COMMISSIONER OF INCOME-TAX Vs. MEERA AND CO

JUDGEMENT

(1.) M/s. Meera and Co. , the assessee, had shown in their books of account cash credit of Rs. 90,000 in the names of three minors. The said amount had been disclosed in the names of the said minors under the voluntary disclosure scheme under the Finance (No. 2) Act, 1965. In the assessment proceedings for the year 1967-68, the Income-tax Officer found that the minors were not able to earn the huge amount of Rs. 30,000 each from any available source and, therefore, concluded that the aggregate amount of Rs. 90,000 represented the assessee's concealed income from undisclosed sources. The assessment was made on that basis. On the assessee's appeal, the Appellate Assistant Commissioner deleted the addition by observing that the assessee had discharged its onus by pointing out that the credits were given out of the amount disclosed under the voluntary disclosure scheme mentioned above and the Income-tax Officer was not competent to go behind the source of the cash credits in the hands of the creditors. The Revenue took the matter in appeal before the Tribunal which followed Rattan Lal v. ITO [1975] 98 ITR 681, a decision of the Delhi High Court, which was on identical facts, and agreed with the decision of the Appellate Assistant Commissioner and dismissed the appeal filed by the Revenue. The Revenue sought a reference and the Tribunal has referred the following two questions of law for our opinion ; " (1) Whether, on the facts and circumstances of the case, and on a true interpretation of Section 24 of the Finance (No. 2) Act, 1965, the Appellate Tribunal was right in law in affirming the decision of the Appellate Assistant Commissioner of Income-tax, holding that after having accepted the voluntary disclosures of the three minors holding cash credits totalling Rs. 90,000 in the books of the assessee, it was not competent for the Department to go into the question of genuineness of these cash credits as appearing in the books of the assessee ? (2) Whether, on the facts and in the circumstances of the case, the assessee had discharged the onus which lay on it under Section 68 of the Income-tax Act, 1961, to explain the source of the deposits of Rs. 90,000 introduced in its business in the accounting year under consideration ?"

(2.) THE decision in Rattan Lal's case [1975] 98 ITR 681 (Delhi), went up in appeal before the highest court of the land at the instance of the Revenue and was set aside in ITO v. Rattan Lal [1984] 145 ITR 183 (SC ). In another case Jamnaprasad Kanhaiyalal v. CIT [1981] 130 ITR 244 (SC), on similar facts, the highest court overruled the decision of the Delhi High Court. Earlier also, a similar matter came up before a Division Bench of this court in CIT v. Salig Rum Prem Nath [1985] 153 ITR 234. Following the decision of the Supreme Court and other High Courts, it was held that if a declaration under Section 24 of the disclosure scheme referred to above is made on behalf of a minor, mere acceptance of the amount on behalf of the minor in the disclosure scheme would not discharge the onus which lay on the assessee under Section 68 of the Income-tax Act, 1961. In Jamnaprasad Kanhaiyalal's case [1981] 130 ITR 244 (SC), the following guidelines were laid down at page 245 : "held, (i) that the declaration under Section 24 (2) of the Finance (No. 2) Act, 1965, had to relate to income actually earned by the declarant and the Act granted immunity to the declarant alone and not to other persons to whom the income really belonged; (ii) that the finality under Section 24 (8) of the Finance (No. 2) Act, 1965, was to the order of the Central Board under Section 24 (6) and not to the assessment of tax made on the declarations furnished under the scheme; (iii) that under Section 24 (1), the declaration was required to be made in respect of the amount which represented the income of the declarant. The declaration could not be made in respect of an amount which was not the income of the declarant. If, therefore, a person made a false declaration with respect to an amount which was not his income, but was the income of somebody else, then there was nothing to prevent an investigation into the true source of the amount. There was nothing in Section 24 of the Finance (No. 2) Act, 1965, which prevented the ITO, if he was not satisfied with the explanation of an assessee about the genuineness or source of an amount found credited in his books, in spite of its having already been made the subject of a declaration by the creditor and taxed under the scheme, from investigating the true nature and source of the credits; (iv) that the legal fiction created by Section 24 (3) of the Finance (No. 2) Act, 1965, was limited in its scope and could not be invoked in assessment proceedings relating to any person other than the person making the declaration under that Act so as to rule out the applicability of Section 68 of the I. T. Act, 1961 ; (v) that, in a case of this description, there was no question of double taxation. Once it was found that the income declared by the creditors did not belong to them, there was nothing to prevent the same from being taxed in the hands of the assessee to whom it actually belonged. Held also, that the ITO was justified in treating the cash credits appearing in the books of account of the assessee amounting to Rs. 46,250 as the assessee's income from undisclosed sources since the assessee failed to discharge the burden of proof placed upon it under Section 68 of the I. T. Act, 1961. "

(3.) A reading of the aforesaid clearly goes to show that it was open to the Revenue to dispute the genuineness of the cash credit appearing in the books of account of the assessee and the finality under Section 24 (8) of the Finance (No. 2) Act, 1965, which was attached to the order of the Central Board under Section 24 (6) of that Act was not available while framing the assessment of tax in the hands of the assessee. Question No. 1 is covered with the weight of binding authority and we need not dilate on it any further. The decision of the Tribunal on question No. 1 is obviously contrary to law and we answer the same in favour of the Revenue and against the assessee, i. e. , in the negative.