JUDGMENT Rajes Kumar, J.
1. The Tribunal has referred the following question of law under Section 256(2) of the IT Act, 1961 (hereinafter referred to as "Act"), for the asst. yr. 1977-78 for opinion to this Court :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in rejecting the affidavits and oral evidence adduced on behalf of the assessee ?"
2. The brief facts of the case are as follows :
The applicant/assessee (hereinafter referred to as 'assessee') is an HUF and was engaged in the Sarrafa business and also had income from property and agriculture. The IT Department conducted a search at the business and residential premises on 2nd/3rd Sept., 1976.
In the search conducted by the Department, considerable ornaments and bullion were found both at the shop as well as at the residence, some of which were also seized. Besides the above, the officers also seized a cash book in the search. The CIT(A) referred to it as a Kachchi cash book. The reading by the Tribunal of the cash book did not lead to any such conclusion. According to the Tribunal, it was a normal cash book, except with the interpolations, which will be discussed a little later.
In the course of assessment proceedings, the ITO found several abnormal features in the maintenance of the books of account as well as in the activities of the assessee. He found that the assessee had disclosed a profit of Rs. 19,714 on the sale of silver ornaments of Rs. 35,211. In the immediate preceding year, the profit shown was Rs. 15,473 on the sales of Rs. 21,043. He, however, found that the assessee had made purchases of silver ornaments of Rs. 1,92,066 in the year under appeal as against the purchases of only Rs. 19,231 in the earlier year. To him, this appeared to be abnormal, particularly when the sales in the year amounted to only Rs. 35,211. The closing stock disclosed in .the year under appeal of similar ornaments amounted to Rs. 2,11,342 as against the closing stock of only Rs. 34,770 of the same commodity in the earlier year. This also made a difference in the balance sheets of the two years. While the balance sheet of the year under appeal totalled Rs. 2,47,153, that of the earlier year showed the total of only Rs. 78,954. The increase was reflected in the creditors, which increased from Rs. 20,110 in the preceding year to Rs. 1,91,503 in the year under appeal.
The above abnormalities led the ITO to examine the position a little deeper. It was submitted before him that the entire stock found at the time of the search either at the business premises or at the residence were duly reflected in the accounts. It was pointed out to him that in the year under appeal, the assessee had made heavy purchases of silver ornaments for which the finances had come by way of loans from several agriculturists, as also from the agricultural income of the assessee itself.
The examination by the ITO of the assessee's cash book seized in the search showed various credits aggregating Rs. 90,000 which together with the agricultural income of Rs. 5,000 credited in the cash book on 19th March, 1976 came to Rs. 95,000. The details of these credits are given in para 27 of the assessment order, which need not be repeated here. All these amounts were claimed to have been invested in the purchase of the silver ornaments on the very day they were received by the assessee. It was claimed before the ITO that besides purchase of silver ornaments amounting to Rs. 95,000, ornaments of the value of Rs. 43,000 had been taken on approval basis from M/s Genda Lal & Sons, Chowk, Lucknow, and M/s Nand Kishore Moti Lal Sarraf, Chowk Bazar, Mathura. It was also submitted before him that the purchases of the ornaments as well as their receipts on approval basis had also been duly entered in the assessee's cash book.
At this stage, the ITO examined the assessee's cash book found in the search. He examined the various entries and noticed that they had also been interpolated after the cash book had been written in the normal course. In support of the assessee's explanation that it had borrowed funds to the extent of Rs. 90,000 from the various parties, affidavits of the concerned parties had also been produced, some of these parties were also examined by the ITO. They had invariably, except some, stated that they held certain agricultural land and they had deposited their savings with, the assessee. In the case of Smt. Lalmani Devi, it was submitted, which was supported by her affidavit, that she had sold land from 1970 to 1973, and the sale proceeds had been deposited with the assessee in two credits of Rs. 8,000 and Rs. 5,000 on 13th Feb., 1976 and 14th Feb., 1976. It appears she was a Pardanashin lady. Request was made for her examination on commission, which was probably not accepted by the ITO. The ITO did not believe the story of the assessee that it had borrowed Rs. 90,000. According to him, none of the parties was in a position to have any amount to make deposits with the assessee. In the case of Smt. Lalmani Devi, according to the ITO, it was not possible to believe that she could make deposits in 1976 out of the sale proceeds of land made from 1970 to 1971. He also found that the affidavits given by the parties were stereotyped giving somewhat similar narrations. Some of them, of course in their examinations by the ITO, supported the contents in their affidavits but they were not believed by the ITO.
The ITO also examined the cash book with regard to the purchases of silver ornaments amounting to Rs. 95,000. He found that the credits shown as receipts from the creditors were squared up by showing the purchase of silver and the labour charges relating to its transport, which did not effect the final totals. His finding, however, was that all these entries had been interpolated in the cash book either after it was seized in the search or before that, in order to create funds for the huge unaccounted stocks found in the search. He also found that there were no details of purchases of any silver, which also went to show that they had actually not been purchased on the dates mentioned in the cash book. He also disbelieved the assessee's case that it had taken any such ornaments for approval from either M/s Genda Lal & Sons of Lucknow or M/s Nand Kishore Moti Lal Sarraf of Mathura. He finally held that the entries in the cash book relating to borrowings amounting to Rs. 95,000 and Rs. 1,30,000 relating to the purchase of silver or silver ornaments were bogus entries, not backed by any real transactions. His next consequential finding was that the assessee had failed to explain the source of silver ornaments found in the search. He valued such ornaments at Rs. 1,13,914 and included it as the assessee's income from undisclosed sources.
The assessee appealed to the CIT(A). The CIT(A) accepted the assessee's explanation. According to him, the cash book found in the search, which could be treated as Kachchi cash book, had been maintained in the normal course of business and that there was nothing unusual about the various entries either relating to the credits or relating to the purchase of silver ornaments. He, of course, admitted that these entries were in different ink but observed that they had been made by the responsible persons, while the other entries were made by the Munim. He also held that the assessee had fully explained the genuineness of the credits by proving the identity of the lenders and their capacity to lend the amounts. He also observed that there was nothing to doubt the purchase of silver ornaments by the assessee. Similarly, he also accepted the genuineness of the ornaments taken on approval from the two, Lucknow and Mathura, parties. He finally deleted the addition of Rs. 1,13,914.
The Department came in appeal before the Tribunal challenging the above deletion. The Tribunal dealt with the matter in paras 24 to 27 of its order in the following words :
"24. We have carefully considered the submissions placed before us. Sec. 132(4A) of IT Act, 1961, no doubt creates a presumption that the contents of the books of account and other documents found in the search are true, but that presumption is rebuttable. In our opinion, it has been rebutted by the Department in the present case. We have ourselves examined the cash book found in the search very carefully and closely. We are clearly of the opinion that the entries relating to the borrowings as well as for the purchases of the silver and for ornaments have been subsequently interpolated in the cash book at the space left at the time of its original writing. The entries have been somehow or other filled in a crude manner in the left space had different handwriting. On the one hand, the various amounts, as mentioned in para 27 of the assessment order, have been shown on the credit side of the cash book, on the other hand, the exact amount has been shown as spent in the purchase of silver ornaments and as labour charges for transporting them. These have, thus, crossed each other without making any difference in the final total. We do not understand what was the necessity of such interpolations if the cash book had really been maintained in the normal course of business as was believed by the CIT(A). The Supreme Court in the case of CIT v. Durga Prasad More has observed that the taxing authorities were not required to put in blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. In our opinion, the CIT(A) had certainly put on blinkers while holding that the entries had been made in the cash book in the normal course of business. Even a layman would not believe such a finding and, in our opinion, rightly so. It is not necessary for us to enter into investigation at what stage these entries were made. Whatever might have been the stage, they were certainly made after the entire cash book had been written i.e., after the end of the year. The cash book is for the period 14th Oct., 1975 to 2nd Sept., 1976. The entries, therefore, seem to have been made after 2nd Sept., 1976 or at least after 28th Aug., 1976 when the last entry in dispute relating to the ornaments valuing Rs. 20,000 claimed to have been received on approval from M/s Genda Lal & Sons of Lucknow was made.
25. The last two entries in the cash book relate to receipt of ornaments of the value of Rs. 23,000 on 18th Aug., 1976 from M/s Nand Kishore Moti Lal Sarraf and of Rs. 20,000 on 28th Aug., 1976 from M/s Genda Lal & Sons. On 18th Aug., 1976, the relevant entries have been interpolated in the cash book on both the credit and debit sides. The final total which was Rs. 2,288 was changed to Rs. 25,288 showing an increase of Rs. 23,000. Similarly, on 28th Aug., 1976, the entries relating to Rs. 20,000 were interpolated in the cash book. The total originally stood at Rs. 694.24 on both the sides, which was increased by additing the figure of 20 making it Rs. 20,694.24. This is clear even from the naked eye.
26. For the reasons stated above, we are in agreement with the findings of the ITO that the entries in the cash book cannot be relied upon. The question then arises whether independent of the cash book, the assessee's explanation that it had received various amounts aggregating Rs. 90,000 from different parties or the alleged purchase of silver and/or ornaments of the value of Rs. 95,000 together with the receipt of ornaments of the value of Rs. 43,000 on approval could be believed. Here also we are in agreement with the findings of the ITO. We have perused his order thoroughly. He has dealt with the affidavits of the alleged creditors as well as their statements. Some of them were also not produced before the ITO. We did not agree with the stand of the assessee that Smt. Lalmani Devi could not be produced before the ITO as she was a Pardanashin lady. "We wonder how she could go to the Oath Commissioner or Notary for swearing the affidavit in the state of affairs. The answer is obvious that the assessee avoided her production before the ITO for cross-examination. We agree with the finding of the ITO that there is no evidence to link the sale proceeds received by her from 1970 to 1973 from sale of her land with the two deposits of Rs. 8,000 and Rs. 5,000 on 13th Feb., 1976 and 14th Feb., 1976 with 'the assessee. Similarly, we agree with the findings of the ITO that the other creditors were also not in a position to make any advance to the assessee. The mere fact that they were possessing some land for which the assessee did lead evidence before the ITO did not, by itself, prove that they had surplus funds for making deposits with the assessee on which they had also not received interest. It is no doubt claimed that some of the amounts had been returned to them, but it is surprising that none of them made a claim for either the payment of interest or the refund of the amount when they were petty agriculturists and must have been requiring funds for their own purposes. That only goes to show that they were really not the owners of the funds. Somewhat similar position is about the claim of the assessee that it had made purchases of silver/ornaments. The details of any such purchases have been produced before the ITO. With regard to the income from agriculture, we have held following our findings in the asst. yr. 1976-77 that amount had been utilised by the assessee for the household expenses. The sum of Rs. 5,000 also could not, therefore, remain with the assessee for investment in the silver/ornaments. Our finding, therefore, is that the assessee has failed to explain the source of the acquisition of silver or silver ornaments amounting to Rs. 95,000. We restore the addition to this extent."
3. Heard Sri Shakil Ahmad, learned Counsel appearing on behalf of assessee, and Sri Govind Krishna, learned standing counsel.
4. We have perused the order of Tribunal. We do not find any error in the order of Tribunal. Tribunal has considered the affidavits and other evidence and has given reasons for their non-acceptance. Tribunal held that the entries in the books of account have been manipulated. Findings of the Tribunal are the findings of fact. Findings of Tribunal since based on material on record cannot be said to be perverse and no interference is called for.
In the result, question referred to us is answered in affirmative i.e., against the assessee and in favour of the Revenue.