Sohan Lal vs Commissioner of Income Tax

V.K. Singhal, J.—The Income Tax Appellate Tribunal has referred the following question arising out of its order dated October 26, 1983, in respect of the assessment year 1976-77 u/s 256(1) of the Income Tax Act, 1961 :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee failed to bring convincing material on record to establish the genuineness of cash credit of Rs. 35,000?"

The brief facts of the case are that the assessee is the proprietor of Pukhraj Nehalchand. There was a cash credit of Rs. 35,000 in the name of Bheru Nath Mohanlal and Co. Bheru Nath, a partner of Bheru Nath Mohanlal and Co. was examined by the Income Tax Officer, A-Ward, Pali, on May 22, 1978, wherein it was deposed that such entries are only havala entries and no money passed from the said party to the assessee. The assessee contended that the statement of Mohanlal was false and an affidavit dated December 28, 1978, of Mohanlal was filed wherein he has stated about his mental state of affairs and confirmed the credit entry. The assessee was required to produce Mohanlal to substantiate his contention and to discharge his burden. The authorised representative of the assessee submitted that he had met with an accident and he will be produced on January 12, 1979. On that date, time was again sought for till January 22, and then January 23, 1979. On January 23, 1979, the authorised representative requested to issue notice u/s 131 of the Income Tax Act, 1961. The assessee was informed that since he has failed to produce Mohanlal and thus he failed to discharge the onus which was on him, the credit entry of Rs. 35,000 will be treated as the assessee''s income from undisclosed sources. Thereafter the assessee was again provided further opportunity, vide letter dated March 15, 1979, to produce evidence on which he wanted to rely in his support. On March 19, 1979, Mohanlal was produced and his statement was recorded. In his statement, Mohanlal stated that a sum of Rs. 35,000 was advanced to him and he has not made any statement before the Income Tax Officer, Pali, on May 22, 1978, and only signed the statement which was prepared by the Income Tax Officer. The Income Tax Officer was of the view that the statement dated March 19, 1979, was full of contradictions, false and incorrect and the earlier statement given on May 22, 1978, that it was only a havala entry is the correct statement. The said amount was considered as income from undisclosed sources. In appeal before the Appellate Assistant Commissioner, it was held that the entry in the books of account was havala entry and the order of the Income Tax Officer treating the income as income from undisclosed sources was upheld.

The Appellate Assistant Commissioner has taken into consideration the cash balance with reference to the three figures of Rs. 10,000, Rs. 20,000 and Rs. 5,000, which entries were made on May 7, 1975, May 10, 1975, and May 16, 1975, respectively. It was also found that Mohanlal carried on a havala entry business from the assessment years 1976-77 to 1978-79 and various parties to whom the amount is alleged to have been shown have surrendered the amount of entries. The names of some other parties have been given by the appellate authority and it was also taken as one of the grounds. It was also found that in respect of the assessment year 1977-78 notice u/s 148 of the Income Tax Act was issued to Bheru Nath Mohanlal and Co. The return showing Rs. 27,500 was filed which was assessed on February 27, 1980, declaring the income as "nil" on the ground that the income has already been taken in the hands of various debtors and as such it has been excluded to avoid double taxation. The Appellate Assistant Commissioner came to the conclusion that even if the debtors have accepted the debt as not genuine, Mohanlal should have continued to show it as his real income if it was the actual money given on interest by him. The conduct of the assessee falsified the subsequent statement on the basis of which the addition was upheld.

The matter was challenged before the Income Tax Appellate Tribunal in second appeal and it was found that there is no reason in support of the contention of the assessee that the statement dated May 22, 1978, was not reliable. This fact was also taken note of that there were other partners of the firm (other than Mohanlal) who were not produced by the assessee in support of his contention that the amount of Rs. 35,000 was really advanced by the firm to the assessee. The finding which was arrived at by the Appellate Assistant Commissioner was accordingly upheld and the appeal was dismissed.

Learned counsel for the assessee has submitted that the earlier statement dated May 28, 1978, cannot be relied upon and the statement dated March 19, 1979, should have been relied upon.

We have considered over the matter. The burden to prove that the entry existing in the books of account is not genuine has to be discharged by the Revenue and it was discharged by way of statement of Mohanlal recorded on May 22, 1978, and the onus thus shifted to the assessee. The alleged creditor in the present case has given the statement on May 22, 1978, and has subsequently resiled. Therefore, one of the two statements is false. The entire evidence which was produced by the assessee has duly been considered and it is not a case where the finding has been recorded without any evidence or on the basis of inadmissible evidence. The question as to which of the two statements is reliable has to be determined by the authorities on the basis of other facts and circumstances of the case. It is not a case where the taxing authorities have not taken into consideration any evidence which was existing on record. Even if in respect of a particular piece of evidence two opinions are possible, it is not for this court, in reference jurisdiction, to act as appellate authority and come to the conclusion that the statement which has been given earlier should have been ignored. The jurisdiction of this court is only advisory and not original or appellate. The finding which has been recorded is supported by a number of reasons which have been given by the Appellate-Assistant Commissioner in his order and that order has been upheld. The Tribunal has observed that the statement on May 22, 1978, was recorded in connection with the recovery proceedings but there is no material on record to show that the statement was not correctly made by Mohanlal. The Tribunal observed:

"Later he filed an affidavit and gave statement, but no convincing reason has been given at either stage that the statement dated May 22, 1978, was not correctly made by him."

On the basis of the above finding and other circumstantial evidence that other parties to whom the money was lent have surrendered the credit entries as their income, it was only the totality of circumstances on the basis of which the Tribunal has recorded its finding that the assessee has failed to bring convincing material to establish the genuineness of the credit. The genuineness of a credit even otherwise is a question of fact and in the present facts and circumstances, it cannot be said that there is any convincing material on record to establish the genuineness of the cash credit and, therefore, we are of the opinion that the Income Tax Appellate Tribunal was right in holding that the assessee failed to bring convincing material on record to establish the genuineness of the cash credit.

Consequently, the reference is answered in favour of the Revenue and against the assessee. No order as to costs.