TMI Blog1998 (6) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... ash book out of which the above amount was deposited. Though there was no dispute about the fact that the assessee had cash balance of Rs. 3,28,305.47 on the date when the currency notes of Rs. 1,000 denomination for the value of Rs. 2 lakhs were tendered by the assessee to the Reserve Bank of India for encashment, the Income-tax Officer accepted the explanation only to the extent of Rs. 36,000 covered by 36 notes of Rs. 1,000 denomination and treated the balance amount of Rs. 1,64,000 as unexplained and added the same as income from undisclosed sources under section 68 of the Income-tax Act, 1961 ("the Act"). This, the Income-tax Officer, held on the basis of his opinion based on some independent enquiries from different banks that the assessee had received on withdrawal of money from those banks only 36 notes of Rs. 1,000 denomination during the period from August 1977, till January 19, 1978, when they were tendered for encashment. The assessee appealed to the Commissioner of Income-tax (Appeals) against the above order. The Commissioner (Appeals) examined the matter, though on the same lines as done by the Income-tax Officer, and came to the conclusion that the assessee could ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance in the course of business and that the assessee had been keeping cash balance much more than the amount in the form of high denomination notes. The addition to the income of the assessee of a sum of Rs. 1,04,000 as income from undisclosed sources, according to learned counsel, has been sustained by the Commissioner (Appeals) and the Tribunal on an erroneous understanding of law. It was submitted that the authorities having been satisfied about the availability of sufficient cash with the assessee on the date of the deposit and the genuineness of the same, it was not open to them to add any amount as income from undisclosed sources only on the ground that the assessee failed to furnish details of acquisition of currency notes of a particular denomination. According to learned counsel, additions in this case, having been made merely on suspicion and conjectures, are not tenable in law. Reliance is placed in support of this contention on the decisions of the Supreme Court in Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 and Sreelekha Banerjee v. CIT [1963] 49 ITR 112 (SC). Mr. R. V. Desai, learned counsel for the Revenue, on the other hand, submits that the additions h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sources. It appears from the order of the Tribunal that the Tribunal itself was conscious of the fact that once the cash balance on the crucial date was sufficient to cover the value of high denomination notes tendered by the assessee for encashment on demonetisation, no further enquiry was required about the source of high denomination notes. The Tribunal, however, felt that in the instant case, the Income-tax Officer, having verified from the banks the receipt of the amount in high denomination notes by the assessee and having considered other possible sources of receipt of Rs. 1,000 denomination notes, was justified in adding the balance amount of Rs. 1,04,000 as income from undisclosed sources. The Tribunal observed that the Income-tax Officer had discharged the initial burden cast upon him by collecting specific information about the acquisition of high denomination notes by the assessee and it was for the assessee to dislodge such finding by means of appropriate evidence. Since, according to the Tribunal, the assessee failed to do so, there was no justification for interfering with the order of the Commissioner (Appeals). We find it difficult to agree with this finding of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers on the very same day. In such a situation, there is no justification for adding a portion of the amount received by the assessee on encashment of Rs. 1,000 denomination notes as income of the assessee from undisclosed sources for the alleged failure of the assessee to furnish the source of acquisition of the amount in notes of Rs. 1,000 denomination. Reference may be made in this connection to the decision of the Supreme Court in Sreelekha Banerjee v. CIT [1963] 49 ITR 112 (SC). In that case also a question arose whether the Tribunal could make a guess as to the number of high denomination notes which could be accepted. The Supreme Court said : "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 documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt branches of the assessee. In the course of assessment for the year 1946-47, the Income-tax Officer noticed that the assessee had encashed high denomination notes of the value of Rs. 2,91,000 on January 19, 1946. The assessee explained that the notes formed part of its cash balances, including the cash balance in the almirah account, which, on January 12, 1946, the date on which the High Denomination Bank Notes (Demonetisation) Ordinance, 1946, was promulgated, were Rs. 29,284 in its rokar and Rs. 2,81,397 in the almirah account, and in order to prove its explanation, the assessee relied on certain entries in its accounts wherein the fact that the moneys were received in high denomination notes had been noted. Portions of these entries were found by the Income-tax Officer to be later interpolations. The Income-tax Officer rejected the assessee's contention and treated Rs. 2,91,000 as undisclosed profits from its business. The Tribunal was of the view that there was no reason to suspect the genuineness of the account books in which interpolations were made and having examined the cash books and taking into consideration all the circumstances which had been adverted to by the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipts are of an assessable nature. That is not the position in the case before us. In this case, the assessee could prove satisfactorily the source and nature of the amounts. Addition was made not for that reason. The assessee was further required to prove the receipt of the amount of Rs. 2 lakhs therefrom in high denomination notes. In other words, the assessee was asked to prove as to when and from whom he received the amount in high denomination notes. The assessee gave reasonable explanation for his inability to give detailed account of receipts and disbursements of amounts from time to time in currencies of various denominations including high denomination notes. He could, however, satisfy the authorities about the fact that he was often in possession of Rs. 1,000 denomination notes and the probability of high denomination notes of the value of Rs. two lakhs being included therein. In fact, the Revenue itself was satisfied about the inclusion of 96 notes of Rs. 1,000 each therein. The amount of Rs. 1,04,000 was added as income from undisclosed sources only because, according to the Revenue, the assessee failed to discharge the onus cast on him to prove the acquisition of eac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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