JUDGMENT Sushil Harkauli, J.
1. The following questions have been referred for the opinion of this Court:
Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that in the case of cash credits in the assessee's books in the names of close relatives, the burden of proof on the assessee under Section 68 of the I.T. Act, 1961 extended to requiring the assessee to establish the nature and source of the amount?
2. For ready reference Section 68 of the Income Tax Act, 1961 (called the ''Act' for brevity) is reproduced below:
68. 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 Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.
3. The facts are that the assessee, during the previous year relevant to the Assessment Year 1987-88, had credit entries in the assessee's accounts showing receipt of Rs. 74,400/- from the assessee's wife, Smt. Pashupati Devi, and Rs. 69,300/- from Om Prakash, the minor son of the assessee.
4. The wife of the assessee was assessed to tax and returns were filed under the Amnesty Scheme disclosing total income of Rs. 51,400/-the breaking being Rs. 15,200/-, Rs. 18,100/- and Rs. 18,100/- for the Assessment Years 1984-85, 1985-86 and 1986-87 respectively. The lady was not assessed to tax either earlier or latter and she did not have any known source of income. It was found from her bank account that a sum of Rs. 50,000/- was deposited therein on 6.10.1986 and again a sum of Rs. 24,400/- was deposited in that account on 24.10.1986. Thereafter the sum of Rs. 74,400/- was withdrawn on 25.10.1986 through cheque, which was given to the assessee.
5. Similarly, Om Prakash, i.e. the minor son of the assessee, was assessed to tax for the Assessment Years 1983-84 to 1986-87. Income of Rs. 15,200/- was shown for the Assessment Years 1983-84 to 1985-86 and Rs. 18,200/- for the Assessment Year 1986-87. Thus his total income was Rs. 63,800/- against which he is said to have given Rs. 69,300/- to the assessee.
6. For a clear understanding the contents of Section 68 of the Act may be divided into two parts:
The first part requires the assessee to explain the sum found credited in the books of the assessee about the nature and source thereof. This part only requires the assessee to disclose the source from which the money has been received by the assessee. This does not require the assessee to disclose the source of that source, i.e. the source from which the donor or investor has received the money which has been invested.
7. The second part of Section 68 of the Act consists of offering an explanation which is "satisfactory" in the opinion of the Income Tax Officer. What explanation would be considered ''satisfactory', how much of details should be furnished to make the explanation ''satisfactory' normally depends upon the facts.
8. The Tribunal has held, on the facts and circumstances narrated above, that for making the explanation 'satisfactory', the assessee was required to furnish in the explanation the additional information as to from where the assessee's wife and minor son, having no source of income, obtained the money which was given to the assessee by them.
9. The phrase "burden of proof" in the referred question is slightly misleading. The real issue is whether the explanation furnished in the facts and circumstances of the case was or was not satisfactory.
10. We are of the opinion that, in view of the facts mentioned above, if the assessee failed to furnish the information about the source from which his wife and minor son obtained money for investing with the assessee, the mere explanation regarding the source of the receipt or credits in the account books of the assessee, viz. that he received the money from his wife and minor son, is far from "satisfactory".
11. Learned Counsel for the assessee has relied upon the following decisions:
1. Commissioner of Income-Tax (Central) Calcutta v. Daulat Ram Rawatmull,
2. Commissioner of Income-Tax, Orissa v. Orissa Corporation P. Ltd.
3. Deputy Commissioner of Income-Tax v. Rohini Builders,
4. Nemi Chand Kothari v. Commissioner of Income-Tax and Anr. and
5. (2005) 147 Taxman 448 Commissioner of Income-Tax v. Jauharimal Goel.
12. Each of these cases turned on their own facts. As already stated, what explanation would be "satisfactory" would depend upon the facts and circumstances of each case.
13. It is well settled that under Section 68 the assessee has to prove three conditions, viz. (1) the identity of the creditor, (2) the "capacity" of such creditor to advance the amount, and (3) the genuineness of the transaction.
14. The second condition, referring to the "capacity" of the creditor, cannot be said to have been established on the facts and circumstances of the present case, in absence of the details referred above viz. the source from which the non-earning wife and minor son got the money to invest with the assessee.
15. Thus generally but not always, depending upon the facts and circumstances, when the credits have been received by an assessee from such close relatives, the explanation to be furnished under Section 68 would require to disclose the facts necessary to establish the "capacity" of the creditor as above.
16. In the circumstances, the question referred is answered as above by holding that on the facts and circumstances of the present case, when the credits were received by the assessee from close relatives like his non-earning wife and minor son, the explanation to be furnished under Section 68 in order to qualify as "satisfactory" would require to disclose the source of the depositor for establishing the "capacity" of the creditor as above.
17. The reference is answered, as above.