T.V.RAJAGOPALA RAO, J.M. : -
(1.) THIS is an assessees appeal relating to asst. yr. 1982-83. It is directed against the order of the CIT(A)-IV, Hyderabad, dt. 7th Feb., 1989.
(2.) The only point involved is whether the addition of Rs. 32,000 made under S. 68 of the IT Act, 1961 (hereinafter called "the Act") in the hands of the assessee company is justifiable. Few facts relating to this addition are the following.
Smt. Samanthakala and Smt. Sashirekha are daughters of Shri K. Venkatramireddy, resident of Rangapuram village, Kodakandla Mandal, Warangal district. Smt. Sashirekha was married to Sri R. S. Ravula and she has been residing along with her husband in U.S.A. since 1968. She was having agricultural land of 19 acres 28 guntas at Devnoor village, Warangal district, and that land was being managed by her brother Shri Kamalakarreddy. She was getting yearly income of about Rs. 30,000 as agricultural income from her lands. The said income was all managed by Shri K. Kamalakarreddy on her behalf. It is the case of the assessee that from July, 1980 to June, 1981 Shri Kamalakarreddy had advanced a total sum of Rs. 1,17,000 to the assessee-company and he also received back an amount aggregating to Rs. 1,07,000 out of it. It is also the case of the assessee that Smt. Sashirekha came down and stayed in India from 10th June, 1980 to 11th Sept., 1980 and during her stay she had kept an amount of Rs. 38,000 with her sister Smt. Samanthakala for purposes of purchasing a flat to her, that Smt. Samanthakala deposited that amount of Rs. 38,000 in her Savings Bank Account in Andhra Bank, Narayanguda branch at Hyderabad. Smt. Samanthakala is the wife of Shri P. K. Reddy. Smt. Samanthakala is a director whereas her husband Shri P. K. Reddy, is the managing director of the assessee-company which is a private limited company. For asst. yr. 1982-83, on the ground that the assessee was not able to establish the identity or the capacity of the creditor and also the genuineness of the cash credit appearing in favour of Smt. Sashirekha, the ITO added a sum of Rs. 32,000 which represents the peak credit in her account maintained by the assessee-company. The ITO in his assessment order dt. 30th March, 1985 admitted that Smt. Sashirekha is no other than the sister of Smt. Samanthakala, one of the directors of the assessee-company. He found that the ledger account appearing in the name of Smt. Sashirekha was found written at a streteh and did not seem to have been written in ordinary course of business. By letter dt. 4th March, 1985, the ITO requested the assessee to produce Smt. Sashirekha for cross-examination. Since she was residing in USA she was not able to be produced. Justifying the addition made, the ITO had the following to say : "The assessee-company has not established the identity, capacity of the creditor and genuineness of the transaction. The managing director has informed that Smt. Sashirekha is outside India. The burden is on the assessee-company to prove the genuiness of the cash credits. As Smt. Sashirekha happens to be a close relative and she was not produced for the cross-examination makes me to believe that it is the money of the company introduced in the name of Smt. Sashirekha." It is not out of place to mention here that a sum of Rs. 31,931 was also added to the income of the assessee-company as unexplained investment under S. 69A. Inter alia, against these two additions, the assessee went in appeal before the CIT(A)-IV, Hyderabad. The addition of Rs. 31,931 was made on the following grounds. As already stated Smt. Samanthakala was having an Savings Bank Account in Andhra Bank, Narayanguda branch. In that account, a sum of Rs. 38,000 was credited on 8th July, 1980. It is the case of the assessee that the sum of Rs. 38,000 was given by Smt. Sashirekha to her sister Smt. Samanthakala for purposes of purchasing a flat to her. It is the further case of the assessee that on 30th July, 1980, for a sum of Rs. 31,747.05 a demand draft was purchased favouring Premier Engineering Corporation to which the assessee-company was due. The ITO made the addition of Rs. 31,931 in the hands of the assessee-company under S. 69A of the Act, however, disbelieving the version of the assessee. In appeal, the learned CIT(A) found that the amount of Rs. 31,931 was borrowed by the assessee-company from Smt. Samanthakala and with the said amount a demand draft was furnished in favour of Premier Engineering Corporation to which the assessee was due. Thus, the learned CIT(A) held agreeing with the assessee-company that the amount in fact represents the amount drawn from the Saving Bank Account of Smt. Samanthakala. On 4th March, 1985, the ITO issued a letter calling upon the assessee to explain the genuineness of the cash credits, inter alia, standing in the name of Smt. Sashirekha in an amount of Rs. 1,17,000. A reply was sent to that letter on 11th March, 1985, copy of which is furnished at pages 2 and 3 of the paper compilation filed before us. In the said letter it is informed that Smt. Sashirekha was residing in USA and her address was provided as follows : "10535, Chappal Hill Drive, Hoston, TEXAS - 77099". Smt. Samanthakala was examined by the ITO under S. 131 of the Act on 15th March, 1985. Sworn statement recorded from her is found at page 4 of the paper compilation filed before us. In that examination it is stated that her parents gifted her 3 acres of wet land and 8 acres of dry land, out of which she receives Rs. 10,000 as yearly agricultural income and from those realisations she had lent to her sister Smt. Shakuntala, invested Rs. 30,000 in the assessee-company and also invested another Rs. 30,000 in Best Abbressive Company. She further stated that she had got a bank account, inter alia, in Andhra Bank, Narayanguda. With reference to the entries made in the Savings Bank Account, she was cross-examined. On 28th July, 1980, an amount of Rs. 38,300 appeared to have been deposited in her account in Andhra Bank, Narayanguda branch. Explaining the source to that amount, she stated that her sister Smt. Sashirekha who was residing in USA at that time gave the said amount to her for purchasing a flat and she also stated that the amount was personally delivered to her by her sister, viz., Smt. Sashirekha. On 13th Nov., 1981, another sum of Rs. 72,926 was found to have been credited in her Savings Bank Account. Explaining about the said remittance she stated that she received a cheque from her sister who was residing in USA. A confirmatory letter was sent from Smt. Sashirekha herself from USA, a copy of which is furnished at page 6 of the paper compilation furnished before us. In the said confirmatory letter, she confirmed that she was having an extent of 19 acres 20 guntas of agricultural land at Devnoor village, Warangal district, out of which she was getting agricultural income of Rs. 25,000 per year, that the lands as well as the income derived therefrom were being managed by her brother Shri Kamalakarreddy, that she authorised him to deal with her money and as per her authorisation he had been temporarily advancing the money to the assessee-company and also had been receiving back monies on her behalf. Further, she stated in her confirmatory letter that she had been visiting India occasionally especially between 10th June, 1980 to 11th Aug., 1980 she was in India and during her stay she used to advance monies to her sister Smt. Samanthakala as well as her brother-in-law Shri P. K. Reddy and was also receiving back money from them personally. Shri Kamalakarreddy, the brother of Smt. Sashirekha also gave an affidavit in support of the contentions of the assessee. Copy of the said affidavit is furnished at page 7 of the paper compilation. It was duly notarised. In the said affidavit he had corroborated the version given by Smt. Sashirekha in her confirmatory letter given above. More particularly, he had affirmed that from out of the accumulated agricultural income belonging to his sister Smt. Sashirekha, he used to advance monies to the assessee-company to which Shri P. K. Reddy, his brother-in-law was the managing director. He had advanced a total sum of Rs. 1,17,000 on various dates between July, 1980 to June, 1981, and also received back a sum aggregating to Rs. 1,07,000. He further affirmed that he had been giving certain amounts to Smt. Sashirekha whenever she wanted during her stay in India on her visit. The ledger copy of the account of Smt. Sashirekha maintained by the assessee-company was furnished at pages 8 and 9. It discloses that the total amount borrowed was Rs. 1,17,000 and the amount repaid was Rs. 1,07,000.
(3.) IN appeal, though the learned CIT(A) partly allowed the appeal filed, gave relief to the assessee only by deleting the addition of Rs. 31,931. However, he confirmed the addition of Rs. 32,000 which represents the peak of the cash credits standing in the name of Smt. Sashirekha. The learned CIT(A) held that the explanation furnished by the assessee to account for cash credits suffers from serious infirmities and gaps which makes him difficult to acquiesce in the version of the assessee. Assuming that Smt. Sashirekha had agricultural land fetching Rs. 30,000 yearly it does not necessarily follow, according to the learned CIT(A), that the money was invested with the assessee-company and was not spent otherwise. The learned CIT(A) holds that there should be an immediate nexus between the receipt of the alleged agricultural income and the subsequent investment. However, the learned CIT(A) observes that what is on record was only uncorroborated version of different parties concerned to explain the cash credit and the gaps in those self-serving statements have not adequately been bridged by material particulars having a bearing on them. The learned CIT(A) finds that it would be very difficult for him to give credence to the patch work of defence as clobbered out by the assessee without a modicum of acceptable evidence. According to the CIT(A), the nexus between agricultural income and the cash credit has to be established not by bland statements but in terms of date linking the two both in point of time and the quantum of credit involved. He ultimately finds that the onus to establish the truth of the cash credits exclusively lies on the assessee which the assessee, according to him did not discharge to the satisfaction of the ITO or to his satisfaction in appeal. Therefore, he refused to interfere with the ITOs finding and confirmed the addition.;