TMI Blog1983 (10) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee was called upon to explain the nature and source of the deposits. The assessee filed a confirmatory letter from Durga Prasad Sureka of Calcutta, but he was asked to produce him for verification. The assessee did not produce the creditor and for Jit Ram, it was stated that he was a pretty old man and he deposited Rs. 1,600 out of his past savings. The ITO did not accept the explanation. He observed that the assessee had been depositing his own income from undisclosed sources in different names. The ITO, with regard to the deposit in the name of Durga Pd. Sureka to the extent of Rs. 28,000, made a reference to his counterpart in Calcutta who reported that the deposits were not verifiable and he, accordingly, required the assessee to produce Durga Prasad Sureka along with the books of account, if any, but the assessee expressed his inability to do so. As the genuineness of the deposit, according to the ITO, had not been proved, it was treated as the assessee's income from undisclosed sources. The ITO, therefore, treated this amount as the assessee's income from undisclosed sources. Regarding the deposit of Rs. 1,600 in the name of Jit Ram, it was stated on behalf of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention on the ground that the two credits were in different accounts and it had not been admitted in writing that both the sums represented the assessee's own concealed income. It is desirable to state here that the appeal of the assessee against the addition of Rs. 62,500 in the immediately preceding year was under challenge before the Tribunal and was pending. The AAC found the alternative contention of the assessee to be contradictory to his main claim that both the credits represented genuine borrowings. According to the AAC, there was no alternative to the facts and there could be only an alternative argument in law. The AAC, therefore, rejected the alternative contention of the assessee and confirmed the addition of Rs. 28,000. The order of the AAC is marked as annexure-B to the statement of the case. So far as the addition of Rs. 1,600 credited in the account of M/s. Jit Ram was concerned, the AAC upheld the addition made by the ITO. The assessee thereafter, went up in further appeal before the Tribunal. Before the Tribunal, the assessee advanced the same submissions as advanced before the AAC. The Tribunal, so far as the deposit of Rs. 1,600 found in the name of Jit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the Revenue filed an application under s. 256(1) of the Act before the Tribunal for referring the matter to this court. The Tribunal by its order dated May 20, 1972, rejected the reference application. Thereafter, the Revenue filed an application under s. 256(2) of the Act before this court. As stated before, this court, by its order dated September 19, 1973, called upon the Income-tax Appellate Tribunal, Patna Bench, to state the case and refer the question of law, as quoted above, to this court for opinion. Learned senior standing counsel for the Department, firstly, submitted that s. 68 of the Act places the onus upon the assessee to prove the source of money introduced in the accounts to the satisfaction of the ITO and, to discharge this onus under s. 68 of the Act, the assessee had to adduce positive evidence required for the purpose which was lacking in the instant case. Secondly, the learned senior standing counsel for the Department submitted that the initial plea taken by the assessee before the ITO having been found to be incorrect, the assessee, in law, could not take an alternative plea to explain the source of money introduced in his accounts and, lastly, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the I.T. Act. In the absence of such proof, the ITO is entitled to treat it as taxable income. These are well established propositions of law and, if reference is needed, they are Kale Khan Mohammed Hanif v.CIT[1963] 50 ITR 1 (SC) and CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 (SC). The main question in the instant case is whether the assessee having failed to establish his initial plea can fall back on an alternative plea. In the instant case, the initial plea, as referred to above, in order to explain the cash credit of Rs. 28,000 in the name of Durga Prasad Sureka of Calcutta, was not accepted by the Revenue authorities. However, the assessee before the AAC took an alternative plea, as already referred to above. Learned senior standing counsel for the Revenue, in order to support his submissions, as referred to above, relied upon the case of CIT v. Banarsilal Dhawan [1977] 109 ITR 360 (Mad) and CIT v. Daluram Pannalal Modi [1981] 129 ITR 398 (MP). It is desirable to quote from the case of CIT v. Banarsilal Dhawan [1977] 109 ITR 360 (Mad) for l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the misconception arising from the inaccurate and misleading use of the expression 'intangible additions', this court did not lay down any such general proposition of law, as if the additions made to the income returned by an assessee, by the department, constitute his last refuge whenever he finds himself in a tight corner not being able to explain the credits found in his accounts. The truth is that such additions are as real an income, at any rate as far as the department is concerned, as the income returned by the assessee, and one can as much as the other constitute, the source to explain the credits in the accounts in the subsequent years. Therefore, the decision of this court does not invest such additions with any special significance as a source to explain the credits in the subsequent years. In any case, it will be a question of fact whether there was evidence to find that such additions were the source of the subsequent credits and in this behalf there is no difference between this source and any other source, apart from the position that with regard to the income assessed in the earlier years, its existence as a possible source of the credits will be a matter of rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... silal Dhawan [1977] 109 ITR 360, disagreed with the view taken in the case of CIT v. Ram Sanehi Gian Chand [1972] 86 ITR 724 (P H) and observed as below (pp. 368-9): ......... there was no question of there being any legal position or any point of law, because it was simply a question of fact by way of explaining as to where the sum of Rs. 20,004.35 came from. " Thus, in my opinion, the ratio decided in the case of CIT v. Banarsilal Dhawan [1977] 109 ITR 360 (Mad), is that "in any case, it will be a question of fact whether there was evidence to find that such additions were the source of the subsequent credits ...... may be a matter to be proved. " Thus, from the quotations as above, in my opinion, the ratio decided in [1977] 109 ITR 360 (Mad) is not that once the assessee has originally shown the credits as having emanated from certain named individuals and when he failed to establish the same, it was not open to him to fall back upon an alternative plea, but the ratio is that an alternative plea can be taken by the assessee, but that being a question of fact, it has to be ascertained and established and further that with regard to the income assessed in the earlier years, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assumption is not warranted by law. Without setting aside the finding of the ITO that the cash credits represented income from undisclosed sources, the Tribunal was not justified in holding that the amount of Rs. 15,300, which was added as income from undisclosed sources, was covered by the intangible additions made to the income of the assessee. " Thus, from the quotation as above, it is clear that, Ls a question of fact, it is for the assessee to show by adducing satisfactory evidence that cash credits were referable to undisclosed income of the very known or disclosed source, namely, the business, whose income had already been estimated. This case only laid down that the Tribunal was not justified in holding that the amount of Rs. 15,300 which was added as income from undisclosed source was covered by intangible additions made to the income of the assessee, without setting aside the finding of the ITO that the cash credits represented income from undisclosed sources. In my opinion, the facts of that case are clearly distinguishable from the facts of the instant case and, in that view of the matter, in my opinion, the decision in the case, CIT v. Daluram Pannalal Modi [1981] 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any event the Tribunal is not precluded from adjusting the tax liability of the assessee in the light of its findings merely because the findings are inconsistent with the case pleaded by the assessees. The first question raised in the application for reference is a question of fact. It is true that there is no direct evidence of any connection between the cash credit entries and the income withheld from the books of account by the assessees. But if the Tribunal inferred that there was connection between the profits withheld from the books and the cash credit entries, it cannot be said that the conclusion is based upon speculation. The first question sought to be raised is, therefore, purely one of fact and could not be referred under section 66." Learned counsel for the assessee has also relied upon a decision of the Supreme Court in the case of Gouri Prasad Bagaria v. CIT [1961] 42 ITR 112 and the Supreme Court, in this case, held as follows (p. 115): " In our opinion, the Tribunal having believed the assessee's statement, there was an end of the matter in so far as that fact was concerned, and if the finding was based upon a statement which was good material on which it co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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