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TMI Blog1975 (12) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... tuted by two partners, Sri Maduri Rajeswara Rao and Sri Maduri Narasimha Rao, carrying on business in cloth. For the assessment year 1960-61 (corresponding accounting year commencing from November 11, 1958, and ending with November 30, 1959), the ITO did not accept the returns submitted by the assessee but added two amounts, Rs. 47,348 towards extra profit in the trading account, and Rs. 1,41,729 towards explained cash credits under the head "Income from other Sources". On appeal, the AAC sustained the addition of Rs. 47,348 to the account of gross profits but, however, the addition of Rs.1,41,729 as income from undisclosed sources was found referable to two periods, viz., November 11, 1958, to April 1, 1959, and April 1, 1959, to November 30, 1959. It was found that the unexplained cash credits pertaining to the period prior to April 1, 1959, do not fall under the year of account and, hence, they have to be deleted. The amount of unexplained cash credits for the period subsequent to April 1, 1959, was found to be Rs. 51,008. Since addition of Rs. 47,348 was upheld by him on account of low gross profit, the AAC thought that no further addition on account of cash credits was justifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly held that the assessee had not substantiated his claim but failed to establish that the sum of Rs. 51,008 found in the form of cash credits in the accounts of the assessee really represented genuine loans or credits. This finding is one of fact which has been arrived at by the Tribunal on the material on record. Such finding is binding on this court. It next falls for determination whether the ITO had jurisdiction and was competent to make the further addition of Rs. 51,008 towards unexplained cash credits under the head " Other sources ". It is now well settled that the onus of proving the source of a sum of money found to have been credited by the assessse either in his names or in the names of third parties is on the assessee who must be held to have the special knowledge about the circumstances under which the credit was made by him or by his agent or clerks in the books of account maintained by him and if he fails to establish the source of such a cash credit satisfactorily, such amount can be treated by the taxing authorities as taxable income. It is for the assessee and not for the department, either to establish satisfactorily by independent evidence that the receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee within whose special knowledge the source of the credit is, to plead and establish that a particular credit relates to, or has any connection with, the undisclosed income from his known business in the year of account and, therefore, it cannot be added once again when the business income itself has been made subject to estimate. The income from other source is different and distinct from undisclosed income from a known source, whether it is by business or any other. The same receipt of income is not exigible to double taxation. The ITO cannot estimate the gross profit from the disclosed or known business of the assessee and add to it the cash credits forming part of the undisclosed income of the same business. But, however, where the assessee fails to satisfactorily explain that the unexplained cash credits found in his books of account form part of, or relate to, the undisclosed or unaccounted profits of the business, or known source of business already taxed either on the basis of the return of income or by resorting to an estimate, the ITO is having ample power and jurisdiction to treat such sums as income from an undisclosed source and tax them accordingly. Rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not depend on whether the income from the first mentioned business had been computed on the basis of a return filed or of an estimate of the income made by the taxing authorities...... Therefore, it cannot be said that the taxing authorities were precluded from treating the amounts of the credit entries as income from undisclosed sources simply because the entries appear in the books of a business whose income they had previously computed on a percentage basis." The same view has been reiterated by the Supreme Court in CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 at pp. 196, 197. The learned judge, Shah J. (as he then was), speaking for the court, ruled thus : " There is nothing in law which prevents the Income-tax Officer in an appropriate case in taxing both the cash credit, the source and nature of which is not satisfactorily explained and the business income estimated by him under section 13 of the Income-tax Act, after rejecting the books of account of the assessee as unreliable......... Whether in a given case the Income-tax Officer may tax the cash credit entered in the books of account of the business, and at the same time estimate the profit must, however, de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce under s. 66 of the Indian I.T. Act, 1922. Even the Supreme Court treated the credits as business receipts which were chargeable to tax, rejecting the explanation of the assessee that it represented the sale price of family jewels. Hence, that case does not assist the assessee in the present case. The next case that is relied upon is Mansfield & Sons v. CIT [1963] 48 ITR 254 (Cal). Therein, it was held that where an unexplained cash credit is found in the business accounts of an assessee, such amount is taken to be income from an undisclosed source and the same can be treated as business income if the assessee has no other source of income, and taken into account as business income for purposes of excess profits tax. That decision also is not a case of the type with which we are now concerned in this reference. Daulatram Rawatmull v. CIT [1967] 64 ITR 593 (Cal) is the next case cited by the assessee's counsel. In that case, the Calcutta High Court, on a consideration of the facts, held that the concealed income in the form of fixed deposits entered in the account books was all income from the assessee's very business disclosed, as the assessee was found to have no other source o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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