Judgment:
1. The above-mentioned appeals have been filed by the Revenue against two different orders of the learned CIT(A) dt. 27th Jan., 2003 for the asst. yrs. 1994-95 and 1995-96, respectively. Since the issues in both the appeals are common, they are being taken up together for the sake of convenience as under: On the facts and in the circumstances of the case and in law the learned CIT(A)-II, Jaipur has erred in deleting the addition of Rs. 2,79,890 representing the bogus trade deposit and interest accrued thereon in the name of M/s Magadh Medicos holding that 'the assessee has discharged the burden which primarily lay on him under the provisions of Section 68' despite the fact that the AO had proved that all the explanation offered and evidence/documents furnished by the assessee in relation to the trade deposit were false.
3. The brief facts of this case are that return of income was filed on 30th Oct., 1995 and the assessment was completed under Section 143(3) on 11th March, 1998 after making various additions discussed in the order. The learned CIT(A) vide his order dt. 2nd Nov., 1998 restored the matter back to the AO with the following directions: (i) Regarding the loan of Rs. 2 lakhs from M/s Mathevan Sons, the AO is directed to verify whether or not, the confirmation letter was filed before her and even otherwise, the present confirmation letter may be examined afresh.
(ii) Regarding the addition on account of Rs. 6 lakhs from M/s Magadh Medicos, it has been directed by the learned CIT(A) that this addition requires afresh consideration on the part of the AO and various contentions made by the assessee require further investigation. So the matter is restored back to the AO. As such AO was directed to verify the confirmation letter and other contentions made by the issue in respect of trade deposits aggregating to Rs. 8 lakhs from Magadh Medicos and Mathevan Sons and decide the matter afresh.
4. Regarding loan of Rs. 2 lakhs from M/s Mathevan Sons, the confirmation letters were received and no addition on this account was made.
5. Regarding loan from Magadh Medicos, Makhania Kuan Road, Patna, for Rs. 6 lakhs the AO after perusing all the records and contentions therein and the various investigations as per instruction of learned CIT(A) observed vide para (vii) at p. 8 of his order dt. 28th Feb., 2001 reads as under: It is relevant to note that as per Section 68 of IT Act, whenever any sum is found credited in the books of assessee maintained for any previous year, it is the responsibility of the assessee to explain the nature and source thereof and satisfy the AO regarding genuineness of the said credit entries. The onus lies on the assessee to prove the identity of the lender, capacity of the lender and genuineness of the said transactions. In this particular case, the assessee was given repeated opportunities to submit the confirmation from the assessee. The assessee had expressed his inability to do so. Accordingly, as per the request of the assessee, letter dt. 21st April, 1999 was directly sent to the Magadh Medicos at the address provided by the assessee seeking information about the cash credit in his name. No response was received from the said party. Assessee was informed of the same vide letter dt. 1st Jan., 2000. Assessee sought time for filing his contentions. Then they filed a letter stating that M/s Magadh Medicos is proprietary concern of Jai Prakash Verma and is being assessed with ITO, Ward-1, and PAN of Shri Jai Prakash Verma given as AAPT-9696N and confirmation of Shri Jai Prakash Verma dt. 15th May, 1995 was also filed. Subsequently, inquiries were made on the basis of above informations by letter dt. 9th Oct., 2000 to ITO, Ward-1(1), Patna and commissions dt. 20th Oct., 2000 issued to Asstt. CIT, Circle-1(3), Patna. As per the result of the enquiries, it has been stated by proprietar of M/s Medicana Medical Agency, Shri Umesh Prasad Sharma that they have never made any transaction with the above concern. This shows that the investment of Rs. 4 lakh claimed by the assessee to have been made in the name of Medicana Medical Agency is not verifiable. This deposit has been shown to have been received by the assessee on following dates as per books of M/s Jawa Laboratories: So the above period relates to asst. yr. 1994-95. However, same transferred on 18th July, 2004 to the account of M/s Magadh Medicos.
As such, during the current year M/s Magadh Medicos is the creditor shown in the books of M/s Jawa Laboratories. The above facts emerge from the evidence collected by the Departmental authorities and the statement of prop, of M/s Medicana Medical Agency who is brother of Late Shri Ramesh Prasad proprietor of M/s Magadh Medicos.
It is very clear from above facts that assessee has not been able to discharge the onus on her to prove the identity, capacity and genuineness of the transactions regarding credit entry of Rs. 4 lakhs. Moreover, proprietor of M/s Medicana Medical Agency has specifically denied having made any transaction with M/s Jawa Laboratories.
Further, as regards the deposits from M/s Magadh amounting to Rs. 2 lakhs during the financial year 1994-95, it has been claimed by the assessee that Jai Prakash is proprietor of the said concern as per the confirmation letter filed while the enquiries revealed that this person was only staff member of M/s Magadh Medicos and actual proprietor was Shri Ramesh Prasad. It is also mentioned that PAN of Shri Ramesh Prasad was claimed to be PAN of Shri Jai Prakash Verma by the assessee in his letter dt. 30th Sept., 2000.
All these contradiction and results of the enquiries made from Patna through Departmental channels show that assessee has not been able to produce any evidence regarding the identity, capacity and genuineness of the transaction and in fact confirmation of Shri Jai Prakash Verma was filed showing as a proprietor of M/s Magadh Medicos while actual proprietor of said concern was Shri Ramesh Prasad, Keeping all the above facts in view, assessee's claim is rejected.
Out of above amount of Rs. 6 lakhs, Rs. 4 lakhs relate to asst. yr.
1994-95 and balance Rs. 2 lakhs relate to asst. yr. 1995-96. The learned CIT(A) had directed that various contentions made by the assessee regarding trade deposits from Magadh Medicos require further investigations. So the investigations from M/s Magadh Medicos clearly reveal that no such trade deposit was advanced by them, while the assessee had claimed that Rs. 6 lakhs were received by the assessee during asst. yrs. 1994-95 and 1995-96. Even the interest has also been claimed to have been paid by the assessee amounting to Rs. 79,890 to M/s Magadh Medicos during asst. yr.
1995-96 and Rs. 28,100 to M/s Medicana Medical Agency, Patna during the asst. yr. 1994-95 as per the records.
6. Keeping the above results of investigation and assessee's contentions in view, the AO made an addition of trade deposit of Rs. 2 lakhs and interest amount of Rs. 79,890 in asst. yr. 1995-96 and balance amount of Rs. 4 lakhs and interest thereon amounting to Rs. 29,110 was considered for asst. yr. 1994-95 for which relevant proceedings were separately initiated by the AO.7. The learned CIT(A) deleted the addition of Rs. 2,79,890 by observing that the assessee has discharged the burden which primarily lay on the assessee under Section 68 of the Act.
8. We have heard the rival submissions and have considered the totality of the facts. The deposit from M/s Magadh Medicos during the year has been claimed by the assessee as that of Jai Prakash as proprietor of M/s Magadh Medicos as per the confirmation letter filed, whereas as per the enquiries made by the AO Mr. Jai Prakash was a staff member of M/s Magadh Medicos and actual proprietor was Mr. Ramesh Chand and PAN of Mr. Ramesh was claimed to be PAN of Mr. Jai Prakash vide letter of the assessee dt. 30th Sept., 2000. The assessee has given wrong information throughout and, therefore, the assessee could not prove the genuineness of the deposit and the identity or the capacity of the depositor. In such circumstances, the deposit of the assessee of Rs. 2 lakhs along with interest of Rs. 79,890 has rightly been treated as income of the assessee under Section 68 of the Act by the AO. Therefore, we confirm the action of the AO and reverse the decision of the learned CIT(A).
Hence, the appeal of the Revenue is allowed.
(1) On the facts and in the circumstances of the case and in view of the Expln. 1 given under the proviso to Section 147, the learned CIT(A)-n, Jaipur, has erred in holding that the notice under Section 148 issued on 28th March, 2001 for the asst. yr. 1994-95 was barred by limitation within the meaning of proviso to Section 147, despite the fact that while framing the original assessment order the AO had not made any enquiry to ascertain the genuineness of the trade deposit of Rs. 4 lakhs declared in the name of M/s Medicana Medical Agencies.
(2) Without prejudice (to) the above, the learned CIT(A)-II has erred in not appreciating that the alleged confirmation filed by the assessee was 'false' as proved by the AO while making enquiries in asst. yr. 1995-96. The AO has correctly issued the notice under Section 148 within the meaning of Expln. 1 to Section 147 and its proviso. The learned CIT(A) has, therefore, erred in not confirming the addition on account of bogus trade deposit and interest claimed thereon on the basis of merit of the case.
10. The brief facts of this case are that the assessment in this case was completed for the asst. yr. 1995-96 under Section 143(3)/250 dt.
28th Feb., 2001 and it was found that the transaction of the assessee in the name of M/s Medicana Medical Agency, Makhania Kuan Road, Patna showing trade deposit during asst. yr. 1994-95 of Rs. 4 lakhs and interest of Rs. 28,110 claimed to have been paid to it were bogus and accordingly the AO issued the notice under Section 148 on 28th March, 2001 for the asst. yr. 1994-95. The facts of the deposit from M/s Medicana Medical Agency has already been discussed in detail and in case of ITA No. 208/Jp/2003 where the said deposit along with interest was held by the AO as bogus. The AO has discussed this issue in detail vide his order dt. 26th March, 2002 for the asst. yr. 1994-95 from pp.
1 to 5 of his order. Under the circumstances and the reasons mentioned therein in the (order) of the AO at pp. 1 to 5 as abovesaid, the AO treated the deposit of Rs. 4 lakhs along with interest of Rs. 28,110 as income of the assessee under Section 68 of the Act.
11. The learned CIT(A) vide his order dt. 27th March, 2003 observed by accepting the contention of the assessee that during the course of original assessment proceedings the assessee has duly filed the confirmation from the party with regard to trade deposit and the said confirmation is lying in the assessment record and the deposit has been accepted by the AO while making original assessment under Section 143(3) dt. 19th Oct., 1995 and from the facts on record there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment and the notice under Section 148 having been issued on 28th March, 2001 after expiry of period of 4 years from the end of relevant asst. yr. 1994-95 was barred by limitation as per proviso to Section 147 of the Act and notice under Section 148 if so warranted could have been issued on or before 31st March, 1999 and in view of this the learned CIT(A) annulled the assessment made by the AO on 26th March, 2002.
(1) In the appeal for asst, yr. 1994-95 Department has objected the annulment of assessment order under Section 147 by CIT(A) holding that it was time-barred.
(2) Notice under Section 148 issued on 28th March, 2001 for asst.
yr. 1994-95.
(3) The AO during the course of assessment proceedings for asst. yr.
1995-96 conducted enquiries and reached the conclusion that there were reasons to believe that income to the extent of Rs. 4,28,110 has escaped assessment for asst. yr. 1994-95, hence notice under Section 148 was issued.
(4) Section 149(1)(b) provides the time-limit in this case for issuance of notice under Section 148. If the escapement of income is or likely to be Rs. one lakh or more, then notice under Section 148 can be issued upto six years from the end of relevant assessment year. Hence notice under Section 148 issued for 1994-95 was well within time.
(5) In this case during the original assessment for asst. yr.
1994-95 the AO had not made any enquiry to ascertain the genuineness of the trade deposit of Rs. 4 lakhs declared in the name of M/s Medicana Medical Agencies. Here reference to Expln. 1 given under proviso to Section 147 is to be taken.
'Production before AO of account books or other evidence from which material evidence could, with due diligence, have been discovered by the AO will not necessarily amount to disclosure within the meaning of foregoing proviso.' Hence, in this case notice under Section 148 was well within time and after valid reasons of belief of AO.13. On the other hand, the learned Authorised Representative relied upon the order of the learned CIT(A).
14. We have heard the rival submissions and perused the material on record. The AO vide his order dt. 28th Feb., 2001 has found the deposit of Rs. 4 lakhs and interest thereon as bogus while framing the assessment for the asst. yr. 1995-96. Now the issue before us is to adjudicate upon, whether the AO is authorized to issue notice under Section 148 for the asst. yr. 1994-95 of the Act or not on the basis of information obtained while framing assessment for the asst. yr.
1995-96. The learned CIT(A) has quashed the assessment being barred by limitation since the assessee has disclosed fully and truly all material facts in the original assessment, whereas the AO while framing assessment of asst. yr. 1996-96 has found out the impugned deposit of Rs. 4,00,000 and interest thereon as bogus, then the assessee, in the opinion of AO, has not disclosed fully and truly all material facts necessary for her assessment for the asst. yr. 1994-95 and income chargeable to tax for that year has been underassessed. When the assessee has not disclosed fully and truly all material facts necessary for her assessment then as per proviso to Section 147 limitation period under Section 149(1)(a) will not apply but limitation period under Section 149(1)(b) of the Act shall apply i.e., notice under Section 148 of the Act could be issued within 6 years from the end of relevant assessment year. Merely because the case of assessee was accepted as correct in the original assessment, it does not preclude the AO to reopen the assessment of an earlier year on the basis of his findings of fact on the basis of fresh materials in the course of assessment of next year. Such view has been taken by the Hon'ble Supreme Court in the case of Ess Ess Kay Engg. Co. (P) Ltd. v. CIT (2001) 166 CTR (SC) 396 : (2002) 124 Taxman 491 (SC). Therefore the learned CIT(A) has wrongly ignored the findings by AO during the assessment of following assessment year i.e. 1995-96 vide order dt. 28th Feb., 2001, that the deposit of Rs. 4,00,000 and interest thereon are bogus. Thus, the limitation of 4 years from the end of, relevant assessment year under Section 149(1)(a) does not apply and the case shall fall under Section 149(1)(b) of the Act and the AO has issued the notice under Section 148 well within time. Hence, we reverse the order dt. 26th March, 2002 of learned CIT(A) and direct the learned CIT(A) to decide the case on merit. Hence, this appeal of the Revenue is allowed.