1958 (9) TMI 78 - HC - Income Tax

High Court rules in favor of Department, deems Tribunal's actions unjustified. Assessee burdened to prove cash credits.

Commissioner of Income-tax Versus Chennabasappa (GM.)

The High Court held in favor of the Department, ruling that the Income-tax Appellate Tribunal's actions were unjustified. The Tribunal's rearrangement of ... - Issues Involved:1. Justification of the Income-tax Appellate Tribunal in making out a new case for the assessee in respect of the peak credit.2. Whether the sum of Rs. 10,300 ascertained by the Tribunal as a peak credit is based on an obvious mistake.Detailed Analysis:Issue 1: Justification of the Income-tax Appellate Tribunal in making out a new case for the assessee in respect of the peak creditThe Tribunal had rearranged the cash credits in the assessee's accounts to determine the peak credit, which resulted in a reduced peak credit of Rs. 10,300. The Tribunal opined that this amount should not be added to the assessment since intangible additions of over Rs. 30,000 were made for the assessment years 1946-47 and 1947-48. It concluded that part of these additions should be available to cover the peak credit of Rs. 10,300. Consequently, the Tribunal deleted the entire addition of Rs. 19,968.The High Court observed that the Tribunal's approach lacked any basis or justification. The Tribunal's rearrangement of the cash credits was not supported by any reasons in its order, nor was it the case of the assessee that the transactions in the four ledger accounts constituted a single account. The High Court emphasized that the accounts standing in the names of different individuals could not be regarded as one account for the purpose of arriving at the peak credits. Thus, the Tribunal had no foundation for treating them as the same account and should not have attempted to make out a new case for the assessee.The High Court also noted that the explanation offered by the assessee for the cash credits was found unsatisfactory by the Income-tax Officer, the Appellate Assistant Commissioner, and the Tribunal. The assessee ultimately admitted that several entries were fictitious. Therefore, the Department was entitled to treat these cash credits as income amounts. The High Court rejected the contention that the cash credits were genuine and upheld the view that the Tribunal's rearrangement of the credits was unjustified.Issue 2: Whether the sum of Rs. 10,300 ascertained by the Tribunal as a peak credit is based on an obvious mistakeThe Tribunal's determination of the peak credit at Rs. 10,300 was questioned for being potentially based on an obvious mistake. The High Court examined whether the Tribunal's opinion that these sums might have been included in the intangible additions for the previous years was sustainable. The Tribunal had concluded that it was not unreasonable to assume that part of the intangible additions made in the previous years could cover the peak credit of Rs. 10,300.The High Court held that once the explanation for the cash credits was rejected, the Revenue was at liberty to treat them as income amounts derived in the year the entries were made. It was for the assessee to prove that these amounts were part of the intangible additions from previous years. No such case was put forward by the assessee at any stage. The High Court found that the Tribunal's indulgence in guesses and conjectures was unwarranted. The burden of proof was on the assessee to show that the cash credits were not of an income nature, and the deletion of the entire addition of Rs. 19,968 by the Tribunal was unwarranted.Conclusion:The High Court answered both questions in favor of the Department. It found that the Tribunal was not justified in making out a new case for the assessee by rearranging the cash credits and determining the peak credit. The Tribunal's deletion of the entire addition of Rs. 19,968 was also unwarranted. The High Court emphasized that the burden of proof was on the assessee to show that the cash credits were not income amounts, and the Tribunal's approach lacked any basis or justification. The respondent was directed to pay the costs of the petitioner, fixed at Rs. 150.