1. In the account books of the assessee-company for the previous year relevant to the assessment year 1959-60 there were cash credits totaling Rs. 3,36,000. This amount was added as income of the assessee in the said assessment year.In appeal, the AAC found that cash credits amounting to Rs. 2,50,000, out of the total cash credits of Rs. 3,36,000 fell within that part of the financial year which was relevant to the assessment year 1958-59 and since the financial year was to be considered as the previous year for the assessee's income from undisclosed sources, the AAC deleted the sum of Rs. 2,50,000 from the assessment year 1959-60. In view of the deletion made by the AAC, the ITO issued a notice under s. 147(a) of the I.T. Act, 1961, for the assessment year 1958-59. Finding that there was no satisfactory explanation of the source of the cash credits to the extent of Rs. 2,25,000, that amount was included in the assessment for the assessment year 1958-59.
2. When the matter was taken in appeal to the AAC, he accepted the contention that having regard to the provisions of s. 297(2)(d)(ii) read with s. 68 of the I.T. Act, 1961, the said amount was assessable in the assessment year 1959-60 and not in the assessment year 1958-59. The AAC, therefore, cancelled the assessment made by the ITO. This view of the AAC was confirmed by the Tribunal. Arising out of this order of the Tribunal, the following question has been referred under s. 256(1) of the I.T. Act, 1961 :
'When the completed assessment for 1958-59 is reopened by notice issued by the Income-tax Officer under section 148 of the Income-tax Act, 1961, would the inclusion of the unexplained cash credits be governed by section 68 of the Income-tax Act, 1961, or the law as it was found under the Indian Income-tax Act, 1922, in view of section 297(2)(d)(ii) of the Income-tax Act, 1961 ?'
3. When this reference was called out, there was no appearance on behalf of the assessee. Appearance has already been entered on behalf of the assessee by M/s. Ambubhai and Diwanji, attorneys. Mr. Joshi has produced before us an intimation given both to the assessee and to the attorneys, dated January 1, 1983, that the reference will be heard here on January 10, 1983. This intimation produced before us sufficiently shows that at least the attorneys have enough intimation of the hearing. We have, therefore, proceeded to hear the reference. Mr. Joshi, appearing on behalf of the Revenue, has invited our attention to the decisions of the Supreme Court in Govinddas v. ITO : 103ITR123(SC) , in which, construing the provisions of s. 297(2)(d)(ii), the Supreme Court has held that the words 'all the provisions of this Act shall apply accordingly' in that provision merely refer to the machinery provided in the new Act for the assessment of escaped income and that they do not import any substantive provisions of the new Act which create rights or liabilities. In the same decision the Supreme Court has held that the substantive law to be applied for determining the liability to tax must necessarily be the law under the old Act, for that is the law which applied during the relevant assessment years and it is that law which must govern the liabilities of the parties. The view taken by the AAC and the Tribunal is that having regard to the provisions of s. 297(2)(d)(ii), the liability of the assessee in respect of the cash credits in question must determined with reference to the provisions of s. 68 of the I.T. Act, 1961. Section 68 provides that where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof, or the explanation offered by him is not in the opinion of the ITO satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. That is why the AAC and the Tribunal have taken the view that the addition should have been made in the previous year, relevant to the assessment year 1959-60. Now, it can hardly be disputed that s. 68 of the I.T. Act is a substantive provision determining the liability of the assessee in respect of cash credits for which no satisfactory explanation is offered by the assessee. Having regard to the decision of the Supreme Court, therefore, if s. 68 is a substantive provision, that will not be attracted in the instant case and the liability will have to be determined under the old Act. It is not, therefore, possible to endorse the view taken by the AAC and the Tribunal that having regard to the provisions of s. 68, the cash credits could not be added to the income of the income of the assessee in the financial year relevant to the assessment year 1958-59. The view of the AAC and the Tribunal now no longer holds good, having regard to the decision in Govind das cited supra. Accordingly, the question has to be answered by holding that the unexplained cash credits will be governed not by s. 68 of the I.T. Act, 1961, but by the law as it was under the Indian I.T. Act, 1922. The question is accordingly answered as above. As there is no appearance on behalf of the assessee, there will be no order as to costs of this reference.