- (1.) K. C. SMGHAL, J.M.: This appeal is against Block assessment order passed by Sri S.M. Keshkamat, Assistant Commissioner (Inv.), Panali, Goa dt. 26th Feb., 1997. The block period consists of asst. yrs. 1986-87 to 1996-97.
(2.) The assessee is an individual dealing in batteries. The premises of the assessee was searched under section 132 of the Income Tax Act, 1961, on 10th Feb., 1996. The search completed on 28th Feb., 1996. In response to notice under section 158BC the assessee filed his return for the aforesaid block period declaring undisclosed income at Rs. 2,10,000. According to the assessing officer, the post search enquiries revealed that ' assessee was engaged in money-lending business from the premises of his proprietary concern M/s Solar Batteries at Vasco-da-Gama and the assessee was not disclosing any income from this source. Hence, survey was conducted at the aforesaid premises of the assessee in the course of which some loose papers were found containing.the money-lending activities of the assessee. Thereafter, the assessee was summoned under section 131 and this statement was recorded on 22nd Nov., 1996. In this statement, it was confirmed by the assessee that money-lending activities were being carried on by him for the last 3 to 4 years. Accordingly, the assessee filed the revised return on 9th Jan., 1997, disclosing additional undisclosed income of Rs. 10,00,000 pertaining to asst. yrs. 1993-94 to 1996-97. The loose papers found from the premises of the assessee contained the names of the persons from whom the assessee had borrowed money as well as the names of the persons to whom the money was lent. The borrowings amounted to Rs. 79,00,000 while the lending amounted to Rs. 89,00,000. This difference of Rs. 10,00,000 was considered and assessed as income from money-lending business' The assessee was asked to furnish confirmations from all the persons from whom the assessee claimed to have borrowed funds for his money-lending business. The confirmations were filed by the assessee. To test check the genuineness of the loans, 9 persons were issued notices under section 131. These persons appeared before the assessing officer. Their statements were recorded on oath wherein all of them confirmed that they had lent the money to the assessee at the rate of 24 per cent interest. However, the assessing officer rejected all the confirmations by observing as under : "On verification of confirmation letters produced by the assessee it was found that the assessee has merely got stereotype letters signed by some people. All of them claimed to have advanced money only to this assessee but nobody admitted to have any taxable income. All of them are supposed to be dealing in commodities which are not specified and the loan is attributed to saving from such business. Even those who have appeared before the undersigned in response to the notice under section 131 have given stereotype answers stating the source to be savings from manual labour, household savings, savings from salary, etc. Even the confirmations which contain the total incomes for the last 3 years of a particular person were also found to be same in many cases. Further, it was claimed in the confirmation letters that the people have given loan only to this assessee and not to any other 61se. All things considered the stereotype confirmation letters filed by the assessee are found to be not from genuine persons who had genuinely advanced money to this assessee. Thus, the entire loans of Rs. 79 lakhs borrowed by the assessee are considered bogus and added back to the total income of the assessee. " Aggrieved by this part of the order, ~he present appeal has been preferred by the assessee. The learned counsel for the assessee Mr. Pathak has seriously assailed the order of the assessing officer by raising various contentions. Firstly, it was contended by him that statement of the assessee recorded under section 131 should be either accepted or rejected in toto unless there is material on the record to prove the contrary. According to him, if the statement of the assessee to the effect that he was carrying on money-lending business and certain amounts were advanced by way of loan aggregating Rs. 89,00,000 as mentioned in the loose paper is accepted, then as a corollary, the other part of statements to the effect that he had borrowed the amounts from different persons as mentioned in the loose paper should also be accepted. In support of this contention, he relied on the decision of the Supreme Court in the case of Mahendra v. Sushila AIR 1965 SC 367 and various other Tribunal decisions mentioned below - (1) Tribunal Ahmedabad Bench decision in the case of Income Tax Officer v. Ganshyambhai R. Thakkar (1996) 56 M (Ahd) 460; (2) Tribunal Delhi Bench decision in the case of Ashwani Kumar v. Income Tax Officer (1991) 39 I7D 183 (Del),- (3) Tribunal Jaipur Bench Decision in the case of Kishanchand Sobhrajmal v. Assistant Commissioner (1992) 42 M (JP) 423 : (1992) 41 I7D 97 OP); and (4) Tribunal Ahmedabad Bench Decision in the case of Devilal Gherfial Shah v. Dy. CIT (1995) 127 CTR Mk) (Ahd) 135. In view of the aforesaid decision, it was submitted by him that the contents of loose paper found in the course of survey should be accepted in toto and the fact that the assessee has borrowed money from the persons as mentioned in the loose paper should be accepted. Secondly-it was contended that the provisions of s. 68 cannot be applied to the facts of the present case since the loose papers found in the course of survey cannot be considered as books of account maintained by the assessee in view of the decision of Tribunal Pune Bench in the case of Kantilal & Bros v. Assistant Commissioner(1995) 52 ITD 412 (Pune). According to him, the loose paper was never meant for disclosing to the IT authorities and, therefore, the contents of the loose paper are to be accepted in toto unless the department brings in material on the record to disprove the case of the assessee. Thirdly-it was his. contention that the provisions of Chapter XIV-B provide for assessment of undisclosed income. See. 158BA being charging section to assess the undisclosed income, the burden is on the Revenue to prove the undisclosed income of the assessee by bringing positive material on the record. According to him, not even a single material has been brought on record to prove that borrowings mentioned in the loose paper amounted to undisclosed income of the assessee. The assessment is purely on the basis of surmises and conjunctures. Fourthly-his submission was that if the statement of the assessee is rejected in toto, then the loose paper found from the premises of the assessee would be a dump paper and no inference can be drawn on the basis of such paper, because even the name of the assessee is not written on the loose paper. It is not clear from the loose paper whether it pertains to money-lending business. The amounts shown against the names of persons are very small amounts whidh may not even exceed Rs. 20,000 in aggregate. Fifthly-even assuming that onus was on the assessee to prove the genuineness of the borrowing, no fault can be found with the assessee. It was only in the beginning of February, 1997, that assessee was asked to file the confirmation from the creditors and a very short time of 8 days was given to file the confirmation. The assessee furnished all the confirmations before the assessing officer and thereafter nothing was asked from the assessee. To test check the genuineness of the confirmations, the assessing officer of his own issued summons to 9 persons who appeared before him and their statements were recorded under section 131 These 9 persons confirmed before the assessing officer that they had lent the money to the assessee on interest at the rate of 24 per cent per annum. Since nothing further was asked from the assessee, he was under the bona fide impression that the confirmations filed by him were accepted by the assessing officer. But, to his surprise, he received the assessment order wherein the entire borrowings had been rejected on flimsy grounds. According to Mr. Pathak, the onus which lies on the assessee has been duly discharged and the same were shifted to the assessing officer for disproving the stand of the assessee. According to him, not even a single material has been brought on record to suggest that confirmations filed by the assessee were false or bogus. In support of his contention that no addition can be made if primary burden is discharged, the reliance was placed by him on the following decisions : (1) Smt. Narinder Bedi v. Income Tax Officer (1996) 59 lTD 417 (Chd); (2) = v. Sahibganj Elecuic Cables (P) Ltd, (1978) 115 ITR 408 (Cal); (3) CIT v. Shyam Sunder & Co. (1989) 79 CTR (Cal) 211 : (1990) 181 ITR 187 (Call. and (4) Pragati Construction Co. v. Income Tax Officer (1997) 60 lTD 201 (Del). Lastly, it was submitted by him that even the draft order proposed by the assessing officer was not disclosed to the assessee and, therefore, the question of rebuttal did not arise.
(3.) THE learned senior departmental Representative has supported the order of the assessing officer by reiterating the reasonings by the assessing officer which need not be repeated since the same have been reproduced by us in earlier paras. Regarding the first legal contention of Mr. Pathak, it was submitted by him that statement of the assessee can be disbelieved in part. He also relied on the same decision of the Supreme Court which was relied upon by Mr. Pathak. In support of his submission, he relied upon the observations of the Hon'ble Supreme Court in para 213 of the order appearing at p. 404 of the report. Particular reliance was placed on the observations "on doubt what applies to an admission in the pleading would not apply to statements made by witness in evidence." According to him, the statement of the assessee under section 131 cannot be considered as an admission in order to accept it fully. Further stated that defence which is false can be rejected. Regarding the second contention of Mr. Pathak, it was submitted by him that assessing officer has not invoked the provisions of s. 68 and, therefore, the same has to be ignored. According to him, the general principles applicable to the borrowings would apply and the burden is on the assessee to prove the identity, the creditworthiness of the creditors and genuineness of the transactions. Regarding the onus, it was submitted by him that the same has not been discharged by the assessee, Onus is shifted to the Revenue only where the initial burden which lies on the assessee is discharged. In support of his submission, he relied on the decision of the Bombay High Court in the case of Orient Trading Co. Ltd. v. CIT (1963) 49 ITR 723 (Bom) and the decision of the Tribunal Hyderabad Bench in the case of Assa. CIT v. Dhanalaxn2i Steel Rerolling Mills (1996) 55 TTJ Wyd) 679. He then drew our attention to the confirmations filed by the assessee to point out the inherent weakness in such confirmations. In this regard, he repeated the reasoning given by the assessing officer namely-(1) that confirmations were in the stereo type form; (2) the nature of business carried on by the creditors not specified; and (3) all of them claimed to have advanced money only to the assessee. It was further stated by him that most of the creditors had shown similar income. Loans were received in odd figures which is not a probability. Income-tax Form No. 4A were filed after the search and, therefore, have no evidentiary value. Reliance was placed on the decision of the Tribunal in the case of Govindram M. Oberoi v. Income Tax Officer (1997) 57 TTJ (Pn) 1(TM). He also referred to the decision of Ahmedabad Bench in the case of Dhaneshkumar B. Shah v. Assistant Commissioner (1995) 52 7TJ (Ahd) 185, in support of his submission. It was further submitted that all the loans were received in cash, though banking facilities were available. He also referred to a pronote appearing on the last page of the paper book to show that assessee was in the habit of borrowing money on the basis of pronotes and, therefore, cash transactions could not be believed. It was also pointed out by him that in fact the total borrowings were to the extent of Rs. 65,60,000 while the confirmations were given for Rs. 78,00,000 which shows that the confirmations filed by the assessee were bogus. A query was raised from the Bench as to why al the persons from whom money was borrowed by the assessee were not examined. It was stated by him that assessee had requested in a statement not to make investigations as his business would be ruined. It is because of this reason that all the persons were not examined. THE learned departmental Representative also invited our attention to the notes on confirmations appearing at pages 1 to 4 of the paper book filed by him to show the weaknesses in the statement of the persons who appeared before the assessing officer. Lastly, it was submitted by him that on the basis of the loose paper, there was negative balance on 18th Sept., 1996, to the extent of Rs. 18,20,000 which remains unexplained and, therefore, the addition to this extent has to be sustained. He also raised an alternative ground to the effect that assessee had made investment by way of loans and the source of money has not been proved by the assessee. THErefore, the additions should be sustained under section 69. He referred to various decisions mentioned below for the proposition that addition can be sustained even on other grounds (1) (1987) 22 lTD 983 (sic); (2) Marolia & Sons v. CIT (1979) 8 CTR (AD) 170: (1981) 129 IM 475 (All); (3) P. Lbrahim Hali v. CWT (1998) 98 Taxman 249 (Ker); (4) Steel Containers Ltd. v. CIT (1978) 112 ITR 995 (Cal),- (5) Bishamber Nath Ram Sarup v. CIT (1986) 51 CTR (Del) 34 : (1987) 163 ITR 4 75 (Del); and (6) D.M. Neterwalla v. CIT (1980) 122 1TR 880 (Bom).;