INCOME TAX OFFICER v. SETH ABDUL GAFFAR HAJI SHUKOOR
[Citation -1987-LL-0731-8]

Citation 1987-LL-0731-8
Appellant Name INCOME TAX OFFICER
Respondent Name SETH ABDUL GAFFAR HAJI SHUKOOR
Court ITAT
Relevant Act Income-tax
Date of Order 31/07/1987
Assessment Year 1982-83
Judgment View Judgment
Keyword Tags estimate basis • fresh evidence • bearer cheque • demand draft • cash balance • cash credit
Bot Summary: The suspicious were further strengthened when the Income-tax Officer found that the amounts were repaid to the creditor by bearer cheques which were found to have been encashed by the assessee's own Accountant Mohd. A further probe into the bank account of the creditor in Siddiambar Bazar Branch, Hyderabad showed that the heavy amount paid by the assessee by bearer cheques were never deposited in the Hyderabad Bank account. Since the assessee did not give the agency the creditor had raised the interest payable by the assessee on these amounts from 12 per cent to 18 per cent. With regard to the encashment of the amounts could return by bearer cheque, he accepted the assessee's explanation that it was for convenience of the creditor that the Accountant was asked to encash the cheque. The Income tax Officer found that on the dates on which he had issued the cheques, there was not sufficient funds in the bank account of the creditor in Hyderabad. Monies had been deposited in t h e creditors bank account just a day before the assessee presented the cheques for encashment. The second strange feature is that the return of the amount by the assessee to the creditor. The Income tax Officer had found that the monies allegedly paid to the creditor by the bearer cheques were never found deposited in the creditor's bank account in the city.


This is appeal by department. issue is whether addition of R s . 1,00,000 made by Income-tax Officer as explained cash credits is justified. 2. assessee individual has business in manufacture of agarbathi. Income-tax Officer found cash credits in name of Ibrahim Haji Shakoor of Akola on two dates. Rs. 75,000 was credited on 16-4-1981 and further Rs. 25,000 was credited on 10-5-1981. Income-tax Officer found that both these cheques which bear consecutive numbers were issued on Union Bank of India, Siddiambar Bazar Branch, Hyderabad where creditor had bank account. peculiarity of these cheques were that on dates on which cheques were issued in favour of assessee, there was no sufficient funds. first cheque issued on 16-4-1981 for Rs. 75,000 was at time when cash balance was only Rs. 200. Just before date of presentation of cheque of Rs. 75,000, equal amount was deposited in that account. This enabled assessee to encash that cheque. same was position with second cheque issued on 10-5-1981. bank account showed balance of Rs. 312 Only. Just before encashment of cheque on 28-5-1981 sufficient funds were deposited in that account enabling assessee to draw amounts. 3. Income-tax Officer found these will be suspicious features when there was no cash balance on date of issue of cheques, if cash was introduced on 20-5-1981 and immediately thereafter assessee presents his cheque and draws money. That amount deposited in bank on 20-5-1981 would have been normally sent only by creditor by demand draft. But, contrary to this, Income-tax Officer was told that creditor came to Hyderabad for purpose of crediting this sum of Rs. 25,000. 4. suspicious were further strengthened when Income-tax Officer found that amounts were repaid to creditor by bearer cheques which were found to have been encashed by assessee's own Accountant Mohd. Hussain. 5. With these suspicious regarding genuineness of cash credits, Income-tax Officer visited Akola. He requested creditor to produce books of account. creditor did not produce on plea that books containing entries till 3-9-1982 were lost in fire accident. However, he examined him and statement was taken. In this statement, he had accepted that loans were given to assessee by him. Income-tax Officer also examined income-tax records of creditor at Akola Income-tax Office. He found that balance-sheet as on 31-3-1980 and 31-3-1981 showed heavy liabilities towards one Ratilal & Company, Bombay. financial position as revealed by balance-sheet would not support view that he could advance loan of Rs. 1,00,000. 6. further probe into bank account of creditor in Siddiambar Bazar Branch, Hyderabad showed that heavy amount paid by assessee by bearer cheques were never deposited in Hyderabad Bank account. Further, he found that creditor did not maintain any proper books of accounts at all. What he maintained were in nature of memorandum. There were no dates on any of those entries. cash position was not ascertained daily. He further found that if assessee's story were to be accepted then every time assessee drew money to return loan in cash, creditor must have been present in Hyderabad. books did not reflect any such travelling expenses of creditor from Akola to Hyderabad. He further found that creditor did not have any business dealings at Hyderabad and in course of some years, there was only one deal in December 2980. On these grounds, he held that creditor was not genuine and added amount as disclosed income. 7. On appeal, Commissioner deleted addition. He pointed out that assessee had established indentity of creditor and creditor had also accepted that he had advanced these loans. Under these circumstances, according to Commissioner burden shifted on to department. This burden on Dept. has not been discharged by sufficient and adequate materials. He found that Income-tax Officer has approached on suspicious and conjectures. He pointed out that in assessment years also, there had been such credits in assessee's books. first amount of Rs. 1 lac was sent through demand draft from Bombay by Company by name Ratanlal & Company. He also accepted assessee's submission that amount was Company. He also accepted assessee's submission that amount was received initially as deposit for agency of agarbthies manufactured by assessee. Since assessee did not give agency creditor had raised interest payable by assessee on these amounts from 12 per cent to 18 per cent. With regard to encashment of amounts could return by bearer cheque, he accepted assessee's explanation that it was for convenience of creditor that Accountant was asked to encash cheque. He found fault with Income-tax Officer for not having examined Accountant Hussain for disproving this claim. In any event, according to Commissioner, Accountant had not stated that impugned amounts were handed over to assessee. fact that transactions could not be verified because creditor's books were lost cannot be ground for presuming that amounts were not genuine. He further held that there was no evidence at all to show that amount credited to creditor's bank account during intervening period represented assessee's own funds and not that of creditor. He dismissed finding of Income-tax Officer that creditor was heavily inducted to be of no consequence. He, therefore, deleted addition. 8. department is on appeal. Shri Santhanam for department submitted that Income-tax Officer had gathered sufficient evidence to show that cash credits were not genuine. He submitted that it is universally accepted that burden is on assessee to prove that cash credit is genuine. It is not sufficient if assessee had established only indentity of t h e creditor. He must also establish that loan given by creditor was genuine. For this purpose, he relied on decision of Calcutta High Court in case of Shankar Industries v. CIT [1978] 114 ITR 689. He also submitted that evidence tendered by assessee to prove genuineness must be s u c h it should be reasonable and acceptable. Citing Supreme Court's decision in case of CIT v. Durga Prasad More [1971] 82 ITR 540, he submitted that Courts should not ignore facts of life and no superficial view of onus should be taken. Courts and Tribunals have to judge evidence before them by applying test of human probabilities, If materials gathered by Income-tax Officer is viewed on basis of human probabilities, he submitted there is sufficient evidence to support findings of Income- tax Officer. 9. Mr. Syed Jameeluddin for assessee pointed out that there were similar cash credits for asst. year 1981-82 which were accepted by department as genuine. He reiterated Commissioner's findings that creditor has been identified and he had agreed that he had advanced amounts. He further submitted that creditor is income-tax assessee. 10. We have considered submissions. Income-tax Officer making n enquiry into genuineness of cash credits, would expect from assess full evidence to show that cash credits are genuine. What would be evidence led by assessee to prove that loan is genuine would depend upon facts and circumstances of such loan. But merely because credited has been identified it may not be enough to show that onus placed on assessee is discharged. What is further required is sufficient evidence to show that entry found in books of accounts of assessee is genuine. Let us analyse evidence. No doubt, this was case where creditor had accepted that he had granted loans. But, Income tax Officer found that on dates on which he had issued cheques, there was not sufficient funds in bank account of creditor in Hyderabad. Monies had been deposited in t h e creditors bank account just day before assessee presented cheques for encashment. During relevant period, creditor was in Akola. Yet cash had been deposited in his accounts. question then is who deposited this cash in creditor's bank account. It was stated that creditor came to Hyderabad just for purpose of crediting this amount. It would be quite natural in case of creditor who has business connections in Hyderabad, requiring his presence here very often. But Income tax Officer has established that creditor did not have connections in Hyderabad. There was only one transaction in December, 1980. This had not been controverted. That being so, it will be very strange that, creditor comes very obligingly to Hyderabad just to credit in his own account, thus enabling assessee to present his cheque. Now this is strange feature. It has to be taken not of in evaluating genuineness of credits. 11. second strange feature is that return of amount by assessee to creditor. These amounts were returned by bearer cheques. It has been established that, these amounts were returned by bearer cheques. It h s been established that, these bearer cheques were encashed by Accountant of assessee. It has not been denied that, amount was paid to Mohd. Hussain, assessee's employee. Now this is clear evidence to show that monies had come back to assessee's employee. Presumably, it has come back to assessee. Even if it cannot be presumed that money had come back to assessee, there is no evidence to show that monies were given to creditor. If monies were given to creditor, assessee has to lead fresh evidence prove it. On this point, Commissioner (Appeals) has misdirected himself regarding onus of proof. He had stated that Income- tax Officer had not examined assessee's Accountant for disproving claim that creditor had collected amounts. It is not for Income tax Officer to prove anything. As we see it, evidence of Bank Manager had proved that monies were given to assessee's employee. On face of this evidence, it is for assessee to prove that monies were handed over to creditor. Because certain strange features are found in assessee's case, it is necessary that proof must be reasonable and it should show degree of probability that money had been given to creditor. It is in this connection that further evidence brought by Income tax Officer is relevant. Income tax Officer had found that monies allegedly paid to creditor by bearer cheques were never found deposited in creditor's bank account in city. This is certainly piece of evidence to show that creditor may not have received amounts. We do not think Commissioner is correct in holding that this piece of evidence is irrelevant. 12. In this connection, we may also refer to statement of creditor that he has received amounts. No doubt, such statement seem to have been made but Income tax Officer is certainly entitled to satisfy himself that, funds had really reached him. Since he is creditor who is businessman, it will be natural to find such large amounts reflected in books of account maintained by him. Income tax Officer found that, none of these amounts are properly reflected in books maintained by creditor. There are some entries made in memorandum type of book. This is what Income tax Officer observed regarding books of creditor. "When Income tax Officer went to Akola alleged creditor produced books of account for period subsequent to 03.09.1982 and they were found to be in nature of Memorandum where no entries are made day after day and no cash balance was struck at all. entries were made in book produced on monthly basis without giving dates. But alleged creditor has furnished copy of my assessee's A/c in his books with covering letter dated 31.01.1984 giving different dates for credits and debits when books produced never before dates. When alleged creditor was questioned he stated that, he has given dates on estimate basis which is not acceptable." above evidence has some relevancy in determining genuineness of loan. 13. We agree with Commissioner on point regarding destruction of books of account of creditor up to 03.09.1982. No adverse inference can be drawn from this one piece of evidence. However, when question is whether two entries in April and May, 1981, in books of account of assessee are genuine all attendant circumstances must be taken together. Many of these evidence which are neutral and colourless by themselves would take in colour when considered along with other evidence. In appreciating evidence therefore we are to keep in our minds cumulative effect of all these evidences. Here is case where cheques are said to be issued by creditor when there was no money in his account, monies are deposited in that account just day prior to withdrawal by assessee of amount, that assessee repays this amount by bearer cheques which are encashed by his own employee, further creditor bank account do not reflect receipt of such amounts by creditor and lastly memorandum type of accounts maintained b y him do not allow any verification whether such amounts were received by him. When all these considered together one get feeling that loan taken i s not genuine. As Supreme Court has pointed out in Durga Prasad Mori's case [supra]" Science has not yet invented any instrument to test reliability of evidence placed before High Court or Tribunal. Therefore, Courts and Tribunals have to judge evidence before them by applying test of human probabilities. Human minds may differ as to reliability of piece of evidence. " We have to apply this test of human probabilities, it will give us finding that loans are not genuine. 14. Commissioner had referred to similar credit in prior ass. year which was accepted by department as genuine. We find that in that case Rs. 1 lac was sent through Demand Draft from Bombay by one Ratan Lal Company at request of creditor. Thus, facts were entirely different. In any case, merely because in one year credit was accepted does not operate against department in making further enquiries in this next year. We are satisfied that order made by Income tax Officer was reasonable on facts and in circumstances of case. His order is restored and departmental appeal is allowed. *** INCOME TAX OFFICER v. SETH ABDUL GAFFAR HAJI SHUKOOR
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