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1978 Supreme(Cal) 135
High Court Of Calcutta
SABYASACHI MUKHERJI, SUDHINDRA MOHAN GUHA
COMMISSIONER OF INCOME-TAX - Appellant
Versus
SAHIBGANJ ELECTRIC CABLES PVT.LTD. - Respondent
Income-Tax Reference 40 Of 1969
Decided On : 02/27/1978
B.K.Bagchi, B.K.NAHA, RUPEN MITRA
The onus of proving that the cash credit entry appearing in the assessee's account books did not represent income of the assessee was on the assessee. The ITO was not entitled to reject an explanation of the assessee without some other positive evidence falsifying the assessee's case.
Headnote:
INCOME TAX - Assessment year 1961-62 - Addition of Rs. 40,000 as assessee's income from undisclosed sources - Loans taken from two parties - Whether the Tribunal was justified in deleting the addition - Whether the Tribunal's conclusion was perverse.
Fact of the Case:
The assessee, a private limited company, claimed that the loans of Rs. 35,000 and Rs. 5,000 in the names of Sri Narainsingh Amarlal and Sri Jethanand Madhavdas, respectively, were genuine. The ITO and AAC added back the entire amount of Rs. 80,000 as the assessee's income from undisclosed sources. On appeal, the Tribunal deleted the additions.
Finding of the Court:
The Tribunal relied on the confirmation letters of the respective parties giving the respective income-tax file numbers of the creditors, the facts that all the amounts were received by cheques and the payments were also made by cheques, cheques issued for repayment of the loans were "cleared through assessee's bankers," and various other evidence produced before the Tribunal in confirmation of payment. The Tribunal concluded that these loans were genuine and/or at least the assessee has discharged the onus that these loans were genuine and, therefore, these amounts cannot be added.
Issues: Whether the Tribunal was justified in deleting the addition of Rs. 40,000 as the assessee's income from undisclosed sources.
Ratio Decidendi: The onus of proving that the cash credit entry appearing in the assessee's account books did not represent income of the assessee was on the assessee. The ITO was not entitled to reject an explanation of the assessee without some other positive evidence falsifying the assessee's case. The Tribunal found that there was no reasonable ground for rejection of the assessee's explanation by the ITO. The Tribunal's view was not perverse or unreasonable.
Final Decision: The question referred to this court is answered in the negative and in favor of the assessee.
( 1 ) IN this reference, we are concerned with the assessment year 1961-62. The relevant accounting period is the year ending 31st March, 1961. The assessee is a private limited company carrying on business of purchase of aluminium rods and manufacture of conductors. The trading results, as shown by the assessee, were more or less accepted by the ITO. In the course of the assessment proceedings, the ITO found the following loans in the assessee's account books :
. Rs . 1. Sri Kartar Singh 20,000 2. Bhagwandas Khemchand 20,000 3. Narain Singh Amarlal 35,000 4. Jethanand Madhavdas 5,000 . 80,000
( 2 ) THE assessee offered an explanation by its letter dated 18th February, 1966. In the said letter, the assessee stated, inter alia, as follows:"regarding hundi bankers we are to inform you that we have all the vouchers regarding the same and they are genuine parties. The matter was gone into in detail previously also. They are assessed to tax and all payments to them have been made by cheques. They have their bank accounts and income-tax files and they are not related to any shareholder or director of the company. Obviously they are genuine parties and the transactions cannot be treated as income from undisclosed sources. All the papers will be produced if you so desire. In this connection we would like to draw your kind attention to our letter Nos. SEC/28/5 and SEC/28/6 both dated 20th July, 1965. The file number of Shri V. L. Chandi has already been given. Mrs. Rodrigues appeared before you and explained the position regarding her credit. We hope you will kindly complete the assessment. The delay in making the assessment has caused unnecessary troubles, which could have been avoided had the assessments been completed at an early date. The managing director is out of station and we are experiencing further difficulties for the same. We believe you will appreciate the position. "
( 3 ) THE sums were said to be representing genuine hundi loans from hundi bankers taken in the ordinary course of business. It was submitted that the assessee was in possession of vouchers evidencing the said transactions and the parties were assessed to income-tax. All payments to them were made by cheques. It was urged that the lenders had bank accounts and income-tax files and they were not in any way connected with any shareholder or director of the assessee-company. The ITO did not, however, accept the said explanation and observed, inter alia, as follows :"narainsingh Amarlal: From this party the assessee has taken hundi loans. The notice of summons issued on this party came back unserved. The assessee was informed of this position by my letter dated 28th January, 1966. The hundi papers of this assessee were examined. It is seen that all the loans have been advanced by Shri Lalla who had admitted in connection with certain other cases that he has been doing bogus name-lending business under the name and style of 'narainsingh Amarlal'. The assessee's plea is that the money has come by cheque. It is a well-known fact in hundi racket that cheques received were preceded by money being given in cash by the party concerned. In these circumstances I treat the money introduced in his name as the assessee's own income from undisclosed sources. The peak credit in this account comes to Rs. 35,000. Jethanand Madhavdas: In this case the hundi papers itself were missing. The assessee obtained from this party a confirmation letter, IV-B which is significant: 'please try to send us the above mentioned discharged hundi papers, which has not been returned by you '. The summons issued on this party came back unserved. On being informed by others the assessee has not produced this party before me. This party is known to be lending name for bogus loans. As such I am constrained to treat the money introduced in the name of this party as the assessee's own income from undisclosed sources. "
( 4 ) THE ITO, therefore, added back the ent
