TMI Blog1986 (3) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... I MUKHERJEE. and R. S. PATHAK. JUDGMENT The judgment of the court was delivered by SABYASACHI MUKHARJI J .-These appeals by special leave arise from the decision of the Orissa High Court dated October 31, 1973, refusing to direct the Tribunal to state a case under section 256(2) of the Income tax Act, 1961 (hereinafter called " the Act "), and to refer certain questions said to be questions of law arising out of the appellate order of the Income-tax Appellate Tribunal for determination by the High Court. The assessment year involved was 1962-63. There were proceedings-one appeal was related to an assessment order whereby additions were made to the quantum of income disclosed by the assessee and the other was in respect of impositi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t creditors whose general index numbers were with the Income-tax Department. Attempts had been made to bring those creditors before the Income-tax Officer by issue of notices under section 131 of the Act, but the said notices were returned with the endorsement " left ". The Income-tax Officer, therefore, treated the entire amount of Rs. 1,50.000 as unproved cash credit and added the same to the income of the assessee. The appeal of the assessee to the Appellate Assistant Commissioner was dismissed. Thereafter, there was a further appeal to the Tribunal. In the meantime, on the basis of the assessment order, proceeding was taken under section 271(1)(c) of the Act and the Inspecting Assistant Commissioner imposed a penalty of Rs. 50,000. An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 1,50,000 to the total income of the assessee and also on the imposition of penalty. The questions sought for by the Revenue were to the effect noted before. The Tribunal refused to refer any statement of the case to the High Court on those questions. The Revenue went up in an application under section 256(2) of the Act before the High Court. The High Court also refused to accede to the prayers of the Revenue. Hence, these appeals. Our attention was drawn to the statements in the assessment order where the Income-tax Officer had observed certain inconsistencies in the confirmation letters and observed further that the confirmation letters did not inspire confidence. It also observed that the assessee had stated that after making all pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctorily explained might be assessed as income. The section enacts that if a sum is found credited in the books of an assessee maintained for any previous year (which might be different from the financial year), the cash credit might, in cases where it is assessed as undisclosed income, be treated as the income of that previous year, and the financial year may not be taken as the previous year for such a cash credit even if the undisclosed income was not found to be from the assessee's regular business for which the books were maintained. The cash credit might be assessed either as business profits or as income from other sources. Under the 1922 Act, where a large amount of cash was found credited on the very first day of the accounting ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al. On no account whatever should the Tribunal base its findings on suspicions, conjectures or surmises, nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures and surmises. In that case, the so-called hundi racket in which the assessee was alleged to have been involved was not proved. That was only a suspicion of the Revenue. The question was again considered by this court in Homi Jehangir Gheesta v. CIT [1961] 41 ITR 135, when this court reiterated that it was not in all cases that by mere rejection of the explanation of the assessee, the character of a particular receipt as income could be said to have been established ; but where th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see himself, it is necessary for the assessee to establish, if asked, what the source of that money was and to prove that it was not income. The Department was not at that stage required to prove anything. It could ask the assessee to produce any books of account or other documents or evidence pertinent to the explanation if one was furnished and examine the evidence and the explanation. If the explanation showed that the receipt was not of an income nature, the Department could not act unreasonably and reject that explanation to hold that it was income. If, however, the evidence was unconvincing, then such rejection could be made. The Department cannot by merely rejecting good explanation unreasonably, convert good proof into no proof. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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