JUDGMENT
Ashwini Kumar Sinha, J.
1. This is a reference under Section 256(1) of the I.T. Act, 1961, made by the Income-tax Appellate Tribunal, Patna Bench, Patna, and the following question of law has been referred for the opinion of this court :
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in deleting the addition of Rs. 20,000 as the respondent’s income from undisclosed sources and in allowing the interest of Rs. 1,318 on the same ?”
2. The case relates to the assessment year 1964-65. The assessee is a private limited company deriving income from business in paper, stationery and machinery, etc. The ITO, in the course of assessment proceedings, found that there were two deposits of Rs. 10,000 each in the names of Gopaldas Mohanlal and Lilaram Govindram of Calcutta on April 23, 1963, and July 23, 1963, respectively. The ITO required the asseseee to explain the nature and source of these amounts totalling Rs. 20,000. The assessee submitted before the ITO that these items represented genuine loans taken from the parties concerned. The assessee further submitted that the amounts in question were paid to the assessee by cheques and the assessee also repaid the amounts in question by means of account payee cheques. The amount of interest was also paid by cheque and so also the brokerage in each case. The assessee further stated that letters were addessed to the parties concerned for confirmation of the deposits but the same came back with a postal remark “addressee left”.
3. For the reasons mentioned in the assessment order, the ITO added back the amount of Rs. 20,000 as the assessee’s income from undisclosed sources and disallowed the interest of Rs. 1,318 on the same. A copy of the order of the ITO is marked as annexure A to the statement of case.
4. The assessee went before the AAC against the order of the ITO and the order passed by the ITO was confirmed. A copy of the order of the AAC is marked as annexure B to the statement of case.
5. Against the appellate order, the assessee went in appeal before the Tribunal and before the Tribunal the assessee submited that the authorities below were not right in confirming the addition of Rs. 20,000 as the assessee’s income from undisclosed sources and were also not right in disallowing the interest of Rs. l,318on the same. It was submitted on behalf of the assessee that the lenders advanced loan by means of account payee cheques in favour of the assessee from their bank accounts. The assessee
encashed the cheques through his banker (Canara Bank Limited) and the assessee gave the cheque numbers and all the details along with the certificate of the bank were also produced by the assessee. The assessee also submitted that the brokerage amount was also paid by account payee cheque, vide banker’s certificate dated April 24, 1963. The assessee further submitted that the creditors were genuine persons and they had telephones and their names appeared in the Calcutta Telephone Directory also. The assessee further submitted that the loans in question were repaid by the assessee by account payee cheques drawn on Canara Bank Limited and the same was encashed through their bank account.
6. It is true that the letter of request sent by the assessee to the creditors for confirmation of the loan came bank with the postal remark “addressee left”. It seems this was on account of the lapse of time as the loans in question were taken in 1963 and the assessment proceedings started in 1969.
7. Submissions advanced by the assessee, as above, were common with regard to both the creditors.
8. The Tribunal on the materials placed before it, came to the conclusion that the assessee had discharged the primary onus that lay upon him to prove the nature and source of loans which were duly repaid and it held that the assessee had established that the creditors were not fictitious persons. The Tribunal further held that the fact that the creditors were not fictitious persons was never disputed by the Department, and in that view of the matter, the Tribunal held “that the loans taken from the above-mentioned two parties amounting to Rs. 20,000 could not be treated as income of the assessee from undisclosed sources”. A copy of the Tribunal’s order is marked annexure C to the statement of case.
9. On the facts and circumstances as mentioned above, the only question is whether the Tribunal was right in deleting the addition of Rs. 20,000 as the assessee’s income from undisclosed sources and also whether the Tribunal was right in allowing the interest of Rs. 1,318 on the same.
10. Learned counsel appearing for the Revenue has contended that the assessee has not disclosed the identity of the creditors and the sources of income and the assessee cannot be said to have discharged the primary onus.
11. The assessee was asked to explain the nature and the source of the deposit and the assessee filed details of loans stating the nature and the mode of transactions. In the instant case, the transactions were completed through account payee cheques. The creditors gave the amount in question to the assessee by account payee cheques which were encashed by the
assessee through his own bank. Not only this, the assessee has also submitted the copy of a certificate of the bank to the effect that the cheques in question, given by the creditors, were honoured in favour of the assessee. Even the brokerage amount on the transaction was also paid through cheques. When the assessee disclosed the names of the creditors and the names of the banks on which the cheques were drawn, the assessee discharged the primary onus and the assessee not only disclosed the identity of the creditors but also the sources of income. Then the onus shifted on the Department to verify. The creditors were having bank accounts. Hence, not that they were known only to the bank but they were introduced by a third person to the bank. In view of these facts, it could not be said that the creditors were fictitious persons. As I have already held above that the assessee discharged his primary onus and the onus shifted upon the Department, the Department, on getting materials in hand could proceed to Verify whether the creditors were genuine or not. They could also examine the other transactions of the creditors in their respective bank accounts and could have also examined the person who introduced them to the bank and such an examination/verification would have given a correct picture and then if any adverse material was available, the same could have been passed on to the assessee. In my opinion, the assessee hav-ing discharged the primary onus, the Department without resorting to verification, could not add the amount as income from undisclosed sources.
12. On the facts and in the circumstances of the instant case, in my opinion, the amount in question could not be added as the assessee’s income from undisclosed sources and thus, the Tribunal was right in deleting the addition of Rs. 20,000 as assessse’s income from undisclosed sources and was also right in allowing the interest of Rs. 1,318 on the same.
13. The question referred for our opinion is, thus answered against the Revenue and in favour of the assessee. Hearing fee Rs. 200.
Sushil Kumar Jha, J.
14. I entirely agree. But, in deference to the tenacity of the learned counsel for the Revenue, I wish to add a few observations of mine. The very fact that all the transactions were entered into between the parties through account payee cheques, makes the question of identity fall into oblivion. As my learned brother has already observed that all the transactions took place through account payee cheques, the identity of the creditors becomes absolutely irrelevant.