V. Bhargava, J.
1. The following question has been referred by the Income-tax Appellate Tribunal for opinion to this Court in compliance with the orders passed by this Court under Section 66 (2) of the Income Tax Act :
'Whether there was any material on which the Tribunal could come to the conclusion that the amount of Rs. 68,958/- out of the cash deposits appearing in the assessee's personal accounts represented his concealed income of the previous year of the assessment year 1945-46?'
2. It appears from the statement of the case submitted by the Tribunal that in the accounts submitted by the assessee there were two accounts in the name of the sole proprietor Sri M. L. Garg. One was the personal account of the proprietor and the other was a loan account. These two accounts showed various defects as well as some withdrawals during the previous year in question. In the loan account there were withdrawals to the extent of Rs. 47,222/8/-, which were made in the month of March just before the previous year closed.
It was held by the Tribunal that the sums received by the proprietor by these withdrawals in the month of March could not have been available to him for making the deposits which were made earlier. The Tribunal, however, accepted the view that all other withdrawals which had been made earlier by the proprietor could have been availed of by him in order to make the various deposits. Consequently, for the purpose of calculating the amount of deposit which the proprietor had to explain, those withdrawals were deducted out of the deposits.
On this basis it was found that the assessee was required to account for deposits amounting to Rs. 1,80,212/-. The assessee on being called upon to submit his explanation presented a statement showing the sources from which he had drawn the money in order to make these deposits. There were various sources amongst which were bank balance available on the first day of the opening of the previous year, realisations made in respect of sales effected during the preceding year and profits for the preceding year.
Another source disclosed was agricultural income earned by the assessee by carrying on an horticultural farm during a number of years preceding the previous year in question. The explanation given by the assessee -was scrutinized by the Income-tax authorities. The explanation of some of the sources was accepted whereas for others it was rejected.
Ultimately it was held that the assesses had failed to give any adequate explanation for the deposits amounting to Rs. 68,958/-. This amount was then held to be concealed income of the previous year in question and was therefore added to thetaxable income. In this reference, the assessee has challenged the correctness of this view taken by the Income-tax Appellate Tribunal.
3. Learned counsel for the assessee, while arguing this reference before us, wanted to urge that the order of the Income-tax Appellate Tribunal rejecting the various explanations given by the assessee for the sources from which he had drawn the money in order to make those deposits was incorrect and was without material, so that that portion of the order of the Appellate Tribunal should be scrutinized by us and corrected.
It is to be noticed that the question whether the explanation given by the assessee was or was not correct was a question of fact. Neither in the application under Section 66 (1) of the Income-tax Act before the Appellate Tribunal nor in the application under Section 66 (2) of the Income-tax Act before this Court did the assessee seek any reference to this Court of the question whether the findings given by the Appellate Tribunal holding that the explanation was not correct were without material and vitiated in law.
That question, therefore, is not before us in this reference. For the purpose of this reference, we have to accept the findings of fact given by the Appellate Tribunal on this point. Consequently, this reference has to be decided on the basis that, with regard to the deposits amounting to Rs. 68,958/- by the proprietor in the accounts of the assessee, either the assessee has failed to give an explanation or give explanations which were not accepted as correct.
The whole of this sum of Rs. 68,958/- is shown as receipts during the previous year in question. The question arose whether in these circumstances a reasonable inference could be drawn that this amount represented the concealed income of the previous year in question. On this point our attention was drawn to a decision of a Bench of this Court in Mithoo Lal Tek Cband v. Commissioner of Income-tax, U. P., : 23ITR494(All) (A), where the law on the question of drawing inferences under such circumstances was explained after a discussion of the cases decided by various High Courts. The view expressed was as follows :
'An examination of these cases would, therefore, go to show that, if from the books of account of the assessee it appears that during the relevant account period he had received certain sums of money, it is for him to explain from where he got the same, and if his explanation is accepted there is an end of the matter. The question then might arise, which would be in most cases a question of law whether the assessee's claim that the receipt--its true source being known--is not taxable income is justified or not.
Where, however, his explanation is rejected, the Tribunal has to record a finding on such materials as may be available, whether the money represents revenue receipt 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 receipt 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.
The question must always remain a question of Fact which has to be decided on the materials available. In each case the revenue authorities are entitled to take into consideration the fact that the explanation given by the assessee is either unreasonable or is false and then to consider whether that circumstance alone or the other materials available along with that circumstance would entitle them to hold that the amount so deposited represented the undisclosed income of the assessee in the year in question.'
In the instant case, so far as the sums of money deposited in the name of the proprietor in respect of which explanation has been accepted by the Income-tax Authorities is concerned that ends the matter. With regard to the remaining amount, it appears from the facts found that the exact sources of the receipts by the assessee could not be ascertained. The assessee had given his explanation for the sources from which he had drawn this money in order to make the deposits but that explanation was rejected.
When an explanation is found unsatisfactory that in itself could be a circumstance which the Income-tax Officer was entitled to take into consideration but it did hot necessarily lead to the conclusion that the receipt was a revenue receipt taxable as income received during the previous year in question. As held in the case cited, above, the revenue authorities were entitled to take into consideration the fact that the explanation was not acceptable and then to consider whether that circumstance alone or the other materials' available along with that circumstance would entitle them to hold that the amount so deposited represented the undisclosed income of the assessee for the year in question.
In deciding this question, it appears that the Appellate Tribunal committed a serious mistake by placing the entire burden of proof on the assessee when formulating the question which came up fat decision before it. The Tribunal said that the simple point for determination as regards the cash credits before them was whether the appellant had been able to prove that the cash deposits represented his accumulated income from the year 1930 to 1944 from his agricultural farm and from his business of seeds etc., and was as alleged by him brought in the year of account as capital investment for increasing the volume of business as and when necessity arose.
This was not the real question that arose in the appeal. It was /or the taxing authorities to first discover the material;; on the basis of which it could be held that the receipts were revenue income taxable in the relevant year. The assessee no doubt had the burden of giving an explanation, but as held above the mere fact that the explanation was not found to be correct does not necessarily in every case lead to the inference that it was revenue income liable to be taxed.
In some case, the fact that the explanation given was either unreasonable or false could be treated as a circumstance which might alone justify an inference that the income was revenue income taxableas income of that very year. The Tribunal did not pay any attention at all to this aspect of the case. What the Tribunal did was to reject the explanation given by the assessee and thereupon, without examining the reasonableness of the inference, it laid down as an inevitable consequence that the receipts were taxable income of the previous year.
The Tribunal did not apply its mind at all to the question whether there was any material in addition to the fact that the explanation had been rejected and whether, if there was such material, in the particular circumstances of the case the inference drawn by the Tribunal was or was not justified. The consequence is that the order of the Appellate Tribunal has not been of much assistance to us in answering the question referred for our opinion,
4. Having gone through the order of the Appellate Tribunal as well as the assessment order and the order of the Appellate Assistant Commissioner we have found that in this case there was no suggestion on the part of the income-tax authorities that during the previous year in question the assessee was carrying on any other business besides those shown by him in his books of accounts.
The only other source of income disclosed by the assessee was agricultural income derived from the horticultural farm worked by him. If this amount of Rs. 68,958/- is held to be concealed income of the previous year in question, it can, in these circumstances be taxed only as income derived from the business in respect of which the accounts ' were submitted by the assessee. The Appellate Assistant Commissioner has dealt with this question of various businesses carried on by the assessee.
The order of the Appellate Assistant Commissioner was noticed by the Appellate Tribunal and it appears that the explanation accepted by the Appellate Assistant Commissioner with respect to the speculative business and celery business was cited with some disapproval by the Appellate Tribunal, Even, therefore, the Appellate Tribunal did not differ from the Appellate Assistant Commissioner.
The Tribunal relied on the fact that even the appellant had not been able to meet the point raised by the Income Tax Officer relating to the appellant's having a contract for packing and about the appellant's doing business in the supply of seeds in the previous year in question. Thereafter, the Appellate Tribunal went on to hold that'the manner in which the appellant kept the accounts of his business left much room for leakage of profits and it could be safely presumed that the accounts of the appellant did not reflect his full income and profits from these sources.
This view expressed by the Appellate Tribunal would indicate that, according to it, this concealed income of Rs. 68,958/- was derived from the business in supply of seeds and the contract for packing which the assessee had been carrying on during the previous year in question and the income was concealed by improper maintenance of accounts. Our opinion has to be given on the basis that this sum of Rs. 68,958/- has been taxed as concealed income derived from those very businesses in respect of which accounts were submitted.
Examining this aspect, we have discovered that the findings of fact given by the Income-tax Authorities go to show that some instances of concealment of the profits were proved. A sum of Rs. 26,397/- had to be added back for sales of seeds and a sum of Rs. 403/- for sales of plants. In addition the assessee had shown a loss of Rs. 12,782/- in vegetable contract account and the finding given was that no such loss was incurred.
It can very reasonably be inferred that a partof this sum of Rs. 68,958/- which was deposited by the proprietor must consist of the amounts which he was able to retain in his hands by such manipulation of accounts and suppression of these items of income. These three items of Rs. 26,397, Rs. 403/- and Rs. 12,782/- which were either suppressed from the turnover or which were wrongly shown as loss in the account must have remained in the hands of the proprietor and they must have been utilised by him for the purpose of making at least a part of the deposits in question.
When there are clear findings indicating that profits were suppressed or losses were wrongly shown-in the accounts, in our opinion, the income-tax authorities were justified in inferring that this sum of Rs. 68,958/- represented suppressed income which had been earned in the previous year in question. This sum can be divided into two parts. One part consists of those items of concealed income which have already been added back such as the sum of Rs. 26,397/-, added for sales of seeds, the sum of Rs. 403/-, added for sales of plants and the sum of Rs. 12,782/- added for wrongly showing loss in vegetable contract account.
This sum cannot be held to include within it the sum of Rs. 7,724/- which was the suppressed income from the packing business because credit for that amount has already been given to the assessee by the Appellate Assistant Commissioner by deducting that amount from the profits in order to avoid double taxation. The other part of the sum of Rs. 68,958/- consists of those amounts in respect of which the income-tax authorities could not discover from the books of accounts bow the suppression of this income has taken place and could not consequently add back those amounts when calculating the taxable income.
There is, however, the circumstance that the account maintained by the assessee were unsatisfactory; that he had been unable to give a satisfactory explanation of the sources from which he derived this amount in order to make the deposits and that at least in respect of a part of this amount of Rs. 68,9587- there was clear material to show that it did represent the Suppressed income of the previous year in question.
In these circumstances a reasonable inference can be drawn that even the other part of this sum of Rs. 68,958/- in respect of which the actual source could not be discovered by the income-tax authorities was concealed revenue income of the previous year in question. It appears that in these circumstances, though the whole amount of Rs. 68,958/-has to be held to be concealed income of the previous year in question, the amounts, which have already been added back as concealed income or extra profits or in respect of losses wrongly shown, cannot be taxed as concealed income of the previous year in question because they have already beentaxed and added back and double taxation of the same income is not permissible.
What can be taxed on the basis of the deposits made by the proprietor are only those items which have not been added back already when calculating the taxable income and those are the only sums which can be taxed as concealed income of the previous year when making the assessment for the assessment year 1945-46.
5. Our answer, therefore, is that the sum of Rs. 68,958/- represents concealed income of the assessee of the previous year for the assessment year 1945-46 but, out of this sum, the sums of Rs. 26,397/-, Rs. 403/- and Rs. 12,782/- have already been taxed and, therefore, instead of Rs. 68,958/-, only a sum of Rs. 29,376/- can be added ts determine the assassee's total income on the basis of the deposits appearing in Ms books.
6. In the circumstances of this case, the partiesshould bear their own costs.