1970 (11) TMI 30 - HC - Income Tax

Copy of entries from the accounts of another firm supplied by the sales tax department to the Income-tax Officer and ITO made assessment on unproved copy of accounts obtained from Sales tax authorities - assessee denies the entries in the copy - such copy of entires could not be relied upon by ITO for imposing extra burden of income-tax on the assessee

Issues Involved:
1. Legality and admissibility of evidence (Uchanti Bahi).
2. Discrepancies in account books.
3. Independent verification of evidence.
4. Reliance on secondary evidence.
5. Burden of proof and assessment procedure.

Detailed Analysis:

1. Legality and Admissibility of Evidence (Uchanti Bahi):
The core issue revolves around whether the Uchanti Bahi, a duplicate cash book allegedly belonging to M/s. Goel Iron Stores, constitutes legal and admissible evidence. The High Court held that the mere copy of the Uchanti Bahi supplied by the sales tax department was not legal or admissible evidence. It was emphasized that "legal and admissible evidence means evidence on which a judicial mind can act by forming a belief that it is true although the assessee denies it." The court noted that the original Uchanti Bahi was missing, and there was no explanation for its disappearance, casting doubt on the authenticity of the duplicate copy.

2. Discrepancies in Account Books:
The Income-tax Officer identified discrepancies between the Uchanti Bahi and the assessee's books of accounts. The Uchanti Bahi showed credit entries totaling Rs. 40,261, whereas the assessee's books accounted for only Rs. 26,306. Similarly, debit entries in the Uchanti Bahi amounted to Rs. 25,424, while the assessee's books showed only Rs. 15,388. These discrepancies led the Income-tax Officer to conclude that the difference of Rs. 13,955 represented undisclosed income. However, the court found that these discrepancies were not substantiated by reliable evidence.

3. Independent Verification of Evidence:
The court criticized the Income-tax Officer for not conducting independent verification of the Uchanti Bahi entries. It was stated that "the Income-tax Officer made no independent enquiries and merely relied on the copy supplied by the sales tax department." The court emphasized the duty of the Income-tax Officer to verify the truthfulness of the information and to provide the assessee with a reasonable opportunity to rebut it.

4. Reliance on Secondary Evidence:
The court found fault with the reliance on secondary evidence, i.e., the duplicate copy of the Uchanti Bahi. The Appellate Assistant Commissioner had rejected this document, noting that "a duplicate copy which is uncertified cannot replace the original." The court agreed, highlighting the suspicious circumstances surrounding the disappearance of the original Uchanti Bahi and the missing pages in the duplicate copy.

5. Burden of Proof and Assessment Procedure:
The court underscored the principle that the burden of proof lies with the Income-tax Officer to establish the reliability of the evidence used for assessment. The court noted that "the Income-tax Officer gravely erred in relying on the entries from the Uchanti Bahi without ascertaining their correctness from any other source and acted on a mere suspicion which was not justified." The court concluded that the Appellate Assistant Commissioner had rightly deleted the addition of Rs. 13,955, as the evidence was not legally and admissibly sufficient to support the Income-tax Officer's assessment.

Conclusion:
The High Court answered the referred question in the negative, in favor of the assessee, concluding that there was no legal and admissible evidence to support the Income-tax Appellate Tribunal's finding. The court held that the addition of Rs. 13,955 as income from undisclosed sources was not justified and awarded costs to the assessee.

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