Judgment:
ORDER
T. V. RAJAGOPALA RAO, PRESIDENT :
This is an assessees appeal relating to asst. yr. 1989-90 and arising out of the order of the CIT(A), Bareilly, dt. 29th April, 1991.
2. assessed is a dealer in lubricants. During the relevant accounting year ending on 31st March, 1989, assessed started another unit by name Jaiswal Chemical Industries, R/5-6 Industrial Area, Paraskhera, Bareilly. In connection with the new unit assessed has shown expenditure on construction of a factory. Investment during the accounting period had been shown at Rs. 6,92,555. The balance sheet of Jaiswal Chemical Industries, Bareilly, shows that the assessed had introduced a sum of Rs. 4,50,000 as his own capital in the venture. He also showed unsecured loans amounting to Rs. 2,25,000 from 13 persons. The assessed also showed as part of the capital introduced a sum of Rs. 10,000 said to have been earned by him from scrap business. Further, he had shown a sum of Rs. 1,12,000 as gifts received from the following six persons :
Rs.
(i) Shri Itwarilal
20,000
(ii) Shri Kishorilal
16,000
(iii) Shri Lalta Prasad
16,000
(iv) Shri Ram
20,000
(v) Shri Madanlal
20,000
(vi) Shri Suraj Prakash
20,000
All the above six persons are brothers-in-law of the assessee, Shri Sushil kumar Jaiswal.
3. The ITO called upon the assessed to produce the evidence for all the above gift amounts and also of the income of Rs. 10,000 said to be earned by him from scrap business by his order-sheet entries dt. 20th March, 1990, and 2nd May, 1990. In compliance, the assessed filed a written reply dt. 15th May, 1990, along with declaration of gifts from the aforementioned six persons. According to the ITO all the declarations are found to be undated. The declarations read that out of the donors, Shri Itwarilal had allegedly made one gift and the remaining persons had made two gifts each. Further, as regards income derived from scrap business the ITO found that the assessed was not having any regular dealings in scrap and during the relevant accounting period, the ITO observed, that the assessed had made small dealings and income of Rs. 10,000 was shown to be earned. By the office note dt. 16th July, 1990, the ITO specifically called upon the assessed to produce the donors. On the date of compliance assessed was able to produce only two persons, viz., Shri Lalta Prasad and Shri Madanlal and they were examined. The other four donors, viz., Shri Itwarilal, Shri Kishorilal, Shri Ram and Shri Suraj Prakash have not been produced in spite of one more specific opportunity given to the assessed by the office note of ITO dt. 10th January, 1991. However, on that date a written reply was filed with certificates of gift purported to have been obtained from the above four persons.
4. From the statement of Lalta Prasad recorded by the ITO, he found out the following :
'He is a caterer (halwai) during marriage season and on other days he sells groundnuts, etc., on a handcart (thela). His family consists of 8 persons including six children. He admitted that he had to take help of his relatives for the only marriage performed by him four years ago of his daughter. He stated that his monthly income was around Rs. 600 to Rs. 1,000. He does not have any savings account in any bank anywhere. However, he stated that he had gifted Rs. 16,000 to the assessed in two installments of Rs. 10,000 and Rs. 6,000 in cash. The amount of gift is said to be out of his savings. The entire expenditure incurred by him for the purpose of performing the marriage of his daughter was about Rs. 20,000 to Rs. 22,000.'
5. According to the ITO the statement of Shri Lalta Prasad utterly failed to convince him about the truth of the gifted amount. There is no evidence of any kind to support the alleged gift. The person having such a large family, and on his own showing, having only a meagre income which could hardly be sufficient to sustain the family can by any stretch of imagination be said to be in a position to give the substantial amount of Rs. 16,000 His capacity to make any savings, the ITO found, is to be viewed in the light of the fact that he had to borrow funds from his relatives for the marriage of his daughter for which the entire expenditure came to about Rs. 20,000 to Rs. 22,000. On these facts the ITO rejected the version given by Shri Lalta Prasad and held that the amount of Rs. 16,000 represents assessees own income from undisclosed sources. Next he had taken up the statement of Shri Madanlal for consideration. In his statement Shri Madanlal stated that he was running a sweetmeat shop from which he earns Rs. 700 to Rs. 800 p.m. His family consists of himself, his wife and 7 children. He stated that he had got a bank account in which his savings could be found to be about Rs. 3,000. But, this account had to be closed leaving a balance of Rs. 60 only for want of funds. This person also stated that he had gifted Rs. 20,000 in two installments to his brother-in-law. The ITO stated that the testimony of this person is to be viewed in the light of the fact that his monthly income is only Rs. 800, he has a family of 9 members and he could not continue his savings account in the bank for want of funds. There is no evidence whatsoever that previously any gifts were made by him in favor of the assessee. The ITO, thereforee, came to the conclusion that the amount of Rs. 20,000 introduced by the assessed in his capital account in the name of Madanlal is his own income from undisclosed sources. Thus, he added a sum of Rs. 20,000.
5.1 As already observed, the other four donors were not produced for examination though a specific notice dt. 10th January, 1991, was given to the assessed by the ITO. So also as already stated a written reply had been filed together with certificates of gifts from these four persons. According to these certificates and the photostat copies of sale vouchers of silver enclosed therewith to those certificates, it is gathered that Shri Itwarilal was a halwai doing contract work in marriage seasons and he had sold some silver to one Kumari Meera Agarwal of Bareilly on two dates, i.e., 10th September, 1988 and 11th September, 1988. Out of these sale proceeds and out of his own savings, the case of the assessed was that he made the alleged gifts. So also Shri Ram and Shri Suraj Prakash have sold old silverwares to the same Kumari Meera Agarwal and have allegedly made the gift to the assessee. The ITO found that a certificate was also produced which is said to be the certificate issued by Shri Madanlal who had already deposed about the gift. However, in his deposition dt. 25th July, 1990, Shri Madanlal nowhere made any statement that he had sold any silver for the purposes of gift, though in the certificate purported to have been issued by him it was claimed that he had made gift partly out of his own savings and partly out of sale proceeds of silver to the same Kumari Meera Agarwal. The certificate was not proved and was never put to him while under examination.
6. Generally commenting upon the capacity of the donors mentioned above, the ITO found that it would be highly unimaginable to believe that the persons having meagre means of living would be able to save money, would go out of the way to dispose of their silver ornaments and give the sale proceeds to their brother-in-law, the assessee, for the purposes of expansion of his business. Thus, he disbelieved the certificates given by the above four persons as regards the gifts and added the aggregate sum of Rs. 76,000 as undisclosed income.
7. The matter came in appeal against the ITOs assessment orders before the CIT(A), Bareilly. It was contended before the CIT(A) that the gifts were genuine and in support of the gifts assessed has produced confirmation letters. The identity of the deposits was established. Once again having critically examined the statements of Shri Lalta Prasad, the CIT(A) came to the conclusion that his sources of income are too limited so as to able him to sustain a large family of 8 members. Ultimately, he reached the conclusion that Shri Lalta Prasad was not in a position to gift the sum of Rs. 16,000 to the assessee. He confirmed the order of the ITO. Even with regard to the deposition of Shri Madanlal, after critically examining it, the CIT(A) agreed with the ITOs conclusion and held that the amount of gift is nothing but the income of the assessed from undisclosed sources and it has been rightly subjected to tax by the ITO.
8. As regards to the other 4 donors, firstly, the learned CIT(A) held that the ITO had already offered sufficient opportunity to the assessed to produce the parties but they were not produced. The contention of the assessed that he was not given adequate opportunity was rejected. The learned CIT(A) further held that it was not sufficient for the assessed to produce merely confirmation letters of the parties. It was equally necessary to satisfy about the capacity of the donors in question. He held that all the 6 donors have chosen to give sizeable amounts to the assessed almost around the same period of time. In order to lend support to the alleged source of gift most of the parties have procured receipts showing sale of silver to the same party almost around the same time and dates. In the case of Shri Madanlal when he was first examined he did not state that the gifted amount came out of his own sale proceeds realised by sale of silverwares. However, later a certificate was also produced having sold the silver ornaments to Kumari Meera Agarwal of Bareilly. The learned CIT(A) came to the conclusion that the assessed had introduced his own income in his capital account in the names of the six brothers-in-law. He further held that these six donors have no capacity to gift anything. Thus, he confirmed the ITOs order making the addition of Rs. 1,12,000.
9. Before this Tribunal the gift papers purported to have been made by the six donors, the alleged certificates issued by them accompanies by the entries in the purchase book of Kumari Meera Agarwal, moneylender and bankers, Bareilly, were filed on behalf of the assessed in a paper-book from pp. 15 to 39. However, a close reading of the documents would present the following :
(i) The gift declaration of Shri Itwarilal does not bear any date. However, the reading of the declaration at p. 15 of the paper-book would show that it must have been made on 14th September, 1988, and the gift is a cash gift of Rs. 20,000 and purported to have been made out of the self-earned income. However, at p. 16, a certificate purported to have been issued by Shri Itwarilal which is dt. 25th September, 1990, has been provided. In the said certificate, it is stated that out of Rs. 20,000 he realised Rs. 12,118 from the sale of silver articles and the balance came of his past savings. Thus, it is evident that the version found at p. 16 is something different from the version found at p. 15. According to the version of p. 16, only part of the amount, roughly about Rs. 7,800, represented his savings and Rs. 12,118 represents the amount realised by the sale of silver ornaments. Further, at pp. 17 and 18, the entries in the purchase book of Kumari Meera Agarwal were furnished. As per p. 17, a sum of Rs. 6,595 was realised by sale of silver articles on 10th September, 1988, and a sum of Rs. 5,523 was realised by sale of some other silver ornaments on 11th September, 1988. Thus, it can be seen that even on the own showing of the assessed Shri Itwarilal was in possession of Rs. 12,180 even before the date of gift, viz., 14th September, 1988. If this is correct, there is no reason why in the gift declaration it was stated that whole amount came out of the own savings of Shri Itwarilal. It is significant that Shri Itwarilal was neither present nor examined by the ITO or the CIT(A).
(ii) Coming to Shri Kishorilal, he appeared to have made two gifts, one on 6th October, 1980, of Rs. 10,000 and another of Rs. 6000 on 19th January, 1989. Rs. 10,000 is stated to have come out of his self-earned income, whereas Rs. 6,000 came out of the sale of silver ornaments. The gift papers are marked pp. 19 and 20, respectively. At p. 21 of the paper-book is a certificate purported to have been issued on 25th September, 1989. It is significant to note that on 20th September, 1988, itself he has realised Rs. 9,901 from the sale of silver ornaments. That means even on the date of his first gift dt. 6th October, 1988, he has money realised out of the sale of silver ornaments. If that is true, there is no reason why he did not make the gift of a consolidated sum of Rs. 16,000 even on 6th October, 1988, itself and what is the reason for him to wait up to 19th January, 1989 to make the second gift of Rs. 6,000. Further, Shri Kishorilal was not examined.
(iii) As regards Shri Lalta Prasad who stated to have given Rs. 16,000 and Shri Madanlal who stated to have given Rs. 20,000 are the two persons examined by the ITO. Their evidence was discussed by the lower authorities and they have held that these two persons had no means to gift the amounts as claimed by them. We fully agree with the reasons given by the lower authorities and hold that they had no capacity to gift the amounts of Rs. 16,000 and Rs. 20,000 respectively.
(iv) We now take up the gift paper at pp. 25 and 26. By those papers Shri Ram purported to have made two gifts, one on 30th September, 1988, and another on 24th December, 1988. The amount gifted was Rs. 10,000 on each of the two occasions. In each of the gift deeds it is stated that the gift money came out of his self-earned income, whereas certificate at p. 27 discloses that out of total gift of Rs. 20,000 he realised Rs. 12,156 by sale of silver ornaments and the balance came out of his savings. Thus, there is deviation in the story of these alleged gifts from the very documents filed by the assessee. Further, Shri Ram appeared to have obtained Rs. 5,011 on 13th September, 1988, and Rs. 7,139 on 12th September, 1988, from Kumari Meera Agarwal after the sale of silver ornaments. That means that even on the date of first gift, i.e., 30th September, 1988, he was having Rs. 12,156 in cash with him. In such a case there is no reason why he made a gift of Rs. 10,000 only on 30th September, 1988, and there is also no reason why he waited up to 24th December, 1988, to make the second gift of Rs. 10,000. Shri Ram was not present to explain these discrepancies and he was not examined.
(v) At pp. 30 and 31 of the paper-book the gift deeds purported to have been executed by Shri Madanlal were provided. According to the tenor of the gift deeds, he made a cash gift of Rs. 10,000 on 30th September, 1988, and another cash gift of equal amount on 24th December, 1988, from his self-earned income. However, if we look to the certificate provided at p. 32, it is stated that out of Rs. 20,000 cash gift of Rs. 13,212 was realised out of sale of silver ornaments and the rest only came from his past savings.
(vi) As per pp. 33 and 34, Shri Madanlal was stated to have disposed of the silver ornaments and realised Rs. 7,406 and Rs. 5,806 on the same date, i.e., 20th September, 1988. That means even on 30th September, 1988, when he made the first gift he was having with him Rs. 13,212 which was realised on the sale of silver ornaments and Rs. 10,000 from his own savings. Thus, even though he was having fully Rs. 20,000 on 30th September, 1988, itself with him, we do not know for what reason he made a gift of Rs. 10,000 only and waited three more months for making another gift of Rs. 10,000 on 24th December, 1988. It is significant that Shri Madanlal is one of the persons examined by the ITO on behalf of the assessed but he never stated anything about the sale of silver ornaments or Realizing Rs. 13,212 out of sale proceeds. Thus, we completely agree with the lower authorities and hold that Shri Madanlal had no capacity to lend Rs. 20,000 to the assessed and there is ample evidence on record in support of this view. When he himself is on hand to mouth existence, it is highly improbable that he would give not (sic) an inconsiderable sum of Rs. 20,000 to his brother-in-law to start a new business. The probabilities of the case are certainly to be taken into account while deciding the truthful nature of the advances said to have been received by the assessee. In the case of Sumati Dayal vs. CIT : [1995]214ITR801(SC) , dismissing the appeal against the order of the Settlement Commission, the Honble Supreme Court held the following :
'Held, dismissing the appeal, that the Settlement Commission after considering the surrounding circumstances and applying the test of human probabilities had rightly concluded that the appellants claim about the amount being her winnings from races was not genuine.'
(vii) Now, let us come to Suraj Prakash. He had executed two gift deeds, one on 30th September, 1988, for Rs. 5,000 and another on 24th December, 1988, for Rs. 15,000. Both the gift deeds recite that the gifts were made out of self-earned income. However, the certificate purported to have been given by him on p. 37 reveal that out of Rs. 15,000 gifted by him on 24th December, 1988, the sum of Rs. 11,987 was realised from the sale of silver ornaments. He claimed that he is running a sweetmeat shop in partnership with his brother, Sri Kishorilal but his income is less than taxable limit. Shri Suraj Prakash was not examined before the ITO or before the CIT(A).
10. In support of the assessees contentions that the gifts were genuine, the assessed relied upon the following case law :
Shilpa Lab. vs. ITO 15 Tax Law Report 668. This case is easily distinguishable. In the case decided by the Indore Bench of the Tribunal, there is a clear finding given by the Tribunal that the amount of Rs. 11,000 which was the cash credit in question before them cannot be earned within one month from the start of business itself and this was one of the important circumstances specifically mentioned to be so to conclude that the assessed cannot earn such income within such a short period and, thereforee, the deposit should be taken as genuine. However, in this case, assessed was already a dealer in lubricant oil under the name of Jaiswal & Co. and there is a clear possibility of earning the gifted amounts in that business venture outside his books of account. It is nowhere stated that the new venture is the only single venture started by the assessed within the accounting period in question. Jaiswal & Co., dealing in lubricant oil has been there since last several years. Since there is a possibility of earning a profit of Rs. 1,12,000 outside the books of accounts, the case in 15 Tax Law Reporter 668 (supra) does not apply to the facts of the present case.
The next decision cited before us is M. vs. ITO (1980) 9 TTJ (Bom) 506. In that case the creditors deposited the amount in both the accounting years relevant to asst. yrs. 1972-73 and 1975-76. They appeared before the ITO and confirmed the version of the assessee. However, in the case before us it is not the case but it is the case of one time outright gifts of cash. thereforee, whether the donor has capacity to gift such heavy amounts, as claimed by them, is definitely a question to be taken into consideration and simply because two of the donors were examined that does not mean that their versions should, without critical scrutiny, he taken as true, while judging the veracity of the evidence, the broad probabilities and the human conduct and behavior should also be taken into consideration according to the Supreme Court decision already cited above. Shri Lalta Prasads family consists of 8 persons. He was able to marry his daughter from borrowing funds from his relatives and the total cost of the marriage performed was only Rs. 20,000 to Rs. 22,000. His earnings are Rs. 600 to Rs. 1,000 p.m. The question is that a person having such a big family, would it be possible for him to give Rs. 16,000 The evidence on record is correctly sifted and appreciated by the lower authorities and their appreciation is perfectly on sound lines and the conclusion of the learned authorities does not warrant any interference from us.
As regards the gifts of other donors, they were never produced though several opportunities were given to the assessed to produce them and their capacity to give the amounts is not proved at all. The gift deeds executed by them remained all unproved.
11. The learned Departmental Representative contended that the capacity to make gifts by the impugned donors has not been proved by the assessee. Their creditworthiness is also not proved. Until the parties are produced and the gift deeds executed by them are proved, the gifts cannot be accepted to be proved and in support of this proposition the learned Departmental Representative relies upon the case Shree Krishna vs. CIT & Ors : [1983]142ITR618(All) . In the headnote of the said decision, it is observed as follows :
'It is neither a rule of prudence nor a rule of law that the statement made in an affidavit which remains uncontroverted, must invariably be accepted as true and reliable. Ordinarily, in the absence of denial, the statement may be accepted as true but if there are circumstances which suggest that the statements on affidavit should not be accepted as true, the absence of denial by the other side, would not by itself be sufficient to clothe the statements on affidavit with truthfulness and reliability.'
So, it is argued that simply because the gift documents were produced and certificates of the donors were produced, they by themselves cannot be sufficient to prove the truthfulness of the gifts made. The learned Departmental Representative also relied on the case of IAC vs. Indian Art Emporium (1994) 50 ITD 21 (Bom). In that case the fact that the creditors filed IT returns was very much pressed for consideration before the Tribunal to show that the creditors had the capacity to lend. The aspect has fully gone into by the learned Third Member and he held the following at p. 35 of the said decision :
'Those returns can provide only prima facie evidence but not conclusive evidence. thereforee, nothing can be read in the filing of the returns by the HUF in favor of the assessee. On the other hand, a motive to file the returns namely to provide evidence, can be attributed to the assessed because the Kartas of those two HUFs happened to be the partners here, the other partner being their father. On account of the intimate connection and the deep involvement brought about by the raid and the fastening of huge tax liability by order passed under s. 132(5) a need arose to bring money into the books to pay the tax, and with a view to provide evidence for the money that was being brought into the books, the credits were introduced. This appears to be the sequence of events or the historical sequence of evidence that must have taken place.'
In this case also, the donors are none other than the brothers-in-law of the assessee. A substantial sum of Rs. 1,12,000, which forms part of Rs. 6,92,555 which went into the construction of the factory, remained unexplained and in order to escape the tax liability the necessity to invent the theory of gifts arose to the assessee. The gift documents first of all should be proved and they are only to be considered as prima facie evidence and not conclusive evidence. Here, in this case, they were not even proved, leave alone the other important aspect that donees are capable of giving the hefty amounts to their brother-in-law as gifts.
12. In reply, the learned counsel for the assessed relied upon the decision of Delhi Bench of Tribunal Raj Vikas Quarries & Industries (P) Ltd. vs. CIT (1992) 42 TTJ (Del) 262. In that case, the genuineness of the cash credits was in question. The assessed furnished copies of accounts of creditors, gave their addresses and GIR numbers. In response to summons issued by the AO under s. 131, some of them appeared through their counsel and some reported unavailable. No further enquiries were made by the AO. assessed also produced affidavits of substantial numbers of creditors. Though the assessed was able to produce three creditors only but the other creditors as the next day was observed as Bharat Bandh and no opportunity thereafter was given to the assessee; the initial burden that lay on the assessed was held as discharged. Here in this case none of the creditors were income-tax assessees. All of them took the stand that their income is much below the taxable limit and hence, they did not even file their IT returns.
Further, several opportunities were granted to the assessed to produce the donors but none of the opportunities were availed of by the assessed and none of them was produced, except the two, whose evidence is already discussed above. Thereafter, this decision in (1984) 42 TTJ (Del) 262 (supra) does not apply to the fact of the present case.
13. The learned Departmental Representative in reply cited the decision in the case of Krishnaveni Ammal vs. CIT : [1986]158ITR826(Mad) , in which the Madras High Court held that if the best evidence available with the assessed or the cash creditor was not produced, the cash credit can be said to have been not proved. In that case the cross cheques were available but they were not produced. In this case also the best evidence is the production of the donor himself in order to prove the gift. If the donors are not produced and examined, then the Department would not have the chance of examining their creditworthiness, the truth of the transaction, the occasion which warranted the cash gift, etc., and how frequent such gifts were given by all of the 6 brothers-in-law and what is the special occasion for giving a gift of Rs. 1,12,000 by all of them on a particular date. However, by not producing the four donors, the best evidence in the case should be taken to have not been produced.
14. We agree with this contention and hold that the four gifts were not proved. We hold that the 2nd and 3rd grounds taken in this appeal should be held against the assessee.
15. Now, let us take up the 4th and 5th grounds of appeal. The subject matter of these grounds is 11 cash credits. It is the case of the assessed that towards the investment of the new unit, loan from UPFC was delayed and, thereforee, assessed was compelled to borrow the amounts from other persons. The names of the persons and the amounts borrowed as loan are furnished as under :
Name
Amount
Rs.
(1) Sri Sagheer Ahmed
17,000
(2) Sri Krishan Lal
18,000
(3) Shri Ajai Kumar Tandon
10,000
(4) Smt. Om Wati Devi
10,000
(5) Sri Anwar Hussain
13,000
(6) Sri Ramesh Chand
19,000
(7) Sri Raj Kumar Gupta
19,000
(8) Shri Ram Prakash
17,000
(9) Shri Ram Naresh
18,000
(10) Sri Ram Kishore
15,000
(11) Smt. Usha Srivastava
10,000
1,66,000
The ITO had accepted the deposit of Rs. 10,000 in the name of Sri Ajai Kumar Tandon but the other deposits were rejected as they were held to be unproved cash credits under s. 68 of the IT Act. Confirmation letters in which the full addresses were given were filed. Copies of accounts of these depositors were also filed. Their accounts show that in the subsequent accounting period the amounts were repaid in cash to them.
16. The ITO listed the following reasons for rejecting cash credits :
(i) They are neither trade creditors nor the amount received from them had come through any bank account.
(ii) They are not income-tax assessees. Specific opportunities were allowed on 16th July, 1990, and 10th January, 1991, to produce these cash creditors and in between this period also adjournments were granted on the request of the assessed to produce them; however, none of the depositors have been produced for verification and no reason has been advanced for not producing them.
(iii) All these transactions are in cash. No attempt has been made to establish the identity of the depositors, their capacity to advance the money, as well as the genuineness of the transactions.
The ITO held that these cash credits appear to be assessees own income from undisclosed sources introduced in the books of accounts in the names of the aforesaid parties. Thus, he disbelieved the cash credits except one in the name of Ajai Kumar Tandon and made an addition of Rs. 1,56,000 to the returned income of the assessed as per his order dt. 18th January, 1991, passed under s. 143(3).
17. The learned CIT(A) did not agree with the contention of the assessed that there was lack of opportunity given to the assessed to prove the cash credits. The learned CIT(A) held that the so-called cash creditors all fall under no - income group and there was no evidence to show their capacity to advance substantial amounts. They did not have bank account. None of the 10 parties were produced even though sufficient time or opportunity was allowed. No logical reason was given either before the AO or before the CIT(A) as to why the depositors were not produced. The learned CIT(A) held that neither the identity nor the capacity of the creditors have been established. He held that even the payment claimed to have received in cash is not supported by any evidence. thereforee, he ultimately agreed with the ITO who treated these cash credits as income of the assessed from undisclosed sources. Thus, he confirmed the addition of Rs. 1,56,000 after agreeing with the findings of the ITO and dismissed the appeal filed before him.
18. Against dismissal of the appeal by the CIT(A) the assessed came in second appeal before this Tribunal and thus, the matter stands for our consideration. The assessed has already furnished the list of names from whom the cash credits were borrowed and respective amounts taken from each of them. After going through the records and also after going through the details filed in the paper-book at pp. 41 to 53 the arguments on both the sides, we are of the opinion that the disallowance of cash credits is perfectly justified. The following are our reasons for the conclusion which we have reached :
(i) None of the cash creditors are produced or examined before the AO or before the CIT(A). The only reason for not producing them, if at all, offered by the assessed is found in the reply to show cause notice, dt. 10th January, 1991, a portion of which is extracted at p. 5 of the paper-book which is as follows :
'Regarding the presence of all those persons, it is very much difficult to produce all the persons before you particularly because of the fact that some of them reside outside Bareilly. But, still if you feel the presence of those persons are necessary for the true assessment of income of the assessee, we may try to produce them before you in due course of time.'
The ITO, by his order sheet entries dt. 2nd May, 1990, 25th July, 1990 and 23rd September, 1990, required the assessed to prove the deposits from these persons. Opportunities were also given to the assessed to produce these cash creditors on 16th July, 1990, and 10th January, 1991. In between this period also adjournments were specifically taken by the assessed for purposes of producing them. The advances were all said to be in cash.
(ii) None of the deposits were paid to the assessed by any banking channels, i.e., by passing crossed cheque or by bank demand drafts. Similarly, even when the amounts were said to have been repaid they were only open payments and crossed cheques or demand drafts were not issued to the creditors. This is quite in contravention to the provisions of s. 269SS, the material portion of which is as follows :
'Sec. 269SS. No person shall, after the 30th day of June, 1984, take or accept from any other person (hereinafter in this section referred to as the depositor), any loan or deposit otherwise than by an account payee cheque or account payee bank draft if, -
(a) the amount of such loan or deposit or the aggregate amount of such loan and deposit; or
(b) on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or
(c) the amount or the aggregate amount referred to in cl. (a) together with the amount or the aggregate amount referred to in cl. (b) is ten thousand rupees or more;
(The word 'ten' is substituted for 'twenty' w.e.f. 1st April, 1989) and, thereforee, came into effect from asst. yr. 1989-90). up to asst. yr. 1988-89 it is enough if the loan or deposit is either Rs. 10,000 or more.'
The loan or deposit said to have been advanced by each of these depositor is more than Rs. 10,000. It is significant to note that the assessed who had accepted the deposits is an income-tax assessee. Similarly, Shri Ajai Kumar Tandon and Smt. Om Wati Devi were income-tax assessee, according to the assessee. thereforee, according to the clear language of s. 269SS it is enough if either the depositor or a person who receives the deposit is an income-tax assessee. In such a case provisions of this section clearly apply. Copies of confirmatory letters were never provided in the paper-book filed before us. Even according to the assessed it is only the confirmatory letters which contain the addresses of the depositors or cash creditors. At p. 7 of the paper-book the following is submitted before the CIT(A) :
'It is not correct at all the identity of depositors is not given. The evidence on file enclosed shows the complete identity of depositors.'
What is filed before this Tribunal is only the ledger copies of the cash credits. In the ledger copies Sri Bhai Sagheer Ahmeds address is stated to be Mataki Chowki, Bareilly, the address of Bhai Kishan Lal is given as Kalicharan Marg Mohalla, Subhash Nagar, Bareilly, Smt. Om Watis address is given as w/o Shri Brij Mohan, resident of 152 Biharipura Kashgaran, Barely-income-tax assessee. The address of Bhai Anwar Hussain is stated as 699, Civil Lines, Bareilly. The address of Bhai Rameshchandra is given as M.M. 402 Kushmaran, Bareilly. Address of Bhai Rajkumar Gupta is stated as 409 Kashgaran, Bareilly. Address of Bhai Ramprakash ji was stated as Nekpur, Bareilly. Address of Ram Naresh Paan wala was given as Subhash Nagar, Bareilly. The address of Bhai Ramkishan ji is given as Bhiharipur, Bareilly. Address of Smt. Usha Srivastava was simply mentioned as Bareilly. All these particulars are given at pp. 40 to 53 of the paper-book. After reading these so-called addresses one thing is clear that all the cash creditors belong to Bareilly to which place assessed also belongs. If all the cash creditors belong to same town to which assessed also belongs, there is no reason why assessed was not able to produce all or any of them. Particularly, there is no reason why he was not able to produce Smt. Omwati Devi his own brothers wife. There is also no reason why her GIR No. and the ward in which she has been assessed was not given if she was really an income-tax assessee. Out of the loan creditors, Shri Bhai Sagheer Ahmed, Bhai Kishanlalji, Bhai Rameshchandraji, Bhai Ramprakash ji purported to have subscribed their thumb impressions when they took back the amounts from the assessed in the accounting year relevant to the next asst. yr. 1989-90. assessed himself did not issue any crossed cheques or demand drafts while returning the amounts. They are all open payment.
(iii) In all the cases of cash credits, the following three essential ingredients are to be proved by the assessed :
(i) Identity of creditors;
(ii) Capacity of creditors; and
(iii) Genuineness of the transaction.
[See CIT vs. Precision Finance (P) Ltd. : [1994]208ITR465(Cal) ].
In this case none of these ingredients were fulfillled. Further there is a clear transgression of provisions of s. 269SS which is already quoted above. For all the above reasons we hold that none of the cash credits were proved and the findings given by the lower authorities are clearly justified and hence, we hold that assessed is not entitled to any relief whatsoever.
19. The 6th ground in this appeal is that the CIT(A) erred in disallowing Rs. 500 out of miscellaneous expenses. Since this is a small amount and since the disallowance is based upon presumption and since there is no tangible evidence on record, we set aside the disallowance and direct the AO to allow Rs. 500 towards miscellaneous expenses.
20. The first ground is about the disallowance of depreciation. assessed claimed depreciation of Rs. 5004.48 assessed had appended the depreciation chart to his IT return. It is no doubt true that assessed claimed only Rs. 1,508.84 as depreciation in the P&L; a/c. Without stating anything for disallowing the rest of the claim, the ITO allowed only Rs. 1,508.84 towards depreciation. Thus, according to the assessed there was short allowance of depreciation to an extent of Rs. 3,495.24. In the appeal the CIT(A) had simply restored the matter to the ITO. After going through the record, we hold that there is no justification for the CIT(A) to remand the matter to the ITO again and we direct that whole of the depreciation claimed, viz., Rs. 5,004.84 should be allowed to the assessee. That means we order the relief of Rs. 3,495.24 for incorrect calculation of depreciation.
21. In the result, appeal is partly allowed.