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Issues Involved:
1. Justification of the addition of Rs. 9,000 to the total income of the assessee firm from undisclosed sources on account of encashment of high denomination notes. Issue-Wise Detailed Analysis: 1. Justification of the Addition of Rs. 9,000 to the Total Income of the Assessee Firm: The primary issue in this appeal is whether the addition of Rs. 9,000 to the total income of the assessee firm from undisclosed sources, due to the encashment of high denomination notes, was justified. The facts of the case reveal that the assessee, a registered firm engaged in hiring out films, maintained its books of account on a mercantile system. During the assessment year 1978-79, the firm tendered nine high denomination notes of Rs. 1,000 each, claiming they were part of daily collections from three cinemas. The Income Tax Officer (ITO) noted these high denomination notes during the assessment proceedings and questioned their source. The ITO rejected the assessee's explanation, despite proper entries in the cash book, and considered the amount as income from undisclosed sources. This decision was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], leading to the present appeal. The assessee argued that the authorities had no evidence to support their conclusion and had ignored reliable evidence, including an affidavit from Sujan Singh, the cashier-cum-head booking clerk, who confirmed the receipt of these notes in the ordinary course of business. The ITO had accepted the cash book entries but doubted the cash balance on 17th Jan., 1978. Upon careful consideration, it was found that Sujan Singh, acting in his official capacity, collected daily cash, including high denomination notes, and handed it over to the firm's cashier. The ITO's argument that high denomination notes ceased to be legal tender on 17th Jan., 1978, was deemed irrelevant as the transaction was internal within the firm, not with an external party. The Tribunal noted that the CIT(A) had examined Sujan Singh, who provided consistent and reasonable answers, supporting the assessee's claim. The Tribunal found no contradictions significant enough to discredit the affidavit or the cash book entries, which were accepted by the ITO. The Tribunal concluded that the revenue failed to provide evidence to rebut the assessee's explanation. The books of account were not doubted, and the Supreme Court judgments cited by the assessee supported the view that the revenue must provide evidence to contradict the assessee's claims. The Tribunal found no merit in the addition of Rs. 9,000 and directed its deletion, allowing the appeal. Conclusion: The appeal was allowed, and the addition of Rs. 9,000 to the total income of the assessee firm was deleted. The Tribunal emphasized the importance of evidence over suspicion and upheld the reliability of the assessee's books of account and the affidavit provided by Sujan Singh.
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