Decided on October 29,2014

Dhanraj Mills (P.) Ltd. Appellant


N.K.Billaiya, Member (A) - (1.) THESE four appeals were heard pursuant to the directions of the Hon'ble Bombay High Court. In the first round of litigation, the matter travelled up to the Hon'ble Bombay High Court and the Hon'ble Bombay High Court was pleased to restore the contentious issues to the file of the Tribunal to re -examine and re -adjudicate afresh the nature and the character of the transactions involved in the appeal revolving around the subject questions. Respectfully following the directions of the Hon'ble Bombay High Court, these appeals were heard. First, we shall take up the appeal for A.Y. 1987 -88. The contentious issues are: "(i) Addition u/s. 68 of the Income Tax Act, 1961 amounting to Rs. 6,69,35,505/ - (ii) Disallowance of interest of Rs. 33,96,194/ - payable to M/s. Champaklal Devidas."
(2.) WHILE scrutinizing the return of income for the A.Y. 1987 -88, the A.O. noticed that the balance has been drawn by the assessee in the Andhra Bank, Fort branch account amounting to Rs. 6,69,35,305/ -. The assessee was asked to furnish full details of sale and purchase transactions of securities and units. The assessee filed a statement of Andhra Bank account along with copy of some bank advices. The A.O. observed that the details were incomplete as there was no mention about the counter parties nor any confirmation was furnished in this respect. The assessee was asked to explain why liabilities of Rs. 6,69,35,305/ - shown in the Andhra Bank, Fort branch should not be treated as bogus liability. Vide letter dtd. 5 -1 -1995, the assessee took a stand that it has not entered into any security transactions. The broker has arranged the fund by entering into certain transactions with Andhra Bank and further stated that the details of these transactions can be obtained from Andhra Bank. The A.O. did not accept this explanation of the assessee and proceeded by making addition of Rs. 6,69,35,305/ - u/s. 68 of the Act holding that the assessee was not able to explain nature, source and genuineness of the credits. Proceeding further, the A.O. noticed that in the sundry creditors list, interest of Rs. 33,90,164/ - is claimed by the assessee in respect of loan received from M/s. Champaklal Devidas. The interest was charged to P&L account. The assessee was asked to file complete details. The A.O. further proceeded by verification from M/s. Champaklal Devidas independently. It was found that in the account of M/s. Champaklal Devidas that there is no mention of the interest amount. The A.O. was of the opinion that such claim of interest is not confirmed and not fully explained by the assessee. He accordingly disallowed the interest of Rs. 33,96,164/ -. The assessee carried both these issues before the ld. CIT(A) but without any success.
(3.) BEFORE us, the ld. Counsel for the assessee vehemently submitted that the transactions with Andhra Bank, Fort branch are akin to the transactions involved in the securities scam for which Janaki Raman Committee was constituted by the Reserve Bank of India. Referring to the Janaki Raman Committee report, the ld. Counsel for the assessee stated that the transactions were no more than an unsecured loan of fund. It is the say of the ld. Counsel for the assessee that the transactions were supported by debit and credit notes issued by the bank. The nature of the transactions being unsecured loan has been confirmed by the Janaki Raman Committee in its report, capacity of Andhra Bank cannot be doubted. Thus, the assessee had discharged the onus cast upon it by virtue of section 68 of the Act. To substantiate its claim, the ld. Counsel for the assessee relied on various judicial pronouncements namely (i) Kamal Kumar Saharia v. CIT : [1995] 216 ITR 217 : [1994] 73 Taxman 299(Gau.), (ii) Shreelekha Banerjee v. CIT : [1963] 49 ITR 112 (SC) (iii) Addl. CIT v. Bahri Bros : [1988] 154 ITR 244 : 22 Taxman 3 (Pat.) and (iv) CIT v. Daulat Ram Rawatmull : [1973] 87 ITR 349 (SC). The ld. Counsel for the assessee continued to argue that once the nature of transaction has been accepted as that of unsecured loan, the Revenue Authorities have grossly failed in confirming/examining the transaction from Andhra Bank, Fort branch and the broker M/s. Champaklal Devidas. The ld. Counsel for the assessee time and again repeated that the assessee has discharged the onus and the onus shifted on to the Department and the Revenue Authorities have failed in discharging the onus.;

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