TMI Blog1963 (11) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... siness of clearing and forwarding agency at Nagapattinam. For the assessment year 1956-57, he returned a net income of ₹ 1,993 and that was accepted in so far as his business income was concerned. But, on a scrutiny of the accounts, the Income-tax Officer found various deposits and withdrawals in the name of one Murugesam Pillai and one Krishnamurthi of Karaikal. In support of his claim that they were merely borrowings and repayment, the assessee filed letters from the two persons referred to. The Income-tax Officer separately corresponded with these parties and they wrote to the officer confirming that they had made deposits with the assessee. The Income-tax Officer however was not satisfied and he asked the assessee to produce the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lai and Krishnamurthi for examination was not the only method possible to verify the truth or otherwise of the statements made by Murugesam Pillai and Krishnamurthi. From the records placed before us, it would appear that at one stage an inspector of the department was sent from Nagapattinam to Karaikal. The distance was not great. But that inspector was apparently not able to contact these two gentlemen. Whether either at the stage of the appeal before the Assistant Commissioner or at the stage of the appeal before the Tribunal, a similar course could have been adopted of having Murugesam Pillai and Krishnamurthi examined at Karaikal by an officer or an inspector of the department does not appear to have been considered either by the Assis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justified in rejecting the statements made by these two persons out of hand and in demanding that the assessee should prove positively by other means that the transactions were of the character which he attributed to them. Reliance has also been placed upon a decision of the Bombay High Court in Orient Trading Co. v. Commissioner of Income-tax [1963] 49 I.T.R. 723. In that case, certain cash credits appeared in the accounts of the assessee. The decision according to the headnote is: If the entry stands not in the name of any such person having a close relation or connection with the assessee, but in the name of an independent party, the burden will still lie upon him to establish the identity of that party and to satisfy the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be proper for them to correlate these entries with some undiscovered source and to claim that these deposits must represent income from such undisclosed sources. Though in the order calling for a statement of the case, this court gave certain direction with regard to the examination of Murugesam Pillai and Krishnamurthi, we are exceedingly doubtful whether in the limited jurisdiction which this court possesses under section 66 of the Indian Income-tax Act, the collection of further evidence for the assessee or for the department is at all permissible. Whatever doubt there might have existed on this point have been set at rest by the decisions of the Supreme Court categorically laying down that at this stage of the proceedings it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orward as having made the loan to possess funds requisite for the purpose. It is not merely the duty of the assessee to show that the person whose name finds recorded in the book as having made the loan is a real person and that that person comes forward and says that he made the loan. If that was all the substance of the onus that lies upon the assessee, then any entry can be made in the account-books of the assessee and passed off as a genuine transaction with impunity. That is not what to our minds the learned judges of the Bombay High Court say. It is the real nature of the transaction with regard to which the assessee has to produce prima facie evidence and unless that evidence satisfies the Income-tax Officer, the assessee cannot be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int to any possible source from which such income could have been derived, it is not open to the department merely to rely upon undisclosed or undiscovered sources as a head of assessment, must fail. If the assessee has been shown to have received funds which may or may not be in the nature of income, it is for him to show that it is not income. If he fails to establish that fact, depending as he does upon the claim that they represent capital in the shape of a loan taken by him, the only other alternative is to regard these sums as income. It would be impossible for the department to trace out from what source such income could be derived. Such an onus does not rest upon the department before it can bring to tax an unexplained entry which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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