V.Bhargava, J. - (1.) In compliance with an order passed by this court under Section 66 (2) of the Indian Income-tax Act, the Income-tax Appellate Tribunal has referred the following two questions for our opinion :- " Q. CD Whether, on the facts and in the circumstances of this case, there was any material on the record for the finding that Rs. 42,840/-were suppressed profits of the assesses; Q. (2) Whether it could be said that the whole amount or a major portion thereof was income which had been derived in the account year mentioned above."
(2.) The reference relates to the assessment year 1945-46. The relevant account year in question began on 15th September, 1943, and ended on 1st September, 1944, The assessee, in its return, showed a loss of Rs. 5,783/13/9. During the assessment proceedings, the Income-tax Officer found three deposits in the name of Jagannath, minor son of Sheo Dutt Rai who was the karta of the assessee Hindu undivided family. These deposits were of Rs. 9000/- on 15th September, 1943. Rs. 31,840/- on 25th September, 1943, and Rs. 2000/-on 25th October, 1943. The Income-tax Officer issued a notice under Section 23 (3) calling upon the assessee to explain the nature of the source of these deposits. The assessee gave his statement to the effect that these deposits were in respect of loans taken from Jagannath, his minor son who had been taken in adoption by one Lala Gopal Das, the father-in-law of Sheo Dutt Rai and had received from his adoptive father cash to the extent of Rs. 40,000/-and ornaments worth about Rs. 20,000/-, besides the business of a shop known as Ratan Lal Gopal, Das. Sheo Dutt Rai went on to state further that this sum of Rs. 42,840/- had been kept with Smt. Bishan Dei, the natural mother of Jagannath and the wife of Sheo Dutt Rai, and this money had been taken from her in the name of Jagannath as a loan. There was a further plea that, in the previous year corresponding to the assessment year 1943-44, he had taken a loan of Rs. 27,100/from Jagannath. Cut of that, he had returned a sum of Rs. 27,000/- to Jagannath during that very year. The plea thus was that Jagannath had ample resources available to him out of which he could have made this advance to the assessee. This explanation was not accepted by the Income-tax Officer or the Appellate Assistant Commissioner of Income-tax. The Income-tax Appellate Tribunal also agreed with this rejection of the explanation which had been offered by the assessee. The Income-tax Appellate Tribunal then proceeded to hold that these unexplained cash credits, which appeared in the books of account for the years in dispute and in respect of which the assessee had failed to prove the nature and source, though it could easily do so, could justifiably be held by the income-tax authorities to be income of the year in which they had been credited in the books of account. On this view, it was held that the whole of this sum of Rs. 42,840/- was taxable income of the year in question and was liable to be assessed to tax as such.
(3.) The question of burden of proof in the case of cash credits has come up for decision before various courts in a number of cases. This Court expressed its opinion on this point in the case of Mithoo Lal Tek Chand v. Commr. of Income-tax. U. P. 1953-23 ITR 494 : (AIR 1953 All 701) (A), and held that, if an assessee receives certain sums of money in the relevant accounting period, it is for him to explain from where he got the money. If his explanation is accepted, there Is an end of the matter. The true source being known, the question, which might then arise, is whether it Is or ft is not taxable income. Where the explanation of the assessee is rejected, the Tribunal has to record a finding on such materials as may be available, whether the money represents revenue receipts taxable as income of the relevant account period. The burden, in the first instance, must be on the assessee to show the true nature of the receipts and why he claims that it is not taxable income. When the assessee furnishes an explanation, if that explanation is unsatisfactory, that may in itself be a circumstance which the Income-tax officer may be entitled to take into consideration but it need not necessarily in every case lead to the conclusion that the receipt is a revenue receipt taxable as income received in a particular year. In the instant case, this sum of Rs. 42,840/-was shown as a receipt in the account books maintained by the assessee. The burden, therefore, lay on the assessee to show the true nature and source of this receipt. Sheo Dutt Rai came forward with the explanation that he had received this amount as a loan from his minor son, Jagannath, who had been adopted by his father-in-law Lala Gopal Das. That explanation has been rejected by the income-tax Appellate Tribunal. (The rejection of that explanation is a question of fact which cannot be re-examined by us.) The position, therefore, is that the true nature and source of the receipt of this sum remain unproved. The assessee was in the best position to explain the true source and nature but it failed to do so. In the circumstances it cannot be said that the Income-tax Authorities could not have held that the deposits represented assessee's income. The amounts having been credited by the assessee in his account books, it is he who must be able to say whence the money came. The taxing authorities could not be expected to provide evidence about facts which were within the special knowledge of the assessee. If the assessee does not explain what he alone could know, an inference is possible that the nature of the receipts were such as rendered him liable to tax. It was also found in the present case that no debit entries relating to the amounts in question existed in the account books of Messrs Ratanlal Gopaldas which, is said to belong to Jagannath minor nor was any interest paid to him in respect of these deposits. We are, therefore, unable to say that there was no material to justify the finding that the deposits came out of the assessee's income.;