Income-tax---

----Cash credits---Genuineness of cash credits---Income-tax Officer adding credit in names of two minor girls to income of assessee-firm---Creditors genuine persons and identity of creditors -proved---Creditworthiness of creditors proved as amount of loan was accumulation of income on account of customary gifts in Hindu society received by minor girls ---Assessee-firm belonged to maternal uncle of creditors---Cash credits genuine and amount cannot be added to income of assessee---Indian Income Tax Act, 1961, S.68.

In the course of the assessment proceedings for the assessment year 1987-88, 'the Income-tax Officer found two cash credit entries in the names of two minor girls of Rs.9,000 each in the books of the assessee-firm and called upon the assessee to produce the two creditors. The Income-tax Officer being dissatisfied with the statement of the guardian of the minors added the amounts to the income of the assessee. The Commissioner of Income-tax (Appeals) affirmed the order of the Income-tax Officer. The Tribunal affirmed the order of the Commissioner of Income-tax (Appeals). On a reference:

Held, that the two creditors were genuine persons and the identity of the creditors had been proved. In Hindu society generous gifts in cash and kind are given to young children on the occasion of Dipawali, Dussera, Raksha Bandhan, etc. As regards the creditworthiness of the creditors, the guardian of the minors had stated that the amount of loan was accumulation of income on account of customary gifts received by the two young ladies, who lost their father at an early age. Since the amount involved in the loan advanced to the assessee by the minors was only a small amount of Rs.9,000 each, it could not be said that the creditors would not have accumulated that much amount during the period in question. The gifts were received by the minors on various occasions each year and for 12/14 years. Therefore, it could not be said that the creditworthiness of the creditors had not been established. The assessee-firm belonged to the maternal uncle of the creditors and hence the investment of the amount by the assessee in its own firm and paying them interest was a genuine transaction. Therefore, the assessee had satisfactorily discharged the primary onus which lay on it to prove the nature and source of the credits. Therefore, the cash credits could not be added to the income of the assessee.

CIT v. Anusuya Devi (Smt.) (1968) 68 ITR 750 (SC); CIT v. Precision Finance (Pvt.) Ltd. (1994) 208 ITR 465 (Cal.); CIT v. United Commercial and Industrial Co. (P.) Ltd. (1991) 187 ITR 596 (Cal.) ref.

R.K. Joshi and Mrs. U. Chakrawarthy for the Assessee.

U. Bhuyan for the Commissioner.

JUDGMENT

P.G. AGARWAL, J.---Under section 256(2) of the Income Tax Act, 1961, as per direction of this Court, the Appellate 'tribunal has referred the following question to this Court:

"Whether, on the facts and circumstances of the case, the assessee had discharged its onus as required under section 68 of the Income Tax Act, 1961, in relation to the two cash credits of Rs.9,000 each from Smt. Probha Bothra and Kumari Sonita Bothra?"

The relevant facts are that in the course of assessment proceedings for the year 1987-88, the Income-tax Officer was not satisfied about the genuineness of the two entries of cash credit in the name of Smt. Probha Bothra and Kumari Sunita Bothra of Rs.9,000 each. The Income-tax Officer called upon the E6sessee to produce the creditors, whereupon one Kamal Chand Bothra, elder brother and legal guardian of the two minor girls, appeared and the statement under section 13 1' of the Act was recorded. The Income-tax' Officer, however, was not satisfied and was of the view that the above amounts are not genuine transactions and added the same to the income of the assessee.

The Commissioner of Income-tax (Appeals) was also of the opinion that though the identities of the creditors have been proved but the credit worthiness of the creditors and genuineness of the loans have been proved and the Income-tax Officer was justified in adding a sum of Rs.18,000. The assessee made another futile attempt before the Income-tax Appellate Tribunal. Aggrieved by the decisions, the assessee approached this Court and the above reference was directed to be made.

We have heard learned counsel for both the parties.

Mr. U. Bhuyan, learned counsel for the Revenue, has raised a preliminary objection to the effect that in the present reference no question of law is involved and, as such, this Court may decline to answer the question. The question before us is, whether the assessee could discharge his onus under section 68 of the Income-tax Act? The facts are definitely involved to answer the above question but that does not make it a pure question of fact. Relying on the decision of the apex Court in the case of CIT v. Smt. Anusuya Devi (1968) 68 ITR 750, we reject the preliminary objection.

This is a case of cash credit and the primary burden is, on the assessee. In the case of CIT v. United Commercial and Industrial Co. (P.) Ltd. (1991) 187 ITR 596 (Cal.), reliance on which has 'been placed by learned counsel for the Revenue, the Calcutta High Court has laid down the following three propositions.

The assessee must prove---

(i) identity of creditors,

(ii) their creditworthiness, and

(iii) the genuineness of the transaction.

In the instant case, there is no dispute at the Bar that the two creditors, Smt. Probha Bothra and Kumari Sunita Bothra, are genuine persons. Even the Income-tax Officer was of the opinion that the identity of the creditors has been proved. As regards the creditworthiness of the creditors, it has been stated by the legal guardian that the amount of loan was accumulation on account of customary gifts received by these two young ladies, who lost their father at an early age. Although there is no direct material as regards the age of the two creditors, we find from the statement under section 131 of the Act that out of the two sisters, one was married in the year 1987 itself, which means, that she was of marriageable age. At the relevant time, the younger sister was reading in school. It is well-known that in our society, particularly in Hindu society, gifts in cash and kind are given to the young kids. Such gifts become generous on compassionate grounds. The gifts are generally given on the occasion of Dipawali, Dussera. Raksha Bandhan, etc., and considering the age and the amount involved, that is, a sum of Rs.9,000 only, it cannot be said that the creditors would not have accumulated that much amount during the above period. The Commissioner of Income-tax (Appeals) has observed that the creditors could have submitted a list of donors and the Tribunal, on the other hand, has stated that evidence, like affidavits from the relatives who paid the gifts, could have been produced. .In cases where the gift amount does not run into four or five figures, generally no record or list is maintained. Moreover, this is not a case of receipt of gifts on one occasion, like marriage, etc. Gifts were purportedly received on various occasions, each year and for 12/14 years. Thus, considering the facts and circumstances of the case, it cannot be said that the credit worthiness in respect of a sum of Rs.9,000 each by the two creditors has not been established.

As regards the genuineness of the transaction, it is submitted that the assessee-firm belongs to the own maternal uncle of the two creditors. Hence, if the assessee offered to invest their savings in their own firm and paying them interest at 18 percent., there was nothing to- disbelieve the transaction. There is no requirement of law that the amount should have been paid by way of cheque. Confirmation letters were duly produced before the Income-tax Officer.

Considering the facts and circumstances of the case, in our view, the assessee satisfactorily discharged the primary on us which lay on him to prove the nature and source of the credits. There cannot be any inference under the law that the confirmatory letters given by the assessee are bogus.? Learned counsel for the Revenue has relied on a decision of the Calcutta High Court in the case were of? CIT v. Precision Finance (Pvt.) Ltd.(1994)208 ITR 465.The facts of the case were altogether different as in that case the Assessing Officer had conducted enquiries through the inspector; but in the instant case, no enquires were made by the Revenue.

In view of the foregoing discussion, the reference is answered against the Revenue and in favour of the assessee.

M.B.A./4089/FC???????????????????????????????????????????????????????????????????????????????? Reference answered.