1. This appeal by the revenue is directed against the order of CIT(Appeals)-III, Hyderabad dated 24-2-1988 for assessment year 1984-85.
2. The main issue in the present appeal is regarding deletion of Rs. 14,12,081. The first ground of appeal is general in nature. Ground Nos.
2, 3 and 4 are regarding the abovementioned sum.
3. The brief facts leading to the present appeal are that the assessee is a registered firm consisting of 5 partners which came into being in terms of a partnership deed dated 7-1-1982. It is engaged in manufacture and sale of MS rounds. It is also engaged in purchase and sale of this material and also in purchase and sale of scrap. The assessee was assessable to income-tax from the assessment year 1984-85 onwards and for the assessment year with which the appeal is concerned, i.e., for the assessment year 1984-85, whose year ended on 4-11-1983.
The assessee filed first return declaring nil income. But, however subsequently a series of revised returns were filed. A revised return was filed on 30-9-1986, describing it as an Amnesty return. In this return, an income of Rs. 1,11,272 was disclosed but, the Assessing Officer completed the assessment on 31-3-1987 under Section 143(3) determining the assessee's income at Rs. 15,57,580. The above-mentioned sum includes addition of Rs. 14,12,081 which is the main addition.
During the course of assessment, the Assessing Officer started investigation by way of correspondence with the Sales-tax Department and with the Registrar of Firms in connection with certain enquiries relating to M/s. Balaji Scrap Traders, Begum Bazar, Hyderabad, a proprietary concern dealing in scrap and which had business dealings with the assessee. The Assessing Officer found that the assessee had purchased iron steel scrap to the extent of Rs. 68,38,478 which included purchases to the extent of Rs. 56,42,058 from Hindustan Ship Yard, Visakhapatnam. During the accounting year relevant to the year under appeal, the assessee had sold scrap for a value of Rs. 17,63,803 which included sales of Rs. 14,12,081 to M/s. Balaji Scrap Traders. The Assessing Officer had taken deposition of Sri Mohanlal, one of the partners of the assessee-f irm who has stated that the assessee has also purchased scrap from M/s. Balaji Scrap Traders amounting to Rs. 25,913. He has also further stated that he did not know the person who runs M/s. Balaji Scrap Traders. Sri Mohan Lal further stated that Sri Rajendra Kumar, one of the partners, was looking after the purchase and sale of scrap. Sri Mohanlal was further asked as to who took delivery of the goods on behalf of Balaji Scrap Traders and he replied that lorry people and representatives of Balaji Scrap Traders took delivery.
The Assessing Officer on further examination found that in the statement given for the month of March 1983, the sale was shown as nil, whereas according to Sri Mohanlal, scrap sale to the extent of Rs. 22,862 was effected to Balaji Scrap Traders. The Assessing Officer deputed Inspector for making enquiries and report, and in the report, it was stated that he visited House No. 15-8-215, Nasheerbagh, Hyderabad where Balaji Scrap Traders was supposed to have its business, that there was no firm in existence when he visited, that enquiries with Balaji Scooter Works, a neighbour who was doing repairs work for one and half years revealed that there was no scrap business in 15-8-215, Begum Bazar, Hyderabad that other neighbours vagely remembered unloading of scrap in Autorickshaws and that they stated that even if the business was in existence, it was a small business and it may be inferred that the business in the name of Balaji Scrap Traders should have been closed. Thereafter, the Assessing Officer sent a letter to the CTO having jurisdiction over Begum Bazar, on 8-1 -1986 asking for details with regard to sales-tax assessment of Balaji Scrap Traders. The CTO informed the Assessing Officer that there was a firm by name Balaji Scrap Traders, Begum Bazar, Hyderabad and the said firm possessed RC APGST No. 4917/82-83 and CST No. 3261782-83, and that the final assessment of this concern for the assessment year 1982-83 was completed on a net turnover of Rs. 75,887. The Assessing Officer also obtained a copy of the sales-tax assessment orders of Balaji Scrap Traders. The Assessing Officer found from April 1984 to March 1985, the turnover was Rs. 4,92,401 and sales-tax turnover of Balaji Scrap Traders was fixed at Rs. 2,52,057 and in view of the above stated facts, the Assessing Officer held that it was imperative that M/s.
Balaji Scrap Traders would not have effected purchases to the extent of Rs. 15,25,664 from the assessee. Subsequently, after the above enquiries the Assessing Officer summoned Sri Prahladrai of Balaji Scrap Traders on 29-3-1986 as per the address supplied by Sri Mohan Lai, partner of the assessee-firm. These summons could not be served by the Notice Server as no such person was available in the given address. The Assessing Officer also issued summons to Sri Mohanlal and Sri Rajendra Kumar, partners of the firm. On that day, Sri Mohanlal did not comply but, Sri Rajendra Kumar complied and sought for adjournment.
Ultimately, on 7-11-1986, Sri Rajendra Kumar appeared before the Assessing Officer from whom a statement was recorded. In his deposition, Sri Rajendra Kumar stated that M/s. Balaji Scrap Traders, M/s. Dhanalakshmi Steel Re-rolling Mills, etc., were the major parties and the statement of Sri Rajendra Kumar revealed that he was not the sole person who looks after purchases and sales of scrap, etc., but Mr.
Mohanlal and also the Munim also at times look after the purchases and sales and Mr. Mohanlal denied that he does not know the parties from whom he receives money. Sri Rajendra Kumar in his sworn statement stated that Sri Mohanlal also at times received advances from Balaji Scrap Traders. Subsequently, on 30-9-1986, the assessee filed a revised return disclosing income of Rs. 2,50,000. On 27-2-1987, the Assessing Officer issued show-cause notice for production and evidence to the effect that the assessee received nearly Rs. 15 lakhs from M/s. Balaji Scrap Traders. A similar letter was also addressed to Sri Rajendra Kumar requiring him to produce Sri Prahladrai of Balaji Scrap Traders and accordingly Sri Prahladrai was produced before the Assessing Officer and the Assessing Officer recorded statement from him and the said statement of Sri Prahladrai, inter alia, stated at the time of deposition that he was doing commission business in iron steel scrap and received commission from purchasers and he stated that he did business in 1983 by name 'Balaji Scrap Traders'. He stated that the business was located in Begum Bazar opposite to Mitti-ka-share near Coal Depot. He also further stated that in 1982, he had invested about Rs. 70,000 to Rs. 80,000 and later, he took loans from his friends and relatives of Rs. 7,00,000 nearly without any interest or by giving any promissory note and he did not own any immovable properties. In response to further querries by the Assessing Officer he stated that the loans were obtained at the rate of 18% but, nothing was given in writing because all thosepeople had given loans out of unaccounted monies. To a further question, he stated that Dhanalakshmi Steel Re-rolling Mills was in their locality and as a customer, he knew it and he stated that he used to buy iron scrap from them and he did not obtain any bills from the assessee and that he used to give advances of Rs. 1 lakh or Rs. 2 lakhs before receipt of material and he had no bank account and he used to take loans in cash and handed over the advances to Munim Sri Badripershad, sometimes to Sri Rajendra Kumar. He further stated that he might have given about Rs. 13 to Rs. 14 lakhs to Dhanalakshmi Steel Re-rolling Mills. It was further stated by him that he had disclosed Rs. 1 lakh as turnover to Sales-tax authorities. To a specific question of the Assessing Officer regarding an amount of Rs. 14 lakhs which was advanced by Sri Prahladrai to the assessee-firm when he disclosed a turnover of Rs. 1 lakh only, it was stated as under :-- I did not disclose the entire turnover to the Sales-tax authorities and from out of my unaccounted money, I lent Rs. 14 lakhs to Dhanalakshmi Steel Re-rolling Mills. As Dhanalakshmi people did not give any sale bills, when I received the material I was also not issuing any sale-bills to my customers and the entire transactions were unaccounted.
In this background, the Assessing Officer was not satisfied with the explanation offered by Sri Prahladrai and added entire amount of Rs. 14,12,081 as income of the assessee-firm for the year under appeal which was introduced in the name of Balaji Scrap Traders.
4. The assessee challenged the addition before the CIT(Appeals) and on appeal, the CIT(Appeals) has deleted the same by an order dated 24-2-1988 with the following observation :-- As regards the alternative claim of the appellant that there is no justification for the addition of Rs. 14,12,081, I find that there is considerable force in the appellant's submission that it is uncalled for. The report of the ITI, notwithstanding, it is an undisputed fact that M/s. Balaji Scrap Traders is a proprietary concern of which Sri Prahladrai was the proprietor. The evidence gathered by the ITO himself from the Commercial Tax Department, bears ample testimony to this. Sri Prahladrai appeared before the ITO and stated that he had made the advances in question to the appellant and that the appellant was despatching scrap against the advance. However, the ITO refused to believe this. It is quite evident that the ITO in coming to the conclusion that the advances were not actually made was influenced by the following facts : (iii) He had stated that he had borrowed Rs. 7 lakhs from his friends and relatives, whom he refused to identify.
I do not think that the fact that Sri Prahladrai had not disclosed his entire turnover to the Sales-tax authorities should influence the ITO in his conclusion that the advance was not made at all. In fact his sales-tax assessments have nothing to do with these transactions with the appellant, which he owned. The possibilities of scrap sale by Sri Prahladrai being made as advance for further supplies were always there. Sri Prahladrai stated that he borrowed about Rs. 7 lakhs from friends and relatives, whom he did not identify. If Sri Prahladrai is not in a position to explain how he managed the sources for making advances to the appellant, I do not see how the appellant can be punished for the same. For Sri Prahladrai's omission to disclose the names of persons from whom he made the borrowals for making advances to the appellant for supply of scrap. The ITO has to proceed against this person and not the appellant. The ITO did not state in the order that the sum of Rs. 14,12,081 was being considered by him as cash credit. He only questioned the genuineness of the claim that advances were made for the sake of lifting supplies of scrap. As the appellant had rightly pleaded, by accepting that sale to the extent of Rs. 14,12,081 was effected to M/s Balaji Scrap Traders by the appellant during the year of a/c, the ITO himself has tacitly accepted the fact relating to the purchase of scrap by Sri Prahladrai from the appellant. There can be no purchase without payment of consideration and the advances made represented such consideration.
8.2 Though the ITO has not stated in the order that he was making the addition of Rs. 14,12,081 as unexplained cash credit, even granting that this sum could also be regarded as unexplained advance or cash credit, it is not well established that there is no onus to prove source of source and origin of origin. Courts have held that the fact that the assessee was unable to satisfy the authorities as to the source from which the depositor had derived money cannot be used against the assessee CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC), Tolaram Daga v. CIT[1966] 59 ITR 632 (Assam), Sarogi Credit Corporation v. CIT [1976] 103 ITR 344 (Pat.).
8.3 In the case of CIT v. Daulatram Rawatmull [1973] 87 ITR 349. The Supreme Court held that the fact the depositor had not been able to give satisfactory explanation regarding the source of deposit would not be decisive even of the matter as to whether the depositor was or was not the owner of the amount, that a person could still be held to be the owner of a sum of money even though the explanation furnished by him regarding the source of that money was found to be incorrect, and that from the simple fact that explanation regarding the source of the money had been found to be false, it would be a remote and far-fetched conclusion to hold that the money belonged to the assessee. In this case, the Supreme Court also held that the use of extraneous and irrelevant material in arriving at that conclusion would vitiate the conclusion of fact because it is difficult to predicate as to what extent the extraneous and irrelevant material has influenced the authority in arriving at the conclusion of fact.
8.4 For the reasons stated in paras 8.1, 8.2 and 8.3 I hold that there is no justification for the ITO to hold that the sum of Rs. 14,12,081 being advanced made by Sri Prahladrai to the appellant for supply of scrap as not genuine and adding the same to the income of the appellant. I, therefore, delete the addition of Rs. 14,12,081.
5. The revenue is aggrieved by the said deletion and hence in appeal before the Tribunal. During the course of hearing of appeal, the learned DR entirely relied on the findings of the Assessing Officer and further submitted that the theory of the CIT(Appeals) regarding sources of the same is not correct as the assessee has failed to prove the creditworthiness and genuineness of the transaction and hence there is no question of source in the instant case.
In this connection, it is stated that the Case-laws relied on by the CIT (Appeals) are regarding 1922 Act where were no deeming provision as it is in 1961 Act in the form of Section 68 of the Act. The learned Departmental Representative in support of his arguments relied on the following cases: (v) In the case ITO v. Hotel Emerald (P.) Ltd. [IT Appeal Nos. 510 and 229 (Hyd.) of 1988 dated 3-9-1992] for assessment year 1982-83.
6. The learned AR of the assessee, on the other hand, relied on the findings of the CIT (Appeals) and submitted that the findings of the Assessing Officer and conclusions are different. In this connection, he took us through paras 13 and 14 of the assessment order. The AR further submitted that after taking us through the deposition of Sri Prahladrai that the identity, creditworthiness and genuineness of the transactions have been established. Therefore, the CIT(Appeals) is justified in deleting the same. It is further submitted that the books of account of the assessee have been accepted when scrap purchases and sales are done, then there is no question of making any addition by the Assessing Officer as he has done in the present case. It is further submitted that the assessee has discharged its onus and therefore the additions are not called for and in this connection the learned AR of the assessee relied on the following case-laws : The learned AR of the assessee further relied on the following Sales-tax cases: (i) Dy. Commissioner of Commercial Taxes v. Manohar Bros. [1962] 13 STC 686 (Mad.) (ii) Carona Sahu Co. (P.) Ltd. v. Collector of Sales-lax [1962] 13 STC 693 (Mah.) (iii) A.D.M. Stores v. Commissioner of Safe-tax [1966] 18 STC 305 (Punj.) (iv) Arvind Milk Ltd. v. State of Gujarat [1966] 18 STC 311 (Guj.)Ram Pal Madan Gopal v. Punjab State [1968] 22 STC 79 (Punj. & Har.) (vi) Devinder Kumar Kewal Kumar v. State [1972] 30 STC 352 (Punj. & Har.)State of Madras v. Radio & Electricals Ltd. [1966] 18 STC 222 at 224 and 231 (SC).
7. The learned AR of the assessee further submitted that the cash credit only can be assessed in the hands of Sri Prahladrai and not anybody's hands, and in this connection, he relied on the findings of the CIT(Appeals) in para 8.2 of his order. It is further submitted that the source was properly explained and the assessment can be made in the previous year basis and not on the basis of financial year. It is further stated that Section 68 of Income-tax Act, 1961 does not contain any deeming provision, but, it is stated that Sections 69,69A, 69B and 69C contain the deeming provisions. In this connection, the AR of the assessee further relied on the Sampath Iyengar's 8th Edition page 2891 and Baladin Ram v. CIT[1969] 71 ITR 427 (SC) and Bishan Dutt v. CIT [1960] 39 ITR 534 (All.). It is further submitted that the Assessing Officer taxed the same in question under the head 'Business' and not under 'other sources'. It is further stated that the Hotel Emerald (P.) Ltd.'scase (supra) relied on by the learned DR is different and not applicable to the facts of the present case. The learned DR while replying to the submissions of the learned AR of the assessee submitted that the submissions made by the learned AR and sales-tax cases relies on by him are not applicable to the income-tax proceedings as there is no corresponding provision in the Sales-tax Act like that of Section 68 which is a deeming provision. It is further stated that the submissions of the learned AR of the assessee that it is seen from the assessment order as the assessment is made on account of cash credits which can be added only under Section 68 of Income-tax Act though the Assessing Officer has not specifically mentioned the section but, reading of the entire order, it is more than clear that the addition has been under Section 68 of Income-tax Act only.
8. We have considered the submissions of the parties,.gone through the paper book filed. We have also gone through the assessment order, appellate order and the case laws relied on by both the parties and the depositions of Sri Prahladrai, Mohanlal and Rajendra Kumar and other papers available on record and inclined to agree with the findings of the Assessing Officer and submissions made by the learned DR. In this connection, we may extract Section 68 of Income-tax Act which is as follows :-- 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 Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.
The above section clearly shows that any sum found credited in the books of an assessee maintained for a previous year may be charged to income-tax as the income of the assessee of that previous year, if (a) the assessee offers no explanation about the nature and source of such sum, or (b) the explanation offered by him is, in the opinion of Assessing Officer, not satisfactory.
9. As a matter of fact, Section 68 is a statutory recognition of what was previously established by judicial decisions under 1922 Income-tax Act to the effect 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 there were genuine borrowings as the facts are exclusively within assessee's knowledge as decided by the Hon'ble Courts in the case of Sikri & Co. (P.) Ltd. v.CIT[1977] 106 ITR 682, at 688 (Cal.), (2) CIT v. Kulwant Kaur [1980] 121 ITR 914 (Delhi), (3) CIT v. Sahibganj Electric Cables (P.) Ltd. [1978] 115 ITR 408 at 414 (Cal.).
10. The case of Nanak Chandra Laxman Das v. CIT[1983] 140 ITR 151 at 155 (All.) has also held that Section 68 gives a statutory recognition to the principle that cash credits which are not satisfactorily explained may be assessed as income. It is also held in the case of CIT v. Ganpatrai Gajanand [1977] 108 ITR 403 at 406 (Ori.), that Section 68 essentially containing a deeming provision which applies when the assessee's explanation about a cash credit found in his books is rejected. There is no distinction to be drawn between income resulting from application of Section 68 and income accruing from any other of the heads indicated in Section 14.
11. It is held in A. Govindarajulu Mudaliar v. CIT[1958] 34 ITR 807 at 810 (SC) that there is ample authority for the proposition that where an assessee fails to prove satisfactorily the source and nature of a certain amount of cash received during the accounting year, the Assessing Officer is entitled to draw the inference that the receipts are of an assessable nature. Again the Hon'ble Supreme Court in the case of Kale Khan Mohammad Hanif v. CIT[1963] 50 ITR 1 at page 4, has held that the onus of proving the source of a sum found to have been received by the assessee is on him. If he disputes the liability for tax, it is for him to show either that the receipt was not income or that if it was exempt from taxation under the provisions of the Act. In the absence of such proof, the Assessing Officer is entitled to treat it as taxable income. There are umpteen number of cases on this issue.
(8) R. Dalmia v. CIT[1978] 113 ITR 522 (Delhi) and CIT v. Ishwar Dass Sharma [1986] 158 ITR 168 (Delhi) In this connection, we may mention that by now, it is well settled that the burden of proving the source of a cash credit is on the assessee.
The Hon'ble Supreme Court in the case of Sreelekha Banerjee(supra), has held that when a cash credit entry appears in the assessee's books of account in an accounting year, the assessee has a legal obligation to explain the nature and source of such credit.
13. In this connection, it is also worth noting the findings of the Supreme Court in the case of Kale Khan Mohammad Hanif (supra) and A.P.High Court's decision in the case of CIT v. Krishna Mining Co. [1972] 83 ITR 860 wherein their Lordships have held that if the assessee offers an explanation about the cash credit, the Assessing Officer can put the assessee to proof of his explanation and if the assessee fails to tender evidence or burkes an enquiry, then the Assessing Officer is justified in rejecting the explanation and holding that the income is from an undisclosed source. The Assessing Officer is not required to specify or prove what that source is which from the nature of the case must be known only to the assessee.
13. It is necessary for the assessee to prove prima facie the transaction which results in a cash credit in his books of account.
Such proof includes proof of the identity of the creditor, the capacity and creditworthiness of such creditor to advance the money and, lastly, the genuineness of the transaction. These things must be proved prima facie by the assessee and only after the assessee has adduced evidence to establish prima facie the aforesaid, the onus shifts on the revenue.
Merely establishing the identity of the creditor is not enough as held in Shankar Industries v. CIT[1978] 114 ITR 689 (Cal.), C. Kant & Co. v.CIT[1980] 126 ITR 63 (Cal.) and Oriental Wire Industries (R) Ltd. v.CIT[1981] 131 ITR 688 (Cal. Similarly, in the case of Bharati (P.) Ltd. v. CIT[1978] 111 ITR 951 (Cal.), and CIT v. W.J. Walker & Co. [1979] 117 ITR 690, at 694 (Cal.), it was held that mere filing of confirmatory letters does not discharge the onus that lies on the assessee. In the instant case, the facts show that the assessee has only established the identity of the creditor but miserably failed to establish the creditworthiness of the creditor and genuineness of the transaction. In this connection, the CIT(Appeals)'s observation that the assessee was asked to prove the source of the source is not correct as the assessee has failed to prove prima facie the transaction, which are appearing in its books of accounts which are clear from the facts stated above.
14. As regards onus of proof, we may again mention that the very words "an undisclosed source" show that the disclosure must come from the assessee and not from the department. This is so because the source of the credit in the books of the assessee and is within the knowledge of the assessee and Section 106 of the Evidence Act requires the assessee and not the department to disclose it and to prove it. It may also be mentioned that the law of evidence mandates that if the best evidence is not placed before the Court, an adverse inference can be drawn as against the person who ought to have produced it - CIT v. Krishnaveni Ammal [1986] 158 ITR 826, 829, 830 (Mad.). In the instant case, both the assessee and the creditor have failed to produce any sort of evidence regarding the creditworthiness of the creditor and genuineness of the transaction. In the instant case, no evidence worth the name has been produced to support the assessee's case, and the effect of non-production of documentary evidence of corroborative value is to draw an adverse inference against the assessee and the revenue has done exactly the same in the facts and the circumstances of the case.
15. We may also mention the findings of their Lordships of Delhi High Court in the case of Kulwant Kaur(supra), that Section 68 contemplates a factual explanation and not a purely a legal argument without any statement of fact. In the instant case, the learned authorised representative of the assessee relied on the decisions of the Sales-tax cases which have been mentioned in the foregoing paras, but they are not at all helpful in deciding the issue in question of this nature. He has not been able to forward any factual explanation. Section 68 of the Income-tax Act is peculiar by itself and there is no parallel provision in the Sales-tax Act on which the AR of the assessee heavily relied.
Therefore, the Sales-tax cases relied by the learned AR are irrelevant and out of place in the present context. We are not deciding issue relating sales, but, income under deeming provisions of Section 68 of Income-tax Act. As has been held in Ganpatrai Gajanand's case (supra), that Section 68 essentially contains a deeming provision which applies when the assessee's explanation about the cash credit/deposit found in his books is reflected, and in the instant case, the Assessing Officer has rightly done so with which we agree.
16. As regards the CIT (Appeals)'s observation that the Assessing Officer has not made the addition under Section 68 of the Income-tax Act is also not correct. From the plain reading of the assessment order, it is more than clear that the addition has been made on account of cash credit/cash deposit. This means obviously the additions have been made under Section 68, though Income-tax Officer has not mentioned that he is making addition under Section 68. But, this will not make any difference regarding character of addition. We may also mention that in the instant case both the assessee and the creditor shut the doors for further investigation or enquiry by the revenue authorities by their actions. The facts stated above clearly go to show that the creditor is a person of very insufficient means to lend from his own sources. Therefore, the story that he has advanced such huge sum from his own sources to the assessee falls to the ground. Therefore, in these circumstances as decided by the Allahabad High Court in the case of Ganga Prasad v. CIT[1947] 9 ITR 373 (All.), the irresistible conclusion, one can draw is that the so-called deposit or loan has really not been made by the creditor or a third party but has come out of the resources of the assessee itself. We may also mention that the Hon'ble Supreme Court in the case of CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78, has held that where the assessee furnishes full details regarding the creditor, it is up to the revenue to purs ue the matter further to trace those and examine their creditworthiness. But, in the instant case the creditor by making categorical statement that he won't disclose the names from whom he received moneys as they have advanced the moneys from their undisclosed sources. This statement of the assessee shut the doors for further investigation by the revenue as required by the Supreme Court in the case of Orissa Corpn. (P.) Ltd. (supra), to pursue the matter further to trace them and examine their creditworthiness. If this statement of the creditor is given the credence then Section 68 will have to be omitted from the statute as no additions under that section can be made, which can be sustained. In this connection, we may usefully take extract from the Hon'ble Supreme Court's decision in the case of CIT v. Durga Prasad More [1971] 82 ITR 540 which is as follows--at page 546 of the decision : Science has not yet invented any instrument to test the reliability of the evidence placed before a court or Tribunal. Therefore, the Courts and Tribunals have to judge the evidence before them by applying the test of human probabilities. Human minds may differ as to the reliability of a piece of evidence. But in that sphere the decision of the final fact finding authority is made conclusive law.
The above observation of the Hon'ble Supreme Court if viewed from the available facts of the present case narrated above, will clearly go to show that the assessee and the creditor have failed to discharge their respective duties. The evidences produced by them are scant and rather we should state that they are no evidences at all to decide the issue in question. Firstly, the creditor is a man of very meagre resources who could not have advanced or deposited such huge sums with the assessee. Secondly, the story that he borrowed the sums from some persons, but, refused to disclose their identity as they have advanced from their undisclosed sources. This story is very difficult to be believed. It is also stated by the creditor that he took the money from different persons without any documents. This story is also difficult to believe and beyond the human probabilities as no man can give such huge sums of money without any document specially when the man is of a meagre resources. Strangely enough the CIT(Appeals) believed and accepted the fantastic story of the assessee and wrongly put the onus on revenue by not properly appreciating or understanding the provisions of Section 68 of Income-tax Act, 1961. If the story of the parties is believed then the door will be left open to evade tax and there will be further proliferation of black money in the Country.
17. In view of the facts and the circumstances stated above, we may state that, for deciding the issue of this nature, there cannot be one general or universal proposition of law which could be the guiding yardstick in the matter. Each case has got to be decided on the facts and circumstances of that case. The surrounding circumstances to be considered must however be objective facts", evidence adduced before the authorities, presumption of facts based on common human experience in life and reasonable conclusions. In holding a particular receipt as income from undisclosed source, the fate of assessee cannot be decided by the authorities on the basis of surmises, suspicions or probabilities.
18. But, in the instant case, the assessee failed to discharge the primary onus that lay on him. The assessee could only identify the alleged creditor and failed to establish the creditworthiness and the genuineness of the transaction. The Assessing Officer tried to probe further, but creditor brought the matter to a dead end by categorically stating that he will not disclose the names of the parties from whom he got the moneys as they have advanced them out of their concealed sources. This clearly go to show that the parties failed to tender and burked further enquiry and investigation by the revenue. This statement of the creditor tantamounts to no explanation regarding the credits/deposits. Thus the creditworthiness and genuineness of the transaction which are the primary requirements have not been established to consider the credit/deposit as genuine. Therefore, the authorities have drawn inferences against the assessee which a reasonable person can draw in the facts and the circumstances of the case. The revenue has not rejected the explanation merely on surmises and conjectures, but with sufficient material of case laws to support their conclusions which is apparent from the discussions in the foregoing paras. Therefore, we have no hesitation in upholding the findings of the Assessing Officer that the cash credits/deposits in the books of the assessee are the "deemed income" of the assessee from some "undisclosed sources" in terms of Section 68 of Income-tax Act.
19. In the result, the CIT(Appeals)'s findings are reversed on this issue.
20. The second and last issue is regarding the CIT(Appeals)'s decision in deleting the amount of Rs. 52,167 which was paid to Shri Thangavelu.
The Assessing Officer added the same in question with the following observations :-- An amount of Rs. 52,167.50 ps. is debited to the Profit and Loss A/c as being incurred at Vizag Shipyard. According to the letter dated 26-3-1987 of the assessee, they have promised to file the details by Monday i.e., 30-3-1987. But no details have been furnished. This amount is debited in the name of one Mr. Thangavelu. Mr. Thangavelu is no other than the assessee's employee who looks after the purchases at Vizag Shipyard. Therefore, the amount is not a genuine payment to him as he has been receiving salary and other allowances from the assessee-firm. Hence this amount is disallowed.
21. On appeal, the CIT (Appeals) has deleted the same with the following observations:-- The appellant had maintained its office at Visakhapatnam Shipyard for purchase of scrap from the shipyard. This office was being looked after by Mr. Thangavelu. A sum of Rs. 52,167 was debited to the profit and loss A/c. On the ground that no details were furnished and that the sum was debited in the name of Thangavelu, the ITO disallowed the amount. He also stated that the payment was not genuine as Sri Thangavelu was in receipt of salary also. I have considered the appellant's submissions in respect of this addition.
The appellant had made substantial purchases of scrap from Vizag Ship vard. Without maintaining a office and without incurring expenses in relation to these purchases, the appellant cannot be expected to lift scrap from the Shipyard. The sum of Rs. 52,167 represented reimbursement of expenses to Sri Thangavelu on production of a/cs by him. That is why the debit was made in the name of Sri Thangavelu. The expenses related to legitimate business expenses. Therefore, they are allowable. The addition of Rs. 52,167 is, therefore, deleted.
The learned DR relied on the orders of the Assessing Officer and the learned AR of the assessee relied on the orders of the CIT(Appeals).
22. We have considered the submissions and inclined to agree with the submissions made by the learned DR. From the order of the CIT(Appeals), it is evident that he has deleted the addition purely on surmises and conjectures which has no place on income-tax proceedings. The nature of expenses have not even filed before us. Sri Thangavelu is an employee of the assessee and therefore there is no question of again making payment to him and in the absence of any details and the nature of expenses, we hold that the disallowance is justified and accordingly the same is upheld and the CIT(Appeals)'s findings are reversed on this issue.