ORDER
M.L. Gusia, A.M.
This appeal of the revenue is directed against the order of Commissioner (Appeals)-II, Agra dated 8-11-1995, for the assessment year 1992-93.
2. The grounds of appeal are as under :
“(1) That the learned Commissioner (Appeals), Agra, has erred in law and on facts in deleting the addition of Rs. 4,32,266 made on account of unexplained deposit of silver and interest thereon without properly appreciating the facts of the case especially when there was no written agreement between the assessee and the lenders and there was also no receipts with the lenders as a proof.
(2) That the learned Commissioner (Appeals), Agra, while deleting the above addition has totally ignored the arguments of the assessing officer and decided the matter in favour of the assessee by giving credence to his version without proper consideration and appreciation of the material facts placed on record and also discussed in the assessment order.
(3) That the order of the learned Commissioner (Appeals), Agra being erroneous in law and on facts be set aside and that of the assessing officer be restored.”
3. The facts of the case in brief are that a sum of Rs. 4,32,266 has been added to income of the assessee as value of unexplained silver weighing 51.147 kg. taken as loan from 4 persons and the amount of interest paid thereon as under
Silver Wt. Kg.
Interest Rs.
(i)
Rajesh Kumar Agarwal
12.150
1,620
(ii)
Govind Prasad Sharma
15.187
2,076
(iii)
Govind Ram
11.560
4,215
(iv)
Madho Prasad Agarwal
12.244
4,950
51.147
12,861
4. The assessee was carrying on the business of manufacturing of silver ornaments under the proprietorship concern styled as Govind Ram Kishan Lal having Branch at Mathura and Delhi. The modus operandi of the business of the assessee was purchase of silver locally at Delhi and send them to Salem for manufacture of ornaments and make sales at Mathura. The assessee has maintained all the regular books of accounts for both Delhi and Mathura offices including stock registers. The purchases of silver at Delhi was made on assessee’s own vouchers and for sale proper bills etc. were issued. The assessing officer has passed a lengthy order and has narrated large number of entries in the books of the assessee. The purpose of narrating such entry was only to show that daily books have not been written. However, it was submitted before the Commissioner (Appeals) that there is no such legal compulsion to derive daily cash balance or stock without making any transaction. As and when the assessee entered into any transaction the- same was entered on that day and balance of cash/stock, as the case may be, was shown. In the opinion of the assessing officer the loans in the form of silver from the various parties referred above were not genuine or their credit worthiness was not proved. Therefore, he treated the same as undisclosed income of the assessee.
5. During the course of assessment proceedings first three persons namely Shri Rajesh Kumar Agarwal, Shri Govind Prasad Sharma and Shri Govind Ram were produced before the assessing officer who had also recorded their statements. They have admitted that they had given silver on loan to the assessee. Confirmation letters of these persons were also filed which were supported by their affidavits. These confirmation letters and affidavits contained the date of giving silver, rate of interest/rent, source of giving silver and rent and also the name and address of the depositor alongwith his IT file numbers, etc. The assertions of Shri Rajesh Kumar Agarwal and Shri Govind Prasad Sharma were further supported by their copy of accounts from M/s Shambu Nath Abhushan Bhandar where the silver was earlier lying deposited. On being required to produce these persons, they were produced and their statements were recorded by the assessing officer in which all the three persons had confirmed the contents of affidavits and had admitted the fact of giving silver loan to the assessee. The assessing officer has not found/noted any discrepancy/misstatement or falsity in the statements of any of the three persons. The assessing officer has also not recorded a finding that these persons were either incapable of giving silver to the assessee or that these persons had in fact not given any silver on loan to the assessee. In all the three cases, the assessing officer has stated that statements of all these persons were far from satisfactory, there was no written agreement with the assessee to give silver on loan, purity was not tested before taking/giving silver, the assessments of these persons were not made under scrutiny and the persons were produced to help the assessee. The Commissioner (Appeals) at pp. 6 to 8 has held as under :
“It is reiterated that the assessing officer had not noted any discrepancy in the statements of these persons or any other evidence has not been brought on record to show that these were untrue. The income-tax file number of all these persons were also available with him who were assessed either with himself or other wards at Mathura only. This shows that he must have compared the information with records of these persons and had not noted any discrepancy.
As far as the question of written agreement is concerned, it is the satisfaction of lender who may require such agreement. In the line of business of assessee large number of people give and take silver on loan without any written agreements. Traditionally there are no written agreements. Further there is no legal requirement to enter into a written agreement to venture into such type of contract. Under the provisions of Indian Contract Act, contract may be written or oral also. But the basic requirements of a valid contract are that parties must be competent to contract, the contract should be legal and there should be a consideration. All the necessary requirements are satisfied/co-exist. It is submitted that assessing officer cannot dictate the terms/method of accepting loan. All that assessing officer has to see is that transaction is not bogus and illegal or legally barred or prohibited/punishable under any Law/Income-tax Law. Otherwise, a businessman is free to set his own technology of doing business.
The above submissions squarely apply to facts when the assessing officer says that purity of silver was not obtained. As submitted earlier, here the case is not that assessee was claiming loss on account of impurity of extraordinary magnitude for which he may be required to prove the purity. The assessee has taken pure silver on loan In in case of Shri Govind Ram which was sent to Salem as such) for manufacture of ornaments. It is submitted that pure silver is distinctly visible/identifiable and a person of reasonable prudence having reasonable knowledge of doing this kind of business can easily identify the purity of silver. In metallurgic science, it is said that silver (which is the main reason of popularity of metals like silver and gold) have wide range of physical and chemical properties and is subject to easier test like weight, sound, colour, shine, ductibility, etc., to complex chemical and other analytical test. In the ordinary course of business silver is not so often sent for testing which causes loss in weight and extra expenses and delay but a businessman takes decision on the basis of his own experience and prudence. Silver is got tested occasionally and at the time of doubt only. It is submitted that such assertion of AO is therefore not correct and he should not have drawn any adverse inference therefrom. There is no deeming provision in law in regard to such transaction as in the case of cash credits where the assessee is obliged to prove the loan to the satisfaction of the assessing officer. In such circumstances, the various persons produced before the assessing officer, in law, were own witness of the assessing officer. These witness having said nothing in favour of assessing officer, the assessing officer was barred from drawing any contrary conclusion.”
6. We have carefully considered rival contention, assessment order, order of the Commissioner (Appeals) and we noted that the assessing officer has not given any finding that why the statements given by all the three persons. namely Shri Rajesh Kumar Agarwal, Shri Govind Prasad Sharma and Shri Govind Ram, were not acceptable. No iota of evidence has been brought on record to disprove the statements given by these persons, affidavits filed by them and confirmatory letters filed in support of their admittance about giving silver on loan. We also noted that it is not necessary in business to make any written agreement for particular transaction. Further taking of silver on loan is, very common in, the silver business as it is cheap, convenient and free from risk of market fluctuations and such practice is well accepted and there is nothing uncommon in it. The persons dealing in the silver ornaments have wide experience to judge the purity of silver. Therefore, it is not necessary while doing each and every transaction to test the silver. It is not acceptable also that explanation offered by the above-mentioned three depositors are not acceptable only for the reason that their assessment was never taken into scrutiny. Further the assessing officer asked the assessee to produce the above three persons, then how he arrived that these persons are produced by the assessee to help him. In such circumstances, in the absence of any supporting evidence, the rejection of the explanation by the assessing officer is not justifiable. Hence we decline to interfere with the order of the Commissioner (Appeals) in regard to Rajesh Kumar Agarwal, Govind Prasad Sharma and Govind Ram.
7. In respect of Shri Madhav Prasad the assessee filed confirmatory letter along with affidavit before the assessing officer as is apparent from the order sheet dated 22-2-1996. However, Shri Madhav Prasad could not be produced as he was out of station. In such a circumstance, the assessing officer is duly bound to issue summons under section 131 directly to Shri Madhav Prasad and compel him to appear before the assessing officer to ascertain the truth in regard to the explanation offered by the assessee. The assessee has produced the confirmation letter, affidavit and IT file number of Shri Madhav Prasad which have been overlooked by the assessing officer and rejected the explanation offered by the assessee without bringing any evidence on record. Therefore, rejection of the explanation by the assessing officer is not justifiable. In such circumstances, we decline to interfere with the order of the Commissioner (Appeals). Hence, the appeal of the revenue is dismissed.
8. In the result, appeal of the revenue is dismissed.