COMMISSIONER OF INCOME TAX Vs. SHIHABUDEEN

JUDGEMENT

(1.) Heard Senior counsel appearing for the appellant and counsel appearing for the respondent - assessee.

(2.) The assessee is a jeweller who claims to have received gold deposits from nine persons for each of the two years, the names and addresses of whom were furnished to the department. The assessments involved are for the years 2000-2001 and 2002-2003. The Assessing Officer conducted detailed enquiry by going to the houses of the depositors and she found that their condition in life is so poor that none of them have the capacity to deposit such huge quantity of gold, which in some cases is above 3 kilograms. After taking evidence from the depositors personally, the Assessing Officer came to the conclusion that assessee's cash credit entries of gold are bogus entries and, therefore, the entire cash credits were added as income under S.68 of the Income Tax Act. When assessee filed appeals before the Commissioner (Appeals), the Commissioner also considered in detail the alleged deposit made by each and every depositor and found that the assessee's claim is bogus. However, in second appeal filed before the Tribunal, the Tribunal came to the conclusion that the depositors are genuine persons because they have issued confirmation letters to the effect that deposits have been made. However, Senior counsel appearing for the appellants referred to Division Bench decision of this Court in Income Tax Officer v. Diza Holdings Pvt. Ltd., 255 ITR 573, and contended that unless the assessee proves the genuineness of the credits which necessarily involves the capacity of the creditors to deposit the amount or gold, addition under S.68 is permissible. We find force in the contention of the Revenue because the Tribunal has in a casual and indifferent manner allowed the appeal without considering the facts found by the Assessing Officer on enquiry and confirmed by the appellate authority. A strange observation is made by the Tribunal that 'it is the customary practice of village people to possess gold by way of ornaments so that it can be used in case of emergency needs'. Further observation of the Tribunal is that it is the practice of people going abroad to deposit their gold ornaments with gold dealers. To our knowledge, nobody entrusts his gold with any dealer without adequate security in the first place. Secondly, it is common knowledge that most of the women in poor household in Kerala wear imitation gold which is the thriving business in the State. Therefore, the observation of the Tribunal which we feel is the basis of their order, is thoroughly unrealistic and unacceptable. When the Assessing Officer and the first appellate authority considered the genuineness of each and every case of deposit alleged to have been received by the appellant, it was the duty of the Tribunal to have considered the evidence in a realistic manner and to make reasonable inference and decide the case reasonably. Even though assessee is a dealer in gold ornaments who has registration under the KGST Act and is filing returns, strangely none of the authorities have chosen to consider whether assessee has accounted purchase of all these gold ornaments and paid purchase tax under S.5A because deposits are admittedly taken as stock in trade and used in business. Therefore, if the transaction is genuine, the assessee would have accounted purchase of old gold paying tax under S.5A and paid sales tax on corresponding sales turnover of new jewellery. This is of course only a corroboration of facts and even if assessee has paid sales tax accounting bogus purchases, nothing stands in the way of the Income Tax Department in making addition under S.68, if justified. As already stated, we find absolutely no material for the Tribunal to reverse the orders of the lower authorities. However, since Tribunal has not considered the findings of the Assessing Officer running into several pages after taking facts and figures and evidence from the household of each and every depositor, we allow the appeals by setting aside the orders of the Tribunal and remand the matter to the Tribunal for rehearing and to decide afresh after giving an opportunity to both sides. We make it clear that the Tribunal should consider claim of cash credit in a genuine and realistic sense without making fantastic assumptions of the kind made in the impugned orders. The Tribunal is directed to dispose of the appeals afresh within a period of three months from date of receipt of copy of this judgment.