IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 16.06.2009 C O R A M: THE HONOURABLE MR.JUSTICE F.M.IBRAHIM KALIFULLA and THE HONOURABLE MR.JUSTICE B.RAJENDRAN TAX CASE (Appeal) No.376 of 2004 Sri Mangilal Jain, 29B, Big Bazzar Street, Myiladuthurai. .. Appellant vs. The Income Tax Officer, Ward I (2), Kumbakonam. .. Respondent Tax Case Appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras 'B' Bench, Chennai, dated 07.08.2001 in I.T.A.No.2693/MDS/1995 relating to the assessment year 1992-93. For Appellant : Mr.R.Venkatanarayanan for M/s.Subbaraya Aiyar For Respondent : Mr.K.Subramaniam Standing Counsel for IT - - - - - J U D G M E N T
(Judgment of the Court was delivered by B.RAJENDRAN, J.)
The assessee is the appellant. The assessee is an individual deriving income from business as a dealer in radio and spare parts. In the course of the assessment proceedings for the assessment year 1992-93, the Assessing Authority found that there was a total sum of Rs.90,000/- appearing as credit in the assessee’s books of account in the name of R.Subramanian and the assessing authority did not accept the claim that this was a genuine credit from the said person and he treated the said sum as assessee’s income from undisclosed source u/s.68 of the Income Tax Act, 1961. The assessee also claimed deduction of Rs.14,580/- as interest on such credit and as it represented the interest on the alleged debt, the same was disallowed by the assessing authority.
2. Against the said order of the assessing authority, the assessee filed appeal before the C.I.T (Appeals) and the Commissioner after enquiry and on production of the alleged letter of confirmation from a third party creditor of the assessee, the C.I.T.(Appeals) directed the Assessing Officer to treat the loan of Rs.90,000/- as genuine and also to allow the claim of interest on the loan. The Department aggrieved against the said order of the C.I.T.(Appeals) preferred an appeal before the Income Tax Appellate Tribunal.
3. The Tribunal on consideration of the facts and circumstances of the case held that the view of the C.I.T. (Appeals) was not correct in deleting the addition amount without weighing the evidence brought on record by the Assessing Officer and hence reversed the order of the Appellate Authority and sustain the addition of Rs.90,000/- as unexplained cash credit. The disallowance of the sum of Rs.14,580/- as interest on the credit also was upheld in favour of the Department and restored the order of the Assessing Authority.
4. Aggrieved against the order of the Tribunal, the assessee has preferred this appeal raising the following questions of law, viz.,
“1. Whether on the facts and in the circumstances of the case the Tribunal was right in sustaining the order of the respondent in rejecting the explanation offered for the credit entry of Rs.90,000/- pertaining to Sri R.Subramaniam and consequential addition with interest while determining the taxable total income for the relevant year ?
2. Whether on the facts and in the circumstances of the case the Tribunal was right in justifying the addition when the appellant discharged the burden of proving the identity of the creditor and source from which he received the money ?
3. Whether on the facts and in the circumstances of the case, the Tribunal was right in reversing the order of the Commissioner of Income-Tax (Appeal) when the identity of the person, his credit worthiness and genuineness of the transaction in respect of cash credit in the name of R.Subramaniam have been established by the appellant ?
5. We have heard the learned counsel appearing for both the parties elaborately.
6. The assessee’s main contention was as far as the loan transaction is concerned, he was able to produce evidence viz., on the examination of R.Subramaniam, before the Assessing Authority stating that Rs.90,000/- was advanced by him and it was his money and apart from this, the said amount of Rs.90,000/- was given as a loan by way of a cheque and therefore a genuine transaction cannot be questioned. He further argued that once the evidence is produced viz., the identity of the creditor is shown and the transaction was made by way of cheque, there ends the matter and the Department cannot take any other view in order to conclude that the transaction was not genuine.
7. A careful reading of the orders of the Appellate Authority and the Tribunal disclose three vital facts viz.,
(1) It seems R.Subramanian was allegedly gave loan to the assessee to the tune of Rs.90,000/- was examined before the Assessing Authority and though originally he has admitted that he has paid money of Rs.90,000/- and when the source of the amount was asked by the Assessing Authority, he immediately stated that the amount does not belonged to him and that the amount was advanced to him only by the assessee.
(2) Thereafter, when the said R.Subramanian was cross examined by the assessee, he again reiterated that the amount belonged to him and he had only paid it. Therefore, he backtracked the original stand as if he has advanced a sum of Rs.90,000/-.
(3) The assessing authority has also stated in the order that even though the said R.Subramanian had a bank account jointly in the name of his wife, for the purpose of this transaction, he opened a new bank account only in the year April, 1991 and deposited a sum of Rs.50,000/- on 20.05.1991 and again a sum of Rs.10,000/- on 21.05.1991 and thereafter issued a bearer cheque in the name of the assessee herein on 25.01.1991. He has also further deposited a sum of Rs.30,000/- on 06.06.1991 and then issued a bearer cheque for an equal amount in favour of the assessee.
Thus even the bank transactions clearly indicated that the transaction was done are deposits made only on the previous dates and on the next date it was given as bearers cheque and it was also not explained why new account was opened when already there existed another account.
8. Taking into consideration, the reversal of the stand of the said R.Subramanian, before the authority concerned, the authority rightly rejected the theory of funding of money by R.Subramanian, whereas the admission of R.Subramanian was that the money belonged to Mangilal Jain has been given more credence to. It is also pertinent to point out that before the Assessing Authority no other document was produced. After the Assessing Authority passed its order, in the C.I.T.(Appeals) the present appellant seems to have brought the records viz., letters from the third parties to the fact that the said Subramanian had sold a property in the year 1975, i.e. 17 years prior to the assessment year and he had advanced money to various parties and from and out of that advances, he had got the amount of Rs.89,500/- during the relevant period. Substantiating this point, he seems to have produced letters only from those persons subsequent to the filing of this appeal. Only relying upon the said documents, the C.I.T.(Appeals) has come to the conclusion that the loan transactions are genuine transactions. But as rightly pointed out by the Tribunal, in the evidence given by the said Subramanian, before the Assessing Authority, he has categorically stated that the money was kept by him in cash in the house. No where he has stated that the money was paid into the bank and from which the loan was given. Even this point of alleged sale and money received, as rightly pointed out in the Tribunal was the claim of the assessee only and not that of Subramanian. Therefore, there is contradiction of statement even in respect of the source where it was kept, whether it was in the house or in the bank. So the said Subramanian has contradicted every statement of him and as rightly pointed out both by the assessing authority and then by the Tribunal, the evidence of the said Subramanian could not be relied upon and rightly the appellate authority and the Tribunal had come to the conclusion that the transactions as stated by the assessee in respect of the loan cannot be believed and this transaction can only be treated as income for the relevant year. Admittedly, the deduction claimed by the assessee towards interest could not also be allowed as expenditure. In that regard both the authority as well as the Tribunal has rightly disallowed the interest portion also. Hence the finding of the first appellate authority viz., C.I.T. Appeals relying upon the letters and granting exemption is rightly set aside by the Tribunal.
9. One another point which was pointed out by the Department was that merely because the loan transaction was sought to be relied upon by the assessee, as that transaction was given by cheque, by itself will not prove the genuineness of the transaction for which reliance was placed upon the judgment of the Calcutta High Court in the case of United Commercial & Industrial Co.P.Ltd., (187 ITR 596), which was also relied upon by the Tribunal, which categorically states that the assessee must prove not only the identity of the creditor but their creditworthiness and genuineness of the transaction has also to be proved beyond any reasonable doubt by the assessee. In this case, the assessee has miserably failed in proving such a transaction especially in view of the contrary statement and withdrawal of the statement by the alleged lender R.Subramanian.
10. In the other decision reported in (1978) 114 ITR 689 (Shankar Industries Vs. Commissioner of Income Tax) the Calcutta High Court came to the conclusion and as rightly held that the burden of proof of genuineness, the Assessee must prove not only the identity of the creditor, capacity of the creditor to advance money and genuineness of the transaction. A mere proof of identity of creditor is not sufficient.
11. As rightly pointed out by the Tribunal, apart from this transaction of Rs.90,000/- in the new bank account the subsequent transaction to the tune of Rs.30,000/- would relate to a different period viz., in the assessment year 1992-93, this has been wrongly calculated by the C.I.T (Appeals) and hence as rightly pointed out by the Tribunal, this order was reversed both on factual and legal grounds.
12. The assessee has not made any legal ground calling for interference of this Court and the order passed by the Tribunal in respect of both the claims raised can not be said to be perverse or illegal. We find no reason to interfere with the finding of the Tribunal. Hence the appeal fails and the same is dismissed and the question of law is answered against the appellant.
kk
To
1. The Income Tax Officer,
Ward I (2), Kumbakonam.
2. The Income Tax Appellate Tribunal,
Madras ‘B’ Bench,
Chennai