1954 (10) TMI 58 - HC - Income Tax

Summary

Issues Involved:
1. Whether the amount of Rs. 53,000 representing the value of high denomination notes was income assessable to income-tax received during the accounting period.
2. Onus of proof regarding the source and nature of the amount received.
3. Validity of the Appellate Tribunal's assessment of the amount as secreted profits.
4. Justification for the exclusion of Rs. 20,000 by the Appellate Tribunal.

Issue-Wise Detailed Analysis:

1. Assessability of Rs. 53,000 as Income:
The primary issue was whether the amount of Rs. 53,000, representing the value of high denomination notes encashed by the assessee, was assessable as income received during the accounting period. The Tribunal concluded that the notes were not encashed on behalf of another individual (Mr. N.K. Misra) as claimed by the assessee. Given the contradictory explanations provided by the assessee and the lack of satisfactory proof, the Tribunal held that the sum of Rs. 53,000 was part of the assessee's secreted income. The High Court upheld this view, emphasizing that the burden of proof lay with the assessee to establish the source and nature of the amount received.

2. Onus of Proof:
The judgment reiterated the established principle that the onus is on the assessee to prove positively the source and nature of an amount received during the accounting year. If the assessee fails to discharge this onus, the Income-tax authorities are entitled to infer that the amount is of an income nature. This principle was supported by precedents such as S.N. Ganguly v. Commissioner of Income-tax, Bihar and Orissa, and others, which were cited to reinforce that the burden of proof is on the assessee, not the revenue authorities.

3. Validity of the Appellate Tribunal's Assessment:
The Appellate Tribunal's decision to include Rs. 53,000 in the assessee's total income was challenged on the grounds that no proper investigation was made into whether the amount could represent savings from non-taxable zamindari income. The High Court found this argument without merit, noting that the assessee had never claimed that the high denomination notes were part of his zamindari income. The Tribunal's decision to treat the amount as secreted profits was based on the assessee's failure to provide a consistent and credible explanation for the source of the notes.

4. Justification for Exclusion of Rs. 20,000:
The assessee argued that the Tribunal's decision to exclude only Rs. 20,000 as representing his savings was arbitrary. The High Court disagreed, noting that the Tribunal had considered the assessee's status, habits, and expenses before concluding that Rs. 20,000 could reasonably be excluded from the taxable amount. The Tribunal's decision was based on an estimation of what a person of the assessee's status might reasonably hold in high denomination notes. The High Court found that the Tribunal had provided sufficient reasoning for its conclusion and that the exclusion of Rs. 20,000 was not arbitrary.

Conclusion:
The High Court concluded that the Appellate Tribunal had not committed any error of law in its findings. The onus was on the assessee to prove the source and nature of the high denomination notes, which he failed to do satisfactorily. The Tribunal's decision to include Rs. 53,000 as secreted income was upheld, and the High Court answered the reference against the assessee and in favor of the Income-tax department. The assessee was ordered to pay the costs of the reference.

Separate Judgments:
Both judges, Ramaswami and Choudhary, agreed with the conclusion, and the reference was answered accordingly.