Adverse inference on unexplained credit fails where the assessee takes steps to secure witness attendance and explanation remains unrebutted.

A credit entry of Rs. 10,000 in the assessee's books was not assessable as income merely because the named creditor was not produced. The court noted that the assessee had taken steps to secure the witness's attendance, while the revenue had not used the available coercive or other procedural measures to compel production. In the absence of legal material rebutting the assessee's explanation that the sum was a deposit made by the named person, an adverse inference could not sustain the addition. The question was answered in favour of the assessee.

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Issues: Whether the sum of Rs. 10,000 credited in the assessee's books in the name of Banarasidas was income assessable in the assessee's hands, and whether the authorities were justified in drawing an adverse inference merely because Banarasidas was not produced by the assessee.

Analysis: The reference arose from an addition made on the footing that the assessee had failed to produce Banarasidas and had not satisfactorily explained the credit entry. The record showed that the assessee had taken steps to secure Banarasidas' attendance, but no coercive process or other steps contemplated by the procedural law for securing a witness's presence had been taken by the Income-tax Officer. The finding against the assessee was therefore based on the absence of production of Banarasidas rather than on any legal material rebutting the assessee's explanation. On the material before the Tribunal, there was nothing to displace the assessee's case that the amount represented a deposit made by Banarasidas.

Conclusion: The credit of Rs. 10,000 could not be treated as the assessee's income on the basis adopted by the department, and the question referred was answered in favour of the assessee.

Ratio Decidendi: Where an assessee has taken the steps available to secure a witness's attendance, an adverse addition cannot be sustained merely because the witness is not produced, unless there is legal material rebutting the assessee's explanation.

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