N.N. Mathur , J. - (1.) THIS appeal under Section 260A of the Income-tax Act, 1961, is directed against the order dated February 28, 2000, passed by the Income-tax Appellate Tribunal, Jodhpur Bench, Jodhpur, in Income-tax Appeal No. 865/JP of 1993 for the assessment year 1988-89, whereby the Tribunal partly dismissed the appeal of the appellant-assessee and remitted the matter to the assessing authority to decide afresh the point with respect to an addition of Rs. 50,000 in accordance with law.
(2.) THIS court by order dated April 27, 2001, admitted the appeal for hearing after framing the following substantial question of law : "Whether, in the facts and circumstances of the case, the Tribunal was justified in not quashing but merely setting aside the addition made on account of alleged unexplained cash credit of Rs. 50,000 in the name of Manju Gugalia, whose affidavit has been filed and she was the existing assessee, and remitted a case for making fresh enquiry but not considering the fact that the appellant has discharged his onus to explain the cash credit standing in his books of account, when as per its own finding on the very same material in the case of the addition made on account of cash credit of Rs. 16,000 standing in the name of Shri Raj Kumar in the same order were quashed ?" Briefly stated the facts of the case are that the appellant, Rajshree Synthetics, is a private limited company. The appellant-assessee filed the return for the assessment year 1988-89 declaring total loss of Rs. 4,97, 140. The second respondent, viz., the Assistant Commissioner of Income-tax, Circle Udaipur, under Section 143(3) called for the details with respect to certain transactions. The assessee submitted the requisite details. The books of account produced were examined on test check basis. The details filed were also examined on test check. While verifying the genuineness of the investment as share capital, the following investments were not found as genuine : JUDGEMENT_331_ITR256_2002Html1.htm The assessing authority also noticed that the assessee-company had obtained an unsecured loan of Rs. 50,000 from one Smt. Manju Gugalia. The transaction was not found to be genuine. Therefore, a sum of Rs. 50,000 as income of the assessee, which was shown as loan in the name of Mst. Manju Gugalia from undisclosed sources, was added to the total income of the assessee. Accordingly, the assessing authority disallowed depreciation of Rs. 10,400 being erection charges/ payment of salary to Smt. Sushila Jain, director of the company, amounting to Rs. 7,000, addition of Rs. 16,000 for loom permit, Rs, 1,69,000 as unexplained investment, Rs. 50,000 as unexplained loan and Rs, 2,886 out of travelling expenses. Accordingly, the Assistant Commissioner of Income-tax, Circle Udaipur, by order dated March 31, 1989, directed to issue a demand notice for a sum of Rs. 2,39/096. The appellant preferred an appeal before the Commissioner of Income-tax (Appeals), Ajmer. The said appeal was partly allowed with a relief of Rs. 1,69,000. Aggrieved by the order of the Commissioner (Appeals), the assessee as well as the Revenue preferred appeals to the Income-tax Appellate Tribunal. The Tribunal by the impugned order dated February 28, 2000, dismissed the appeal of the Revenue. However, the appeal filed by the appellant-assessee was partly allowed and the matter was remitted to the assessing authority with respect to addition of Rs. 50,000. It would be relevant to refer to some of the facts with respect to the addition of Rs. 50,000. One Smt. Manju Gugalia through a cheque No. 851290 dated May 20, 1987, deposited a sum of Rs. 50,000 with the appellant-company. The said amount was credited in the books of the appellant. On the same day, the appellant paid back Rs. 50,000 to Smt. Manju Gugalia through a cheque No. 310761, dated August 20, 1987, drawn on Punjab National Bank, Bhilwara. In the course of the assessment proceedings for the assessment year 1988-89 under Section 143(3) of the Income-tax Act, the second respondent called for the details in respect of the aforesaid transaction. The appellant filed an affidavit dated March 6, 1989, of Smt. Manju Gugalia confirming that she deposited Rs. 50,000 with the appellant and the same was repaid to her. The say of the appellant is that in the affidavit, her whereabouts) i.e., her address, age, husband's name, etc., were mentioned. It was also stated that she was an income-tax payer and was assessed in Bhilwara itself. Her income-tax file number was also mentioned in the affidavit. The assessing authority asked the appellant to produce Smt. Manju Gugalia. The appellant failed to produce her. A letter of Smt. Manju Gugalia dated March 25, 1989, was produced wherein she stated that because of ill health, it was not possible for her to appear before the assessing authority. She also stated that she had advanced a loan of Rs. 50,000 to the appellant-company at the interest of 16.2 per cent, per annum, which was repaid on the same day. The assessing authority issued a notice to the said lady under Section 131 of the Act but she did not appear. The assessing authority observed that unless the said lady appears, it was not possible to cross-examine her to know the truth. It was also found that in her letter, she had not mentioned the source from which the said amount was advanced as loan to the assessee-company. In view of this, the assessing authority held that Smt. Manju Gugalia was not in a capacity to deposit such a huge amount and, as such, treated a sum of Rs. 50,000 as income of the asses-see, which has been shown as a loan in the name of the lady from the undisclosed sources and added the said sum to the total income of the assessee. The finding of the assessing authority has been upheld by the Commissioner of Income-tax (Appeals). However, the Tribunal was of the view that the matter could go back to the assessing authority for examining Smt. Manju Gugalia or to verify the relevant facts from the assessment record of the said lady, whose file exists with the Income-tax Officer, Ward-II, Bhilwara. Accordingly, the Tribunal set aside the order of the Commissioner of Income-tax (Appeals) and the order of the assessing authority in relation to the addition of Rs. 50,000 and restored the matter back to the Assessing Officer. The Tribunal directed the appellant-assessee to produce the said depositor before the assessing Authority for cross-examination. It was further directed that in case, the assessee submits convincing reasons showing inability to produce the depositor, the Assessing Officer may issue summons under Section 131 and record her statement. The Tribunal also gave the liberty in the alternative to the assessing authority to get the necessary facts of deposit of Rs. 50,000 made by her verified from the assessing authority of Smt. Manju Gugalia. It is contended by Mr. Gajendra Maheshwari that the assessee had not only given the address of Smt. Manju Gugalia but also the details of her income-tax return file. There is also the affidavit of the creditor, viz., Smt. Manju Gugalia. In such circumstances, the Tribunal instead of remitting the matter to the assessing authority, ought to have set aside the addition of Rs. 50,000. It is also submitted that on the same material, the addition made on account of cash credit of Rs. 16,000 standing in the name of Shri Rajkumar was quashed by the Tribunal. Thus, according to learned counsel, in the same order, the Tribunal has adopted two different yardsticks. On the other hand, it is submitted by Mr. L. M. Lodha learned counsel for the Revenue, that the burden of proving the creditworthiness is on the assessee. In the instant case, the creditworthiness of the depositor has not been proved by the assessee. The confirmation by filing an affidavit is not enough to arrive at a conclusion that the assessee had discharged the burden of proving the cash credit.
(3.) SECTION 68 of the Income-tax Act, which deals with the cash credit, reads as follows : "68. Cash credits.--Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." Section 68 gives a statutory recognition to the principle that the cash credits which are not satisfactorily explained, may be assessed as income. This provision empowers the Assessing Officer to make enquiry specifically to be satisfied regarding the cash credit. If he is satisfied that these entries are not genuine, he has every right to add its amounts as income from other sources. The satisfaction of the Assessing Officer is the basis for invocation of powers under Section 68 and the satisfaction must be derived from the relevant factors on the basis of proper enquiry. It is well settled that the assessee is required to prove prima facie the transactions, which result in cash credits in his books of account. Such proof includes the proof of identity of his creditor, the capacity of such creditor to advance the money and, lastly, the genuineness of the transaction. These things must be proved prima facie by the assessee and only after the assessee has adduced evidence to establish prima facie the aforesaid onus shifts on the Department. Mere filing of confirmatory letters do not discharge the onus that lies on the assessee. Similarly, mere furnishing of particulars is not enough. In Sreelekha Banerjee v. CIT [1963] 49 ITR (SC) 112, it is held that when a cash credit entry appears in the assessee's books of account in an accounting year, the assessee has a legal obligation to explain the nature and source of such credit. It is further held in Kale Khan Mohammad Hanif v. CIT [1963] 50 ITR 1 (SC), that if the assessee offers an explanation about the cash credit, he has to prove his explanation and if the assessee fails to tender the evidence or shirks an enquiry, then the assessing authority is justified in rejecting the explanation and holding that the income is from undisclosed source. Since the Tribunal has remitted the matter to the assessee, we refrain from making any further observations on the controversy, as it may prejudice the case of either of the parties. So far as the addition made on account of the cash credit of Rs. 16,000 standing in the name of Raj Kumar is concerned, it is evident that said Shri Raj Kumar, the managing director, had purchased looms from Modern Suiting Ltd., for the assessment year 1986-87. The payment of Rs. 16,000 for the purchase was made by him from his own funds and the same was duly recorded in his books of account. The statement of Shri Raj Kumar was recorded in which he accepted all the facts. The loan of Rs. 16,000 was paid to Raj Kumar outside his disclosed capital. Thus, the advance of Rs. 16,000 to Shri Raj Kumar is clearly distinguishable. Thus, in our opinion, in the facts and circumstances of the case, the Tribunal was justified in not quashing but only setting aside the addition on account of the unexplained alleged cash credit of Rs. 50,000 in the name of Manju Gugalia and remitting the matter for fresh enquiry. The order of the Tribunal calls for no interference. ;