TaxTMI 
TaxTMI 
2005 (6) TMI 26
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....ment dated March 31, 1986. It appears that there were search proceedings under section 132 of the Act on December 24, 1983, at the premises of the bank and due to various discrepancies/irregularities in the records maintained by the assessee-bank, with special reference to issuance of various fixed deposit receipts the authorised officer issued a prohibitory order of attachment under section 132(3) of the Act, directing the assessee-bank not to take any action in relation to fixed deposit receipts. It is an admitted position that the said prohibitory orders were modified/lifted from time to time on partial basis depending on different applications moved by the assessee-bank. The Assessing Officer has made additions to the tune of Rs. 1,80,95,811 as income from undisclosed sources representing fixed deposits as unexplained for the reasons stated in the order. He also made an addition, as a consequence, to the tune of Rs. 21,71,500 towards interest on the aforesaid fixed deposits by applying the rate of 12 per cent. per annum to the figure of Rs. 1,80,95,811. The principal grounds on which the additions have been made by the Assessing Officer are: (i) There are various discr....
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....unt involved was more than Rs. 10,000 ultimately the addition comprised of various deposits which were even below the amount of Rs. 10,000. That the Assessing Officer had equated irregularity committed by the staff of the assessee-bank in maintenance of records with deposit of unaccounted money by treating deposits of third party depositors as income of the assessee-bank. That the Commissioner of Income-tax (Appeals) and the Tribunal had rightly taken cognizance of the fact that more than 90 per cent. of the fixed deposit holders were having either savings account or current account with the bank and such accounts had neither been doubted nor had the balance in those accounts been treated as undisclosed income of the assessee-bank. He therefore urged that no interference was called for and the reference was liable to be rejected. In the light of the fact that the Tribunal has confirmed the order of the Commissioner of Income-tax (Appeals) the findings recorded by the Commissioner of Income-tax (Appeals) may be briefly adverted to. Referring to the basis adopted by the Assessing Officer like payment of interest to one person when the fixed deposits were in the name of different p....
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....idelines and directions, reflect that the deposits are made by an identifiable person and that for obtaining deposits the assessee-bank has made payment in cash at the time of deposit. It has further been recorded by the Commissioner of Income-tax (Appeals) that while lifting the prohibitory orders the authorities have taken cognizance of the fact that against security of fixed deposits the bank had advanced loans to the deposit holders. That the assessee-bank has placed on record affidavits of the depositors which confirm that the deposits have been made by the persons making affidavits, and the affidavits contain details like addresses, G.I.R. Numbers or permanent account numbers. That the prohibitory orders have been lifted after due verification of such affidavits as well as accounts of the deposit holders. In this context the Commissioner of Income-tax (Appeals) has recorded that each communication modifying the prohibitory order invariably refers to the explanation tendered by the assessee and only certain specific fixed deposits are released from the operation of the prohibitory order depending upon the evidence furnished. The Commissioner of Income-tax (Appeals) states that....
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.... the Reserve Bank of India and as such in the absence of any material available on record it was not possible to presume that the assessee indulged in any other activity apart from banking. That the Assessing Officer by holding that the assessee had earned income from undisclosed source was indirectly proceeding on a surmise that the bank was indulging in activity other than banking activity and such surmise was not borne out from the record. While confirming the aforesaid findings of the Commissioner of Income-tax (Appeals) the Tribunal has recorded: (i) In the case of a bank it was not possible to state that it is undisclosed income: if there is any such income, it would be of the depositors and not of the bank; (ii) The names and addresses of all depositors had been supplied by the assessee as demanded by the Assessing Officer and the Assessing Officer had agreed to treat the same as samples of the total number of depositors as is evident from the communication referred to by the assessee and by the Commissioner of Income-tax (Appeals); this fact was not disputed by the Revenue; (iii) The assessee's letter dated March 10, 1986, gave sufficient indication regarding pa....
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....sits as income of the assessee. In the case of CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349, the apex court was called upon to decide the issue as to whether the deposit standing in the name of son of the partner of a firm could be treated as belonging to the respondent firm because the respondent firm had offered the fixed deposit receipt as collateral security to the bank while taking a loan from the bank. It is laid down by the apex court that firstly, the onus of proving that the apparent was not the real was on the party who claimed it to be so; secondly, the question was not whether the amount really belonged to the son of the partner, but whether it belonged to the firm. That as it was the Revenue which claimed that the amount of fixed deposit receipt belonged to the respondent firm even though the same had been issued in the name of the son of the partner, the burden was on the Department to prove that the firm was the owner. The fact that the son of the partner was not able to satisfactorily explain the source of amount put in the fixed deposit would not be decisive even of the matter as to whether the son of the partner was or was not the owner of the amount. That fro....
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....burden lying on the assessee can be said to have been duly discharged by him. It will not, therefore, be for the assessee to explain further as to how or in what circumstances the third party obtained the money and how or why he came to make advance of the money as a loan to the assessee. Once such identity is established and the creditors, as in the instant case, have pledged their oath that they have advanced the amounts in question to the assessee, the burden immediately shifts on to the Department to show as to why the assessee's case could not be accepted and as to why it must be held that the entry, though purporting to be in the name of a third party, still represented the income of the assessee from a suppressed source. And, in order to arrive at such a conclusion, even the Department has to be in possession of sufficient and adequate materials. As I have already indicated above, the Income-tax Officer's rejection not of the explanation of the assessee, but of the explanation regarding the source of income of the depositors, cannot by itself lead to any inference regarding the non-genuine or fictitious character of the entries in the assessee's books of account." This co....