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Kesarimal Sohanraj Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberIncome-tax Case No. 19 of 1970
Judge
Reported in[1972]84ITR519(AP)
ActsIncome Tax Act, 1961 - Sections 256(1) and 256(2)
AppellantKesarimal Sohanraj
RespondentCommissioner of Income-tax
Appellant AdvocateY.V. Anjaneyulu and ;K.N. Raju, Advs.
Respondent AdvocateP. Rama Rao, Adv.
Excerpt:
.....cash credits - sections 256 (1) and 256 (2) of income tax act, 1961 - income tax officer assessed cash credits as petitioner's undisclosed income from other sources - appellate tribunal upheld assessment - tribunal declined to state a case for court's opinion on ground that no question of law arose from its decision - whether such assessment was correct having regard to independent estimate of income from assessee's business - in case of cash credits assessee required to prove source of income - income tax officer can consider cash credit as income from undisclosed source in absence of proof to contrary - held, no question of law arises from tribunal's order. - - 6. the learned counsel, sri anjaneyulu, appearing for the petitioner contended that the assessee himself contended..........on the facts and circumstances of the case, the assessment of the whole or any portion of the cash credits amounting to rs. 15,350 was correct, having regard to the independent estimate of income from the assessee's business ?'2. the material facts are: the petitioner, who is carrying on wholesale and retail business in brass-ware and stainless-steel, for the assessment year 1962-63 declared his business income at rs. 4,866. the accounts were not closed and the stocks at the commencement and closing of the relevant accounting year were not taken. the net profit of rs. 4,866 was returned by the assessee on the basis of an estimate of gross profit on a turnover of rs. 96,814 at 10% and after deducting overhead expenses therefrom amounting to rs. 8,415.3. in the course of examination.....
Judgment:

Sriramulu, J.

1. This is an application filed under Section 256(2) of the Income-tax Act, 1961, requesting this court to direct the Income-tax Appellate Tribunal to state a case on the following question of law:

' Whether, on the facts and circumstances of the case, the assessment of the whole or any portion of the cash credits amounting to Rs. 15,350 was correct, having regard to the independent estimate of income from the assessee's business ?'

2. The material facts are: The petitioner, who is carrying on wholesale and retail business in brass-ware and stainless-steel, for the assessment year 1962-63 declared his business income at Rs. 4,866. The accounts were not closed and the stocks at the commencement and closing of the relevant accounting year were not taken. The net profit of Rs. 4,866 was returned by the assessee on the basis of an estimate of gross profit on a turnover of Rs. 96,814 at 10% and after deducting overhead expenses therefrom amounting to Rs. 8,415.

3. In the course of examination of the accounts, the Income-tax Officer found that there were cash credits in the accounts of eleven persons, aggregating to Rs 15,350. The assessee submitted before the Income-tax Officer that those cash deposits in the accounts of eleven persons were in fact sales effected by the petitioner. The petitioner also requested the Income-tax Officer to treat the sum of Rs. 15,350 as sales for the purpose of determining the business income. It was also brought to the notice of the Income-tax Officer that for the same assessment year the Sales Tax Officer had estimated the sales at Rs. 1,30,000. Taking those factors into consideration, the Income-tax Officer estimated the turnover at Rs. 1,35,000 and the gross profit at 12%. After allowing overhead expenses of Rs. 3,000 from the gross profit determined on that basis, the petitioner's net business income was determined at Rs. 13,200. The Income-tax Officer also included a sum of Rs. 15,350 representing the cash credits in theaccounts of those eleven persons as the petitioner's undisclosed income under the head ' Other sources.'

4. On appeal preferred by the assessee, the Appellate Assistant Commissioner reduced the estimate of the business income to Rs. 12,000 and upheld the inclusion of the cash credits, as undisclosed income from other sources. A further appeal was carried to the Income-tax Appellate Tribunal by the assessee.

5. Before the Income-tax Appellate Tribunal, the assessee contended that:

(1) there was no justification for the assessment of the sum of Rs. 15.350 as undisclosed income from other sources, in view of the petitioner's explanation that those credits represented sales effected by the petitioner,

(2) when the income from business having been estimated, taking the above fact into consideration, on a turnover, which was much higher than the book turnover, there was no justification for the addition of the cash credits. After due consideration, the Income-tax Appellate Tribunal upheld the assessment of Rs. 15,350 as the petitioner's undisclosed income from other sources, but at the same time reduced the business income to Rs. 10,000. Aggrieved by the decision of the Tribunal, the assessee filed a reference application under Section 256(1) of the Income-tax Act of 1961, requiring the Tribunal to state a case on the question stated above. The Income-tax Appellate Tribunal declined to draw up a statement as it was of the opinion that no question of law arose from the decision of the Tribunal. Hence, this petition to this court.

6. The learned counsel, Sri Anjaneyulu, appearing for the petitioner contended that the assessee himself contended before the Income-tax Officer and the Tribunal that the cash credits found in the accounts of eleven persons represented the sales effected by the assessee and this fact was taken into consideration by the income-tax authorities as well as by the Tribunal in estimating the turnover at a higher figure than what was disclosed in the account books. Since the assessee had raised the contention that the credits, in question, represent its sales and that fact having been taken into consideration by the department as well as by the Tribunal to estimate its business income, it was imperative on the part of the department and the Tribunal to have telescoped the cash credits into the business income and treat the same as the suppressed business income. Where the assessee did not raise that contention that the cash credits had no relevancy to the business, then only the two independent additions, one in respect of the unexplained cash credits, and the other in respect of business income, which was estimated, could be made. In support of the above contention the learned counsel relied upon the decision of this court in Commissioner of Income-tax v. J.V.S. Bapana Rao (R.C. No. 27/64), and also a decision inKuppuswami Mudaliar v. Commissioner of Income-tax, [1964] 51 I.T.R. 757 (Mad.). In Kuppuswami Mudaliar's case the question was whether the additions made in the earlier year towards profits were available for being deposited in the year of account as cash credits in the various accounts. In that connection the learned judges of the Madras High Court observed that:

' There can be no relaxation from that position and we have no doubt that the department cannot deviate from or wriggle out of it without departing from ordinary standards of justice and fairplay. If in such a case the assessee points to that addition as the source from which he got a .particular amount which he is called upon to explain, the department is bound to accept it as exceedingly likely and probable, consistent with its previous act in treating the additions as income, unless it be that it is possible to say that the source was not available to the assessee. The onus of proving this would be on the department. Otherwise, it would amount to the department saying ' heads I win, tails you lose'.'

7. Those observations of the Madras High Court cannot be considered as good law, in view of the decision of the Supreme Court in Commissioner of Income-tax v. Devi Prasad Viswanath Prasad, [1969] 72 I.T.R. 194 (S.C.). In that case their Lordships of the Supreme Court categorically laid down that:

' Where there is an unexplained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee, and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income, it is income from a source which has already been taxed.'

8. In view of the pronouncement of the law, it is not open to contend that the onus is on the department to prove the source from which the undisclosed income had come from. In the instant case before us, although the assessee had contended that the cash credits in the accounts of eleven persons represented the sales and had no connection with the business that the assessee was carrying on, the Tribunal did not accept that contention. What the Tribunal had observed in paragraph 5 of its order is :

' The assessee's claim in short is that the cash credits represent extrasales. There is no proof in this regard. Even the names of the parties towhom the sales have been made being not available, it is not knownwhether those represent sales at all. On the contrary the credits stand asextra amounts received in the books. Admittedly, the books are not closedand a stock inventory is not available. In this state of affairs, it is notpossible to accept the assessee's contention that the credits can be Regardedas sales on the basis of the fact that the purchases were Rs. 1,27,586 asagainst which sales of Rs. 96,814 have been only shown. It is even possiblethat the cash credits represent income of an earlier year or some other income of the current year. '

9. In view of the Tribunal's refusal to accept the contention raised by the assessee, that the cash credits, in question, represent the sales, we are satisfied that the facts of this case squarely fall within the decision of the Supreme Court in Commissioner of Income-tax v. Devi Prasad Viswanath Prasad.

10. It is now well-settled that in the matter of cash credits, the burden of proof is upon the assessee to prove the source and if the source is not proved, it is open to the Income-tax Officer to include the aggregate amount of the cash credit as income of the assessee from undisclosed source and no further duty lies upon the department to prove from which source the assessee had earned that income.

11. In view of these facts, no question of law arises from the Tribunal's order. We. accordingly, reject the application with costs. Advocate's fee is Rs. 100.


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