Burden of proof for third-party cash credits shifts to revenue once assessee shows identity and genuineness of the source.

Cash credits recorded in an assessee's books require an explanation of their nature and source, and where the entries stand in a third party's name the assessee must at least establish the third party's identity and place material showing that the account is real. Once that initial burden is discharged, the burden shifts to the revenue to produce cogent material showing that the credits still belong to the assessee. On the stated facts, the account was treated in connected proceedings as belonging to another business house, the balance had been transferred before assessment, and minor date discrepancies were insufficient to reject the explanation. The credits were therefore treated as not assessable as undisclosed income of the assessee.

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Issues: Whether the cash credits standing in the name of a third party in the assessee's books represented the assessee's undisclosed income.

Analysis: Where cash credits appear in an assessee's books, the assessee must explain the nature and source of the entries. In the case of entries in the name of a third party, the assessee must at least establish the identity of the third party and place material showing that the account is real and not fictitious. Once that initial burden is discharged, the burden shifts to the department to produce material showing that the credits still belong to the assessee. On the facts, the account was treated in the connected proceedings as belonging to the other business house, the balance was transferred to that account before the present assessments were completed, and the department had no sufficient material to reject the assessee's explanation merely because of minor date discrepancies.

Conclusion: The cash credits of Rs. 2,50,000, Rs. 40,000 and Rs. 1 lakh did not belong to the assessee and were not assessable as its undisclosed income.

Ratio Decidendi: Once an assessee adduces adequate material to show that third-party credits are genuine and belong to another identifiable source, the burden shifts to the revenue, which must then disprove the explanation by cogent material before treating the credits as undisclosed income of the assessee.

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