COMMISSIONER OF INCOME-TAX Vs. RAM NARAIN GOEL

JUDGEMENT

(1.) THIS is a petition under Section 256 (2) of the Income-tax Act, 1961 (for short, "the Act"), by the Commissioner of Income-tax, seeking a direction to the Income-tax Appellate Tribunal, New Delhi (for short, "the Tribunal"), to refer the following question of law to this High Court for opinion : "whether, on the facts and in the circumstances of the case, the learned Tribunal is right in law in deleting the addition of Rs. 2,66,360 on account of cash credits by holding that the assessee was not supposed to prove the source of loans because that could not be said to be within his special or exclusive knowledge ?

(2.) FROM the facts emerging from the order of the Revenue authorities, as well as the order of the Tribunal, it appears that the cash credit entry, recorded in the books of the assessee in the name of Ishwar Chand, was disbelieved on the suspicion that the creditor, Shri Ishwar Chand, being the real brother of the assessee's wife and also being an employee of the assessee, did not have the means to advance any loan to the assessee. The Assessing Officer took the view that the creditor, Ishwar Chand, was not doing any business and returns had been filed by him under the Act for the earlier three years so as to accommodate and help the assessee. The Tribunal, however, noticed that the confirmation letter had been duly filed and Ishwar Chand was also subsequently examined by the Commissioner of Income-tax during the appellate proceedings wherein Ishwar Chand confirmed the loan to the assessee. A sum of Rs. 37,000 had been advanced by Ishwar Chand to the assessee on March 14, 1986, and the second amount of Rs. 30,000 was given on March 19, 1986. Both the payments were made by account payee cheques. The money was returned by the assessee to Ishwar Chand with interest amounting to Rs. 2,399 on July 22, 1986, by account payee cheque. A copy of the bank account of Ishwar Chand was also filed. On these facts, the Tribunal rejected the finding of the Assessing Officer as well as the Commissioner of Income-tax that the credit entry was not genuine.

(3.) THE fourth credit entry, recorded in the books of assessee in the name of Rajinder Prashad, was also treated by the Tribunal as a genuine entry inasmuch as the money had been advanced by Rajinder Prashad by account payee cheque and a confirmation letter had been filed. He was also an assessee and had been duly assessed for the earlier three years. He was also examined by the Commissioner of Income-tax during the appellate proceedings and therein he had admitted to have advanced money to the assessee. The loan was returned by the assessee to Rajinder Prashad with interest by account payee cheque on August 13, 1986. A copy of the bank account had also been filed. On these facts, the Tribunal took the view that it was only a case of suspicion that the credit entry had been treated to be bogus and fictitious whereas the facts brought on record did not justify the suspicion.