BHARGAVA, J. - (1.) THE judgment of the court wads delivered by THE question referred by the Income-tax Appellate Tribunal for the opinion of this court is :
(2.) WHETHER there was any material to warrant the finding that the sums of Rs. 16,200 and Rs. 13,700 in dispute were profits of the assessee liable to tax ? The assessee in this case is a registered firm having three partners, Pooranchand, Shivji Bhai and Parshotam. Parshotam is the son of Shivji Bhai. The proceedings relate to the assessment year 1945-46 for which the relevant previous year ran from 29th October, 1943, to 13th October, 1944. The assessee firm submitted a return on the basis of the account books and the trading result as disclosed was accepted by the Income-tax Officer with only minor additions which additions were subsequently deleted by the Appellate Assistant Commissioner. In one respect, however, the account books were not accepted. That related to these two entries of credits of sums of Rs. 16,200 and Rs. 13,700 in the accounts of the assessee firm in the name of Mahesh Chandra Agrawal, minor son of Pooranchand, partner, and of Channalal Agrawal father of Pooranchand, partner. In respect of these two items the Income-tax Officer called upon the assessee to disclose the real source of these amounts credited in the books of account of the assessee and held on rejection of the explanation given by the assessee that these two amounts were income of the assessee from undisclosed sources. On appeal the Appellate Assistant Commissioner upheld the decision though coming to the view that these amounts represented income not from entirely undisclosed sources but from black-marketing activities of the firm. The assessee went up in appeal to the Income-tax Appellate Tribunal which upheld the decision for adding these amounts to the profits of the assessee firm and dismissed the appeal. The appellant moved the Income-tax Appellate Tribunal under section 66(1) of the Income-tax Act to state the case to this court on the ground that the decision for holding that these two items represented taxable profits of the assessee was given without any material or evidence. The Tribunal rejected that application. Thereupon the assessee moved this court under section 66(2) of the Income-tax Act and the court directed the Tribunal to state the case after framing the question as reproduced above. The statement of the case has now been received and we have heard learned counsel for the parties on this question. In dealing with the question referred to us for opinion it will be convenient to take each item separately. The first item is the sum of Rs. 16,200 credited on various dates in an account in the name of Mahesh Chandra Agrawal who is admittedly a minor son of one of the partners, Pooranchand. The circumstances and facts which appear from the appellate order of the Tribunal, the statement of the case and the documents which form part of the statement of the case as annexures relating to this point are as follows : (1) That this sum of Rs. 16,200 was credited in the account of Mahesh Chandra Agrawal during the relevant previous year on various dates between 18th of April, 1944, and 7th of September, 1944, through Pooranchand himself. (2) That there was a similar account in the name of Mahesh Chandra Agrawal in the previous year corresponding to the preceding assessment year 1944-45 and in the account of that previous year there were transfers of some credits and debits from the account of Pooranchand to the account Mahesh Chandra Agrawal. (3) In the objection which was filed on behalf of the assessee no attempt was made to claim that the moneys shown in the account actually belonged to Mahesh Chandra, Minor, who being the son of Pooranchand was under his guardianship. On the other land it was admitted that Pooranchand was operating on this account. (4) The explanation which was offered on behalf of the assessee for these entire of deposits in the account of Mahesh Chandra Agrawal was merely that these deposits were made out of the the withdrawals made at earlier stages from the same account. But this explanation was rejected by the Tribunal on the ground that the assessee had failed to explain why these withdrawals had been made, had failed to connect those withdrawals with the deposits through any other accounts or data and had failed to show that those withdrawals had been kept intact so that they could be utilized for the purposes of making these deposits.
(3.) THE question that thus follows for decision is whether these facts and circumstances found by the Tribunal can be said to be material on the basis of which the Tribunal could come to a finding that these deposits were the revenue income of the assessee liable to income-tax. It appears to us that these circumstances taken together are such that it is possible to draw an inference that these deposits did represent income of the assessee from undisclosed sources. THE facts show that when the money actually came into the accounts of the assessee firm it was brought in by the one of the partners Pooranchand Under the law : of partnership, Pooranchand was entitled to handle the funds of the partnership business and consequently he could have in his possession moneys belonging to the partnership as well as his own moneys. THE explanations given on behalf of the assessee nowhere asserted in plain language that the money which was being deposited by Pooranchand was his own money and in fact, as we have noticed above, it was not even asserted that it actually belonged to Mahesh Chandra, his minor son. THE explanation that the money was deposited out of the withdrawals also appear to have been rejected on the basis of circumstances and reasons which follow relevant considerations and on the basis of which the Tribunal was entitled to act. It is true that there was no requirement in law that Pooranchand should gave maintained a separate account of the moneys withdrawn by him in order to show that the subsequent deposits were made out of those withdrawals but, when such an explanation was tendered on behalf of the assessee, it was for the assessee to give some evidence in proof of that explanation. No attempt was made even to file an affidavit in support of the explanation which was put forward. THE withdrawals were by a partner and not a stranger to the firm. This was significant as the partner was a person who could have funds of the assessee firm in his hands as he was entitled to deal with moneys belonging to the firm in his capacity as a partner. This was, therefore, not a cast where the fact that withdrawals from the account were available for making re-deposits had to be proved by third person with whom the assessee had no connection. THE Tribunal found that the assessee : firm failed even to give any other data from which it could be inferred that there season connection between the withdrawals and the deposits. In all these circumstances it is not possible for us to hold that in this case there was no material before the Tribunal to arrive at the finding which did. It is not competent for us to examine how far the inference drawn by the Tribunal is a correct or incorrect one. THE inference has been drawn from facts which the Tribunal found and itself an inference of fact. In drawing the inference, irrelevant material was not relied upon and the inference that was drawn from the facts was a possible and a reasonable inference. In these circumstances the principles laid down by the Supreme Court in Sree Meenakshi Mills Ltd. v. Commissioner of Income-tax, lead to the conclusion that this court cannot upset the decision of the Tribunal on this point. Learned counsel for the assessee, however, contended that there was at least no material on the basis of which the Tribunal could come to a finding that this sum of Rs. 16,200 represented profits belonging to the assessee firm when it could also have been held that this sum represented profits which may have been earned by Pooranchand, partner, in his individual capacity from some undisclosed sources of his own. In support of this proposition learned counsel referred us to a decision of the Bombay High Court in Narayandas Kedarnath v. Commissioner of Income-tax. In that case also a very similar question had arisen and, on the facts and circumstances of the case, the Bombay High Court held that the Tribunal was not justified in holding that the amounts shown as credited in the account of certain partners were income of the assessee firm. THE facts of that case were, however, different from the facts of the case before us. In that case, the Bombay High Court reiled on the circumstance that the Tribunal had found as a fact that the amounts in question had been actually brought in from Jaipur by means of drafts of the Imperial Bank of India, Jaipur, and there was no evidence at all to connect the assessee firm with any moneys at Jaipur as the assessee firm had no business at all there. In that case also, the partner had failed to prove there own sources from which they had earned those profits at Jaipur but, in spite of their failure, it was held that the profits could not be treated as the profits of the firm. THE decision in that case clearly turned on the facts of that case which were as stated above. While the moneys were brought in from Jaipur by the partners and there was no evidence to connect the assessee firm with any transactions for earning profits in Jaipur, the only solitary fact which remained was that the moneys had been deposited on the accounts of the firm by the partners. THEre were no other facts and circumstance in addition of that which could have led to the inference that the moneys belonged to the assessee firm and not to the partners themselves. In the case before us the facts and circumstances enumerated above show that the position is quite different. THE moneys had been deposited in an account in the name of a minor son of a partner. THEy have not been brought in by straightforward deposits in the name of the partner himself. THEre is no finding at all that the moneys were brought by Pooranchand, partner, or Mahesh Chandra Agrawal from any place and in fact there was not even an indication that either of them had any other sources of income. THEre was no fact on the record which might indicate that the moneys come from a place with which the assessee firm had no connection. Consequently, it cannot be said that, on the facts and circumstances which appeared in this case, the reference which was drawn by the Tribunal was not a possible or reasonable inferences and consequently, the question in so far as it relates to the sum of Rs. 16,200 must be answered against the assessee. The position with regard to the other amount of Rs. 13,700 appears to us to be quite different. This sum is entered in an account which stands in the name of Channalal Agrawal, the father of Pooranchand, partner. In the objection which was field on behalf of the assessee firm it was stated that Channalal had another independent business of his own. Further Channalal being an adult person there could be no inference that either moneys deposited in his account could belong to Pooranchand, partner, or to the firm of which he was a partner. It is true that in this case also the Income-tax Appellate Tribunal did not accept the explanation given on behalf of the assessee that this amount was received as a loan from Channalal. The mere non-acceptance of that explanation does not, however, provide material for a finding that this sum represented income of the assessee firm. There is no finding of fact that the money when deposited in the accounts of the firm came from the hands of any person who could, in the natural course of circumstances, be in possession of the firms moneys such as a partner. No doubt Channalal was the father if one of the partners but there was nothing to show that Channalals funds were being manipulated by Pooranchand or by any one else connected with the assessee firm. On the face of the accounts, the receipt did not appear as a receipt of money belonging to the assessee firm. In order to tax this receipt as income of the assessee it was necessary to arrive at three finding; first fo all there had to be a finding that the money received belonged to the assessee firm, secondly, the source of that receipt had to be determined, and finally the question had to be decided whether the money having been found to belong to the assessee and coming from a particular source or an undisclosed source amounted to a receipt of such a nature that it was liable to tax, which and that it was a revenue receipt and not a capital receipt or receipt of some other nature which is not liable to charged with income-tax. It is the first requirement of showing that the ownership vested in the assessee which is the most important one of the three. Until a finding is given that the receipt represents money belonging to the assessee, there can be no question of taxing the amount received as income of the assessee. The burden of providing that a particular receipt represents money belonging to the assessee lies on the Department when, on the face of the record or accounts, it does not appear to be so. In the accounts in the present case the moneys appear as belonging to Channalal, a third person, who himself had no interest in the assessee firm. No doubt the explanation which was given on behalf of the assessee that this receipt represented a loan received from Channalal was not accepts by the Income-tax Appellate Tribunal but that circumstances by itself cannot give rise t any inference that the money belonged to the assessee. The case is different where the explanation set forth by the assessee is found to be unreasonable or false, in which case that circumstances will be relevant for deciding whether the receipts represents moneys belonging to the assessee or to some other person. This principle was laid down by this court in Mithoo Lal Tek Chand v. Commissioner of Income-tax. It was there held :;