TMI Blog1973 (8) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... re exactly in proportion to the shares of the partners in the business, The stand of the assessee before the Income-tax Officer was that the deposits were out of the income of the partners and should be assessed in their hands ; they were not the income of the registered firm. Of course, it was admitted before the Income-tax Officer that the source of the money brought in by the partners could not be explained. The Income-tax Officer did not find the explanation satisfactory and added the amounts to the income of the firm. The assessee went up in appeal. The Appellate Assistant Commissioner maintained the addition and dismissed the appeal. A further appeal was taken before the Income-tax Appellate Tribunal and the Tribunal, mainly relying upon section 68 of the Act, upheld the addition holding that since the explanation given by the assessee had not been found to be satisfactory, the addition was justified in view of the said provision of law. On being asked by the assessee to state a case to this court, the Tribunal has done it and referred the aforesaid question of law to this court. Learned counsel for the assessee placed reliance upon several decisions of the various cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons could not have taken that view then also the finding is not binding on the High Court. If the money was found to have been deposited by the partners in the books of account of their partnership firm and if the fact of deposit was believed then the mere failure of the partners to explain from where they got the money did not justify the addition of the amount of cash credit in the firm's income. In the background of these broad principles of law, I proceed to examine the facts of the instant case. Before the Income-tax Officer it was asserted that the sum of Rs. 45,900 has been brought by the eight partners from sources which could not be explained but the money had been deposited in the firm. The Income-tax Officer rejected this explanation and chiefly on two grounds--(i) that in the assessment year 1960-61 the assessee-firm was found to be maintaining double set of account books and two big sums to the tune of Rs. 1,06,000 were added to the assessee's income, and this, in the opinion of the Income-tax Officer, proved that the profits of the business outside the books had been divided amongst the partners, and (ii) that the very fact that, the amounts have been deposited in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act, 1922, corresponding to section 68 of the Act. Section 68, however, was enacted, as it appears, mainly to give a statutory recognition to the principles of law laid down by the various authorities making a departure in regard to two matters only, as pointed out by the learned authors Kanga and Palkhivala in The Law and Practice of Income Tax, 6th edition, volume I, page 537. Previously, a dispute had arisen as to whether a cash credit found in a particular accounting year of the assessee could be taken to be the income of that accounting year or whether it should be taken to be of a separate previous year according to the financial year. This matter has been set at rest by section 68 which says that in all events the income of the assessee has to be treated of that previous year in which the cash credit has been found. Another dispute which had cropped up in various cases was as to whether the amounts found deposited on the very first day of the accounting year could be treated as the secreted income of the assessee of that accounting year. That matter has also been set at rest by section 68. But on the main question the argument advanced on behalf of the assessee b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee could not persuade the Tribunal to record a finding in its favour that the money found deposited in its account books was actually the money brought by the partners and deposited. Let me now proceed to examine briefly the case law on the point. Naraynadas Kedarnath v. Commissioner of Income-tax is a Bench decision of the Bombay High Court. There certain amount standing to the credit of some of the partners of the assessee-firm was found to be the amount actually brought in by them from their native place by means of bank draft, although the source from where the partners brought the money was not known. It was known, however, that it was the partners who had deposited the amount in the firm's account books and consequently it was held to be not the secreted profit of the firm. Balbhadra Chand Munnalal v. Commissioner of Income-tax is a Bench decision of the Allahabad High Court. The facts of this case are in conformity with the Bombay decision and the principles laid down are almost identical. The case of Lalchand Bhagat Ambika Ram v. Commissioner of Income-tax is a decision of the Supreme Court whereby the Bench decision of this court had been reversed. It was a cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is based upon relevant materials, not only it is not perverse but seems to be reasonable also, then it is not open to this court to say that the findings arrived at by the departmental authorities or the Tribunal are vitiated in law. This same view has been expressed in the case of Bai Velbai, where it has been pointed out that a finding on a question of fact is open to attack in reference as being erroneous in law when there is no evidence to support it or if it is perverse or has been reached without due consideration of the several materials relevant for such a determination. Orient Trading Co. Ltd. v. Commissioner of Income-tax is a decision of the Bombay High Court, in which it has been pointed out that if the credit entry stands in the name of the assessee himself, the burden is undoubtedly on him to prove satisfactorily the nature and source of the amount of that entry ; if the entry stands in the name of the assessee's near relation, in that case also the burden is on him. if the entry, however, stands in the name of a third party then the assessee discharges his burden if he proves to the satisfaction of the Income-tax Officer the identity of the third party and also supp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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