TMI Blog1974 (6) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... er made some enquiries as to the status of Thenappa Chettiar. The enquiries revealed that Thenappa Chettiar was a man of little means and that he could not have advanced a heavy sum of Rs. 3,00,000 to the assessee. The Income-tax Officer thereupon felt that the said cash credits in the name of Thenappa Chettiar should really represent the undisclosed business profits of the assessee. He, therefore, initiated proceedings under section 34(1)(a) of the Indian Income-tax Act, 1922. The assessee objected to the reopening of the assessment on the ground that the credit in the name of Thenappa Chettiar has been examined and accepted as genuine in the course of the original assessment proceedings and that the assessee having disclosed fully and truly all materials necessary for the assessment, the Income-tax Officer had no jurisdiction to initiate proceedings under section 34(1)(a). The Income-tax Officer, however, rejected the objection and held that the information that Thenappa Chettiar was a man of little means and would not have been in a position to advance such a large sum was not before the Income-tax Officer at the time when the original assessment was completed and the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. In this view the Income-tax Officer revised the assessment by treating the sum of Rs. 5,05,000 together with the interest of Rs. 6,633 alleged to have been paid to Thenappa Chettiar as the assessee's business income. On an appeal the Appellate Assistant Commissioner also held that the reassessment proceeding initiated under section 34(1)(a) was valid and that the inclusion of a sum of Rs. 3,00,000 as business profits of the assessee was justified on the facts. He, however, held that the above sum of Rs. 2,05,000 which has been found deposited in the name of Thenappa Chettiar with the Golden Hill Tea Estates Ltd. by Thenappa Chettiar cannot be taken to be the business profits of the assessee and that there was no justification for considering credits in the business of Golden Hill Tea Estates Ltd. in the assessment of the assessee. Thus, while confirming the inclusion of the above Rs. 3,00,000 in the reassessment of the assessee he deleted a sum of Rs. 2,05,000 from the assessment. As regards the sum of Rs. 3,00,000 which was added as business profits of the assessee in the reassessment proceedings by the Income-tax Officer, the Appellate Assistant Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e instance of the revenue the following question has been referred to this court in T. C. No. 125 of 1968 : " Whether on the facts and in the circumstances of the case, the action under section 34(1)(a) of the Income-tax Act, 1922, was not justified ? " The two questions referred to in T. C. No. 294 of 1970 were also at the instance of the revenue, but the reference has been made after a direction has been given by this court, under section 66(2) of the Indian Income-tax Act, 1922. These questions are as follows : " 1. Whether the Appellate Tribunal had material to hold and had arrived at a reasonable conclusion on facts in holding that there was no justification to assess the sum of Rs. 1,15,000 and Rs. 6,633 as the assesee's income from business or from undisclosed sources ? " " 2. Whether the Appellate Tribunal was right in law in holding that the Appellate Assistant Commissioner had no jurisdiction to direct the assessment of Rs. 1,15,000 and Rs.6,633 as income from undisclosed sources ? " The question involved in T. C. No. 125 of 1968 deals with the scope and ambit of section 34(1)(a) of Indian Income-tax Act, 1922. It is seen that the Tribunal dealt with this q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the revenue contends that the reasoning of the Tribunal that the assessee having produced the account books and all information necessary for the assessment is not under a duty to prove the financial status of the creditors, and that once the details of the creditors are given it is for the department to make investigation and then complete the original assessment is erroneous and that the said view of the Tribunal is not in accord with the view taken in Anne Nagendram and Bomma Reddi Venkayya and Co. v. Commissioner of Income-tax, Commissioner of Income-tax v. T.S.PL. P. Chidambaram Chettiar and in V. N. S. Sockalingam Chettiar v. Commissioner of Income-tax B. We are inclined to agree with the above contention of the learned counsel. In Anne Nagendram and Bomma Reddi Venkayya and Co. v. Commissioner of Income-tax, which is also a case relating to cash credits, it was observed : " Where the In come-tax Officer after considering the cash credits accepted them and allowed interest, when it is subsequently discovered that those cash credits are false and not genuine, the provisions of section 34(1)(a) can be invoked because that would be a non-disclosure fully or truly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is, therefore, no question of any deficiency in his original assessment. It is in view of the materials gathered subsequently after the original assessment, the reassessment had been initiated on the ground that from those materials it is reasonable to infer that the statement made by the assessee regarding the credits in the name of Thenappa Chettiar cannot be true. We are of the view that, on the materials, the initiation of proceedings under section 34(1)(a) was justified. The question,referred in T.C. No. 125 of 1968 is, therefore, answered in favour of the revenue. As regards the questions raised in Tax Case No. 294 of 1970 the first question relates to the assessment of sums of Rs. 1,15,000 and Rs. 6,633 as the assessee's income from business or from undisclosed sources. As already stated the Tribunal has held that the materials on record are not sufficient to base a reasonable conclusion that the said sums represent the assessee's income either from business or from undisclosed sources. This finding of the Tribunal has been challenged by the revenue before us. According to the revenue the materials available can lead only to one conclusion that the credit entries i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppa Chettiar came to possess those funds by some means, that the fact that Thenappa Chettiar was not able to properly disclose his sources for those monies cannot be used against the assessee and the assessee cannot be said to have been the owner of those monies. We are inclined to agree, on those facts and circumstances of the case, with the view of the Tribunal. The revenue has not made out its case that the credits in the name of Thenappa Chettiar represent the undisclosed income of the assessee. As a matter of fact a case on all fours with the facts of this case came up for consideration in Commissioner of Income-tax v. Daulat Ram Rawatmull. In that case also an assessee's books disclosed credit entries to a sum of Rs. 5,00,000 in the name of one Biswanath. The explanation furnished by Biswanath with regard to the source of the said sum of Rs. 5,00,000 in his personal assessment was found to be incorrect and false. This fact was taken into account by the Tribunal for arriving at a conclusion that the said sum of Rs. 5,00,000 in the name of Biswanath was the concealed income of the assessee. The High Court took the view that such circumstance alone was not sufficient to hold ..... X X X X Extracts X X X X X X X X Extracts X X X X
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