Judgment:
1. This appeal has been admitted in terms of the following questions :
'Whether the learned Income-tax Appellate Tribunal was right in its wisdom to hold that entries reflected in the regular books of account cannot be considered for the block assessment period ?
Whether the learned Income-tax Appellate Tribunal was justified in deleting additions by holding that the assessee had discharged its onus by producing the creditors ?
Whether it can be said that the mere production of creditors is sufficient to discharge the onus of the assessee and the creditworthiness/paying capacity is of no relevancy at all ?
Whether the learned Income-tax Appellate Tribunal was justified in deleting the additions without rejecting the findings of the Assessing Officer with regard to the creditworthiness and genuineness of the transactions ?
Whether the learned Income-tax Appellate Tribunal was justified in not applying the ratio in the case of Shankar Industries v. CIT : [1978]114ITR689(Cal) , as decided by the court to the present matter ?'
2. A search and seizure operation was carried out under Section 132 of the Income-tax Act, 1961, on August 2, 1996, at the business premises of Om Shanti and Sons, Bapu Bazar, Jaipur, Marcopolo, Choudhary House and at Rajdeep Hotel, Bapu Bazar, Jaipur. During the course of search incriminating documents and loose papers pertaining to the assessee, Ajay Kumar Sharma, partner of Holiday India Travels 'N' Tours, were seized.
3. Accordingly, on June 26, 1997, notice under Section 158BD of the Act was issued to the assessee, that was served on him on June 30, 1997. In response tothe notice, the assessee filed returns for the assessment years 1995-96 and 1996-97 on January 16, 1998. The assessee was also asked to file return for the block period, i.e., from 1986-87 to 1996-97. In response to that notice, the assessee filed the return for the block period also.
4. During the course of scrutiny of the returns and relevant material available for assessing the income for the block period, the Assessing Officer made an addition of Rs. 1,11,000 on account of unexplained cash credits. It is noticed by the Assessing Officer that the assessee has shown loans from the following parties :
S.No.
Name ofdepositors
Date
Amount
1.
Shri Jai Nath
22-4-1994
1,500
5-7-1994
10,000
11,500
2.
Shri Sunesh Sharma
28-5-1994
9,500
9,500
3.
Smt. Asha Sharma
15-6-1994
5,000
15-11-1994
14,000
6-14995
2,000
21,000
4.
Shri Tarun Arora
5-7-1994
10,000
10,000
5.
Shri S. P. Rajoria
5-7-1994
8,000
5-11-1994
10,000
18,000
6.
Shri Virendra Singh
15-11-1994
1,000
9-1-1995
7,000
8,000
7.
Sh. Harish Chaturvedi
15-11-1994
10,000
10,000
P. Y. 1995-96
1.
Shri S. P. Rajoria
8-4-1995
11,500
11,500
2.
Smt. Savitri Devi
10-9-1995
11,500
11,500
5. The summons were issued to these cash creditors. They, except Savitri Devi, appeared before the Assessing Officer and they were examined by the Assessing Officer. The Assessing Officer disbelieved the genuineness of the loans advanced by the aforesaid cash creditors. The Assessing Officer added Rs. 1,11,000 on account of bogus cash credits shown in the books.
6. In appeal before the Tribunal, the Tribunal has deleted the addition holding that cash credits are genuine. Otherwise also the Tribunal has taken the view that once the cash credits have been shown in the books of account maintained by the assessee in the regular course of business activities, no addition is warranted. He deleted the addition so made.
7. Heard learned counsel for the parties. Mr. Singhi, learned counsel for the Revenue, submits that when the cash credits are not genuine, the Assessing Officer has rightly taxed that amount in the hands of the assessee. He placed reliance on the decision of the Calcutta High Court in the case of CIT v. Korlay Trading Co. Ltd. : [1998]232ITR820(Cal) . He further submits that even if the cash credits have been shown in the cash books, unless that has been disclosed as income in the relevant assessment years, that can be taxed in the block assessment year treating that income as undisclosed income of the assessee.
8. We have considered the submissions of learned counsel and also perused the orders of the authorities below, i.e., the Assessing Officer and the Tribunal. The statements of cash creditors have been recorded, reasons have been given as to why the cash credits should not be treated as genuine.
9. In appeal before the Tribunal, after considering the contents of the statements of the cash creditors, the Tribunal has concluded the issue in para. 10 of its order, which reads as under :
'We have heard the rival parties and have perused the material placed on record. We are of the opinion that in regard to the cash creditors, the asses-see has discharged his primary onus by producing the creditors, another person who were duly examined by the Assessing Officer on oath. These creditors have accepted the fact of advancing loans. Besides, these loans are duly reflected in the books of account maintained by the assessee in the regular course of business activities. We, therefore, feel that the Assessing Officer was not justified in making the addition on these accounts. The additions are, therefore, deleted.'
10. On a perusal of reasons given by the Assessing Officer for disbelieving the cash credits they do not appear to be justified. The creditor Tarun Arora is a commission agent on sale of chappals. He advanced Rs. 10,000 and confirmed the genuineness of loan. Harish Kumar Chaturvedi, the other creditor, who advanced Rs. 10,000 and confirmed the loan. He receives commission from the United India Insurance Company. He earns commission roughly Rs. 30,000 to Rs. 40,000 per year. The next creditor is Shri Sunesh Sharma, who is working as accounts assistant in Taj Trade and Transport Co. Ltd. He advanced Rs. 9,500 and confirmed the loan advanced. The other creditor is Shri S.P. Rajoria, who is a retired employee and getting Rs. 2,000 as pension per month. He advanced Rs. 11,500 and confirmed the loan advanced. The next creditor is Jain Nath, who is a constable and his salary is Rs. 4,000 per month. He advanced Rs. 11,500 and confirmed the genuineness of the loan advanced by him to the assessee.
11. The next creditor is Smt. Asha Sharma. She is the mother of the assessee. She advanced Rs. 21,000. She is a teacher. She has stated that she advanced a loan out of her savings and part of the amount has been withdrawn from the bank. The next creditor is Shri Virender Singh. He advanced Rs. 8,000. He has explained that his source of income is agriculture. He is in a joint family. He confirmed the loan of Rs. 8,000 advanced to the assessee.
12. Smt. Savitri Devi advanced a loan of Rs. 11,500. Neither has she been produced nor has she filed the confirmation. The facts are not in dispute that except Smt. Savitri Devi all the cash creditors appeared and confirmed the advancement of loan to the assessee. They have even disclosed their source of income. The identities of the creditors are not in dispute.
13. With regard to the creditworthiness of such petty amounts, in our view, it cannot be said that the creditors are not capable to advance this petty amount, which has been shown against their names. Therefore, the identity of the creditworthiness of the creditors and their confirmation, the genuineness of the cash credit should not be disbelieved except in case of Savitri Devi, as neither she has been produced nor she filed the confirmation. The initial burden is on the assessee to discharge that the cash credits are genuine. Therefore, except the advance shown in the name of Smt. Savitri Devi, we do not find any justification to interfere in the order of the Tribunal so far as the rest of the cash creditors are concerned.
14. However, we are agree with Mr. Singh that merely because some entries in the books of account if shown, that does not prohibit the Assessing Officer to tax that amount in the block period, if that amount has not been taxed in the regular assessment. When the cash credits are not taxed in the relevant assessment years, that can be treated as undisclosed income and can be taxed after search in the block period.
15. In the result, we direct that except the cash credit shown in the name of Smt. Savitri Devi all other cash credits should be accepted as genuine. No addition can be made on account of those cash credits. However, we restore the order of the Assessing Officer regarding advance shown in the name of Smt. Savitri Devi. We further clarify that if the income is not offered for tax in the regular assessment years, showing the same in the regular books of account does not prohibit the Assessing Officer to tax that income in the block assessment for the block period.
16. In the result, the appeal is partly allowed.