ORDER
Manzoor Ahmed Bakhshi, Judicial Member
1 to 7. [These paras are not reproduced here as they involved minor issues.]
8. Ground No. 5 is relating to addition of Rs. 2,74,600 on account of unexplained cash credits assessed as income from undisclosed sources. Assessing Officer had noticed credits in the name of family members of the partners as under :
Sh. Sahil Chawla Rs. 84,900 Smt. Meena Chawla Rs. 49,900 Smt. Seema Chawla Rs. 49,900 Ms. Ratika Chawla Rs. 89,900
Assessee had furnished confirmations from these creditors and proof that these amounts had been received by means of cheques. They were also claimed to be regular income-tax payers. The Assessing Officer summoned the creditors, being the family members of the partners of the firm and recorded their statements. On analysing the statements, he was of the view that the credits in the name of the family members of the partners were not genuine and that the assessee had introduced his own money in its books of accounts. He accordingly assessed the entire sum of Rs. 2,74,600 as income of the firm from undisclosed sources. The first appellate authority held that under Section 68 of the Act, the genuineness of the cash credits in the books of accounts of the assessee had to be determined with reference to the identity of the creditors, capacity of such creditor to advance money and genuineness of the transaction. Whereas assessee had established the identity of the creditors and latter had also confirmed having advanced the amounts to the assessee and copy of the assessment orders passed under Section 143(1) had also been furnished, the capacity of the creditors to advance such amounts had not been established. The learned appellate authority has also referred to the fact of necessity of the firm to introduce cash in the form of deposits from the close family members with reference to payment of Rs. 4,50,000 to M/s Hindustan Aluminium Corporation soon after the deposit of money in the name of creditors. Reference is also made to the debit balance in the bank account of Rs. 6,68,607 as on 21st February, 1986. To support the addition, learned CIT (A) has placed reliance on the decisions of Allahabad High Court in the cases of Chaturbhuj & Co. v. CIT [1959] 36 ITR 386, Munnalal Biharilal v. CIT [1956] 30 ITR 809 (Nag.), Shankar Industries v. CIT [1978] 114 ITR 689 (Cal.) and Prakash Textile Agency v. CIT [1980] 121 ITR 890 : 4 Taxman 323 (Cal.).
9. The learned counsel for the assessee contended that assessee having discharged the onus to prove the identity of the creditors is not disputed. The very fact that all the four creditors were assessed to tax established their credit worthiness. According to the learned Counsel, the primary burden had been discharged by the assessee. In this connection, reliance was placed on the decision of Patna High Court in the case of Addl. CIT v. Hanuman Agarwal [1985] 151 ITR 150 : [1984] 17 Taxman 19 at page 156. Reliance was also placed on the decision of the Delhi High Court in the case of CIT v. Om Prakash Mahajan & Sons [1985] 152 ITR 583 : [1984] 18 Taxman 496 in support of the contention that the burden of the assessee stood discharged with the furnishing of confirmations, assessment orders and the evidence relating to the receipt of the credits by means of cheques. The learned counsel contended that there is no presumption in law that witness appearing for an assessee come forward to give false evidence to oblige the assessee. In this connection reliance was placed on the decision of the Allahabad High Court in the case of Sheo Narain Dull Chand v. CIT [1969] 72 ITR 766. The learned counsel further pointed out that much has been sought to be made from the fact of creditors not having opened bank account for several years of carrying on the business/profession and the same having been opened only in February 1986. According to the learned counsel, it was the choice of the depositors to keep the cash available with them or to deposit the same in bank accounts. The learned counsel further contended that the creditors were men of means as can be observed from the fact that they were assessed to tax for several years. It was contended that the assessments in the case of creditors not having been cancelled, the former would not loss the evidentiary value. Reliance was placed on the decision of the Allahabad High Court in the case of CIT v. Goyal Private Family Specific Trust [1988] 171 ITR 698 : [1987] 35 Taxman 522.
10. The learned counsel further contended that the creditors having admitted to have advanced the money and they having been assessed to tax, it was for the revenue to establish that the claim of the assessee was bogus and alternatively, the credits had to be accepted as genuine. It was accordingly urged that the addition of Rs. 2,74,600 may be deleted.
11. The learned D.R., on the other hand, relied upon the orders of the revenue authorities and in particular upon the decisions referred to by the CIT (A) in his order at page 19. Reliance was placed on the decision of the Patna High Court in the case of Sarogi Credit Corporation v. CIT [1976] 103 ITR 344. The learned D.R. pointed out that all the four creditors had deposited the amounts in question in their respective bank accounts in February 1986 so as to give the colour of genuineness to the credits. There is a contradiction in the statement of the creditors in respect of the income earned. None of the creditors had been able to substantiate the claim that they were carrying on any business or profession on the basis of which returns had been filed before the Assessing Officer. No convincing replies had been given about the bank accounts having been opened only in the year under appeal. The learned D.R. also pointed out that the creditors were the close relatives of the partners of the firm and as such the decisions relied upon by the learned counsel for the assessee are inapplicable. In the case of close relatives, the learned D.R. contended that assessee has to establish the source of the deposit and the degree of proof in the case of such creditors required to be furnished by the assessee is heavy which in this case has not been discharged. It was accordingly urged that the addition sustained by the first appellate authority may be confirmed and the appeal of the assessee dismissed.
12. We have given our careful consideration to the rival contentions. Before considering the facts of this case, it would be useful to refer to the relevant case laws regarding the cash creditors and the burden of proof. In the case of Sarogi Credit Corpn. (supra), their Lordships of the Patna High Court have held as under :
That if the credit entry in the books of the assessee stands in the name of the assessee or the assessee’s wife and children, or in the name of any other close relation or an employee of the assessee, the burden lies on the assessee to explain satisfactorily the nature and source of the entry. But if the entry does not stand in the name of any such person having a close relation or connection with the assessee, but in the name of an independent party, the burden will still lie on him to establish the identity of that party and to satisfy the Income-tax Officer that the entry is real and not fictitious. Once the identity of the third party is established before the Income-tax Officer and other such evidence was prima facie placed before him pointing to the fact that the entry is not fictitious, the initial burden lying on the assessee can be said to have been duly discharged by him. It will not, therefore, be for the assessee to explain further as to how or why he came to make an advance of the money as a loan to the assessee. Once such identity is established and the creditors, as in the present case, have pledged their oath that they have advanced the amounts in question to the assessee, the burden immediately shifts on to the Department to show as to why the assessee’s case could not be accepted and as to why it must be held that the entry, though purporting to be in the name of a third party, still represented the income of the assessee from a suppressed source. And, in order to arrive at such a conclusion, even the department has to be in possession of sufficient and adequate materials.
It is evident from the aforemention decision of the Patna High Court that in the case of close relatives, the burden lies on the assessee to explain satisfactorily the nature and source of the credit. Mere confirmation by the party and the fact of receipt of money by cheque in such cases is not sufficient to shift burden to the revenue.
13. In the case of Shankar Industries (supra), their Lordships of the Calcutta High Court have held that it is necessary for the assessee to prove prima facie identity of the creditor, the capacity of such creditor to advance the money and the genuineness of the transactions. The onus will shift to the department only after the assessee had adduced evidence to establish prima facie the identity, capacity and the genuineness of the creditor.
14. In the case of Om Prakash Mahqjan & Sons (supra), assessee’s wife had disclosed on 30th March, 1966 a sum of Rs. 10,000 as her income under the voluntary disclosure scheme of the Finance No. 2 Act of 1965. Credit for this amount was made in the assessee’s account books on 4th April, 1966. The assessee’s explanation was that this amount represented the money which was available with his wife on 30th March, 1966. The Tribunal held that the immediate source and the nature of cash credit had been explained and held that the amount must obviously have been in existence on 30th March, 1966 when the wife made a declaration and therefore, so far as the cash credit in the assessee’s book was concerned, it is explained having come out from the amounts which come into existence in the financial year 1965-66 and therefore, the sum of Rs. 10,000 would not be treated as income of the accounting year 1966-67 relevant to assessment year 1967-68. On a reference, Delhi High Court held that the amount disclosed by the assessee’s wife could be assessed as income of the assessee. In this connection, reliance was placed on the decision of the Supreme Court in the case of Jamnaprasad Kanhaiyalal v. CIT [1981] 130 ITR 244 : 6 Taxman 61.
15. In the case of Hanuman Agarwal (supra), their Lordships of the Patna High Court have held as under :
The assessee is not supposed to know the capacity of the money-lender or the cash creditor. It is within the exclusive domain or the dark trusses of the minds of the creditors to know as to whether and how their sources of income are arrived. It is for that specific purpose that Section 131 of the Act has been introduced so that in case of any suspicion, the ITO or the authorities concerned may exercise the powers of a civil court under Section 131 and call upon the creditor concerned to prove his capacity to pay and the genuineness of his transaction. Once the ITO or the authority concerned is satisfied that the creditor is not telling the truth, it has been left open to the assessee to discharge his subsequent onus of proving the genuineness of the transaction and the capacity of the creditor to pay by cross-examining him. Where, therefore, an assessee gives the correct name, address and the GIR number of the creditor, as my learned brother has observed he has discharged his onus and unless a notice in due form under Section 131 of the Act is issued by the revenue authority concerned to test the veracity of the genuineness of the transaction or the capacity of the creditor to pay, the assessee has to succeed.
From the aforementioned decision it is evident that where the assessee gives correct name, address and the GIR number of the creditor and the Assessing Officer does not make any enquiry about the veracity or the genuineness of the transaction or the capacity of the creditor to pay, the addition cannot be made. However, where the Assessing Officer makes enquiries and tests the veracity or the genuineness of the transactions or the capacity of the creditor to pay and the Assessing Officer is satisfied that the creditor is not telling the truth, the assessee shall have to discharge his subsequent onus proving the genuineness of the transaction.
16. In the case of Prakash Textile Agency (supra). Assessing Officer had issued a summon under Section 131 of the Income-tax Act on a creditor from whom a loan of Rs. 1 lakh was shown by the assessee-a registered firm. By a letter dated 26th March, 1970 the creditor expressed his inability to produce the relevant books of accounts. The Income-tax Officer, therefore, added the sum as income of the assessee from undisclosed sources. The AAC confirmed the addition. At the instance of the assessee, the Tribunal called for the books of accounts of the creditor in the custody of the Income-tax Department to be produced and examined the proprietary of the creditor company. The Tribunal disbelieved the evidence of the proprietary of the creditor company and held that only the payment of interest by cheque was recorded in the books of creditor to give a colour of genuineness to transaction although neither the loan nor the repayment were recorded and that the creditor was not in a position to advance the loan on 16-9-1964. The Tribunal also held that assessee had not proved the source of the sum of Rs. 1 lakh credited in the books of account and the Appeal of the assessee was accordingly dismissed. The Hon’ble Calcutta High Court held that the assessee had established the existence and the identity of the creditor yet he had failed to establish the ability of the creditor to advance the loan or the genuineness of the transaction. Therefore, it cannot be said that there was no material or evidence to support the inference or conclusion of the Tribunal that a sum of Rs. 1 lakh represented the assessee’s income from undisclosed sources.
17. In the case of CIT v. Orissa Corporation (P.) Ltd. [1986] 159 ITR 78 : 25 Taxman 80F their Lordships of the Supreme Court have held, “that assessee had given the name and address of the alleged creditors and that it was in the knowledge of the revenue that the said creditors were income-tax assessees. Revenue apart from issuing notice under Section 131 at the instance of the assessee did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. There was no effort made to pursue the so-called alleged creditors. In these circumstances, the respondents could not do any further. In the premise, if the Tribunal came to the conclusion that the respondent had discharged the burden that lay on it then it could not be said that such conclusion was unreasonable or perverse or based on any evidence.
18. From the various decisions referred to above the following position emerges :
(a) In the case of cash creditors the onus is on the assessee to establish the identity of the creditor, his credit worthiness and genuineness of the transaction.
(b) Where the creditor is not closely connected with the assessee and the latter establishes the identity of the creditor, furnishes evidence about his credit worthiness, payment is received by cheque and genuineness of the transaction is established, the initial onus is discharged by the assessee. In such cases, the onus shifts to the revenue. It would then be for the Assessing Officer to verify the veracity and genuineness of the evidence. If on making enquiry the Assessing Officer is not satisfied about the correctness or the genuineness of the evidence the burden shifts back to the assessee.
19. However, where assessee has furnished prima facie evidence and the Assessing Officer does not pursue to examine the veracity or the genuineness of the evidence furnished as indicated above, the addition cannot be made in respect of cash credits, in such circumstances.
19A. In the case of relatives, the degree of proof to be furnished by the assessee is heavy and mere furnishing of identity, confirmation etc. would not be sufficient. It is necessary for the assessee to establish the source of the credit to the satisfaction of the Assessing Officer.
20. Now let us consider the issue involved in this case in the light of aforementioned principles of law. It is not disputed before us by the revenue that in respect of four credits in the names of Sh. Sahil Chawla, Smt. Meera Chawla, Smt. Seema Chawla and Ms. Reetika Chawla, the amount of Rs. 84,900, Rs. 49,400, Rs. 49,400 and Rs. 89,900 respectively had been received by means of cheques drawn on respective bank accounts of the creditors. It is also undisputed fact that these creditors had furnished returns of income for several years in respect of which assessments had been made by the revenue under Section 143(1). The statement of the four creditors had been recorded by the Assessing Officer and the advancing of money to the appellant firm had been confirmed by all the said creditors.
21. On the other hand, it is not disputed on behalf of the assessee that the four creditors are close relatives of the partners of the firm. Shri Sahil Chawla is son of Shri K.K. Chawla. Latter is having 50 per cent share in the profits of the firm. In the first period, Shri K.K. Chawla was having 40 per cent share in the profits of the firm. Smt. Meena Chawla is wife of Shri Rahul Chawla. Latter having 20 per cent share in the profits of the firm. Seema Chawla is the wife of Sanjay Chawla. Latter having 20 per cent share in the profit of the firm. Ms. Reetika Chawla is daughter of Shri K.K. Chawla. It is also not disputed that the firm is a family concern and that no outsider is a partner. It is in these circumstances we have to consider as to whether the assessee has discharged its onus regarding the identity of the creditor their credit worthiness and the genuineness of the transactions. In this case the identity of the creditors has been established. In respect of the credit worthiness of the creditors assessee has furnished evidence in the form of assessment orders in respect of the creditors. The statements of the creditors have also been recorded and it is on the basis of the statements of the creditors that the revenue has come to the conclusion that the loanees were not creditworthy and could not have advanced the stated amounts to the firm. We may have to deal with the statement of each creditor.
22. The statement of Shri Sahil Chawla is placed at pages 38 to 41 of the paper book. From the said statement following facts emerge.
He claimed to be working as an agent in the purchase and sale of automobiles mainly Maruti cars. He had no place of business and claimed to have functioned from his friends place namely, Shri Vikram Puri, Jawahar Nagar and also from some petrol pump, the name not disclosed. He was a student till 1981 and as on the date of recording of his statement i.e. 16-3-1988, he claimed to be in the business for the last 8 years. He had filed the income-tax returns for assessment years 1983-84, 1984-85, 1985-86 declaring income of Rs. 14,480, Rs. 15,010, Rs. 15,020 and for the year under appeal the return filed disclosed the income at Rs. 17,085.
23. As per his statement his annual income varied between Rs. 25,000 to Rs. 30,000 p.a. He was asked by the Assessing Officer as to whether he could give name of some parties to whom cars had been sold. In reply Shri Sahil Chawla stated that he had nothing to do with the names. He was interested in commission which ranged between Rs. 500 to Rs. 1500 per car. Another factor that assumes importance is that he had not any bank account up to 14th February, 1986 when Account No. 29590 was opened with Punjab National Bank, Shahdara, A sum of Rs. 25,000 was deposited on 14-2-1986 and Rs. 40,000 on 19-2-1986. A cheque for Rs. 64,900 had been issued on 22nd February, 1986 in the name of the assessee-firm i.e., soon after depositing the aforementioned amounts. On 22nd February, 1986 a cheque of Rs. 20,000 was issued in the name of the firm by depositing cash of Rs. 20,000 simultaneously on the same date with the Punjab National Bank, Shahdara. After the withdrawal of the said money from the bank account there are no substantial transactions made by Shri Sahil Chawla with the bank. When all the facts and circumstances are taken into account the claim of Shri Sahil Chawla being of person of means does not accord with human probabilities. In the case of CIT v. Durga Prasad More [1971] 82 ITR 540, their Lordships of the Supreme Court at page 545 have held as under :
It is true that apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents.
Keeping in view the aforementioned principle laid down by their Lordships of the Supreme Court and looking into the circumstances emerging from the statement of Shri Sahil Chawla and the surrounding circumstances, it is not difficult for us to conclude that the finding recorded by the revenue authorities that credit worthiness of Shri Sahil Chawla has not been established is well founded. It is nobody’s case that reasonable opportunity of being heard was not allowed to the assessee after recording of the statements of the creditors. We, therefore, uphold the addition of Rs. 84,900 in respect of the credit appearing in the name of Sahil Chawla in the books of accounts of the firm. As already observed the firm is a family concern and the creditor a family member.
24. Similar is the position in regard to Smt. Meena Chawla. Her statement recorded by the Assessing Officer is available at pages 59 to 60(b). Smt. Meena Chawla claimed to be in the business of stitching and knitting since 1975 and her annual income as per her statement ranged between Rs. 3,000 to Rs. 4,000 p.a., Whereas she had filed the return of income for assessment years 1983-84, 1984-85 and 1985-86 declaring income of Rs. 15,020, Rs. 14,870, Rs. 15,020 respectively. Though she claimed to be in business for more than a decade she had no bank account till 13th February, 1986 when she opened an account by depositing a sum of Rs. 15,000. On 19th February, 1986 another sum of Rs. 35,000, had been deposited. A cheque for a sum of Rs. 49,900 had been issued in the name of the firm on 22nd of February i.e., soon after the making of the two deposits. There was no other substantial deposit in the bank account after 19th February, 1986, though she claimed to have continued the business. She could not name any tailor whom she had engaged for doing the work though she had stated that all the dresses she sold were stitched by tailors. She had stated that a sum of Rs. 12,000 was available with her in the year 1982. As per her own statement she was having income between Rs. 3,000 to Rs. 4,000 p.a. She had also stated that she had spent whatever she earned and there was no surplus. It was, therefore, concluded by the revenue authorities that the credit worthiness of Smt. Meena Chawla had not been established. Considering the facts and circumstances of this case, we agree with the findings of the revenue authorities and uphold the same.
25. In the case of Smt. Seema Chawla, a sum of Rs. 49,000 is claimed to have been received on 22nd February, 1986. She had also opened a bank account on 13th February, 1986 by depositing a sum of Rs. 15,000. On 19th February, 1986 another sum of Rs. 35,000 had been deposited. Soon after, making the two deposits, a cheque for a sum of Rs. 49,000 had been issued on 22nd February, 1986 in the name of the firm. Copy of, statement of Mrs. Seema Chawla is available at pages 83(a, b) to 84(a, b). She1 has stated that she was basically a housewife but was also doing some business of knitting, stitching, crafts etc. since 1968. There was no regular place of business. She claimed to have carried on the business from her residence. She claimed to have earned income ranging between Rs. 2,000 to Rs. 5,000 p.a. She did not maintain any books of accounts. She had filed the return of income for assessment years 1983-84, 1984-85 and 1985-86 declaring income of Rs. 15,030, Rs. 15,020, Rs. 15,040 respectively. The income disclosed by her in the returns of income and as stated in her statement is at huge variance. She was not having any qualification or training in any specific craft. She was married in 1980. She did not make any deposit in her bank account after 19-2-1986. A cheque for a sum of Rs. 49,000 had been issued after making two deposits in the bank account in the month of February. The facts and circumstances stated above do not lend credence to the claim of the assessee that the credit worthiness of Seema Chawla had been established. The facts emerging from the statement of Mrs. Seema Chawla and the circumstances under which the bank account has been opened and cheque issued after making deposits and no further deposits having been made in the bank account justify the inference that Mrs. Seema Chawla was not creditworthy and that the transaction was not genuine. We, therefore, confirm the view of the revenue authorities in this regard.
26. A sum of Rs. 89,900 appears in the books of account of the assessee in Ms. Reetika Chawla’s name on 22nd February, 1986. Her statement is available at pages 14 to 17 of the paper book. She has claimed to be in the profession of textile designing for 8 to 9 years. The profession has been claimed to have been carried on from the residence. Income of Rs. 14,000 to Rs. 15,000 has been claimed to have been earned from the profession. She has studied upto 10th class and left education in the year 1979. She did not have any diploma in the textile designing. She claims to have attended some crash courses at Kamla Nagar. Exact address was claimed as not remembered. She also claimed to have attended some course at Karol Bagh and having learned batik during school days. These courses of 1 month to 2 months duration were claimed to have been attended during the year 1980-81. She claimed to have received orders at her residence but no bulk orders as such were received from any firm or company. No accounts had been maintained. She claimed to have earned between Rs. 14,000 to Rs. 15,000 p.a. She did not open any bank account till 14thFebruary, 1986 when she deposited a sum of Rs. 25,000. Another sum of Rs. 40,000 was deposited on 15-2-1986. A cheque for a sum of Rs. 64,900 was issued on 22nd February, 1986 in the name of the firm i.e. soon after the depositing of money with the bank. Another cheque of Rs. 20,000 was issued in the name of the firm after depositing a sum of Rs. 20,000 on the same day i.e on 22nd February, 1986. The return of income for assessment years 1983-84, 1984-85 and 1985-86 disclosing income of Rs. 15,010, Rs. 15,035, Rs. 15,080 respectively had been furnished. She had stated that she was charging a sum of Rs. 150 to Rs. 200 per saree for block printing. Assessing Officer was of the view that block printing does not cost that much and that such printing is done on cotton sarees. It was inferred by the Assessing Officer that Ms. Reetika Chawla was not even aware of the terminology used in textile designing as there was nothing like fabric colour as stated by her in reply to question No. 6. The Assessing Officer came to the conclusion that even though she might have carried some business as claimed she did not have the capacity to earn Rs. 14,000 to Rs. 15,000 p.a. and to save a huge amount of Rs. 90,000 approximately after leaving school in 1979.
27. The inference drawn by the Assessing Officer and confirmed by the CIT (A) that the credit worthiness of Ms. Reetika Chawla has not been established, in our view, is well founded. The addition made by the Assessing Officer by treating the credit in the name of Ms. Reetika Chawla is Justified and accordingly upheld.
28. Before winding up, we may refer to the contention raised on behalf of the assessee that assessment having been completed by the Assessing Officer even under Section 143(1) could not be ignored as the same had not been cancelled. Under Section 263 or under any other provision of the Act. It is well established principle of law that principles of estoppel do not apply to income-tax proceedings. Assessee having filed the returns of income and Assessing Officer having accepted the return under Section 143(1) is of no consequence on the facts and in the circumstances of this case. Under the scheme of assessments, Assessing Officer had been directed to accept the return of income without making any scrutiny. The assessments having been made does not put a seal on the claim of the declarant that he had earned the income from business/profession. Creditors having filed the returns declaring income less than Rs. 25,000, Assessing Officer had no option but to accept the return under Section 143(1). The filing of voluntary returns and acceptance of the same under Section 143(1) cannot be on a better footing than a declaration made under the voluntary disclosure scheme where there is a promise to accept the declaration without scrutiny. In the latter case, their Lordships of the Supreme Court in the case of Jamnaprasad Kanhaiyalal (supra) held that the immunity of not making any enquiries was available only in the hands of the declarant and where the credit appears in the third party account, the revenue would be entitled to make enquiries and record a conclusion on the basis of the evidence. Keeping these principles of law in mind, we are of the view, that making of assessment under Section 143(1) in the case of creditors is not a factor that precludes the Assessing Officer from examining the veracity and genuineness of the claim of having earned the income.
29. Another aspect that requires consideration is as to whether in a case where the Assessing Officer finds any sum credited in the books of accounts of the assessee and explanation of the assessee regarding its source is found unsatisfactory, the Assessing Officer is bound to find out the exact source or the possibility of the money belonging to any other person. In our view, under Section 68, any amount found to be credited in the books of accounts of the assessee and explanation of the assessee regarding its source having been found to be unsatisfactory, addition can be made under Section 68 by treating the amount of the credit as income from undisclosed sources of the previous year in which the amount is credited. In such cases, it is not for the Assessing Officer to find out the exact source or the possibility of money belonging to any other person. In the case of firm when entry is in the books of the firm and the explanation regarding source is found to be unsatisfactory the addition has to be made in the assessment of the firm and the Assessing Officer is not required to consider the possibility of the partners having introduced the money in the name of others. Section 68 clearly provides assessment of the sum in the case of the assessee in whose books entry is found to have been made and the explanation for its source is found to be unsatisfactory as in the case of Om Prakash Mahajan & Sons (supra) where their Lordships of the Delhi High Court have held that presumption under Section 68 that the amount is the income of the year of account does not apply where explanation is accepted or partially accepted that it relates to another year. Their Lordships held that the amount disclosed by the wife can be assessed as income of the husband. However, in that case the Tribunal had recorded a finding of fact that the sum of Rs. 10,000 had surfaced on 30th March, 1966 as such assessment could not be made in the subsequent assessment year. In the case before us, there is no finding that the amount had surfaced in any other year than the previous year relevant to assessment year under appeal. The amount has been found to have surfaced in the year under appeal and therefore, it was permissible for the Assessing Officer to assess the amount as income from undisclosed sources of the assessee-firm under Section 68 in this year.
30. We may point out that other decisions referred to on behalf of the assessee are inapplicable to the facts of this case. As held by their Lordships of the Supreme Court in the case of CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297 observations of the Court in a particular case are to be understood in the light of question before the Court. Those are not to be divorced from context. The appeal of the assessee on this ground is accordingly dismissed.
31. Next ground of appeal is relating to the disallowance of car expenses, depreciation and telephone expenses. Assessing Officer had made disallowance at 1/3rd out of car expenses and depreciation on account of personal use by partners. The claim of the assessee was that the disallowance was excessive. The CIT (A) has restricted the disallowance to 1/5th of the expenses. In our view, disallowance at 1/6th out of the expenditure of car and its depreciation would be justified. Assessing Officer is directed to allow relief accordingly.
32. A disallowance of Rs. 300 out of telephone expenses is reasonable and we accordingly decline to interfere.
33. The next ground of appeal is relating to levy of interest under Sections 216 and 217.
34. Assessee had raised following ground of appeal before the CIT (A):
That, the learned Income-tax Officer has further erred in charging interest from the assessee-firm under Sections 216 and 217 of the Income-tax Act. Before charging such an interest the Income-tax Officer did not provide any opportunity to the assessee-firm. His order, levying such a charge is thus unsustainable and invalid. In any case the charge being made not in accordance with law requires to be modified.
35. The CIT (A) has not recorded any finding in regard to this ground of appeal except directing the Assessing Officer to give consequential relief, if any, as a result of appellate order. Since the ground raised by the assessee in this regard has not been disposed of, we, in the interest of justice, consider it reasonable to remit this issue to the file of the Assessing Officer for fresh disposal. Assessee shall be given reasonable opportunity of being heard and matter decided in accordance with law.
36. In the result, appeal of the assessee is partly allowed.