Ita/85/2001 Of Kanhaialal Jangdi v. The Assistant Comissioner Income Tax

D.B. INCOME TAX APPEAL NO.85/2001. DATED : 02.01.2007 HON'BLE MR. RAJESH BALIA, J.HON'BLE MR. CHATRA RAM JAT, J. Mr.M.S.Singhvi for appellant.Mr.Sangeet Lodha for the respondent. ***** The appeal was admitted on 15.10.2001. The substantial question of law that arises for consideration of this appeal were notframed at the time of admission. The assessee appellant in his memoof appeal has raised following questions as substantial questions oflaw. 1: Whether the learned ITAT wasjustified in upholding the addition ofRs.32,000/- in the hands of the assessee forthe A.Y.1991-92 which represented the cashcredits taken by the assessee from one SriRamulal and Shri Devendra Sankhla? 2.Whether, the learned ITAT wasjustified in upholding of addition to theextent of 1/4[th] of depreciation and Rs.1,000/-on account of expenditure on books andperiodicals? Questions Nos. 3 and 4 referred to an amount in appeal aregeneral and does not relate to any specific subject matter. So far as question No.2 is concerned we find that theAssessing Officer has considered the claim of the assessee forallowing as deduction the expenses incurred by him on purchase ofbooks, periodicals and stationary for the purposes of his business.However, the Assessing Officer found when inquired to verify thepurchases of these items the assessee was unable to produce anymaterial either in the form of vouchers or otherwise to support thisclaim. In the circumstances, the Assessing Officer disallowed theclaim of Rs.2,500/- out of Rs.4,500/- claimed as deduction on thiscount. On appeal the CIT [Appeals] sustained the disallowance buton further appeal the Tribunal sustained the disallowance only to theextent of Rs.1,000/-. Since it is a case in which the verification of explanation ofexpenses actually incurred was not available and the disallowance ofthe claim led by the assesssee was made on the estimated basisbecause of the want of relevant material to sustain actual expenditureincurred on aforesaid items, in our opinion it does not give to anyquestion of law much less substantial questions of law. In theabsence of verification of material expenses claimed as deduction as expenses actually incurred or laid out wholly and exclusively for thepurposes of assessee, the reas... to estimation is permissible in lawand ... guess work is inherently invoked in such estimation. Hencethe extent to which claim of the assessee has been sustainedremaining ordinarily a finding of fact. In the facts andcircumstances where in the absence of proper material if theAssessing Officer has resorted to estimate and on estimated basis theTribunal has sustained the certain amount of claim only, it cannot besaid to be that disallowance of the claim is founded on no material orirrelevant consideration. Therefore, the finding on that account doesnot call for interference. The Question No.1 relates to disallowance on account ofcash credits found in the books of the assessee Rs.16,000/- wasalleged to have been borrowed to have been by Sri DevendraSankhla and Rs.16,000/- was allegedly borrowed from one Ramulal.Assessee has produced the confirmation letters from both thecreditors and has also produced Sri Devendra Sankhla before theAssessing Officer. Sri Devendra Sankhla on being produced beforethe Assessing Officer, affirmed that he had given in advance a sumof Rs.16,000/- to the assessee. However, the explanation of theassessee about the receipt of Rs.16,000/- from Devendra Sankhlawas rejected on the ground that on inquiry from Devendra Sankhla The Question No.1 relates to disallowance on account ofcash credits found in the books of the assessee Rs.16,000/- wasalleged to have been borrowed to have been by Sri DevendraSankhla and Rs.16,000/- was allegedly borrowed from one Ramulal.Assessee has produced the confirmation letters from both thecreditors and has also produced Sri Devendra Sankhla before theAssessing Officer. Sri Devendra Sankhla on being produced beforethe Assessing Officer, affirmed that he had given in advance a sumof Rs.16,000/- to the assessee. However, the explanation of theassessee about the receipt of Rs.16,000/- from Devendra Sankhlawas rejected on the ground that on inquiry from Devendra Sankhla the creditor could not satisfactorily explain source wherefromwhether he could have advanced Rs.16,000/-, looking to his incomeand family expenditures. In other words, the cash credit in the nameof Devendra Sankhla was rejected on the ground that the assesseehas failed to prove source wherefrom deposit or advance by SriDevendra Sankhla could be made. This finding has beenconsistently affirmed by CIT [Appeals] as well as by Tribunal. We are of the opinion that in rejecting the explanation of theassessee on the undisputed facts is founded on erroneous applicationof law in the matter. While it was the assessee's burden to furnishexplanation relating to such cash credits, the Assessee's burdendoes not extent beyond proving the existence of the creditor andfurther proving that such creditor owns to have advanced the amountcredited in the account of assessee to him. However, the burdendoes not go beyond to put the assessee under an obligation to furtherprove that where from the creditor has got or procured the money tobe deposited or advanced to the assessee. The fact that theexplanation furnished by the creditor about the source from wherehe procured the money to be deposited or advanced to the assessee,is not relevant for the purposes of rejecting the explanation furnishedby the assessee, and make additions of such deposits as income ofthe assessee from undisclosed sources by invoking Section 68 of the Income Tax Act, unless it can be shown by the Department that thesource of such money comes from the assessee himself or suchsource could be traced to the assessee itself. In the present casewhile existence of Sri Devendra Sankhla the creditor is not in doubt,and he has admitted to have advanced the loan to the assessee. Thefact that the explanation furnished Sri Devendra Singh about hissource of such advancement has not been accepted by the RevenueAuthority cannot lead to any presumption that the source of suchadvancement by Sri Devendra Sankhla emanated from the assessee.Therefore, additions of Rs.16,000/- in the income of assessee as cashcredit in the name of Sri Devendra Sankhla cannot be sustained.Such addition of income of assessee has to be deleted from theincome of assessee. Another Rs.16,000/- has been added to the income of assesseeas unexplained cash credit in the name of Sri Ramulal. The assesseehas explained that Ramulal who is a Land Tax Inspector hasadvanced the loan of Rs.16,000/- to him. However, he has alsofurnished an affidavit purporting to be by Sri Ramu Lal owning saidadvance to the the assessee. However, the Assessing Officer hasfound that said Ramulal was not produced for examination when sorequired by the Assessing Officer. He also found that the assesseehas not given correct and complete address of the said Ramulal so Another Rs.16,000/- has been added to the income of assesseeas unexplained cash credit in the name of Sri Ramulal. The assesseehas explained that Ramulal who is a Land Tax Inspector hasadvanced the loan of Rs.16,000/- to him. However, he has alsofurnished an affidavit purporting to be by Sri Ramu Lal owning saidadvance to the the assessee. However, the Assessing Officer hasfound that said Ramulal was not produced for examination when sorequired by the Assessing Officer. He also found that the assesseehas not given correct and complete address of the said Ramulal so that the efforts could be made through Inspector of Circle toascertain the genuineness of the creditor. In other words,notwithstanding the filing of affidavit the real existence of thecreditor who could come forward to own the deposit or advancementmade to the assessee was not proved. In such circumstances, theconclusion drawn by the Assessing Officer that the cash creditstanding in the name of Sri Ramulal is not explained to thesatisfaction of the Assessing Officer and consequently additionsmade in the income of assessee is a finding reached on the relevantmaterial. We hasten to add that it may not be taken that in all caseswhere a creditor is not produced the explanation furnished by theassessee has to be discarded without anything else. For example, ifthe creditor is an income tax assessee and holds a PAN Number, themere non-production of the creditor may not by itself entails thepresumption about non-existence of the creditor and non-advancement of the loan by him. It depends on facts andcircumstances of each case whether the fact about advancement ofthe amount by a creditor to the assessee has been explainedsatisfactorily or not. Once, the fact of advancement has been properly proved it isnot further obligation of the assessee to prove the source of source toreject the explanation about such credit with the assessee. Since, in the present case the Assessing Officer hasdefinitely referred to non-furnishing of complete address of thecreditor and that has hampered the inquiry into the correctness of theadvance made by the alleged creditor or his existence, the findingreached by the Assessing Officer about unsatisfactorily state ofexplanation furnished by the assessee about having receivedRs.16,000/- from Ramulal and consequential additions of suchamount as an income from undisclosed sources of assessee for theAssessment Year in question is a finding of facts founded onrelevant consideration. This finding has been successfully sustainedby CIT [Appeals] and the Tribunal and it does not given rise tosubstantial question of law to be examined for reappreciation of theentire evidence in this regard and to reach at a different conclusion.Accordingly, the additions of Rs.16,000/- as unexplained cash creditfrom Ramulal does not call for interference. Accordingly this appeal is partly allowed to the extent theaddition made on account of unexplained cash credit received fromSri Devendra Sankhla are to be deleted. Other additions challengedby the assessee in this appeal are sustained. No costs. J. , J.