Acron Finance (P) Ltd. vs Commissioner of Income Tax

Ajay Kumar Mtttal, J.—This appeal u/s 260A of the Income Tax Act, 1961 (for short ""the Act"") has been filed by the Assessee against the

order dated 13-7-2005, passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as ""the Tribunal"") in ITA

No. 208/Asr/2000 relating to the assessment year 1996-97.

The appeal was admitted for determination of the following substantial questions of law by this Court:

Whether the Tribunal was right in law in sustaining the order of the authorities below, wherein the latter had treated certain deposits as

unexplained cash credits, by neither taking any cognizance of the affidavits of the depositors as per which their identity and source of deposits

stood duly substantiated nor brought any material on record which could go to refute the contents of the same?

Whether on the facts and in the circumstances of the case, the Tribunal was right in law in 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 the same to the file of the assessing officer for reconsideration?

The facts, in brief, necessary for adjudication, as narrated in the appeal are that the Assessee filed return for the assessment year 1996-97

declaring loss of Rs. 1,82,095 which was taken up for scrutiny and notice u/s 143(2) of the Act was issued. During assessment proceedings, the

assessing officer earmarked deposits in the names of 35 parties, aggregating to Rs. 4,22,300 and made query from the Assessee in respect of the

parties whose deposits were found to be of Rs. 9,000 or above. The Assessee supplied complete particulars of the depositors. But still, the

assessing officer on further investigation into the matter at his own level, treated the above amount in respect of all the 35 deposits as unexplained

cash credits and assessed the income of the Assessee company at Rs. 3,45,120 vide order dated 24th Dec, 1998.

Before the CIT (A), the Assessee produced further evidence in the shape of affidavits of 15 depositors in order to wriggle out of the additions

made by 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 by the assessing officer and, accordingly directed the assessing officer to examine the aforesaid fresh evidence and report whether such

credits were acceptable or not. During remand proceedings before the assessing officer and despite various submissions made on behalf of the

Assessee nothing favourable could be gained by him. The assessing officer, thus, again put its seal on the additions made earlier.

The CIT (A) on receipt of report from the assessing officer sustained the additions made by him and dismissed the appeal vide order dated 9-2-

2000 as the Assessee had not produced material to substantiate genuineness of those deposits. The CIT (A) in paras 3.4 to 3.6 observed as

under:

3.4 The assessing officer has since submitted his report dated 24th/27th Dec, 1999, copy of which was made available to the Appellant. It was

pointed out by the learned assessing officer that the learned Counsel Shri K.K. Sareen, chartered accountant was asked to furnish whatever

evidence he had to prove the source of deposit corresponding to which additions have been made at the time of assessment. The case was fixed

for hearing by the assessing officer on 17th Dec, 1999, as desired by the counsel. On 17th Dec, 1999, Shri K.K. Sareen, chartered accountant

appeared along with Shri Rakesh Thapar, managing director of the company before the assessing officer. However, neither any depositor was

produced for recording of statement nor any written reply was filed. The assessing officer has concluded that the Assessee company had no

evidence to prove the source of cash credits.

3.5 A copy of the report of the assessing officer was made available to the Appellant and the case was fixed for hearing on 8-2-2000. It was

admitted by Shri K.K. Sareen and Shri Dheeraj Sehgal, director that no evidence were produced before the assessing officer in suppot of the

credits. A written submission dated 8-2-2000 was also filed along with copies of certain documents. As none of these documents was produced

before the assessing officer neither during the assessment proceedings or during the remand proceedings, no cognizance is being taken in respect of

these documents and this was brought to the notice of learned Counsel during the appellate proceedings on 8-2-2000.

3.6 In the light of above discussion, it is clear that the Assessee company had shown deposits in 35 names but required evidence was not

produced before the assessing officer to prove the genuineness of the credits by establishing the identity and capacity of the creditors and

genuineness of the transactions although the assessing officer had allowed seven opportunities to the Assessee. No evidence was produced before

the assessing officer even when another opportunity was allowed to the Assessee to produce necessary evidence before the assessing officer

during the remand proceedings as mentioned above. In these circumstances, the action of the assessing officer in treating the deposits of Rs.

4,22,300 as income of the Assessee was justified and is upheld.

The Assessee took the matter in appeal before the Tribunal and emphatically submitted that the assessing officer and CIT (A) had failed to

appreciate the facts in the right spirit. Before the Tribunal as well, the Assessee reiterated its submissions made before the authorities below. The

Tribunal while partly allowing the appeal provided one more opportunity to the Assessee to prove the genuineness of four depositors, namely, Shri

C.L. Duggal, Mr. Nirdosh Sareen, Pinki Dada and Shri Satinder Sehgal, by restoring the matter to the file of the assessing officer. However, the

other depositors were not accepted to be genuine as 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 have perused the record.

Learned Counsel for the Assessee submitted that the Tribunal was in error and had recorded findings which are based on surmises and

conjectures without there being any sufficient material on record. Learned Counsel further submitted that the affidavits had been filed by the

depositors to prove their identity and, in such a situation, it was not proper for the Tribunal to have sustained the additions. It was next argued that

the Tribunal had referred back the matter in respect of four depositors, namely, C.L. Duggal, Mr. Nirdosh Sareen, Pinki Dada and Satinder and

the Tribunal ought to have remanded the case with regard to other depositors also. Once the affidavits had been furnished by the Assessee, there

could not have been any doubt about the genuineness of those depositors.

Learned Counsel placed reliance on Mehta Parikh & Co. v. CIT (1956) 30 ITR 181 Sohan Lal Gupta Vs. Commissioner of Income Tax, and

Collector, Land Acquisition, Anantnag and Another Vs. Mst. Katiji and Others, .

We have given our thoughtful consideration to the submissions made by the learned Counsel for the Assessee.

It would be apt to reproduce the findings recorded by the Tribunal 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 not file any evidence and even affidavits during the course of assessment proceedings. Even

during the course of appellate proceedings, the Assessee could file affidavits only in respect of 15 depositors. The learned CIT (A) referred these

affidavits to the assessing officer with a direction to examine the same in the light of evidence whatever the Assessee would like to produce. Copies

of these affidavits appeared on pp. 42 to 54 of the CIT (A)s appeal folder. Even the written submissions filed by the Assessee before the CIT (A)

vide letter dated 30-11-1999 are at pp. 55 to 60 of the paper book. Nowhere the same shows that the Assessee had offered that it could

produce depositors provided an opportunity of producing the same was allowed by the assessing officer. It simply refers that the assessing officer

could have issued summons u/s 131 for investigating the source. But summons u/s 131 could be issued only if the Assessee expresses its inability

for producing the creditors or requests the assessing officer to do so. Otherwise the onus is on the Assessee to produce such creditors before the

assessing officer as held by the Honble Punjab & Haryana High Court in the case of CIT v. Vir Bhan & Sons (supra). The assessing officer

submitted the remand report vide letter dated 24th/27th Dec, 1999 where he had clearly mentioned that the Assessee was given full opportunity to

furnish whatever evidence was with him to prove the sources of cash credits. Neither the Assessee produced the creditors nor filed any written

submissions and, therefore, there was no evidence available with the Assessee to prove the same. This was also confronted to the Assessee vide

CIT (A)s letter dated 2nd Feb., 2000 and the case was posted for hearing on 8-2-2000. The learned Counsel for the Assessee along with the

director and the accountant appeared before the CIT (A) on 8-2-2000 and accepted that no evidence was produced before the assessing officer

as reported by the assessing officer. The order sheet entry dated 8-2-2000 is duly signed by these persons. However, the reply submitted in the

letter dated 8-2-2000 is on record of CIT (A)s folder at pp. 87 and 88. In the said letter, it has been mentioned that on 17th Dec, 1999, few

depositors were asked to come to the office for recording their evidence, but they could not turn up within office hours and as such three more

persons appeared at about 5.30 p.m. and their affidavits were got signed from them and attested. The details for the same were given in the letter.

These facts clearly show that the Assessee could not produce the depositors despite opportunity allowed by the assessing officer during the course

of remand proceedings. The contentions of the learned Authorised Representative that the Assessee was not asked to produce these depositors is

untenable and incorrect, in view of the facts placed on record. In fact, the Assessee has miserably failed both during the course of appellate

proceedings and assessment proceedings to produce these depositors or furnish any worthwhile evidence in spite of the fact that ample

opportunities were allowed.

3.11. Before parting with this ground, I wish to mention that the learned Counsel had relied on certain judgments stating that the averments made in

the affidavits should be accepted until there is a contrary material brought on record. I am unable to agree with such proposition for the simple

reason that there is no universal proposition of law that a statement given in the form of an affidavit should be accepted as true. I have already

discussed in detail that in case of cash credits, the onus of proving the source and genuineness is entirely on the Assessee and mere filing of

confirmations or affidavits without there being any corroborative evidence does not by itself prove the source and genuineness thereof. Moreover,

these affidavits were not even filed during the course of assessment proceedings. These were filed only during the course of proceedings before the

CIT (A) and there also the asssessee failed to either produce depositors or file any further corroborative evidence in support of the case, I am

unable to accept the submissions of the Assessee that contents of the affidavits should be accepted and no addition on account of cash credit

should be made.

As observed by the CIT (A) and also recorded by ""the Tribunal, the Assessee had been provided ample opportunities to substantiate its claim

with regard to depositors to be genuine, but the Assessee had failed to discharge the onus placed upon it by establishing the identity of the

creditors, their creditworthiness and genuineness of the deposits. The CIT (A) had already provided another opportunity to the Assessee to prove

its case but the Assessee had failed to produce any material to show the deposits to be genuine. The Tribunal had remanded the case with regard

to four depositors whereas other depositors were held not to be genuine on the ground that the amount was stated to have been paid to the

Assessee by them out of savings from household expenses etc. without producing any evidence. The counsel, however, made an attempt to

persuade this Court to remand the matter. But in the facts and circumstances of the case, as noticed above, it is considered not to be a fit case

where the Assessee deserves any further opportunity to establish genuineness of other depositors by remanding the case in that regard. The

findings of fact recorded by the authorities below have not been shown to be perverse in any manner which 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 judgments do not come to the rescue of the Appellant. The substantial questions of law are

answered against the Assessee and finding no merit in the appeal, the same is dismissed.