COMMISSIONER OF INCOME TAX Vs. LUXMI TRADING CO

JUDGEMENT

(1.) This reference arises out of the income-tax assessment of Luxmi Trading Co. for the assessment year 1963-64, the corresponding accounting period being the Ram Navami Day of S.Y. 2019. At the assessment, the ITO found a number of cash credits standing in the names of various persons as follows : (a) M/s. Arjunlal Bhagwandas--Rs. 6,000 ; (b) M/s. Laxmichand Parmanand--Rs. 40,000 ; (c) Gopaldas Chainrai--Rs. 30,000 ; (d) M/s. Ghanshyamdas Uttamchand--Rs. 35,000 ; and (e) Seth Giridharidas Lila-ram--Rs. 40,000. The ITO also found khata-peta loans of Rs. 20,000 and Rs. 52,000 purported to have been received from M/s. Daluram Gaganmull and Padam Textiles.

(2.) In confirmation of the cash credits, which according to the assessee were originally borrowed on hundis as also the khata-peta loan, confirmation letters of the lenders were produced. The ITO issued summons under Section 131 of the I.T. Act, 1961, to the lenders at the addresses given by the assessee, but they were returned unserved with the remark "not known". The assessee could not furnish the latest whereabouts of the creditors except that one Bidyanand Surekha was produced on behalf of Daluram Gaganmull. Even this person could not produce the books of account or any other evidence in support of the loan. The ITO took note of the fact that Bidyanand Surekha had made a confession before the ITO, Special Circle, Calcutta, that all loan transactions shown as having been effected with the firm, Daluram Gaganmull, were the petitioner's. No money actually passed and the firm had acted as a mere name-lender. The ITO accordingly held that neither the cash credit loans nor the khata-peta loans had been explained by the assessee and that the amounts thereunder represented the concealed income of the assessee during the relevant year from undisclosed sources and, taking into consideration the peak amount of the cash credits, added the amount of Rs. 1,51,000 to the assessee's income. Similarly, the khata-peta loans aggregating Rs. 72,000 were also added back.

(3.) Being aggrieved, the assessee preferred an appeal before the AAC. It was contended in the appeal that the summons having been issued long after the transaction the assessee could not be held responsible for causing the physical appearance of the creditors at the proceedings. It was submitted that the onus of proving the transactions had been discharged by the assessee as the circumstantial evidence adduced showed the genuineness of the loans and the identity of the creditors had also been established. The AAC found as follows :