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TMI Blog1967 (1) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Suresh Chandra Podder 28-10-46 20,000 2. Do. 23-11-46 10,000 3. Pannalal Agarwalla 28-10-46 40,000 In Darwani Books: 4. Satnarain Agarwalla 24-10-46 20,000 5. Debi Dutta Agarwalla 30-11-46 15,000 In Domar Books: 6. Banwarilal Oswal 3-12-46 20,000 7. Nripendra Chandra Roy 8-12-46 15,000 Total 1,40,000 The assessee was asked by the Income-tax Officer to explain the source of these amounts. The assessee's explanation before the Income-tax Officer was that the amount in question was received from the firm of M/s. Surajmull Nagarmull to which the assessee was an associate company. The names of the parties, according to the assessee, were suggested by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garmull before the Investigation Commission did admit that a sum of ₹ 16 lakhs remained as an idle cash of the firm. Further, it is urged that when M/s. Surajmull Nagarmull's identity is established and it is well-known that the said firm has means to pay, the department should not have refused the assessee's explanation without any materials. Thus, one onus to explain the receipt of the said sum of ₹ 1,40,000 has been discharged by the assessee and the department should not have included the said sum of ₹ 1,40,000 as the suppressed income of the assessee from an undisclosed source. Mr. Balai Pal, learned counsel for the respondent, has submitted that the Appellate Tribunal's order should not be interferred with by the High Court in its jurisdiction under section 66(1) of the Income-tax Act, inasmuch as the Tribunal's conclusion cannot be said to be based on no evidence or that such conclusion is perverse. Further, by referring us to the records of the income-tax proceedings for 1948-49 and 1947-48, he has asked us to hold that, although the assessee was given all the opportunities to the assessee and also M/s. Surajmull Nagarmull, no satisfacto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents or vouchers in relation to those entries were called for, nor was the presence of the deponents of the three affidavits considered necessary by either party. The appellants thought that the affidavits of those persons sufficiently explained the assessee's case and those affidavits were not challenged by the department. Under those circumstances, the Supreme Court was of opinion that the revenue was not justified in challenging the correctness of the cash book entries on the statements made by those persons in their affidavits. Dr. Pal next cited Sreelekha Banerjee v. Commissioner of Income-tax [1963] 49 I.T.R. (S.C.) 112 and relied on the following observations of the Supreme Court at page 120: It seems to us that the correct approach to questions of this kind is this. If there is an entry in the account books of the assessee which shows the receipt of a sum on conversion of high denomination notes tendered for conversion by the assessee himself, it is necessary for the assessee to establish, if asked, what the source of that money is and to prove that it does not bear the nature of income. The department is not at this stage required to prove anything. It can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be assessable income of assessee from some undisclosed source. The next case, Ram Kishan Das Munnu Lal v. Commissioner of Income-Tax [1961] 41 I.T.R. 452, 464, is a decision which was decided by the Allahabad High Court in favour of the assessee on the peculiar facts of that case. B.K. and R. were some of the members of a joint Hindu family. In the account books of the firm in which B was a partner in his individual capacity, certain cash deposits were credited in the name of K, R and B's mother. Those amounts were not treated as the income of the firm but the family was called upon to explain the deposits and show cause why the amounts should not be treated as its income. The explanation given was not believed and the aggregate of the amounts was assessed as the income of the family. It was held that the assessee family, in this case, could not be said to have received the amounts in question at all. In that case, the learned counsel for the income-tax department fairly conceded that there was no material other than the rejection of the explanation on which a finding could be legally based that the amounts were the income of the family. It was clear that the case credits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee-firm and the assessee's account books showed a corresponding credit in favour of R. Similarly, G's name was utilised for securing overdraft facilities for the assessee-firm. But the third sum of ₹ 5 lakhs, which happened to be held in the name of S, was offered as a security for overdraft to a company, in the managing agency of which the partners of the assessee-firm had a controlling interest. The Appellate Tribunal came to the conclusion that the amounts deposited in the names of R and G represented secret profits of the assessee-firm, but the amount deposited in the name of S cannot be held to be the secret profits of the assessee-firm. There the Tribunal found no connecting link between the third remittance and the assessee and decided in favour of the assessee in respect of this amount. The Supreme Court in refusing to interfere with the decision of the Tribunal reiterated the principles laid down in the said earlier case and made the following observations at page 579: The rules which govern the approach of the High Court are: '(i) When the point for determination is a pure question of law, such as construction of a statute or a document of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the said party, and to satisfy the Income-tax Officer that the entry is real and not fictitious. When, however, in a case where the entry stands in the name of the third party, the assessee satisfies the Income-tax Officer as to the identity of the third party and also supplies such other evidence which will show, prima facie, that the entry is not fictitious, the initial burden which lies on him can be said to have been discharged by him. If will not, thereafter, be for the assessee to explain further how or in what circumstances the third party obtained money and how or why he came to make a deposit of the same with the assessee. The burden will shift on to the department to show why the assessee's case cannot be accepted and why it must be held that the entry, though purporting to be in the name of a third party, still represents the income of the assessee from a suppressed source. In order to arrive at such a conclusion, however, the department has to be in possession of sufficient and adequate material. In our opinion, when cash credit entry appears in the assessee's books of account in an accounting year, the assessee has the legal obligation to explain the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion may be afterthought. The break-up of the said sum of ₹ 16 lakhs, as the idle cash of Messrs. Surajmull Nagarmull was never mentioned before the Commission and the link between the said sum of ₹ 16 lakhs and the cash credits in the assessee's books of account is, therefore, not necessarily established. Further, according to the assessee, the total sum of ₹ 1,40,000 was paid by way of loan by Messrs. Surajmull Nagarmull to the assessee-company, but no attempt was made to prove that these sums were actually drawn from the said firm. A memorandum from the said firm to the effect that the said sum of ₹ 1,40,000 belonged to the said firm and the fact that the said sum was credited from time to time in the assessee's books of account in the name of alleged benamidars do not necessarily justify the conclusion that the said sum could not be the income of the assessee unless the contents of such memorandum are proved to be correct by some positive evidence, oral or documentary, from the firm itself. There is nothing to show that the said memorandum was accepted by the department. Messrs. Surajmull Nagarmull is a well-known firm and there is no difficulty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from undisclosed source. It was in the above context. the Appellate Assistant Commissioner in his report made the aforesaid observations. It may be added that the assessee's representative in 1948-49 proceedings, Mr. J.P. Gupta, also appeared before the Income-tax Officer and the Appellate Assistant Commissioner of Income- tax in the income-tax proceedings for 1947-48. Reference may also be made to the following statements in the assessment order of the Income-tax Officer for the assessment year 1948-49: 3. Mr. Gupta's explanation was that these amount were received from Messrs. Surajmull Nagarmull but were credited in various names which were given by them. He produced a certificate from Messrs. Surajmull Nagarmull saying that the loans in question were advanced by them in various benami names. 4. Now, in the books of the assessee-company, there is no mention anywhere that the money came from Messrs. Surajmull Nagarmull, as claimed. Messrs. Surajmull Nagarmull and the assessee were therefore requested to produce some substantial independent evidence to show that the money actually came from Messrs. Surajmull Nagarmull as now claimed. The said observat ..... 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