M/S. Acron Finance (P) Ltd v. Commissioner Of Income Tax-2Jalandhar

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 61 of 2006Date of decision: 30.11.2010 M/s. Acron Finance (P) Ltd.through its Director Rakesh Thapar --- Appellant Versus Commissioner of Income Tax-2Jalandhar --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTALHON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present:Mr. Ravish Sood, Advocatefor the appellant-assessee. None 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 the orderdated 13.7.2005, passed by the Income Tax Appellate Tribunal AmritsarBench, Amritsar (in short “the Tribunal”) in ITA No. 208(ASR)/2000relating to the assessment year 1996-97. The appeal was admitted for determination of the following substantial questions of law by this Court: “1-Whether the Tribunal was right in law in sustaining the orderof the authorities below, wherein the latter had treated certainof the authorities below, wherein the latter had treated certain ‘deposits’ as ‘unexplained cash credits’, by neither taking anycognizance of the ‘affidavits’ of the ‘depositors’ as per whichtheir identity and source of deposits stood duly substantiatednor bring any material on record which could go to refute thecontents of the same? 2- Whether on the facts and in the circumstances of the case,the tribunal was right in law by treating the deposits of Rs.10,000/- each of S/Smt. Payal Sehgal and Veena Rani as‘unexplained cash credit’ and therein not setting aside thesame to the file of the A.O. for reconsideration?”the tribunal was right in law by treating the deposits of Rs.10,000/- each of S/Smt. Payal Sehgal and Veena Rani as‘unexplained cash credit’ and therein not setting aside thesame to the file of the A.O. for reconsideration?” The facts, in brief, necessary for adjudication, as narrated in the appeal are that the assessee filed return for the assessment year1996-97 declaring loss of Rs. 1,82,095/- which was taken up for scrutinyand notice under Section 143(2) of the Act was issued. Duringassessment proceedings, the assessing officer earmarked deposits inthe names of 35 parties, aggregating to Rs. 4,22,300/- and made queryfrom the assessee in respect of the parties whose deposits were foundto be of Rs. 9,000/- or above. The assessee supplied completeparticulars of the depositors. But still, the assessing officer on furtherinvestigation into the matter at his own level, treated the above amountin respect of all the 35 deposits as ‘unexplained cash credits’ andassessed the income of the assessee company at Rs. 3,45,120/- videorder dated 24.12.1998. Before the Commissioner of Income-tax (Appeals) {in short“the CIT(A)”}, the assessee produced further evidence in the shape ofaffidavits of 15 depositors in order to wriggle out of the additions madeby the assessing officer in that context. The CIT(A), however, was of the view that since it was a fresh evidence which could only be examined bythe assessing officer and, accordingly directed the assessing officer toexamine the aforesaid fresh evidence and report whether such creditswere acceptable or not. During remand proceedings before theassessing officer and despite various submissions made on behalf of theassessee nothing favourable could be gained by him. The assessingofficer, thus, again put its seal on the additions made earlier. The CIT(A) on receipt of report from the assessing officersustained the additions made by him and dismissed the appeal videorder dated 9.2.2000 as the assessee had not produced material tosubstantiate genuineness of those deposits. The CIT(A) in paras 3.4 to3.6 observed as under: view that since it was a fresh evidence which could only be examined bythe assessing officer and, accordingly directed the assessing officer toexamine the aforesaid fresh evidence and report whether such creditswere acceptable or not. During remand proceedings before theassessing officer and despite various submissions made on behalf of theassessee nothing favourable could be gained by him. The assessingofficer, thus, again put its seal on the additions made earlier. The CIT(A) on receipt of report from the assessing officersustained the additions made by him and dismissed the appeal videorder dated 9.2.2000 as the assessee had not produced material tosubstantiate genuineness of those deposits. The CIT(A) in paras 3.4 to3.6 observed as under: “ 3.4 The A.O. has since submitted his report dated 24/27-12-99, copy of which was made available to the appellant.It was pointed out by the Ld. A.O. that the Ld. counsel Sh.K.K. Sareen, C.A. was asked to furnish whatever evidencehe had to prove the source of deposit corresponding to whichadditions have been made at the time of assessment. Thecase was fixed for hearing by the A.O. on 17.12.99, asdesired by the counsel. On 17.12.99, Sh. K.K. Sareen, C.A.appeared along with Sh.Rakesh Thapar, Managing Directorof the company before the A.O. However, neither anydepositor was produced for recording of statement nor anywritten reply was filed. The A.O. has concluded that theassessee company had no evidence to prove the source ofcash credits. 3.5 A copy of the report of the A.O. was made available tothe appellant and the case was fixed for hearing on 8.2.2000.It was admitted by Sh. K.K. Sareen and Sh. Dheeraj Sehgal,Director that no evidence were produced before the A.O. insuppot of the credits. A written submission dated 8.2.2000was also filed along with copies of certain documents. Asnone of these documents was produced before the A.O.neither during the assessment proceedings or during theremand proceedings, no cognizance is being taken inrespect of these documents and this was brought to thenotice of Ld. counsel during the appellate proceedings on8.2.2000. 3.6 In the light of above discussion, it is clear that theassessee company had shown deposits in 35 names butrequired evidence was not produced before the A.O. to provethe genuineness of the credits by establishing the identityand capacity of the creditors and genuineness of thetransactions although the A.O. had allowed sevenopportunities to the assessee. No evidence was producedbefore the A.O. even when another opportunity was allowedto the assessee to produce necessary evidence before theA.O. during the remand proceedings as mentioned above. Inthese circumstances, the action of the A.O. in treating thedeposits of Rs. 4,22,300/- as income of the assessee wasjustified and is upheld.” The assessee took the matter in appeal before the Tribunaland emphatically submitted that the assessing officer and CIT(A) had failed to appreciate the facts in the right spirit. Before the Tribunal aswell, the assessee reiterated its submissions made before the authoritiesbelow. The Tribunal while partly allowing the appeal provided one moreopportunity to the assessee to prove the genuineness of four depositors,namely, Sh. C.L. Duggal, Mr. Nirdosh Sareen, Pinki Dada and Sh.Satinder Sehgal, by restoring the matter to the file of the assessingofficer. However, the other depositors were not accepted to be genuineas the assessee had failed to establish the identity of the creditors, creditworthiness of the creditors, and genuineness of the said deposits. Hence, this appeal at the instance of the assessee. We have heard learned counsel for the appellant and haveperused the record. failed to appreciate the facts in the right spirit. Before the Tribunal aswell, the assessee reiterated its submissions made before the authoritiesbelow. The Tribunal while partly allowing the appeal provided one moreopportunity to the assessee to prove the genuineness of four depositors,namely, Sh. C.L. Duggal, Mr. Nirdosh Sareen, Pinki Dada and Sh.Satinder Sehgal, by restoring the matter to the file of the assessingofficer. However, the other depositors were not accepted to be genuineas the assessee had failed to establish the identity of the creditors, creditworthiness of the creditors, and genuineness of the said deposits. Hence, this appeal at the instance of the assessee. We have heard learned counsel for the appellant and haveperused the record. Learned counsel for the assessee submitted that the Tribunalwas in error and had recorded findings which are based on surmises andconjectures without there being any sufficient material on record.Learned counsel further submitted that the affidavits had been filed bythe depositors to prove their identity and, in such a situation, it was notproper for the Tribunal to have sustained the additions. It was nextargued that the Tribunal had referred back the matter in respect of fourdepositors, namely, C.L. Duggal, Mrs. Nirdosh Sareen, Pinki Dada andSatinder and the Tribunal ought to have remanded the case with regardto other depositors also. Once the affidavits had been furnished by theassessee, there could not have been any doubt about the genuinenessof those depositors. Learned counsel placed reliance on Mehta Parikh and Co.v. Commissioner of Income Tax, Bombay, (1956) 30 ITR 181 (SC), L.Sohan Lal Gupta v. Commissioner of Income Tax, U.P. Lucknow, (1958) 333 ITR 786 and Collector, Land Acquisition v. Mst. Katiji andothers, (1987) 167 ITR 471. We have given our thoughtful consideration to thesubmissions made by the learned counsel for the assessee. It would be apt to reproduce the findings recorded by theTribunal in paras 3.9 and 3.11 of its order, which are: “3.9. Now in this case, it is a fact that the assessee did notfile any evidence and even affidavits during the course ofassessment proceedings. Even during the course ofappellate proceedings, the assessee could file affidavits onlyin respect of 15 depositors. The Ld. CIT(A) referred theseaffidavits to the A.O. with a direction to examine the same inthe light of evidence whatever the assessee would like toproduce. Copies of these affidavits appeared on pages 42 to54 of the CIT(A)’s appeal folder. Even the writtensubmissions filed by the assessee before the CIT(A) videletter dated 30.11.1999 are at pages 55 to 60 of the paperbook. Nowhere the same shows that the assessee hadoffered that it could produce depositors provided anopportunity of producing the same was allowed by the AO. Itsimply refers that the AO could have issued summons underSection 131 for investigating the source. But summons underSection 131 could be issued only if the assessee expressesits inability for producing the creditors or requests the AO todo so. Otherwise the onus is on the assessee to producesuch creditors before the A.O. as held by the Hon’ble Punjaband Haryana High Court in the case of CIT vs. Vir Bhan and sons (supra). The A.O. submitted the remand report videletter dated 24/27.12.1999 where he had clearly mentionedthat the assessee was given full opportunity to furnishwhatever evidence was with him to prove the sources ofcash credits. Neither the assessee produced the creditorsnor filed any written submissions and, therefore, there wasno evidence available with the assessee to prove the same.This was also confronted to the assessee vide CIT(A)’s letterdated 2.2.2000 and the case was posted for hearing on8.2.2000. The Ld. counsel for the assessee along with theDirector and the Accountant appeared before the CIT(A) on8.2.2000 and accepted that no evidence was producedbefore the AO as reported by the AO. The order sheet entrydated 8.2.2000 is duly signed by these persons. However,the reply submitted in the letter dated 8.2.2000 is on recordof CIT(A)’s folder at pages 87 & 88. In the said letter, it hasbeen mentioned that on 17.12.1999, few depositors wereasked to come to the office for recording their evidence, butthey could not turn within officials hours and as such threemore persons appeared at about 5.30 P.M. and theiraffidavits were got signed from them and attested. Thedetails for the same were given in the letter. These factsclearly show that the assessee could not produce thedepositors despite opportunity allowed by the AO during thecourse of remand proceedings. The contentions of the Ld.AR that the assessee was not asked to produce thesedepositors is untenable and incorrect, in view of the facts placed on record. In fact, the assessee has miserably failedboth during the course of appellate proceedings andassessment proceedings to produce these depositors orfurnish any worthwhile evidence in spite of the fact thatample opportunities were allowed. 3.11. Before parting with this ground, I wish to mention thatthe Ld. counsel had relied on certain judgments stating thatthe averments made in the affidavits should be accepted untilthere is a contrary material brought on record. I am unableto agree with such proposition for the simple reason thatthere is no universal proposition of law that a statement givenin the form of an affidavit should be accepted as true. I havealready discussed in detail that in case of cash credits, theonus of proving the source and genuineness is entirely onthe assessee and mere filing of confirmations or affidavitswithout there being any corroborative evidence does not byitself prove the source and genuineness thereof. Moreover,these affidavits were not even filed during the course ofassessment proceedings. These were filed only during thecourse of proceedings before the CIT(A) and there also theasssessee failed to either produce depositors or file anyfurther corroborative evidence in support of the case, I amunable to accept the submissions of the assessee thatcontents of the affidavits should be accepted and no additionon account of cash credit should be made.” As observed by the CIT(A) and also recorded by theTribunal, the assessee had been provided ample opportunities to As observed by the CIT(A) and also recorded by theTribunal, the assessee had been provided ample opportunities to substantiate its claim with regard to depositors to be genuine, but theassessee had failed to discharge the onus placed upon it by establishingthe identity of the creditors, their creditworthiness and genuineness ofthe deposits. The CIT(A) had already provided another opportunity to theassessee to prove its case but the assessee had failed to produce anymaterial to show the deposits to be genuine. The Tribunal hadremanded the case with regard to four depositors whereas otherdepositors were held not to be genuine on the ground that the amountwas stated to have been paid to the assessee by them out of savingfrom household expenses etc. without producing any evidence. Thecounsel, however, made an attempt to persuade this Court to remandthe matter. But in the facts and circumstances of the case, as noticedabove, it is considered not to be a fit case where the assessee deservesany further opportunity to establish genuineness of other depositors byremanding the case in that regard. The findings of fact recorded by theauthorities below have not been shown to be perverse in any mannerwhich may warrant interference. As regards the judgments relied upon by the learned counsel,suffice it to say that the proposition of law laid down therein is well-recognized, but in view of the findings noticed above, the said judgmentsdo not come to the rescue of the appellant. The substantial questions oflaw are answered against the assessee and finding no merit in theappeal, the same is dismissed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) JUDGE *rkmalik*