TMI Blog1963 (3) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... 000being the value of high denomination notes encashed by the assessee, has been validly taxed as profits from some undisclosed business". The original assessee, Rai Bahadur H. P. Banerjee, is dead.His son, who was substituted in his place, also died during the pendency of the proceedings in the High Court. The present appeal has been filed by he widow of the son and other legal representatives. Banerjee was the owner of several collieries in the Jharia Coal fields in the State of Bihar and was also 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:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed it by showing that he had large amounts on hand, which were held for convenience in high denomination notes. The appellants thus submit that the burden, if any, upon the assessee was discharged in the case, and the evidence being unrebutted, the additional assessment could not be made. The appellant rely upon Kanpur Steel Co., Ltd. v. C. 1. T. [1957] 32 I. T. R. 56 where, according to the appellants, the Allahabad High Court explained the nature of burden of proof in the way contended for by the appellants. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of Rs. 15,000, because 15 notes could be traced to a bank, but was rejected in respect of the balance. The Patna High Court pointed out that if an assesse received an amount in the year of account, it was for him to show that the amount so received did not bear the character of income, and the tax-payer in the case had failed to prove this fact in respect of the remaining notes. The Patna case finds support in A. Govindaraju Mudaliar v. Commissioner of Income Tax Hyderabad; [1958] 94 I.T.R .8.70 where 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 accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t accepted. The Tribunal accepted the explanation as to Rs.31,000 only. This Court held that if the account books were accepted and the deponents were not cross examined on their affidavits, the rejection of the explanation as to a part proceeded only on surmise and the finding that Rs.30,000 were income from some undisclosed source was based on no evidence. It may be pointed out that Venkatarama Ayyar J., in that case, chose to rest his decision on the second ground only, treating the decision as involving an error 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 dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to Rs.1,41,000. No reasons were given for distinguishing the good part of the explanation from the bad. This Court examined the reasons and held that except for the insertion of the numbers of notes in the book, none of the other reasons had any probative value and that they were mere conjectures and surmises. This court pointed out that if the explanation for the interpolations was good for the acceptance of the explanation as to Rs.1,50,000, it must be held to be good also for the balance, because there was nothing 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 stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and to prove that it does not bear the nature of income. The Department is not at this stage required to prove anything. It can ask the assessee to bring any books of account or other documents or evidence pertinent to the explanation if one is furnished, and examine the evidence and the explanation. If the explanation shows that the receipt was not of an income nature, the Department cannot act unreasonably and reject that explanation to hold that it was income. If, however, the explanation is unconvincing and one which 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made a day later and Rs. 20,000 were withdrawn ten days later to finance the business.It appears that the money on hand (Rs. 45,000) was not touched at all, but on January 30, 1946, a further sum of Rs. 6,000 was withdrawn and not utilized, which made up the sum of Rs. 51,000 for which the high denomination notes were encashed. On these facts, the Tribunal came to the conclusion that the high denomination notes represented not the cash balance but some other money which remained unexplained, and the Tribunal treated it as income from some undisclosed source. The High Court held on the above facts and circumstances that there were materials to show that Rs. 51,000 did not form part of the cash balance, and the source of money not having been satisfactorily proved, the Department was justified in holdingit to be assessable income of the assessee from some undisclosed source. In this conclusion, the High Court was justified, regard being had to the principles we have explained above. The argument that as this was a case under s. 34 of the Income Tax Act, it cast a special burden on the Department to show that this income had escaped earlier, need not detain us. No doubt, proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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