Decided on November 19,1954

Niranjanlal Ramballabh Appellant


- (1.)THIS case arises out of a reference under s. 66(2) of the Indian IT Act in compliance with the requisition made under that section by the High Court of Judicature at Nagpur by its order dt. 18th March, 1952.
(2.)THE statement of the case is as follows : The assessee firm does cloth business at Nagpur under the name "Niranjanlal Ramballabh". The partners of the firm are Babulal and Niranjanlal. It was registered under s. 26A of the IT Act, the registration taking effect from the asst. yr. 1946 -47. On total sales of Rs. 5,79,143 the assessee showed a profit of Rs. 24,191 that is below 4per cent which was regarded as extremely low. The ITO after scrutinising the ledger accounts of various parties in the books of the assessee felt doubtful about the genuineness of certain deposits in the personal account of persons staying in Marwad. As these deposits formed an important factor in the matter of the present assessment he called for the assessee to show that the deposits were actually received from the creditors in whose names they appeared in the assessee's account books. The accounts in which such deposits are found were as under :
(3.)THE case of the assessee was that the aggregate amount in dispute representing the credits in the accounts of the parties mentioned above were deposits made by them with the assessee firm.
The depositors are not residents of Nagpur. According to Babulal who is one of the partners of the . Rs.

(1) Sawitribai Kejriwal 12,000

(2) Sagarmal Agarwal 10,000

(3) Sitabai Modi 4,168 . 1,700

(4) Ramgopal Kejriwal 5,000

(5) Bhimraj Duggad 9,500

(6) Bhagirathi Bai 1,500 . 43,868

firm, Sawitribai Kejriwal is a resident of Jaipur, Sagarmal Agarwal is a resident of Marwad, while the rest of the creditors are of Fatehpur. Babulal stated that the assessee firm has not executed any promissory note, bond, hundi, nor has it pawned any ornaments with the abovenamed creditors in respect of the sums appearing in their names. He stated that letters were received along with the drafts from these creditors and the correspondence has been kept.

On the basis of the above statement, Babulal was directed by the ITO to produce the letters received from the creditors. The assessee also filed affidavits executed by Ramgopal Kejriwal, Sawitribai Kejriwal and Sitabai, in support of his contention that the deposits were genuine. In proof of the genuineness of the above deposits the assessee relied on the following :

(i) affidavits filed before the ITO, (ii) the deposits were received by cheques or drafts on banks in British India and the same were repaid by cheques or drafts and (iii) interest on these was also stated to have been paid by cheques or drafts. The ITO was of the opinion that the letters by creditors Sawitribai, Sitabai, Setib and Bhimraj Duggad were not genuine although affidavits were filed in support of the deposits by Ramgopal Kejriwal, Savitribai and Sitabai. The ITO felt doubtful about the genuineness of the loans and directed Babulal that unless the deponents came forward and were prepared to be cross -examined in respect of the transactions which are alleged to have been made, he was not prepared to accept the affidavits at their face value ; the assessee expressed his inability to produce the deponents for cross -examination but offered to examine all the depositors on commission, as, according to the assessee, these persons resided at a distance of more than 700 miles from Nagpur, but no commission was issued. The ITO held that the deposits amounting to Rs. 43,868 represented profits from undisclosed sources and included them in the total income of the assessee.

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