Judgment:
1. This is an appeal of the assessee for asst. yr. 1996-97 which is directed against the order of CIT(A), dt. 29th March, 2000.
2. Briefly stated, the facts of this case are that the assessee is a partnership firm deriving income from the running of petrol pump situated at Amet. The assessee is having a branch office at Udaipur in addition to head office at Amet. The assessee also derives income from the plying of tankers of its own and of others taken on hire on commission basis. The assessee filed its return of income declaring income of Rs. 64,110. This return was processed under Section 143(1)(a) of the Act. Thereafter, this case was selected for scrutiny and the assessment under Section. 143(3) was completed by determining the total income of the assessee at Rs. 13,62,970 as against the returned income of Rs. 64,110. This assessment order was subjected to appeal before the first appellate authority, who also confirmed certain additions which are the subject-matter of this appeal. The appellant has challenged the findings of lower authorities by taking legal as well as on factual grounds. We will deal first with the ground on merits and thereafter the other grounds will be dealt with.
3. The main issue on merits in this case is with regard to cash credits, which were noticed by the AO while going through the balance sheet filed along with the return. The assessee had shown credits of Rs. 9,84,237 in the accounts of head office at Amet and Rs. 65,37,101 in the branch office at Udaipur. It was claimed by the assessee that the credits of Rs. 1,21,976 and Rs. 47,50,263 pertaining to the head office and the branch office, respectively, were old and had been shown in the asst. yr. 1995-96. The assessee filed confirmations in respect of these credits and also claimed that all these creditors were assessed to tax and that these credits had been received either through cheque or bank drafts only. While making a payment of interest to these creditors, the assessee also claimed to have deducted TDS. The AO, however, required the assessee to produce all these cash creditors before him in person. The assessee produced Sh. Dasrath, Sh. Gopal Mantri, Sh. Anil Khandelwal and Smt. Pushpa Gandhi out of the ten creditors. Their statements were also recorded by the AQ. Regarding the remaining cash creditors, a request was made by the assessee to summon them under Section 131 of the Act, as they were not amenable to it. The AO, therefore, issued summons to them. Sh. Ajay Murdiya appeared before the AO in response the summons sent to him. Smt. Basat Devi Ranka refused to receive the summons and Smt. Kushumlata, Smt. Ramratan Devi Jajoo and Smt. Ratan Devi Gaggar avoided the service of summons.
4. The AO got the summons served on the evading cash creditors by the Inspector through affixture, even then there was no response. The creditors were 10 in number as detailed below : 5. However, let us make it clear that the cash credits in relation to Sh. Ajay Muradiya, Sh. Gopal Mantri, Sh. Dashrath Kishore Vijay, Sh.
Anil Khandelwal and Smt. Pushpa Gandhi are the subject-matter of dispute before us. Now, we will discuss these cash credits to find as to whether these credits are genuine or not in the light of the given facts and circumstances of this case. But, before doing that, we would like to highlight the provisions of Section. 68 and the intensity of proof which are required to be proved by the assessee to establish the genuinity of the cash credits by establishing the identity of the cash creditor, the creditworthiness of the cash creditor and the genuinity of the transaction of such a credit.
6. We would not (now) like to discuss the law relating to such cash credits in the light of the numerous judicial pronouncements rendered by various Courts including the Hon'ble apex Court. To understand the requirements of the law to prove the genuinity of a cash credit, we would reproduce the Section. 68 of the Act, 1961 (hereinafter referred to as the 'Act' for short).
"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 AO, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." 7. The subject of cash credit has assumed ominous overtures, over the years. This subject has been one of the major areas of litigation in taxation. To understand this subject one needs to know about the alpha and the omega of the law relating to cash credits, starting with its legislative history upto its development in this cyber era, step by step, in order to understand this subject threadbare.
8. The provision relating to cash credit was brought on the statute book for the first time in the IT Act, 1961, by Act No. 43 of 1961, as Section 68. There was no such provision corresponding to the above in the IT Act, 1922. It would be pertinent to mention that Section. 6.8 is a new section, which is a culmination of a series of judicial pronouncements under the provisions of the old Act of 1922, on the issues relating to cash credit.
9. This section can be comprehended in a better way by dividing it into the following ingredients (parts) : (c) and the assessee offers no explanation about its nature and source; or (d) the explanation offered by the assessee is not, in the opinion of the AO, satisfactory; then (e) the sum so credited may be charged to income-tax, as the income of the assessee of that previous year, in relation to which it is so found to have been credited.
10. Thus, it is clear from the above that the initial catchwords of this section are : 11. Section 68 comes into play immediately when an entry relating to a sum is found to have been credited in the books kept by the assessee.
Meaning thereby, that the condition-precedent to apply this section is the existence of books and the recording of a sum, as cash credit therein. Thereafter, the satisfaction of the AO with regard to genuinity of the cash credit in question arises. In case, he doubts the relevant entry, after making possible enquiry(ies), the AO is satisfied that the entries are not genuine, he is vested with the power to add the said sum in the total income of the assessee represented by such cash credit entries, as the income of the assessee from other sources.
Thus, the satisfaction of the AO is the basis of invocation of his powers under Section 68. However, such satisfaction must not be illusory and imaginative but must be based on valid and legitimate reason(s). The AO is required to make a proper enquiry of all materials, which are placed before him or over which he has a command.
Thus, the inquiry envisaged under Section. 68 is an enquiry, which is reasonable and just. This is a quasi-judicial enquiry and not an arbitrary one. This enquiry should not be based on terrorem but should be based on reasons. The enquiry must be based on logic and not on magic. In a nutshell, the enquiry should be objective and not a subjective one.
12. Regarding the books of the account, much" has been said by various authorities, forums and the Courts. But, the 'books', as ordinarily understood to mean is a collection of sheets of papers or other, material, which may be blank, written or printed, fastened or bound together as to form a material whole. Therefore, loose sheets or scraps of papers cannot be termed as 'book' because they can easily be detached and replaced. Section. 34 of the Evidence Act, 1872, provides that entries in a book of account-, which is regularly kept and maintained in the ordinary course of business, are relevant, whenever they refer to a matter into which the Court has to enquire, but such statements shall not be sufficient evidence to charge any person with liability unless established as per law.
13. It is a, well-settled principle of law that when a person (litigant) claims a fact to be true, this is he who has to prove that fact. In other words, when a person wants the Court to believe that a fact is true, a preliminary onus is cast upon him to prima facie prove that fact. This onus is said to have been discharged in case he (the assessee) establishes his claim prima facie. Thereafter, the onus may or may not shift on the other party depending upon various factors, which will be discussed in latter paras. It follows from the above, as a natural corollary, that even correct and authentic entry in the books of accounts cannot without independent evidence of its trustworthiness can be, ipso facto, accepted as correct.
14. Therefore, a pass book of a bank cannot be treated as a book of account of the assessee because this is provided by the banker, which is given to its customer and is only a copy of the customer's account in the books maintained by the bank. The bank does not act as an agent of the customer nor can it be said that the banker maintains the pass book under the instructions of the customer (the assessee). Therefore, a cash credit shown in assessee's pass book relevant to a particular previous year, but not represented in the cash book maintained by the assessee, does not attract the provisions of Section 68. However, it may be a subject-matter of Section 69, which pertains to unexplained investment.
15. Likewise, the books of a firm cannot be said to be the books of the partner of the firm. In case of a firm, if cash credits are found in the partners account, in the books of a firm and if no evidence or material is produced to indicate that they are the profits of the firm, then, such sum cannot be assessed in the hands of the firm but shall be assessed in the hands of individual partners of the said firm.
16. The Section. 68 is a charging section and it applies when the assessee's explanation with regard to cash credit is rejected as being unsatisfactory and also where the assessee does not tender any explanation in that respect. The AO has to state as to how he has formed his opinion that the explanation is unsatisfactory.
17. As has been stated in the beginning that Section 68 has gained great importance over the years, the reason(s) for the same are that some unscrupulous assessee(s) use this method, i.e., of cash credit, as a device to channelise black money into white money. The Government needs funds for various purposes like maintenance of law and order, defence, social/health services, etc. and it raises funds from various sources including taxation. Justice Holmes of U.S. Supreme Court has long ago rightly said that tax is the price, which we pay for a civilised society. It is the 'cupidity of the tax payer and the stupidity of the tax collector', which results in either the loss of taxes or harassment of the taxpayer. But, all the cash credits cannot be christened as dubious because the assessee(s) have to take deposits in the regular course of their business(es) and such cash credits can definitely be genuine one. Therefore, when this method is (mis)used, it becomes the duty of the legislature to nip these types of activities by enacting a provision of law. This provision was brought on the statute in the form of Section 68. By this provision, a thin line has been drawn between the genuine and non-genuine transaction. Over the years various Courts have drawn their receptive 'lines' in the given facts of their respective cases. But, it would not be out of place to mention that there cannot be straight-jacket formula, which can fit into the facts of a given case and whereby it can be decided whether a credit is genuine or not. It depends on the facts and circumstances of a given case and the Court(s) dealing with the same has to find out the true colour of the impugned transaction.
18. The various Courts have given their verdicts with regard to the genuinity or ingenuinity of the cash credits involved in the cases they were dealing with in their own way. The gist of most of such decisions is that the onus to establish the identity and the creditworthiness of the creditor(s) and the genuinity of the transaction(s) of a cash credit in question, is cast upon the assessee. The case of CIT v.Precision Finance (P) Ltd. , in which it has been held that by now it is a trite law that the onus to prove the above three ingredients is cast upon the assessee and again the decision of Hon'ble Calcutta High Court in the case of Shankar Industries v. which is a leading decision on this subject and invariably relied by the Department also requires the assessee to prove the above three ingredients.
19. The case of Roshan Di Hatti v. CIT is also often relied by the Revenue to plead that it is the assessee who wants the Department to accept a claim with regard the genuinity of a cash credit, has to prove the same in all conditions. But again, this decision is misread in the sense as if the Hon'ble apex Court has held in this case that the onus to prove the creditworthiness of the creditor is to be proved to the hilt and the Department is never required to prove the ingenuinity of such cash credit even in case the assessee has established it prima facie.
20. These decisions are most of the times than not are misread to mean that a very hard and never shifting and never dischargeable onus is cast upon the assessee to prove their cash credits. It has been pleaded by the Department, in cases where the deposit is through account payee cheque and the particulars of the creditor are furnished even then the impugned credit does not stand proved. For that matter, reliance is placed on the decision of Hon'ble Calcutta High Court in the case of Precession Finance (P) Ltd. (supra), wherein it has been held that mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction as genuine. Many a times, this limited ratio of the above decision is applied to rebut the argument of the assessee that the deposit has been received through account payee cheque. But, they loose sight of fact that the above decision was rendered under entirely distinguishable facts. In the above case, the identity of the cash creditors was not at all established. Unfortunately, the ratio of various decisions is used to suit their requirements in piecemeal. It is well-settled law to apply a decision on a given fact of a particular case; it has to be applied in its entirety and without reading it out of context. Likewise, the decision of Hon'ble Supreme Court in the case of Roshan Di Hatti (supra) where it has been held as under : "The law is well-settled that the onus of proving the source of a sum of money found to have been received by an 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, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the Revenue is entitled to treat it as taxable income.
To put it differently, where the nature and source of a receipt, whether it be of money or of other property, cannot be satisfactorily explained by the assessee, it is open to the Revenue to hold that it is the income of the assessee and no further burden lies on the Revenue to show that the income is from any particular source." 21. The Hon'ble Supreme Court has not given a verdict that the burden which is initially cast on the assessee to prima facie establish the relevant cash credit by establishing the identity, the creditworthiness of the creditor and the genuinity of the transaction never shifts on the Department. The Hon'ble apex Court in the above decision has held that in case the above three requirements are not established by the assessee, in that case no further burden lies on the Revenue to show that the income is from any particular source. Otherwise also, the facts of that case are very peculiar.
22. The various other decisions shall be discussed hereinafter but before that it can be safely stated that the decisions of the Courts rendered in the context of Section 68 are only guidelines, which can be properly applied to the given facts of a particular case and these do help to some extent to arrive at a just decision. But, none of the above decisions can completely help in deciding a particular transaction of deposit because the facts of two cases are never exactly identical. It is only that Court who is dealing with the given facts of a case, who has to winnow the chaff from the grain after taking guidance from the available precedents.
23. More often than not, the decisions including the above are interpreted in the sense that the assessee is duty-bound to prove the source of the source of the deposit. When the source of the source is demanded by the Courts, invariably, the counsel appearing for the assessee exclaims that, can a beggar be a chooser and can an assessee who has to take loan from a creditor can ask for the source of his amount which is being given as a loan. This query of the counsel sounds sensible. No Court ever has given a decision that source of the source has to be proved by the assessee, in that way. But sometimes, in order to demand proof of creditworthiness of the creditor, the intensity of the required proof is stretched too far to mean that the creditworthiness of the creditor can be established only and only when the source of the source is also proved. With due respect, it is observed that this can never be the intention of any piece of legislation nor of any precedent for that matter. What is required is the proof of creditworthiness of the creditor which can be done by various other methods and not directly by demanding the proof of the source of the source directly. This is a reality of life that no loanee can ever ask the loaner to explain the source of his source before he gives a loan to him. Therefore, to demand the proof of the genuinity of the source of the source will be like demanding the proof of impossible.
24. Let it be mentioned that a deposit, through account payee cheque is a very good piece of evidence towards establishing the genuinity of a transaction. But, in case the identity of the depositor itself is not proved on record, how the claim of the assessee can be accepted as genuine. But, at the same time, the assessee can prove the cash credit only by proving that the payment has been received through account payee cheque, when the identity of the depositor is very much established or is obvious and as such, not doubted by the Department.
In that eventuality, a payment having been received through account payee cheque becomes sacrosanct. This is what exactly has been stated by the Hon'ble Calcutta High Court.
25. Unfortunately, the decisions are read in a hurry and in isolation because we are living in a fast moving society. Only the head notes of a decision which are usually drafted by publishers, etc., according to their understanding of the matter, are perused by concerned persons, which many a times carry wrong meaning of a decision. The decision has to be read in its entirety to arrive at a correct ratio descendai.
26. The decision in the Precesion (P) Ltd. (supra) is always relied to deny the claim of the assessee that the payment through account payee cheque has been held as not a sacrosanct and it cannot establish the transaction as genuine.
27. With due respect, it is stated that this is not the gist of the above decision. The decision has to be read in its entirety, along with the facts of the given case.
28. It is in the background of the above facts, it was held by the Hon'ble Calcutta High Court as above.
29. This decision is very much in the line of various other decisions on the subject and does not give any different finding from the others.
30. For a cash credit, two parties are required. The one is the assessee and the other is the cash creditor. No one can deposit his own money with himself. In order to get benefit of Section 68 of the Act, another person should have deposited a sum of money with the assessee.
This 'another person' cannot be a fictitious person but he should be a real person, who can be also a legal juristic person, which are permitted under the IT Act. The other person should have deposited his 'own money' and not the money of the assessee. Therefore, a maxim is created that if the real person deposits his own money with the assessee, the deposit is genuine and nothing else. In a sense, all the three ingredients which have been overall accepted generally, i.e., the identity, the creditworthiness and the genuinity are different parts of only one ingredient, i.e., the genuinity of a cash credit. If the money is deposited by the self in the name of others, it cannot be said to be a cash credit at all. If the money is stated to be deposited in the name of a person, who does not exist at all, it cannot be a cash credit. If no money is deposited but only entry is passed in the books of the account, it is not a cash credit at all. Therefore, what is necessary to establish to prove a cash credit under Section 68 of the Act is that any other person other than the assessee must have given or deposited money(s) worth with assessee out of his own money.
31. In the light of above discussion, it can easily be stated that a prudent man can quickly find out from the given facts of the case as to whether the cash credit in question is genuine or not.
32. As has been stated above, the cupidity of the tax payer and the stupidity of the tax collector are the main sources of tax evasion. To understand cupidity, the following story would help a lot. There was a person in the ancient times who lived in a hutment of shepherds nearby a sea. He was very cupid and would cheat his fellow by one way or the other. All the inhabitants at last got fed up with his nefarious activities. Ultimately, a Panchayat was called and the Panchayat condemned him to death. In their clan, the mode of condemning is very naval. The condemned person was stated (served) during the day with drink and dine and was tide (tied) with a tree nearby a seashore covering his face with some canvass cloths. After the dawn, the villagers would come in inebriated condition and beating the drums and signing the songs in a procession. Thereafter, some young men would untie his hands and throw him in the sea after tying a heavy stone with his legs.
33. During the day time, a young shepherd can (came) around along with his big herd of sheep. He was not aware of what was happening with the condemned man. The young shepherd enquired from the condemned person as to what has happened with him. After inquiring something from the young shepherd, the prisoner replied that the villagers want to give him a lot of money after the sunset, but he is not greedy. He thereafter enquired from the young shepherd in case you want money you can come in my place. The young shepherd without thinking much readily agreed to swap. The prisoner went away with the herd of sheep and the villagers threw the poor, young shepherd after attaching a big boulder with his legs in the deep sea. The next morning, the naughty man came towards the village playing on the flute along with the big herd of sheep. When the villagers enquired from him he narrated that the God of Sea has given him all this fortune and has also asked him to tell his fellow villagers that he is waiting to give whatever they demanded from Him.
Without thinking even for a spur of moment all the young villagers ran towards sea and jumped into the deep sea. Obviously, all of them were dead and the cupid person played the trick which could befool the whole society and ended up in gain to himself and loss to society in general.
34. This is how ah unscrupulous taxpayer can play tricks as were played by the above naughty man.
35. Now, the stupidity of a tax collector can be explained by the following little short story.
36. In the campus of University of Paris, the capital of France, Mr. T was giving a lecture to the students of philosophy. Mr. X was the head of the Department of Philosophy. All of sudden, Mr. X posed a question, 'can you tell as to who is the greatest man in this world ?' The students named someone or the other according to as they thought of them. But, Mr. X replied quickly that none of them was correct because 'Mr. X' is that man. When the students exclaimed! he started proving this fact then and there.
37. Mr. X invited the attention of the students at the globe of the universe which was placed in the class room. He said (asked) in this map of the world, which country was the best. The students replied, naturally, the France, because they all belonged to that country. Mr. X told them forget about all other parts of the world and tell what city is the best in France. All replied in one voice that it was Paris.
Thereafter, he asked them to tell the best place in Paris. The place where a person resides most of the time and has chosen himself to live there would naturally like the best. Therefore, all of them yelled, it was the campus. Thereafter, he inquired about the Department, which was best in the whole campus. For the same reason, all of them screamed to tell, the Department of Philosophy. Thereafter, the last question was who is the head of the Department. Mr. X was the head of the Department and like this he proved himself to be. the best in the world.38. This is a very short story but contains volumes of knowledge, which is being imparted through it. If the taxman behaves in the above manner, he can prove whatever he wants to prove and it would on the very face of it would seem as if it is the best solution. But, this type of reasoning is not required while dealing with certain important questions of facts.
39. A combined gist of above story is that there cannot be any fixed rule or a straight-jacket or a chemical formula, which can be said to be a sure-shot test to judge the genuinity of a cash credit. This story tells that an unscrupulous or dishonest assessee who has no respect for law can play any tricks to evade payment of tax and can relate concocted stories which seems to be plausible and reasonable on the face of its. Therefore, it is for the taxman to discern the truth in the given facts and the circumstances of that case. At the same time, the taxman has to act as an ordinary prudent man instead of posing as a super human being and trying to prove himself as a numero uno. He has to strike a balance while conducting himself with the taxpayers, by remembering the taxpayer is a respectable citizen and he contributes a lot towards the coffers of the Government, who in turn utilise this fund for the benefit and the welfare of the people at large. Therefore, the task of a taxman is very important because he has to walk on an edge of a razor and at the same time he has to maintain a balance between what is right and what is wrong. He has to follow the laws of the land before he can preach the taxpayer to abide by the law. The taxman has to conduct himself in a way which is friendly to the taxpayer by showing that he is not an enemy but a friend. This friendly manner, if adopted by the taxman, should also be shown to be so overtly as well as covertly. All the precedents simply guide the decision-maker in a given facts of a particular case and it is he who has to apply his judicial mind with all the prudence at his command to decide that case.
More often than not the ratio of a decision is followed only by adopting its letters. The decision has to be followed both in its letter as well as the spirit. The spirit of a decision is its soul.
Yes, to follow the letter only is not that harmful, but the unfortunate part of it is that the letters are torn out of context from a given judgment and the same are put where they do not fit. In this melee, the real meaning of a decision is lost. The most useful precedents are usually lost when only from an excerpt of a decision, entirely different meanings are drawn by different people. In this regard, the examples of the famous decisions in the cases of CIT v. Steller Investment Ltd. and CIT v. Sophia Finance Ltd. (1994) 205 ITR 98 (Del)(FB), the ratios of which were considered for a long time to be divergent, but when these were meticulously examined, it was found that the ratios were identical in both these cases. This confusion arose because of wrong inferences having been drawn from the headnotes of these cases. In the case of Sophia Finance (supra), the Full Bench of Hon'ble Delhi High Court had given the finding that the existence of shareholders is must and to that extent enquiry could be made in the beginning. In case, the shareholders do not found to exist at all, that some can be added under Section 68 of the Act. In the case of Stellar Investment (supra), the facts regarding the existence of the shareholders stood explained in the very beginning and the Hon'ble Judges constituting the Double Bench gave a finding only thereafter.
Therefore, the decisions of both the above cases are exactly identical but the headnotes of both these decisions created havoc for quite long time.
40. When the Hon'ble Judges of the Patna High Court in the case of Addl. CIT v. Hanuman Agarwal held that it can never be within the exclusive knowledge of debtor to know the sources of income of the creditor, once he is supplied the credits that he wants, he is satisfied. Once, he has furnished the true identity, the correct address and the correct GIR number of the creditor, he fulfils his obligations under the Act. The assessee is not supposed to know the capacity of the money-lender or the cash creditor. This fact is within the exclusive domain of the creditor. It is for that specific purpose that Section. 131 of the Act has been introduced so that in case of any suspicion, the ITO or the authorities concern may exercise the power of a civil Court under that provision and call upon the creditor concerned to prove his capacity to pay and the genuineness of the transaction.
Once, the ITO is satisfied that the creditor is not telling the truth, it has been left open to the assessee to discharge his subsequent onus of proving the genuineness of the transaction and the capacity of the creditor to pay, by cross-examining him.
41. Hon'ble Judges of the Calcutta High Court in the case of C. Kant & Co. v. CIT have held that in the case of cash credit entry it is necessary for the assessee to prove not only the identity of the creditors but also to prove the capacity of the creditors to advance the money and the genuineness of the transaction. If this case is read in its entirety it would be clearly revealed that the Judges did not want the assessee to do an impossible act. In the light of the given facts of that case it was held that it was a question of fact whether the onus to prove the capacity has been discharged in a particular case or not. In that case, the assessee was not able to discharge even the preliminary onus cast on him, in this regard. But, if one goes by the headnote or a limited finding of the above Calcutta case, he would be misled. Therefore, both the decisions have almost the identical ratio but the misreading of the two creates confusion. Thus, it is always a factual matrix of a given case, which has to decide the fate of given cash credit. The onus to prove that the apparent is not the real is on the person who claims it to be so, it was mandated by the Hon'ble apex Gourt as back as in the year 1973 by deciding a case of CIT v. Daulatram Rawatmull . The query of the legal practitioner that is it possible to ask the proof of the capacity of the lender is very much real and apparent and the answer to it is only and only big 'No'. Any or every decision which ordains the proof of the capacity of the depositor, lender or the creditor, can never mean to ask for their direct capacity to advance, as has been sometime taken to mean.
42. In the light of all these observations, let it be stated that there may be cases where all the abovestated ingredients of Section 68 as established by the plethora of judicial pronouncements, are proved by the assessee, nevertheless, the credit may not be genuine. For example, if the assessee has created a genuine firm with different identity with the help of certain strangers, but this fact was obscured from the Department or it remained overlooked anyhow, and the assessee has proved that he received deposit/cash credit through account payee cheque, that other firm or assessee is assessed to tax and also had paying capacity and transaction is also established to be genuine, can it be a valid cash credit. The answer is 'No'. What follows from the above is that it is the overall commonsense and average prudence of the taxman, who is dealing with the facts of a particular case, which can decide the genuinity of the transaction, of course, which includes all the above three ingredients. In the same manner, there may be cases, where the deposit was not through account payee cheque, no confirmation was even filed, but the entries are found recorded both in the books of the creditor and the assessee, and both of them are assessed with the same AO, who is having command over the records of both of them, he can immediately accept the cash credit, as genuine. There is no need to even ask for any evidence, in this regard, any further, for that matter. That is why unlimited powers have been given by the precincts of this section and other sections of this Act to ascertain the veracity of a fact.
43. In a nutshell, it can be stated that the AO has to find out as to whether the deposit/gift/cash credit is a result of any collusion, is a result of any dubious device employed by the assessee, is a result of any subterfuge, which is aimed at evasion of tax. Therefore, even the cash credits by near and dear relatives and the partners of the firm can be genuine. These are to be doubted to a certain limit and thereafter the doubts should not be perennial.
44. The assessee has shown credit of Rs. 1,00,000 in the name of Sh.
Ajay Murdiya on 14th Aug., 1995, vide cheque No. 776641 issued on Dena Bank, Udaipur, and has credited interest of Rs. 11,250 as on 31st March, 1996. This creditor was produced, before the AO and his statement was recorded on 16th Feb., 1999. This creditor clearly accepted the factum of deposit with this assessee of Rs. 1,00,000 on 14th Aug., 1995, through cheque. He was subjected to lengthy cross-examination by learned AO to find out his capacity to deposit the impugned sum with the assessee. This amount was also accepted to have been returned to this creditor through cheque. For the source of deposit of Rs. 1,00,000 in cash, in his bank account, he explained that when his mother died in 1989, she left IVPs of Rs. 50,000 which were subsequently encashed in 1994, and on maturity he received Rs. 1,00,000, which was partly invested in business and partly given on loan and in the year 1995, the same was received from them and deposited in the bank account on 12th Aug., 1995. The AO also asked further minute details with regard to every statement by this creditor.
Because, the creditor could not give the details of IVPs and also the names and addresses of the persons to whom the sum was given subsequently in the year 1994 and received back in the year 1995, so the learned AO was of the view that this creditor was of very petty means and his creditworthiness and also the genuineness of the transaction were not proved and the assessee had himself routed its own unaccounted money through bank account of Sh, Murdiya.
45. Learned CIT(A) also confirmed this addition. on the basis of almost the similar reasonings. Learned Authorised Representative, Sh. Amit Kothari, submitted that the assessee has discharged the onus cast upon him as the. ; payment was made through cheque dt. 14th Aug., 1995, for Rs. 1,00,000, account confirmation was given by the creditor which is placed at page No. 80 of the paper book, the affidavit of the creditor was also filed which is placed at page No. 82 of the paper book, bank statement of Dena Bank was also produced, creditor was income-tax assessee, his statement was recorded by the AO, the repayment of the loan was made through cheque No. 530139 on 21st Jan., 1998, copy of account confirmation for asst. yr. 1998-99 (paper book at p. 83) was also filed. In the light of the above, it has been submitted that whatever was possible for the assessee, it has produced all the relevant evidence on record. The factum of loan has been proved and the repayment of the same along with the interest has been proved. The identity of the creditor is of course not in dispute. The AO has doubted this deposit on the basis of few instances with regard to repayment was in cash or through cheque, the names of persons with whom the money of the creditor was deposited during intervening period, etc.
46. The learned Departmental Representative has vehemently relied on the orders of learned AO and learned CIT(A) and read over the same in the open Court.
47. We have cogitated the above facts in the light of our reasonings which are discussed in detail in the foregoing paragraphs.
48. The undisputed facts with regard to the deposit of Rs. 1,00,000 by the creditor, Sh. Ajay Murdiya, are that this creditor has accepted the factum of deposit and the factum of the receipt of his loan amount along with the interest. His statement was also recorded by AO. All the possible documentary evidence(s) have been furnished in the case of this cash creditor. But, the only dispute, according to us, is with regard to capacity of this cash creditor to advance a sum of Rs. 1,00,000 to the assessee. This creditor was also cross-examined by the Representative of this assessee. Now, the question arises when this cash credit is tested from the yardstick of our detailed discussion given in earlier paras of this order, as to whether the onus cast upon the assessee stands discharged by him or not. It is true that the statement of the cash creditor could not clearly state various connecting transactions starting from the encashment of IVPs of his mother and thereafter the proceeds of these IVPs given to which and which persons. Can this whole gamut of facts lead only to the conclusion that the assessee has channalised its unaccounted money through this cash creditor When the statement of this creditor is read into its entirety, the preliminary onus cast upon the assessee is definitely discharged partially. This creditor did file IT return during this year only, he also did small business during this period, he also tried to explain the source of this deposit, then a question arises as to why he should tell lies with regard to this loan and the repayment of the loan along with the interest. At the same time, a question arises as to what the Department could have done any more to ascertain the fact of creditworthiness of this creditor. When the assessee has also done a good job in trying to prove this cash credit and the learned AO has also done his part in ascertaining the capacity of the cash creditor in question by way of lengthy cross-examination, during which he also gave chance to this depositor to explain and prove the bare facts regarding the availability of money in cash with him even in future. At the time of the arguments, it was felt by both learned Authorised Representative and learned Departmental Representative that in the light of the above facts, when no clear-cut finding can be given, this issue may be restored to the file of the learned AO for re-examination of this cash creditor.
49. It was also submitted by both the parties at this stage that all the other cash creditors need to be examined afresh because the position in relation to all of them is identical, mutatis mutandis.
50. We have rushed through the facts of other cash creditors and it was found that the payments were made in all these cases either through bank drafts or cheques, all are income-tax assessee's, confirmations of account of the creditor have been given, repayment were made through cheques and in the case of Sh. Gopal Mantri, Sh. Dashrath Kishore Vijay, their statements were recorded. We may however, make it clear that the cash credits along with their interest in relation to only five of the cash creditors, namely, Sh. Ajay Murdiya, Sh. Gopal Mantri, Sh. Dashrath Kishore Vijay, Sh. Anil Khandelwal and Smt. Pushpa Gandhi, totalling to Rs. 5,50,000 as loan amount and Rs. 59,630 being interest thereon, are only in dispute before us. The remaining cash creditors as are mentioned in the facts as above, are not in dispute before us. From our detailed discussion in relation to Section 68, now it becomes clear that when the loan/deposit/credit was received by account payee cheque or draft, the repayment was also through cheque or draft along with interest, confirmations were filed, in many of the cases statements of the cash creditors were also recorded, even then the impugned cash credit, cannot be covertly be taken to be genuine on the very face of it and even in these cases, certain further investigation is required.
51. Therefore, in the interest of justice we restore back the issue of cash credits along with interest to the file of learned AO with the direction that he shall decide this issue afresh after hearing the assessee and giving him a chance to adduce any relevant evidence which is desired by him. We may also make it clear that originally the assessee had taken various lengthy grounds, which were revised later on and only three effective grounds were survived. Therefore, ground Nos.
3 and 4 are restored to the file of the AO, as above.
52. At the same time, it was pleaded by learned Authorised Representative, Sh. Kothari, that in case, this Bench decided this issue on merits, the ground No. 2, which challenges the selection of this case for scrutiny should also be restored, although it was thought by him initially that in case, the appeal is allowed on merits he would not press the legal ground.
53. The above request of learned Authorised Representative is quite justified and we think it proper to restore ground No. 2 also to the file of learned AO, with similar directions.
54. The ground Nos. 1 and 5 are general in nature and the same are dismissed.
55. In the result, this appeal may be treated as allowed for statistical purposes.