ORDER
Rajes Kumar, J.
The Income Tax Appellate Tribunal has referred the following question of law under section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as “Act”) for the assessment year 1977-78 for opinion to this court :
“(a) Whether on the facts and in the circumstances of the case, the Tribunal was justified in rejecting the affidavits and oral evidence adduced on behalf of the assessee?”
2. The brief facts of the case are as follows :
2. The brief facts of the case are as follows :
The applicant/assessee (hereinafter referred to as ‘assessee’) is a Hindu Undivided Family and was engaged in the Sarrafa business and also had income from property and agriculture. The Income Tax department conducted a search at the business and residential premises on 23-9-1976.
3. In the search conducted by the department, considerable ornaments and bullion were found both at the shop as well as at the residence, some of which were also seized. Besides the above, the Officers also seized a cash book in the search. The Commissioner (Appeals) referred to it as a Kachchi cash book. The reading by the Tribunal of the cash book did not lead to any such conclusion. According to the Tribunal, it was a normal cash book, except with the interpolations, which will be discussed a little later.
3. In the search conducted by the department, considerable ornaments and bullion were found both at the shop as well as at the residence, some of which were also seized. Besides the above, the Officers also seized a cash book in the search. The Commissioner (Appeals) referred to it as a Kachchi cash book. The reading by the Tribunal of the cash book did not lead to any such conclusion. According to the Tribunal, it was a normal cash book, except with the interpolations, which will be discussed a little later.
4. In the course of assessment proceedings, the Income Tax Officer found several abnormal features in the maintenance of the books of account as well as in the activities of the assessee. He found that the assessee had disclosed a profit of Rs. 19,714 on the sale of silver ornaments of Rs. 35,211. In the immediate preceding year, the profit shown was Rs. 15,473 on the sales of Rs. 21,043. He, however, found that the assessee had made purchases of silver ornaments of Rs. 1,92,066 in the year under appeal as against the purchases of only Rs. 19,231 in the earlier year. To bim, this appeared to be abnormal, particularly when the sales in the year amounted to only Rs. 35,211. The closing stock disclosed in the year under appeal of similar ornaments amounted to Rs. 2,11,342 as against the closing stock of only Rs. 34,773 of the same commodity in the earlier year. This also made a difference in the balance sheets of the two years. While the balance sheet of the year under appeal total Rs. 2,47,153 that of the earlier year showed the total of only Rs. 78,954. The increase was reflected in the creditors, which increased from Rs. 20,110 in the preceding year to Rs. 1,91,503 in the year under appeal.
4. In the course of assessment proceedings, the Income Tax Officer found several abnormal features in the maintenance of the books of account as well as in the activities of the assessee. He found that the assessee had disclosed a profit of Rs. 19,714 on the sale of silver ornaments of Rs. 35,211. In the immediate preceding year, the profit shown was Rs. 15,473 on the sales of Rs. 21,043. He, however, found that the assessee had made purchases of silver ornaments of Rs. 1,92,066 in the year under appeal as against the purchases of only Rs. 19,231 in the earlier year. To bim, this appeared to be abnormal, particularly when the sales in the year amounted to only Rs. 35,211. The closing stock disclosed in the year under appeal of similar ornaments amounted to Rs. 2,11,342 as against the closing stock of only Rs. 34,773 of the same commodity in the earlier year. This also made a difference in the balance sheets of the two years. While the balance sheet of the year under appeal total Rs. 2,47,153 that of the earlier year showed the total of only Rs. 78,954. The increase was reflected in the creditors, which increased from Rs. 20,110 in the preceding year to Rs. 1,91,503 in the year under appeal.
5. The above abnormalities led the Income Tax Officer to examine the position a little deeper. It was submitted before him that the entire stock found at the time of the search either at the business premises or at the residence were duly reflected in the accounts. It was pointed out to him that in the year under appeal, the assessee had made heavy purchases of silver ornaments for which the financiers had come by way of loans from several agriculturists, as also from the agricultural income of the assessee itself.
5. The above abnormalities led the Income Tax Officer to examine the position a little deeper. It was submitted before him that the entire stock found at the time of the search either at the business premises or at the residence were duly reflected in the accounts. It was pointed out to him that in the year under appeal, the assessee had made heavy purchases of silver ornaments for which the financiers had come by way of loans from several agriculturists, as also from the agricultural income of the assessee itself.
6. The examination by the Income Tax Officer of the assessee’s cash book seized in the search showed various credits aggregating Rs. 90,000 which together with the agricultural income of Rs. 5,000 credited in the cash book on 19-3-1976 came to Rs. 95,000. The details of these credits are given in para 27 of the assessment order, which need not be repeated here. All these amounts were claimed to have been invested in the purchase of the silver ornaments on the very day, they were received by the assessee. It was claimed before the Income Tax Officer that besides purchase of silver ornaments amounting to Rs. 95,000 ornaments of the value of Rs. 43,000 had been taken on approval basis from M/s. Genda Lal & Sons. Chowk Lucknow and M/s. Nand Kishore Motilal Sarraf, Chowk Bazar, Mathura. It was also submitted before him that the purchases of the ornaments as well as their receipt on approval basis had also been duly entered in the assessee’s cash book.
6. The examination by the Income Tax Officer of the assessee’s cash book seized in the search showed various credits aggregating Rs. 90,000 which together with the agricultural income of Rs. 5,000 credited in the cash book on 19-3-1976 came to Rs. 95,000. The details of these credits are given in para 27 of the assessment order, which need not be repeated here. All these amounts were claimed to have been invested in the purchase of the silver ornaments on the very day, they were received by the assessee. It was claimed before the Income Tax Officer that besides purchase of silver ornaments amounting to Rs. 95,000 ornaments of the value of Rs. 43,000 had been taken on approval basis from M/s. Genda Lal & Sons. Chowk Lucknow and M/s. Nand Kishore Motilal Sarraf, Chowk Bazar, Mathura. It was also submitted before him that the purchases of the ornaments as well as their receipt on approval basis had also been duly entered in the assessee’s cash book.
7. At this stage, the Income Tax Officer examined the assessee’s cash book found in the search. He examined the various entries and noticed that they had also been interpolated after the cash book had been written in the normal course. In support of the assessee’s explanation that it had borrowed funds to the extent of Rs. 90,000 from the various parties, affidavits of the concerned parties had also been produced, some of these parties were also examined by the Income Tax Officer. They had invariably, except some, stated that they held certain agricultural land and they had deposited their savings with the assessee. In the case of Smt. Lalmani Devi, it was submitted, which was supported by her affidavit, that she had sold land from 1970 to 1973, and the sale proceeds had been deposited with the assessee in two credits of Rs. 8,000 and Rs. 5,000 on 13-2-1976 and 14-2-1976. It appears she was a pardanashin lady. Request was made for her examination on commission, which was probably not accepted by the Income Tax Officer. The Income Tax Officer did not believe the story of the assessee that it had borrowed Rs. 90,000. According to him, none of the parties was in a position to have any amount to make deposits with the assessee. In the case of Smt. Lalmani Devi, according to the Income Tax Officer, it was not possible to believe that she could make deposits in 1976 out of the sale proceeds of land made from 1970 to 1971. He also found that the affidavits given by the parties were stereotyped giving somewhat similar narrations. Some of them, of course in their examinations by the Income Tax Officer, supported the contents in their affidavits but they were not believed by the Income Tax Officer.
7. At this stage, the Income Tax Officer examined the assessee’s cash book found in the search. He examined the various entries and noticed that they had also been interpolated after the cash book had been written in the normal course. In support of the assessee’s explanation that it had borrowed funds to the extent of Rs. 90,000 from the various parties, affidavits of the concerned parties had also been produced, some of these parties were also examined by the Income Tax Officer. They had invariably, except some, stated that they held certain agricultural land and they had deposited their savings with the assessee. In the case of Smt. Lalmani Devi, it was submitted, which was supported by her affidavit, that she had sold land from 1970 to 1973, and the sale proceeds had been deposited with the assessee in two credits of Rs. 8,000 and Rs. 5,000 on 13-2-1976 and 14-2-1976. It appears she was a pardanashin lady. Request was made for her examination on commission, which was probably not accepted by the Income Tax Officer. The Income Tax Officer did not believe the story of the assessee that it had borrowed Rs. 90,000. According to him, none of the parties was in a position to have any amount to make deposits with the assessee. In the case of Smt. Lalmani Devi, according to the Income Tax Officer, it was not possible to believe that she could make deposits in 1976 out of the sale proceeds of land made from 1970 to 1971. He also found that the affidavits given by the parties were stereotyped giving somewhat similar narrations. Some of them, of course in their examinations by the Income Tax Officer, supported the contents in their affidavits but they were not believed by the Income Tax Officer.
8. The Income Tax Officer also examined the cash book with regard to the purchases of silver ornaments amounting to Rs. 95,000. He found that the credits shown as receipt from the creditors were squared up by showing the purchase of silver and the labour charges relating to its transport, which did not effect the final totals. His finding, however, was that all these entries had been interpolated in the cash book either after it was seized in the search or before that, in order to create funds for the huge unaccounted stocks found in the search. He also found that there were no details of purchases of any silver, which also went to show that they had actually not been purchased on the dates mentioned in the cash book. He also disbelieved the assessee’s case that it had taken any such ornaments for approval from either M/s. Genda Lal & Sons of Lucknow or M/s. Nand Kishore Moti Lal Sarraf of Mathura. He finally held that the entries in the cash book relating to borrowings amounting to Rs. 95,000 and of Rs. 1,30,000 relating to the purchase of silver or silver ornaments were bogus entries, not backed by any real transactions. His next consequential finding was that the assessee had failed to explain the source of silver ornaments found in the search. He valued such ornaments at Rs. 1, 13,914 and included it as the assessee’s income from undisclosed sources.
8. The Income Tax Officer also examined the cash book with regard to the purchases of silver ornaments amounting to Rs. 95,000. He found that the credits shown as receipt from the creditors were squared up by showing the purchase of silver and the labour charges relating to its transport, which did not effect the final totals. His finding, however, was that all these entries had been interpolated in the cash book either after it was seized in the search or before that, in order to create funds for the huge unaccounted stocks found in the search. He also found that there were no details of purchases of any silver, which also went to show that they had actually not been purchased on the dates mentioned in the cash book. He also disbelieved the assessee’s case that it had taken any such ornaments for approval from either M/s. Genda Lal & Sons of Lucknow or M/s. Nand Kishore Moti Lal Sarraf of Mathura. He finally held that the entries in the cash book relating to borrowings amounting to Rs. 95,000 and of Rs. 1,30,000 relating to the purchase of silver or silver ornaments were bogus entries, not backed by any real transactions. His next consequential finding was that the assessee had failed to explain the source of silver ornaments found in the search. He valued such ornaments at Rs. 1, 13,914 and included it as the assessee’s income from undisclosed sources.
9. The assessee appealed to the Commissioner (Appeals). The Commissioner (Appeals) accepted the assessee’s explanation. According to him, the cash book found in the search, which could be treated as Kachchi cash book, had been maintained in the normal course of business and that there was nothing unusual about the various entries either relating to the credits or relating to the purchase of silver ornaments. He, of course admitted that these entries were in different ink but observed that they had been made by the responsible persons, while the other entries were made by the Munim. He also held that the assessee had fully explained the genuineness of the credites by proving the identity of the lenders and their capacity to lend the amounts. He also observed that there was nothing to doubt the purchase of silver ornaments by the assessee. Similarly, he also accepted the genuineness of the ornaments taken on approval from the two Lucknow and Mathura parties, He finally deleted the addition of Rs. 1,13,914.
9. The assessee appealed to the Commissioner (Appeals). The Commissioner (Appeals) accepted the assessee’s explanation. According to him, the cash book found in the search, which could be treated as Kachchi cash book, had been maintained in the normal course of business and that there was nothing unusual about the various entries either relating to the credits or relating to the purchase of silver ornaments. He, of course admitted that these entries were in different ink but observed that they had been made by the responsible persons, while the other entries were made by the Munim. He also held that the assessee had fully explained the genuineness of the credites by proving the identity of the lenders and their capacity to lend the amounts. He also observed that there was nothing to doubt the purchase of silver ornaments by the assessee. Similarly, he also accepted the genuineness of the ornaments taken on approval from the two Lucknow and Mathura parties, He finally deleted the addition of Rs. 1,13,914.
10. The department came in appeal before the Tribunal challenging the above deletion. The Tribunal dealt with the matter in paras 24 to 27 of its order in the following words
10. The department came in appeal before the Tribunal challenging the above deletion. The Tribunal dealt with the matter in paras 24 to 27 of its order in the following words
“24. We have carefully considered the submissions placed before us. Section 132(4A) of Income Tax Act, 1961 no doubt creates a presumption that the content of the books of account and other documents found in the search are true, but that presumption is rebuttable. In our opinion, it has been rebutted by the department in the present case. We have ourselves examined the cash book found in the search very carefully and closely. We are clearly of the opinion that the entires relating to the borrowings as well as for the purchases of the silver and for ornaments have been subsequently interpolated in the cash book at the space left at the time of its original writing. The entries have been somehow or other filled in a crude manner in the left space had in different handwriting. On the one hand, the various amounts, as mentioned in para 27 of the assessment order, have been shown on the credit side of the cash book, on the other hand, the exact amount has been shown as spent in the purchase of silver ornaments and as labour charges for transporting them. These have, thus, crossed each other without making any difference in the final total. We do not understand what was the necessity of such interpolations if the cash book had really been maintained in the normal course of business as was believed by the Commissioner (Appeals). The Supreme Court in the case of CIT v. Durga Prasad More 82 ITR 640 (SC) has observed that the taxing authorities were not required to put in 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 racitals made in those documents. In our opinion, the Commissioner (Appeals) had certainly put on blinkers while holding that the entires had been made in the cash book in the normal course of business. Even a layman would not believe such a finding and, in our opinion, rightly so. It is not necessary for us to enter into investigation at what stage these entries were made. Whatever might have been the stage, they were certainly made after the entire cash book had been written, i.e., after the end of the year. The cash book is for the period 14-10-1975 to 2-9-1976. The entries, therefore, seem to have been made after 2-9-1976 or at least after 28-8-1976 when the last entry in dispute relating to the ornaments valuing Rs. 20,000 claimed to have been received on approval from M/s. Genda Lal & Sons of Lucknow was made.
25. The last two entries in the cash book relate to receipt of ornaments of the value of Rs. 23,000 on 18-8-1976 from M/s. Nand Kishore Moti Lal Sarraf and of Rs. 20,000 on 28-8-1976 from M/s. Genda Lal & Sons. On 18-8-1976 the relevant entries have been enterpolated in the cash book on both the credit and debit sides. The final total which was Rs. 2,288 was changed to Rs. 25,288 showing an increase at Rs. 23,000. Similarly on 28-8-1976 ‘ the entries relating to Rs. 20,000 were interpolated in the cash book. The total originally stood at Rs. 694.24 on both the sides, which was increased by additing the figure of Rs. 20 making it Rs. 20,694.24. This is clear even from the naked eye.
26. For the reasons stated above, we are in agreement with the findings of the Income Tax Officer that the entries in the cash book cannot be relied upon. The question then arises whether independent of the cashbook, the assessee’s explanation that it had received various amounts aggregating Rs. 90,000 from different parties or the alleged purchase of silver and/or ornaments of the value of Rs. 95,000 together with the receipt of ornaments of the value of Rs. 43,000 on approval could be believed. Here also we are in agreement with the findings of the Income Tax Officer. We have perused his order thoroughly. He has dealt with the affidavits of the alleged creditors as well as their statements. Some of them were also not produced before the Income Tax Officer. We did not agree with the stand of the assessee that Smt. Lalmani Devi could not be produced before the Income Tax Officer as she was a pardanashin lady. We wonder how she could go to the oath Commissioner or Notary for swearing the affidavit in the state of affairs. The answer is obvious that the assessee avoided her production before the Income Tax Officer for cross examination. We agree with the finding of the Income Tax Officer that there is no evidence to link the sale proceeds received by her from 1970 to 1973 from sale of her land with the two deposits of Rs. 8,000 and Rs. 5,000 on 13-2-1976 and 14-2-1976 with the assessee. Similarly, we agree with the findings of the Income Tax Officer that the other creditors were also not in a position to make any advance to the assessee. The mere fact that they were possessing some land for which the assessee did lead evidence before the Income Tax Officer did not, by itself, prove that they had surplus funds for making deposits with the assessee on which they had also not received interest. It is no doubt claimed that some of the amounts had been returned to them, but it is surprising that none of them made a claim for either the payment of interest or the refund of the amount when they were petty agriculturists and must have been requiring funds for their own purposes. That only goes to show that they were really not the owners of the funds. Somewhat similar position is about the claim of the assessee that it had made purchases of silver/ornaments. We details of any such purchases have been produced before the Income Tax Officer. With regard to the income from agriculture, we have held following our findings in the assessment year 1976-77 that amount had been utilize by the assessee for the house hold expenses. The sum of Rs. 5,000 also could not, therefore, remain with the assessee for investment in the silver/ornaments. Our findings, therefore, is that the assessee has failed to explain the source of the acquisition of silver/or silver ornaments amounting to Rs. 95,000. We restore the addition to this extent.”
11. Heard Sri Shakil Ahmad, learned counsel appearing on behalf of assessee and Sri Govind Krishna, learned standing counsel.
11. Heard Sri Shakil Ahmad, learned counsel appearing on behalf of assessee and Sri Govind Krishna, learned standing counsel.
12. We have perused the order of Tribunal. We do not find any error in the order of Tribunal. Tribunal has considered the affidavits and other evidences and has given reasons for their non-acceptance. Tribunal held that the entries in the books of account have been manipulated. Findings of the Tribunal are the finding of fact. Finding of Tribunal since based on material on record cannot be said to be perverse and no interference is called for.
12. We have perused the order of Tribunal. We do not find any error in the order of Tribunal. Tribunal has considered the affidavits and other evidences and has given reasons for their non-acceptance. Tribunal held that the entries in the books of account have been manipulated. Findings of the Tribunal are the finding of fact. Finding of Tribunal since based on material on record cannot be said to be perverse and no interference is called for.
13. In the result, question referred to us is answered in affirmative, i.e., against the assessee and in favour of the revenue.
13. In the result, question referred to us is answered in affirmative, i.e., against the assessee and in favour of the revenue.
