TaxTMI 
TaxTMI 
2005 (7) TMI 44
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....facturing and sale of rice and rice bran and also from purchase and sale of foodgrains, pulses and oil seed. In the course of scrutiny of the account the assessing authority found the following cash credit entries during the relevant accounting period: --------------------------------------------- Sl. Name Old No. balance --------------------------------------------- (1) (2) (3) --------------------------------------------- 1. Smt. Sharda Gupta, 8,166 w/o Sri Prayag Narain Gupta, partner 2. ....
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....p; 48,460 60,900 3,848 64,748 -------------------------------- 4,80,900 38,801 5,61,106 -------------------------------- The depositors were the wife and minor children of Prayag Narain Gupta and Pramod Kumar Gupta, partners of the firm, except Sri Anil Kumar Gupta, who was major son of Prayag Narain Gupta. The Assessing Authority asked the assessee to explain the new cash credits in terms of section 68 of the Act. The assessee filed written explanation and explained that the above depositors are genuine and true and all the depositors were old assessee. Their assessment orders have also been filed. It was explained that all of them got themselves assessed in the amnesty scheme in view of the Board's Circular No. 451 (see [1986] 158 ITR (St.) 135) and deposited their respective money in the different banks and in order to earn more interest money was advanced by the depositors to the assessee-firm by way of cheques. It was further explained that Km. Meera Gupta, Smt. Sharda Gupta and Anil Kumar Gupta had old balance apart from the fresh deposits made in this year an....
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.... both the partners have introduced the cash creditors in the names of their family members in proportion to their capital in the assessee-firm. The assessee has explained that they have introduced their money under the amnesty scheme and deposited in the bank accounts and by withdrawing from bank accounts, they have deposited with the assessee-firm. The assessee cannot take any benefit of the amnesty scheme introduced by the Board by issuing various circulars in this regard. Circular No. 451, dated February 17, 1986 (see [1986] 158 ITR (St.) 135), in the question and answer from Question No. 11 is very much relevant on this issue which is reproduced below: 'Question No. 11. Whether ladies and minors can avail of the immunity given by the circulars? Answer: Yes. In respect of their own income or wealth certainly. But taxpayers who try to introduce black money and benami investments in the names of ladies or minors will be doing so at their own risk.' Hence the Board had specifically mentioned that bogus and benami declarations are not allowable under the amnesty scheme. The assessee has nowhere furnished evidence regarding the source of income declared by the creditors i....
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.... assessee from undisclosed sources for this year and added to its total income." The assessee filed an appeal before the Commissioner of Income-tax (Appeals) which was rejected. The applicant further filed appeal before the Tribunal, which too has been rejected. Before the Tribunal the assessee raised the following submissions: "2. That the learned Commissioner of Income-tax (Appeals) has failed to appreciate that the interest on these deposits has been duly accepted by the Income-tax Officer, which indirectly proves that he has partially accepted the credits. 3. That the learned Commissioner of Income-tax (Appeals) has failed to appreciate that each of the creditors were regular assessees on record and had deposited fund with the assessee by means of cheques drawn by them in favour of the assessee-firm on their personal bank account. 4. That the learned Commissioner of Income-tax (Appeals) has misdirected himself in stating that the partners have introduced the cash credits in proportion to their capital in the assessee-firm. There is no basis for such observation. In any case, even if these credits represent the credits made by the partners then also these cannot be i....
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....ion made by the creditors will got to prove the genuineness of the cash credits made in the accounts of the assessee. The hon'ble Supreme Court in the case of Jamnaprasad Kanhaiyalal v. CIT [1981] 130 ITR 244 had held that the declaration under section 24(2) of the Finance (No. 2) Act, 1965, had to relate to income actually earned by the declarant and the Act granted immunity to the declarant alone and not to other persons to whom the income really belonged. The legal fiction created by section 24(3) of the Finance (No. 2) Act, 1965, was limited in its scope and could not be invoked in assessment proceedings relating to any other person, other than a person who is making the declaration under the Act, so as to rule out the applicability of section 68 of the Income-tax Act, 1961. The facts of this case were that there were certain cash credits in the names of sons of managing partners and the sons were having an independent source of income. Disclosure was made by the sons under the Voluntary Disclosure Scheme. Such disclosure did not preclude enquiry into the genuineness of the cash credits and their assessment as the firm's income from undisclosed sources under section 68 of the I....
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....y in the names of the wives and minors just to dilute the impact of taxation while, in fact, the amount really belonged to the assessee. As the amount has been declared in the Voluntary Disclosure Scheme by the wives and minors, the assessee cannot be allowed to take the advantage of the said disclosure. The hon'ble High Courts and the hon'ble Supreme Court, have been very specific on this point that such immunity cannot be availed of by a third person other than the declarant. Hence we are of the opinion that the conclusions arrived at by the learned Commissioner of Income-tax (Appeals) were perfectly correct and justified and do not suffer from any infirmity. As regards Shri Anil Kumar Gupta, it has been emphasised that he had sufficient liquid fund out of which he has deposited Rs. 90,000 on different dates with the assessee-firm. A copy of account of Shri Anil Kumar Gupta in M/s. Anil Rice Mills, that is, the assessee has been filed which shows the pending balance of Rs. 59,645 in 1983-84. It has been stressed that this assessee as back as in 1983-84 had estimated the amount as cash credits standing in the account of the assessee itself and the same was accepted by the Depar....
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....ed their income under the amnesty scheme under the Board Circular No. 451 (see [1986] 158 ITR (St.) 135), dated February 17, 1986, and the declarants' income has been assessed under the amnesty scheme treating it as their own income from undisclosed sources and the gift received. He submitted that under the amnesty scheme the Board has allowed the declarant income from other sources also and it was not necessary to disclose the specific source of income. He submitted that the disclosed income has been accepted for the various years under the amnesty scheme and the depositors had savings out of such disclosed income, which were deposited in the bank in their account and subsequently by cheque paid to the assessee. Therefore, the source of the deposits was fully explained and established. He submitted that under the amnesty scheme ladies and minors have also been allowed to avail of the benefit of the immunity. Their returns have been accepted and their incomes have been assessed. Income disclosed by the depositors, minors and ladies, have not been treated as income of their husband and father. He submitted that there is no issue involved relating to the claim of immunity allowed und....
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.... the said decision it has been held that the immunity enjoyed by a declarant under section 24 of the Finance (No. 2) Act, 1965, under the Voluntary Disclosure Scheme is confined to the declarant alone and is not extended to the assessment of a third party assessee in relation to the income disclosed by the declarant. It was further held that there is nothing in section 24 of the Finance (No. 2) Act which prevents the Income-tax Officer, if he is not satisfied with the explanation of the assessee about the genuineness of sources of amounts found credited in his books to add them to the assessee's income amount in spite of these having already been made the subject-matter of the declaration made by the depositors/creditors. He is entitled to include them as income of the assessee from undisclosed sources." We have given our anxious consideration to the arguments of learned counsel for the parties. The apex court in case of CIT v. United Trading and Construction Co. [2001] 247 ITR 819 has only held that there is nothing in section 24 of the Finance (No. 2) Act which prevents the Income-tax Officer, if he is not satisfied with the explanation of the assessee about the genuineness....
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....Textile Agency v. CIT [1980] 121 ITR 890 (Cal); Oriental Wire Industries P. Ltd. v. CIT [1981] 131 ITR 688 (Cal); CIT v. Baishnab Charan Mohanty [1995] 212 ITR 199 (Orissa); Jalan Timbers v. CIT [1997] 223 ITR 11 (Gauhati) and CIT v. Korlay Trading Co. Ltd. [1998] 232 ITR 820 (Cal)). If all the aforesaid three conditions are proved the burden shifts on the Revenue to prove that the amount belong to the assessee (vide CIT v. United Commercial and Industrial Co. P. Ltd. [1991] 187 ITR 596 (Cal); M.A. Unneeri Kutty v. CIT [1992] 198 ITR 147 (Ker) SLP dismissed [1993] 201 ITR (St.) 23; CIT v. Precision Finance P. Ltd. [1994] 208 ITR 465 (Cal)). It has been held by the various High Courts that the assessee cannot be asked to prove source of source or the origin of origin [vide S. Hastimal v. CIT [1963] 49 ITR 273 (Mad); Tolaram Daga v. CIT [1966] 59 ITR 632 (Assam); CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC); Sarogi Credit Corporation v. CIT [1976] 103 ITR 344 (Patna)]. In the case of Jalan Timbers v. CIT [1997] 223 ITR 11, the Division Bench of the Gauhati High Court held that under section 68 of the Income-tax Act, the assessee has to prove three important conditions ....
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.... (SC); [1997] 11 SCC 198 while interpreting similar language used in section 69 has held as follows (page 573 of [1999] 237 ITR and page 200 of [1997] 11 SCC): "Shri Ranbir Chandra, the learned counsel appearing for the Revenue, has urged that the Tribunal as well as the High Court were in error in their interpretation of section 69 of the Act. The submission is that once the explanation offered by the assessee for the sources of the investments are found to be unacceptable the only course open to the Income-tax Officer was to treat the value of the investments to be the income of the assessee. The submission is that the word may in section 69 should be read as 'shall'. We are unable to agree. As pointed out by the Tribunal, in the corresponding clause in the Bill, which was introduced in Parliament, the word 'shall' had been used but during the course of consideration of the Bill and on the recommendation of the Select Committee, the said word was substituted by the word 'may'. This clearly indicates that the intention of Parliament in enacting section 69 was to confer a discretion on the Income-tax Officer in the matter of treating the source of investment which has not been s....