Case: Smt. Srilekha Banerjee And Others Vs. Commissioner Of Income-Tax, Bihar And Orissa

amount of the notes. No doubt, this Court, in referring to that case, summarised the reasons, but it pointed out that it was not open to the Tribunal to make a guess as to the number of high denomination notes which could be accepted, and cited the Allahabad case and some others in that connection.13. It seems to us that the correct approach to questions of this kind is this, If there is an entry in the account books of the assessee which shows the receipt or a sum of conversion of high denomination notes tendered for conversion by the assessee himself, it is necessary for the assessee to establish, if asked, what the source of that money is and to prove that it does not bear the nature of income. The Department is not at this stage required to prove anything. It can ask the assessee to bring any books of account or other documents or evidence pertinent to the explanation if one is furnished, and examine the evidence and the explanation. If the explanation shows that the receipt was not of an income nature, the Department cannot act unreasonably and reject that explanation to hold that it was income. If, however, the explanation is unconvincing and one which deserves to be rejected, the Department can reject it and draw the inference that the amount represents income either from the sources already disclosed by the assessee or from some undisclosed source. The Department does not then proceed on no evidence, because the fact that there was receipt of money, is itself evidence against the assessee. There is thus prima facie evidence against the assessee which he fails to rebut, and being unrebutted, that evidence can be used against him by holding that it was a receipt of an income nature. The very word "an undisclosed source show that the disclosure must come from the assessee and not from the Department. In cases of high denomination notes, where the business and the state of accounts and dealings of the assessee justify a reasonable inference that he might have for convenience kept the whole or a part of a particular sum in high denomination notes, the assessee prima facie discharges his initial burden when he proves the balance and that it might reasonably have been kept in high denomination notes. Before the Department rejects such evidence, it must either show an inherent weakness in the explanation or rebut it by putting to the assessee some information or evidence which it has in its possession. The Department cannot by merely rejecting unreasonably a good explanation, convert good proof into no proof. It is within the range of these principles that such cases have to be decided.We do not think that the Allahabad view puts no burden upon the assessee and throws the entire burden on the Department. The case itself does not bear this out. If it does, them, it is not the right view.14. In the present case, the assessee claimed that the high denomination notes were a part of the cash balance at the head office.The Income-tax Officer found that at first the cash on hand was said to be Rs. 1,62,022, but on scrutiny, it was found to be wrong. Indeed, the assessee himself corrected it before the Appellate Assistant Commissioner and stated there that the balance was Rs. 1,21,875. Ordinarily, this would have prima facie proved that the assessee might have kept a portion of this balance in high denomination notes. But the assessee failed to prove this balance, as books of the assessee did not contain entries in respect of banks. Though cash used to be received from banks and sent to the various places where works were carried on and vice versa, no central account of such transfers was disclosed. There was also no account of personal expenses of the assessee and he had failed to prove why such large sums were kept on hand in one place when at each of the places where work was carried on, there were banks with which he had accounts. The Appellate Assistant Commissioner also went into the question and found that on the same day when the high denomination notes were encashed, a sum of Rs. 45,000was drawn by cheque. The next remittance immediately afterwards was of Rs. 16,000 to Bakaro, but Rs. 17,000 were withdrawn a few days before to meet this expense. A withdrawal of Rs. 8,000was made a day later and Rs. 20,000 were withdrawn ten days later to finance the business. It appears that the money on hand (RS. 45,000) was not touched at all, but on January 30, 1946, a further sum of Rs. 6,005 was withdrawn and not utilized, which made up the sum of Rs. 51,000 for which the high denomination notes were encashed.15.On these facts, the Tribunal came to the conclusion that the High Court denomination notes represented not the cash balance but some other money which remained unexplained, and the Tribunal treated it as income from some undisclosed source. The High Court held on the above facts and circumstances that there were materials to show that Rs. 51,000 did not form part of the cash balance, and the source of money not having been satisfactorily proved, the Department was justified in holding it to be assessable income of the assessee from some undisclosed source. In this conclusion, the High Court was justified, regard being had to the principles we have explained above.16. The argument that as this was a case under S. 34 of the Income-tax Act, it cast a special burden on the Department to show that this income had escaped earlier, need not detain us. No doubt, proceedings under S. 34 can only be commenced under the conditions prescribed in the section, but when the proceedings are validly commenced, there is no difference between an ordinary assessment and an additional assessment under S. 34, and the same rule as to burden of proof governs the additional assessment.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]14. In the present case, the assessee claimed that the high denomination notes were a part of the cash balance at the head office.The Income-tax Officer found that at first the cash on hand was said to be Rs. 1,62,022, but on scrutiny, it was found to be wrong. Indeed, the assessee himself corrected it before the Appellate Assistant Commissioner and stated there that the balance was Rs. 1,21,875. Ordinarily, this would have prima facie proved that the assessee might have kept a portion of this balance in high denomination notes. But the assessee failed to prove this balance, as books of the assessee did not contain entries in respect of banks. Though cash used to be received from banks and sent to the various places where works were carried on and vice versa, no central account of such transfers was disclosed. There was also no account of personal expenses of the assessee and he had failed to prove why such large sums were kept on hand in one place when at each of the places where work was carried on, there were banks with which he had accounts. The Appellate Assistant Commissioner also went into the question and found that on the same day when the high denomination notes were encashed, a sum of Rs. 45,000was drawn by cheque. The next remittance immediately afterwards was of Rs. 16,000 to Bakaro, but Rs. 17,000 were withdrawn a few days before to meet this expense. A withdrawal of Rs. 8,000was made a day later and Rs. 20,000 were withdrawn ten days later to finance the business. It appears that the money on hand (RS. 45,000) was not touched at all, but on January 30, 1946, a further sum of Rs. 6,005 was withdrawn and not utilized, which made up the sum of Rs. 51,000 for which the high denomination notes were encashed.15.On these facts, the Tribunal came to the conclusion that the High Court denomination notes represented not the cash balance but some other money which remained unexplained, and the Tribunal treated it as income from some undisclosed source. The High Court held on the above facts and circumstances that there were materials to show that Rs. 51,000 did not form part of the cash balance, and the source of money not having been satisfactorily proved, the Department was justified in holding it to be assessable income of the assessee from some undisclosed source. In this conclusion, the High Court was justified, regard being had to the principles we have explained above.16. The argument that as this was a case under S. 34 of the Income-tax Act, it cast a special burden on the Department to show that this income had escaped earlier, need not detain us. No doubt, proceedings under S. 34 can only be commenced under the conditions prescribed in the section, but when the proceedings are validly commenced, there is no difference between an ordinary assessment and an additional assessment under S. 34, and the same rule as to burden of proof governs the additional assessment.