Burden of proof on third-party cash credits shifts to revenue once the assessee gives a credible explanation.

Cash credits recorded in an assessee's books, including entries in a third party's name, may be treated as undisclosed income if the explanation is unsatisfactory. The assessee carries the initial burden to prove the identity of the third party and produce material showing that the entry is genuine and not fictitious. Once a credible explanation is supported by surrounding circumstances, the burden shifts to the revenue to establish that the amount still represents suppressed income. On the stated facts, the connected assessment treatment and later assessment evidence supported the assessee's explanation, and a minor date discrepancy was insufficient to displace it; the credits were therefore not treated as the assessee's undisclosed income.

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Issues: Whether the cash credits standing in the name of a third party in the assessee's books were proved to belong to the assessee as undisclosed income, and whether the assessee had discharged the initial burden of explaining the nature and source of those credits.

Analysis: Cash credits in an assessee's books, even when standing in the name of a third party, may be treated as the assessee's income if the explanation is unsatisfactory. However, the initial burden is on the assessee to establish the identity of the third party and to produce material showing that the entry is real and not fictitious. Once the assessee offers a satisfactory explanation supported by surrounding circumstances, the burden shifts to the department to show that the entry still represents suppressed income. On the facts, the account was treated in the connected assessment proceedings as belonging to the real source behind the benami name, the later treatment of the same entries in the other party's assessments supported the assessee's version, and the minor discrepancy in dates was not sufficient to displace that explanation.

Conclusion: The cash credits did not belong to the assessee and did not constitute its undisclosed income. The first question was answered in the negative in favour of the assessee, and the consequential taxability issue did not arise.

Ratio Decidendi: In respect of cash credits standing in the name of a third party, the assessee must first give a credible explanation of identity and source, after which the burden shifts to the revenue to prove that the entry represents the assessee's suppressed income.

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