Y.R Meena, J.:— By this reference the Tribunal has referred the following two questions for our opinion:

“(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that there was no failure on the part of the Commissioner of Income-tax (Appeals) to carry out the mandate contained in the Tribunal's order dated the twenty-third day of July one thousand nine hundred and seventy five?

(2) Whether on the facts and in the circumstances of the case, the several findings of the Tribunal on which its conclusion is based are perverse and/or unsupported by any evidence?”

2. The assessee is a private limited company which used to be regularly assessed under the provisions of the Indian Income-tax Act, 1922. The year under consideration is the assessment year 1960-61. In the year under consideration, the assessee had shown certain credits on account of hundi loans. The assessment was completed treating these hundi loans as genuine. Thereafter it was brought to the notice of the Income-tax Officer by some employees of the assessee that the hundi loans are not genuine. On the basis, the assessment was reopened under section 147(a) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”). After reopening of the assessment, the Income-tax Officer issued notices to the creditors at their addresses given by the assessee, but the notices came back unserved with the remarks “not known” and “nobody in this name stays here”. In the absence of response, the Income-tax Officer came to the conclusion that all the hundi loans represented the assessee's income from undisclosed sources and he reassessed the income by addition of hundi loans at Rs. 2,65,912. This reassessment order was challenged before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner cancelled the assessment order on the ground that reopening was bad in law. Thereafter the Revenue preferred an appeal before the Tribunal and the Tribunal on consideration of the rival submissions found that the reopening under section 147(a) of the new Act, 1961 was in accordance with law and restored the matter to the Appellate Assistant Commissioner for fresh disposal on the merits. Then the appeal was transferred to the Commissioner of Income-tax (Appeals).

3. The Commissioner of Income-tax (Appeals) called upon the assessee to produce the persons who have advanced the loans. The assessee expressed inability to produce the persons with whom the assessee never had any direct contact but the assessee offered to produce the particular broker who had secured the said loans for which he had received brokerage from the assessee and he has also produced the bank certificates in the matter of encashment of various cheques by which the assessee had received the loans.

4. Considering the submissions of learned counsel for the assessee, the Commissioner of Income-tax (Appeals) was of the view that the assessee has not discharged the burden to prove the genuineness of the loans and dismissed the appeal. In second appeal before the Tribunal, the Tribunal has also confirmed the view taken by the Commissioner of Income-tax (Appeals). The limited controversy before us is whether the finding of the Tribunal regarding genuineness of the hundi loans is perverse.

5. Learned counsel for the assessee submits that the Assessing Officer has used the statement of some creditors and no opportunity was given to the assessee to cross-examine those witnesses. For that he placed reliance on the decision of the apex court in the case of State Of Punjab v. Bhagat Ram , (1975) 1 SCC 155 : AIR 1974 SC 2335 and Kishinchand Chellaram v. CIT, [1980] 125 ITR 713 (SC). In State Of Punjab v. Bhagat Ram , (1975) 1 SCC 155 : AIR 1974 SC 2335, para 8, their Lordships observed as under:

“It is unjust and unfair to deny the Government servant copies of statements of witnesses examined during investigation and produced at the inquiry in support of the charges levelled against the Government servant. A synopsis does not satisfy the requirements of giving the Government servant a reasonable opportunity of showing cause against the action proposed to be taken.”

6. It is true that if some evidence has been used in support of the charges or against the party he should be given opportunity to counter that evidence.

7. In Kishinchand Cheuaram's case, [1980] 125 ITR 713 (SC), the issue before their Lordships when taken evidence of the ex-employee has been used the assessee should have opportunity to cross-examine that employee and also the copy of that evidence should be supplied to the assessee before making use of that evidence against the assessee. It is further held that when the Department wants to add a particular amount in cases where the amount has been remitted by A to B, the Department should show that the money remitted by A belonged to the assessee.

8. Before we proceed further, it is necessary to consider whether any evidence in the form of statements, recorded by the Revenue, of the creditors has been used to take the hundi loans as not genuine.

9. Before we go into the merits the admitted facts are that the assessee initially claimed the hundi loans. They were accepted by the Assessing Officer in the original assessment order. Thereafter on the basis of information that the loans are not genuine the assessment was reopened under section 147(a) and when the assessee failed to prove that the loans are genuine, the amount of hundi loans were added in the income of the assessee as undisclosed income of the assessee. The assessee has challenged that assessment order on the ground including that reopening is bad in law. The Appellate Assistant Commissioner has set aside the order of the Income-tax Officer. Against that Appellate Assistant Commissioner's order, the Revenue has preferred the appeal before the Tribunal.

10. The Tribunal found that reopening is in accordance with law and remitted the matter back to the Appellate Assistant Commissioner to decide the appeal on the merits whether the hundi loans are genuine or hot? As the assessee failed to produce those creditors and on verification it is found that so called creditors were not available at the given address. On merits the Commissioner of Income-tax (Appeals) has decided the appeal against the assessee.

11. To consider the cases reported in State Of Punjab v. Bhagat Ram , (1975) 1 SCC 155 : AIR 1974 SC 2335 and Kishinchand Chellaram v. CIT, [1980] 125 ITR 713 (SC), firstly it has to be seen whether the Assessing Officer or the Appellate Assistant Commissioner or the Tribunal has found the non-genuineness of hundi loans on the basis of some statements recorded by the Assessing Officer. In paragraph 11 of the Tribunal's order, the counsel for the Revenue has argued the statements which were recorded for reopening of the assessment under section 147(a) of the Act of 1961, were not used for considering the case of hundi loans on the merits. The relevant portions of paragraphs 11 and 12 read as under:

“It was further submitted that the statements of the loan creditors were merely ‘information’ meant for enabling the learned Income-tax Officer to make up his mind for initiating reopening proceeding under section 147 of the Act and that thereafter it was open to the assessee to prove that the allegations were unfounded. Shri S. Bagchi, the learned Departmental Representative, contended that the loan creditors who were the assessee's persons and it was for him to produce them for proving the case.”

“As is clear from the Tribunal's order dated July 23, 1975, the action of the learned Income-tax Officer pertaining to reopening under section 147 was confirmed and the case was remanded for considering the merits of the additions. The reopening having been found and accepted to be in order, it was subsequently for the assessee to prove that the transactions were genuine and the parties had both established the indentities and the capacities. The loan creditors earlier deposed before the Revenue authorities that they never advanced any loans to anybody including the assessee and that their names might have been used in bogus or fictitious loan transactions. The learned Income-tax Officer made use of such statement merely to form an information and initiate reopening action. Thus far and no further, the statements were used by the Revenue. The loan creditors never acquired a status of the Revenue's witnesses. They made the statement as their own witnesses and such statements touched the assessee as the situation so warranted. Thus, the assessee's position that the loan creditors converted themselves into the Revenue's witnesses and kept their position intact.”

12. In view of the finding of the Tribunal that the statement of the creditors were never used for considering the genuineness of the hundi loans, but those statements were used for reopening of the assessment and that reopening was found valid by the Tribunal and that order has not been challenged thereafter the reopening has become final in accordance with law. Thereafter the hundi loans can be considered afresh whether they were genuine or not and the burden still lies on the assessee to prove the genuineness of the hundi loans in the fresh assessment proceedings.

13. Whether the loan is genuine or not, the burden lies on the assessee to prove the genuineness of loan. In Bharti Pvt. Ltd. v. CIT the court has considered the single issue and had held that the finding of the Tribunal that mere filing of the confirmatory letters did not discharge the onus that lay on the assessee as no other evidences were laid by the assessee except confirmatory letters, the Tribunal found that there is no material on record even to establish the identity of the creditors. This court has taken the view that on such facts, it cannot be said that the finding of the Tribunal is perverse and answered the question in the negative that is in favour of the Revenue.

14. In the case of Shankar Industries v. Commissioner Of Income-Tax, Central, Calcutta, [1978] 114 ITR 689, the issue before this court was that whether cash credits can be treated as income from undisclosed sources of the assessee. At page 698, this court has observed as under:

“We would like to observe that the law on this point is now well settled. It is necessary for the assessee to prove prima facie the transaction which results in a cash credit in his books of account. Such proof includes proof of the identity of his creditor, the capacity of such creditor to advance the money and, lastly the genuineness of the transaction. These things must be proved prima facie by the assessee and only after the assessee has adduced evidence to establish prima facie the aforesaid, the onus shifts on the Department. In the instant case it seems that the assessee established only the identity of the creditor and nothing more.”

15. There is no dispute on the facts that the burden lies on the assessee to prove the genuineness of the cash credits and how that burden is discharged. The assessee has to prove the identity of the creditors, the capacity of such creditors to advance names and lastly the genuineness of the transaction.

16. When the facts are not in dispute that the reopening of the assessment is found in accordance with law and it was open to the Assessing Officer to ascertain the genuineness of the hundi loans, the burden lies again on the assessee to prove the genuineness of hundi loans. We do not agree with learned counsel for the assessee that once the genuineness of the hundi loans are accepted in the original assessment, the Revenue should prove that the hundi loans were not genuine.

17. In our considered opinion, once the assessment was reopened to consider the genuineness of the hundi loans, even after reopening the burden lies on the assessee to prove the genuineness of the hundi loans though he filed confirmatory letters, the notices of which were returned with the remark that “they are not known” at the given address. Even in some cases, it was found from the record that some of the creditors have not advanced the hundi loans to the assessee. When the initial burden is on the assessee to prove the identity of the creditor, the capacity of the creditor to advance the loan and the genuineness of the transaction, thereafter only the Revenue is to prove that the loans are not genuine but when the initial burden has not been discharged by the assessee, there is no question of asking the Revenue to show that it is the income of the assessee.

18. Firstly, the Revenue has not based its finding that the hundi loans are not genuine on the basis of the statement of some of the creditors. They have clarified that the statements of some of the creditors were used only as “information” for reopening of the assessment and they were never used to consider the question of genuineness of the hundi loans on the merits. Secondly, when the assessee has not discharged its burden to prove the genuineness of the hundi loans by establishing the identity of the creditors, the capacity of the creditors to advance the hundi loans and the genuineness of the transaction, it cannot be said that the finding of the Tribunal is perverse.

19. On the given facts, the only conclusion the authorities below can be arrived at is that the hundi loans are non-genuine and rightly added in the income of the assessee. The Commissioner of Income-tax (Appeals) has rightly carried out the direction of the Tribunal that is to decide the issue on the merits regarding the genuineness of the hundi loans. In view of all these facts stated and the law referred to, we answer question No. 1 in the affirmative that is in favour of the Revenue and against the assessee. And for question No. 2 also we answer in the negative that is in favour of the Revenue and against the assessee. All parties to act on a signed copy of the operative portion of this judgment upon usual undertaking.

Prabir Kumar Samanta, J.:— I agree.