T.P. Mukherjee, J. - (1.) THE material facts bearing on this reference are as follows. THE assessee is a registered firm. It carried on business as a commission agent in catechu. During the relevant previous year, ending on Chait 2007 (S.Y.), a cash deposit of Rs. 17,000 was found in the books of the assessee on September 10, 1949. THE amount was credited to the account of one Abdul Sattar Abdul Ghani. THE amount was withdrawn on October 11, 1949. THE Income-tax Officer, in the course of his assessment of the assessee-firm for the year 1950-51, noticed this deposit and asked the assessee to explain the nature and source thereof. THE assessee's explanation was that Abdul Sattar and his son, Mohammad Ismail, were carrying on business at Moolganj in Kanpur. Mohammad Ismail was well known to the partners of the assessee-firm. When Mohammad Ismail was going home in Kutch he deposited' the sum of Rs. 17,000 with the assessee-firm and he took back the amount on his return therefrom. THE assessee stated in its written explanation that if its explanation in point was not accepted then notice might be issued under Section 37 of the Indian Income-tax Act, 1922 (hereinafter referred to as "the Act"), to the party concerned at its cost. THE Income-tax Officer, it appears, paid no heed to the request made on behalf of the assessee and he completed the assessment under Section 23(3) of the Act on a total income of Rs. 92,672 including the sum of Rs. 17,000 which was treated as the income of the assessee from undisclosed sources.
(2.) AN appeal to the Appellate Assistant Commissioner proved futile. The assessee then preferred an appeal to the Tribunal. The Tribunal, however, dismissed the appeal of the assessee in point holding as under : " The assessee did not produce any evidence to show that the deposit was a genuine one. In these circumstances, it is difficult to hold that the deposit was genuine. The assessee has not discharged the onus that lay on him. The inference follows that the amount was income of the assessee from some undisclosed source." The following question has been stated by the Tribunal in compliance with an order made by this court under Section 66(2) of the Act: "Whether, by reason of the omission to summon and examine the evidence offered by the assessee, the finding of the Tribunal with regard to the nature and source of the sum of Rs. 17,000 has not been legally vitiated ? " In our opinion, the grievance of the assessee that he was not given a reasonable opportunity and facility to produce evidence in support of its explanation is justified. In this case a notice under Section 23(2) of the Act was issued to the assessee.
(3.) IN reply to this notice the assessee submitted its explanation to the INcome-tax Officer on October 22, 1954, by means of a letter. IN paragraph 5 of this letter the assessee stated as follows : " Deposit of Rs. 17,000 in the account of M/s. Abdul Sattar Abdul Ghani. Mohammed Ismail, son of Abdul Sattar, was formerly working in M/s. Habib Moosa who was very well known to us. He and his father, Abdul Sattar, were carrying on business in Moolganj, Kanpur. At the time of his going to his home in Kutch he deposited this amount of Rs. 17,000 with us and when he returned back to Kanpur, he took back the amount. It may also be submitted that at the time when he deposited the money, we were not short of funds. Sri Abdul Sattar died subsequently and his son, Mohammad Ismail, has since left Kanpur. " The letter concluded as follows: " We trust we have made our position quite clear, but if any further information is required or if the parties are to be called in support of the genuineness of the above deposits, then notices under Section 37 may kindly be issued at our cost." ;