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TMI Blog1955 (2) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer noticed that there were two credits--one of ₹ 10,000 and another of ₹ 8,500 in the assessee's wife's accounts with the Bank of India. The first credit was on 30th April, 1945, and the second one was on 1st May, 1945. On 29th March, 1947, the Income-tax Officer directed the accountant of the assessee, who appeared for the assessee, to prove the source of these cash deposits. On 31st March, 1947, the assessee was present before the Income-tax Officer and requested for time to obtain duplicate copy of his current account with the Imperial Bank as the originals had been misplaced (the assessee was also asked to produce his personal pass books). He also requested for time to explain the deposits and the case was fixed for hearing on 7th April, 1947. On 11th April, 1947, the assessee wrote a letter to the Income-tax Officer. In the course of his letter, he wrote as follows: As regards the sum of ₹ 8,500, I may point out that for the last so many years I drew from the company various sums of money from time to time and paid the same to my wife to enable her to defray the household and other expenses of the family. My withdrawls for the year ending 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income- tax Officer did not feel satisfied with the explanation offered for the deposit of ₹ 8,500. It is clear that the petitioner derives substantial income from business and he has withdrawn about ₹ 26,000 every year for personal expenses. The petitioner is not carrying on any other business and the receipts from the picture houses have been properly shown. It is also clear that the petitioner has withdrawn substantial amounts every year. It may be a fact that the petitioner's wife was able to save the amount and that she was in possession of funds for crediting the same in her account from funds given to her by her husband. Apparently there is no reason to disbelieve the explanation offered and there are no materials on file to hold that the petitioner carried on some other business or that the income from the cinema business was not properly returned. Records do not go to show that the petitioner did not credit the receipts properly or that he had any other business activity not disclosed by him. The addition of ₹ 8,500 was not warranted and it shall be deleted. The Income-tax Officer thereupon appealed to the Appellate Tribunal against the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the same in her account from funds given to her by her husband.........there are no materials on file to hold that the petitioner carried on some other business................' It is not for the Income-tax Department to find out what other business the assessee was doing. It may be that he was carrying on some business unknown to the Income-tax Department. It is for an assessee to explain satisfactorily the source of a credit to his own account. 7. On receipt of the order of the High Court under section 66(2) of the Indian Income-tax Act we checked up the records. According to the record, the position is as follows: Accounting year ended 31st March. Drawings. Loans outstanding. Interest paid. Remarks. 1. 2. 3. 4. 5 1943 26,147 25,337 836 The payments of taxes not separately debited. There is a likelihood of this being paid out of current year's withdrawals. 1944 27,129 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's income from undisclosed sources? In the opinion of the Tribunal, however, the real question which arises is: Whether there was material on which the Appellate Tribunal could have rejected the assessee's explanation? In this connection, attention is invited to the observations of the Bombay High Court in the case of Jethabhai Hirji Co. v. Commissioner of Income-tax M. R. Bobde, for the assessee. M. Adhikari, for the Commissioner. JUDGMENT Tribunal believes or does not believe the person's statement. We may add, although the assessee's representative objects, that when the appeal was heard, Mr. Malhotra who was a Member of the Bench, was aware that a penalty was imposed upon the assessee under section 28(1)(c) of the Act. That penalty was confirmed by a Bench of which Mr. Malhotra was the Member. 9. We had made enquiries as to the practice obtaining in the United Kingdom and we were informed that the Commissioners in the United Kingdom do not record any long order. The Commissioners in the United Kingdom are the final fact finding authority under the English income-tax law. 10. As directed by their Lordships of the Nagpur High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. As regards the amount of ₹ 8,500 he submitted the following explanation: As regards the sum of ₹ 8,500, I may point out that for the last so many years I drew from the company various sums of money from time to time and paid the same to my wife to enable her to defray the household and other expenses of the family. My withdrawals for the years ending 31st March, 1943, 31st March, 1944, 31st March, 1945, and 31st March, 1946, were ₹ 26,147-15-9, ₹ 20,100-2-9, ₹ 31,036-12-9 and ₹ 47,106-4-6 (this ought to be ₹ 37,106-4-6) respectively. My wife made some savings out of the said amounts and when the savings amounted to the above, she asked me to credit the said amount to her account in the Bank of India Ltd., Nagpur, on 1st May, 1945. 4. The above explanation was not accepted by the Income-tax Officer who observed: It is difficult to believe that the assessee was withdrawing funds for construction of his bungalow and household expenses indiscriminately without ascertaining from his wife as to whether the money previously drawn and handed over to her was fully spent or not. Besides the savings of ₹ 8,500 could not have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Commissioner of Income-tax, Punjab([1937] 5 I.T.R. 464), it was held that the Income-tax Authorities are not bound to prove by positive evidence that the accounts are unreliable and their finding cannot be disturbed unless it is altogether capricious and injudicial. What applies to accounts also applies to all other evidence tendered by an assessee including his explanation on the source of income. Therefore, while it is true that the rejection of the assessee's explanation cannot be disturbed if it is based on reasonable grounds, it can be challenged if it is capricious, arbitrary or injudicial. 7. The facts of the instant case are that the assessee has maintained his accounts properly and made a correct return of the income of his cinema business. That he withdrew from time to time from his business the amounts stated by him and gave them to his wife for household expenses is also not in dispute. Presumably, therefore, the amount in dispute credited to her account with the bank has its source in the funds which she used to receive from her husband, as no other source is indicated. 8. The Tribunal rejected the assessee's explanation on the ground that he would n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat section 23(3) Of the Income-tax Act requires the Income-tax Officer to hold an enquiry before making an assessment and under the proviso to section 13 he has to determine the basis and the manner of computing the assessment. 11. In cases where the explanation of the assessee regarding the source of a disputed amount is not accepted, the question still remains whether it is a revenue income. It is not in all cases that by mere rejection of the explanation the character of the disputed item as revenue income can be deemed to be established. Each case has to be judged on its own merits for this purpose. In Mahabir Prasad Munna Lal v. Commissioner of Income-tax(1) there was a credit entry in the assessee's account books in the name of Hari Kishan who was found to be a fictitious person. The question arose whether there was anything in law to prevent the Income-tax Officer or the appellate authority from presuming or inferring that the receipt evidenced by the credit entry was a revenue receipt. This question was answered by their Lordships as below: If an assessee gives an explanation which is false or unbelievable, there is nothing in law to prevent the Income-tax Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st his contention. This decision does not differ from Mahabir Prasad Munna Lal v. Commissioner of Income-tax(1). 13. In J.A. Shellim v. Commissioner of Income-tax, Bengal(2), the assessee's bank accounts showed considerable credits for a period of one year for which he did not give any information as to their source, and it was for this reason that it was held that the question whether the assessment, which was made under the provisions of section 13 of the Indian Income-tax Act, was proper or not was one of fact. That was, however, a decision which was peculiar to the facts of the case and did not answer the question whether when the explanation of the assessee is rejected, it inevitably follows that the receipt is income assessable to tax. In Udayram Jagannath, In re(3), their Lordships did not decide this question and only referred to the decision in Mahabir Prasad Munna Lal v. Commissioner of Income-tax(1) on the one hand and G.M. Madappa v. Commissioner of Income-tax, Madras(4), on the other. In Anraj Narain Dass v. Commissioner of Income-tax, Delhi(5), it was held that the initial onus of explaining cash credits in the accounts lies on the assessee. While this is true, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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