TaxTMI 
TaxTMI 
1978 (7) TMI 41
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.... 4. On appeal from the assessment, the assessee contended before the AAC that is a letter confirming the said loan had been filed and as the creditor had respondent to the summons under s. 131 of the Act, the ITO was wrong in treating the said sum as income, of the assessee. The AAC rejected such contention and confirmed the assessment. 5. The assessee preferred a further appeal to the Income-tax Appellate Tribunal and contended that it had discharged its onus of proving the of the said loan also the existence of the creditor. A confirmatory letter from the creditor had been filed before the ITO, the creditor was and income-tax assessee and had responded to the summons under s. 131 of the Act. The loan received on the 16th September, 1964, had been repaid in two instalments of Rs. 50,000 each on the 15th April and the 30th April, 1965, respectively, in cash and Rs. 5,412.50 being interest thereon had been paid by an account payee cheque on the 25th May, 1965. The creditor could not produce its books of account as they were seized by the I.T. department. 6. At the instance of the assessee, the Tribunal caused the books of account of the creditor in the custody of the I.T. depa....
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....ded at the hearing that the credit entry in dispute entered in the books of the assessee as having been advanced by a third party, the only burden on the assessee was to establish (1) identity of the creditor and (2) the genuineness of the transaction represented by the entry. The assessee was not required to establish the source or the sources, that is, the source where from the loan was advanced by the creditor. Even if the explanation of the creditor as to his source was not accepted, the same could not be held to be the income of the assessee as there was no direct nexus between the two. 11. Dr. Pal also contended that the assessee had established the identity of the creditor, who was an income-tax assessee, who admitted the transaction and it was established from his evidence that he had capacity to advance the loan on the 16th September, 1964. The creditor also explained why the payment of interest was entered in the accounts and the loan was not so entered. Dr. Pal submitted that the assessee discharged its onus of proving the genuineness of the loan. 12. In support of his contentions Dr. Pal cited the following decisions : CIT v. Daulat Ram Rawatmull [1973] 8....
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....n employee of the assessee, the burden lies on the assessee, though, the entry is not in his own name, to explain satisfactorily the nature and source of that entry. But, if the entry stands not in the name of any such person having a close relation or connection with the assessee, but in the name of an independent party, the burden will still lie upon him to establish the identify of that party and to satisfy the Income-tax Officer that the entry is real and not fictitious. Once the identity of the third party is established before the Income-tax Officer and other such evidence are prima facie placed before him pointing to the fact that the entry is not fictitious, the initial 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 an 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 ....
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.... that entry. Where the entry stands not in the name of any such person having a close relation or connection with the assessee, but in the name of an independent party, the burden will still lie upon him to establish the identity of the said party, and to satisfy the Income-tax Officer that the entry is real and not fictitious. When, however, in a case where the entry stands in the name of the third party, the assessee satisfies the Income-tax Officer 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 have been 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 same with the assessee. The burden will then shift on to 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 depart....
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....framed the contentions of Dr. Pal could not be gone into. The questions to be decided were, firstly, whether there was any material or evidence to support the inference or conclusion of the Tribunal and, secondly, if the conclusion of the Tribunal that the loan represented the assessee's income from undisclosed sources, was perverse, on the sole ground that no reasonable man could come to such conclusion. 15. Mr. Sengupta contended that none of the primary facts found by the Tribunal has been challenged but only the ultimate conclusion was challenged. Mr. Sengupta urged that the Tribunal had found the following facts, viz., (i) interest had been shown to be paid by cheque to give a colour of genuineness to the transaction ; (ii) assertion by Vidyanand Sureka that he had lent Rs. 1,00,000 to the assessee was not corroborated by the entries in his books and the reasons given for not recording the same were not accepted; (iii) the maximum capital (taking the higher of the figures mentioned) available to Sureka could only be about Rs. 1.5 lakhs and it did not follow that the entire capital was available for making the advance to the assessee; and that creditworthiness of the cre....
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....down that when an assessee claims that he has borrowed money from a third party the initial onus lies on the assessee to establish (a)the existence of the third party; (b) the ability of the third party to advance moneys and (c) that prima facie the loan is a genuine one. The assessee by proving these facts discharges the onus upon him. But that does not prevent the authority concerned to probe further into the matter and investigate the case on materials available to the authority to come to an independent and unbiased finding as to the genuineness of the transaction. It is true that the tax authority is not entitled to reject the assessee's case summarily or arbitrarily or without sufficient reason. It is true that the authority's duty is to examine all the materials carefully and objectively. But if it is found that the authority concerned after careful consideration of all relevant materials has come to the conclusion that the assessee's case of a loan from a third party cannot be accepted, it is not open to this court to disturb the finding in a reference under sec. 66(1). " (b) Another unreported decision of this court in Income-tax Reference No. 238 of 1....
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....uch proof includes proof of the identity of his creditor, the capacity of such creditor to advance the money and, lastly, the genuineness of the transaction. These things must be proved prima facie by the assessee and only after the assessee has adduced evidence to establish, prima facie, the aforesaid, the onus shifts on to the department. In the instant case, it seems that the assessee established only the identity of the creditor and nothing more. " (h) CIT v. Durgaprasad More [1971] 82 ITR 540 (SC). Reliance was placed on the following observations of the Supreme Court in this case: "Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and tribunals have to judge the evidence before them by applying the test of human probabilities. Human minds may differ as to the reliability of a piece of evidence. But in that sphere the decision of the final fact-finding authority is made conclusive by law." 21. We are of the opinion that the question in the present reference is wide enough so as to enable us to go into the question as to whether the assessee ad established all the ing....