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TMI Blog1958 (12) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... s were not accepted. That related to these two entries of credits of sums of ₹ 16,200 and ₹ 13,700 in the accounts of the assessee firm in the name of Mahesh Chandra Agrawal, minor son of Pooranchand, partner, and of Channalal Agrawal father of Pooranchand, partner. In respect of these two items the Income-tax Officer called upon the assessee to disclose the real source of these amounts credited in the books of account of the assessee and held on rejection of the explanation given by the assessee that these two amounts were income of the assessee from undisclosed sources. On appeal the Appellate Assistant Commissioner upheld the decision though coming to the view that these amounts represented income not from entirely undisclosed sources but from black-marketing activities of the firm. The assessee went up in appeal to the Income-tax Appellate Tribunal which upheld the decision for adding these amounts to the profits of the assessee firm and dismissed the appeal. The appellant moved the Income-tax Appellate Tribunal under section 66(1) of the Income-tax Act to state the case to this court on the ground that the decision for holding that these two items represented taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making these deposits. The question that thus follows for decision is whether these facts and circumstances found by the Tribunal can be said to be material on the basis of which the Tribunal could come to a finding that these deposits were the revenue income of the assessee liable to income-tax. It appears to us that these circumstances taken together are such that it is possible to draw an inference that these deposits did represent income of the assessee from undisclosed sources. The facts show that when the money actually came into the accounts of the assessee firm it was brought in by the one of the partners Pooranchand Under the law: of partnership, Pooranchand was entitled to handle the funds of the partnership business and consequently he could have in his possession moneys belonging to the partnership as well as his own moneys. The explanations given on behalf of the assessee nowhere asserted in plain language that the money which was being deposited by Pooranchand was his own money and in fact, as we have noticed above, it was not even asserted that it actually belonged to Mahesh Chandra, his minor son. The explanation that the money was deposited out of the withdrawal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his individual capacity from some undisclosed sources of his own. In support of this proposition learned counsel referred us to a decision of the Bombay High Court in Narayandas Kedarnath v. Commissioner of Income-tax[1952] 22 I.T.R. 18]. In that case also a very similar question had arisen and, on the facts and circumstances of the case, the Bombay High Court held that the Tribunal was not justified in holding that the amounts shown as credited in the account of certain partners were income of the assessee firm. The facts of that case were, however, different from the facts of the case before us. In that case, the Bombay High Court relied on the circumstance that the Tribunal had found as a fact that the amounts in question had been actually brought in from Jaipur by means of drafts of the Imperial Bank of India, Jaipur, and there was no evidence at all to connect the assessee firm with any moneys at Jaipur as the assessee firm had no business at all there. In that case also, the partner had failed to prove there own sources from which they had earned those profits at Jaipur but, in spite of their failure, it was held that the profits could not be treated as the profits of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee firm. There is no finding of fact that the money when deposited in the accounts of the firm came from the hands of any person who could, in the natural course of circumstances, be in possession of the firm's moneys such as a partner. No doubt Channalal was the father if one of the partners but there was nothing to show that Channalal's funds were being manipulated by Pooranchand or by any one else connected with the assessee firm. On the face of the accounts, the receipt did not appear as a receipt of money belonging to the assessee firm. In order to tax this receipt as income of the assessee it was necessary to arrive at three finding; first of all there had to be a finding that the money received belonged to the assessee firm, secondly, the source of that receipt had to be determined, and finally the question had to be decided whether the money having been found to belong to the assessee and coming from a particular source or an undisclosed source amounted to a receipt of such a nature that it was liable to tax, which and that it was a revenue receipt and not a capital receipt or receipt of some other nature which is not liable to charged with income-tax. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d v. Commissioner of Income-tax[1953] 23 I.T.R. 494], where we pointed out that if and assessee gives explanation which is false or unreasonable, that may be a circumstance which might entitle the Department to hold against the assessee, but, the burden in such cases being on the Department, the mere rejection of an explanation does not necessarily lead to the result that the case of Department must be correct, nor can it be used as positive evidence to prove their case against the assessee. In these two cases, thus, distinction was drawn between cases where the explanation given by the assessee is found to be false or unreasonable, and cases where the explanation is, no doubt, rejected but it is not found to be false or unreasonable or unsatisfactory. In the latter type of cases, the explanation is rejected usually on the ground that the evidence tendered by the assessee in support of the explanation is not satisfactory, that the explanation has not been proved. In a case where the explanation is only rejected as not proved or for want of proof, no positive circumstance comes into existence which provides material for the Tribunal to draw an inferences against the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question then arose whether they were taxable revennue receipts in the hands of that assessee partner. For that purpose the assessee was called upon to give an explanation. The assessee's explanation was in two parts. For a sum of ₹ 80,000, his explanation was that this sum represented profits which had been earned by his father who had kept these profits with himself till the died and that just prior to his death he had entrusted them to the assessee's aunt who died subsequently and who before her death handed over this amount to the appellant. As regards the balance of about ₹ 42,000 the explanation of the appellant was that they represented profits earned in another partnership business which the assessee had carried union certain earlier years. The Tribunal giving its finding of fact held that the explanation that referred to the sum of ₹ 80,000 was false, whereas the explanation with regard to the remaining amount of ₹ 42,000 was not established. It was on these facts and findings that the Supreme Court expressed the view that it was open to the Income-tax Officer to hold that the income must be the concealed income of the assessee. It will thu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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