TaxTMI 
TaxTMI 
2002 (5) TMI 218
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....ed CIT(A)-V, Hyderabad, failed to note that the Assessing Officer had during the course of assessment proceedings, collected all the information relating to the purchases of Diamonds from the Income-tax Department, Surat/Mumbai which revealed that the transactions were genuine and therefore erred in confirming the addition of Rs. 51,92,750. 5. The learned CIT(A)-V, Hyderabad, erred in not appreciating the evidence placed by the appellant relating to the transactions of Sale of Diamonds to parties at Surat. 6. The learned CIT(A)-V, Hyderabad, has confirmed the addition of Rs. 51,92,750 merely on surmise and suspicion which is totally contrary to the facts and evidence on record. 7. The learned CIT(A)-V, erred in confirming the appellant's share of Agricultural Income of Rs. 3,75,000 from M/s. Basanth Farms for Rate purposes when neither the Income-tax Act nor the Rules provide for such aggregation. 8. Any other ground(s) that may be urged at the time of hearing." 2. The assessee is an individual. Ground Nos. 1 to 6 relate to addition of Rs. 51,92,750 under section 68 of the Income-tax Act, 1961. The relevant facts are as follows. 3. For the assessment year 1998-99, the appella....
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....ses. The appellant disputes the aggregation of agricultural income earned from the partnership firm of Basant Farms at Rs. 3,75,000 on the ground that the income cannot be aggregated as the share income from the firm is exempted and also the rules relating to aggregation of agricultural income are not applicable to share income earned from agricultural farms. 5. Aggrieved by the assessment order dated 30-3-2001, the assessee has filed an appeal before the Commissioner (Appeals) who confirmed the order of the Assessing Officer on the aforesaid two issues. Aggrieved by the order of the Commissioner (Appeals), the assessee has filed the present appeal on the grounds mentioned above. 6. Sri K.C. Devdas, Chartered Accountant, learned authorised representative of the assessee, took us through the assessment order and stated that the additions have been made by the Assessing Officer disbelieving the assessee's claim for the sale of diamonds at Surat as not being genuine for the following reasons as stated in the last paragraph of the assessment order : "(1) The assessee in the return of income filed by the assessee, initially he stated that the diamonds were sold at Daman, but when the....
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....fficer that the assessee could not have removed the diamonds from the gold jewellery, the learned authorised representative submitted that the fact that the diamonds were separated from gold was not disputed as the gold and diamonds were sold separately and the sale proceeds of gold were accepted by the Department. He also submitted that the Assessing Officer examined the Expert jeweller behind the back of the appellant and the examination of the expert revealed that any person could remove the diamonds, but he ran the risk of reduction in value to the extent of breakage. Therefore, he submitted that the appellant took the risk of removal of diamonds and was successful and therefore the finding that the appellant could not have removed the diamonds flew from surmise and suspicion. 9. As regards the observation regarding handing over diamonds of over Rs. 50 lakhs to Shukra Jewellers and the remittance of sale proceeds on a later date, the learned authorised representative of the assessee submitted that this was the practice in this line of trade where the diamonds were collected first and the payments are made subsequently. Here again, he submitted, the appellant, being a businessm....
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....aper book wherein the payment has actually been made on 15-12-1997 to Ashoka Distributors and the appellant was not in Hyderabad on 15-12-1997. Evidence in this direction was filed in the form of air tickets, hotel bills to prove that the appellant was not in Hyderabad on 15-12-1997. Therefore, on this ground also, the learned authorised representative of the assessee submitted that the addition could not be made. 12. Elaborating further, the learned authorised representative stated that M/s. Shukra Jewellery Ltd. had in their letter of 19-2-2001 addressed to the Dy. Commissioner of Income-tax, Circle 2(1), Hyderabad, which was available much before the assessment order was passed, had confirmed the entire transaction and also replied to the various questions asked by the Assessing Officer in his letter dated 16-2-2001. Therefore, it was submitted that the entire transaction with Shukra Jewellers was genuine and that the earlier letters written to Shukra Jewellers were returned unserved as the concern ceased to carry on business at Surat and had offices later only at Mumbai and Daman. On correspondence with the Mumbai Office, Shukra Jewellers had responded by giving complete detai....
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....hours of the night and, therefore, it cannot be presumed that he was not at Surat on 22-2-1998. As regards the date 15-3-1998, when the diamonds were sold, the appellant was actually at Salem according to the credit card statement. The appellant had stated that the sale of jewellery in the family started from 3-12-1997 and in response to query No. 128 the appellant had stated that on most of the dates the appellant was at Surat thereby meaning that it was not necessary for the appellant to be at Surat at all times. 14. As regards the sale of diamonds on 25-3-1998, the learned authorised representative submitted that neither the Assessing Officer nor the Commissioner (Appeals) had brought on record any statement or evidence to show that the appellant was in Hyderabad on 25-3-1998. Therefore, he submitted that the observation of the lower authorities that the appellant was not in Surat on the dates when the diamonds were sold are all based merely on surmise and suspicion and the fact remains that the gold and diamonds were separated and that the sale of gold was accepted by the Assessing Authority. 15. Without prejudice to the above, the learned authorised representative of the ass....
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.... : 1. S. Hastimal v. CIT [1963] 49 ITR 273 (Mad.). 2. Orient Trading Co. Ltd. v. CIT [1963] 49 ITR 723 (Bom.). 3. Balurghat Transport Co. Ltd. v. Asstt. CIT [1993] 63 TTJ (Cal.) 302. 4. Addl. CIT v. Bahri Bros. (P.) Ltd. [1985] 154 ITR 244 (Pat.). 5. CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78 (SC). 6. Umacharan Shaw &Bros. v. CIT [1959] 37 ITR 271 (SC). 7. Sarogi Credit Corpn. v. CIT [1976] 103 ITR 344 (Pat.). As regards the case laws relied on by the Commissioner (Appeals), the learned authorised representative submitted that in the case of CITV. Precision Finance (P.) Ltd. [1994] 208 ITR 465(Cal.), the facts of the case and the decision were distinguishable as the appellant in the case before us had proved the identity of M/s. Shukra Jewellers, the genuineness of the transaction as also the creditworthiness as Shukra Jewellers had responded to all the queries raised by the Assessing Officer. As regards the reliance placed by the Commissioner (Appeals) on the decision in the case of CIT v. Durga Prasad More [1971) 82 ITR 540 (SC), he submitted that this decision is also not applicable to the present case and is distinguishable as the evidence placed in relation to th....
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....tted that in response to query No. 81 at page 61 of the appellant's paper book, the appellant had stated that he took only about 30-60 minutes to sell the diamonds and it was not probable that the transaction could have been completed on such a fast track. 21. The learned departmental representative further submitted that the appellant was at Hyderabad on 22-2-1998, one of the dates of sale, and he could not have been at Surat as the flight leaves Hyderabad at about 8.30 A.M. and having regard to the travelling time taken after alighting at Mumbai, checking time in hotels, the assessee could not have undertaken the journey from Mumbai to Surat and come back to Hyderabad the same day to be in Orchid Restaurant at Hyderabad. He, therefore, submitted that the appellant was not at Surat on 22-2-1998 to sell diamonds for Rs. 14,57,750. As regards 15-3-1998, another date of sale, he was of the view that the appellant was at Salem and, therefore, could not have sold the diamonds worth about Rs. 18,23,170. As regards 25-3-1998, sale of diamonds for Rs. 19,11,830, he drew our attention to page 13 of the paper book filed by him, wherein on 25-3-1998 Sri Harish Kumar had drawn a sum of Rs. 5....
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....f R.B. Mittal v. CIT [2000] 246 ITR 283, for the proposition that the burden of proof for cash credits is on the assessee to prove its genuineness and creditworthiness of the parties. 24. The learned authorised representative of the assessee, in his rejoinder, at the outset submitted that all the documents filed in the paper book of the department from pages 9 to 21 were not put to the appellant and, therefore, it is material which is being placed for the first time before the Tribunal. Without prejudice to the aforesaid submission, the learned authorised representative submitted that as far as the question of the appellant being at Surat on the dates of sale of diamonds is concerned, the submissions were already made by him and that as regards the withdrawal of amount on 25-3-1998 by Sri Harish Kumar from State Bank of India, Hyderabad, which according to the learned departmental representative proved that the appellant was at Hyderabad when the diamonds were sold at Surat on that day, the learned authorised representative submitted that Sri Harish Kumar always left blank cheques whenever on tours and this was evidenced from the replies to query Nos. 108, 109 and 114 at pages 66 ....
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....wellers with whom the appellant had business transactions. 27. Commenting on page 21 of the paper book filed by the learned departmental representative, the learned authorised representative of the appellant stated that the letter dated 5-3-2001 was addressed by the DCIT, Surat, to DCIT, Hyderabad, in which he gave a generalised statement and stated at paragraph 6 that M/s. Shukra Jewellers were at Mumbai and, therefore, the jurisdiction was not with DCIT, Surat. He, therefore, submitted that the department has not discharged the onus as regards the genuineness of the transaction of the appellant with M/s. Shukra Jewellers. As regards the postal endorsement in respect of a letter addressed to Shukra Jewellers Ltd. Surat, which was returned, the learned authorised representative submitted that Shukra Jewellers had discontinued their business at Surat and this was clear from the letter of 5-3-2001 addressed by the DCIT, Surat, to the DCIT, Hyderabad, wherein it was clearly mentioned that the address of Shukra Jewellers was at Mumbai and not at Surat and therefore the letter was returned unserved. In respect of letters unserved, the learned authorised representative further pointed o....
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....sold separately. It is also an admitted fact that the sale of gold which was separated from the diamonds was made for Rs. 4,59,979 at Hyderabad and this sale has been accepted. The fact remains that the diamonds were separated. As regards the sale of diamonds to Shukra Jewellers, Surat, we find from the material evidence placed before us that the identity of the party has been established, the transaction is genuine and the creditworthiness of Shukra Jewellers has been proved beyond doubt by the assessee. The bank accounts of M/s. Shukra Jewellers which were collected by the Assessing Officer showed that the amounts were received by account-payee DDs from Mumbai. The DDs were taken by Shukra Jewellers and sent to the appellant which were credited in the appellant's bank account and used for business purposes of his business entities. As regards the credits in the bank account of Shukra Jewellers, we agree with the submission of the learned authorised representative of the appellant that it is not the duty of the appellant to prove the sources of the credits in the bank account of Shukra Jewellers. The appellant cannot establish the source of the source. The decision of the Honourab....
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....ale of diamonds on 25-3-1998, it has been the contention of the revenue that the appellant was at Hyderabad on 25-3-1998 as he withdrew a cheque on 25-3-1998 and this was debited in the bank account of M/s. Neeru Textiles, Hyderabad. We have perused the statement and the rejoinder of the appellant. We have verified the bank statement and found that the sum of Rs. 5,00,000 was not drawn on 25-3-1998 but was credited to the bank account of M/s. Neeru Textiles and it is a transfer entry on 25-3-1998 from the bank account of Harish Kumar (Ind.) in State Bank of India to the bank account of M/s. Neeru Textiles and, therefore, the contention of the Revenue that the appellant was at Hyderabad on 25-31998 is not correct. 35. As regards letters filed by the learned departmental representative at pages 15 to 19 of the paper book, we hold that these are internal correspondence between the Income-tax Department at Surat and at Hyderabad which were never put to the appellant. None of these letters, which are in the form of general statements, pertains to Shukra Jewellers with whom the appellant had transactions. A specific reference to letter dated 5-3-2001 at page 21 of the paper book shows t....
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....nt, cannot be a ground to hold that the transactions of sale of diamonds were not genuine. The initials placed on the business purchase invoices of M/s. Neeru Textiles, in which the appellant is a partner, were the dates meant-for payment and the endorsements were made earlier. This had been demonstrated by the appellant with documentary evidence. We hold that in respect of huge deposits of amounts in the bank account of Shukra Jewellers, the appellant cannot be called upon to comment on the same as the department ought to have examined Shukra Jewellers as summons under section 131 was issued. The proceedings thereafter have not been placed before us by the Revenue. 38. Thus, the identity of, Shukra Jewellers, genuineness of the transaction and creditworthiness of Shukra Jewellers have been amply established by the appellant. We shall now consider the judicial decisions cited by the appellant and the Revenue. 39. The decisions relied on by the learned authorised representative of the appellant, viz., Kishinchand Chellaram and Giridhar Agency's case, support the view that information collected behind the back of the assessee cannot be relied upon. In the present case, the entire e....
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....efore making an addition under section 68, the Assessing Officer has to exercise his discretion judiciously. Applying the aforesaid tests, we find that it is not so. In spite of the facts pointing in the direction of genuineness and identity of Shukra Jewellers and their creditworthiness not being in doubt, the addition has been made on presumptions, surmises and suspicions and, therefore, the judgment of the Supreme Court applies to the facts of the present case. We, therefore, hold that the Assessing Officer has erred in making the addition of Rs. 51,92,750 under section 68 of the Income-tax Act, 1961. 41. We find that the case laws relied on by the learned departmental representative are all distinguishable on facts and do not apply to the facts of the appellant's case. The decision of the Calcutta High Court in the case of Precision Finance (P.) Ltd., wherein it has been stated that it is for the assessee to prove the identity of creditors, their creditworthiness and genuineness of the transaction, related to a Cash Credit entry. In the case on hand, though it is a sale transaction, it has been found factually that the appellant brought to the notice of the Revenue that the tr....