1954 (7) TMI 21 - HC - Income Tax

Summary

Issues Involved:

1. Whether the sum of Rs. 13,000 representing high denomination notes encashed on 19th January, 1946, is income assessable to income-tax.

Issue-wise Detailed Analysis:

1. Whether the sum of Rs. 13,000 representing high denomination notes encashed on 19th January, 1946, is income assessable to income-tax:

The case pertains to the re-assessment of the assessee for the assessment year 1946-47. The Income-tax Officer initiated proceedings under section 34 of the Indian Income-tax Act, 1922, after receiving information that the assessee had encashed high denomination notes worth Rs. 28,000 following the High Denomination Bank Notes (Demonetization) Ordinance, 1946. The assessee filed a return and explained that the high denomination notes were his previously earned savings for which taxes had already been assessed.

The assessee's declaration stated that the sum of Rs. 28,000 was kept in high denomination notes due to a lack of reliable banking facilities and for occasional business purposes. He claimed the notes were accumulated from savings of personal income since the disruption of his joint Hindu family and were part of reserve cash kept at home.

The Income-tax Officer, unsatisfied with the explanation, included the entire amount of Rs. 28,000 as secreted profits in the assessee's total income. The Appellate Assistant Commissioner upheld this inclusion, considering the high denomination notes as income from concealed sources.

On appeal, the Appellate Tribunal remanded the case to verify the assessee's claim that 15 of the 28 notes were received from the Hongkong Shanghai Banking Corporation. The Tribunal accepted the explanation for these 15 notes, deleting Rs. 15,000 from the assessment. However, the Tribunal upheld the inclusion of Rs. 13,000, as the assessee failed to substantiate the source of the remaining notes.

The Tribunal's findings were based on the assessee's inability to produce evidence proving the source of the high denomination notes. The Tribunal considered the unexplained increase in the assessee's wealth, which occurred during the previous year, as secreted profits.

The High Court examined whether there was material to hold that the sum of Rs. 13,000 was income assessable to income-tax. The assessee contended that he had sufficient cash from previous withdrawals and savings. However, the Court noted that the assessee did not maintain a home chest account or produce evidence of disbursements for the relevant years. Without such evidence, it was impossible to determine the cash balance on the date of encashment.

The Court emphasized that the burden of proof lies on the assessee to show that the receipt is not of an income nature. The assessee failed to discharge this burden by not providing sufficient material to prove the source and nature of the high denomination notes.

The High Court concluded that the sum of Rs. 13,000 was income liable to income-tax, as the assessee did not furnish a satisfactory explanation for the source of the high denomination notes. The question referred to the High Court was answered against the assessee and in favor of the Income-tax department. The hearing fee was assessed at Rs. 250.