Rs. 20,000 to Smt. Bimla Devi was on the assessee ?
11. Whether the learned Tribunal was correct in law in upholding the addition of Rs. 12,900 being the alleged unexplained credit and interest thereon in the account of Shri Puran Mal and Rs. 10,560 being the alleged unexplained credit and interest thereon in the account of Shri Ram Parshad, holding that the assessee failed to prove the creditworthiness of the depositor ?
12. Whether learned Tribunal has not misdirected itself in law in holding that the burden to prove the source of deposit in their bank account was on the assessee ?
13. Whether the finding of the Tribunal that Smt. Bimla Devi was not the existing assessee like Smt. Sanara Devi (in the case of M/s Ramjas Mal Nathu Ram) is not an arbitrary, biased finding and as such the order is not vitiated in law ?
14. Whether on the material on record, the Tribunal was justified and right in law in holding that the credits of Rs. 1,00,000 and interest thereon aggregating to Rs. 38,755 including the profits derived by Smt. Bimla Devi had rightly been assessed as the income of the assessee from undisclosed sources ?
15. Whether the learned Tribunal has not misdirected itself in law in restoring the issue to the AO regarding the levy of interest under Section 215 of the IT Act ?'
2. The assessee, which is a registered firm and is engaged in the business of sale of agricultural commodities and commission agency, filed return for the asst. yr. 1988-89 declaring an income of Rs. 86,040. The AO completed the assessment at Rs. 2,40,770 by making additions on account of cash credits including interest thereon, disallowance of losses in gram and barley accounts etc., the particulars of which are as under :
(a) Rs. 2250 being the alleged excess shortage in gram account :(b) Rs. 750 being the alleged excess shortage in barley account :(c) Rs. 10,000 on account of low household withdrawals by the partners :(d) Rs. 40,000 being the alleged unexplained deposits in the account ofSmt. Bimla Devi :(e) Rs. 29,135 being the alleged undisclosed profit earned in the purchaseand sale of sarson :(f) Rs. 20,000 being the alleged unexplained deposit in the account ofSmt. Bimla Devi :(g) Rs. 12,900 being the alleged unexplained deposit in the account ofShri Prabhu Dayal :(h) Rs. 26,160 being the alleged unexplained deposit in the account ofShri Puran Mal :(i) Rs. 10,560 being the alleged unexplained deposit in the account ofShri Ram Parshad.'
3. The Commissioner of Income-tax (Appeals), Faridabad [for short, 'CIT(A)'], vide his order dt. 17th Jan., 1991, upheld the additions and disallowances, but deleted the interest charged under Sections 215 and 216 of the Act on the ground that the assessee had not been given opportunity of being heard and restored the matter to the AO for reconsideration of the issue relating to the levy of interest.
4. In the further appeal, the Tribunal deleted the additions/disallowances mentioned at S. Nos. (a), (b) and (c) above, but upheld the remaining additions by recording detailed reasons.
5. The application filed by the assessee under Section 256(1) of the Act was dismissed by the Tribunal vide its order dt. 26th June, 1999.
6. Shri Akshay Bhan, learned counsel for the assessee submitted that his client had discharged the onus which lay upon it to prove the genuineness of the deposits made by Smt. Bimla Devi and Sarv Shri Prabhu Dayal, Puran Mal and Ram Parshad and, therefore, the additions made by the AO are liable to be deleted. He further submitted that the evidence produced by the assessee clearly established the source of income of the depositors and the genuineness thereof and the AO committed a grave illegality by rejecting the same.
Shri Rajesh Bindal, learned counsel for the Revenue supported the order of the Tribunal and argued that none of the questions framed by the assessee can be treated as a question of law requiring determination by this Court.
7. We have given serious thought to the respective arguments. In his detailed order passed under Section 143(3) of the Act, the AO gave cogent reasons for disallowing the deposits made by Smt. Simla Devi and Sarv Shri Prabhu Dayal, Puran Mal and Ram Parshad and the undisclosed profit earned in the purchase and sale of sarson. He also made addition on account of the alleged excess shortage in gram and barley accounts and low household withdrawals. The CIT(A) independently examined the entire matter and upheld the additions and disallowances. He, however, quashed the assessment order to the extent of charging of interest by observing that the same was vitiated due to the violation of the rule of hearing. The Tribunal upheld the order of the assessment as well as the appellate order, but deleted the additions made at S. Nos. (a), (b) and (c). While upholding the disallowance of deposits made by Smt. Bimla Devi, the Tribunal referred to her statement recorded on 28th Dec., 1998 and held that the assessee had failed to discharge the onus of proving the capacity of Smt. Bimla Devi and genuineness of the deposits made by her. The observations made by the Tribunal on this issue are as follows :
'In para 5 of the said statement, she stated that she earned income of Rs. 15,000 in the year 1979 and Rs. 15,000 in the year 1982. In the year 1979, she was not married and was hardly of 17 years of age as is apparent from the fact that her age at the time of recording of the statement on 28th Dec., 1986 was 26 years. She has also stated that the sewing work was done by her at Ateli. It is not available from the records as to where her parents were residing. Before her marriage, she may be studying also. In view of all these circumstances, it is highly probable that a girl of 17 years could earn income of Rs. 15,000 from the work of sewing and embroidery, particularly when she did not undergo any course of sewing and embroidery; (ii) another fact which emerges from the said statement is that according to the lady she earned Rs. 15,000 in 1979 and Rs. 15,000 in 1982. No details in respect of her income have been given for the intervening years nor for the subsequent years. The AO has observed in the assessment order that along with the return of income for asst. yr. 1984-85 submitted under the Amnesty Scheme, it has been mentioned that she could accumulate only a sum of Rs. 6,000 upto 31st March, 1983 from such work and her income upto 31st March, 1983 never exceeded the taxable income. The facts so stated in the documents annexed with the return of income for asst. yr. 1984-85 are clearly contrary to the facts stated in the statement dt. 28th Dec., 1988, where she claimed to have earned Rs. 15,000 in 1979 and Rs. 15,000 in 1982. Such contradictory facts destroys the reliability and correctness, of the facts stated in both the aforesaid set of documents; (iii) it has been claimed that she could accumulate only a sum of Rs. 6,000 upto 31st March, 1983. If the ratio of savings as compared to income from sewing and embroidery, as claimed, is considered, it will be found that the ratio of savings was very nominal and small. On the income of Rs. 15,000 + Rs. 15,000 earned in 1979 and 1982 i.e., on total income of Rs. 30,000 of only 2 years, Smt. Bimla Devi could accumulate a sum of Rs. 6,000, which gives a ratio of 1/5th of income.
However, the income in asst. yr. 1984-85 to 1986-87, shown at Rs. 15,300, 15,300 and Rs. 18,200 aggregating to Rs. 48,800, a sum of Rs. 40,000 is claimed to have been deposited in cash in the bank account on 10th March, 1987, which, prima facie, appears to be highly improbable. A lady of respectable family belonging to a rich business family is not likely to engage herself in the work of preparing paper, mungeri or doing sewing and embroidery work unless the family needs funds. In case the lady would have actually been doing such work on such a large scale as claimed, a substantial amount would have been utilised for meeting the necessities of the family and the ratio of savings out of such income would have been quite limited, and it is impossible to believe that the ladies doing such work could save almost their entire income from such sources, so that after a gap of several years, the amount so kept in home chest is available for deposit by an account payee cheque to partnership form, in which her husband is one of the partners. (iv) In the statement dt. 28th Dec., 1988, the lady has stated that her income from sewing and embroidery reduced after the year 1982, and her present monthly income may be Rs. 100 to Rs. 200. The figures of income from such sources shown in asst. yr. 1984-85 to asst. yr. 1986-87, on the other hand show an increasing trend of income. These facts are mutually contradictory.
4.21 Smt. Bimla Devi has not shown any income from sewing or embroidery work or from the work of preparing paper, mungeri, etc. The only income shown by her in asst. yr. 1988-89, is the profit on purchase and sale of 140 bags of sarson through the assessee-firm Rs. 29,936 and interest from assessee-firm and bank Rs. 3,642 (total income has thus been computed at Rs. 32,578). However, in the said statement dt. 28th Dec., 1988, she has stated that she earned about Rs. 1,000 in the year from the work of manufacturing of paper of various parties of Mandi Ateli and had also stated that her income from sewing and embroidery at present was Rs. 100 to Rs. 200 per month. (v) Smt. Bimla Devi has clearly admitted that the entire amount of Rs. 60,000 was deposited out of money lying in her home chest. A family which is engaged in the business of dealers and commission agent of agricultural produce, would have spared no efforts to utilise such amount in business, as and when earned by Smt. Bimla Devi by taking the deposits from her time to time rather than allowing the accumulated amount to be kept idle in home chest. This claim of the assessee is also highly improbable.
4.22 Smt. Bimla Devi did not know the name of the bank, where she had the bank account. She also did not know the details of purchase price and sale price of sarson, which was claimed to have been purchased and sold through the assessee-firm on her behalf. She was also not aware as to when or whether her IT returns were filed.
4.23 The aforesaid inconsistencies and contradictions and the ignorance of Smt. Bimla Devi relating to some of the vital facts clearly indicate that the stand taken by the assessee that a sum of Rs. 40,000 was deposited out of her income from sewing and embroidery, etc. which was kept in home chest prior to making of the deposit in cash in the bank account immediately preceding the issue of cheque in favour of the assessee-firm, does not accord with human probabilities. Its acceptance could result in ignoring the facts of life. The story cannot be treated as believable. The assessee has thus failed to discharge the onus of proving the capacity of Smt. Bimla Devi and the genuineness of the transactions, which clearly lay on the assessee under Section 68 of IT Act, 1961.'
8. The Tribunal buttressed the aforementioned conclusions by making reference to the judgments of the Supreme Court in CIT v. Durga Prasad More : [1971]82ITR540(SC) , Sumati Dayal v. CIT and of this Court in CIT v. Meera & Co. and of Andhra Pradesh High Court in Radio Instruments Association (P) Ltd. v. CIT : [1987]166ITR718(AP) .
9. The Tribunal also rejected the theory of alleged gift made by Prabhu Dayal by assigning detailed reasons in paras 4.35 and 4.37 which are reproduced below :
'4.35. The sources of a deposit of Rs. 20,000 in the account of Smt. Bimla Devi on 6th April, 1987 was explained to be a gift from Prabhu Dayal, grandfather of Shri Om Parkash. The learned counsel for the assessee submitted that statement of Shri Prabhu Dayal was only recorded by the AO. He has confirmed the fact of making the said gift and also the fact of making a deposit in his own name with the assessee-firm. Our attention was also invited towards the copy of pass book of SB Account No. 2705 of Shri Prabhu Dayal with a view to show that deposits were made by him in the said bank account in the month of February, 1987 also the genuineness of which has not been doubted. He submitted that Shri Prabhu Dayal is an old gentleman of 80 years of age. The statement should not have been disbelieved by the Departmental authorities.
4.37 We have carefully gone through the statement of Shri Prabhu Dayal recorded by the AO on 25th Jan., 1989. Shri Prabhu Dayal had also filed returns of income under Amnesty Scheme for asst. yrs. 1984-85 to 1986-87 declaring income of Rs. 15,500 for asst. yr. 1984-85, Rs. 15,800 for asst. yr. 1985-86 and Rs. 18,800 for asst. yr. 1986-87. The bank account No. 2705 with New Bank of India was opened by him on 5th Feb., 1987 with a cash deposit of Rs. 10. On 9th Feb., 1987 and 24th Feb., 1987. He deposited Rs. 10,000 and Rs. 15,000 respectively in the said bank account. A cheque was issued for Rs. 20,000 on 2nd March, 1987. Again cash of Rs. 25,000 was deposited in the said bank account on 10th March, 1987. A cheque for Rs. 20,000 was given to Smt. Bimla Devi as gift on 6th April, 1987. This amount was deposited by Smt. Bimla Devi with the assessee-firm on 6th April, 1987. Shri Prabhu Dayal in his statement dt. 25th Jan., 1989 has stated that he is doing the business of cloth for last 3-4 years at the payment outside the shop of the assessee-firm. He did not have any bill for purchase of cloth nor in respect of sale of cloth. He stated that his sales were Rs. 16,000 and sometimes it was extended upto Rs. 29,000. It is not known whether the aforesaid figures of sale were for one year or for one month or for one day. He stated that he was selling Rajai, Sadra and Tehmat. He was however not able to say as to what was the normal length and size of a Rajai, Gadra and Tehmat sold by him. He was also not able to tell as to what was the rate of purchase and sale of such material/items. He also stated in the said statement that due to health problem, he has not carried on any business in the last 3/4 years from the date of said statement recorded on 25th Jan., 1989. It was also admitted by him that he resides with his grandson, Shri Om Parkash who meets the entire expenses. Since Shri Prabhu Dayal could not even tell the normal length and size of Rajai, Gadra and Tehmat nor could he state the normal purchase price or selling rate of these commodities, it is not believable that he really carried on such business of cloth in asst. yr. 1984-85 to asst. yr. 1986-87 for which returns of income were submitted under Amnesty Scheme. The AO has observed that Shri Prabhu Dayal admitted in the statement that total sales of cloth made by him was about Rs. 16,000 to Rs. 29,000 during last 3-4 years. He could not earn an income of Rs. 15,000 to 18,000 per annum on such meagre amount of sales. Such conclusions derived by the AO have not been challenged by the assessee by bringing any material in rebuttal thereof. The assessee has not produced any evidence to show that Shri Prabhu Dayal had really carried on such cloth business and his annual sale of cloth was higher than the one adopted by the AO on the basis of the reading of the statement of Shri Prabhu Dayal. The aforesaid facts and discussion and elaborate reasons given in the orders of the learned Departmental Authorities, clearly prove that the assessee has failed to discharge the burden of proving the capacity of Shri Prabhu Dayal of making a gift of Rs. 20,000 to Smt. Bimla Devi as well as for making deposits with the assessee-firm. Apart from the aforesaid facts and reasons, it is clear from the copy of statement of Shri Prabhu Dayal placed at p. 12 of the paper book, that he, inter alia, stated that gift of Rs. 20,000 was given to Smt. Bimla Devi wife of his grandson in the year 1988. He also stated that gift of Rs. 20,000 was given to Shri Om Parkash in the year 1987. Since Shri Prabhu Dayal stated on oath that the gift of Rs. 20,000 was given to Smt. Bimla Devi in the year 1988, the said amount of gift given by cheque on 6th April, 1987 was not a real gift by him and the same could not be a valid source for explaining the deposit of Rs. 20,000 claimed to have been made by Smt. Bimla Devi with the assessee-firm on 6th April, 1987. This fact further fortifies the view taken by the AO on the basis of valid and convincing reasons mentioned in the assessment order.'
10. In regard to the deposits made by Prabhu Dayal, the Tribunal, after noticing the relevant facts and arguments of the counsel for the assessee, observed as under :
'Those deposits made in the preceding year have surfaced in the accounting year in question. Hence, no addition can be made in the year under consideration in view of the judgment of Hon'ble Delhi High Court reported in CIT v. Om Prakash Mahajan & Sons : [1985]152ITR583(Delhi) . The Hon'ble Delhi High Court in the said case has observed that the assessee's wife had disclosed on 30th March, 1966 a sum of Rs. 10,000 as her income under VDS. Credit for this amount was made in assessee's account books on 4th April, 1966. The assessee's explanation was that this amount represented the money which was available with his wife on 30th March, 1966. It was held by the Hon'ble High Court that amount disclosed by assessee's wife could be assessed as income of the assessee. Since the Tribunal had accepted the explanation to the extent that the amount was available on 30th March, 1966, it was held that the amount could not have been earned in the accounting period relating to asst. yr. 1967-68 but same was directed to be taxed in the correct year, namely, asst. yr. 1966-67. The facts of that case are clearly distinguishable. In the present case, it has been held that no income was really earned by Shri Prabhu Dayal. He did not carry on any business of cloth as shown in the returns filed under Amnesty Scheme. The deposits in the bank account of Shri Prabhu Dayal made in the month of February, 1987 have been debited in the said bank account on 2nd March, 1987 by an amount of Rs. 20,000. Thereafter, Rs. 25,000 was deposited in his bank account on 10th March, 1987. On 6th April, 1987, a debit entry of Rs. 20,000 appears in the said bank account. In the statement, Shri Prabhu Dayal stated that he made a gift of Rs. 20,000 to Shri Om Parkash in the year 1987. There are two debit entries in the said bank account of Shri Prabhu Dayal, one on 2nd March, 1987 and the other on 6th April, 1987. In the statement Shri Prabhu Dayal had stated that gift to Smt. Bimla Devi was made in the year 1988, although it was stated on behalf of the assessee that such a gift of Rs. 20,000 was made by him to Smt. Bimla Devi on 6th April, 1988, out of withdrawal of the said amount from his bank account. The deposit of Rs. 11,000 has been made by Shri Prabhu Dayal in the books of accounts of the assessee-firm on 13th April, 1987. The immediate source of this deposit is a credit entry in the said SB Account of Shri Prabhu Dayal of Rs. 6,000 on 13th April, 1987. The assessee has failed to establish any nexus of income declared in the return of income filed by Shri Prabhu Dayal for asst. yr. 1984-85 to asst. yr. 1986-87. The accounting year for asst. yr. 1986-87 ended on 31st March, 1986. The deposits in the bank account were made in the year 1987. No direct nexus or correlation between the two has been established by the assessee in the present case. The facts in the case of Shri Om Parkash Mahajan & Sons (supra) therefore are entirely different. Their gap was only 4 days and the Tribunal had accepted the nexus of the amount voluntarily disclosed on 30th March, 1966 and the credit of the equivalent amount in the books on 4th April, 1966. The said decision, therefore, does not, in any manner, support the assessee's contention.'
11. Dealing with the disallowance of the deposits made by Puran Mal, the Tribunal noted that he is the son of Lallu Ram and Shri Ram Parshad is his father-in-law. He then referred to the statement of Ram Parshad recorded by the AO on 31st Jan., 1989 and discarded the same by assigning the following reasons :
'We have carefully gone through the statement of Shri Ram Parshad. He was of 82 years of age at the time when his statement was recorded on 31st Jan., 1989. He discontinued his business of selling kerosene oil in Bombay in the year 1982. Then he came to Mandi Ateli. He lived there for 10-12 months and did not do any work during his stay at Mandi Ateli. Thereafter, he went to Delhi and lived with his son, Shri Daya Ram. He has stated that he did the work of cloth business at Delhi. He sold the cloth at footpath at Tri Nagar Bazar and Cantt. Bazar. He has not maintained any books of accounts. Vouchers for purchase and sale were also not maintained. He has stated that such work was done at Delhi for 3 years and thereafter he stopped work on account of weak eye sight. His eyes operation was also conducted at Bhiwani five years ago. He stated that a bank account was opened by him with New Bank of India, Ateli Mandi. It was also admitted by him that whatever funds were deposited in the said bank account, were wholly spent on the death of his wife. His wife died 4/5 years ago. In the subsequent para, he has taken a different stand that whatever amount was earned by him at Delhi, that was given by him to his daughter who resides at Ateli Mandi. A gift of Rs. 20,000 was given on 4th April, 1986 to Smt. Narbada and another gift of Rs. 20,000 is claimed to have been given to Shri Puran Mal on 9th April, 1987. A deposit of Rs. 9,000 was also stated to have been made with the assessee-firm. He further stated that he lived at Delhi since 1986. A statement of Shri Puran Mal was also recorded by the AO on 16th Jan., 1989. In this statement, he stated that he received a gift of Rs. 20,000 from his Nana Ji who was doing some work at Bombay. At present he is not doing any work, Shri Puran Mal has not stated anything about his Nana Ji's cloth business at Delhi.'
12. The Tribunal also upheld the rejection of the deposits allegedly made by Ram Parshad by observing that the assessee had failed to prove his capacity and genuineness of the deposits.
13. In our opinion, the reasons assigned by the Tribunal for refusing to interfere with the order passed by the AO, who, as mentioned above, had disallowed the deposits shown in the names of Bimla Devi, Prabhu Dayal, Puran Mal and Ram Parshad and made additions under other headings do not suffer from any infirmity. The AO, the CIT(A) and the Tribunal have elaborately dealt with each and every issue raised before them and have given detailed reasons in support of their respective conclusions. The findings recorded by them on the genuineness of the deposits made in the names of Smt. Bimla Devi and Sarv Shri Prabhu Dayal, Puran Mal and Ram Parshad and the undisclosed profits earned in the sale and purchase of sarson are essentially findings of fact based on appreciation of evidence and none of the questions framed by the assessee can be treated as a question of law requiring determination by this Court.
14. Consequently, the petition is dismissed.