ABRAHAM Vs. COMMISSIONER OF INCOME TAX, KERALA

JUDGEMENT

(1.) THE Income -tax Appellate Tribunal,Cochin Bench has referred to this court the following question of law under section 256(1)of the Income -tax Act,1961(hereinafter referred to as the Act ): "Whether,on the facts and in the circumstances of the case,the Tribunal was justified in restoring the order of the Income -tax Officer with regard to the addition of Rs.11,000 as income from undisclosed sources by holding that there was no burden on the department to establish that the intangible addition of Rs.11,000 for the assessment year 1966 -67 was not available for subsequent credit? "

(2.) THE assessee,an individual,was engaged in the business of operating passenger bus services and he had derived income from the said business during the relevant accounting period,namely the Malayalam year 1140 which ended on 16th August 1968.While completing his assessment for the year 1968 -69 the Income -tax Officer noticed in the assessee's books certain cash credits amounting to Rs.19,000 which,according to the assessee,represented sums borrowed from six persons mentioned in the accounts.Those parties were summoned by the Income -tax Officer and after considering the statements given by such of them who appeared before him,a long with the other materials available on record,the Income -tax Officer came to the conclusion that those parties were financially incapable of advancing such loans and that the explanation given by the assessee regarding the source of the credits could not be accepted as true.He therefore assessed the credits aggregating to Rs.19,000 as income from other sources in the hands of the assessee for the year in question.

(3.) AGAINST the said order of the Appellate Assistant Commissioner the department filed an appeal before the Tribunal.The Tribunal agreed with the Income -tax Officer that the assessee had failed to discharge the burden that lay on him of proving the nature and source of the credits in question.The Tribunal held that merely on account of the fact that in making the assessment for an earlier year some amount had been added as undisclosed income derived by the assessee from other sources,the law does not cast any burden on the department to establish that the said amount was not available with the assessee during a subsequent accounting period and that even in such cases it is the duty of the assessee to explain the source of every credit noticed in his accounts for such subsequent period.In the opinion of the Tribunal,if the credits in question had really come out of the additions made in the earlier year,such an explanation would have been given by the assessee in the first instance itself before the Income -tax Officer and since that had not been done and the said plea was taken by the assessee for the first time only before the Appellate Assistant Commissioner it could have been only the result of an after­thought.In the light of the above conclusions arrived at by it,the Tribunal allowed the department's appeal,set aside the order of the Appellate Assistant Commissioner and restored that of the Income -tax Officer.On application made to it by the assessee under section 256(1)of the Act the Tribunal has referred the aforesaid question of law for determination by this court.