1962 (1) TMI 94

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.... of 21 high denomination notes, which were exchanged by the assessee, 13 represented income of the assessee from some undisclosed source." The facts giving rise to the reference are that the assessee carries on business in cloths, parchoon, kerosene and salt and has been income from zamindari. Upon the coming into force of the High Denomination Notes (Demonetisation) Ordinance in January, 1946, the assessee encashed 21 high denomination notes. Having been called upon to explain the nature and the source of the amount represented by these 21 notes the assessee explained that they were received by him in the usual course of business and formed part of his cash balance. In support of his case the assessee produced a chart. This showed th....

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....essee to come into possession of some of these notes in the course of his business in cloth. The assessee appears to have produced a chart of his sales and by reference to that chart the Tribunal took the view that there were three transactions of over Rs. 1,000 on December 27, 1945, and these transactions might very well have included one note of Rs. 1,000 each. This accounted for three notes. They also noticed that there was another transactions of Rs. 1000 after December 27, 1945. Accordingly they took the view that from this transaction also the assessee might have received one high denomination note. Thus the total number of high denomination notes accounted for by the business operations of the assessee was four from December 27, 1945....

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....rticulars of any high denomination notes that he might have received. It was only as a result of the Ordinance that the assessee was required by the income-tax authorities to furnish an explanation as to the nature and source of receipt of high denomination notes. In those circumstances prima facie the value represented by the high denomination notes which might be in the possession of an assessee was presumed to be a part of his cash balance. If the department wanted to treat the value of high denomination notes as the concealed income of the assessee from some undisclosed source then it was for the income-tax department to establish that fact. It is obvious that the fact could be established only on the basis of material which might be in....

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....t of high denomination notes. A buyer might hand over a note of Rs. 1,000 and pay for the transaction of purchase of say Rs. 500, 600 or 700 and take the balance in cash. This possibility is always there and this possibility cannot be ruled out because as already stated above the burden of proof in a matter like this is upon the department. Unless the possibility of the receipt of high denomination notes in transaction of less than Rs. 1,000 was completely ruled out, it could not be said that the mere fact that there were no sale transactions of Rs. 1,000 or over, would not exclude that possibility and the burden which rests upon department would remain undischarged. The other error which the Tribunal made was in mooting the possibility of ....