| SooperKanoon Citation | sooperkanoon.com/70210 |
| Court | Income Tax Appellate Tribunal ITAT |
| Decided On | Aug-11-1998 |
| Appellant | K.C.N. Chandrashekar |
| Respondent | Assistant Commissioner of |
234A, 234B and 234C of the Act.
2. Appearing for the assessee, the learned counsel Mr. Venkatesan submitted that Mr. B. N. Vasudev is in noway related to the assessee.
He submitted that Mr. Vasudev is a handicapped person and had advanced the assessee Rs. 6 lakhs. The amount was received through proper banking channels and the assessee had obtaining confirmations which were produced during the course of assessment proceedings. The AO, however, was not satisfied with the confirmation because he was of the view that the creditor must indicate the source from which he had advanced the amount to the assessee together with the information about he being assessed under the Act, etc. The other reason which compelled the AO to disbelieve the confirmation was that Mr. Vasudev did not respond to the summons that was issued under the Act. Mr. Venkatesan submitted that Mr. Vasudev could not attend because of his handicapped confinement, but had filed a letter in response to the summons which had been reproduced by the AO in his order. In this letter, he had stated that the information called for by the AO was three to five years old and he needed time to trace them and in this letter he had again confirmed that he had paid Rs. 6 lakhs to the assessee by means of an account payee cheque. The AO directed the assessee to produce the creditor, in which it was stated that if the assessee failed to produce the creditor, the amount of Rs. 6 lakhs would be treated as income in his hands. In reply to the directions of the AO, the assessee had stated that the creditor is out of station and had not been keeping good health and prayed for further time. However, the creditor never appeared before the AO and thus the AO added Rs. 6 lakhs to the income of the assessee.
3. The CIT(A) has issued the summons and the creditor was examined by him on 2nd February, 1996. The creditor in his statement had confirmed having lent the amount to the assessee. The CIT(A) had observed that the creditor was advised vide his letter dt. 7th February, 1996, that he had failed to furnish the address of Mr. Devichand, from whom he had borrowed the amount; the address of a friend of the brother of Mr.
Vasudev who had introduced him to the bank at Madras in which the cheque received from Mr. Devichand was alleged to have been given credit for; the details and copies of the bank accounts maintained by him from the last five years and the agreement with the assessee on 5th February, 1996. Because the assessee failed to prove the creditworthiness of the creditor, he refused to delete the addition.
4. Mr. Venkatsan drew our attention to the decision of the Patna High Court in Saraogi Credit Corpn. vs. CIT (1976) 103 ITR 344 (Pat), for the proposition that when the creditor is not a relative of the assessee and the assessee having shown that the amounts have been received through cheques only and the creditor is equally identified, then, the burden shifts from the assessee to the Department to prove that the credit is an unexplained one. He also referred to the Third Member decision of the Tribunal in ITO vs. Suresh S. Kalmadi (1988) 32 TTJ (Pune) (TM) 300 : (1988) 1 SOT 865, wherein it is held that if the loans have been received by cheque, the assessee's liability is discharged and the assessee could not be burdened with unexplained cash credit. Mr. Venkatesan contended that the assessee had done all that is possible and the Department had also noted that the creditor is alive and had been examined and had accepted having lent the amount. He further submitted that the Department had carried out the examination of the creditor to the extent that they had obtained confirmations from Mr. Devichand and also the source from which he had given the amount to the assessee. In these circumstances, he submitted that nothing further requires to be done by the assessee in establishing that the credit is a genuine one.
5. Mr. Jacob, the learned Departmental Representative vehemently opposed the various submissions made by the counsel Mr. Venkatesan. He said that one of the main criteria is establishing the creditworthiness of the creditor. Merely because the amounts were received by cheques it does not mean that the assessee had discharged the onus that lay upon him. He referred to the decision of the Calcutta High Court in Shankar Industries vs. CIT (1978) 114 ITR 689 (Cal), wherein the Court clearly ruled that the requirement of proving the genuineness of a cash credit covers the establishing the identity of the creditor, his creditworthiness to advance the money and the genuineness of the transaction. He also referred to another decision of the Calcutta High Court in C. Kant & Co. vs. CIT (1980) 126 ITR 63 (Cal) for the same proposition. The third decision of the Calcutta High Court that was cited for the same proposition was in the case of CIT vs. Precision Finance (P) Ltd. (1994) 208 ITR 465 (Cal).
6. The rival contentions in this regard have been very carefully considered. The assessee is carrying on the business of production and distribution of motion pictures and has other business activities too.
Mr. B. N. Vasudev is supposed to be a local resident of Indira nagar, Bangalore. Going by the proposition of the assessee that Mr. Vasudev is a third party unrelated to the assessee, there must obviously be some factor that existed between the assessee and Mr. Vasudev which would have compelled Mr. Vasudev to lend Rs. 6 lakhs to the assessee. To put it in other words, no person who is not known to the assessee would take the risk of giving Rs. 6 lakhs to a person who is dealing in the production and distribution of films. The other claim made is that Mr.
Vasudev is a handicapped person. The movements of a handicapped person are always restricted, but however, he may have friends who could take care of him and also his financial interests. The features of various interests of Mr. Vasudev is not brought out anywhere and how he came about to lend the amount to the assessee has also not been brought out anywhere.
7. Mr. Venkatesan, however, made a statement during the course of hearing that the Department had carried out examination of Mr.
Devichand who had apparently lent the amount to Mr. Vasudev, who in turn lent the same to the assessee. There were wild statements unsupported by any sort of evidence. In fact, even during the reply to the submissions made by the Departmental Representative, Mr. Venkatesan did not even plead to call for examination of the various records of Mr. Vasudev wherein the stated examinations were conducted.
8. As had been observed by the Calcutta High Court in Shankar Industries (supra), the existence of a person is nodoubt important and more important is the capacity of the creditor of advance the money and to establish that it was a genuine transaction. As observed above, the party being unrelated to the assessee would have definitely taken such precaution so as to ensure that the amount could be recovered. We may observe that the counsel Mr. Venkatesan did not touch upon the observation of the CIT(A) that was made with reference to six sheets of paper purported to be copies of confirmations of loans taken by Mr.
Vasudev that has been referred to in his order in para 3. He had noted that all the six sheets were xerox copies with identical printing thereon and the handwritten portion in all the sheets were written by the same person and five of the six sheets bore one person's signature.
The handwritten portion indicates that the amounts were lent by Mr.
Vasudev between 5th and 19th February, 1992. The CIT(A), however, observed that the look of the copies clearly indicates that they were not prepared in the regular course of business. The CIT(A) further observed that the assessee did not even explain as to how he managed to obtain the said confirmations from Mr. Vasude v.9. The CIT(A) had drawn reference to the decision of the Karnataka High Court in Bedi & Co. (P) Ltd. vs. CIT (1983) 144 ITR 352 (Kar) wherein it was observed that it was for the Department to show that the apparent state of affairs was not real. After referring to the above, he concluded that in the instant case, the assessee had not been able to show that the creditor was creditworthy enough. The creditor Mr.
Vasudev was nodoubt produced before the CIT(A) and the CIT(A) had clearly observed that the undertaking given by the creditor to provide information with regard to the person from whom he had taken the amount and also produced the bank pass book and the cheques that were issued in favour of the assessee, but had failed to provide the necessary facts and evidences. Mr. Vasudev was fully aware of the purpose for which he was being summoned and if the transactions were really carried out by him, he would have carried with him the necessary evidences.
Because he did not carry the necessary support etc., which he obviously did not possess, it is one of the cases where the person purported to be a creditor had failed to establish his creditworthiness.
10. In these circumstances, we are of the view that the authorities in this particular case, in the circumstances of the case were justified in adding the amount as unexplained cash credit and we confirm their action.
11. Insofar as the levy of interests under ss. 234A, 234B and 234C is concerned, the perusal of the provisions of the Act, leaves little doubt that it is mandatory, that it is to say that the AO has no discretion whatsoever with regard to levy of interest. This plea of the assessee is also rejected.