JAGJIWAN KUMAR VS COMMISSIONER OF INCOME-TAX/WEALTH TAX, 1998 PTD-PUNJAB-AND-HARYANA-HIGH-COURT-INDIA 1461 (1996)

Income-tax---

----Reference---Assessment--Cash credits--Creditors identified, appearing in proceedings, admitting the advancement of loans to assessee---Confirmation letters filed---Sums advanced by cheque and repaid with interest by cheque-- Copies of Bank Statements filed---Tribunal on facts holding credit entries genuine---Justified---No question of law arises ---Assessee not bound to prove source of loans---Indian Income Tax Act, 1961, S.256(2).

The assessee derived income as a commission agent. During the assessment proceedings for the assessment year 1986-87, the Assessing Officer noticed four cash credit entries in the books of the assessee and, taking the view that all the four credit entries were bogus and fictitious and represented the unaccounted income of the assessee, made an addition of Rs.2,66,360 to the assessee's income. The Tribunal found that the moneys had been advanced by account payee cheques, arid had been returned by the assessee with interest by account payee cheques, that copies of bank statements had been filed, that the creditors had filed confirmation letters, had appeared before the Commissioner (Appeals), and admitted having advanced money to the assessee and had filed returns of their incomes. The Tribunal, therefore, took the view that all the cash credits stood duly explained by sufficient evidence and, therefore, there was no justification for any addition for any of the cash credit entries. The entire addition was thus deleted. On an application to direct a reference

Held, dismissing the application that no question of law arose from the Tribunal's order. The finding of fact given by the Tribunal was based on the material on record. The Tribunal correctly took the view that the assessee was not bound to prove-the source of the loans. Suspicion, however, strong, could not take the place of evidence or proof.

R.P. Sawhney, Senior Advocate and Mahavir Ahlawat for Petitioner.

Nemo for Respondent.

JUDGMENT

N.K. AGRAWAL, J.---This is a petition under section 256(2) of the Income Tax Act, 1961 (for short, "the Act"), by the Commissioner of Income-tax, seeking a direction to the Income-tax Appellate Tribunal, New Delhi (for short, "the Tribunal"), to refer the following question of law. to this High Court for opinion:

"Whether, on the facts and in the circumstances of the case, the learned Tribunal is right in law in deleting the addition of Rs.2,66,360 on account of cash credits by holding that the assessee was not supposed to .prove the source of loans because that could not be said to be within his special or exclusive knowledge?"

The assessee derived income as a commission agent in coal. He sold wagons and coal rakes of the third parties and charged commission. Search and seizure operations at the business and residential premises of the assessee took place on June 13, 1985, under section 132 of the Act. A return of income was filed by the assessee in the status of an individual on January 16, 1987. During the assessment proceedings for the assessment year 1986-87 (accounting year ending March 31, 1986), the Assessing Officer noticed the following cash credit entries in the books of the assessee:

Rs.

The Assessing Officer took the view that all the four credit entries were bogus and fictitious and represented the unaccounted income of the assessee. An addition of Rs.2,66,360 was, therefore, made to the assessee's income. The assessee went in appeal but did not get relief and, therefore, he filed a second appeal before the Tribunal where he succeeded. The Tribunal took the view that all the cash credits stood duly explained by sufficient evidence and, therefore, there was no justification for any addition for any of the cash credit entries. The entire addition was thus deleted.

From the facts emerging from the order of the Revenue Authorities, as well as the order of the Tribunal, it appears that the cash credit entry, recorded in the books of the assessee in the name of Ishwar Chand, was disbelieved on the suspicion that the creditor, Shri Ishwar Chand, being the real brother of the assessee's wife and also being an employee of the assessee, did not have the means to advance any loan to the assessee. The Assessing Officer took the view that the creditor, Ishwar Chand, was not doing any business and returns had been filed by him under the Act for the earlier three years so as to accommodate and help the assessee. The Tribunal, however, noticed that the confirmation letter had been duly filed and Ishwar Chand was also subsequently examined by the Commissioner of Income-tax during the appellate proceedings wherein Ishwar Chand confirmed the loan to the assessee. A sum of Rs.37,000 had been advanced by Ishwar Chand to the assessee on March 14, 1986, and the second amount of Rs.30,000 was given on March 19, 1986. Both the payments were made by account payee cheques. The money was returned by the assessee to Ishwar Chand with interest amounting to Rs.2,399 on July 22, 1986, by account payee cheque. A copy of the bank account of Ishwar Chand was also filed. On these facts, the Tribunal rejected the finding of the Assessing Officer as well as the Commissioner of Income-tax that the credit entry was not genuine.

The cash credits, recorded in the books of the assessee in the names of Prem Chand, Hindu undivided family and Prem Chand, individual, were also treated to be bogus and fictitious for the same reason as in the case of Ishwar Chand. Here also, the creditor had filed returns of income for the earlier three years after the search and seizure operation had taken place at the business premises of the assessee and assessments were got completed for all those years. The Tribunal accepted the two entries as genuine inasmuch as the identity of the creditor had been duly established and confirmation letter had also been filed. Money had been advanced by Prem Chand by account payee cheques and the loan was also repaid by the assessee by account payee cheque in July, 1986. Since the creditor, Prem Chand, was also examined by the Commissioner during the course of appellate proceedings before him, wherein Prem Chand had affirmed the advancing of money to the assessee, the Tribunal treated the two entries in the name of Prem Chand as genuine entries.

The fourth credit entry, recorded in the books of assessee in the name of Rajinder Orashad, was also treated by the Tribunal as a genuine entry inasmuch as the money had been advanced by Rajinder Prashad by account payee cheque and a confirmation letter had been filed. He was also an assessee and had been duly assessed for the earlier three years. He was also examined ,by the Commissioner of Income-tax during the appellate proceedings and therein he had admitted to have advanced money to the assessee. The loan was returned by the assessee to Rajinder Prashad with interest by account payee cheque on August 13, 1986. A copy of the bank account had also been filed. On these facts, the Tribunal took the view that it was only a case of suspicion that the credit entry had been treated to be bogus and fictitious whereas the facts brought on record did not justify the suspicion.

From the facts, as discussed above, there appears no question of law arising from the Tribunal's order. The finding of fact given by the Tribunal is based on the material on record. The Tribunal correctly took the view that the assessee was not supposed to prove the source of the loans. Suspicion, however, strong, cannot take the place of evidence or proof. On these facts, the question, as sought to be referred is declined.

The application is dismissed.

M.B.A./1408/FC Application dismissed.