1. For the assessment year 1967-68, the following two questions have been referred to us :
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the assessment of the sum of Rs. 10,000 in the hands of the assessed as the assessed's income from undisclosed sources is not correct following the decision of the Delhi High Court in the case of Rattan Lal v. Income-tax Officer : 98ITR681(Delhi)
(2) Whether the Tribunal was correct in holding that the aforesaid amount cannot be brought to tax in the assessment year 1967-68 in spite of the provisions of s. 68 of the Income-tax Act ?'
2. The answer to the first question has to be in favor of the Department because of the judgment of the Supreme Court in Jagnaprasad Kanhaiyalal v. CIT : 130ITR244(SC) , wherein the judgment of the Delhi High Court reported as Rattan Lal v. ITO : 98ITR681(Delhi) was overruled.
3. The second question presents some problem. In this case, the disclosure by the wife under the Voluntary Disclosure Scheme under the Finance (No. 2) Act of 1965 was made on March 30, 1966, and the credit was made in the assessed's book on April 4, 1966. The AAC came to the view that the money did not belong to that lady, i.e., the assessed's wife, but belonged to the assessed. So, it was a benami declaration by the wife. He also held that the sum of Rs. 10,000 was taxable in the assessment year 1966-67 and not 1967-68, because the deposit, which was made in the books on April 4, 1966, was nothing else but the amount disclosed on March 30, 1966, as a voluntary disclosure. He directed the ITO to make the assessment in the year 1966-67.
4. On appeal to the Tribunal, this view has been upheld. The Tribunal observed :
'.......In such a case, the amount of the cash credit cannot be assessed the hands of the assessed in the assessment year 1967-68. The position is the same in the present case also. The cash credit in the assessed's book occurs on April 4, 1966. The assessed's Explanationn is that this represented the money which was available with his wife on March 30, 1966. This immediate source and the nature of the cash credit in the books has been satisfactorily explained. Obviously, the amount must have been in existence on March 30, 1966, because it cannot be presumed that without there being any money in existence at all, Smt. Some Rani (or assuming that she is the benamidar of the assessed), or he would have gone to the commissioner of Income-tax with a voluntary disclosure and paid tax. It is, thereforee, clear that so far as the cash credit is concerned, it has been explained as having come out of the amounts which were in existence in the previous accounting year. The amount of the credit cannot, thereforee, be treated as the income of the accounting year 1966-67, when it is clear that the money was in existence even in the financial year 1965-66.'
5. The quoted portion shows that the Tribunal took it as satisfactory Explanationn that the amount appearing in cash credit was not earned during the financial year relating to the assessment year 1967-68. If this is so, s. 68 was not attracted. Obviously, the amount had to be taxed in the assessment year 1966-67.
6. The terminology of s. 68 is such that if cash credit entries in the accounts are not satisfactorily explained, they would be treated as revenue receipts or income of the assessment year relative to which the entry appears. In this case, as the entry was dated April 4, 1966, it would relate to the assessment year 1967-68, because the previous year was the year ending March 31, 1967. However, if the assessed's Explanationn to the effect that this amount was in existence in that accounting period relating to the assessment year 1966-67, as it was disclosed by his wife under the Voluntary Disclosure Scheme on that date was fully accepted then it would not be taxable in the assessed's hands either in the assessment year 1967-68 or 1966-67. If the Explanationn was accepted to the extent that the amount was there in March, 1966, but did not belong to the assessed's wife on the footing that she was a benami holder for the assessed, then the income would be attributable to the assessed but not in the assessment year 1967-68, but in the assessment year 1966-67. Both the AAC and the Tribunal accepted the Explanationn to the extent that the amount was in existence on March 30, 1966, when it was disclosed by the assessed's wife but they did not accept the claim that it belonged to the wife. Their conclusion was that the wife had declared an amount which if the amount which belonged to the husband and it was a benami declaration. It follows that if the amount was in existent in March, 1966, it could not have been earned in the accounting period relative to the assessment year 1967-68. This is why the AAC directed the ITO to add the amount in the assessment year 1966-67. When the matter came in appeal to the Tribunal, they recorded their conclusion as quoted above. In other words, they accepted the fact that the amount was in existence in March, 1966, and, thereforee, could not be taxed in the assessment year 1967-68.
7. The question referred to us concerning the impact of s. 68 seems to be on the basis that the amount must be taxed under that section in the year in which the entry appears in the account books. We do not think that this follows as a necessarily corollary to the conclusion on facts. The amount may be taxed in the assessment year in question, when the Explanationn is not found to be satisfactory but if the Explanationn is found to be satisfactory to the extent the Tribunal has found it, then the amount is not to be taxed under s. 68, but on the ground that this income which was not disclosed in 1966-67, that is the result of the passage quoted above, which may again be quoted here, viz. :
'.....This immediate source and the nature of the cash credit in the books has been satisfactorily explained.'
8. In our view, the conclusion of the Tribunal on facts leads to the conclusion that the question posed to us has a self-evident answer. If the Explanationn is satisfactory, then s. 68 does not apply.
9. The result of this analysis may be summarised as follows :
If an Explanationn is offered regarding the case credit entry which is rejected in toto, the amount may be added in the year in which the entry appears, i.e., in the present case, it would be taxed in the assessment year 1967-68. If the Explanationn is partially accepted to the extent that the entry relates to the income earned in some previous period, then the entry cannot be taxed in 1967-68, but to be taxed in the correct year. Learned counsel for the Commissioner urged that it could only be taxed in 1967-68 on the footing that a partially accepted Explanationn means rejection of the Explanationn. However, the wording of s. 68 says that the amount may be taxed in the previous year. If this income relates to some other year, it must be taxed in the correct year. thereforee, the application of the provision depends on the facts actually found in any particular case.
10. Learned counsel for the Department also urged that he did not really challenge this point of view but he submitted that the Tribunal and wrongly accepted the Explanationn to the extent of holding that the amount was in existence in March, 1966. We thing this is a finding of fact. The Tribunal could have rejected the Explanationn, but in order to make it taxable in the hands of the assessed, there had to be a finding that the amount was benami and did not belong to the wife. The wife's point of view was that this was the same amount which was disclosed under the Voluntary Disclosure Scheme on March 30, 1966. When this Explanationn was rejected on the footing that the wife had never any source of income, an inference of fact was drawn that this was the husband's money which was disclosed by the wife. It would, thereforee, follow that the finding that the amount was in existence in March, 1966, followed from the Explanationn given by the assessed and that given by his wife.
11. It is a conclusion of fact.
12. We, accordingly, answer this reference. We have already observed that the answer to question No. 1 is in the negative by holding that as the Delhi High Court judgment has been overruled, the amount was taxable in the hands of the assessed. However, it had to be taxed in the correct assessment year. The answer to the second question is in the affirmative on the footing that the amount could be taxed in 1966-67, notwithstanding the language of s. 68 of the I.T. Act.
13. We make no order as to costs.