1. The Income-tax Appellate Tribunal has, at the instance of the Revenue, referred the following question for our opinion under s. 256(2) of the I. T. Act, 1961 (hereinafter referred to as the 'Act').
'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in deleting the inclusion of an amount of Rs. 72,000 appearing as a credit in the capital account of the assessee ?'
2. The assessee in his return of income for the assessment year 1966-67 disclosed an income of Rs. 2,824. The year of account relating to the said assessment year was Samvat year 2021. According to the assessee, he was carrying on business in grains and grocery. In his capital account for the Samvat year 2021, which he produced before the ITO, the assessee had shown a credit balance of Rs. 72,000 on the first day of the accountings period. He had also credited of Rs. 7,596 as net income from agriculture. The household expenses were shown at Rs. 1,480. In the balance-sheet filed along with the return, Rs. 76,000 were shown in the home-chest account. The ITO completed the assessment under s. 144 of the Act. He found that the cash balance was not genuine. The assessee had filed returns for the assessment years 1966-67 to 1968-69 on the same day, i.e., April 1, 1969. The ITO was of the view that the aforesaid cash balance was shown only to explain investment made in the subsequent years. In the opinion of the ITO, home-chest account and income from agriculture shown by the assessee were not genuine. In the result, he estimated the assessee's income at Rs. 85,000 under s. 144 of the Act. After deducting annuity deposit paid by the assessee, the total income was computed at Rs. 74,370.
3. The assessee carried the matter in appeal before the AAC, who, however confirmed the assessment made by the ITO. The AAC disbelieved the assessee's case regarding cash credit balance of Rs. 72,000 shown on the first day of the year of account and observed as follows :
'Further, the appellant contends that the net savings after incurring all the agricultural expenses were nearly Rs. 8,000 to Rs. 12,000 every year, and in this view of the matter the savings of Rs. 72,000 out of the agricultural income of the past years were not unbelievable. Further, the appellant contends that he was staying in a village where no bank facilities were available and the cash available with him had to be kept in the home-chest. The appellant urges that the ITO should have accepted the opening cash in hand of Rs. 72,000 in the books of account.
After considering the facts of the case, I hold that the contentions put forth by the appellant are not supported by any documentary evidence. No documentary evidence has been produced to show that the so-called land belonging to the appellant was really cultivable. The appellant also has not shown as to how such a large amount was kept in the house particularly when banking facilities were available in the nearby town.'
4. Being aggrieved by the order of the AAC, the assessee went in appeal before the income-tax Appellate Tribunal. The Tribunal took the view to the effect that the assessee could not have made such a huge amount of income in the very first year at the very threshold. The Tribunal further observed that the ITO and the AAC had disbelieved the assessee's statement that he was in possession of the cash amount of Rs. 72,000 and held that he had shown the cash balance only to explain the investment made in the subsequent years. The Tribunal observed : 'Therefore, if the possession of the cash claimed by the assessee is disbelieved, then three is nothing that remained to be added to the assessee's income.' In the result, the Tribunal reduced the total income computed by the ITO by Rs. 72,000. The questions which arises for our consideration is whether the Tribunal was justified in deleting the inclusion of the amount of Rs. 72,000 appearing as a credit in the capital account of the assessee.
5. In our opinion, the Tribunal has not property appreciated the provisions of s. 68 of the Act and misread the conclusions reached by the ITO and the AAC in deleting addition of Rs. 72,000. Both the ITO and the AAC have not found that the assessee was not in possession of cash balance of Rs. 72,000. As observed above, what has been found is that the explanation given by the assessee as regards the source of cash balance of Rs. 72,000 was not believable. The assessee's explanation was that Rs. 72,000 which he credited in his capital account represented his savings from agricultural income. The assessee had failed to prove by satisfactory evidence whether he had any agricultural income and even if he had such income whether he could have saved the amount of Rs. 72000 as alleged by him. It was under these circumstances that the ITO and the AAC refused to believe the assessee's explanation that he had cash balance of Rs. 72,000 on the first day of the year of account. The accounts produced by the assessee were not found to be reliable. The Tribunal erred in assuming the assessee's case to the effect that the credit entry of Rs. 72,000 in his capital account on the first day of the year of account was believed by the ITO and the AAC. The accounts were not accepted either by the ITO or the AAC. Therefore, it would not be correct to say that the entry of Rs. 72,000 is made on the first day of the year of account. The accounts could have been created at any time and entry of Rs. 72,000 though made later on could have been shown to have been made on the first day of the year of account. There is, therefore, no justification for the observations made by the Tribunal to the effect that huge income of Rs. 72,000 could not have earned 'in the first year of business at the very threshold'. The assessee himself has admitted that he had an amount of Rs. 72,000 with him. There is, therefore, no question of ITO refusing to believe that he did possess such amount. What is disbelieved by the ITO and the AAC is the explanation given by the assessee as regards its source. The Tribunal has totally misread the orders of the ITO and the AAC when it finds that the assessee was not held to be in possession of the aforesaid amount of Rs. 72,000.
6. Amount of Rs. 72,000 shown credited in the capital account is liable to be added as income under s. 68 of the Act. Section 68 lays down that 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 ITO satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. On the assessee's own showing the amount of Rs. 72,000 stood credited in his books for the relevant year of account. The assessee's explanation about the nature and source thereof has rightly not been accepted by the ITO and the AAC. In our opinion, the assessee's explanation is not supported by any evidence on record and hence it cannot be believed. Therefore, under s. 68 of the Act, the amount of Rs. 72,000 was liable to be included in the assessee's income for the year under appeal.
7. In our opinion, therefore, the Tribunal was nor justified in deleting the inclusion of Rs. 72,000.
8. In the result, we answer the question refereed to us in the negative and against the assessee.
9. No order as to costs.