Rastogi, J. - (1.) M/s. Nanak Chandra Laxman Das, Allahabad, a registered firm, hereinafter referred to as "the assessee" carried on business in the manufacture and sale of bricks. For the assessment year 1963-64, the relevant accounting period being October 26, 1961 to October 31, 1962, the assessee disclosed a net profit of Rs. 27,030 on sales and cartage receipts amounting to Rs. 2,23,399. The ITO did not accept the disclosed profit and, applying a net profit rate of 17 1/2 per cent. on the total receipts, estimated it at Rs. 2,30,000. Ultimately, the Appellate Tribunal sustained the net profit at Rs. 34,500.
(2.) THE ITO further found that during the relevant previous years the assessee had taken some hundi loans. One such creditor was M/s. Jethanand Madan Das, r/o-4/1, Madan Street, Calcutta, and a loan of Rs. 17,000 was shown to have been taken from him on September 5, 1962. On the same date there was a loan of Rs. 25,000 taken from M/s. Amar Mal Mool Chandra, whose residence was the same as that of M/s. Jethan and Madan Das and there was a third loan of Rs. 20,000 taken on the same date from M/s. Govind Das Nichal Das of Calcutta. THE assessee filed a confirmation letter from these creditors but, despite opportunities given, did not produce them before the ITO. Accordingly, the ITO treated the aggregate amount of these loans which came to Rs. 62,000 as the assessee's income from undisclosed sources. Aggrieved, the assessee filed an appeal. The AAC set aside the assessment order and directed the ITO to make it afresh after allowing the assessee an opportunity to cross-examine these parties and also to produce such evidence as it may like. It may be noted that the ITO had relied upon some confessions made by these creditors in which they had disowned the advance of such loans. The assessee was not satisfied with the remand order passed by the AAC and went in second appeal before the Income-tax Appellate Tribunal. The Tribunal, vide its order dated February 26, 1973, called for a remand report from the ITO. The ITO complied with that order and submitted his report. Thereafter, when the appeal came up for hearing before the Tribunal the parties agreed that the Tribunal would not be required to see what more could have been done by the ITO or the assessee. In the Tribunal's own words: "what we have to see is what has been done or what has been brought on record and what is our impression from the material on record". With that end in view the Tribunal proceeded to reappraise the material brought on record. The Appellate Tribunal was also of the opinion that the onus to prove the nature and source of credit was upon the assessee and that the filing of a mere confirmation letter would not amount to a sufficient discharge of the burden placed upon the assessee under Section 69 of the I.T. Act. The assessee has to prove not only the identity of the creditor but has further to prove that the creditor had the capacity to advance the loan. The Tribunal then found that the identity of the creditors could not be disputed because they were all assessees on record and also had made statements before the Department. As for their capacity to advance the loans, the Tribunal accepted the genuineness of the loan taken from M/s. Govind Ram Nichal Das, but in regard to the other two did not accept the genuineness of the same. As for the alleged loan from M/s. Jethanand Madan Das the only evidence on record was the confirmation letter of the party, which, in the opinion of the Tribunal, was not sufficient to discharge the burden which lay on the assessee. Accordingly, the addition of that amount was confirmed.
(3.) AT the instance of the assessee and as directed by this court, the Appellate Tribunal drew up a statement of the case and referred the following question for the opinion of this court: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in rejecting the assessee's explanation for the credit entries standing in favour of M/s. Jethanand Madan Das and, in particular, whether the finding of the Tribunal is vitiated on account of irrelevant consideration and misappreciation of law ?" So far as the question as to whether or not the Tribunal was influenced by any irrelevant consideration is concerned, nothing could be pointed out to us in support of it. As noted above, in first appeal, the AAC had accepted the assessee's contention that proper opportunity had not been given to it to produce its evidence before the ITO. The AAC accordingly remanded the case with certain directions to the ITO to make the assessment afresh. The assessee was even then not satisfied and took up the matter in appeal before the Appellate Tribunal. The Appellate Tribunal set aside the order of the AAC and called for a remand report from the ITO. After the remand report was received the assessee and the Department both agreed before the Tribunal that it was not required to see what more could have been done by the ITO or the assessee. The Tribunal was left to decide the matter on the basis of the material on record. The Tribunal, thereafter, decided the question of the genuineness of this loan on the basis of that material and we agree that a mere confirmation letter from the alleged creditor could not have been treated as sufficient evidence to prove the genuineness of the loan. The Tribunal was not swayed by any irrelevant consideration in arriving at this finding.;