Dayal Singh And Sons Throughits v. Commissioner Of Income Taxkarnal

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 73 of 2004Date of decision: 23.11.2010 Dayal Singh and Sons throughits Proprietor Dayal Singh --- Appellant. Versus Commissioner of Income TaxKarnal --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present:Mr. Pankaj Jain, Advocatefor the appellant. Mr. Yogesh Putney, Central GovernmentStanding Counsel for the respondent-Revenue. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act,1961 (for short “the Act”) has been filed by the assessee against theorder dated 16.7.2003, passed by the Income Tax Appellate TribunalChandigarh Bench ‘A’, Chandigarh (in short “the Tribunal”) in ITA No.1249/CHANDI/1998, relating to the assessment year 1995-96. The following substantial question of law has beenclaimed for determination by this Court: “Whether under the facts and circumstances of the caseand on the true and correct interpretation of theprovisions of Section 68, whether the Tribunal is justifiedin upholding the addition on the ground of lack ofexplanation for the source of income whereas when thegenuineness of the transaction and the identity of thecreditors along with the explanation of the credit standsestablished thereby complying with the requirements ofthe provisions of the Act?” The facts, in brief, necessary for adjudication, as narrated in the appeal are that the appellant-assessee is engaged in thebusiness of manufacturing, sale and re-sale of wheat thrasher andvarious agricultural implements. A survey was conducted on thepremises of the assessee on 7.3.1995. The assessment wascompleted on 27.3.1998. The assessing authority made an additionof Rs. 50,000/- on account of one cash credit received by theassessee through an account payee’s cheque No. 858325 on24.2.1995 from the saving bank account of one Manjit Kaur in theState Bank of Patiala. In response to a questionnaire issued in theprocess of probe, said Manjit Kaur got recorded her statement on22.12.1997 whereby she confirmed the advancing of the amount ofRs. 50,000/-. The assessing authority did not feel satisfied with theexplanation furnished on behalf of the assessee and consequentlymade an addition of the said sum vide order dated 27.3.1998. Aggrieved by the order of the assessing officer, theassessee filed appeal before the Commissioner of Income Tax(Appeals), for short [“CIT(A)”]. The CIT(A) deleted the said addition vide order dated 18.9.1998. In the appeal carried by the Revenuebefore the Tribunal, the order of the CIT(A) deleting the addition ofRs. 50,000/- was set aside and that of the assessing authorityrestored, vide order under appeal. We have heard learned counsel for the parties and haveperused the record. The point for determination in this appeal is, whether theTribunal had rightly sustained the addition made under Section 68 of theIncome Tax Act, 1961 by disagreeing with the explanation furnished bythe assessee and, holding that the cash credit was not genuine.Findings recorded by the Tribunal may be reproduced with advantagewhich read as under:- “In respect of ground no.2 AO noted that the assesseereceived a sum of Rs.50,000 from Smt. Manjit Kaur as cashcredit through account payee cheque No.858325 dated24.2.95. Statement of Manjit Kaur was recorded, whereinshe confirmed the loan being advanced AO noted that asum of Rs.50000 was deposited in cash on the same datewhen the cheque was advanced to the assessee firm. Aboutsource, Manjit Kaur stated 'I don't remember at themoment'. AO ultimately made the addition which came to bedeleted by CIT(A) in first appeal. 3.1 Ld. DR relied on order of AO and pointed out that a sumof Rs.50,000 no doubt was advanced through cheque buton the same date cash was deposited in the a/c of ManjitKaur. In respect thereof, she could not explain the source. “In respect of ground no.2 AO noted that the assesseereceived a sum of Rs.50,000 from Smt. Manjit Kaur as cashcredit through account payee cheque No.858325 dated24.2.95. Statement of Manjit Kaur was recorded, whereinshe confirmed the loan being advanced AO noted that asum of Rs.50000 was deposited in cash on the same datewhen the cheque was advanced to the assessee firm. Aboutsource, Manjit Kaur stated 'I don't remember at themoment'. AO ultimately made the addition which came to bedeleted by CIT(A) in first appeal. 3.1 Ld. DR relied on order of AO and pointed out that a sumof Rs.50,000 no doubt was advanced through cheque buton the same date cash was deposited in the a/c of ManjitKaur. In respect thereof, she could not explain the source. She is not a regular assessee. Her affidavit is incompleteand simply states that loan was given out of money sent byher husband from abroad and also from agriculturalsavings. No evidence was, however, filed to prove hercreditworthiness and genuineness of transaction. Ld. AR onthe other hand, relied on the impugned order. 3.2 After considering the rival submissions, we find thatManjit Kaur has advanced a sum of Rs.50,000/- to theassessee firm through cheque. In her statement, she hasaccepted that she advanced money to the assessee firm butin reply to source, she stated my husband owns about 10acres of land in village Jhimalgora and the loan was givenout of agricultural income. She also stated that her husbandis having income in Italy. In reply to a question 'what wasapproximate amount sent by your husband from Italy, shereplied, '...exactly it is not known to me'. AO further raised aquestion from the copy of account produced by theassessee M/s Dayal Singh & Sons, it is seen that you havedeposited Rs.50,000/- in cash on 24.2.95, please explainthe exact source of deposit', she relied ' I don't rememberexactly but amount might have been deposited from mysavings and agricultural income or from money sent by myhusband from Italy'. From the said statement, it is clear thatManjit Kaur explained the source of deposit in cash in ageneral manner. If any, funds are being received from aforeign country the same should have come throughbanking channel. That is not the position in the instant case. This is a case where provisions of Section 68 are clearlyattracted. Section 68 provided that any cash credit found inthe books relating to which the assessee offers noexplanation is unsatisfactory. Such credit could be chargedto tax as income of the assessee. The principle embodied inSection 68 is only a statutory recognition of what wasalways understood to be the law based upon the rule ofevidence that it is for the assessee to prove thegenuineness of borrowings or other credits in his books,since the relevant facts are exclusively within hisknowledge. The expression 'nature and source' has to beunderstood together as a requirement of identification of thesource and the nature of the source, so that thegenuineness or otherwise could be inferred. The law on thesubject prior to 1968 illustrates this position in a number ofprecedents. The Supreme Court in Kala Khan Mohd. HanifVs. CIT 50 ITR 1 pointed out that the onus on the assesseehas to be understood with reference to the facts of eachcase and proper inference drawn from the facts. The lawafter introduction of Section 68 did not change andrecognize the rule lay down by the Apex Court. We feel thatthe assessee could not prove the creditworthiness of thecreditors and genuineness of transaction because thecreditor has deposited the money on the same day in cashwhen the money on the same day was advanced to theassessee firm. The creditor was not in a position to pinpointthe exact source of money which was deposited nor did anyevidence or circumstantial filed before the tax authorities or even before us. We feel that it is a fit case where the AOhas rightly rejected the genuineness of the transaction andadded the cash credit. On facts of the case, we set asidethe order of CIT(A) on this issue and restore that of the AO.For relying on the surrounding circumstances and applyingthe test of human probabilities we rely on the decision in thecase of Sumati Dayal Vs. CIT 214 ITR 801 (SC). Groundstands allowed.” The Tribunal on appreciation of material on record hadobserved that the cash credit of Rs. 50,000/- in the name of Mrs. ManjitKaur was not proved to be genuine and was, therefore, liable to beadded under Section 68 of the Act. The Tribunal has taken a plausibleview while reversing the order of CIT(A) and the finding is based onevidence on record. Learned counsel for the appellant made strenuous effortsfor re-appreciation of evidence on the basis of which finding of fact hasbeen recorded by the Tribunal. However, he remained unsuccessful inhis attempt as he only required re-appreciation of evidence, withoutpinpointing any illegality or perversity in the evidence. Accordingly, thereis no merit in the appeal and the same is dismissed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) JUDGE