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TMI Blog1986 (3) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... late order of the Income-tax Appellate Tribunal for determination by the High Court. The assessment year involved was 1962-63. There were proceedings-one appeal was related to an assessment order whereby additions were made to the quantum of income disclosed by the assessee and the other was in respect of imposition of penalty under section 271(1)(c) read with section 274(2) of the said Act. The questions involved respectively in the two applications before the High Court were as follows : "S.J.C. No. 116 of 1972: 1. Whether in the absence of proving confirmation letters and hundis by the assessee, the assessee has discharged his initial onus by producing merely the confirmation letters and hundis to prove the nature of the transaction ? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee to the Appellate Assistant Commissioner was dismissed. Thereafter, there was a further appeal to the Tribunal. In the meantime, on the basis of the assessment order, proceeding was taken under section 271(1)(c) of the Act and the Inspecting Assistant Commissioner imposed a penalty of Rs. 50,000. An appeal against the imposition of penalty was also filed before the Tribunal. Both the appeals were disposed of by the Tribunal. The Tribunal noted that the credit entries stood in the names of third parties in the account books of the assessee. The explanation was that the amounts represented loans to the assessee from the concerned persons. The assessee had produced discharged hundis and confirmation letters from these alleged lenders. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention was drawn to the statements in the assessment order where the Income-tax Officer had observed certain inconsistencies in the confirmation letters and observed further that the confirmation letters did not inspire confidence. It also observed that the assessee had stated that after making all possible attempts in their own way, had failed to produce the parties and thereupon requested the Income-tax Officer to issue summons under section 131 to all the alleged creditors and the notices under section 131 of the Act which had come back unserved with the remarks "left". The assessee thereafter wanted further opportunity to find out the present whereabouts of the alleged lenders. The Income-tax Officer observed further that the wide prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me was not found to be from the assessee's regular business for which the books were maintained. The cash credit might be assessed either as business profits or as income from other sources. Under the 1922 Act, where a large amount of cash was found credited on the very first day of the accounting year, and considering the extent of the business, it was not possible that the assessee earned a profit of that amount in one day, the amount could not be assessed as the income of the year on the first day on which it was credited in the books. Under this section, even in such a case, the unexplained cash credit might be assessed as the income of the accounting year for which the books are maintained. See, in this connection, the observations in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s again considered by this court in Homi Jehangir Gheesta v. CIT [1961] 41 ITR 135, when this court reiterated that it was not in all cases that by mere rejection of the explanation of the assessee, the character of a particular receipt as income could be said to have been established ; but where the circumstances of the rejection were such that the only proper inference was that the receipt must be treated as income in the hands of the assessee, there was no reason why the assessing authority should not draw such an inference. Such an inference was an inference of fact and not of law. It was further observed that in determining whether an order of the Appellate Tribunal would give rise to question of law, the court must read the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome nature, the Department could not act unreasonably and reject that explanation to hold that it was income. If, however, the evidence was unconvincing, then such rejection could be made. The Department cannot by merely rejecting good explanation unreasonably, convert good proof into no proof. In CIT v. Daulatram Rawatmull [1964] 53 ITR 574 (SC), the principles governing reference under section 66 of the 1922 Act, similar to section 256 of 1961 Act were discussed and it was held that the High Court has no power under section 66(2) of the Indian Income-tax Act, 1922, which is in pari materia with section 256(2) of the Act, to call upon the Appellate Tribunal to state a case, if there was some evidence to support the finding recorded by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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