TaxTMI 
TaxTMI 
1995 (12) TMI 90
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....t to have held that once the appellant had established that LAF had a large income from its agricultural farm and this should have been accepted by the Administrative CIT after proper and full enquiry, it was not open to the ITO in a subsequent year to take a contrary view and/or in any event the burden was on the ITO to establish by evidence that income was not available from the LAF. 3. The CIT(A) failed to appreciate that an assessee is not required to establish the same facts year after year. 4. The CIT(A) erred in confirming the addition of Rs. 25.49 lakhs to your appellant's income for the asst. yr. 1976-77. On the facts and circumstances of the case, your appellant says and submits that the said sum of Rs. 25.49 lakhs does not represent its income and consequently, the CIT(A) erred in including the same in its total income. 5. The CIT(A) ought to have held that the said sum of Rs. 25.49 lakhs is not your appellant's income and ought to have been deleted. 2. As the counsel for the assessee, inspite of arguing all of the 5 grounds separately has advanced consolidated arguments and the issue involved for all these appeals being taxability of cash credit in the asses....
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....ssee insists that without production of any evidence in this regard in view of the disclosures made by Jalans under the Voluntary Disclosure Scheme of 1975, the ITO should give credit for agricultural income of Rs. 22 lacs per annum.....' 2.3. Thereafter in para 6 of my order I had explained that "the onus of proving the sources of a sum of money found to have been received by the assessee is on him". Para 6 of my order dt. 30th March, 1983, reads as— '6. The various decisions of the Courts in very clear terms laid down that under s. 68 any sum found credits in the books of an assessee maintained for a previous year may be charged to income-tax as the income of the assessee of that previous year, if— (i) the assessee offers no explanation about the nature and source of such sum or, (ii) the explanation offered by him is, in the opinion of the ITO, not satisfactory. [Todar Mal vs. CIT 1977 CTR (P&H) 174 : (1977) 106 ITR 619 (P&H)]. There is sample authority for the proposition that where an assessee fails to prove satisfactorily the source and nature of a certain amount of cash received during the accounting year, the ITO is entitled to draw the inference that ....
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....t to the assessee, the assessee has completely discharged the burden of proving the source of the amount. In our opinion, we cannot entertain such an argument for the simple reason that it is not enough to show that a person says that he paid the money but it must be shown from where the money actually came, i.e., the source. That has not been established in this case." 6. By the time, the ITO took the said set assessments for the asst. yrs. 1976-77 and 1977-78, the returns for asst. yrs. 1978-79 to 1980-81 had also been furnished and, therefore, the ITO took all the six assessments together and all the notices/letters of enquiry as well as the assessee's replies were for all these years. 7. As there were cash credits in all these assessment years in the name of M/s LAF, details of which have been given in para 5 above, the ITO proceeded to investigate/verify the genuineness of the same as required under s. 68 of the IT Act. Before completing the assessment, the ITO tried his best to get some information or evidence from the assessee as well as from the creditor and managing partner of the creditor Mr. Tolaram Jalan who was partner in assessee-firm in the individual capacity ....
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.... opportunities to the creditor M/s LAF, but not a single piece of evidence relating to the cash credits appearing in the name of LAF in all these years was furnished. The assessee's only plea before the ITO was that during the course of its disclosure made under the Voluntary Disclosure Scheme of 1975, in which the disclosure was made upto the asst. yr. 1972-73, the assessee had established that M/s LAF was having agricultural income in lakhs of rupees and, therefore, the Department should accept that finding in all the subsequent years. As the assessee was not coming out with any sort of evidence relating to the cash credits in all these years appearing in the name of M/s LAF the ITO made detailed investigations himself by visiting the place where the creditor's agricultural farm was stated to be maintained and the information/material collected by the ITO during his visit to the creditors, farm site where he held camp office, was brought in assessee's notice, but still no evidence, whatsoever, was filed by the assessee, except the old plea that the existence of agricultural income with the creditor should be accepted on the basis of voluntary disclosure petition. 10. After lab....
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....hese amounts are accordingly added to the total income as concealed income of the assessee-firm." 11. Aggrieved with the ITO's order, the assessee came in appeal before the CIT(A). The CIT(A) after considering the assessee's submissions thread by thread, confirmed the ITO's order. From the ITO's order and order of the CIT(A), the facts which were not disputed by the assessee before the Tribunal are summarised as under: (A) "The ITO under his letter dt. 6th Sept., 1983, had called upon the assessee to produce the following: (i) The books of accounts of LAF. (ii) Details of land under possession/cultivation of LAF during the relevant period. (iii) Area of land, if any, acquired by the Govt. under the U.P. Land Ceiling Act. (iv) Details of produce obtained from the agricultural operations including the name of the produce and the quantity. (v) Names and addresses of parties by whom the agricultural produce had been sold. (vi) Evidence relating to transportation of the produce, if say, from the farm to the place where the produce had been sold by LAF. The ITO had further informed the assessee as under: "I have gone through the papers of VDS-cum-Settlement.....
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....ages. It was stated that the witnesses were persons of repute and that the average income of the farm was Rs. 4,000 to Rs. 5,000 per acre per year. The ITO was told by the assessee that the Department had accepted during VDS-cum- Settlement of 1975 that the farm had spent Rs. 70 lacs for development and that the income derived from the farm upto 1972 was as under: Years Acres available for cultivation x Income per year per acre Income per year x No. of years Gross income Rs. 1951-55 500 acres x Rs. 100 Rs. 50,000 x 5 2.5 lacs 1956-60 1000 acres x Rs. 500 Rs. 5 lacs x 5 25.00 lacs 1961-65 1100 acres x Rs. 750 Rs.8.2 lacs x 5 45.25 lacs 1966-70 1100 acres x Rs.1000 Rs. 11 lacs x 5 55.00 lacs 1971-72 1100 acres x Rs.2000 Rs. 22 lacs x 2 44.00 lacs . . . . . . . 167.75 lacs . Less : Expenses for development . . 70.00 lacs . . . . . . . 97.75 lacs It was pointed out by the assessee that an amount of Rs. 97.75 lacs was not taxed as it was treated as the net agricultural income der....
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....by him in his earlier letters, it was pointed out by the ITO that though the settlement had been made in Dec., 1975, under the VD Scheme, the assessee had been given credit for income upto 1972 only because LAF had been closed down all its operations after 1972. In this letter the ITO had further stated as under: "You are very well aware that regular Khasra and Khatawani are maintained by the District Revenue authorities giving whole and full particulars of the above requirements of mine besides giving other information. None of such evidence has been produced by you before me so far. The existence of farm land and earning of income by conducting agricultural operations are two distinct facts and can be proved by separate evidence alone. You are aware that agricultural operations, if carried out, may result in losses also. Therefore, you have to prove by adducing sufficient evidence that the alleged income from the farm was in fact not agricultural receipt from the farm. No evidence of these facts has been produced before me either in respect of conducting the agricultural operations or proving the fact that so much of the income was earned by the farm so far." ".....Time and....
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....under: ".....I had informed you that I would like to camp at Baharaich so that you could show me the land owned, possessed and cultivated under the name and style of M/s LAF. You have chosen not to avail of the opportunity." ".....I had planned to camp at Baharaich from 9th Dec., 1983, to 16th Dec., 1983, so that you had all the opportunity to adduce evidence relating to your claim that huge incomes have been earned by you from year to year from M/s LAF and I could verify the veracity of the same first hand. As intimated to you, I camped at Baharaich, C/o ITO, Income-tax Office, Baharaich, but there was no appearance by you or by your authorised representative. I also took this occasion to go through the Revenue records maintained by the Revenue authorities, particularly the papers relating to the consolidation proceedings which were taken place in the villages of Rajhao and Gangapur, Paragana Baharampur, Tehsil Numpara, Distt. Baharaich, during 1975 to 1980. The consolidation proceedings information are compiled by the Revenue authorities in Form No. CH 2A, a copy whereof is being sent to you along with this letter. This record clearly shows that the land o....
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....68 of the Act. 12. The assessee's contention before the CIT(A) remained the same as was before the ITO. The main ground of the assessee was that in the voluntary disclosure petition under the VD Scheme which was upto the year 1972, the CIT after having gathered information through the ITO by sending the ITO on tour to the site of LAF in 1974 and 1975 had accepted that LAF was having agricultural income of Rs. 22 lacs per annum. So it was no more open for the ITO to ask for evidence in connection with cash credits appearing in assessee's books for the asst. yrs. 1976-77 to 1980-81. It was also submitted that there is no iota of evidence on record on the basis of which it could be said that decision made by the CIT was not correct. It was further stated that the ITO Sec. IX(Central), Bombay, under his letter dt. 2nd March, 1973, had informed LAF as under: "Your contention is absolutely incorrect and the Department has not agreed at all for determining the agricultural income after December, 1975. Your argument is, therefore, incorrect to say that the Department has allowed you Rs. 22 lakhs income after 1975." The above noted observations of the ITO, it was stated, proved bey....
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....alan's family, accepted the existence of land holdings with the creditor LAF, availability of agricultural income in the hands of LAF and the genuineness of the then loans given by LAF. He further submitted that though the aforesaid three facts were accepted to be in existence till the year 1971-72, but because the enquiries were conducted by the CIT in the years 1974 and 1975, so the existence of land holdings with the creditor LAF, availability of agricultural income with LAF and genuineness of loans given by LAF will be deemed to have accepted for the years 1974 and 1975 also as well as for the subsequent years upto 1981. Deriving strength from the so-called "Note on disclosure in Jalan's cases" and Statement 'C', he submitted that the ITO should have accepted the existence of land holdings with creditor LAF, should have accepted the availability of agricultural income in the hands of creditor LAF @Rs. 5,000 per acre for 500 acre because in 1971-72 the CIT had determined the yearly agricultural income in the hands of LAF @Rs. 2,000 per acre; and should have accepted the genuineness of the transactions for the asst. yrs. 1976-77 to 1980-81 also. In other words, the submissi....
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....to the findings of the CIT arrived at while accepting disclosure made by Jalan's family because of the doctrine of res judicata. Reliance was placed on the following decisions: (i) Parimisetti Seotharamamma vs. CIT (1965) 57 ITR 532 (SC) (ii) S. Hastimal vs. CIT (1963) 49 ITR 273 (Mad) (iii) Orient Trading Co. Ltd. vs. CIT (1963) 49 ITR 723 (Bom) (iv) Tolaram Daga vs. CIT (1966) 59 ITR 632 (Assam) (v) CIT vs. Orissa Corpn. P. Ltd. (1986) 52 CTR (SC) 138 : (1986) 159 ITR 78 (SC). To strengthen his plea, the learned counsel for the assessee further relied on the statement of the 4 persons, namely—(i) Sri Jasvantrai Pande; (ii) Sri Radheshyam Shivnarayan; (iii) Sri Parasuram and (iv) Sri Brijlal Yadav. 15. The learned Departmental Representative, on the other hand, submitted as under: He disputed the assessee's theory of non-availability of creditor's books of account, because according to him it was unbelievable that a person claiming to have crores of agricultural income was keeping the books of account in the fields itself. On the contrary, he submitted that the creditor, during the periods relevant to assessment years under appeal had neither ....
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....osure proceedings, the learned Departmental Representative referring to para Nos. 3.6 of note on disclosure in Jalan's cases, statement 'C' to it, and ITO's letter, submitted that firstly these documents have no evidentiary value as none has been signed either by ITO or by CIT and even otherwise there is nothing in these documents, which may establish that the creditor LAF had crores of agricultural income during the years 1975-76 to 1979-80 relevant to asst. yrs. 1976-77 to 1980-81. According to him, these documents, at the most would have been relevant upto the year 1972 because, in Statement 'C', the availability of agricultural income with LAF was found to be only upto the year 1972. He further relied on the findings of AO and CIT(A). In response to submissions of the assessee's counsel that the creditor's identity and capacity was established by the present creditor's returns of income for all these years before the same ITO, the learned Departmental Representative drew our attention to page No. 14 of the ITO's order wherein the contents/details of creditor's return for the asst. yrs. 1975-76 to 1982-83 have been detailed (as under), and from these details he submitted that th....
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....partmental Representative the assessee's counsel reiterated its old submissions. 16. We have considered the submissions of both the parties and gone through the records available before us and have come to the conclusion that for the disposal of these appeals, the questions to be decided by the Tribunal are as under: (i) What are the requirements and ingredients of s. 68 of the Act, which the assessee in these appeals was to satisfy? (ii) Was it assessee's onus to first prima facie satisfy the requirements/ingredients of s. 68? (iii) Can the assessee, on the basis of material before the Tribunal, be said to have discharged its primary onus, (iv) (a) Whether the Revenue authorities were bound to accept the availability of agricultural income in the hands of the creditor by accepting the fact that, because availability of agricultural income upto year 1972 in the hands of the creditor was accepted by the CIT during disclosure made by Jalan's family, so the availability of agricultural income in the hands of the creditor during the periods relevant to asst. yrs. 1976-77 to 1980-81 should also be accepted—even without any evidence regarding ownership of land, details o....
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....e Punjab and Haryana High Court had occasion to analyse the requirements of provisions of s. 68 in case of Todar Mall vs. CIT 1977 CTR (P&H) 174 : (1977) 106 ITR 619 (P&H) and held as under: "Head Notes" "In view of s. 68 of the IT Act, 1961, where any sum is found credited in the books of an assessee and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not satisfactory, the sum so credited may be charged to income-tax as the income of the assessee without further proof." Sec. 68, therefore, gives a statutory recognition to the principle that the cash credits which are not satisfactorily explained may be assessed as income and it is not necessary for the ITO to collect further material. The Hon'ble Allahabad High Court in the case of Nanak Chandra Laxman Das vs. CIT (1982) 28 CTR (All) 280 : (1983) 140 ITR 151 (All) had occasion to consider the provisions of s. 68 and as per headnote, extracted below held as under: "Sec. 68 of the IT Act, 1961, gives a statutory recognition to the principle that cash credits which are not satisfactorily explained may be assessed as income." Language used in s. 68 of the Act f....
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.... appears in the assessee's books of account in an accounting year, the assessee has a legal obligation to explain the nature and source of such credit [Sreelekha Banerjee vs. CIT (1963) 49 ITR 112, 117 (SC)]. If the assessee offers an explanation about the cash credit, the IT Department can put the assessee to proof of his explanation, and if the assessee fails to tender evidence or burkes an enquiry, then the AO is justified in rejecting the explanation and holding that the income is from an undisclosed source. The AO is not required to specify or prove what that source is, which from the nature of the case must be known only to the assessee [Seth Kalekhan Md. Hanif vs. CIT (1958) 34 ITR 669, 673, 674 (MP) affirmed (1963) 50 ITR 1 (SC); CIT vs. Krishna Mining Co. (1972) 83 ITR 860; A. Govindarajulu Mudaliar vs. CIT (1958) 34 ITR 807-810 (SC)]. According to provisions of s. 68 it is necessary for the assessee to prove prima facie the transaction which results in a cash credit in his books of account. Such 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 b....
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....ies must prove his case sufficiently to justify a judgment in his favour if there is no other evidence." When, however, in a case where the entry stands in the name of an independent third party, the burden will still lie upon the assessee to establish the identity of the said party, and to satisfy the AO that the entry is real and not fictitious (Gumni Ram Siri Ram vs. CIT, distinguishing Tola Ram Daga vs. CIT. From the above-mentioned provisions of law and various authorities it is settled law: (a) that the primary onus to prove the genuineness of a cash credit appearing in the books of a person is upon that person, which can be discharged by prima facie proving the identity of the creditor, capacity of the creditor and genuineness of the transaction. (b) This onus will shift to the Department only if the aforesaid three ingredients are satisfied. (c) That if the person fails to satisfy the aforesaid three ingredients of s. 68 then the AO is entitled to consider the amount of cash credit in the books of the assessee as assessee's income from undisclosed sources. 20. We now proceed to examine the submissions of the counsel for the assessee in the light of above-ment....
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....00 . . . 1,67,75,000 Less : Expenses for development of the Farm 70,00,000 . . . Rs.97,75,000 EXTRACT FROM DOCUMENT AT PAGE NO. 618 NO. CENTRAL/IK/F.D.I/75-76 Office of the ITO, Sec. IX Central Rg. II, Bombay Camp At : Bahraich (U.P.) Dated Sept. 26, 1976. M/s. Loknath Tolaram, 135, Modys Street, Fort, Bombay Camp at Bahraich (U.P.) Sir, Please refer to your letter dt. 25th Sept., 1975. Shri Basudevi Prasad Srivastav have attended and he was cross-examined by you. He has given his own reasons as he could not bring the records from Tehsil Office, Manpara. During his cross-examination, you have produced a certified copy of Khatuni in respect of the lands in the name of Sri Uma Shankar Lohia of village Majjon. I have deputed my inspector to obtain a copy of the Khatuni from the same office from which you have obtained by me (sic) clearly shows that Shri Uma Shankar Lohia was having the following lands in vill. Majjan in Fasli year 1366 i.e., Calendar year 1988. These lands are shown according to classification from the Khatauni Muhal register maintained in the Collector office as under: Classification of land Tota....
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....ost, confirms that the creditor LAF had agricultural income till the year 1972. There is nothing in these documents which may prove or even suggest that the creditor LAF had any agricultural land or any agricultural income during the periods relevant to asst. yrs. 1976-77 to 1980-81. Consequently, the presumption arrived at by the assessee's counsel that these documents confirm the availability of agricultural land and agricultural income sufficient to advance amounts of cash credits in various years detailed herein-before is absolutely unfounded and cannot in any way be taken as supportive to his submissions. We, therefore, have no hesitation in holding that there is nothing either in the letter alleged to have been written by ITO from his camp office at Bahraich (U.P.) on 26th Sept., 1975 or in so-called "Note on disclosure in Jalan's cases which may prove or even suggest that the creditor LAF had any agricultural land or agricultural income sufficient to advance the cash credits under appeal during the periods relevant to asst. yrs. 1976-77 to 1980-81. Inspite of the fact that there was nothing in the so-called disclosure petition which could support the assessee's p....
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.... and capacity to lend the money has been accepted by the Department in the past. It was also claimed that there is no change in the situation since the acceptance of the income from the farm by the Department during VDS-cum-Settlement of 1975." As these findings were never disputed by the assessee, so we are in agreement with the ITO that during the period relevant to asst. yrs. 1976-77 to 1980-81, the creditor had no agricultural land and or at least had no income from agriculture so as to advance the cash credits under appeal. Submission of assessee's counsel is, therefore, rejected. 21. The assessee's next contention that the authorities below were bound to follow the CIT's findings in disclosure petition is also of no merit because the documents at page Nos. 618 or 621 to 634 bears neither the signature of any authority i.e., ITO or CIT nor these have been certified by the assessee or his counsel and, therefore, we could have ignored them without taking cognisance, but we have taken note of the same only in the interest of justice and still have found that there is nothing in these documents which may prove the assessee's point of view. As regards to the applicabili....
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.... only invalid and non est, but also confirm that the LAF had no agricultural income at all, because had it any income then the same would have been definitely shown in the relevant columns. We, therefore, hold that the returns of income filed by the creditor LAF do in no way establish any of the three ingredients of s. 68 of the Act. 23. The next submission of the assessee's counsel was that the existence of creditor's account in assessee's books amply confirms the genuineness of the transaction. To decide this issue, it is necessary to reproduce the alleged creditor's copy of account appearing at page No. 553 of the assessee's paper book, on which the assessee's counsel had heavily relied. M/S RAMKUMAR JALAN IN THE BOOKS OF M/S JALAN TRADING CO. ACCOUNT OF "M/S LOHIA AGRICULTURAL FARM" (i.e., LAF) Asst. yr. . . Amount . Opening balance . — . Add : Cash receipts . 25,49,000.00 . Less : Transfer by journal Prakash Cotton Mills 34,101.81 . . Jalan Hindu Undivided Family Amanat A/c 25,14,898.10 . . Closing Balance . 25,49,000.00 After having gone through the copy of account, which is not signed ei....
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....isions under the Indian IT Act, 1922, namely, that where certain sums of money were claimed by the assessee to have been borrowed from certain persons, it was for the assessee to prove by cogent and proper evidence that these were genuine loans." The Hon'ble Allahabad High Court in case of Nanak Chandra Laxman Dass vs. CIT had also occasion to consider the scope of s. 68 of the Act and, as per headnote, held as under: "Sec. 68 of the IT Act, 1961, gives a statutory recognition to the principle that cash credits which are not satisfactorily explained may be assessed as income. Where any sum is found credited in the books of the assessee the initial onus is on the assessee to offer an explanation of the nature and source of cash credit. If the explanation is not found satisfactory or reasonable, the ITO can treat such money as the assessee's income from undisclosed sources. It is not necessary for the ITO to locate the exact source of the credits. The assessee can prove the genuineness of the credits by establishing from some plausible evidence the identity of the creditor and his creditworthiness. Irrespective of the fact that the credit entry is in the name of a t....
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....substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim litigating under the same title, in a Court competent to try such subsequent suit or the suit in which such issues has been subsequently raised, and has been heard and finally decided by such Courts." The doctrine of res judicata rests on the principle that one should not be vexed twice for the same course and that there should be finality of litigation. The basic principle of doctrine of res judicata is that the cause of action for the second suit or action being merged in the judgment of first, it does not any more survive, but as far as applicability of doctrine of res judicata or estoppel to the Income-tax matters is concerned, it is now settled law that these have no application to decisions of IT authorities so as to preclude the determination of a question in a previous assessment order from being reopened in proceedings relating to in a subsequent assessment year and reasons are: (i) That the IT authority including the Appellate Tribunal are not Courts; and (ii) that the purpose and the subject-matter....