Sagittraious Builders and Colonisers vs Commissioner of Income Tax

The present appeal filed u/s 260-A of the Income Tax Act 1961 (herein after referred to as the Act.) against the order dated 29.07.2002 passed by the Income Tax Appellate Tribunal Allahabad has been admitted vide order dated 05.03.2003 on the following two substantial question of law, which is said to be involved in the appeal: 1. Whether under the facts and circumstances of the case the Tribunal was justified in confirming the additions u/s 68 of Income Tax Act, 1961 overlooking the fact that the explanation of the assessee regarding four deposits was accepted in part?

Whether the Tribunal was justified in confirming the additions u/s 68 of the Income Tax Act, 1961 despite the identity of its creditors and sources and nature of the credit entries was fully explained by the assessee?

Briefly stated the facts giving rise to the instant appeal are as follows:

The appellant is a builder and colonizer. For the assessment year 1988-89, the appellant filed its return of income. The return was processed and during the course of investigation it was found that the appellant had made entries of deposit of Rs. 88,000/- in the name of Sri Nazeer Ahmad, Rs. 5,000/- in the name of Smt. Urmila Devi, Rs. 15,000/- in the name of Sri Jamal Ahmad and Rs. 50,000/- in the name of Sri Mohd. Ashfaque.

The Assessing Officer asked the appellant to prove the nature and source of the deposits as required u/s 68 of the Act. After considering the material and evidence on record, the Assessing Officer accepted the deposits made by Smt. Urmila Devi and Sri Mohd. Ashfaque. In respect of remaining two deposits of Rs. 88,000/- made by Sri Nazeer Ahmad and Rs. 15,000/- made by Sri Jamal Ahmad, the Assessing Officer came to the conclusion that so far as Sri Nazeer Ahmad is concerned, the appellant has failed to establish that he had the capacity to make deposit of Rs. 88,000/-. In respect of deposit of Rs. 15,000/- made by Sri Jamal Ahmad for the reasons best known the said creditor did not appear before the Assessing Officer in spite of summon having been sent on the address given by the appellant nor the appellant took care to produce him before the Assessing Officer. Consequently, the two deposits of Rs. 88,000/- and Rs. 15,000/- totalling Rs. 1,03,000/- was added as income from unexplained cash credit u/s 68 of the Act. The appeal preferred by the appellant both before the C.I.T.(A) and also before the Tribunal failed.

We have heard Sri Shakeel Ahmad learned counsel appearing for the appellant and Sri A. N. Mahajan learned Senior Standing Counsel for the Revenue.

Sri Shakeel Ahmad learned counsel submitted that so far as Sri Nazeer Ahmad is concerned he had appeared before the Assessing Officer and had admitted of having made a deposit of Rs. 88,000/- with the appellant for the purpose of purchasing a shop which in fact he had purchased in the subsequent year. He had also stated that he had borrowed this amount from his close relatives who have settled in Saudi Arabia and therefore, the source of the deposit should not have been disbelieved.

In so far as the deposit of Rs. 15,000/- is concerned, Sri Shakeel Ahmad submitted that it was deposited by Sri Jamal Ahmad and merely because he did not appear before the Assessing Officer would not be a ground to disbelieve resulting in making the addition.

Sri Mahajan, learned Senior Standing Counsel however submitted that as Sri Wazir Ahmad could not establish the source of deposit of Rs. 88,000/-, the Assessing Officer had rightly added the said amount u/s 68 of the Act. So far as Sri Jamal Ahmad is concerned, he did not appear and therefore, the identity and the source of this creditor was not proved. He therefore, submitted that the order passed by the Tribunal calls for no interference.

Having given our thoughtful consideration to the various pleas raised by learned counsel for the parties, in our considered opinion u/s 68 of the Act, the appellant has to prove the nature and source of the deposit. In the present case, even though Sri Wazir Ahmad had appeared before the Assessing Officer, the identity of the creditor having been established, yet the appellant had failed to prove the source of the deposit made by Sri Wazir Ahmad as his capacity to advance of Rs. 88,000/-could not be established. Mere explanation of Sri Wazir Ahmad that he had borrowed the money from his close relatives, would not be sufficient without there being any further proof of the identity of the persons who had lent the money to Sri Wazir Ahmad. If the particulars of such persons were disclosed by Sri Wazir Ahmad, then the Assessing Officer would have occasion to verify the creditors and the statement made by Sri Wazir Ahmad. In the absence of any further material being brought on record by the appellant, the Assessing Officer was fully justified in making the addition u/s 68 of the Act. In respect of the deposit of Sri Jamal Ahmad, suffice it to mention that Sri Jamal Ahmad did not appear before the Assessing Officer in spite of summon having been sent and the appellant also did not take any steps to produce him, thus the identity and source of the deposit of Jamal Ahmad remain unproved. In our considered opinion, the two deposits have rightly been added u/s 68 of the Act. The order of the Tribunal, therefore, does not suffer from any error of law. The appeal fails and it is accordingly dismissed.