Calcutta H.C : The sum of Rs. 1,68,885 is not the income of the assessee from undisclosed sources for the asst. yr. 1968-69 and whether such finding is otherwise unreasonable and/or perverse

Counsel Appeared

A.C. Moitra, for the Revenue

SUHAS CHANDRA SEN, J.:

The Tribunal has referred the following questions of law under s. 256(2) of the IT Act, 1961 (“the Act”). “1. Whether, on the facts and in the circumstances of the case, the Tribunal relied on irrelevant materials and ignored relevant evidence in holding that the sum of Rs. 1,68,885 is not the income of the assessee from undisclosed sources for the asst. yr. 1968-69 and whether such finding is otherwise unreasonable and/or perverse ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal relied on irrelevant materials and ignored relevant evidence in holding that the sum of Rs. 1,04,085 is not the income of the assessee from undisclosed sources for the asst. yr. 1969-70, and whether such finding is otherwise unreasonable and/or perverse ?”

. Rs. Rs.

1. Om Prakash Suresh 15,16 Chand 2 .

2. Chowdhury Traders 5,191 .

3. shri B.L. Agarwalla 5,384 .

4. Smt. Sabitri Devi 2.052 . . . 27,789

5. Shri Prabhudayal 25,87 .

2. The assessment years involved are 1968-69 and 1969-70. The facts found by the Tribunal are as under : “The respondent in this case is a firm, and has been assessed in the status of an unregistered firm. The assessment years in issue are 1968-69 and 1969-70 for which the relevant accounting periods ended on March 31, 1968, and March 31, 1969, respectively. For the asst. yr. 1968-69, the assessee, Shyam Sunder and Co., was assessed as an unregistered firm on a total income of Rs. 3,00,104 which included a sum of Rs. 1,96,612 representing cash credits in the names of the following 12 parties:

Eductation Charity Trust 6

6. Shri Dal Chand Agarwalla 5,512 .

7. Sri Krishna and Co. 25,97 . 8

8. Shri Durga Rice and Oil Mills

9. Smt. Pushpa Devi 50,650 .

Agarwalla 9,778 .

10. Jagadamba Rice Mills 25,36 .3

11. Ramesh and Co. 20,44 . 6

12. Smt. Kushum Poddar 5,232 .. . 1,68,825 (Received in cash) Total . 1,96,612

3. The ITO treated as the assessee’s income from other sources a sum of Rs. 27,789 representing the cash credits in respect of four parties appearing at serial Nos. 1 to 4 above on the ground that the confirmation certificates were not filed.

4. As regards the cash credits appearing at serial Nos. 5 to 12 as above, the ITO specifically admitted that the confirmatory letters were filed. These cash credits totalled Rs. 1,68,825. But these were also treated on the same facts as income from undisclosed sources on the short ground that the creditors did not respond to the summons issued by the ITO. They were not produced before him and the assessee’s claim as to those credits being genuine was not accepted. Hence, the total income from undisclosed sources was added at Rs. 1,96,612.

5. On appeal, the AAC deleted the addition of Rs. 1,96,612 by observing that for the cash credits of Rs. 27,789 in respect of four parties, the assessee filed confirmatory letters and the ITO did not issue summons to them and, therefore, the claim of the assessee was valid. In respect of the cash credits of Rs. 1,68,825, relating to eight parties, the AAC observed that the loans were advanced by account-payee cheques. The creditors were income-tax assessees and the letters of confirmation were in order and one of the creditors was a public charitable trust. For the asst. yr. 1969-70, the ITO noticed the cash credits aggregating to Rs. 1,04,085 from seven parties as under :

6. Confirmatory letters were filed by the assessee but as the assessee did not produce the creditors with their account books, the ITO rejected the assessee’s claim about the genuineness of these credits and treated the total amount of Rs. 1,04,085 as the income of the assessee from undisclosed sources.

7. On appeal, the AAC deleted the addition of Rs. 1,04,085 by observing that the letters of confirmation were in order and that in view of this decision on a similar point in the

appeal for the earlier year, the ITO was not justified in treating the amount as the assessee’s income from undisclosed sources.

8. In respect of the asst. yr. 1968-69, the Tribunal set aside in part the order of the AAC relating to the four credits amounting to Rs. 27,789 observing that “… . . . there was a lot of controversy before us. The assessment records did not contain the confirmatory letters as they were produced before us. On the other hand, the AAC had mentioned that the confirmatory letters have been looked into by him. We find that the ITO issued summons to all the parties excepting these four

. Rs.

1. Bhurmal Sagarmal 15,760

2. P. K. Poddar and Sons 10,339

3. Om Prakash Dal Mill 10,093

4. Smt. Kanti Devi

Agarwal 10,225

5. Chowdhury and Co. 10,240

6. Sri Krishna and Co. 25,428

7. Smt. Kushumlata

Khemka 22,000

Total 1,04,085 parties. Considering the totality of the circumstances and after hearing the arguments of both the sides, we feel that, in the interest of justice, the issue relating to these four parties involving loans aggregating to Rs. 27,789 should be redecided by the AAC after hearing the ITO as well as the assessee. If the AAC feels satisfied that the creditors had acknowledged the loans and the creditors were credit-worthy, he should treat the loans as genuine after hearing both the parties.”

9. The Revenue went up to the Tribunal against the order of the AAC. The Tribunal held that sufficient materials were supplied to the ITO by the assessee on the basis of which the genuineness of the loans in question could be decided. The ITO failed in his duty in looking into the assessment records of the creditors and checking up bank accounts wherever available. The ITO, however, made short shrift of the assessee’s claim, on the main ground that the creditors and their books of account were not produced before him by the assessee. The pith and substance of the various decisions cited by theDepartmental representative is not that the cash credits should be treated as income from “undisclosed sources” even though the assessee had supplied sufficient materials to the ITO, which could have enabled him to come to a proper decision. These materials were not properly made use of by the ITO. The AAC was right in referring to some of the creditors and observing that even one of them was a public charitable trust. We find that in the case of these eight parties for the first year and seven parties for the second year, the material transactions were by cheques. For example, in the case of Sri Prabhudayal Education Charity Trust, Sri Dalchand Agarwalla and Ramesh and Co., the transactions were by cheques. Similarly, for the asst. yr. 1969-70, there were cheque transactions with P. K. Poddar and Sons, Om Prakash Dal Mill, Smt. Kanti Devi Agarwalla, Chowdhury and Co. and Smt. Kushumlata Khemka. These cheque transactions were not successfully impugned….” “The cash transactions in the case of the other parties could have again been verified by the ITO by looking into the assessment records of these creditors and also finding out whether they were credit-worthy. This was not done. Therefore, we uphold the AAC’s decision in deleting the addition of Rs. 1,68,885 for the first year and Rs. 1,04,085 for the second year and reject the Departmental stand on this issue.”

10. We fail to see how the question can now be raised about the Tribunal’s making its decision on irrelevant materials ignoring relevant evidence. The Tribunal has considered all other aspects of the matter. In some of the cases, the Tribunal felt that further examination was necessary and the cases remanded to the AAC for further investigation. But in the other cases, the Tribunal has taken notice of the fact that confirmatory letters were submitted on behalf of the creditors. The income-tax file numbers were given and the ITO did not summon any of the money-lenders for examination. The Tribunal having considered all aspects of the matter, came to the conclusion that some of the loans were genuine and in respect of some of the loans fresh investigation was necessary. This is a case of appreciation of evidence. Mr. Moitra, appearing on behalf of the Revenue, has been unable to point out how the Tribunal has ignored any relevant material or relevant evidence in coming to this conclusion. Under these circumstances, both the questions are answered in the negative and in favour of the assessee. There will be no order as to costs.

BHAGABATI PRASAD BANERJEE, J.:

I agree.

[Citation :181 ITR 187]