1967 (1) TMI 80 - HC - Income Tax

Unexplained Cash Deposits Deemed as Undisclosed Income: Court Rules in Favor of Tax Authority

Northern Bengal Jute Trading Co. Ltd. Versus Commissioner of Income-Tax

The court upheld the Tribunal's finding that the deposits of Rs. 1,40,000 were the assessee's income from undisclosed sources. The court emphasized the ... - Issues Involved:1. Whether there was any legal admissible evidence to justify the Tribunal's finding that the deposits of Rs. 1,40,000 were the assessee's income from undisclosed sources.Detailed Analysis:Issue 1: Legal Admissible Evidence for Tribunal's FindingThe central question in this case was whether there was any legal admissible evidence to justify the Tribunal's finding that the deposits of Rs. 1,40,000 were the assessee's income from undisclosed sources. The assessee, a limited company engaged in the jute business, had several cash credits totaling Rs. 1,40,000 in its books of accounts at Raninagar, Darwani, and Domar. These credits were in the names of various individuals.The Income-tax Officer asked the assessee to explain the source of these amounts. The assessee claimed that the amounts were loans from M/s. Surajmull Nagarmull, an associate firm, and produced a statement from the said firm to that effect. However, the Income-tax Officer rejected this explanation, and the sum of Rs. 1,40,000 was added as the income of the assessee-company from undisclosed sources. This decision was upheld by the Appellate Assistant Commissioner and the Appellate Tribunal.The Tribunal found that the amounts had been introduced in the names of petty employees of the assessee-company and there was no evidence that these employees were benamidars of M/s. Surajmull Nagarmull. The Tribunal also noted that the acceptance of the deposits by the said firm as their own, two years after their affairs with the Investigation Commission were disposed of, could not be considered a satisfactory explanation.Dr. D. Pal, representing the assessee, argued that the finding was arrived at without any evidence. He contended that the amounts credited in the books of account were admitted in writing by M/s. Surajmull Nagarmull as their own money, and thus, the inference that the sums belonged to the assessee-company's secret income was baseless. He cited several cases to support his argument, including Mehta Parikh & Co. v. Commissioner of Income-tax, Sreelekha Banerjee v. Commissioner of Income-tax, Ram Kishan Das Munnu Lal v. Commissioner of Income-Tax, and Bean (H.M. Inspector of Taxes) v. Doncaster Amalgamated Colliery Ltd..The court, however, found that the Tribunal's conclusion was supported by evidence. The Tribunal had noted that the amounts were introduced in the names of petty employees and there was no evidence to show these employees were benamidars of M/s. Surajmull Nagarmull. The break-up of the Rs. 16 lakhs as idle cash of M/s. Surajmull Nagarmull was never mentioned before the Commission, and the link between the Rs. 16 lakhs and the cash credits in the assessee's books was not established. The court emphasized that the assessee had the legal obligation to explain the sources of such receipts and that the initial onus was on the assessee. The court also noted that the assessee's representative admitted that there was nothing more to produce or say beyond what had already been placed before the authorities.The court concluded that the Tribunal's findings were not perverse and were supported by evidence. Accordingly, the question was answered in the affirmative and against the assessee-company. The assessee-company was ordered to pay the costs of the reference to the respondent.Conclusion:The court upheld the Tribunal's finding that the deposits of Rs. 1,40,000 were the assessee's income from undisclosed sources, based on the evidence presented. The initial onus to explain the cash credits was on the assessee, which was not satisfactorily discharged. The Tribunal's conclusion was found to be supported by evidence and not perverse.