V. Bhargava, J.
1. In compliance with an order passed by this court under Section 66 (2) of the Indian Income-tax Act, the Income-tax Appellate Tribunal has referred the following two questions for our opinion :--
'Q. CD Whether, on the facts and in the circumstances of this case, there was any material on the record for the finding that Rs. 42,840/-were suppressed profits of the assesses;
Q. (2) Whether it could be said that the whole amount or a major portion thereof was income which had been derived in the account year mentioned above.'
2. The reference relates to the assessment year 1945-46. The relevant account year in question began on 15th September, 1943, and ended on 1st September, 1944, The assessee, in its return, showed a loss of Rs. 5,783/13/9. During the assessment proceedings, the Income-tax Officer found three deposits in the name of Jagannath, minor son of Sheo Dutt Rai who was the karta of the assessee Hindu undivided family. These deposits were of Rs. 9000/- on 15th September, 1943. Rs. 31,840/- on 25th September, 1943, and Rs. 2000/-on 25th October, 1943.
The Income-tax Officer issued a notice under Section 23 (3) calling upon the assessee to explain the nature of the source of these deposits. The assessee gave his statement to the effect that these deposits were in respect of loans taken from Jagannath, his minor son who had been taken in adoption by one Lala Gopal Das, the father-in-law of Sheo Dutt Rai and had received from his adoptive father cash to the extent of Rs. 40,000/-and ornaments worth about Rs. 20,000/-, besides the business of a shop known as Ratan Lal Gopal, Das.
Sheo Dutt Rai went on to state further that this sum of Rs. 42,840/- had been kept with Smt. Bishan Dei, the natural mother of Jagannath and the wife of Sheo Dutt Rai, and this money had been taken from her in the name of Jagannath as a loan. There was a further plea that, in the previous year corresponding to the assessment year 1943-44, he had taken a loan of Rs. 27,100/- from Jagannath. Cut of that, he had returned a sum of Rs. 27,000/- to Jagannath during that very year. The plea thus was that Jagannath had ample resources available to him out of which he could have made this advance to the assessee. This explanation was not accepted by the Income-tax Officer or the Appellate Assistant Commissioner of Income-tax.
The Income-tax Appellate Tribunal also agreed with this rejection of the explanation which had been offered by the assessee. The Income-tax Appellate Tribunal then proceeded to hold that these unexplained cash credits, which appeared in the books of account for the years in dispute and in respect of which the assessee had failed to prove the nature and source, though it could easily do so, could justifiably be held by the income-tax authorities to be income of the year in which they had been credited in the books of account. On this view, it was held that the whole of this sum of Rs. 42,840/- was taxable income of the year in question and was liable to be assessed to tax as such.
3. The question of burden of proof in the case of cash credits has come up for decision before various courts in a number of cases. This Court expressed its opinion on this point in the case of Mithoo Lal Tek Chand v. Commr. of Income-tax. U. P. : 23ITR494(All) (A), and held that, if an assessee receives certain sums of money in the relevant accounting period, it is for him to explain from where he got the money. If his explanation is accepted, there Is an end of the matter. The true source being known, the question, which might then arise, is whether it Is or ft is not taxable income.
Where the explanation of the assessee is rejected, the Tribunal has to record a finding on such materials as may be available, whether the money represents revenue receipts taxable as income of the relevant account period. The burden, in the first instance, must be on the assessee to show the true nature of the receipts and why he claims that it is not taxable income. When the assessee furnishes an explanation, if that explanation is unsatisfactory, that may in itself be a circumstance which the Income-tax officer may be entitled to take into consideration but it need not necessarily in every case lead to the conclusion that the receipt is a revenue receipt taxable as income received in a particular year.
In the instant case, this sum of Rs. 42,840/-was shown as a receipt in the account books maintained by the assessee. The burden, therefore, lay on the assessee to show the true nature and source of this receipt. Sheo Dutt Rai came forward with the explanation that he had received this amount as a loan from his minor son, Jagannath, who had been adopted by his father-in-law Lala Gopal Das. That explanation has been rejected by the income-tax Appellate Tribunal. (The rejection of that explanation is a question of fact which cannot be re-examined by us.)
The position, therefore, is that the true nature and source of the receipt of this sum remain unproved. The assessee was in the best position to explain the true source and nature but it failed to do so. In the circumstances it cannot be said that the Income-tax Authorities could not have held that the deposits represented assessee's income. The amounts having been credited by the assessee in his account books, it is he who must be able to say whence the money came. The taxing authorities could not be expected to provide evidence about facts which were within the special knowledge of the assessee.
If the assessee does not explain what he alone could know, an inference is possible that the nature of the receipts were such as rendered him liable to tax. It was also found in the present case that no debit entries relating to the amounts in question existed in the account books of Messrs Ratanlal Gopaldas which, is said to belong to Jagannath minor nor was any interest paid to him in respect of these deposits. We are, therefore, unable to say that there was no material to justify the finding that the deposits came out of the assessee's income.
4. So far as the second question is concerned, it appears to us that the circumstances of the case now before us are very similar to the circumstances that arose in the case of : 23ITR494(All) (A), cited above. In the present case, the first deposit of Rs. 9000/-appears in the books of account on the very first day of the account year in question. The second large deposit of Rs. 31,840/- appears just ten days after the year in question had opened. There was no material at all, and none has been indicated by the Income-tax Appellate Tribunal in their order, which could show that the assessee was in a position to earn a profit of Rs. 9,000/- on the opening day of the account year and another large sum of Rs. 31,840/- within the next ten days thereafter.
The various figures, which appear in the orders of the Income-tax Appellate Tribunal and other income-tax authorities, do not bear out that the scale of business of the assesses was such that such huge profits could be earned by him within these short periods. In the case of Mithoo Lal Tek Chand v. Commr of Income-tax, U. P. (A) cited above, the position was similar inasmuch as a cash deposit of Rs. 65,000/- had appeared on the first opening day of the account year in question.
It was held that that amount could not have been earned in one day only and. consequently it was totally unreasonable to hold that that sum was taxable income of that very account year. The position in the present case is similar. It would be unreasonable to hold that these sums of Rs. 9000/- and Rs. 31,840/- could have been earned as income by the assessee in this very account year which began on 15th September, 1943, when these amounts are shown as received on the opening day and on a day ten days thereafter. In view of these circumstances, we have to hold that there was no material at all to justify a finding at least in respect of the sum of Rs. 40,840/- that it was taxable income of the assessee for the year in question.
5. So far as the remaining sum of Rs. 2,000/-is concerned, it is shown as a receipt one month and ten days after the account year in question had opened. There was in the case of Mithoo Lal Tek Chand v. Commr of income-tax, U P, (A), cited above, a similar deposit of Rs. 5,000/- one month and five days after the beginning of the account year in question. Considering the extent of the business, it was held in that case that it could not be said that it was not possible for the assesses to have made secret profits of Rs. 5000/-in the course of one month and five days.
Consequently, the inference drawn by the in-come-tax authorities in that case could not be held to be unreasonable. In the present case also, it cannot be said that the assessee could not have earned Rs. 2000/- as profits within one month, and ten days of the opening of the account year in question when the nature and magnitude of its business is taken into account. Consequently, the inference drawn by the income-tax authorities that it was taxable income of this very year in question cannot be held to be unreasonable.
In respect of this sum of Rs. 2000/-, however, Sri Satish chandra, learned counsel for the assessee has urged that this sum was not shown as a deposit made by Jagannath in the accounts of the assessee but actually represented interest which had accrued on a sum of Rs. 40,840/- which was shown as a deposit in the name of Jagannath earlier. This is a question of fact which has not been referred to in the appellate order of the Income-tax Appellate Tribunal or in the statement of the case, If this deposit of Rs. 2000/- appears as a deposit of cash advanced by Jagannath, out view expressed with regard to it will apply.
On the other hand, if it is the interest which had accrued on the sum of Rs. 40,840/-, naturally, the decision about this amount would follow our opinion expressed with regard to the sum of Rs. 40,840/-. It will be for the Income-tax Appellate Tribunal to determine the fact correctly and apply our opinion in accordance with it.
6. When this reference had come before us, a preliminary point was discussed that, since this reference to this Court, there had been re-assessment of the assessee and the result of reassessment was that, even if this reference was answered in favour of the assessee, it could not derive any benefit as this sum had been included as its income in the re-assessment which had become final. That point did not arise out of the reference but, in the statement of the case, the Income-tax Appellate Tribunal has taken notice of a written statement which was filed by the Commissioner of Income-tax and has attached as annexures copies of that written statement and the order of re-assessment. Having examined the order of re-assessment, we find that it has been wrongfully designated by the Commissioner of Income-tax as an order of re-assessment. The order, which forms annexure 'B' to the statement of the case, is an order under Section 34 of the Indian Income-tax Act regarding escaped income only. It does not purport to be an order of re-assessment under Section 34 of the Act. Such an order of assessment of escaped income cannot have any effect at all on the original order of assessment made against the assessee.
Any appeal or reference arising out of that original order, therefore, remains completely unaffected by order of assessment of the escaped income under Section 34. The Commissioner of Income-tax in his written statement, somehow assumed and in our opinion without any justification at all, that an' order made by us allowing this reference would be merely of academic interest and would not benefit the assessee. He has made a reference to a disclosure drive which, according to him, took place about a year before he filed his written statement which is dated 16th March. 1953.
According to the Commissioner of income-tax the drive took place some time in the year 1952 and it was during this drive that a fresh return was filed by the assessee and a re-assessment took place. The order of assessment of escaped income, which has been appended to the statement of the case by the Income-tax Appellate Tribunal, is, however, dated 13th February, 1950, i, e., about two years prior to the time when, according to the Commissioner of Income-tax, the re-assessment took place. It seems that the Commissioner of Income-tax has filed a written statement giving incorrect facts. There is nothing to show that there was any re-assessment in the year 1952, or that any fresh return was filed at that time. What took place was only an assessment of escaped income under Section 34 of the Act in the year 1950 and that, as we have said above, can have no bearing at all on the effect of the opinion expressed by this Court on the questions referred to it.
7. Let the papers be returned to the Income-tax Appellate Tribunal with our opinion as expressed above. The assessee is entitled to itscosts from the Department which we fix at Rs.200/-.