Cash credit in third party name needs departmental material before taxing it as assessee's undisclosed income

Where a cash credit stands in the name of a third party, the initial burden does not lie on the assessee to prove the source and nature of the amount; the Department must first produce material showing that it really belongs to the assessee. On the facts, doubts about the creditor's means and surrounding circumstances were insufficient to treat the credit as the assessee's secreted income, and the registered gift deed and other evidence were inconsistent with that inference. The assessment under Section 34 therefore lacked supporting material, and the sum could not be brought to tax in the assessee's hands.

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Issues: Whether there was material before the income-tax authorities to hold that the sum of Rs. 36,120 belonged to the assessee and could be assessed under Section 34 of the Indian Income-tax Act.

Analysis: Where a cash credit stands in the name of a third party, the initial burden does not lie on the assessee to prove the source and nature of the amount. The burden shifts to the Department to establish by material that the amount really belongs to the assessee. On the facts, the Department relied on doubts about the creditor's means and some surrounding circumstances, but these did not provide a proximate or satisfactory basis for treating the credit as secreted profits of the assessee. The registered gift deed and the surrounding evidence were inconsistent with the inference drawn by the Appellate Tribunal, and the finding was held to be unsupported by material.

Conclusion: There was no material to justify assessment of the sum of Rs. 36,120 in the assessee's hands under Section 34 of the Indian Income-tax Act, and the question was answered in favour of the assessee.

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