Sec.145: Estimation of income should be on reasonable/Comparable basis

Shri Om Prakash Singh Vs ACIT (ITAT Agra)

Conclusion: When the books of accounts was rejected, the income of assessee was to be estimated on some reasonable basis for which comparable case and history of assessee could be taken as a guide. Thus, the N.P rate @ 8% applied by the authorities below was without any basis and material on records, the same was rejected and was considered fair to apply an average rate of earlier two years which was 3.50%.

Held: Assessee was a civil contractor doing civil construction work. Case was selected for scrutiny  which got culminated into Assessment order passed under section 144 making trading addition of Rs. 1,42,88,131/-which was reduced to Rs. 1,14,80,575/- by CIT(A). CIT (A), confirmed the action of AO on principals, reduced the N.P rate from 12% to 8% placing reliance in the case of Mahesh Chand, Contractor Vs ITO in ITA No. 359/Agra/2011 that “Once books of accounts were rejected then AO had to estimate the income, but the estimation had to be done in a proper manner and on some basis. It was held that after rejection of accounts, the income of the assessee is to be estimated on some reasonable basis for which comparable case and history of the assessee can be taken as a guide. It was seen that rate applied by the authorities below was without any basis, no case comparable to the case of assessee had been cited, application of N.P rate @ 8% was applied without any material on records, ignoring the past trends of NP rate. However, the past history of assessee on the basis of Returns filed range from 1.88% to 2.04% except in A.Y 2010-11 where assessee agreed for being assessed at 5.25%. Keeping in finding that there was no evidence or reason for application of N.P rate of 8%, it was considered it fair, reasonable and logical to apply an average rate of two years i.e (A.Y 2009-10 N.P rate of 1.88% and A.Y 2010-11 N.P rate of 5.25%) which gave N.P rate of 3.50% as against 2.04% shown by the assessee on turnover. In this case after due consideration of past history average N.P rate was arrived and applied by the Division Bench. However, assessee should not be entitled for any other deduction such as depreciation and interest paid.

FULL TEXT OF THE ITAT JUDGMENT

This appeal, by the assesse, is directed against the order dated 30.06.2016 passed by the learned CIT(A)-I, Agra in the matter of assessment passed under section 144 of the Income Tax Act, 1961 for Assessment Year 2011-12 by the Dy. CIT, Circle-3, Mathura.The assessee has taken following grounds:

1. BECAUSE, the authorities below while framing the assessment under section 144 of the Act and sustaining the addition made therein was highly unjustified in discarding the past history of the ‘appellant’.

2. BECAUSE, while doing so the Ld ‘CIT(A)’ erred in law in overlooking and thereby not considering the binding decisions of the Hon ’ble Allahabad High Court and Hon’ble ITAT, Agra Bench.

3. BECAUSE, while confirming the addition the Ld. CIT(A) was highly unjustified in holding that if books are not maintained presumptive rate of 8% should have been applied by the AO ignoring the fact on records that appellant has maintained Books of Accounts which are audited and as such case do not fall under the provisions of section 44AD of the Act.

4. BECAUSE, application of profit @ 8% is without any basis, evidence and is highly excessive and unreal in the light of facts of the case.

5. BECAUSE, upon overall consideration of the facts and in the circumstances of the case authorities below were highly unjustified in treating the ‘Advance against Property’ amounting to Rs.3,00,00,000/- as ‘Unexplained Cash Credits’ without examining the Creditor, looking to its Books of Accounts and without any justifiable reason . The addition had been made and sustained purely on the consideration of suspicion and unfounded presumptions.

6. BECAUSE, alternatively, in any view of the matter no addition under section 68 can be validly made after rejecting the books of account as the credits pertains to same set of books which had been held unreliable by the learned ‘AO’ while framing assessment.

7. BECAUSE, alternatively, in any view of the matter, entire addition of Rs.3,00,00,000/- cannot have been validly made as the same is liable to be telescoped to the extent of addition made against extra profit as sustained.

8. BECAUSE, the ‘appellant’ denies levy of interest under section 234B of the Act as the Income of the assessee is subjected to TDS.

9. BECAUSE, while making the assessment the authorities below made various observations/ conclusions which are contrary to facts available on records. While making the addition submission made and evidences filed have been rejected arbitrarily.

10. BECAUSE, the order appealed against is arbitrary, illegal, contrary to the facts, material on record, law and principles of natural justice.

The ‘appellant’ reserves his right to add, delete, modify, alter or substitute any or all the grounds of appeal.

2. Vide Grounds No. 1 to 4 assessee has challenged the action of the authorities below in making trading addition by application of N.P rate @8% on contract receipts ignoring the past history of the assessee which as per judicial opinion is a material consideration for estimation of income while proceeding under section 144 of the Act.

3. The assessee is a civil contractor doing civil construction work. Return of Income was filed electronically on 28.09.2011 showing income of Rs. 29,32,732/-. Case was selected for scrutiny under ‘CASS’, which got culminated into Assessment order dated 28.03.2014 passed under section 144 of the I.T. Act making trading addition of Rs. 1,42,88,131/-which was reduced to Rs. 1,14,80,575/- by Ld. CIT(A) and Rs. 3,00,00,000/-in respect of advance received from M/s Easyway Solutions (P) Ltd.

4. On appeal, the Ld. CIT (A), confirmed the action of the learned Assessing officer on principals, reduced the N.P rate from 12% to 8% placing reliance upon ITAT, Agra Bench order in the case of Mahesh Chand, Contractor Vs ITO in ITA No. 359/Agra/2011, after observing on page-5 of the appellate order that “Once books of accounts are rejected then the learned Assessing officer has to estimate the income, but the estimation has to be done in a proper manner and on some basis.”

5. Shri. AnuragSinha, Advocate, Ld. Counsel of the assessee filed a Synopsis together with Paper Books in two sets. The Ld. A.R submitted that where books of accounts are rejected and profit is to be estimated, it is the past history which is the most relevant criteria and such a view has been approved in following cases by the Jurisdictional High Court: –

a) ACIT vs. D. M. Brothers(2010) 44 DTR 0013 (All) (APB-57 -62)

b) CIT vs. Target Construction Co. Ltd.(2015) 55 com294 (All)(APB-63-65)

c) Pragati Engineering Corporation vs. ITO (Order dated 5.04.2013 passed by Hon’ble Allahabad High Court in ITA No. 11/2012)(APB 66-70).

6. He submitted that similar view has been followed by this Bench of the Tribunal in the case of:-

a) ACIT vs. Jagdish Prasad Bansal (2012) 34 CCH 0446 (Agra) (APB 99 -102)

b) Sri Devendra Kumar vs. ACIT (Order dated 31.08.2017 in ITA No. 495/Agra/2015)(APB 108 -119)

c) Infra Developers Vs ITO, Order dated 30.03.2017 in ITA No. 52/Agra/2013(APB 120 -133)

7. The Ld. A.R thus submitted that in light of settled judicial position, learned CIT (Appeals) has erred in estimation of net profit disregarding past history and further placed reliance to the orders passed by the Agra Bench in the cases ofM/s Sri Siddheshwar Engineers India (P) Ltd 886 Takia Azad Gaan, Etawah Vs. ACIT- 5, Firozabad and Smt. ArchanaDutta, Mathura Vs ACIT, Circle-3, Mathura in ITA No. 330/Agra/2016. Copies of which were filed during the course of hearing.

8. The Ld. CIT, D.R Shri. Sunil Bajpayeestrongly disputed the arguments raised by the Ld. A.R, supported the order of the Ld. CIT(A), placed reliance upon the order passed by the ITAT Agra Bench in the case of Mahesh Chand Contractor (supra) and also submitted that estimate is a question of fact and not question of law. Therefore, reliance placed by the assessee to the case laws is fully misplaced.

9. We have heard both the sides, perused the material on records and the judgments relied upon. We agree with the argument of the learned Sr. D.R that estimation is a pure question of fact. It is also a fact on record that books of account are rejected by invoking provisions of Section 145(3) of the Act, pointing out discrepancies regarding details of sundry creditors, incomplete balance sheet, and no detail of sundry debtors. The assessee has not objected to the rejection of the books of account. Therefore, in absence of any challenge by the assessee the rejection of accounts is final. Thus, after rejection of accounts keeping in mind the judicial guideline available on issue, that after rejection of accounts, the income of the assessee is to be estimated on some reasonable basis for which comparable case and history of the assessee can be taken as a guide. The comparative position of trading results as appearing in the impugned order is reproduced as under:

10. It is seen that rate applied by the authorities below is without any basis, no case comparable to the case of the assessee has been cited, application of N.P rate @ 8% is applied without any material on records, ignoring the past trends of NP rate which shows that in A.Y 2009-10 on turnover of Rs.1,90,10,186/- Net Profit of Rs. 3,56,830/- was shown giving N.P rate of 1.88%, and in A.Y 2010-11 upon turnover of Rs. 8,36,63,967/- Net Profit of Rs. 17.04,930/- was disclosed, giving N.P rate of 2.04% as against above in the year under consideration i.e. A.Y. 2011-12 upon Turnover of Rs. 14,35,07,199/- Net Profit of Rs. 29,32,732/- was disclosed which gives N.P rate of 2.04%. Thus, Net Profit of the assessee in filed Returns ranges from 1.88% to 2.04% in the consecutive three assessment years. In A.Y 2010-11, assessment was framed under section 143(3) of the Act vide order dated 2010-11 where income was estimated by application of N.P rate of 5.25%.

However, the past history of the assessee on the basis of Returns filed ranges from 1.88% to 2.04% except in A.Y 2010-11 where assessee agreed for being assessed at 5.25%. Keeping in mind the entire factual matrix of the case and finding no evidence or reason for application of N.P rate of 8% we consider it fair, reasonable and logical to apply an average rate of two years referred above i.e (A.Y 2009-10 N.P rate of 1.88% and A.Y 2010-11 N.P rate of 5.25%) which gives N.P rate of 3.50% as against 2.04% shown by the assessee on turnover of Rs. 14,35,07,199/-. This view of ours is in conformity with the view recently adopted by the Division Bench of Agra ITAT, in ITA No. 330/Agra/2016, order dated 14.05.2018, in the case of Smt. Archana Dutta Vs ACIT, Circle-3, Matura for A.Y 2011-12 in which one of us was the party to the Bench. In this case after due consideration of past history average N.P rate was arrived and applied by the Division Bench. In the referred case, material facts have been found to be same, as assessee therein was also from Mathura and the Assessing officer being the same in person, impugned order was also on same lines and so is the Assessment Year i.e. A.Y. 2011-12. This decision of ours is after consideration of the past history of the assessee and comparable case. Similar view was taken by the Agra Bench in the case of M/s Sri. Siddheshwar Engineers India (P) Ltd. Vs ACIT, Firozabad in ITA No. 160/Agra/2015, order dated 13.03.2018. We also make it clear that assessee shall not be entitled for any other deduction such as depreciation and interest paid. Thus, ground of appeal No.1 to 4 is partly allowed.

11. Vide Ground of Appeal No. 5, assessee has challenged the action of the Ld. CIT(A) in sustaining addition of Rs.3,00,00,000/- under section 68 of the Act. The laerned Assessing officer has made the addition on account of his finding that M/s Easyway Solutions (P) Limited has no capacity and creditworthiness to advance sum of Rs.3,00,00,000/- to the assessee and the same is unexplained cash credit assessable in the hands of the assessee under section 68 of the Act.

12. The Ld. CIT(A) during the course of hearing of the appeal after receipt of written submission filed by the assessee sought further evidences from the assessee pertaining to the advance so received from M/s Easyway Solutions (P) Ltd, which were partly brought on records, Ld. CIT(A) referred the matter to the learned Assessing officer, sought remand report from him on the evidences furnished as per her requisition and also called upon the assessee to furnish rejoinder on remand report and thereafter she confirmed the addition observing that assessee could not prove the capacity and creditworthiness of the creditor and genuineness of the transaction.

13. Before us, the Ld. Counsel inviting attention to his Synopsis submitted that the authorities below had fallen in error of fact and in law in making and sustaining the addition of Rs.3,00,00,000/- received by the assessee.

14. The Ld. A.R submitted that during the year assesse has received a sum of Rs. 3,00,00,000/- towards advance against property from M/s Easyway Solutions Private Limited. Before the learned Assessing officer, assessee submitted copy of agreement along with confirmation and requested the learned Assessing officer that personal financial records pertaining to the creditor such as its ITR and bank statement may be obtained from the party directly. The learned Assessing officer acceding to the request of the assessee issued notice u/s 133(6) of the Act, obtained such details from the party as is evident from the discussion made in the assessment order. However, the AO held that the transaction did not appear to be genuine and made the addition of said amount to the income of the assesse.

15. He also submitted that Ld.CIT(A) further called upon documents from the assessee is respect of advance , which were furnished and Ld. CIT(A) remitted those evidences to the learned Assessing officer, request was also made to issue summons under section 131(1) of the Act, but on this occasion too no attempt was made to examine the creditor and assessee by that time has repaid the advance and it was under these circumstances that he requested for issue of summons. However, the authorities below without examining the creditor and without bringing any adverse evidence on assessment records on the basis of unilaterally drawn conclusions which were based on considerations of presumptions and surmises made and confirmed the addition. He placed reliance to the following case laws in support of his various arguments:

(a) Sona Electric Co. vs. CIT (1984) 152 ITR 507 (Del.)

(b) Aravali Trading Co. vs. ITO (2008) 8 DTR (Raj.) 199

(c) KanhaialalJangid vs. ACIT (2008) 217 CTR (Raj.) 354

(d) CIT Vs Diamond Products Limited (2009) 177 Taxman 331 (Del)

(e) Sargoi Credit Corporation vs. CIT (1976) 103 ITR 344 (Pat.)

(f) MeghajiNarain& Co. vs. ITO (1990) 37 TTJ (Ind.) 624

(g) CIT vs. Daulatram Rawatmal (1973) 87 ITR 349 (SC)

(h) Kishan Chand Chelaram vs. CIT (1980) 125 ITR 713 (S.C.)

(i) CIT Vs. RanchhodJivabhaiNakhava in Appeal No. 50 of 2011 (Guj. H.C)

(j) CIT Vs. M/s. Dataware (P) Limited in ITAT No. 263 of 2011 GA No. 2856 of 2011 (Calcutta High Court)

(k) MunnalalMurliDharVs CIT (1971) 79 ITR 540 (All.)

(l) CIT VsKamdhenuVyapar Co. Limited (2003) 263ITR 692 (Cal)

(m) Addl CIT VsRadheyShyamJagdish Prasad(1979) 117 ITR 186 (Allahabad)

16. Per contra, the Ld. CIT, D.R has placedstrong reliance up on the impugned order, submitted that the party from whom advance is claimed to have been received has no creditworthiness, transaction is in cash and various terms in the agreement do not inspire any confidence so as to make the agreement a genuine one.

17. We have considered the rival submissions, material available on records and precedents upon which reliance was placed by the parties.

18. From the assessment order it is seen that at the stage of assessment as evident from the order sheet of the Assessing officer that the case was transferred to the present Assessing officer i.e. ACIT, Circle-3, Mathura from Additional CIT, Range-3, Mathura vide order dated 12.03.2014 passed under section 120(1) of the Act. The Addl. CIT, Range-3 who was conducting the assessment proceedings prior to the AO, had issued notice dated 26.02.14 u/s 142(1) fixing compliance on 10.03.14 which was done 14.03.14, requiring the assessee to show cause as to why addition u/s 68 be not made by observing as under:

“You have shown current liability of Rs. 3,00,00,000/- in the name of M/s Easy Way Solution (P) Ltd. as on 31.03.2011.

You were asked to give details alongwith confirmation of the above party, vide order sheet entry dated 24.01.2014 but you have not given the same. In this regard you are required to furnish the confirmed copy of account M/s Easy Way Solution (P) Ltd. for A.Y. 2011-2012 bank statement for A.Y. 2011-2012 and copy of acknowledgement of ITR for A.Y. 2011-2012 failing which the amount of Rs. 3,00,00,000/- will be added in your income u/s 68 of the I.T. Act, 1961 which may be noted”

19. On the date appointed of 14.03.2014,assessee sought an adjournment as found noted in the order sheet of the ACIT, Circle-3, Mathura. Thereafter the case was transferred to ACIT, Circle-3, Mathura who issued fresh notice u/s 142(1) of the Act dated 14.03.2014 fixing compliance date on 20.03.2014 requiring the assessee to furnish the following in respect of credit of Rs.3,00,00,000/-

“You have shown current liability of Rs. 3,00,00,000/- in the name of M/s Easy Way Solution (P) Ltd. as on 31.03.2011. You were asked to give details along with confirmation of the above party, vide order sheet entry dated 24.01.2014 but you have not given the same. In this regard you are required to furnish the confirmed copy of account M/s Easy Way Solution (P) Ltd. for A.Y. 2011-2012 bank statement for A.Y. 2011-2012 and copy of acknowledgement of ITR for A.Y. 2011-2012 failing which the amount of Rs. 3,00,00,000/- will be added in your income u/s 68 of the I.T. Act, 1961 which may be noted”

20. This notice on the date appointed was notcomplied with. However, as found noted in the assessment order,the A.R of the assessee Shri Abhishek Garg CA attended on 24.03.2014 before the learned Assessing officer stating that the notice dated 14.03.2014 was received on 20.03.2014 and details were to be produced on the same day which was not possible and therefore he filed Reply to notice u/s 142(1) on 24.03.2014 and as per the order sheet of 24.03.2014 he was required to produce books of accounts, bills, vouchers and Salary & Wages Register for which case was adjourned to 26.03.14. None attended on 26.03.2014 and thereafter, assessment was completed u/s 144 of the Act on 28.03.2014.

21. From the above, it is abundantly clear that vide notice dated 26.02.2014 issued by the Additional CIT, Range-3, Mathura and notice dated 14.03.2014 issued by the ACIT, Circle-3, Mathura assessee was only required to furnish details and confirmation from Easy Way Solutions (P) Ltd, his ITR and Bank Statement and failing which assessee was apprised that addition under section 68 will be made. Perusal of the assessment reveals that before making of the assessment the learned Assessing officer was in receipt of confirmation. Income Tax Return and Bank Statement of the creditor on his records. Post making compliance on 24.03.2014 there was no question asked or remaining to be complied by the assessee in respect of credit of Rs.3,00,00,000/- received from M/s Easy Way Solution (P) Ltd.

22. As noted before, Confirmation and Bank Statement were furnished by the assessee and there is no dispute that such evidences were not filed at the stage of assessment. Even the Assessing officer issued notice u/s 133(6) of the Act to M/s Easyway Solutions (P) Ltd and obtained such details directly from creditor. The return of Income was also obtained from the System of the Department. Thus, after having primary evidences on records of the Department confirming the advance received by the assessee the burden got shifted to the revenue to prove that the confirmation is not genuine. The Assessing officer in the assessment order has noted that creditor has no means to have advanced credit of Rs.3,00,00,000/- referring to deposits and withdrawals made in its Bank account ; the Agreement is undated, unnotarized and unregistered in respect of property to be purchased in future and is not held by the assessee. Assessee is a Contractor not a builder. Thus, these all facts according to the learned Assessing officer proved that it not a genuine business advance.

23. However, as culled from the records and from the perusal of order sheet as made available by the Department in its paper book and notices which are reproduced in the Assessment order we found that no query of such nature was issued on the basis of which addition is made and sustained. Assessee was never put to notice in respect of grounds adopted for making the addition assessee was never called upon to prove the creditworthiness of the creditor. None of the point of objection on which Agreement is discarded was neither conveyed to the assessee nor was his explanation sought in this regard. No enquiry was made from the creditor in respect of points of doubts entertained by the learned Assessing officer. Therefore, the addition is based on considerations on which the learned Assessing officer never sought explanation from the assessee. Such an approach on part of the authorities below cannot be appreciated in law.

24. Before coming to adjudicate the merits of the addition it is considered expedient to re-visit the provisions of section 68 of the Act as evolved by the Hon’ble Courts of the land. Hon’ble Delhi High Court in the case of Sona Electric Co. vs. CIT (1984) 152 ITR 507 (Del.) has held that section 68 makes it clear that the entry can be rejected and the explanation offered by the assessee can be rejected by the ITO on cogent grounds. When such grounds are them self-based on no evidence the question of presumption does not arise. Hon’ble Rajasthan High Court in the case of Araival Trading Co. vs. ITO (2008) 8 DTR (Raj.) 199 has held that once the existence of the creditors is proved and such persons own the credits which are found in the books of the assessee, at the assessee’s onus stands discharged and the latter is not further required to prove the source from which the creditors could have acquired the money deposited with him either in terms of s. 68 or on general principle. Hon’ble Rajasthan High Court in the case of KanhaialalJangid vs. ACIT (2008) 217 CTR (Raj.) 354while interpreting section 68, has held that while it was the assessee’s burden to furnish explanation relating to such cash credits, the assessee’s burden does not extend beyond proving the existence of the creditor and further proving that such creditor owns to have advanced the amount credited in the account of assessee to him.Hon’ble Calcutta High Court in the case of “CIT, Kolkatta-III Vs. M/s. Dataware (P) Limited”, in ITA No. 263 of 2011 GA No. 2856 of 2011 wherein vide Judgment dated 21st September, 2011 the Hon’ble Court held that the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established.

25. It is trite law in view of section 68 of the Act which creates a deeming fiction and which requires the assessee to prima-facie prove the three ingredients of the said section.

(a) Identity of the Person

(b) Genuineness of the transaction and

(c) Creditworthiness of the Creditor

26. We noted that during the course of hearing before the Ld. CIT(A) assessee after furnishing written submission dated 07.09.2015 in response to the directions of Ld. CIT(A) vide his submission dated 16.10.2015 furnished following evidences in relation to property advance of Rs.3,00,00,000/-

(a) I.T. Return of Easyway Solutions (P) Limited for A.Y 2011-12.

(b) Computation of Income of Easyway Solutions (P) Limited for A.Y 2011-12.

(c) Confirmation of Account duly signed by Director of EasywaySolutions (P) Limited confirming the transaction with the assessee.

(d) Balance Sheet of Easyway Solutions (P) Limited for A.Y 2011-12.

(e) Bank Account with BOB of Easyway Solutions (P) Limited for A.Y 2011-12.

27. When we test the explanation of the assessee in the light of evidences available on records and the precedents governing the issue, we find that identity of the Company who has advanced money to the assessee is proved beyond doubt. There can be hardly any dispute regarding the identity of the company which is body corporate and filing its Income Tax Return which was downloaded by the Assessing officer on his own from the system. The genuineness of the transaction is proved from the amount received from the party was duly reflected in the audited accounts of the assessee. Assessee during the course of assessment proceedings has furnished confirmation duly signed by the Director of the Company who has made the advance to the assessee. Even in enquiry undertaken under section 133(6) of the Act, it is not denied by the creditor. The assessee had produced the agreement with the party and its confirmation. Even if the agreement is excluded for the purpose of consideration, as pleaded by the revenue, the fact remains that amount was received and confirmed by the creditor. Thus, no material is brought on records on either of the two occasions by the learned Assessing officer and also by the first appellate authority to impeach the genuineness of the transaction except referring to the terms which are based on unilaterally drawn presumptions without confronting the assessee and therefore, has to be excluded for the purpose of consideration of merits of the addition. Next and last issue required to be established by the assessee was the creditworthiness of the company. The assessee had produced the audited balance sheet of the company (APB 26 -31), which showed that the company had shareholder’s fund of Rs. 41.29 lacs, secured loans from Oriental Bank of Commerce of Rs. 72.48 lacs, unsecured loans of Rs. 999.03 lacs and thus had total liabilities to the tune of Rs. 11.14 Crores. On assets site, it had fixed assets of Rs. 20.67 lacs, fixed deposits of Rs. 3.20 Crore, loans and advances of Rs. 5.84 Crore besides other assets. Schedule ‘F’ to the balance sheet showed advance for land Rs. 5.50 Crore (Previous year Rs. Nil) besides other advances. Thus, not only the company was creditworthy, its balance sheet disclosed advances for land amounting to Rs. 5.50 Crore extended during the year under consideration itself. Thus, on the circumspection of the evidence, Ld. CIT (A) has grossly erred in taking adverse view wherein she has altogether ignored to look into the creditworthiness of the company and the fact that its balance sheet disclosed advances of Rs. 5.50 croretowards land. If the authorities below entertained any doubt and required clarification with regard to any of the affair of the creditor in that eventuality summons under section 131(1) could have been issued which despite request made by the assessee was not issued.Failure to issue summons under section 131(1) on the request of the assessee in order to enable him to discharge his prima facie onus is fatal to the proceedings. Without such request, there is no duty cast on the Assessing Officer to issue summons under section 131, unless the Assessing Officer on its own deems it proper to do so. But as soon a request is made, it becomes incumbent on the Assessing Officer to issue such summons in order to enable the assessee to avail of such opportunity. After such issuance of summons, if those were not responded to or returned without service, the Assessing Officer is free to take his own decision as he may deem fit and proper. Such action of the authorities below is in direct conflict with the principles of law laid down by the Hon’ble Allahabad High Court in the case of “MunnalalMurliDharVs CIT”, (1971) 79 ITR 540 (All.) and“Additional CIT Vs Radhey Shyam Jagdish Prasad”, (1979) 117 ITR 186 (Allahabad) wherein the Hon’ble Allahabad held that failure to issue summons for attendance or witnesses vitiated the assessment.

28. The assessee has thus discharged his onus in the matter. None of the evidence furnished by the assessee has been found to be non-genuine and the evidence has been discarded on the basis of conjectures and hypothesis only. There was nothing in the matter to apply the test of preponderance and probabilities, as was appliedby

Hon’ble Supreme Court in the cases of ‘Sumati Dayal & other’ cases referred by learned Ld. CIT (A). Nothing prevented the authorities to go beyond the transaction and look into the affairs. The assessee in fact made request both at assessment stage as well as appellate stage for examination of the party, but his request was not acceded to without assigning any reason, much less for valid and convincing reason. The assessee could not be punished merely for the reason that advance was received in cash whereas he could do so under the law, prevailing at that time and therefore, the transaction was fully in accordance with the law. The transaction was duly disclosed in the Audited Balance Sheet. In the totality of facts and in the circumstances of the case we are of the view that assessee has sufficiently discharged the burden which lay upon it in terms of section 68 of the Act and no evidence has been brought on records to prove that the amount of Rs.3,00,00,000/-represents undisclosed money of the assessee. Therefore, we are not inclined to agree with the observation of the ld. CIT(A). Accordingly, the addition of Rs.3,00,00,000/- is hereby deleted and the grounds of appeal no. 5 to 7 are allowed.

29. In the result appeal is partly allowed.