Delhi High Court

Dr. Rajesh Sardana vs Ito on 29 April, 2003

Equivalent citations: (2004) 86 TTJ Del 116

ORDER

M.V. Nayar, A.M.:

The assessed has come in appeal against the order of Commissioner (Appeals)-IV, New Delhi, in appeal No. 144/1994-95, dt, 19-7-1996. The only ground of appeal is as given below:

"The learned Commissioner (Appeals) has grossly erred in confirming the additions for a sum of Rs. 1,00,000 (Rs. 45,000 from Dr. T.R. Talwar and Rs. 55,000 from Mrs. Vimal Talwar) as unexplained cash credit."

2. The only grievance of the assessed is regarding addition of Rs, 1,00,000 treating the same as income from undisclosed sources. The sum comprises of the following amounts :

(i) Rs. 30,000 through cheque from T.R. Talwar on 27-1-1991,

(ii) Rs. 16,000 through cheque from T.R. Talwar on 5-3-1991,

(iii) Rs. 40,000 through cheque from Mrs. Vimal Talwar on 27-1-1991,

(iv) Rs. 15,000 through cheque from Mrs. Vimal Talwar on 5-3-1991.

3. The assessing officer observed that during the course of hearing the assessed did not file any confirmation from Mr. T.R. Talwar and Mrs. Vimal Talwar, but filed copy of Bank account. A perusal of the same revealed that cash of Rs. 40,000 was deposited on 26-1-1991, with Punjab National Bank and Rs. 26,000 was deposited on 25-1-1991, in CitiBank and then the a'ssessee received various cheques which have been deposited in the Bank account of Shri T.R. Talwar as under:

4. On 29-1-1991, cheque No. 178967 for Rs. 20,000 debited in Punjab National Bank, 14/19, Shakti Nagar, Delhi.

5. On 29-1-1991, cheque No. 4513 for Rs. 10,000 debited in CitiBank account.

6. On 6-3-1991, cheque No. 178969 for Rs. 15,000 debited in PNB account.

7. In the case of Mrs. Vimal Talwar also it was revealed by the assessing officer from the perusal of the Bank pass-book that Rs. 45,000 was deposited in cash on 24-1-1991 and then two cheques No. 563 for Rs. 20,000 and cheque No. 565 for Rs. 15,000 was debited in Bank account.

Since in the opinion of the assessing officer the assessed could not prove the creditworthiness of the above-mentioned persons, he accordingly added Rs. 1,00,000 as income of the assessed from undisclosed sources.

8. Commissioner (Appeals) furnished the written submissions of the assessed to the assessing officer for his comments vide letter dated 6-3-1996. The assessing officer in his report dated 16-5- 1996, regarding loan of Rs. 70,000 in the name of Shri O.P. Arora observed as under :

"Shri O.P. Arora was summoned ~nder section 131 of the Income Tax Act in order to verify his credit-worthiness and genuineness of transaction regarding loan of Rs. 70,000. Shri O.P. Arora attended my office on 19-5- 1996, in response to summon under section 131 of Income Tax Act, 1961. His statement was recorded on solemn oath and affirmation. In his statement Shri O.P. Arora has denied the fact of giving loan of Rs. 70,000 to Dr. Rajesh Sardana, but he has admitted that his company, namely, Modern Castwell (P) Ltd., 42-S, Site IV, Industrial Area, Sahibabad, Ghaziabad, in which he is a director had given loan of Rs. 70,000 vide Bank draft No, 278381, dated 4-2-1991, to Dilshad Nursing Home. In this connection Shri O.P. Arora has submitted a copy of Bank account No. 1663 in respect of M/s Modern Castwell (P) Ltd. which shows that a sum of Rs. 70,175 was debited on 4-2-1991, for issue of draft.

Regarding the other amounts given by Dr. T.R. Talwar and Mrs. Vimal Talwar the assessing officer was still not convinced of assessed's case."

9. Commissioner (Appeals) confirmed the additions in respect of Dr. T.R. Talwar and Mrs. Vimal Talwar against which the assessed is now in appeal before us.

10. Shri S.K. Jain, CA appeared for the assessed. He stated that the assessed should have been given an opportunity to produce the persons wherever possible to prove the genuineness of the loan taken. According to him the assessing officer chose to completely ignore the rules of natural justice and came to an unjustified conclusion which was bad in law. He also submitted that the Commissioner (Appeals) had ignored the explanatory note written by Shri T.R. Talwar who was not well (60 per cent handicapped) and from whom a sum of Rs. 45,000 was taken as loan from various cheques and also Rs. 55,000 from his wife Mrs. Vimal Talwar (who died on 29-4- 1993) submitted to him on 6-2-1995. In his explanatory note Dr. T.R. Talwar had stated that "I had retired as A. Director, Ministry of Planning in November, 1989 and had got pensionary benefits including provident fund to the tune of over Rs. 2.01 lacs. Also, my wife took voluntary retirement in 1990-91 because she got a deadly disease-TTP for which there was no treatment in the world. She had contributory provident fund for over 30 years in Virmani Model School, Roop Nagar. She had got service benefits around Rs. 40,000 and like amount as per the life-long saving. Unfortunately, my wife died of this disease after a protracted illness spanning seven years in April, 1993. To add to the agony I got paralytic attack in March, 1990 and have been handicapped since then. I have my pension account No. 36902 in PNB, Parliament Street, joint account with my wife in IOB No. 20238 and unfixed account in CitiBank No. 79657. 1 and my wife enjoyed an overdraft limit of 75 per cent of our deposits which was of the order of Rs. 1.2 lacs. I had to apportion my savings in such a way that I have immediately cashable money without touching my FD because of our SOS medical requirements. My other life savings used to be in the form of NSC, NSS, UTI, etc. My joint recollections regarding the payments made to Dr. Rajesh Sardana for repayment of his loans are as follows :

1. I had sold my fiat car (DLV 8644, 1966 model to Wing Commander G.S. Grover, r/o EB 44, Maya Enclave, Hari Nagar, New Delhi, for Rs. 30,000 only in 1990 and,

2. I had NSC and NSS worth Rs. 70,000 as my lifelong savings which I was to purchase as income-tax savings device since 1983 and they use to mature yearly November, 1990 onwards. I received this money through my authorized agent Mr. V.K. Chandha (Ph. No. 232581) whom I had given authority to collect money in cash from GPO, Kashmere Gate, A/c No. 1103708, since my requirements were unexpected and urgent due to the diseases of both of us. Similarly, for some of the NSC not due for payment in the near future, I had to resort to taking loan from Urban Co-operative Bank, Jama Masjid, against such NSCs to maximize cash in hand for exigencies.

After ensuring enough cash in hand readily usable, I used to deposit part of such money in my saving fund account. Also I offered help to my son-in-law Dr. Rajesh Sardana as interest-free loan."

11. Regarding the loan from Mrs. Vimal Talwar, mother-in-law, it was submitted as under :

"Mrs. Vimal Talwar died on 29-4- 1993. Photocopy of the death certificate was duly submitted. It was submitted that Mrs. Vimal Talwar opted for voluntary retirement in late 1990 and got substantial sum on her retirement. Further, she retired as a Principal of the school. Her copy of Bank account was also submitted. Since she is no more, it is impossible to have any further details of this loan which she could give personally had she been alive.

Ignoring all these documents and facts the learned Commissioner (Appeals) has confirmed the action of Income Tax Officer. Income Tax Officer has arbitrarily and unjustifiably tried to link the deposit of cash by late Mrs. Vimal Talwar with the amount of loan given to the assessed. The appellant duly discharged his onus of proving the genuineness of loan and credit-worthiness of the lenders, whereas there was no material available with the learned Income Tax Officer to come o the conclusion that the stated amount be added as assessed's income from undisclosed sources."

12. In support of his contention the learned authorised representative relied on the following rulings

1. Paiimsetti Seetharainamma v. CIT (1965) 57 ITR 532 (SC)

2. (1951) 19 ITR 723 (sic)

3. Saraogi Credit Corporation v. CIT 1975 CTR (Pat) 1 : (1976) 103 ITR 344 (Pat)

4. Sun dannal Bagaria v. CIT (1979) 10 CTR (Pa t) 349

5. Northern Bengal Jute Trading Co. Ltd. v. CIT (1968) 70 M 407 (Cal) and other cases.

13. Smt. Pratima Kaushik, Sr. departmental Representative, relied on the orders of assessing officer and Commissioner (Appeals). According to her the assessed had failed to establish the genuineness of the loan and the addition made by the assessing officer and confirmed by the Commissioner (Appeals) should continue.

14. We have examined the rival submissions. The payments were received by the assessed from the mother-in-law and father-in-law by cheques. His fatherin-law Shri T.R. Talwar was a retired Joint Director who retired from Ministry of Planning in November, 1989. His mother-in-law Mrs. Vimal Talwar was a teacher who retired as a Principal of the school where she served over 30 years. It is clear that the identity of the third parties and their capabilities were not in doubt. The loans were also given by cheques to the assessed, In these circumstances we feel that the initial burden which was on the assessed has been discharged and it is not necessary for the assessed to explain further how or in what circumstances the third party obtained the money and or why he or she made a deposit of the same with the assessed. The burden shifts on the department to show why the assessed's case cannot be accepted and why it must be held that the entry though purporting to be in the name of the third party still represents the income of the assessed from suppressed sources in order to arrive at such a conclusion. However, the department has to be in possession of sufficient and adequate material. We are of the view that in holding the particular receipt as income from undisclosed sources, the fate of the assessed cannot be decided by the revenue on the basis of surmises, suspicion or probabilities. A6cordingly, we are of the view that the explanation offered by the assessed is satisfactory and in order, and cannot be rejected. Accordingly, the order of CIT is set aside and the addition of Rs. 1 lakh made to the income of the assessed (Rs. 45,000 from Mr. T.R. Talwar and Rs. 55,000 from Mrs. Vimal Talwar) is deleted.

15. In the result, the appeal of the assessed is allowed.