JUDGMENT
R.V. Raveendran, C.J.
1. This appeal is by the revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the ‘the Act’), arising from order dated 30-6-2003 of the Tribunal, Indore Bench, in ITA No. 613/Ind/1997 (Assistant Commissioner v. Rajeev Shukla) and C.O. No. 104/lnd/1997 (Rajeev Shukla v. Asstt. CIT) relating to assessment year 1992-93. The appeal has been admitted on the ground that the following three questions raised by the revenue arise for consideration:
(1) Whether the Tribunal was justified in law in holding that the addition of Rs. 63,351 made by the assessing officer on account of unexplained peak difference of investment over income under Section 69 of the Income Tax Act, 1961 (sic) ?
(2) Whether the Tribunal was justified in deleting the addition of Rs. 1,50,606 made by the assessing officer on account of unexplained investment in purchase of foreign currency, under Section 69 of the Income Tax Act, 1961 ?
(3) Whether the Tribunal was justified in deleting the addition of Rs. 80,000 made by the assessing officer under Section 68 of the Income Tax Act, 1961, in absence of any details to prove the loans taken from Shri Biharilal (Rs. 25,000), Shri Badri Prasad (Rs. 30,000) and Shri Hari Ram (Rs. 25,000) ?
Re. Question No. (1):
2. The assessing officer in his order of assessment dated 10-3-1995 added a sum of Rs. 63,351 as unexplained peak difference of investment over income. The assessee had declared an income of Rs. 1,18,101 which included other business income of Rs. 60,000, and on that basis paid self-assessment tax on 24-9-1992. Thereafter there was a search from 28-10-1992 onwards in the premises of Shukla family including the assessee. While framing the assessment, the assessing officer examined the cash rotation statement submitted by the assessee to explain the various investments and held that it was not acceptable for the following reasons:
(a) That the opening cash balance of Rs. 16,996 as on 1-4-1991 was not acceptable as it was made up of three cash gifts of Rs. 6,000 each in the assessment years 1983-84, 1986-87 and 1987-88 respectively and the assessee could not specifically give the sources of the said gifts;
(b) That the assessee had shown rental receipts of rental income of Rs. 21,600 during the year and had deposited the same in the bank account. Therefore, it could not again be included in the cash flow statement;
(c) That the assessee had declared “other business income” of Rs. 60,000 in the return without mentioning the nature of business. The said return was filed during the days when the search was going on and, therefore, declaration of the said income was not bona fide. Further, the said income shown as from lottery and from advising chance numbers to other (relating to lottery) could not be believed, as lottery income is invariably received by cheques, whereas the assessee had shown income by cash, and also on the ground that the assessee did not have the skill or the background of advising the change numbers to others.
Therefore, the assessing officer prepared a revised cash flow statement showing Rs. 1,36,857 as sources of cash (cash receipts) and Rs. 2,00,528 as the application of cash (cash expenditure), which left a deficit of Rs. 63,371). The assessing officer added the same under Section 69 of the Act as undisclosed income used for investments.
3. On appeal by the assessee, the Commissioner (Appeals) found that insofar as the other business income of Rs. 60,000 was concerned, this had been voluntarily disclosed and included in the return filed in regard to which the self assessment tax was paid by the assessee on 24-9-1992, much before the date of search and, therefore, it was unreasonable to infer that the assessee had declared the income of Rs. 60,000 with a view to take advantage of excess income found in search. The appellate authority also found that the lottery prize winnings of less than Rs. 5,000 were settled by spot payments in cash on surrendering of tickets and the payments were not by cheques. Thus, the appellate authority found that the addition of sum of Rs. 63,351 as unexplained investments was not justified and deleted the addition. That was affirmed by the Tribunal in the appeal by the revenue.
4. Preparation of the cash flow or cash rotation statement on the basis of several items of receipts and expenditure shown by the assessee is an exercise relating to a question of fact. The appellate authority examined the matter in detail and found that the basis for the assessing officer rejecting the other business income was erroneous an recorded a finding of fact that the other income of Rs. 60,000 should be accepted. The appellate authority in his order dated 25-3-1997 cancelled the addition on the following reasoning:
8. After considering the submissions of the learned Authorised Representative and after perusing the case records, the following decisions are given
(a) Regarding opening balance of Rs. 16,906 as on 1-4-1991, it is seen that last year’s assessment was reopened under Section 147 of the Income Tax Act and the appellant had submitted the combined cash flow statement of various years in which the closing balance as on 31-3-1991 was shown at Rs. 16,906. The assessing officer after considering the facts of the case has dropped the proceedings under Section 147 of the Income Tax Act for assessment year 1991-92 on 8-2-1994 with the ‘approval of D.C. Range, Bhopal. Hence, the appellant has to be allowed the benefit of opening cash balance of Rs. 16,906 as on 1-4-1991.
(b) Regarding income of Rs. 60,000 shown by the appellant as “other business income”, irrespective of the fact whether the source of it is properly explained or not, since the said income has already been offered by the appellant in the computation of income and taxed also by the assessing officer benefit for the same has to be given in the cash flow statement.
(c) The shop rent received by the appellant during the year was Rs. 21,600 out of which the amount deposited in the bank was Rs. 5,600 only which formed part of total bank deposits of Rs. 1,06,951 and the balance of Rs. 16,000 was available with the appellant in cash. Hence, Rs. 16,000 has to be considered in the cash flow statement.
(d) Hence, if credit is given for above mentioned three amounts of Rs. 16,906, Rs. 60,000, Rs. 16,000, Rs. 92,906, the deficit of Rs. 63,671 gets converted into a surplus of Rs. 29,235. Hence the addition of Rs. – 63,571 made by the assessing officer is deleted.
This has been affirmed by the Tribunal. The question of acceptability of the cash flow on the basis of earning is a question of fact. The appellate authority has given clear and cogent reasons for deleting the said addition of Rs. 63,671 and that has been affirmed by the Tribunal. We find that question of law may not really arise. It is answered in the affirmative against the revenue.
Re. Question No. (2):
5. This relates to deletion of Rs. 1,50,606 added by the assessing officer as unexplained investment in purchase of foreign currency. The same question has been considered by us and answered in the affirmative against the revenue in MA (IT) No. 69 of 2003 decided on 2-3-2005 (CIT v. Savitri Devi Shukla) relating to same assessment year in the case of assessee’s mother Smt. Savitri. Devi Shukla. For the reasons stated therein, we answer the second question in the affirmative, against the revenue.
Re. Question No. (3):
6. The assessing officer had added Rs. 80,000 under Section 68 of the Act on account of following three unexplained loans received by the assessee from Biharilal (Rs. 25,000), Badri Prasad (Rs. 30,000) and Hariram (Rs. 25,000). The assessee filed their affidavits, which disclosed their addresses and the fact that the loans were advanced by demand drafts. The assessee also gave a letter dated 1-3-1995 informing the assessing officer that if the assessing officer had any doubt, he may summon the creditors for verification. Summonses were not issued. On the other hand, the assessing officer, after referring to several circumstances which cast a doubt about the genuineness of the loans, added the sum of Rs. 80,000 as unexplained income under Section 68 of the Act.
7. The appellate authority found that the assessing officer had raised doubts about the loans but had failed to examine the three creditors in spite of specific request made by the assessee for their examination after having filed their affidavits. The appellate authority held that merely on the basis of doubts, additions were not justified and that the assessing officer should have cleared the doubts by examining the creditors before deciding the question. He, therefore, set aside the issue to the file of assessing officer with a direction to examine the three creditors under Section 131 and then decide the issue afresh.
8. Feeling aggrieved by the remand of this issue to the assessing officer, the assessee filed cross-objections before the Tribunal in the appeal filed by the revenue. The Tribunal held that if the assessing officer had any doubt, he ought to have summoned the creditors to verify the claim of the assessee; and as the assessing officer failed to issue summons to the creditors for verification of the claim, the addition was not justified and the appellate authority could not have plugged the lapse on the part of assessing officer by remanding the matter. The said finding is challenged by the revenue in this appeal.
9. It is now well settled that in regard to any sum credited in the books of account, the assessee should establish three things; the identity of the creditor, the capacity of the creditor, and the genuineness of the transaction. It is for the assessee to adduce the evidence establishing the said three factors. In this case, the record disclosed that the assessee did not examine the witnesses but only filed their affidavits. It is also stated that one of the three creditors subsequently died and the assessee made a request for issuing summons to the others, if the assessing officer was not satisfied with the affidavits. The assessing officer was not in fact satisfied for the several reasons set out by him. But as he failed to issue summons to the creditors and decided the matter against the assessee, the appellate authority rightly remanded the matter for examination of the creditors before deciding the issue. It should be noticed that the choice before the appellate authority was either to – remand the matter for examining the witnesses or accept the addition on the ground that the assessee had not established the genuineness of the transactions. In fact the assessee ought to have produced the witnesses or requested for issue of summons, instead of saying that the assessing officer may issue summons to the creditors if he had any doubt. Therefore, the remand. actually favours: the assessee and not the department. The third question is, therefore, answered in the negative, in favour of the Revenue. The deletion made under Section 68 (Rs. 80,000) by the Tribunal is set aside and the remand of the issue to the assessing officer is upheld.
10. Accordingly, the appeal is allowed in part, in regard to question No. (3) (regarding loans of Rs. 80,000) as per para 9 above.