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Issues: Whether the addition of cash credits as income from undisclosed sources was justified when the assessee was refused the opportunity to examine the alleged depositors on commission.
Analysis: The credits standing in the names of non-resident depositors were supported by affidavits and letters, and the assessee had sought to examine the depositors on commission because they lived far from Nagpur. Under section 37 of the Income-tax Act, the income-tax authorities had powers akin to a civil court, including the power to issue commissions for examination of witnesses. Refusal to allow commission, despite the assessee's request, deprived the assessee of a fair opportunity to prove the genuineness of the deposits. In these circumstances, the materials on record were not sufficient to sustain the inference that the credits represented undisclosed profits.
Conclusion: The addition of Rs. 43,868 as income from undisclosed sources was not justified, and the answer to the reference was in favour of the assessee.
Ratio Decidendi: Where cash credits are sought to be treated as undisclosed income, the assessee must be afforded a fair opportunity to prove the genuineness of the credits, including examination of relevant witnesses on commission when their attendance cannot reasonably be compelled.
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