TaxTMI 
TaxTMI 
TaxTMI 
1990 (1) TMI 126
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....d it is for the revenue to prove that the assessee did not give any explanation or that the explanation given was false or that he assessee did not give any explanation or that the explanation given was false or that the assessee was unable to substantiate the explanation offered by him in respect of the credits. None of the ingredients so necessary for the levy of penalty has been established by the ITO except his reliance on the finding in the quantum proceedings. For one thing, the enquiries were conducted behind the back of the assessee and particularly the IT Inspector's report dt. 15th March, 1983 was never put to the assessee. However, the creditors themselves file either letters or affidavits in the course of the assessment proceedings, Sri K. Ramaiah in his sworn deep affidavit has affirmed the advance made to the assessee and had explained the sources of his income and has also stated that the statement given before the IT Inspector to the effect that he did not make the advance was one made out of fear of tax liability. The ITO called upon the assessee to produce the creditor for examination but the assessee was unable to produce him and, therefore, the ITO drew an adver....
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....ove that the assessee has not substantiated his explanation or that his explanation was false. 5. Sri Swamy further contended that Sri Harinarayana was examined by the ITO, Karimnagar, within whose jurisdiction he was residing and before him he had confirmed the transaction. This fact was also overlooked by the ITO. 6. As far as the credit standing in the name of Sri G. Satyanarayana is concerned, Sri Swamy submitted that he denied having given any advance to the assessee in his statement made before the Inspector. When this was put to the assessee, the assessee produced a cash receipt for the payment of Rs. 16,010 (i.e. loan of Rs. 15,000 + interest) signed by one G. Ramesh on 11th Feb., 1980, and this Ramesh was the creditor's brother's son. Subsequently, an affidavit made by Sri G. Satyanarayana was filed by the assessee. In that affidavit, the creditor had confirmed the transaction and also explained that his denial of the transaction before the IT Inspector was out of fear This affidavit is dt. 14th March, 1984, made before and attested by a Notary Public. However, the ITO felt that the signature in the affidavit was a forged one and on that basis he drew an adverse inferenc....
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....03; M/S. B. MOLEOD & Co. LTD vs. STATE OF ORISSA & ORS. 1971 Tax LR VOL. 1 1656 at 1659; T.M.M MADALAI NADAR & CO vs. CIT/CEPT (1957) 30 ITR 191 (Mad) at 197; STO, GANJAM & ANR. vs. UTTARESWARI RICE MILLS, (1973) 89 ITR 6 (SC); CIT vs. RAMESHWAR DAYAL RATANLAL (1985) 156 ITR 411 (Pat); SRI SOHAN LAL JAIN vs. ITO (1986) 20 TLR 410 (Jp) (Trib); LALCHAND BHAGAT AMBICA RAM vs. CIT (1959) 37 ITR 288 (SC) at 290; C. VASANTLAL & CO. vs. CIT (1962) 45 ITR 206 (SC) at 209; ADDI. CIT vs. BURUGUPALLI CHINA KRISHNAMURTHY (DECD) & ORS. (1980) 121 ITR 326 (Appeals); CIT vs. H. ABDUL BAKSHI & BROS. (1986) 58 CTR (Appeals) 13 (FB): (1986) 160 ITR 94 (Appeals) (FB); SIR SHADILAL SUGAR & GENERAL MILLS LTD & ANR. vs. CIT (1987) 64 CTR (SC) 199: (1987) 168 ITR 705 (SC); GIRDHARILAL SONI vs. CIT (1989) 179 ITR 111 (Cal); and also the observations by Chaturvedi & Pithisaria on Income-tax (3rd Edition) Vol. 3 pages 2805 and 2793 and Vol. 2, page 1960. 8. Sri M.K. Rao, learned Departmental Representative, submitted that the assessee has not proved the credits. The Tribunal has upheld the addition on the ground that the onus on the assessee was not discharged by him. This is good evidence for l....
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....they were reliably informed that the assessee was not only in the habit of omitting transactions from his books, but was known to charge much higher rates of interest than the prescribed one, is not sufficient. It is not in the first place shown that the assessee was given an opportunity, nor is it sufficient to justify the assessment which not only does not furnish the basis on which the estimate is made but which, without doubt, can be said to be a guess." Thus, we upheld the contention of Sri Swamy in this regard. 10. But, that is not the end of the matter. The assessee had suo motu furnished an affidavit from Sri G. Satyanarayana in which he had retracted the statements made before the IT Inspector. The ITO wanted the assessee to produce the creditor but he was unable to produce him. There is force in the contention of Sri Swamy that in a situation where there are two conflicting statements from the same person, one before the IT Inspector and another an affidavit sworn before Notary Public who is a public authority, and the assessee is unable to produce the person, the ITO before he draws an adverse inference, ought to issue summons on the person and examine him. This has no....
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...., explaining the circumstances in which the affidavit from Sri G. Satyanarayana was obtained, is on record. In that affidavit, the clerk explained that he was asked by Sri Satyanarayana to wait in the lodge (where he was staying), that he would go to the Notary Public and obtain the affidavit. Later on, he asked the clerk to meet him in the evening and when he met him in the evening at the lodge, Sri Satyanarayana handed over the affidavit. The assessee also had furnished an affidavit on 18th April 1985 vouchsafing for his clerk meeting Sri G. Satyanarayana and obtaining the affidavit after some delay. He has also stated that the stamp paper for the document was not purchased by him. He has further averred that Sri Satyanarayana has turned inimical to him and was trying to harm his interest. When so much is told about the creditor and also in the context of the flat denial of forged signatures, it is incumbent of the ITO to have summoned Sri Satyanaryana under the provisions of s. 131 and obtained a statement on oath and examined him on oath with the right of cross-examination being given to the assessee. This course was not adopted by the learned ITO nor was the Notary Public befo....
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.... material to sustain the observation of the CIT(A) so far as the credit from Sri B. Harinarayana is concerned. 13. Lastly, we take up the credit of Rs. 10,000 in the name of Sri K. Ramaiah, Penalty is levied on the assessee for the reason that the addition was confirmed in quantum proceedings. Sri K. Ramaiah, in his statement before the IT Inspector, had denied having made the advance but the statement was not put to the assessee in the course of the assessment proceedings. Subsequently, Sri Ramaiah gave an affidavit on 9th Jan., 1984 affirming the loan. The assessee in his letter dt. 12th Nov., 1984 had stated that the creditor was growing cotton in Bellary area and that he would be out of station most of the time, and when the assessee had requested him to attend the IT Office, he had stated that as he had "to sell cotton and he could not afford to stay" and so gave an affidavit affirming the loan. Before the ITO there were two statements; one given before the IT Inspector denying the advance, and another an affidavit solemnly affirmated before a Notary Public confirming the advance. There is also a letter from the assessee explaining his inability to produce the creditor. Natur....
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....the amounts constituted prima facie evidence having the effect of discharging the initial burden. The case is not governed by the Explanation as it stood before 1st April, 1976. We have dealt with the provisions prior to 1st April, 1976 only to underline the fact that confirmation letter and sworn statements would constitute good pieces of evidence for discharging the initial burden. With the scrapping of this Explanation by Taxation Laws (Amendment) Act, 1975 (41 of 1975), it cannot be held that the amount added under s. 68 on grounds of unsatisfactory explanation would automatically lead to the inference that there has been concealment of income. This conclusion we reach from an analysis of s. 68 and Explanation 1 to s. 271(1)(c) which are as follows:- S. 68 "Where any sum is found credited in the books an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the ITO, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of hat previous year." Explanation 1 to s. 271(1)(c): "Where in respect of any facts material to....