ORDER
Vimal Gandhi, Vice President
1. This appeal by the assessee for the asst. yr. 1991-92 is directed against the order of the CIT(A), confirming disallowance of liabilities claimed at Rs. 24,31,431.
2. The facts of the case briefly stated are that the assessee submitted a return of wealth for the asst. yr. 1991-92 disclosing net wealth of Rs. 10,78,700. In the aforesaid declared wealth the assessee had claimed liabilities of Rs. 24,31,431. The AO proceeded ex parte against the assessee under s. 16(5) of the WT Act and disallowed the liability claimed in the absence of proof of liabilities.
3. The assessee impugned the above assessment in appeal before the CWT(A), but remained unsuccessful. The learned CWT(A) confirmed the order of the AO with the following remarks :
“6. The appeal was last heard on 26th March, 1997. I pointed out to the appellant’s C.A. that no details of liabilities have been submitted. I further pointed out to him that such details would constitute fresh evidence because the assessment was completed ex parte. I further requested him to make proper application for furnishing fresh evidence. The hearing was adjourned to 28th April, 1997, to enable him to do so.
7. There has been no compliance on this date. No application for adjournment has also been filed. Under these circumstances, I do not find any reason to interfere with the order of the AO.”
4. The assessee is aggrieved and has come up in appeal. We have heard both the parties. The learned counsel for the assessee submitted that the assessee had furnished details of liabilities in all the assessment years. In fact, the liabilities claimed in the year under consideration were same as those claimed in earlier years and, therefore, the AO was bound to allow the liabilities on the basis of record available with him. The learned counsel further argued that in the immediately preceding assessment year also the AO went into the question of liabilities and had allowed Rs. 8 lakhs towards liabilities to ITC Ltd. on getting confirmation from the ITC in response to summons issued by the AO. The confirmation letter was issued by the party as late as 24th February, 1993. The remaining liabilities amounting to Rs. 12,78,575 representing mainly interest payable on the above loan was not allowed by the AO. The assessee had to file an appeal and as per order dt. 7th February, 1995, the liabilities were allowed by the CWT(A). Having regard to the confirmation furnished by ITC as also past record of the assessee, the liabilities in question were wrongly disallowed. The learned counsel for the assessee then drew our attention to the assessment order for the subsequent year 1992-93 where again the entire liabilities due to ITC were accepted and the claim to the extent of Rs. 23,24,535 was allowed. Thus, on the same material, the Revenue authorities in the assessment year under consideration took a contradictory stand. It was accordingly submitted that the liabilities on the basis of material available on record should have been allowed.
5. The learned Departmental Representative on the other hand, supported the impugned order of the CWT(A). He argued that the assessee did not furnish the details of the liabilities and, therefore, the AO in proceeding under s. 16(5) of the WT Act was fully justified in disallowing the claim.
6. On a careful consideration of the rival submissions, in the light of the material available on record, we are inclined to allow the claim of the assessee. The assessment for the year under consideration was made under s. 16(5) of the WT Act as a best judgment assessment based on material available on record. As is clear from the order for the asst. yr. 1990-91, the officer had written to ITC Ltd. for confirming the loan due to them. The party confirmed the loan of Rs. 8 lakhs as on the date which was 24th February, 1993. The AO himself allowed this loan. However, he did not allow liability of interest claimed on the above loan as there was no confirmation from the party, but this further liability of Rs. 12,78,575 was allowed on appeal as similar interest was allowed in the past. This information has clearly been ignored by the AO while disallowing the liability in dispute. The party had confirmed the loan as on 24th February, 1993, whereas the valuation date was 31st March, 1991. The loan having remained unpaid, interest had also accrued and was to be allowed as done in the past. This plea of the assessee was accepted in the immediately preceding assessment year. Besides this, the AO also allowed this liability in the asst. yr. 1992-93. Thus, on the same material, contradictory orders were passed by the AO.
7. In the present case, the principle of continuity of state of things as demonstrated by Illustration (d) to s. 114 of the Indian Evidence Act, 1872, are applicable. As per the above principle, if a thing or state of things is shown to exist, an inference of its continuity within a reasonably proximate time both forwards and backwards may sometimes be drawn. The rule that the presumption of continuance may operate retrospectively also has been recognised in India. How far the presumption may be drawn backwards and forwards depends upon the nature of the thing and surrounding circumstances. The rule has been accepted by the Hon’ble Supreme Court in the case of Ambika Prasad vs. Ram Ekbal Rai AIR 1966 SC 605 and in large number of other cases.
8. Now, in the present case these very liabilities were accepted in the past. They were also established in the immediately preceding year on the basis of confirmation from the loanee (ITC Ltd.) as late as on 24th February, 1993. The material in the shape of assessment order for 1992-93 also establishes existence of liabilities as on 31st March, 1992. Thus, when existence of the same liabilities is proved as on 31st March, 1990 and 31st March, 1992, the presumption that it was in existence on 31st March, 1991, can legitimately be drawn in this case. The onus, therefore, was on the Revenue to prove that the above presumption, having regard to the material available on record, could not be drawn. No such material is available on record to rebut the presumption. On the contrary, the material as stated earlier clearly established that the liability was in existence and stood duly confirmed on 24th February, 1993. In these circumstances, we do not see any justification to disallow the claim. The AO is directed to allow the claim of liability to the assessee.
9. In the result, the appeal is allowed.