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TMI Blog1974 (4) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... ining its books of account. The short facts necessary for the disposal of this reference case may be stated as follows. On August 17, 1946, the assessee filed its return for the relevant assessment year. On November 7, 1946, the assessment proceedings were taken up by the Income-tax Officer when the books of account of the assessee were first examined. An order of assessment was made on October 4, 1948. The assessee took up the matter in appeal to the Appellate Assistant Commissioner of Income-tax, who by his order dated November 14, 1949, set aside the assessment order of the Income-tax Officer and remanded the case to him for reassessment. By an order dated January 27, 1958 (copy marked annexure "A" to the statement of the case), the Income-tax Officer passed an order of reassessment which was affirmed in so far as the present question is concerned by the Appellate Assistant Commissioner by his order dated October 31, 1965, (annexure " B " to the statement of the case). The assessee then went up in second appeal before the Income-tax Appellate Tribunal, Patna Bench, which by its appellate order, dated December 22, 1967 (copy marked annexure " C " to the statement of the case), d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l within the legal limits of its rights in converting notes of small denomination to the notes of high denomination for the purpose of safe keeping and in the interest of security. None-the-less, the contention or the explanation put forward on behalf of the assessee was rejected both by the Income-tax Officer and the Appellate Assistant Commissioner who concurrently held that the assessee had not discharged the onus of proving the source of the high denomination notes. When the appeal was pursued before the Tribunal, the Tribunal again rejected the explanation put forward by the assessee, holding, inter alia, that : (i) There was no custom or practice prevalent in the market for any merchant to keep the number of the high denomination notes. (ii) During the course of the business these notes were received in change for smaller notes but since we are making a presumption against the assessee for not keeping on record of flow in the business of notes, the position remained that the assessee has not been able to prove that he received high denomination notes in exchange for other notes. (iii) When there are high denomination notes tendered for encashment the onus is on the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact-finding authorities as genuine and there was hence no material upon which the Tribunal could reach the inference that the high denomination notes were not the saving oil the assessee and where the cash balance had not exceeded the amount of the value of the high denomination notes subsequently demonetised, it was not necessary for the assessee to explain the source of receipt of such high denomination notes covered by the cash balance showed. It was held in that case on facts more akin to the facts of the instant case thus : "In my opinion, there is no onus thrown upon the Raja (the assessee) to indicate from whom each note to the value of Rs. 10,000 was received, and no adverse inference ought to have been drawn by the Tribunal against the assessee. " It is, in my view, a fundamental principle governing the taxation of any undisclosed income or secreted profits that the income or the profits as such must find sufficient explanation at the hands of the assessee. If the balance at hand on the relevant date is sufficient to cover the value of the high denomination notes subsequently demonetised and even more, in the absence of any finding that the books of account of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Steel Co. Ltd. v. Commissioner of Income-tax, wherein it was held that the burden of proof lay upon the department to prove that the sum said to be representing the suppressed income of the assessee was from undisclosed sources and the burden was not on the assessee to prove how it had received the high denomination notes, for, until the Demonetisation Ordinance -came into force, high denomination currency notes could be used as freely as notes of any lower denomination and no one had any idea that it would be necessary for him to explain the possession of high denomination currency notes. Again, in the case of Bai Velbai v. Commissioner of Income-tax, the principle was reiterated by the Supreme Court, that, in the absence of materials to show that the sum in question which was being sought to be treated as secreted profits did form part of the cash balance and the source of the money had not been satisfactorily explained, the department was justified in holding it to be the assessable income of the assessee from some undisclosed source. The crux of the matter is to explain or establish the source of the income or the receipt of money and not the source of receipt of the high deno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated as a finding of fact based upon certain materials discussed by the Tribunal in rejecting the assessee's contention and that no question of law can be said to arise out of the finding or the decision of the Tribunal. I am, however, definitely of the view that the findings of the Tribunal based upon the observations or materials already quoted in detail at an earlier place go to show that the so-called findings of fact, if any, are based upon placing a wrong onus of proof and applying not the correct principles of law governing such cases. On the facts as discussed by the Tribunal and the subordinate appellate or assessing authorities, no tangible material has been brought on the record to take the shape of any legal evidence for the purpose of recording a finding that the assessee's explanation was not worthy of acceptance. This by itself is a question of law arising from the Tribunal's decision. For the foregoing reasons, I am of the view that the question referred to us by the Tribunal must be answered in the affirmative, and I hold that on the facts and in the circumstances of this case the Tribunal had erred in coming to the conclusion that the cash balance of Rs. 1, ..... 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