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TMI Blog1963 (3) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... o a contractor for raising coal. This matter relates to the assessment year 1946-47. For that year, Banerjee was assessed on an income of Rs. 1,28,738. The assessment was then re-opened under s. 34 of the Indian Income-Tax Act, and was enhanced, but subsequently on appeal, it was reduced to a sum a little below the original assessment. The present assessment was made on a second re-opening of the case under s. 34 in the following circumstances. On January 22, 1946, Banerjee encashed high denomination notes of the value of Rs. 51,000/-.In his application under the Ordinance which demonetized high denomination notes, Banerjee gave the reason for the possession of the notes as follows:- "I am engaged in business as colliery proprietor, contractor under Messrs. Kilburn & Co. in the name and style of H.P. Banerjee & Son and also under the State Rly. Bokaro, Swang, Hazaribagh district in the name of Jharia Dhanbad Coal & Mica Mining Co For conducting the business and payment to labour, I have to pay every week between 30/40 thousand as I did not get payment for work done every week. I had to keep large sum of money to meet emergency. It is neither profit nor part of profit-it is very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants. They claim that the Allahabad case applies to the facts here and point out that the said ruling was considered and approved by this Court in Lalchand Bhagat Ambica, Ram v. Commissioner of Income Tax, Bihar and Orissa [1959] 37 I.T.R. 288. Other cases have been cited on behalf of the department. The cases involving the encashment of high denomination notes are quite numerous. In some of them the explanation tendered by the tax-payer has been accepted and in some it has been rejected. The manner in which evidence brought on behalf of the tax-payer should be viewed, has of course, depended on the facts of each case. In these cases in which the assessee proved that he had on the relevant date a large sum of money sufficient to cover the number of notes encashed, this Court and the High Courts, in the absence of something which showed that the explanation was inherently improbable, accepted the explanation that the assesse held the amount or a part of it in high denomination notes. In other words, in such cases, the assessee was held prima facie to have discharged the burden which was upon him. Where the assessee was unable to prove that in his normal business or otherwise, he was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is laid down by this Court that if an assessee fails to prove satisfactorily the source and nature of an amount received by him during the accounting year, the Income Tax Officer is entitled to draw the inference that the receipts are of an assessable nature. In that case, the explanation-of the assessee in respect of the amounts shown as credits for him in the account books of a firm of which he was a partner, was rejected as un true. It was heldthat t was open to the Income Tax Officer and the Appellate Tribunal to hold that the amounts represented the concealed income of the assessee. From the last two cases, it is plain that if there is receipt of an amount in the accounting year, it is incumbent in the first instance upon the assessee to show that it does not bear the character of income. If be fails to do this, the Income Tax Officer may hold that it represents income of the assessee either from the sources he has disclosed or from some undisclosed source. In applying this principle to the cases of encashment of high denomination notes, there is some difficulty when the assessee has books of account which are accepted and in which there is a cash balance sufficient to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rror of law. But in Sovachand Baidv. Commissioner of Income Tax, [1958] 34 I.T.R. 650 high denomination notes of the value of Rs.2,28,000 were encashed. The assessee stated that he had inherited that amount from his father in 1942, and produced account books from 1926 to 1942. He did not produce earlier account books. The Tribunal found that the books were such as could be written at any time and did not contain full dealings even between 1926 and 1942, and there were no entries showing that any amount as such was received from business. The Tribunal, however, held that Rs.1,28,000 only was income from some undisclosed source. The assessee's appeal in this Court was dismissed, because the rejection of the account books was held to be reasonable in the circumstances of the case. This Court observed that the partial rejection of the explanation by the Tribunal must be treated as a concession rather than a reasoned conclusion. We now come to Lalchand Bhagat's case which is strongly relied upon, particulary, as it has cited the Allahabad case, so it is said, with complete approval. It is therefore, necessary to examine it closely to see if there is such an approval. In that case, 291 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... othing to distinguish between the two parts. This Court, therefore, pointed out that the main question about Rs.1,41,000 was whether there was any material to justify a different conclusion in respect of that amount and pointed to the following facts. The assessee had established the need for keeping a large sum on hand and had proved the almirah account as a genuine account. The almirah account contained the numbers of the high denomination notes in the years previous to the year relative to the assessment. In that year, the numbers were inserted subsequently and this was the only substantial point against the assessee. This Court also pointed out that there were statements of banks and accounts of the branches and of be paris, showing that large amounts were received by the assessee, which made up the amount in the almirah account. Between February 6, 1945 and January 11, 1946, when the notes were encashed, sum,, above Rs. 1,000 received by the assessee aggregated to as much as rupees five lakhs. As the almirah account was not questioned by the Tribunal at all, and out of that amount, more than half was held to be in the shape of high denomination notes, this Court posed the foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich deserves to be rejected, the Department can reject it and draw the inference that the amount represents income either from the sources already disclosed by the assessee or from some undisclosed source. The Department does not then proceed on no evidence, because the fact that there was receipt of money, is itself evidence against the assessee. There is thus prima facie evidence against the assessee which he fails to rebut, and being unrebutted, that evidence can be used against him by holding that it was a receipt of an income nature. The very words "an undisclosed source" show that the disclosure must come from the assesse and not form the Department. In cases of high denomination notes, where the business and the state of accounts and dealings of the assessee justify a reasonable inference that he might have for convenience kept the whole or a part of a particular sum in high denomination notes, the assesse prima facie discharges his initial burden when he proves the balance and that it might reasonably have been kept in high denomination notes. Before the Department rejects such evidence, it must either show an inherent weakness in the explanation or rebut it by putting to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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