Satish Chandra, C.J.
1. The assessee is an individual. He became a partner of the firm, Messrs, Saraswati Udyog, which was constituted in Diwali, 1968. His share in the firm was 27%. On November 7, 1968, he gave 11 engines and some other spare parts to the firm of the total value of Rs. 40,000. This was his capital contribution to the firm. He also gave a cash deposit of Rs. 6,000 to the firm on June 4, 1969. The ITO, while computing the income for the assessment year 1970-71, required the assessee to explain the source of these investments. He disbelieved the explanation offered by the assessee and included these two items in the assessable income.
2. On appeal, it was held that the inclusion was justifiable only under Section 60. On merits, the explanation offered by the assessee was disbelieved and the inclusion was held justified. In the result, the appeal was dismissed. The assessee then went up to the Tribunal. The Tribunal held that Section 68 was applicable because the books of the firm are as much books of the assessee and the credit entry therein can be considered under Section 68. They held that Section 69 was not applicable. On the merits, they agreed with the findings of the authorities below. In the result, the appeal was dismissed.
3. At the instance of the assessee, the Tribunal has referred the following question of law for our opinion:
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that Section 68 of the Income-tax Act and not Section 69 was applicable and on that basis in upholding the addition in assessment year 1970-71 ?'
Section 68 reads:
'68. 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 Income-tax Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.'
Section 68 applies where the books of the assessee show a cash credit entry. The term 'assessee' has been defined by Clause (7) of Section 2 to mean a person by whom any tax or any other sum of money is payable under this Act. Section 2(31) defines the expression 'persons' to include an individual, a Hindu undivided family, a company, a firm or association, etc. The I.T. Act makes a distinction between an individual as a person who is liable as an assessee on the one hand and a firm on the other being as much an entity liable to assessment independently of the individuals who may constitute its partners. When Section 68 uses the term 'books of an assessee', it refers to the assessee whose books show the cash credit entry. In the case of the firm, the books maintained by the firm should show a cash credit entry and the firm's explanation should be found unsatisfactory, then only Section 68 will entitle the ITO to include the amount of the entry as the income of the assessee-firm. Here, the entries were found in the books of the firm but the assessment that we are concerned with is that of an individual, namely, a person who was one of the partners of the firm. For Section 68 to apply to such a case, a cash credit entry has to be found in the books of the individual partner who is the assessee. The existence of the entry in the books of the firm is immaterial because those are the books of a different assessee.
4. Section 69 reads as follows :
'69. Unexplained investments.--Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.'
In the present case, the assessee had made investments. Those investments were not in fact found recorded in his books of account because he had not maintained any books of account at all. The explanation offered by the assessee, namely, the individual partner, was not found satisfactory. All the ingredients and conditions of Section 69 were satisfied in the present case. It was Section 69 which alone could apply. Section 68 was entirely inapplicable.
5. In our opinion, Section 69 was applicable to the facts of the case. The Tribunal was in error in holding that Section 68 was applicable. The Tribunal did not answer the defect pointed out by the assessee in the course of arguments before it that if Section 69 were to apply then on the merits there will be some difficulty in including it in the income for the year 1970-71. The assessee's argument was that the income could be includible under Section 69 only for the assessment year 1969-70. The Tribunal has, however, not given any finding on this aspect. This finding is also not the subject-matter of the question referred to us. We, therefore, leave the question open.
6. In the result, we answer the question referred to us by holding that Section 69 was applicable to the facts of the case and the Tribunal was not justified in upholding the addition for the assessment year 1970-71 on the basis that Section 68 applied. In the circumstances, we make no order as to costs.