JUDGMENT MANCHANDA J. - This is a case stated under section 66 (2) of the Income-tax Act, 1922 (hereinafter referred to as the Act). The question referred is :
"Whether the authorities below acted legally in treating the sum of Rs. 18,005 as the income of the assessee, liable to be taxed in the year 1947-48 ?"
The material facts are these : The assessment is in the status of an individual. The assessee was a partner holding a share of Rs. 0-5-4 in a rupee in the firm, Ganesh Prasad Tribeni Prasad. The previous year of the said firm relevant to the assessment year 1947-48 was the one which commenced on the 14th of April, 1946. On the first day of the accounting year of the firm, i.e., on the 14th April, 1946, the capital account of the assessee in the books of the firm was credited with the sum of Rs. 18,005. The assessee was called upon to explain the source, nature and the character of the cash credit. The assessees explanation was that this was out of the money and ornaments brought from Rangoon in 1943. The assessee had left Rangoon because of enemy action. The assessee and the other partner, Tribeni Prasad, who was also in Rangoon at that time, were forced to leave for India. Tribeni Prasad and the assessee had brought jointly to India the sum of Rs. 20,000 in cash and gold ornaments worth Rs. 16,000. The gold ornaments were said to have been sold to a shopkeeper in Bara Bazar, whose name he did not remember, and it was out of these sale proceeds that the sum of Rs. 18,005 was deposited in the firm on the said date by the assessee in his personal account. In support of his explanation the assessee examined himself and two witness. The explanation was disbelieved by the Income-tax Officer. There was a discrepancy between the witnesses on the vital matter of the alleged distribution of the sale proceeds. Having rejected the explanation, the Income-tax Officer treated the said cash credit as income of the assessee from an undisclosed source. On appeal, the Appellate Assistant Commissioner confirmed the assessment holding that the explanation given was unreliable. On second appeal, the tribunal, for the reasons given by it in dismissing the appeal filed by the other partner, Tribeni Prasad, who had given a similar explanation, rejected the explanation of the assessee and upheld the inclusion of Rs. 18,005 in the assessment of the assessee as income from an undisclosed source. The application under section 66 (1) of the Act having been refused, this court directed the Tribunal to state a case, and that is how the matter is before this court.
The finding of fact arrived at by the Tribunal is that the source, character and the nature of the cash credit had been proved by the assessee. On the basis of that finding, the question that has to be considered is whether it was open to the income-tax authorities and the Tribunal to raise the inference that the credit represented the income of the assessee for the relevant assessment year ? The contention of Mr. Tiwari, learned counsel for the assessee is that the cash credit having been entered in the books of account on the 14th of April, 1946, i.e., within fourteen days of the commencement of the previous year, which is the financial year for income from any undisclosed source, no inference could properly have been drawn that the large sum of Rs. 18,005 was the income of the relevant assessment year. For this proposition he relied upon a decision of this court in Mithoo Lal Tek Chand v. Commissioner of Income-tax where, inter alia, a sum of Rs. 5,000 was notices as cash deposit in the capital account of the assessee in the name of Suraj Mal Sural Ram, i.e., the Hindu undivided family. It was made on the 25th of November, 1941, one month and five days after the opening of the account. The explanation furnished was rejected and the aforesaid sum was treated as profits from an undisclosed source. This court held that a period of one month and five days was long enough for the assessee to have made an income of Rs. 5,000, from an undisclosed source. In respect of another credit of Rs. 65,000, which was made on the opening day of the relevant accounting year, it was held that that large amount could not have been the income of that year. No advantage can be taken by the assessee from this decision, as it is not possible to lay down any hard and fast rule that a period of fourteen days is or is not adequate for a person to earn a certain amount of income. Each case will have to be decided on its own facts, as it is not unknown for persons on the stock exchange to make or lose lakhs in the course of a few hours.
In any event, that would not be the proper approach to the question which arises in these cases. The proper approach would be that, as laid down by the Supreme Court in Govindarajulu Mudaliar v. Commissioner of Income-tax, where it was held that, if the assessee fails to prove satisfactorily the source and nature of the cash credit found entered in the books during the accounting year, the Income-tax Officer is entitled to draw an inference that receipts are of assessable nature. That was a case of a cash credit found entered in the present case. Their Lorships observed : "Whether a receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case. In the present case the receipts are shown in the account books of a firm of which the appellant and Govindaswamy Mudaliar were partners. When he was called upon to give explanation he put forward two explanations ... When both these explanations were rejected, as they have been, it was clearly open to the Income-tax Officer to hold that the income must be concealed income. There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipts are of an assessable nature."
In Devi Prasad Vishwanath Prasad v. Commissioner of Income-tax, a Bench of this court, when called upon to consider whether a sum representing an unexplained cash credit could be included in the total income of the assessee in addition to the income estimated from business after applying the proviso to section 13 of the Act, referred to the aforesaid decision of the Supreme Court in Govindarajulu Mudaliars case and observed in that case : "... the question was entirely different, being what years income, the income disguised as a cash credit or deposit is." Reference was also made to the decision of Madhya Pradesh High Court in Seth Kalekhan Mahomed Hanif v. Commissioner of Income-tax. The observations of Hidayatullah C.J. (as he then was) in that case were not followed. He had observed : "The income-tax department can put the assessee to proof of his explanation, and if the assessee fails to tender evidence or burkes an enquiry, then the Income-tax Officer is justified in rejecting the explanation and holding that the income is from an undisclosed source. The Income-tax Officer is not required to specify or prove what that source is, which from the nature of the case must be known only to the assessee... The very term undisclosed source shows that the disclosure which the assessee ought to have made has not been made... The department was not bound to show categorically what that source was... cash credits do not show that the income which is in the hands of the assessee is from the self-same source. It may be from another source." This court was inclined to take the view that "when the source is not known at all, it is difficult to predicate that it is other than the normal business. An entry of a cash credit or deposit may not show that the income is from the business but it also does not show that it is from another source. ... The income-tax authorities cannot act as if it were from another source. They cannot make an assumption against the assessee.
These observations were, no doubt, made in different context but were pressed into service, by Mr. Tiwari, the learned counsel for the assessee, in the present case, for the proposition that the burden was upon the department to show that the impugned sum of Rs. 18,005 was from some source other than business. There may have been something in this contention if Seth Kalekhan Mahomed Hanifs case had not been affirmed by the Supreme Court. The Supreme court delivered its decision on the 8th of February, 1963, whereas Devi Prasad Vishwanath Prasads case was decided by a Bench of this court on 11th of July, 1962. In Kale Khan Mohammed Hanifs case the Supreme Court, when dealing with the first question which was "Whether the burden of proving the source of the cash credit is on the assessee ?", observed : "It seems to us that the answer to this question must be in the affirmative and that is how it was answered by the High Court. It is well established that the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax it is for him to show either that the receipt was not of the Act. In the absence of such proof, the Income-tax Officer is entitled to treat it as taxable income : see A. Govindarajulu Mudaliar v. Commissioner of Income-tax." It was further held that the amount of cash credits could be added as income from an undisclosed source even though they were found credited in the business books of the assessee. In view of the pronouncement of the Supreme Court in Kale Khans case the assessee can no longer derive any advantage from Devi Prasads case.
It was then contended that the view taken by the Supreme Court in the cases of Govindarajulu Mudaliar would appear to have been modified by the Supreme Court in Parimisetti Seetharamamma v. Commissioner of Income-tax. That is not so. The Supreme Court merely explained that Govindarajulu Mudaliars case, which had laid down that the burden of proof was upon the assessee to prove the source, nature and character of the credit would not apply to a case where the source of the receipt is disclosed by the assessee and there is no dispute about the truth of that disclosure and, in such event, the income-tax authorities would not be entitled to raise an inference that the receipt is assessable to income-tax on the ground that the assessee had failed to lead all the evidence in support of his contention that it is not within the taxing provision. That was a case where the source of the jewellery and the large amount of money aggregating to over Rs. 5 lakhs was admittedly gifts from Sita Devi, the Maharani of Baroda, to the assessee. No inference in such a case could be drawn by the department that it was an income assessable to tax. The Supreme Court, however, went on to reaffirm what it had laid down in Govindarajulu Mudaliars case in these words : "Whether a receipt is liable to be treated as income depends very largely upon the facts and circumstances of each as case : it is open to the income-tax authorities to raise an inference that the receipt by an assessee is assessable income where he fails to disclose satisfactorily the source and the nature of the receipt. But in this case the source of the income was disclosed by the appellant, and there was no dispute about the truth of that disclosure." The present case would clearly fall to be governed by the ratio of the Supreme Court decision in Govindarajulu Mudaliars case. The legal inference therefore could have legitimately been drawn by the Tribunal, from the assessees failure to satisfactorily prove the source, nature and character of the sum of Rs. 18,005, that it was income from an undisclosed source and as such assessable in the relevant assessment year 1947-48. On the facts and in the circumstances of the case, it is not possible to say that such an inference could not have been drawn by any person duty instructed in the law. It was a possible inference and the Tribunal not having misdirected itself, it cannot be said that the Tribunal acted illegally in treating the sum as liable to tax for the assessment year 1947-48.
For the reasons given above, the question is answered in the affirmative and against the assessee. The assessee will pay the costs of the reference which we assessee at Rs. 200. Counsels fee is also assessed at Rs. 200.
Question answered in the affirmative.