P. Chandra Reddy, C.J.
1. This is a reference under Section 66(2) of the Indian Income-tax Act, which arises in the following circumstances.
2. The assessee, a Hindu undivided family, is a manufacturer and dealer in groundnut kernel and oil on a large scale. In its books for the Deepavali year ended 12-11-1947, and for the assessment year 1948-49, there were certain cash credits in favour of several persons totalling a sum of Rs. 41,255/-. The Income-tax Officer, called upon the assessee to prove the genuineness of these transactions in the four ledger accounts annexed as annexures A to D. As the assesses was unable to prove them to his satisfaction, the Income-tax Officer added these sums to the assessment to cover the unsatisfactory features of the case.
On appeal by the assessee, the Appellate Assistant Commissioner took the view that peak credits alone should be added which amounted to Rs. 19,968/-. There was a further appeal to the Income-tax Appellate Tribunal by the assessee. The Tribunal thought that all the four accounts should be rearranged and the peak credits as rearranged should be taken into account in assessing the unexplained cash credits. In that position, the peak credits would aggregate only to Rs. 10,300/-. In its opinion, even this amount should not be added since for the assessment years 1946-47 and 1947-48 intangible additions of over Rs. 30,000/- appear to have been made and 'it is not unreasonable to conclude that a part of them at least should be available to the assessee to cover the above peak introduction of Rs. 10,300/- during the Dewali year ended 12-11-1947, the previous year for assessment year 1948-49, in full'. In the result, the entire addition of Rs. 19,968/- was deleted and the Income-tax Officer was directed to amend the assessment accordingly. The attempt of the Revenue to have a case referred to this Court by the Tribunal proved futile. Thereupon, the petitioner approached this Court for reference under Section 66(2) of the Income-tax Act.
3. The petitioner wanted the following questions of law arising out of the order of the Tribunal to be referred to the High Court.
(1) Whether there was any material available to the Appellate Tribunal on which it could hold that the cash credits in question are explained by the intangible additions made in the previous year's assessments.
(2) Whether on the facts and in the circumstances of the case the assessee has discharged onus of establishing the genuineness of cash credits aggregating to Rs. 19,968/-.
This Court, complying with the request of the petitioner, directed the Tribunal to state a case and submit to this Court the following two question:
(1) Whether the Income-tax Appellate Tribunal is justified in making out a new case for the assessee in respect of the peak credit ascertained by it on a rearrangement or the impugned credits.
(2) Whether the sum of Rs. 10,300/- ascertained by the Tribunal as a peak credit is based on an obvious mistake. Accordingly, the Tribunal has stated the case.
4. The first question to be considered is, whether there was any justification for the Tribunal to have the peak credits determined on a re-arrangement of the- unexplained cash credits. Here, we are not concerned with the correctness of the view of the Appellate Assistant Commissioner whether the cash credits as found in all the four ledgers should have been added to the return or whether it is the peak credits that should be taken into account, as no appeal was filed by the Department against the order of the Appellate Assistant Commissioner and that has become final.
The only point is whether there was any basis for the Tribunal to re-arrange, the cash credits in dispute, A reading of the order of the Tribunal would not disclose any reasons for the procedure adopted by it. Further, it was not the case of the assessee at any time that the transactions in the four ledger accounts set out in annexures A to D aforesaid and standing in the names of different individuals have, in fact, constituted a single account and that they should be arranged chronologically as one account.
On the other hand, one of the grounds urged in support of his appeal before the Appellate Assistant Commissioner was that cash credits should be reduced to peak credits in the annexures B, C and D. Obviously, annexure A was omitted, because there was oily one entry of 9.800/- and, therefore, there was no question of peak credits being taken into consideration. It is significant that even before the Tribunal such a point does not seem to have been presented.
That apart, we fail to gee how the accounts standing in the names of three different individuals could be regarded as one account for the purpose of arriving at the peak credits. Thus, it is clear that there was absolutely no foundation for treating them as the same account and we find that there was no justification for the Tribunal to regard the whole thing as one account and to arrange it chronologically so as to make it a single account. It should not have attempted to make out a new case for the assessee.
5. The learned counsel for the respondent sought to re-open the question whether the cash credits were properly explained or not, but we do not think he cart succeed in doing so. The Income-tax Officer was not convinced with the explanation offered by the assessee. The Appellate Assistant Commissioner as well as the Tribunal acquiesced in the view of the Income-fax Officer that the explanation offered by the assessee was unacceptable. Apart from all that, the assessee himself ultimately had to admit that several of these entries were fictitious ones.
Once the explanation furnished by the asses-pee was found to be unsatisfactory, the Department is entitled to treat them as income accounts. Therefore, the contention of the learned counsel for the respondent that they were genuine cash credits fails and is rejected.
6. The next point for determination is whether the opinion of the Tribunal that these sums might have been included in the intangible additions for the previous years is sustainable. The Tribunal, as already stated, thought that it was not unreasonable to conclude that a part of them at least should have gone into the undisclosed profits which were added to the assessments in the previous years.
When once the explanation given by the assessee that certain cash credits standing in the names of third parties were genuine is rejected as being unconvincing, the Revenue is at liberty to treat them not only as income accounts but also as receipts derived in the year in which these entries were made and it is for the assessee to show that this was the income which he got in the previous years of account and which formed part of the intangible additions made in the previous years. See D. C. Auddy and Bros. v. Commr. of Income-tax, West Bengal : 28ITR713(Cal) . No such case was put forward by the assessee at any time, either before the Income-tax Officer or the Appellate Assistant Commissioner or even before the Tribunal. In such a situation, there was no justification for the Tribunal to have indulged in guesses and conjectures. The burden is upon the assessee to prove that certain amounts of cash received in an accounting year are not of an income nature and it Ss not for the Income-tax Officer to prove that they are. It follows that the deletion of the entire addition of Rs. 19,968/- is unwarranted and could not be sustained.
7. It was maintained by the counsel for the respondent that since the issue whether this formed part of the in tangible additions made for the previous accounting years was not specifically raised in the questions directed to be submitted by the Tribunal, it is not competent for this Court at this stage to answer, that. We do not think we can accede to this argument. It is true that there is no specific mention of this aspect of the matter in either of the two questions. But it looks to us that this is involved in question I.
Otherwise, it would be unmeaning to answer the question regarding the re-arrangement of peak credits and no purpose will be served if really these amounts should be treated as part of the intangible additions for the prior years. We feel that the first question is comprehensive enough to take in the point regarding the intangible additions. However, that is not very material as, in our opinion, this Court has power to recast the questions.
8. Section 66 (5) of the Income-tax Act which confers jurisdiction on the High Court in this behalf reads thus :
'The High Court upon the hearing of any such ease shall decide the questions of law raised thereby and shall deliver its judgment thereon containing the grounds on which such decision is founded and shall send a copy of such judgment under the seal of the Court and the signature of the Registrar to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conformably to such judgment.'
9. In our opinion, the power to recast or reframe questions is implied in this sub-section, although it does not specifically invest the Court with such a power. The only condition is that questions of law should be raised by the reference. The High Court has not only the power but it is its duty to reframe the questions in such a way as to bring out the real dispute between the parties. The court is not confined to the questions which the Tribunal was directed to submit.
10. There is abundant authority for this proposition. In Gauga Ham Balmokand v. Commr. of Income-tax Punjab , the Punjab High Court has ruled that the High Court is not confined to the decision of the question of law as formulated by the Commissioner or the Court issuing the mandamus. On the other hand, that Section (Section 66) confers upon the High Court full powers to decide the question of law in the form it actually arises from the statement of the case made by the Commissioner.
This decision follows the judgment of the Allahabad High Court in Shiva Prasad v. Commr. of Income-Tax, U.P. : AIR1929All819 which has laid down that the High Court is entitled to re-settle issues as it were and to decide them. A Bench of this Court in Rarneshwara Rao v. Commr. of Income-tax, Hyderabad, 1957 A L.T. 891 : AIR 1958 A P 53 had observed that if the quesion was in an ambiguous form, the Court was certainly entitled to reframe it or amend it in such a way as to bring out the real dispute between the parties, and that the power to reframe or amend a question was implied in Sub-section (5) of Section 66 of the Act.
11. The pronouncement of the Supreme Court in Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax : 26ITR765(SC) is to the same effect. Their Lordships, in the course of the judgment, remarked that the High Court should have raised a question which arose as a corollary to the answer given by them to another question. Since that was not done by the High Court, the Supreme Court reframed a question by restoring the question suggested for by the assesses. There are also other decisions which express the same view, but it is unnecessary to multiply citations. Suffice it to say that the High Court has ample power to recast or amend the questions so as to bring out the real controversy between the parties, if they are warranted by the statement of the case.
12. In the result, the questions referred to as are answered in favour of the Department. The respondent will pay the costs of the petitioner, which we fix at Rs. 150/-.