TaxTMI 
TaxTMI 
1995 (12) TMI 90
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.... 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 assessee's books appearing in all these years i....
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....closure 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 the receipts are of an assessable nature [A. Govindarajulu Mudaliar vs. CIT (1958) 34 ITR 807, 810 (SC)]. The onus of proving the source of....
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....n 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 and in creditor-firm in the capacity of a Karta of his HUF and consequently, addressed the following notices/letters. Notices/letters issued....
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.... 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 labouring hard, the ITO considered the cash credits in all these years appearing in the name of M/s LAF as assessee's concealed income by holding as under: "It is settled that the onus is on the assessee to explain the nature and source of cash credits, whether they appear in a....
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....rom 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. I do not find any material therein to support your contention that you were owning/possessing/ cultivating 1100 acres of land under LAF." Therefore, the assessee was called upon to produce evidence to prove that LAF owned/possessed/cultivated agricultural land and that it derived very substa....
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....nd 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 derived by the LAF from the beginning of 1951 upto the end of 1972. It was stated by the assessee that in the circumstances, it was not necessary for the Department to call upon the assessee to prove the capacity of the Farm to produce agricultural income in subsequent years as the issue stood settled and the Department was already having evidence that the Farm was of 2000 acres and that the average income per year per acre was Rs. 5,000. It....
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....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 again, I have been told that evidence has been produced before the CIT, the AAC and before my predecessor and on the basis of such evidence only, the Departmental authorities have agreed to accept the agricultural income from M/s LAF. You must be aware that it is not so. It is needless to emphasise again that there is no res judicata in the income-tax proceedings and I have given you ample opportunities to produce the same before me. You hav....
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....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 owned, possessed and cultivated by you was nowhere near 2000 acres as was your claim. It also shows that most of the land was under adverse possession and the total land belonging to Lohias as per this record is 227.54 acres, the details whereof are as under: Name of village In the name of Total acres 1. Majhao Shri Shyamsunder . . Shri Nirkunj 196.60 . Shri U.S. Lohia 30.94 2. Gangapur Shri Jagannath . 3. Bhojia Any of Lohias Nil 4. Simri Mulmul Any....
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....o 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 beyond doubt that there was an agreement between the assessee and the Department according to which the agricultural income of LAF had to be taken at Rs. 22 lacs per annum for calendar years 1973, 1974 and 1975. It was stated that the agricultural lands which were yielding income of Rs. 22 lacs per annum upto December, 1975 were yielding higher income subsequently and that the ITO had grievously erred in holding that LAF was not deriving any income from agriculture after 1972. It was stated that on the basis of the evidence on record, the ITO ought to have held that the assessee....
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....ell 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 submissions of the learned counsel of the assessee was that once the CIT had accepted the existence of land holdings, availability of agricultural income at the rates varying Rs. 100 to Rs. 2,000 per year during the years 1951 to 1972, so the ITO should have, on the basis of CIT's acceptance of disclosure petition, accepted the assessee's theory that during the periods relevant to asst. yrs. 1976-77 to 1981-82 the creditor LAF was having yearly agricultural income @ Rs. 5,000 per acre from Rs. 500 acre of land and, therefore, LAF was well in a position to advance a loan of Rs. 25,49,000, Rs. 1,19,....
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....ely—(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 any agricultural farm nor any agricultural income and the plea of books having been destroyed was a made up story. He strengthened his conclusion with the further submissions that inspite of nine detailed notices to the assessee, nine detailed summons and notices to Sri Tolaram Jalan who was the managing partner of the creditor LAF as well as partner in assessee's firm and six notices to creditor LAF, none of them has filed any documentary evidence, whatsoever, which may establish/prove that during the periods under appeal the creditor was having any agricultural land, had cultivated any crop, had got any produce or had so....
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....ral 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 their being no P&L a/c and balance sheet attached to them and the relevant income columns having being left blank, there was nothing in these returns as to how much was the agricultural income. Had there been any income, the creditor instead of writing the words "not necessary as there is no other income other than agricultural income" should have mentioned the figure/quantum of agricultural income. He further submitted that none of these returns was filed voluntarily and none of creditor's partners had declared their share of agricultural income in personal returns of income. According to him, none of these returns prove the exis....
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....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 of crops cultivated, quantum of produce, evidence for purchase of inputs and evidence for sale of produce by the creditor, produced by the assessee or the creditor. (b) Were the Revenue authorities barred from asking necessary evidence for genuineness of the cash credits in the assessee's books appearing during the years relevant to asst. yrs. 1976-77 to 1981-82 by applicability of doctrine of res judicata. (v) Whether, where the assessee has failed to discharge its primary onus to prove identity of the creditor, capacity of the creditor and genuineness of the transaction, the Revenue authorities are entitled to consider the unexplained cash cre....
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....ned 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 further leads one to conclude that, 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 a 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 a credit entry is in the name of a third party, the burden lies upon the ....
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...., 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 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 the Department. Merely establishing the identity of the creditor is not enough [Shankar Industries vs. CIT (1978) 114 ITR 689 (Cal); C. Kant & Co. vs. CIT (1980) 18 CTR (Cal) 164 : (1980) 126 ITR 63 (Cal); Prakash Textile Agency vs. CIT (1980) 121 ITR 890 (Cal); Oriental Wire Industries (P) Ltd. vs. CIT (1981) 20 CTR (Cal) 264 : (1981) 131 ITR 688 (Cal)]. It is, therefore, clear that the primary onus is on the assessee to provide identity of the creditor, capacity of the creditor and genuineness of the transaction. The aforesaid proposition of law are fur....
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....nd 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-mentioned facts and principles of law; (i) The first contention of the assessee's counsel is that the availability of agricultural income in the hands of 'LAF' till the year 1972 having been accepted by the CIT while considering disclosure petition of Jalan's family decided in 1975, the availability of agricultural income with 'LAF' in the years 1975-76 to 1980-81 relevant to asst. yrs. 1976-77 to 1981-82 must also be accepted by the Department. After having gone through the so-called note on disclosure in Jalan's cases reproduced below, as well as contents of page No. 618 of assessee's paper book, we are of the opinion that there is nothing in these documents which may prove, even remotely, that the creditor LAF had any agricultu....
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.... 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 Total acres of land in name of Uma Shankar Lohia. Class I nil Class II 322.050 Class III nil Class IV 41.685 Total 363.735 Thus, Shri Uma Shankar Lohia was having 363.735 acres of land in the Majhaon village. This is also clear from the certified copy filed by you in para 'a' and 'c'. In para 'b' of your letter, you state that you have filed a certified copy of khatani in respect of 416.020 and 367.24 acres of land in village Majhaon. It is seen that you have not properly read the certified copy obtained by you. This certified copy submitted by you does not show any land in the name of Shri U.S. Lohia. This certified copy is simply a total acreage of land of Class I to Class IV as per the Khatauni register of Majhaon village, 367.240 acres of land mentioned by you in para 'b' of your letter is also not of Uma Shankar....
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....rove 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 plea, the ITO laboured hard and held a camp office at Bahraich. As there was no cooperation from the assessee's side, so the ITO himself collected the material which has been narrated at p. 11 of his order in the following form: "I visited Baharaich personally as planned and intimated to the assessee. Nobody attended from assessee's side and it was clear that the assessee was not interested in giving any evidence whatsoever. It was noticed that Revenue authorities have taken up consolidation proceedings in villages Majhao and Gangapur during 1975-80 and had maintained consolidation khasara in the form CH 2A. These records show various details including ownership and possession in respect of every plot of land in these villages. The assessee had completely failed to provide me any evidence relating to the possession of agricultural land belonging to other by LAF. On....
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.... 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 applicability of decisions relied upon by the assessee, we are of the opinion that the facts and circumstances of the assessee's case being different from the facts and circumstances of the cases relied upon, so much so that the assessee present before us has not furnished any kind of evidence all along, beginning from the stage of AO till the Tribunal. So, none of these cases supports assessee's submissions. As regards to reliance on the statement of 4 persons, we think that the CIT(A) has very elaborately discussed the evidentiary value of the same and has rightly held that none of them supports the assessee's case. 22. The next contention was that the creditor LAF had furnished its returns of income for all these assessment years and, therefore, that was sufficient evidence to prove creditor's capacity. To decide this issue, we would like to refer to p. 14 and 15 of ITO's order, wherein he had,....
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....n 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 either by the assessee or his counsel, we are constrained to hold that this unauthenticated piece of paper in no way—factually or legally supports the assessee's plea, because in absence of any confirmation from the creditor and capacity of the creditor having not been established, how the creditor's account in assessee's book confirms the genuineness of the transaction is beyond our imagination; the assessee has, therefore, failed to prove the genuineness of the transaction also. 24. The next plea of the assessee's counsel was that if at all the Department was of the view that the cash credits in assessee's books were not genuine and consequently wanted to consider the same as assessee's income, then it was for the Department to prove the same to be assessee's income and as the authorities have not brought any evidence on record so, they were not justified in taxing the same as assessee's income. After having considered the submissions from both sides and various decisions, we are of the view that the submissions of the a....
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.... the identity of the creditor and his creditworthiness. Irrespective of the fact that the credit entry is in the name of a third party, the burden lies upon the assessee to explain the credit entry. In certain circumstances the onus might shift to the ITO. For instance, if the assessee succeeds in showing that entries regarding cash credits in a third party's account are genuine and the sums were in fact received from the third party as loans or deposits, he has discharged the onus and in such a case it will be for the third party to explain the source of the moneys and that cannot be charged as assessee's income in the absence of any material to indicate that they belong to the assessee." Respectfully following the decisions we have no hesitation to hold that once the assessee fails to offer an explanation relating to the genuineness of the cash credit or explanation is found to be unsatisfactory by the AO, then under s. 68 of the Act the AO is entitled to consider the cash credit as assessee's taxable income from undisclosed sources. In the present case, the assessee has not filed any evidence to prove the genuineness of the cash credits and, therefore, the lower authorities we....
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....hority including the Appellate Tribunal are not Courts; and (ii) that the purpose and the subject-matters of the proceedings in a subsequent year are not the same as those in a previous year. The Hon'ble Supreme Court in the case of New Jegangir Vakil Mills Co. Ltd. vs. CIT (1963) 49 ITR (SC) 137, has held that: "In matters of taxation there can be no question of res judicata. The decision given by an ITO for one assessment year cannot affect or bind his decision for another year. Generally, the doctrine of res judicata or estoppel by record does not apply to such decisions." In view of the settled law on this point and respectfully following the aforesaid decision of apex Court, we hold that the doctrine of res judicata or estoppel was not applicable to the facts and circumstances of the case and at least as far as the right of the AO to investigate the genuineness of the cash credits appearing in assessee's books for the asst. yrs. 1976-77 to 1980-81 is concerned, these doctrines were not applicable. We, therefore, hold the action of the lower authorities to be in accordance with law and valid. Even otherwise, if for the sake of arguments, it is presumed that these doctrine....