RAJIVE TEXTILE MILLS Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Amritsar Bench, Amritsar, in compliance with the order of this High Court, dated April 17, 1973, referred the following questions of law under Section 256 (2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"):

(2.) THE assessee is a registered firm and carries on the business of manufacture and sale of woollen cloth on wholesale basis. For the assessment year 1966-67, relevant to the accounting period ending June 26, 1965, the assessee filed its return of income declaring its income at Rs. 41,962. During the course of assessment proceedings, the ITO found a cash credit of Rs. 10,000 in the name of M/s. Amin Chand Moti Ram, Amritsar, in the account books of the assessee. The amount was taken on loan by the assessee against a hundi dated August 17, 1964, and it was paid with interest on December 24, 1965, through a cheque No. 884043 dated December 24, 1965, on the Amrit Bank Ltd. , Amritsar. The details of the loans were given by the assessee to the ITO in its letter dated December 29, 1966. A certificate from the banker, which was an assessee-firm, was furnished to the ITO. A letter of confirmation from the banker was also produced by the assessee before the ITO. He accepted a cash credit entry and completed the assessment of the assessee on a total income of Rs. 43,560 on February 14, 1967.

(3.) LATER, the ITO reopened the case of the assessee under Section 147 of the Act on the ground that it came to his notice that the banker was a mere name-lender indulging in hawala hundi business, and a notice was served on the assessee under Section 148 on March 22, 1968. In the reassessment proceedings, the ITO directed the assessee to produce the proprietor of the banker but the assessee could not do so, as he was out of India. The ITO did not accept the plea of the assessee and added an amount of Rs. 10,000 to its income as income from undisclosed sources, vide order dated September 10, 1968. The assessee went up in appeal before the AAC who set aside the order of the ITO, vide order dated June 15, 1969, and remanded the case to the ITO with a direction that he should give proper opportunity to the assessee for leading evidence.