Decided on November 30,1994



Abdul Razack, Judicial Member - (1.) THE assessee in the second appeal has taken 24 grounds assailing the order of the Assellate Commissioner (A/c.) for the assessment year 1982-83. While grounds 1 to 18 relate to the grievance regarding confirmation of addition towards loan (cash credits) aggregating to Rs. 4,34,400 taken by the assessee from different persons and Rs. 35,000 being interest on such loans totalling to Rs. 4,69,400. THE remaining grounds dispute the confirmation of varying amounts under different heads but the challenge is very serious as regards loan and we shall, therefore, deal with the same first by narrating the connected facts but in brief.
(2.) The assessee borrowed loans from seventeen different persons aggregating to Rs. 4, 34, 400, some through cheques, some by means of bank demand drafts and some petty amounts in cash also. The details can be found at pages 3 and 4 of the assessment order. The loans are recorded in the account books of the assessee which have been maintained by it on mercantile basis as is recorded by the Assessing Officer (AO) in the assessment order. A return was filed on 29th June, 1982 declaring loss of Rs. 2, 99, 486. The Assessing Officer issued letter dated 13-11-1984 to the assessee demanding proof of capital and cash credits (loan) appearing in the account books of the assessee. The case was fixed on 30th November, 1984 for this purpose. This letter was served on the assessee on 15-11-1984. As no proof was advanced on 30-11-1984 the case was adjourned and reported to 3-12-1984 and then again to 5-12-1984. Further time was given by the Assessing Officer till 10-12-1984 for production of evidence but there was no response from the assessee on that date. The Assessing Officer addressed another letter on 15-1-1985 which was served on the assessee on 16-1-1985 demanding proof within five days i. e. by 21-1-1985. The Assessing Officer says that there was no appearance nor any petition for adjournment on that date. However, a letter was filed on 24-1-1985 giving some information by the assessee's advocate but not regarding loans. In the said letter it was stated as under: Contra A/cs. are called for. Whatever we have received are enclosed. Rest will be submitted as soon as received. On 28-3-1985 the Assessing Officer states in his order at page 5 that Mr.. Sanghavi, advocate, assessee's AR appeared and filed some proof. Since the assessment was getting barred by time the Assessing Officer did not refix the case nor gave any further time to enable the assessee to file the required information and evidence relating to loan and the assessment was finalised on 29-3-1985 adding the loans of Rs. 4, 34, 400 plus Rs. 35, 000 being interest thereon. Some other additions were also made by the Assessing Officer which were subject-matter of the first appeal and some before us in this appeal as recorded elsewhere above. It is pertinent to extract have the relevant portion from the advocate's letter (assessee's AR) dated 28-3-1985 which the Assessing Officer has also extracted at page 5 of his order. It reads as under: The firm has written to the parties concerned for confirmation or for sending copies of A/c. Some parties are at Ahmedabad some have gone out of Rajkot and hence we were unable to obtain confirmation from these parties. However, if your honour will kindly go through these remaining account mostly the amount is received by cheques. All the parties are genuine. We undertake to file the copies of A/c. or the confirmation at the earliest. In the mean time assessment be made and if in case your honour feel that some items are unexplained or not genuine we will not take any objection if you reopen the assessment. However, the amount is received by cheques mostly or all remaining A/c. and hence they may be accepted.
(3.) THE Assessing Officer did not accede to the request of the assessee's advocate and after discussing the provisions of Section 68 and some related case laws on the subject added the sum of Rs. 4, 34, 400 plus interest amount of Rs. 35, 000 as assessee's income. THE assessee challenged this addition as well as other additions made by the Assessing Officer in the first appeal before the A/c.;

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