1. The assessee is the managing director of V. C. K. Bus Service (Private) Ltd., Coimbatore. He was also plying one taxi and one lorry. In response to the notice under Section 22(2) of the Income-tax Act, the assessee filed a return of income on August 19, 1960, in respect of the assessment year 1960-61, corresponding to the accounting year ending March 31, 1960, admitting a total income of Rs. 13,507. In the course of the examination of the accounts, it was found that the assessee had introduced cash amounting to Rs. 50,000 on April 1, 1959. The assessee explained that the amount was cash available on hand as on that date. The assessee was required to prove the existence of the cash of Rs. 50,000 as on April 1,1959. He stated that during 1958, there were credits in the accounts of three individuals as under :
Rs.1.V. P. Velliangiri Gounder30,0002.Ramana Gounder19,0003.Champa Gounder12,000
2. In the year ending March 31, 1959, it was the explanation given bythe assessee, that the three persons were repaid their deposits, but thatthe amounts were still available with him for his use. The Income-taxOfficer did not accept the credits in the name of Velliangiri Gounder andRamana Gounder, and, naturally, therefore, the payments of those creditsas well. These amounts appear to have been assessed in the earlier year,and, therefore, ultimately the Income-tax Officer found that the assessee'sexplanation to the extent of Rs. 35,975 is acceptable. So far as the creditin the name of Champa Gounder was concerned, even in the earlier year,the Income-tax Officer accepted the credit as genuine and since the amountwas found entered as paid on July 5, 1958, the Income-tax Officer considered that the sum of Rs. 14,025 represents undisclosed income of theassessee and, accordingly, he brought this amount to assessment.
3. An appeal and a further appeal filed by the assessee to the Tribunal were unsuccessful in regard to this amount.
4. In the meanwhile, the Income-tax Officer also initiated proceedings under Section 28(1)(c) and held that there was concealment of this income by the assessee and, therefore, he was liable to penalty. Accordingly, he levied a penalty of Rs. 14,000, which was reduced by the Appellate Assistant Commissioner to Rs. 10,000. On a further appeal, the Tribunal had reduced it to Rs. 7,000.
5. There was no fresh material available in the penalty proceedings, but the Tribunal and the authorities below have refused to accept the explanation of the assessee that though he had made an entry of repayment to Champa Gounder on July 5, 1958, the amount was still available with the assessee on April l, 1959.
6. The learned counsel for the assessee submitted that merely on the ground that his explanation was not acceptable, it cannot be held that the said sum of Rs. 14,025 was undisclosed income. In this connection, he relied on the decision of the Supreme Court in Commissioner of Income-tax v. Anwar Ali, : 76ITR696(SC) . In that case, the Supreme Court pointed out that proceedings under Section 28(1)(c) are penal in character and that the burden is on the department to prove that a particular amount constituted the income of the assessee. The Supreme Court also held that if there is no evidence on record, except the explanation given by the assessee, which explanation has been found to be false, it does not follow that the receipt constitutes his taxable income. Mere rejecting of the explanation given by the assessee as false does not necessarily give rise to an inference that the disputed amount was the assessee's income.
7. The learned counsel for the revenue contended that whether the sum of Rs. 14,025 was really the amount of Champa Gounder available in the hands of the assessee is a fact within the exclusive knowledge of the assessee and, in those circumstances, it is for him to prove that, it was the amount of Champa Gounder.
8. We are unable to agree with the learned counsel that the amount which belonged to Champa Gounder could be said to be only in the exclusive knowledge of the assessee. If the department wanted to verify whether the amount had been paid to Champa Gounder, they could have examined Champa Gounder and if he is not alive, either his son or his records could have been called for and verified.
9. The learned counsel for the revenue invited our attention to one sentence in the order of the Tribunal, which reads as follows :
'The amount was repaid on July 5, 1958. Credit was on April 1, 1959, and it was not in the account of Champa Gounder.'
10. He wanted us to understand the later portion of this sentence as pointing out that even in Champa Gounder's account, the amount of the assessee had not been shown. We are unable to give this meaning to this sentence in the Tribunal's order. It appears to us that what the Tribunal intended to convey by that sentence is that the assessee had not shown Champa Gounder as a creditor in his account books. Further, if Champa Gounder's account has been looked into by the Income-tax Officer, it should be in evidence to show that either he had received the money on July 5, 1958, or did not receive at all. If there was an entry to the effect that on July 5, 1958, he had received the amount from the assessee in the account books of Champa Gounder, that will clearly go to show that the amount could not have been available with the assessee on April 1, 1959. Such an evidence also is not forthcoming.
11. Therefore, apart from the explanation given by the assessee, which has been found to be not acceptable, there is no other positive evidence to show that Champa Gounder had been paid and the amount was not available with the assessee.
12. The learned counsel for the revenue relying on the decision in D.M. Manasvi v. Commissioner of Income-tax, : 86ITR557(SC) submitted that the finding of the Tribunal is that the amount had been paid to Champa Gounder and it was not available with the assessee and this has to be accepted, and, therefore, the decision in Commissioner of Income-tax v. Anwar Ali is not applicable. But it may be pointed out that in that decision the Supreme Court, at page 565, specifically stated :
'......there was positive material to indicate that the business ofKohinoor Mills belonged to the assessee and the whole scheme was to disguise the profits of the assessee as those of a firm of four partners.'
13. It is only on this basis that their Lordships distinguished the decision in Commissioner of Income-tax v. Anwar Ali.
14. As we have already pointed out, there is no positive evidence in this case to show that Champa Gounder had been paid and the amount was not available with the assessee. Therefore, clearly, this case comes within the principle enunciated by the Supreme Court in Commissioner of Income-tax v. Anwar Ali.
15. Accordingly, we answer the reference in the negative and in favour of the assessee with costs. Counsel fee Rs. 250.