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TMI Blog1967 (1) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... walla 28-10-46 40,000 In Darwani Books: 4. Satnarain Agarwalla 24-10-46 20,000 5. Debi Dutta Agarwalla 30-11-46 15,000 In Domar Books: 6. Banwarilal Oswal 3-12-46 20,000 7. Nripendra Chandra Roy 8-12-46 15,000 Total 1,40,000 The assessee was asked by the Income-tax Officer to explain the source of these amounts. The assessee's explanation before the Income-tax Officer was that the amount in question was received from the firm of M/s. Surajmull Nagarmull to which the assessee was an associate company. The names of the parties, according to the assessee, were suggested by the said firm. The assessee produced from the said firm a statement to the effect that the loans in question were advanced by the firm in the names of the above persons. The assessee also stated that the said firm had a cash amount of ₹ 16 lakhs, possession of which was admitted by them before the Income-tax Investigation Commission and that the amounts shown in the said assessee's books of accounts in Raninagar, Darwani and Domar came out of the said amount. In the premises, the assessee contended that the amount belonged to the said firm and should not be added to the income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclosed source. Mr. Balai Pal, learned counsel for the respondent, has submitted that the Appellate Tribunal's order should not be interferred with by the High Court in its jurisdiction under section 66(1) of the Income-tax Act, inasmuch as the Tribunal's conclusion cannot be said to be based on no evidence or that such conclusion is perverse. Further, by referring us to the records of the income-tax proceedings for 1948-49 and 1947-48, he has asked us to hold that, although the assessee was given all the opportunities to the assessee and also M/s. Surajmull Nagarmull, no satisfactory evidence was made available by the assessee-company to the department (sic). He has therefore argued that the said sum being the income of the assessee-company from undisclosed source has rightly been included in the assessee-company's income and assessed. Several cases were referred to us by the learned counsel for the assessee and the revenue and we may now discuss them. The first case relied on by Dr. Pal is Mehta Parikh & Co. v. Commissioner of Income-tax [1956] 30 I.T.R. 181, 189; [1956] S.C.R. 626 which happened to be a case on high denomination notes. The assessee encashed on 18th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income-tax [1963] 49 I.T.R. (S.C.) 112 and relied on the following observations of the Supreme Court at page 120: "It seems to us that the correct approach to questions of this kind is this. If there is an entry in the account books of the assessee which shows the receipt of a sum on conversion of high denomination notes tendered for conversion by the assessee himself, it is necessary for the assessee to establish, if asked, what the source of that money is 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 sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to explain the deposits and show cause why the amounts should not be treated as its income. The explanation given was not believed and the aggregate of the amounts was assessed as the income of the family. It was held that the assessee family, in this case, could not be said to have received the amounts in question at all. In that case, the learned counsel for the income-tax department fairly conceded that there was no material other than the rejection of the explanation on which a finding could be legally based that the amounts were the income of the family. It was clear that the case credits were found in the books of account of a firm and it was also found that there was nothing to show that the assessee family received the amounts in question at all. It is true that the deposits in the books of account of the firm were made in the names of persons who happened to be members of the assessee joint family. But mere relationship of those persons to the assessee family cannot be a good ground for assuming that the deposits belonged to the family and not to those persons. It is in that connection that the Allahabad High Court has observed: "The onus lay on the department to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the name of S cannot be held to be the secret profits of the assessee-firm. There the Tribunal found no connecting link between the third remittance and the assessee and decided in favour of the assessee in respect of this amount. The Supreme Court in refusing to interfere with the decision of the Tribunal reiterated the principles laid down in the said earlier case and made the following observations at page 579: "The rules which govern the approach of the High Court are: '(i) When the point for determination is a pure question of law, such as construction of a statute or a document of title, the decision of the Tribunal is open to reference to the court under section 66(1). (ii) When the point for determination is a mixed question of law and fact, while the finding of the Tribunal on the facts found is final, its decision as to the legal effect of those findings is a question of law which can be reviewed by the court. (iii) A finding on a question of fact is open to attack under section 66(1) as erroneous in law when there is no evidence to support it or if it is perverse. (iv) When the finding is one of fact, the fact that it is itself an inference from o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make a deposit of the same with the assessee. The burden will shift on to the department to show why the assessee's case cannot be accepted and why it must be held that the entry, though purporting to be in the name of a third party, still represents the income of the assessee from a suppressed source. In order to arrive at such a conclusion, however, the department has to be in possession of sufficient and adequate material." In our opinion, when cash credit entry appears in the assessee's books of account in an accounting year, the assessee has the legal obligation to explain the sources of such receipt. The initial onus is entirely on the assessee, but the question whether such onus has been duly discharged by the assessee or has been shifted to the revenue can only be determined after the evaluation of all the surrounding circumstances. There cannot be one general or universal proposition of law which could be the guiding yardstick in the matter. Each case has got to be decided on the facts and circumstances of that case. The surrounding circumstances to be considered must however be objective facts, evidence adduced before the taxing authorities, presumption o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the effect that the said sum of ₹ 1,40,000 belonged to the said firm and the fact that the said sum was credited from time to time in the assessee's books of account in the name of alleged benamidars do not necessarily justify the conclusion that the said sum could not be the income of the assessee unless the contents of such memorandum are proved to be correct by some positive evidence, oral or documentary, from the firm itself. There is nothing to show that the said memorandum was accepted by the department. Messrs. Surajmull Nagarmull is a well-known firm and there is no difficulty for the assessee, to adduce best evidence by calling somebody or producing documentary evidence from the said firm. It is true that, according to the assessee, the money belonged to the firm, and constituted parts of the firm's undisclosed income as admitted by them before the Investigation Commission and, therefore, their books of account would not reveal any entry showing the said amount; even then it should be remembered that when the cash credits are entered in the assessee's books of account in the name of their own employees, the onus would be much heavier than in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved from Messrs. Surajmull Nagarmull but were credited in various names which were given by them. He produced a certificate from Messrs. Surajmull Nagarmull saying that the loans in question were advanced by them in various benami names. 4. Now, in the books of the assessee-company, there is no mention anywhere that the money came from Messrs. Surajmull Nagarmull, as claimed. Messrs. Surajmull Nagarmull and the assessee were therefore requested to produce some substantial independent evidence to show that the money actually came from Messrs. Surajmull Nagarmull as now claimed." The said observations of the Appellate Assistant Commissioner in the income-tax proceedings for the years 1947-48 and 1948-49, if read together, go to show that reliance was not placed by the department on the said certificate and opportunities were given to the assessee-company and Messrs. Surajmull Nagarmull for giving satisfactory explanation as to the source of the said sum of ₹ 1,40,000. It appears from these facts that the assessee's onus to prove the source remains undischarged. Further, these statements in the Appellate Assistant Commissioner's order also repel a faint suggestio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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