BASIR AHMED SISODIYAversusTHE INCOME TAX OFFICER

                        [2020] 4 S.C.R. 581                             581


                   BASIR AHMED SISODIYA                                 A
                                 v.
                  THE INCOME TAX OFFICER
                   (Civil Appeal No. 6110 of 2009)
                          APRIL 24, 2020                                B
 [A.M. KHANWILKAR AND DINESH MAHESHWARI, JJ.]
       Income Tax Act, 1961 – ss.68, 143, 144, 145, 271 – Assessing
Officer, inter alia, relying on the Balance Sheet and the books of
account, added the credits amounting to Rs.2,26,000/- in declared
                                                                        C
income of the appellant-assessee – Appellant filed appeal – Partly
allowed by Commissioner of Income Tax (Appeals) – CIT(A) upheld
the assessment order by Order dtd. 09.01.2003 – ITAT partly allowed
the appellant’s appeal however, the order regarding credits of
Rs. 2,26,000/- was upheld – High Court dismissed the appeal by
Order dated 21.08.2008 – Held: At the time of assessment, the           D
appellant failed to produce any explanation or evidence in support
of entries regarding purchases of marbles from unregistered dealers
to the extent of Rs. 2,26,000/- – Thus, the said transactions were
assumed as bogus entries (standing to the credit of named dealers
who were non-existent creditors of the assessee) – However, it has
                                                                        E
now come on record that in the penalty proceedings, the appellant
produced affidavits of 13 unregistered dealers out of whom 12 were
examined by the Officer, who recorded their statements and did not
find any infirmity including about their credentials – Dealers stood
by the assertion made by appellant about the purchases on credit
from them; and which explanation has been accepted by the               F
appellate authority in the order dtd 13.01.2011 – Appellate authority
by Order dtd. 13.01.2011, had not only accepted the explanation
offered by the appellant but also recorded a clear finding of fact
that there was no concealment of income or furnishing of any
inaccurate particulars of income by the appellant – Addition of
                                                                        G
Rs.2,26,000/- by the officer u/s.68 towards cash credit amount shown
against the names of concerned unregistered dealers for the
assessment year 1998-99 is set aside – Rest of the assessment Order
dtd. 30.11.2000 as modified by the CIT(A) by Order dtd. 09.01.2003
remains undisturbed.
                                                                        H
                                581
582            SUPREME COURT REPORTS                      [2020] 4 S.C.R.


A           Allowing the appeal, the Court
            Held: 1.1 In I.A.No. 57442/2011 permission has been
      sought to bring on record subsequent events. By this application,
      the appellant/assessee has placed on record an order passed by
      the CIT(A) dated 13.1.2011, which considered the challenge to
B     the order passed by the Income Tax Officer u/s. 271(1)(c) dated
      17.11.2006 qua the appellant for the self-same assessment year
      1998-1999. The Income-Tax Officer had passed the said order
      as a consequence of the conclusion reached in the assessment
      order which had by then become final upto the stage of ITAT
      vide order dated 27.4.2006- to the effect that the stated purchases
C     by the appellant from unregistered dealers were bogus entries
      effected by the appellant. Resultantly, the penalty proceedings
      u/s. 271 were initiated by the Officer. That order, however, has
      now been set aside by the appellate authority [CIT(A)] in the
      appeal preferred by the appellant, vide order dated
D     13.1.2011.[Para 10][589-E-H][590-A-C]
            1.2 The appellant/assessee despite being given sufficient
      opportunity, failed to prove the correctness and genuineness of
      his claim in respect of purchases of marbles from unregistered
      dealers to the extent of Rs. 2,26,000/- (Rupees two lakhs twenty-
E     six thousand only). Resultantly, the said transactions were
      assumed as bogus entries (standing to the credit of named dealers
      who were non-existent creditors of the assessee). However, it
      has now come on record that the appellant/assessee in penalty
      proceedings offered explanation and caused to produce affidavits
      and record statements of the concerned unregistered dealers
F     and establish their credentials. That explanation has been
      accepted by the CIT(A) vide Order dated 13.1.2011. In paragraph
      17 of the said decision reproduced hitherto, it has been noted
      that the Officer recorded statements of 12 unregistered dealers
      out of 13 and their identity was also duly established. After
G     analyzing the evidence so produced by the appellant/assessee,
      the appellate authority [(CIT(A)] noted that the Officer had neither
      doubted the identity of those dealers nor any adverse comments
      were offered in reference to their version regarding sale of marble
      slabs by them to the appellant/assessee in the financial year
      relevant to assessment year 1998-1999 and receipt of payments
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  BASIR AHMED SISODIYA v. THE INCOME TAX OFFICER                       583


after two to three years. Further, there was no denial of purchase     A
of marbles worth Rs. 4,78,900/- (Rupees four lakhs seventy-eight
thousand nine hundred only) by the assessee and sale thereof
worth Rs. 3,57,463/-(Rupees three lakhs fifty seven thousand
four hundred sixty three only) with closing stock of
Rs.2,92,490/- (Rupees two lakhs ninety two thousand four hundred
                                                                       B
ninety only), as disclosed in the trading account for the year ended
on 31.3.1998. The appellate authority thus found that without
purchases of marbles, there could be no sale and disclosure of
closing stock in the trading account. The materials on record
would clearly suggest that the concerned unregistered dealers
had sold marble slabs on credit to the appellant/assessee, as          C
claimed. The appellate authority concluded that there was neither
any concealment of income nor furnishing of inaccurate particulars
of income by the assessee. These observations are made by the
competent forum (appellate authority) in penalty proceedings
u/s. 271 of the 1961 Act in favour of the assessee. However, what
                                                                       D
needs to be noted is that the stated penalty proceedings were
the outcome of the assessment order in question concerning
assessment year 1998-1999. Indeed, at the time of assessment,
the appellant/assessee had failed to produce any explanation or
evidence in support of the entries regarding purchases made from
unregistered dealers. In the penalty proceedings, however, the         E
appellant/ assessee produced affidavits of 13 unregistered dealers
out of whom 12 were examined by the Officer. The Officer
recorded their statements and did not find any infirmity therein
including about their credentials. The dealers stood by the
assertion made by the appellant about the purchases on credit
                                                                       F
from them; and which explanation has been accepted by the
appellate authority in paragraphs 17 and 19 of the order dated
13.1.2011. The appellate authority vide Order dated 13.1.2011,
had not only accepted the explanation offered by the appellant
but also recorded a clear finding of fact that there was no
concealment of income or furnishing of any inaccurate particulars      G
of income by the appellant for the assessment year 1998-1999.
The addition of Rs.2,26,000/- by the officer u/s 68 of the 1961
Act, towards cash credit amount shown against the names of
concerned unregistered dealers for the assessment year 1998-
1999 is set aside. The rest of the assessment Order dated
                                                                       H
584             SUPREME COURT REPORTS                        [2020] 4 S.C.R.


A     30.11.2000 as modified by the CIT(A) vide Order dated 9.1.2003,
      shall remain undisturbed. [Paras 13, 14, 15-17][599-E-H;
      600-A-H; 601-A-D]
              Maddi Sudarsanam Oil Mills Co. v. Commissioner of
              Income-Tax, Hyderabad and Andhra (1959) 37 ITR
B             369 (AP) ; Commissioner of Income Tax v. Aggarwal
              Engg. Co. (Jal.) (2006) 206 CTR (P&H) 648 ;
              Commissioner of Income Tax v. G.K. Contractors (2009)
              19 DTR (Raj) 305 – referred to.
                              Case Law Reference
C     (1959) 37 ITR 369 (AP)               referred to         Para 8
      (2006) 206 CTR (P&H) 648             referred to         Para 8
      (2009) 19 DTR (Raj) 305              referred to         Para 8
              CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6110 of
D     2009.
            From the Judgment and Order dated 21.08.2008 of the High Court
      of Judicature for Rajasthan at Jodhpur in Income Tax Appeal No. 69 of
      2006.
              Dr. Manish Singhvi, K. Radhakrishna, Sr. Advs., Sandeep Kumar
E     Jha, P. V. Yogeswaran, Arpit Parkash, H.Raghavendra Rao, Jitin Singhal,
      Ms. Anil Katiyar, Advs. for the appearing parties.
              The Judgment of the Court was delivered by
              A. M. KHANWILKAR, J.
F           1. This appeal takes exception to the final judgment and order
      dated 21.8.2008 passed by the High Court of Judicature of Rajasthan at
      Jodhpur (for short, “the High Court”) in Income Tax Appeal No. 69 of
      2006, whereby the appellant’s appeal was dismissed and the order of
      Income Tax Appellate Tribunal, Jodhpur Bench (for short, ‘the ITAT’)
G     came to be upheld.
            2. In short, the appellant/assessee was served with a notice under
      Section 143(2) of the Income Tax Act, 1961 (for short, ‘1961 Act’) by
      the Assessing Officer (for short, ‘Officer’) for the assessment year
      1998-1999, pursuant to which an assessment order was passed on
      30.11.2000. This appeal involves limited challenge to certain addition
H
  BASIR AHMED SISODIYA v. THE INCOME TAX OFFICER                            585
              [A. M. KHANWILKAR, J.]

made under the heads - “Trading Account” and “Credits” in the               A
assessment order. The Officer, inter alia, while relying on the Balance
Sheet and the books of account, took note of the credits amounting to
Rs.2,26,000/- (Rupees two lakhs twenty-six thousand only). The Officer
treated that amount as “Cash credits” under Section 68 of the 1961 Act
and added the same in declared income of the assessee (for short, ‘second
                                                                            B
addition’). The Officer then proceeded to compute the income of the
assessee for the concerned assessment year. The relevant part of the
computation is mentioned below: -
      “Credits:
            On examining the balance-sheet and accounts books of            C
      assessee, it is apparent that the assessee has shown credit amount
      of Rs.2,26,000/- in the names of the following 15 persons:
      ………
            Accordingly, sufficient time and opportunity was granted
      to prove the veracity of credits of Rs. 2,26,000/- as shown by        D
      assessee. However false/wrong particulars or explanation were
      submitted with respect to credits shown by assessee. In this
      manner, the credits of Rs.2,26,000/- shown in the name of 15
      persons, is not correct and any correct proof/evidence has not
      been produced by assessee with respect to income of creditors         E
      and source of income. Besides this, the credits of Rs.2,26,000/-
      as shown in the name of 15 persons is held as unexplained under
      Section 68 and added in declared income of assessee.
            Accordingly, the computation of income of assessee for
      assessment year 1998-99 is as follows:                                F
      Income shown in the Returns                             87500/-
      1. Disallowed deduction U/s.24(1)
        as per discussion                           7200/-
      2. Additions in gross profit                 10000/-                  G
      3. Additions on the basis of less
        Household expenses withdrawals             18000/-
      4. Unexplained credits as per discussions 226000/- 261200/-
      Total taxable Income Tax                               348700/-       H
586             SUPREME COURT REPORTS                           [2020] 4 S.C.R.


A           Assessment was made. Necessary forms were issued. Notice
            be issued separately for imposition of penalty under Section
            272(1)(c).”
           3. Aggrieved, the appellant/assessee preferred an appeal before
      the Commissioner of Income Tax (Appeals), Jodhpur (for short,
B     ‘CIT(A)’). The appeal was partly allowed vide order dated 9.1.2003.
      However, as regards the Trading Account and Credits in question, the
      CIT(A) upheld the assessment order.
             4. The appellant/assessee then preferred further appeal to the
      ITAT. Having noted the issues and objections raised by the Department
C     and the appellant/assessee, the ITAT partly allowed the appeal vide order
      dated 4.11.2004. However, the order relating to the second addition (under
      consideration in the present civil appeal) regarding credits of Rs.2,26,000/
      - (Rupees two lakhs twenty-six thousand only) came to be upheld.
            5. The appellant/assessee then filed an appeal before the High
D     Court under Section 260A of the 1961 Act. The appeal was admitted on
      27.4.2006 on the following substantial question of law: -
            ‘‘Whether claim to purchase of goods by the assessee could be
            dealt with under Section 68 of the Income Tax as a cash credit,
            by placing burden upon the assessee to explain that the purchase
E           price does not represent his income from the disclosed sources?’’
            The principal argument of the appellant/assessee was that once
      the books of account have been rejected and an assessment order has
      been passed, the same books of account cannot be then relied upon by
      the Officer to impose consequent addition(s).
F           6. The High Court dismissed the appeal vide impugned judgment
      and order dated 21.8.2008, as being devoid of merits. The High Court
      opined that the amount shown as credits was nothing but bogus entries
      and was justly added to the income of the appellant/assessee. The Court
      also noted other reasons to dismiss the appeal. Relevant part of the
      judgment is reproduced hereunder: -
G
            “In our view, none of the submissions advanced by the learned
            counsel for the appellant has force. Learned counsel has
            proceeded on the basic assumption, about the factum of purchase
            of goods, having accepted by the authorities below, while the
            categoric finding of the Assessing Officer, which has not been
H
BASIR AHMED SISODIYA v. THE INCOME TAX OFFICER                            587
            [A. M. KHANWILKAR, J.]

  disturbed in appeal is, that regarding this purchase from               A
  unregistered dealer assessee was called upon during the course
  of assessment proceedings to prove the correctness and
  genuineness of his claim, but he completely failed, and therefore,
  the purchase cannot be accepted. In our view, this finding,
  rather is clear and categoric, that no purchase was affected
                                                                          B
  by the assessee, and amount was shown in a bogus manner,
  shown to be standing to credit of alleged purchasers, who
  could not be shown, to be either existent, or to be the
  creditors of the assessee, much less for the consideration
  alleged by the assessee. It is clear from the assessment
  orders and the finding affirmed in the appeals, that                    C
  opportunity was given to the assessee to substantiate the
  genuineness of the alleged transactions, but the assessee
  failed, and efforts made by the Revenue, to investigate the
  correctness of the alleged transaction also could not yield
  any results, in favour of the assessee.
                                                                          D
         Thus it is clear, that the amounts shown to be standing to
  the credit of the persons, which had been added to the income of
  the assessee, was clearly a bogus entry, in the sense that it was
  only purportedly shown to be the amount standing to the credit of
  the fifteen persons, purportedly on account of assessee having
  purchased goods no credit from them, while since no goods were          E
  purchased, the amount did represent income of the assessee from
  undisclosed sources, which the assessee had only brought on record
  (books of accounts), by showing to be the amount belonging to
  the purported sellers, and as the liability of the assessee.
        That being the position, the contention about impermissibility    F
  of making addition under this head, in view of addition of Rs.10,000/
  - having been made in trading account, cannot be accepted, as
  books of accounts has been rejected for the purpose of
  assessing the gross profit, as the gross profit shown in the
  books has not been accepted, on the ground, that the                    G
  assessee had not maintained day to day stock registers,
  nor has produced or maintained other necessary vouchers,
  but then, if those books of accounts did disclose certain
  other assets, which are wrongly shown to be liabilities, and
  for acquisition of which the assessee did not show the
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588               SUPREME COURT REPORTS                         [2020] 4 S.C.R.


A              source, it cannot be said that the Assessing Officer was not
               entitled to use the books of accounts for this purpose.”
                                                            (emphasis supplied)
              7. The appellant/assessee in the present civil appeal has reiterated
      the argument that the Officer, having made the addition under Section
B     144 of the 1961 Act being “best judgment assessment”, had invoked
      powers under sub-Section (3) of Section 145. For, assessment under
      Section 144 is done only if the books are rejected. In that case, the same
      books cannot be relied upon to impose subsequent additions, as has been
      done in this case under Section 68 of the 1961 Act. The appellant/assessee
C     adopted a three-pronged plea in support of the above contention; First,
      that assessment order refers to Section 145(2) of the 1961 Act. It should
      have mentioned Section 145(3) of the 1961 Act. For that, the appellant/
      assessee relies on the amendment of the 1961 Act which came into
      effect from 1.4.1997. It is urged that Section 145(2) prior to 1.4.1997
      (pre- amendment) is akin to Section 145(3) post 1.4.1997
D     (post-amendment). It is thus urged that the Department committed error
      in mentioning Section 145(2) and not Section 145(3); Second, that the
      assessment order in reference to the first addition has incorrectly
      mentioned the term “not”. According to the appellant/assessee, the prefix
      of the paragraph and the language used, makes it abundantly clear that
E     the Department had relied upon Section 145(3) of the 1961 Act to impose
      the addition. The appellant/assessee has also placed reliance on the Hindi
      version of the assessment order to buttress this submission; Third, that
      the assessment was made under Section 144 as the same refers to Section
      145(3). Under Section 144, the Officer has to make “best judgment
      assessment”. The appellant/assessee urges that the purport of the stated
F     provision is that the Officer re-assesses the entire accounts and makes
      the assessment of total income and thereafter computes the income tax
      liability. Resultantly, the Officer (after rejecting the books of account)
      cannot then rely on the same books of account to make any subsequent
      addition(s). The appellant/assessee also argues that the approach adopted
G     by the Officer would have the effect of taxing the same transaction
      twice.
           8. To buttress the aforesaid contentions, reliance is placed on Maddi
      Sudarsanam Oil Mills Co. v. Commissioner of Income-Tax,
      Hyderabad and Andhra1; Commissioner of Income Tax v. Aggarwal
H     1
          [1959] 37 ITR 369 (AP)
     BASIR AHMED SISODIYA v. THE INCOME TAX OFFICER                           589
                 [A. M. KHANWILKAR, J.]

Engg. Co. (Jal.) 2 and Commissioner of Income Tax vs. G.K.                    A
Contractors3.
       9. Per contra, the respondent urged that the assumption of the
appellant/assessee that the assessment order had rejected the books of
accounts under Section 145(3) of the 1961 Act is preposterous. In that,
the assessment in question came to be made under Section 143(3) of the        B
1961 Act. Thus, the Officer was justified in relying upon the said books
for making addition(s). The respondent would also urge that while imposing
the first addition, the assessment order does not reject the books of
accounts, but only that part which pertained to assessing the gross profit,
as the assessee had not maintained day to day stock registers, nor had
produced or maintained other necessary vouchers while determining the         C
gross profits. Additionally, the respondent would also urge that the amount
mentioned under “Credits” in the Balance Sheet is incorrect and qualifies
as “Cash Credits” under Section 68 of the 1961 Act, as stated in the
assessment order. Indisputably, the Officer gave several opportunities
to the appellant/assessee to prove the authenticity of the entries in         D
question. As a matter of fact, summon notices were issued to the named
fifteen creditors, but no evidence/explanation was forthcoming. The
finding of fact so recorded by the Officer is unexceptionable. The
respondent thus contends that the finding relating to the cash credits,
does not give rise to any substantial question of law.
                                                                              E
       10. Before we proceed to analyze the rival submissions, we need
to advert to I.A. No. 57442/2011 for permission to bring on record
subsequent events. By this application, the appellant/assessee has placed
on record an order passed by the CIT(A) dated 13.1.2011, which
considered the challenge to the order passed by the Income-Tax Officer
under Section 271(1)(c) dated 17.11.2006 qua the appellant/assessee           F
for the self-same assessment year 1998-1999. The Income-Tax Officer
had passed the said order as a consequence of the conclusion reached
in the assessment order which had by then become final upto the stage
of ITAT vide order dated 27.4.2006 - to the effect that the stated
purchases by the appellant/assessee from unregistered dealers were            G
bogus entries effected by the appellant/assessee. Resultantly, the penalty
proceedings under Section 271 were initiated by the Officer. That order,
however, has now been set aside by the appellate authority [CIT(A)] in
2
    (2006) 206 CTR (P&H) 648
3
    (2009) 19 DTR (Raj) 305 (IT Appeal No. 13/2009, decided on 28.1.2009)     H
590            SUPREME COURT REPORTS                          [2020] 4 S.C.R.


A     the appeal preferred by the appellant/assessee, vide order dated 13.1.2011
      with a finding that the appellant/assessee had not made any concealment
      of income or furnished inaccurate particulars of income for the concerned
      assessment year. As a consequence of the decision of the appellate
      authority, even criminal proceedings initiated against the appellant/
      assessee have been dropped/terminated and the appellant/assessee stands
B
      acquitted of the charges under Section 276(C)(D)(1)(2) of the 1961 Act
      vide judgment and order dated 6.6.2011 passed by the Court of Additional
      Chief City Magistrate (Economic Offence), Jodhpur City in proceedings
      No. 262/2005. Reverting back to the decision of the appellate authority
      [CIT(A)], vide order dated 13.1.2011, it considered the explanation
C     offered by the appellant/assessee in the penalty proceedings concerning
      assessment year 1998-1999 and went on to observe thus: -
            “17. During the course of appellate proceedings, the appellant
            filed an application under Rule 46A vide letter dated 16.10.2008
            and the same was sent to the ITO, Ward-1, Makrana vide this
D           office letter dated 28.1.2009 and 1.12.2010 to submit remand report
            after examination of additional evidences. Along with the
            application under Rules 46A, the appellant filed affidavits from 13
            creditors, sales Tax Order for the Financial Year 97-98 showing
            purchases from unregistered dealer to the tune of Rs.2,28,900/-,
            cash vouchers duly signed on the revenue stamp for receipt of
E           payment by the unregistered dealers and copy of Rasan Card/
            Voter Identity Card to show identity of the unregistered dealer.
            The Assessing Officer recorded statements of 12 unregistered
            dealers out of 13. In the report dated 22.12.2010, he mentioned
            that statements of above 12 persons were recorded on 15/
F           16.12.2010 and in respect of identify, the unregistered filed photo
            copies of their Voter Identity Cards and all of them have admitted
            that they have sold marble on credit basis to Sh. Bashir
            Ahmed Sisodia, the appellant, during the Financial Year
            97-98 and received payments after two or three years.
            However, he observed that none of them have produced any
G           evidence in support of their statement since all are petty
            unregistered dealers of marble and doing small business and
            therefore, no books of account were maintained. Some of them
            have stated that they were maintaining small dairies in the relevant
            period of time but they could not preserve old dairies. Some of
H
BASIR AHMED SISODIYA v. THE INCOME TAX OFFICER                          591
            [A. M. KHANWILKAR, J.]

  them have stated that they have put their signature on the vouchers   A
  on the date of transactions. It is therefore, observed that the
  Assessing Officer has neither doubted their identity nor
  any adverse comments in respect of purchase of marble
  slabs in the Financial Year relevant at AY 98-99 has given
  in the remand report.
                                                                        B
                        xxx xxx xxx
  19. In respect of addition of Rs.2,26,000/-, it would be
  pertinent to note here that there is no denial of purchase of
  marble slabs worth Rs.4,78,900/- and sale of goods worth
  Rs.3,57,463/- and disclose of closing stock of Rs.2,92,490/           C
  - as disclosed in the trading account for the year ended on
  31.3.98.
  …………….
  Without purchases of marbles, there could not have been sale and
  disclosure of closing stock in the trading account and it suggests    D
  that the appellant must have purchased marble slabs from
  unregistered dealers.
  …………….
  The explanation given by the appellant in respect of
                                                                        E
  purchases from the unregistered dealer and their
  genuineness are substantiated by filing of affidavits,
  producing before the Assessing Officer in the course of
  remand report and the Assessing Officer did not find any
  objectionable in respect identity of the unregistered dealers
  and claim made for sale of marble slabs to the appellant in           F
  the Financial Year relevant to AY 98-99.
  …………..
  Thus, there was no justification not to accept the purchase made
  from unregistered dealers. If such an addition is made, it would
  give unreasonable rate of profit. The vouchers in respect of          G
  purchases made from unregistered dealers were produced by the
  appellant.”
                                                (emphasis supplied)

                                                                        H
592            SUPREME COURT REPORTS                            [2020] 4 S.C.R.


A           Finally, in paragraph 20, the appellate authority observed thus: -
            ‘‘20. Under the above facts and circumstances, I am of the view
            that there was no either concealment of income or furnishing any
            inaccurate particulars of income and accordingly, the penalty order
            dated 17.11.2006 passed by the Assessing Officer is cancelled.
B           The grounds of appeal allowed.’’
             Notably, the appellant/assessee has asserted in paragraph 2 of
      the application (I.A. No. 57442/2011) that consequent to the order passed
      by the appellate authority dated 13.1.2011, the Department has refunded
      penalty amount of Rs.98,153/- (Rupees ninety-eight thousand one
C     hundred fifty-three only) alongwith interest to the appellant/assessee.
      That means the Department has allowed the said order dated 13.1.2011
      to become final.
            11. We have heard learned senior counsel, Dr. Manish Singhvi
      and Mr. K. Radhakrishnan appearing for the appellant and respondent,
D     respectively.
             12. Before dissecting the rival submissions, we deem it apposite
      to reproduce the relevant provisions as applicable at the relevant time
      for assessment year 1998-1999 as below;
            “Assessment
E
            143. (1) (a) Where a return has been made under section 139, or
            in response to a notice under sub-section (1) of section 142,-
            (i) if any tax or interest is found due on the basis of such return,
                after adjustment of any tax deducted at source, any advance
                tax paid and any amount paid otherwise by way of tax or
F
                interest, then, without prejudice to the provisions of sub-section
                (2), an intimation shall be sent to the assessee specifying the
                sum so payable, and such intimation shall be deemed to be a
                notice of demand issued under section 156 and all the provisions
                of this Act shall apply accordingly; and
G           (ii) if any refund is due on the basis of such return, it shall be
                 granted to the assessee:
            Provided that in computing the tax or interest payable by, or
            refundable to, the assessee, the following adjustments shall be
            made in the income or loss declared in the return, namely:-
H
BASIR AHMED SISODIYA v. THE INCOME TAX OFFICER                             593
            [A. M. KHANWILKAR, J.]

  (i) any arithmetical errors in the return, accounts or documents         A
      accompanying it shall be rectified;
  (ii) any loss carried forward, deduction, allowance or relief, which,
       on the basis of the information available in such return,
       accounts or documents, is prima facie admissible but which
       is not claimed in the return, shall be allowed;                     B
  (iii) any loss carried forward, deduction, allowance or relief claimed
        in the return, which, on the basis of the information available
        in such return, accounts or documents, is prima facie
        inadmissible, shall be disallowed:
  Provided further that where adjustments are made under the               C
  first proviso, an intimation shall be sent to the assessee,
  notwithstanding that no tax or interest is found due from him after
  making the said adjustments:
  Provided also that an intimation for any tax or interest due under
  this clause shall not be sent after the expiry of two years from the     D
  end of the assessment year in which the income was first
  assessable.
  (b) Where as a result of an order made under sub-section
  (3) of this section or section 144 or section 147 or section 154 or
                                                                           E
  section 155 or section 250 or section 254 or section 260 or section
  262 or section 263 or section 264, or any order of settlement made
  under sub-section (4) of section 245D relating to any earlier
  assessment year and passed subsequent to the filing of the return
  referred to in clause (a), there is any variation in the carry forward
  loss, deduction, allowance or relief claimed in the return, and as a     F
  result of which,-
  (i) if any tax or interest is found due, an intimation shall be sent
      to the assessee specifying the sum so payable, and such
      intimation shall be deemed to be a notice of demand issued
      under section 156 and all the provisions of this Act shall apply     G
      accordingly, and
  (ii) if any refund is due, it shall be granted to the assessee:
  Provided that an intimation for any tax or interest due under this
  clause shall not be sent after the expiry of four years from the
  end of the financial year in which any such order was passed.            H
594      SUPREME COURT REPORTS                            [2020] 4 S.C.R.


A     (c) Where the assessee is a member of an association of persons
      or body of individuals and as a result of the adjustments made
      under the first proviso to clause (a) of sub-section (1) in the income
      or loss declared in the return made by the association or body, as
      the case may be, or as a result of an order made under sub-section
      (3) of this section or section 144 or section 147 or section 154 or
B
      section 155 or sub-section (1) or sub-section (2) or sub-section
      (3) or sub-section (5) of section 185 or sub-section (1) or sub-
      section (2) of section 186 or section 250 or section 254 or section
      260 or section 262 or section 263 or section 264, or any order of
      settlement made under sub-section (4) of section 245D, passed
C     subsequent to the filing of the return referred to in clause (a),
      there is any variation in his share in the income or loss of the
      association or body, as the case may be, or in the manner of
      inclusion of his share in the returned income, then,-
      (i) if any tax or interest is found due, an intimation shall be sent
D         to the assessee specifying the sum so payable, and such
          intimation shall be deemed to be a notice of demand issued
          under section 156 and all the provisions of this Act shall apply
          accordingly, and
      (ii) if any refund is due, it shall be granted to the assessee:
E     Provided that an intimation for any tax or interest due under this
      clause shall not be sent after the expiry of four years from the
      end of the financial year in which any such adjustments were
      made or any such order was passed.
      (1A) (a) Where as a result of the adjustments made under the
F     first proviso to clause (a) of sub-section (1),-
      (i) the income declared by any person in the return is increased;
          or
      (ii) the loss declared by such person in the return is reduced or is
           converted into income, the Assessing Officer shall,-
G
      (A) in a case where the increase in income under sub-clause (i)
          of this clause has increased the total income of such person,
          further increase the amount of tax payable under sub-section
          (1) by an additional income-tax calculated at the rate of twenty
          per cent on the difference between the tax on the total income
H
BASIR AHMED SISODIYA v. THE INCOME TAX OFFICER                           595
            [A. M. KHANWILKAR, J.]

      so increased and the tax that would have been chargeable           A
      had such total income been reduced by the amount of
      adjustments and specify the additional income-tax in the
      intimation to be sent under sub-clause (i) of clause (a) of
      sub-section (1);
  (B) in a case where the loss so declared is reduced under              B
      sub-clause (ii) of this clause or the aforesaid adjustments have
      the effect of converting that loss into income, calculate a sum
      (hereinafter referred to as additional income-tax) equal to
      twenty per cent of the tax that would have been chargeable
      on the amount of the adjustments as if it had been the total
      income of such person and specify the additional income-tax        C
      so calculated in the intimation to be sent under sub-clause (i)
      of clause (a) of sub- section (1);
  (C) where any refund is due under sub-section (1), reduce the
      amount of such refund by an amount equivalent to the
      additional income-tax calculated under sub-clause (A) or           D
      sub-clause (B), as the case may be.
  (b) Where as a result of an order under sub-section (3) of this
  section or section 154 or section 250 or section 254 or section 260
  or section 262 or section 263 or section 264, the amount on which
  additional income-tax is payable under clause (a) has been             E
  increased or reduced, as the case may be, the additional income-tax
  shall be increased or reduced accordingly, and,-
  (i) in a case where the additional income-tax is increased, the
      Assessing Officer shall serve on the assessee a notice of
      demand under section 156;                                          F
  (ii) in a case where the additional income-tax is reduced, the
       excess amount paid, if any, shall be refunded.
  (1B) Where an assessee furnishes a revised return under
  sub-section (5) of section 139 after the issue of an intimation, or
                                                                         G
  the grant of refund, if any, under sub-section
  (1) of this section, the provisions of sub-sections (1) and (1A) of
  this section shall apply in relation to such revised return and-
  (i) the intimation already sent for any income-tax, additional
      income-tax or interest shall be amended on the basis of the        H
596      SUPREME COURT REPORTS                            [2020] 4 S.C.R.


A         said revised return and where any amount payable by way of
          income-tax, additional income-tax or interest specified in the
          said intimation has already been paid by the assessee then, if
          any such amendment has the effect of-
             (a) enhancing the amount already paid, the intimation
B               amended under this clause shall be sent to the assessee
                specifying the excess amount payable by him and such
                intimation shall be deemed to be a notice of demand
                issued under section 156 and all the provisions of this
                Act shall apply accordingly;
C            (b) reducing the amount already paid, the excess amount
                 paid shall be refunded to the assessee;
      (ii) the amount of the refund already granted shall be enhanced
           or reduced on the basis of the said revised return and where
           the amount of refund already granted is-
D            (a) enhanced, only the excess amount of refund due to the
                 assessee shall be paid to him;
             (b) reduced, the excess amount so refunded shall be deemed
                 to be the tax payable by the assessee and an intimation
                 shall be sent to the assessee specifying the amount so
E                payable, and such intimation shall be deemed to be a
                 notice of demand issued under section 156 and all the
                 provisions of this Act shall apply accordingly:
      Provided that an assessee, who has furnished a revised return
      under sub-section (5) of section 139 after the service upon him of
F     the intimation under sub-section (1) of this section, shall be liable
      to pay additional income-tax in relation to the adjustments made
      under the first proviso to clause (a) of sub-section (1) and specified
      in the said intimation, whether or not he has made the said
      adjustments in the revised return.
G     (2) Where a return has been made under section 139, or in
      response to a notice under sub- section (1) of section 142, the
      Assessing Officer shall, if he considers it necessary or expedient
      to ensure that the assessee has not understated the income or has
      not computed excessive loss or has not under- paid the tax in any
      manner, serve on the assessee a notice requiring him, on a date to
H
BASIR AHMED SISODIYA v. THE INCOME TAX OFFICER                          597
            [A. M. KHANWILKAR, J.]

  be specified therein, either to attend his office or to produce, or   A
  cause to be produced there, any evidence on which the assessee
  may rely in support of the return:
  Provided that no notice under this sub-section shall be served on
  the assessee after the expiry of twelve months from the end of
  the month in which the return is furnished.                           B
  (3) On the day specified in the notice issued under sub- section
  (2), or as soon afterwards as may be, after hearing such evidence
  as the assessee may produce and such other evidence as the
  Assessing Officer may require on specified points, and after taking
  into account all relevant material which he has gathered, the         C
  Assessing Officer shall, by an order in writing, make an assessment
  of the total income or loss of the assessee, and determine the sum
  payable by him on the basis of such assessment.
  (4) Where a regular assessment under sub-section (3) of this
  section or section 144 is made,-                                      D
        (a) any tax or interest paid by the assessee under sub-
            section (1) shall be deemed to have been paid towards
            such regular assessment;
        (b) if no refund is due on regular assessment or the amount
            refunded under sub- section (1) exceeds the amount          E
            refundable on regular assessment, the whole or the
            excess amount so refunded shall be deemed to be tax
            payable by the assessee and the provisions of this Act
            shall apply accordingly.
  (5) The provisions of this section as they stood immediately before   F
  their amendment by the Direct Tax Laws (Amendment) Act, 1987
  (4 of 1988), shall apply to and in relation to any assessment for
  the assessment year commencing on the 1st day of April, 1988, or
  any earlier assessment year and references in this section to the
  other provisions of this Act shall be construed as references to
                                                                        G
  those provisions as for the time being in force and applicable to
  the relevant assessment year.
  Explanation.- An intimation sent to the assessee under sub-section
  (1) or sub-section (1B) shall be deemed to be an order for the
  purposes of sections 246 and 264.
                                                                        H
598      SUPREME COURT REPORTS                         [2020] 4 S.C.R.


A     Best judgment assessment.
      144. (1) If any person—
            (a) fails to make the return required under sub-section (1)
               of section 139 and has not made a return or a revised
               return under sub-section (4) or sub-section (5) of that
B              section, or
            (b) fails to comply with all the terms of a notice issued
               under sub-section (1) of section 142 or fails to comply
               with a direction issued under sub-section (2A) of that
               section, or
C
            (c) having made a return, fails to comply with all the
                terms of a notice issued under sub-section (2) of
                section 143,
       the Assessing Officer, after taking into account all relevant
D     material which the Assessing Officer has gathered, shall,
      after giving the assessee an opportunity of being heard,
      make the assessment of the total income or loss to the
      best of his judgment and determine the sum payable by the
      assessee on the basis of such assessment:
      Provided that such opportunity shall be given by the Assessing
E
      Officer by serving a notice calling upon the assessee to show
      cause, on a date and time to be specified in the notice, why the
      assessment should not be completed to the best of his judgment:
      Provided further that it shall not be necessary to give such
      opportunity in a case where a notice under sub-section (1) of
F
      section 142 has been issued prior to the making of an assessment
      under this section.
      (2) The provisions of this section as they stood immediately before
      their amendment by the Direct Tax Laws (Amendment) Act, 1987
      (4 of 1988), shall apply to and in relation to any assessment for
G     the assessment year commencing on the 1st day of April, 1988, or
      any earlier assessment year and references in this section to the
      other provisions of this Act shall be construed as references to
      those provisions as for the time being in force and applicable to
      the relevant assessment year.
H
   BASIR AHMED SISODIYA v. THE INCOME TAX OFFICER                              599
               [A. M. KHANWILKAR, J.]

      Method of accounting.                                                    A
      145. (1) Income chargeable under the head “Profits and gains of
      business or profession” or “Income from other sources” shall,
      subject to the provisions of sub-section (2), be computed in
      accordance with either cash or mercantile system of accounting
      regularly employed by the assessee.                                      B
      (2) The Central Government may notify in the Official Gazette
      from time to time accounting standards to be followed by any
      class of assesses or in respect of any class of income.
      (3) Where the Assessing Officer is not satisfied about the
      correctness or completeness of the accounts of the                       C
      assessee, or where the method of accounting provided in
      sub-section (1) or accounting standards as notified under
      sub-section (2), have not been regularly followed by the
      assessee, the Assessing Officer may make an assessment
      in the manner provided in section 144.”                                  D
                                                      (emphasis supplied)
       13. Reverting to the findings and conclusions recorded by the
Officer and which commended to the appellate authority, as well as, the
High Court, it must follow that the appellant/assessee despite being given
sufficient opportunity, failed to prove the correctness and genuineness        E
of his claim in respect of purchases of marbles from unregistered dealers
to the extent of Rs.2,26,000/- (Rupees two lakhs twenty-six thousand
only). Resultantly, the said transactions were assumed as bogus entries
(standing to the credit of named dealers who were non-existent creditors
of the assessee).                                                              F
      14. However, it has now come on record that the appellant/assessee
in penalty proceedings offered explanation and caused to produce
affidavits and record statements of the concerned unregistered dealers
and establish their credentials. That explanation has been accepted by
the CIT(A) vide order dated 13.1.2011. In paragraph 17 of the said
                                                                               G
decision reproduced hitherto, it has been noted that the Officer recorded
statements of 12 unregistered dealers out of 13 and their identity was
also duly established. After analysing the evidence so produced by the
appellant/assessee, the appellate authority [(CIT(A)] noted that the Officer
had neither doubted the identity of those dealers nor any adverse
comments were offered in reference to their version regarding sale of          H
600            SUPREME COURT REPORTS                          [2020] 4 S.C.R.


A     marble slabs by them to the appellant/assessee in the financial year
      relevant to assessment year 1998-1999 and receipt of payments after
      two to three years. Further, there was no denial of purchase of marbles
      worth Rs.4,78,900/- (Rupees four lakhs seventy-eight thousand nine
      hundred only) by the assessee and sale thereof worth Rs.3,57,463/-
      (Rupees three lakhs fifty-seven thousand four hundred sixty three only)
B
      with closing stock of Rs.2,92,490/- (Rupees two lakhs ninety two thousand
      four hundred ninety only), as disclosed in the trading account for the
      year ended on 31.3.1998. The appellate authority thus found that without
      purchases of marbles, there could be no sale and disclosure of closing
      stock in the trading account. In other words, the materials on record
C     would clearly suggest that the concerned unregistered dealers had sold
      marble slabs on credit to the appellant/assessee, as claimed. As a
      consequence of this finding, the appellate authority concluded that there
      was neither any concealment of income nor furnishing of inaccurate
      particulars of income by the assessee. We are conscious of the fact that
      these observations are made by the competent forum (appellate authority)
D
      in penalty proceedings under Section 271 of the 1961 Act in favour of
      the assessee. However, what needs to be noted is that the stated penalty
      proceedings were the outcome of the assessment order in question
      concerning assessment year 1998-1999. Indeed, at the time of
      assessment, the appellant/assessee had failed to produce any explanation
E     or evidence in support of the entries regarding purchases made from
      unregistered dealers. In the penalty proceedings, however, the appellant/
      assessee produced affidavits of 13 unregistered dealers out of whom 12
      were examined by the Officer. The Officer recorded their statements
      and did not find any infirmity therein including about their credentials.
      The dealers stood by the assertion made by the appellant/assessee about
F
      the purchases on credit from them; and which explanation has been
      accepted by the appellate authority in paragraphs 17 and 19 of the order
      dated 13.1.2011.
             15. To put it differently, the factual basis on which the Officer
      formed his opinion in the assessment order dated 30.11.2000 (for
G     assessment year 1998-1999), in regard to addition of Rs.2,26,000/-
      (Rupees two lakhs twenty six thousand only), stands dispelled by the
      affidavits and statements of the concerned unregistered dealers in penalty
      proceedings. That evidence fully supports the claim of the appellant/
      assessee. The appellate authority vide order dated 13.1.2011, had not
H
   BASIR AHMED SISODIYA v. THE INCOME TAX OFFICER                                601
               [A. M. KHANWILKAR, J.]

only accepted the explanation offered by the appellant/assessee but also         A
recorded a clear finding of fact that there was no concealment of income
or furnishing of any inaccurate particulars of income by the appellant/
assessee for the assessment year 1998-1999. That now being the
indisputable position, it must necessarily follow that the addition of amount
of Rs.2,26,000/- (Rupees two lakhs twenty-six thousand only) cannot be
                                                                                 B
justified, much less, maintained.
       16. Accordingly, this appeal ought to succeed on this count alone
and it would be unnecessary for us to dilate on other questions/contentions
urged by the parties as referred to in the earlier part of this judgment.
       17. Accordingly, this appeal is allowed. The addition of Rs.2,26,000/     C
- (Rupees two lakhs twenty-six thousand only) by the Officer under
Section 68 of the 1961 Act, towards cash credit amount shown against
the names of concerned unregistered dealers for the assessment year
1998-1999, is hereby set aside. The rest of the assessment order dated
30.11.2000 as modified by the CIT(A) vide order dated 9.1.2003, shall
remain undisturbed. There shall be no order as to costs. All pending             D
interlocutory applications are also disposed of.


Divya Pandey                                                   Appeal allowed.

                                                                                 E




                                                                                 F




                                                                                 G




                                                                                 H