1. In this reference under Section 256(1) of the I.T. Act, 1961, we are concerned with the following question of law :
' Whether, on the facts and in the circumstances of the case, and on a correct interpretation of Section 68 of the Income-tax Act, 1961, the Tribunal was right in holding that the unexplained cash credits amounting to Rs. 8,100 appearing within one month of the commencement of the business in the books maintained for the previous year relevant to the assessment year 1963-64 were not taxable as the income of the assessee of the said previous year '
2. The assessee is a firm. The assessee commenced business on 27th November, 1961. The assessment year is 1963-64, for which the previous year ended on 27th October, 1962.
3. In the course of the assessment proceedings, the ITO found certain cash credits appearing in the books of the assessee. The explanation offered by the assessee was not accepted by the ITO. He, therefore, added these cash credits in the assessment.
4. The assessee filed an appeal. The AAC found that the ITO made a mistake in the addition of those amounts and he, therefore, corrected the amount. After making such correction the AAC was also unable to accept the explanation offered by the assessee and, therefore, confirmed the addition to the extent of Rs. 16,300.
5. The assessee filed a further appeal. Both the Judicial and the Accountant Members of the Tribunal were not satisfied with the genuineness of those cash credits. The Judicial Member, however, held that Rs. 8,100 being the cash credit appearing within one month of the commencement of the previous year could not represent the income of the assessee of the year under reference. The Accountant Member did not agree with him. The matter was thereafter referred to the Vice-President as the third Member of the Tribunal.
6. The Vice-President agreed with the Judicial Member and held that Rs. 8,100 could not possibly represent the income of the assessee of the year under reference.
7. The decision in the case of CIT v. Bharat Engineering and Construction Co. : 83ITR187(SC) , on which reliance was placed by the Judicial Member and also by the Vice-President is a case under the 1922 Act. It was held in that case that a large amount of cash appearing on the very first day of the accounting year was not assessable in that year as it was not possible for the assessee to make such a huge income on the very same day on which the assessee started business for that year. Whereas, under Section 68 of the I.T. Act, 1961, even in a case where an amount is credited on the very first day of the accounting year and the explanation offered by the assessee is not accepted such amount may be assessed as income of the assessee of the accounting year for which the books are maintained : (See 7th Edn., Vol. I of Palkhivala's Income Tax Act, at page 610, Section 68 under the heading ' Cash credit on first day of accounting year '),
8. In the premises, we answer the question in the negative and in favour of the revenue.
9. There will be no order as to costs.
R.N. Pyne, J.
10. I agree.