TaxTMI 
TaxTMI 
1975 (7) TMI 82
X X X X Extracts X X X X
X X X X Extracts X X X X
....unal 1966-67 6,000.00 5,094.00 86,790.00 Reopened u/s 146 1967-68 6,000.00 5,748.00 53,790.00 -do- 1968-69 6,000.00 7,070.00 3,35,789.00 -do- 1969-70 6,500.00 8,400.00 93,421.00 -do- 1970-71 7,000.00 10,136.00 6,37,453.00 -do- 1971-72 7,000.00 12,500.00 3,53,910.00 Under consideration by the Tribunal He also observed that the assessee has not maintained any accounts for biri, cigarette business. All the assessments for the earlier years have been framed on no account basis. During the accounting year relevant to the asst. yr. 1963-64 the assessee started money lending business and introduced in the month of June, 1963 the various cash credits in the books. The books were started for the first time in the money lending business only. Summons were issued to all the creditors where the assessee had supplied the address. Out of these 17 notices were received back unserved. The assessee has filed affidavits of some of these creditors. But the ITO in order to verify the genuineness of the money-lending business examined 24 creditors and studied the debtors' accounts. He also went through the tran....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d a few Hawala purchasers. In respect of Hawala purchasers Ram Krishan Harji Mal, Om Prakash Gupta & Sons and Sundoo Mal Ram Sarup, the ITO quoted important details of bank as well as cash transactions and observed that cheques are issued in advance and the cash is deposited in the bank a day or two later. This clearly indicates that the assessee had no funds available with him. According to the ITO the Hawala purchaser's man goes to the bank and deposits the amount in the assessee's bank account so that the cheque issued earlier is encashed. In respect of the cash transactions, the ITO discussed the details of the following parties :- 1. Bhartiya Ispat Udyog,Faridabad. 2. Bajrang Lal Bhawan Das. 3. Bhartia Ispat Udyog,Delhi. 4. Bharat & Co., 5. Beg Raj Bharat Singh, Narela. 6. Bodh Raj Bharat Bhushan. 7. Durga Conduit Pipe Works. 8. Gupta Tin Supply Co. 9. International Mfg. Syndicate. 10. Siwan Ram Nathu Ram. 11. Kishore Textiles Mills. 12. Kidar Nath Ishwar Chander. 13. Loha Udyog. 14. Manage RamOmParkash. 15. Mohan Lal Bubna & Bors. 16. Mohan Chitrlok,Ghaziabad. 17. Onkar Nath ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the debts raised by his month only by selling the property could not dream of raising such huge loans which rose up to Rs. 19,99,999 during the assessment year under consideration. In fact some influential parties approached the assessee to act as a conduit pipe to help them to invest their own black money in the business and the assessee started Hawala business and charges certain premium in the shape of interest. The assessee's creditors included pedlars petty shop-keeper, peons, clerks, teachers an agriculturists. These petty creditors were never in a position to advance money to the assessee. Most of the creditors could not be identified by the assessee. Some of the creditors were produced and their statement on solemn affirmation have been recorded. It has been found by the ITO that most of the creditors are his family members and near relatives. Smt. Sampati Devi, mother of the assessee mortgaged her house on28th Aug., 1937for a sum of Rs. 10,000. She could not repay this amount as the financial position was not happy and finally the house was sold on29th June, 1960for a sum of Rs. 14,000 only. Only then the loan was repaid with interest after realising the sale proceeds of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ong with deposit of Rs. 1,680 Smt. Chanderwati 2,200 Interest as well as the deposit of Rs. 2,200 disallowed. Likewise the ITO discussed the accounts of 105 parties out of which claim of interest in respect of 94 parties amounting to Rs. 1,45,478 was disallowed by the ITO as he did not consider most of these parties as genuine. In respect of accounts of 23 parties in whose cases disclosures made under the Voluntary Disclosure Scheme and their disclosure amounted to Rs. 2,30,000 and since according to the ITO the assessee had not been able to show that there has been any agreement for payment of interest, he held that there is no accrued liability for payment of interest and hence he disallowed the entire claim of interest referred to above. Thus ultimately the ITO held as under :- "The assessee is doing Hawala business and accommodated the influential persons in their nefarious activities. No money has actually passed nor the assessee possessed any funds as discussed above. The assessee's bank account with State Bank of Bikaner and Jaipur shows the opening balance of Rs. 309.50 on 1st April, 1970 and balance as on 31st March, 1971 shows at Rs. 170.72 and other bank a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see ample opportunity which the assessee did not choose to avail. The ITO raised on the facts on record. His enquiries both within the Department and outside and examination of materials in the possession of creditors and debtors and also the arguments advanced on behalf of the assessee by the learned counsel during the course of hearing both before him as well as in appeal clearly point out to the fact that the only conclusion he could draw was that as far as the year of account is concerned there was no material in the possession of the assessee to prove that the transactions entered into by the assessee in respect of the alleged money-lending transactions were true and complete. Having come to this conclusion. I am unable to interfere with the assessment made by the Tio for the asst. yr. 1971-72. However the learned counsel pointed out the there are certain double additions made in the assessment which may be through and after satisfying himself rectify the same. Before parting with this order I must put on record the extensive materials gathered by the ITO in the face of several handicaps and difficulties set by the assessee and brining to tax a sizeable portion of the unaccoun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en the same amount cannot be the income of any other person also. The legal fiction created by sub-s. (3) of s. 24 by which the amount declared by the declarant has to be charged to income-tax at the prescribed rates "as if such amount were the total income of the declarant", can operate only on the assumption that it is not the income of anyone else. If the declared amount becomes under the Finance (No. 2) Act the total income of the declarant for the purpose of charging income-tax on it, it cannot be the income of someone else also for the same purpose of again charging income-tax on it. The legal fiction created by sub-s. (3), therefore, finally imprints on the sum declared of "total income" of the declarant and the finally is achieved by enacting that the income-tax paid as a result of he declaration shall not be refunded in any circumstances. The Legislature has nowhere sanctioned in the Finance (No. 2) Act, 1965, the imposition of double taxation, whether by express or by implied words, and the Act cannot be interpreted to as to tax the subject on the same income twice over. Sec. 24 of Finance (No. 2) Act, 1965, is a provision overriding s. 68 of the IT Act, 1961,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t pipe to the business of certain steel magnets. These persons got their quotas at a fixed rate from Tata Iron & Steel Company etc. and it is common knowledge that those goods are not available in the market at fixed rates or reasonable rates but the dealer charges premium which is not recorded in the books. Similarly, there are other dealers dealing in G.I. Pipes where the position is exactly the same as in the case of Iron & Steel Dealers. One of the major debtors is controlling the same as well as agent of Bharat Steel Tubes Limited, where the goods are sold at company's fixed price and whatever extra price is available according to the market rates that is recorded by the selling agent and reintroduced in the above manner. This is very clearly that in other to introduce their own secret funds the assessee's services were procured and he helped them by lending his own name which is evident from the fact that the assessee has credited the interest to the above party on adhoc basis. The assessee's creditors included pedlars, petty shopkeepers, peons, clerks and agriculturists and these petty creditors were never in a position to advance money to the assessee. Most of the creditors....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Mool Chand 10,000 7. Smt. Maheshwari Rani 10,000 8. Rajinder Kumar 10,000 9. Monohar Lal 10,000 10. Kailash Chand 10,000 11. Deviki Nandan 10,000 In addition of these persons Laxman Dass, Takan Dass, Mool Chand, Smt. Maheshwari Rani, Rajinder Kaur, Manohar Lal, Brij Mohan Mittal, Kailash Chand and Deviki Nadan have made voluntary disclosures also and in this connection we have already quoted in para 3 above the decision of their Lordships of the Delhi High Court in the case of Ratan Lal & Ors. reported in 98 ITR 681 (Del), which is on all fours to the case of the assessee and since the assessee belongs to Delhi, we do not think the other authorities reported in 98 ITR 657 and 95 ITR 624 could be of any help to the Revenue. Moreover we have seen that all the seventeen depositors have confirmed the deposits as genuine by way of affidavits, we do not think the authorities below were right in adding back the amounts in the names of the above depositors to the income of the assessee. 6. Besides the above, in respect of the following depositors the deposits have been made since the asst. yr. 1963-64 :- Shri Om Prakash, Shri Ram Ri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hese to prove the sources of the deposits even copies of the awards and the disclosures made by some of them have also been filed. The discharged handis were also filed to prove the genuineness of the transactions and as such whatever could have been done in the circumstances of the case as most of the deposits appearing in the asst. yr. 1963-64, the assessee has discharged the onus cast upon him under s. 68 of the IT Act, 1961 but the authorities below disregarding the evidence furnished by the assessee have held the deposits to be non-genuine and added back the same to the income of the assessee. We may observe that since most of the deposits belong to the asst. yr. 1963-64 and no assessment has been made in the case of the assessee for the asst. yr. 1963-64, it will be presumed that the revenue has admitted the genuineness of the deposits. Secondly, we may observe that the assessee filed the return for the asst. yr. 1963-64 but no assessment has been made and this fact has not been disputed by the ITO. In such circumstances the assessment for the asst. yr. 1963-64 will be deemed to have been made as declared by the assessee. If the ITO has chosen not to pass regular assessment o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee in any manner. The assessee, we have seen, has extended his full co-operation in the matter as and when required by the ITO. We may further observe that the ITO has made additions on hearsay evidence only. He has discussed about unsocial element, unscrupulous trades, black marketeers, in a general way in the assessment order and has linked the same with the case of the assessee without there being any evidence for the same on the record. The assessee had lent money to traders who carry on business in the market and maintain books of accounts in the regular course of business. Money lent by the assessee is duly entered in the account books of such traders to the credit of the assessee. The account books of none of such traders have been disbelieved by any of their ITO and none of such trader has been considered by any taxation authority as unscrupulous or unreliable as has been observed by the ITO in the case of present assessee. Thus the remarks of the ITO in the above respect are uncalled for as he has made these remarks without any supporting evidence. So far as the claim of the revenue that the assessee is a Benamidar of various other cash creditors, we may observe that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pon him to establish the identity of that party and to satisfy the ITO that the entry is real and not fictitious. When, however, in a case where the entry stands in the name of a third party the assessee satisfies the ITO as to the identity of the third party and also supplies such other evidence which will show, prima facie, that the entry is not fictitious the initial burden which lies on him can be said to be discharged by him. It will not thereafter be for the assessee to explain further how or in what circumstances the third party obtained money and how or why he came to make a deposit of the money with the assessee. The burden will then shift on the Department to show why the assessee's case cannot be accepted and why it must be held that the entry, though purporting to be in the name of a third party still represents the income of the assessee from a suppressed source. In order to arrive at such a conclusion however the Department has to be in possession of sufficient and adequate material. Thus in view of the above observation of the High Court we may hold that the burden cast upon the Department has not been fully discharged while on the other hand the assessee has b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the ITO that loans shown to have been given in cash in the books of the lending firm were all fictitious and what that firm did was that it lent its name to different persons including firms and limited companies inorder to enable them to bring into their account books their own secreted income under disguise of loans from the assessee by depositing the money in its books in their account and for this the assessee was under no obligation to give certificates to these parties and earn money by way of interest from them. This contention was repelled by the Tribunal. Before relying upon any report of enquiry made by the Inspector it is the duty of the ITO to communicate the substance and the result of the enquiry to the assessee and should decide the case after considering the explanation of the assessee, if any, Nothing of the sort in the instant case has been done by the ITO and as such the enquiry report relied upon by the ITO is liable to be vitiated. The Tribunal after going through various decisions of the High Courts and the Supreme Court made the following observation :- "From the above cases it would appear that so far as the principles of law are concerned, there is not m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the depositors (These are to be excluded in view of the Delhi High Court's decision in the case of Rattan Lal vs. ITO 98 ITR 681 (Del). (3) Deposits which are supported by affidavits of the depositors who were produced before the ITO and also confirmed the transactions. (There are clearly explained). (4) Those supported by affidavits by depositors, notices under s. 131 issued to whom came back unserved. (The assessee's plea was that after so many years it was not possible for him to keep track of the depositors and that he had discharged the burden of proving even these deposits). The Revenue sought to justify the additions on the following principal grounds :- (a) The assessee was a mere name-lender, not a money-lender. He was obliging mostly dealers of iron and steel goods, who had unaccounted money with them. (b) There was no evidence that the assessee had furnished any securities for raising the huge amounts of loan and it was not conceivable that, having been engaged in a not too prosperous business of dealing in biri and cigarettes, the assessee would have a credit in the market justifying the raising of huge amounts of loan. (c) The source of most of the....