Decided on April 03,1947



- (1.) THIS is a reference under Section 66 (1) of the Indian Income-tax Act (XI of 1922) by the Income-tax Appellate Tribunal. The questions referred to this Court for our answer are the following :- (1) Where there are grounds for an Income-tax Officer to suspect the genuineness of a credit entry occurring in the personal account of a third party in the assessees books of accounts, whether the Income-tax Officer can, under Section 23 (3) of the Income-tax Act, required the assessee to prove that the entry represents a genuine credit in favour of that party ? (2) When an assessee, being required in the circumstances mentioned in question No. (1) above to prove that a credit entry represents a genuine credit a favour of a party, gives an explanation which is false or unbelievable, whether there is anything in law to prevent the Income-tax Officer or the appellate authority from presuming or inferring that the receipt evidenced by the credit entry is a revenue receipt ? (3) Whether in the circumstances of this case the initiation of the proceedings under Section 34, Income-tax Act, by the respondent was contrary to law and for that reason the assessment is invalid ?
(2.) WE may at the outset say that the questions have not been happily worded and do not clearly bring out the points that have been urged before us. The assessee, Messrs. Mahabir Prasad Munna Lal, is a Hindu undivided family carrying on business as cloth merchants in Generalganj, Cawnpore. Mr. Reoti Raman, Income-tax Officer, completed the assessment for the year 1938-39 on the 19th January, 1939, on the basis of the income from the previous year 1937-38, the total of which after necessary deduction was Rs. 22,325. There was no appeal from this assessment by the assessee and there was no trouble till the next year when the assessment proceedings for year 1939-40 were in progress. The Income-tax Officer for that year was Mr. N. K. Saksena. While examining the books of account for the year 1938-39, which was the relevant year, the Income-tax Officer noticed a credit entry in the name of Hari Krishan. This entry had been brought forward from the previous year. The Income-tax Officer issued notice under Section 23 (3) of the Act with regard to this item and wanted the assessee to prove the identity of Hari Kishan. It may be mentioned, and the fact is not disputed, that in the assessment year 1938-39, on the basis of the accounts for the year 1937-38, the assessee had included in the list of his liabilities under the head sundry creditors an item of Rs. 14,000 as due to Lala Hari Kishan. He had carried this item forward to the next year 1938-39 and had made an entry in that year a sum of Rs. 14,423-7-0 had been repaid to Hari Kishan and the account had been squared up.
(3.) LEARNED counsel has not disputed the correctness of the procedure adopted by the Income-tax Officer in issuing notice under Section 23 (3) of the Act in connection with the assessment for the year 1939-40. In Compliance with the notice under Section 23 (3) the assessee produced books from which it appeared that the sum of Rs. 14,000 consisted of three items of Rs. 2,000, Rs. 5,000 and Rs. 7,000 which were alleged to have been deposited by one Hari Kishan in 1937-38. The munim of the assessees firm, Debi Dayal, was examined as regards the identity of this Hari Kishan, and the Income-tax Officer came to the conclusion that his statement was unsatisfactory. Debi Dayal was not able to give any information about this Hari Krishan except the fact that he had been his tenant for about two or two years and a half.;

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