V.S Desai, J.:— On a requisition made by this court under section 66(2) of the Indian Income-tax Act, 1922, the Tribunal has drawn up the statement of the case and referred to this court the questions hereinafter stated which it was directed to refer. These questions relate to the assessment years 1944-45,1945-46 and 1949-50, the relevant previous years for which were the years ending on the 31st July, 1943, 31st July, 1944, and 31st July, 1948. The assessee is a limited company, incorporated in the former Indian State of Rajasthan, and having its registered office at Sambhar Lake. It was a concern promoted and controlled by a well-known business house of Calcutta, known as Messrs. Surajmal Nagarmal. The main sources of the income of the assessee company were interest on loans, dividends from investments, etc. Although the assessee company was incorporated in the State of Rajasthan and had its registered office at a place in the said State, it was always held to be a resident and ordinarily resident in the then British India, for the purpose of its assessment, in all years including the three assessment years with which we are concerned. In the course of the assessment proceedings of the assessee for the assessment year 1944-45, the Income-tax Officer found that a sum of Rs. 2,50,000 was credited in the books of the assessee company to the account standing in the name of one Rampratap Agarwal. The credit entry of Rs. 2,50,000 appearing in this account was of the date 10th October, 1942, a date which fell in the previous year ended with 31st July, 1943, for the assessment year 1944-45. This account of Rampratap Agarwal was continued in the assessee's account books and was finally closed on the 1st of August, 1950, by transferring the amount of the outstanding credit balance to the account of M/s. Surajmal Nagarmal. Since certain entries in this account are the subject-matter of the questions referred to in the present reference, it may be necessary to state briefly the position of this account in several years. In the year ending with 31st July, 1943, the interest of Rs. 2,020 was credited to this account and the amount of the principal and interest was taken to the next year's account. Interest for the next year was again credited in the sum of Rs. 2,520. During the subsequent year, i.e, the year ending with 31st July, 1945, the amount of interest for the first two years appears to have been paid out and the principal of Rs. 2,50,000 carried forward to the next year. No interest appears to have been credited for this year, and the case of the assessee was that it was paid out in cash without being entered in the account. In the next year, there were further deposits of Rs. 2 lakhs and Rs. 1 lakh, on 8th October, 1945, and 24th November, 1945, respectively, thus increasing the total credit balance at the end of the year to Rs. 5,50,000. No interest was credited in the account during this year, and the assessee's explanation with regard to it was the same as it was with regard to the previous years. In the next year, which was the year ending on 31st July, 1947, there were further deposits of Rs. 2 lakhs on 25th November, 1946, and Rs. 2 lakhs on 24th May, 1947. During this year there were also withdrawals to the extent of Rs. 7,50,000 on three different dates, leaving a balance of Rs. 2 lakhs in the account which was taken forward to the next year. No interest was credited to the account in this year also as in the previous two years. In the next year, two more deposits, one of Rs. 40,000 on 16th March, 1948, and another of Rs. 1 lakh on 19th July, 1948, were made in this account, and interest in the sum of Rs. 6,558 was credited. The credit balance at the end of the year in this account was Rs. 3,46,558-5-0 which was taken to the next year. There were certain deposits and withdrawals in the next two years which need not be stated in detail. At the end of the year ending on 31st July, 1950, the balance in the account was Rs. 5,56,200 and the account was closed on the first day of the next year by transferring this balance of Rs. 5,56,200 to the account of Messrs. Surajmal Nagarmal. During the assessment proceedings for the year 1944-45, the Income-tax Officer called upon the assessee company to establish the identity of Rampratap Agarwal and thus satisfy him with regard to the sources of the credit entry in that account to the extent of Rs. 2,50,000. The assessee's explanation was that Rampratap Agarwal was a benami for Messrs. Surajmal Nagarmal and the amount belonged to Messrs. Surajmal Nagarmal. The assessee stated that in the inquiry by the Investigation Commission under the Taxation on Income (Investigation Commission) Act, 1947, of the case of Surajmal Nagarmal, this amount of Rs. 2,50,000 was accounted for and dealt with in the settlement reached by Messrs. Surajmal Nagarmal with the Central Government. The explanation was not accepted by the Income-tax Officer, and he treated the credit entry of Rs. 2,50,000 in the account of Rampratap Agarwal in the assessee's account books as the assessee's income from an undisclosed source. In the view that he took of the said cash credit entry, he also disallowed the item of interest of Rs. 2,020 credited in the account as not deductible under section 10(2)(iii) of the Income-tax Act. The assessee took the order of the Income-tax Officer in appeal before the Appellate Assistant Commissioner, who agreed with the view which the Income-tax Officer had taken, and dismissed the assessee's appeal. In the said appeal, the assessee requested the Appellate Assistant Commissioner to satisfy himself by inquiring with the Income-tax Officer who was concerned with the assessment of Messrs. Surajmal Nagarmal, as to whether the credits in the account of Rampratap Agarwal in the assessee's account books were or were not considered by the Income-tax Investigation Commission in the case of Surajmal Nagarmal. The Appellate Assistant Commissioner accordingly made inquiries with the Income-tax Officer, Central Circle “X”, Calcutta, who was assessing Messrs. Surajmal Nagarmal. The reply received by the Appellate Assistant Commissioner, according to him, was not sufficient to support the explanation which the assessee was offering with regard to the said credit entries. The assessee then went in appeal before the Tribunal and contended that the explanation which he had given before the lower authorities should have been accepted, on the facts and in the circumstances of the case, and the cash credits should be taken to have been properly explained by the assessee. It was also contended that even if the explanation of the assessee were not accepted, and the income were to be treated as the undisclosed income of the assessee, no tax was payable in respect of that income in view of the provisions of section 14(2)(c). Both these contentions were negatived by the Tribunal, and the assessee's appeal dismissed. The questions which arise out of the order of the Tribunal relating to the assessment year 1944-45, and which are directed to be referred to us on the present requisition under section 66(2) are as follows:

“1. Whether, on the facts and in the circumstances of the case, there was any material before the Tribunal to hold that Rs. 2,50,000 (Rupees two lakhs and fifty thousand) standing in the books of the assessee to the credit of Rampratap Agarwal on October 10, 1942, in the previous year relevant to the assessment year 1944-45 belonged to the assessee as held by the Tribunal?

2. Whether, on the facts and in the circumstances of the case; the Tribunal was justified in holding that the said income of Rs. 2,50,000 (Rupees two lakhs and fifty thousand) accrued or arose in the taxable territories?”

2. As we have already stated, in narrating the position of this account in the subsequent years in the year ending on 31st July, 1944, which is the previous year for the assessment year 1945-46, an amount of Rs. 2,520-3-3 was credited in the account of Rampratap Agarwal by way of interest. In the assessment for the assessment year 1945-46, this item was disallowed by the Income-tax Officer because, according to the view which he had taken, the account of Rampratap Agarwal was an account of the assessee to conceal his undisclosed income. The view taken by the Income-tax Officer was confirmed both by the Appellate Assistant Commissioner and the Tribunal. The questions framed with regard to the order of the Tribunal relating to the assessment year 1945-46 are:

“1. Whether, on the facts and in the circumstances of the case there was any material before the Tribunal to hold that the sum of Rs. 2,520 (Rupees two thousand five hundred and twenty) standing in the books of the assessee to the credit of Rampratap Agarwal as interest in the previous year relevant to the assessment year 1945-46 belonged to the assessee and should be assessed to income-tax as income of the assessee from undisclosed sources?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the said income of Rs. 2,520 (Rupees two thousand five hundred and twenty) accrued or arose in the taxable territories?”

3. The remaining two questions relate to the assessment year 1949-50, the relevant previous year for which was the year ending on 31st July, 1948. During this year there were deposits of Rs. 40,000 and Rs. 1 lakh in this account on 16th March, 1948, and 19th July, 1948, respectively. There was also an entry of Rs. 6,558 crediting interest to this account. The income-tax authorities have treated these credit entries as well as the aforesaid interest amount as income of the assessee from an undisclosed source and brought it to tax. The Tribunal also has upheld the view of the income-tax authorities. The questions arising from this assessment order are as follows:

“1. Whether, on the facts and in the circumstances of the case, there was any material before the Tribunal to hold that the sum of Rs. 1,00,000 (Rupees one lakh) and Rs. 40,000 (Rupees forty thousand) standing in the books of the assessee to the credit of Rampratap Agarwal on March 16, 1948, and July 18, 1949, in the previous year relevant to the assessment year 1949-50 and Rs. 6,558 (rupees six thousand five hundred and fifty-eight) credited in the said account as interest belonged to the assessee as held by the Tribunal?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that, the said income of Rs. 14 (sic) lakhs (Rupees one lakh and twenty five thousand) and Rs. 6,558 (Rupees six thousand five hundred and fifty-eight) accrued or arose in the taxable territories?”

4. Now, the main question which requires to be decided in the present case is whether the cash credit of Rs. 2,50,000 of the date October 10, 1942, appearing in the account of Rampratap Agarwal in the assessee's account books, as also the credits of Rs. 40,000 and Rs. 1 lakh, on March 16, 1948, and July 19, 1948, respectively, in the said accounts represent the assessee's income from an undisclosed source. If the said question is answered in the negative, the further legal contention, namely, whether the said income, if held by the assessee, was or was not liable to tax in view of the provisions of section 14(2)(c), will not survive for consideration. When cash credits appear in the accounts of an assessee, whether in his own name or in the name of third parties, the Income-tax Officer is entitled to satisfy himself as to the true nature and source of the amounts entered therein, and if after investigation or inquiry he is satisfied that there is no satisfactory explanation as to the said entries, he would be entitled to regard them as representing the undisclosed income of the assessee. When these credit entries stand in the name of the assessee himself, the burden is undoubtedly on him to prove satisfactorily the nature and source of these entries and to show that they do not constitute a part of his business income liable to tax. When, however, entries stand not in the assessee's own name, but in the name of third parties, there has been some divergence of opinion expressed as to the question of the burden of proof. In Radhakrishna Behari Lal v. Commissioner of Income-tax [1954] 26 I.T.R 344., the Patna High Court held that though when the cash credits stood in the assessee's name the burden of proof was upon him to show that the receipts were not of an income nature, the position was different in regard to sums which were shown in the assessee's books in the names of third parties. In the latter kind of cases the onus of proof was not upon the assessee to show the sources or nature of the amount of the cash credit, but the onus shifted on to the department to show by some material that the amount standing in the name of the third party did not belong to him but belonged to the assessee. This view was not accepted by the Andhra Pradesh High Court, where a contrary view was taken. In M.M.A.K Mohideen Thamby & Co. v. Commissioner of Income-tax [1959] 36 I.T.R 481., that court held, dissenting from the Patna view, that with regard to the credit entries in the names of partners as well as credit entries in the names of third parties appearing in the accounts of the partnership, the burden is on the assessee to explain the entries and show positively their nature and sources. In the absence of a satisfactory explanation, it is open to the department to infer that the moneys belonged to the assessee and represented his suppressed income. The same view was also taken in another case of the same High Court in Raghava Reddi v. Commissioner of Income-tax. We are ourselves in agreement with the view taken by the Andhra Pradesh High Court in Raghava Reddi v. Commissioner of Income-tax and Mohideen Thamby & Co. v. Commissioner of Income-tax. We agree respectfully with the view expressed by Subba Rao C.J (as be then was) in Raghava Reddi v. Commissioner of Income-tax at page 948 of the report, which was as follows:

“We do not think that the question of burden of proof can be made to depend exclusively upon the fact of a credit entry in the name of the assessee or in the name of a third party. In either case, the burden lies upon the assessee to explain the credit entry, though the onus might shift to the Income-tax Officer under certain circumstances. Otherwise a clever assessee can always throw the burden of proof on the income-tax authorities by making a credit entry in the name of a third party either real or pseudonymous.”

5. It seems to us that where the entry stands in the name of the assessee's wife or children, or in the name of any other near relation or an employee of the assessee, the burden will lie on the assessee, though the entry is not in his own name, to explain satisfactorily the nature and source of that entry. Where the entry stands not in the name of any such person having a close relation or connection with the assessee, but in the name of an independent party, the burden will still lie upon him to establish the identity of the said party, and to satisfy the Income-tax Officer that the entry is real and not fictitious. When, however, in a case where the entry stands in the name of the third party, the assessee satisfies the Income-tax Officer as to the identity of the third party and also supplies such other evidence which will show, prima facie, that the entry is not fictitious, the initial burden which lies on him can be said to have been discharged by him. It will not, thereafter, be for the assessee to explain further how or in what circumstances the third party obtained money and how or why he came to make a deposit of the same with the assessee. The burden will then shift on to the department to show why the assessee's case cannot be accepted and why it must be held that the entry, though purporting to be in the name of a third party, still represents the income of the assessee from a suppressed source. In order to arrive at such a conclusion, however, the department has to be in possession of sufficient and adequate material. Now, in the present case, the facts and circumstances are as follows:

The assessee company was a creature of Messrs. Surajmal Nagarmal and entirely controlled by them. The assessee's case was that the account of Rampratap Agarwal in its account books was a benami account of Messrs. Surajmal Nagarmal, that it was a continuous account which ran from the year 1942-43 and went on up to the beginning of the year 1951 when the account was closed and the balance transferred to the account of Messrs. Surajmal Nagarmal. The account was treated as the account of Messrs. Surajmal Nagarmal by the Income-tax Investigation Commission during the investigation of Messrs. Surajmal Nagarmal's case and the credits in this account subsequent to 1947, i.e, after the settlement by the Investigation Commission of Messrs. Surajmal Nagarmal, were treated as income of Messrs. Surajmal Nagarmal in its subsequent assessments. It was in these circumstances that the assessee claimed that the account was not the assessee's account, and the entries therein did not constitute the undisclosed income of the assessee. The view of the income-tax authorities was that while the assessee's explanation involved an admission that the account was benami, its assertion that it was the benami account of Messrs. Surajmal Nagarmal was not supported by any satisfactory evidence. The result, therefore, was that the account which was admittedly benami was not proved to be the account of Messrs. Surajmal Nagarmal, and must, therefore, be treated as the assessee's own account. It is difficult to understand how this conclusion can be sustained on the facts and material on record. The assessee during the course of its appeals before the Appellate Assistant Commissioner had requested the Appellate Assistant Commissioner to ascertain the truth of its case by instituting inquiries with the Income-tax Officers who were concerned with the assessments of Messrs. Surajmal Nagarmal. The Appellate Assistant Commissioner had accordingly made inquiries with the Income-tax Officer, Central Circle “X”, Calcutta, who was assessing Messrs. Surajmal Nagarmal. The reply received from the Income-tax Officer, Central Circle “X”, Calcutta, according to the Appellate Assistant Commissioner indicated that the credits in the account of Rampratap Agarwal in the books of the Orient Trading Co. Ltd. were not treated by the Investigation Commission as the concealed income of Messrs. Surajmal Nagarmal. This, according to the Appellate Assistant Commissioner, was the substance of the replies received by him from the Income-tax Officer with regard to the entry of Rs. 2,50,000 appearing in the account on the 10th October, 1942. As regards the entries for the year 1947-48, the reply was that Messrs. Surajmal Nagarmal had prepared a memoranda which they called account No. 2, for the period subsequent to 31st March, 1947, on the basis of concealed assets and income discovered by the Income-tax Investigation Commission, and that memoranda showed the cash advanced by them to Messrs. Orient Trading Co. Ltd. as follows: “Rs. 2,00,000 on May 27, 1947, and Rs. 40,000 on March 19, 1948”. According to the income-tax authorities this was not sufficient to establish the identity of these amounts appearing in the account books of the assessee as the amounts deposited with them by Messrs. Surajmal Nagarmal, because there was some discrepancy as to the dates occurring in the memorandum submitted by Messrs. Surajmal Nagarmal and in the account books of the assessee. Thus while the entry of Rs. 2 lakhs in the account books of the assessee was on the 24th May, 1947, that in the memorandum was three days later on the 27th May, 1947, and similarly the entry of Rs. 40,000 while it occurred in the assessee's account books on 16th March, 1948, occurred in the memorandum three days later on the 19th March, 1948. The circumstance that the dates in the memorandum of Messrs. Surajmal Nagarmal were later than the dates in the assessee's account books, according to the income-tax authorities, was inconsistent with the assessee's case that the entries in the assessee's account books were entries of the amounts of Messrs. Surajmal Nagarmal. In our opinion, there can be no doubt on the examination of the replies sent by the Income-tax Officer, who was assessing Messrs. Surajmal Nagarmal that the entire account occurring in the name of Rampratap Agarwal in the assessee's account books was treated as the account of Surajmal Nagarmal both by the Investigation Commission and by the Income-tax Officer assessing Messrs. Surajmal Nagarmal for the subsequent years. The substance of the reply received by the Appellate Assistant Commissioner from the Income-tax Officer, Central Circle “X”, Calcutta, as given by the Appellate Assistant Commissioner in his appellate order, a part of which has been reproduced in the statement of the Tribunal, is not, it appears, quite accurate. It would seem from what the Appellate Assistant Commissioner has stated in that part of his order that the account of Rampratap Agarwal in the assessee's account books was not treated as a part of the concealed income of Messrs. Surajmal Nagarmal. That, however, is not the true position as will be clear on reading the further part of the order of the Appellate Assistant Commissioner. Mr. Joshi pointed out to us that the whole of the appellate order was not annexed to the statement of the case and was not made part thereof, and we should not, therefore, look at the said order, or derive any assistance therefrom for the purposes of determining the question before us. We have disagreed with Mr. Joshi so far as that submission is concerned. Although the order of the Appellate Assistant Commissioner has not been annexed as a part of the statement of the case, it is still incorporated in the statement of the case, and a part thereof has been actually referred to.

6. It would be permissible for us to look at the whole order itself in order to understand what the part which has been reproduced in the statement of the case actually and correctly means. Now, what we find from the order of the Appellate Assistant Commissioner is that the Income-tax Officer, Calcutta, in his reply stated that from the said account of Rampratap Agarwal occurring in the assessee's account books, a sum of Rs. 2,00,00, which was the outstanding credit balance in that account on 31st March, 1947, was regarded as part of the concealed income of Messrs. Surajmal Nagarmal. He, however, pointed out that the item of Rs. 2,00,000 could not be necessarily connected with the initial deposit of Rs. 2,50,000 in that account on 10th October, 1942, because between that date and the 31st March, 1947, there were several other deposits and withdrawals in the said account. If that is the real position, then it seems to us impossible to take the view that the account of Rampratap Agarwal was not considered and treated as the account of Messrs. Surajmal Nagarmal by the Income-tax Investigation Commission in Surajmal Nagarmal's case. If the whole of the account was considered as the account of Messrs. Surajmal Nagarmal, it was clearly not the assessee's own account. Since the investigation of Surajmal Nagarmal's case by the Investigation Commission was on the basis of the increase in wealth of Messrs. Surajmal Nagarmal between certain dates, i.e, between 1939 and 1947, what could be taken as part of his wealth would undoubtedly be the outstanding balance in this account as on the material date. In our opinion, therefore, the reply received by the Appellate Assistant Commissioner from the Income-tax Officer assessing Messrs. Surajmal Nagarmal supplied a very satisfactory support to the assessee's assertion that the account of Rampratap Agarwal in its account was a benami account of Messrs. Surajmal Nagarmal. The further circumstance that the entries in this account were treated as the income of Messrs. Surajmal Nagarmal and brought to tax during the subsequent years is also further proof of a satisfactory nature establishing the assessee's case. The circumstance that there is a discrepancy of a few days between the dates occurring in these two accounts would not be sufficient to destroy the assessee's explanation. It must be remembered that the amounts entered in the accounts are identical with the amounts shown in the memorandum submitted by Messrs. Surajmal Nagarmal; moreover if the entries in the accounts of the assessee were not to refer to the said items as given in the memorandum, there are no other entries of those amounts again at subsequent dates. The further circumstance that at the beginning of the year 1950, the balance from this account was transferred to the account of Messrs. Surajmal Nagarmal is again a circumstance in support of the assessee's case. It must be remembered that the assessment proceedings on the assessee in respect of the present assessment years were completed by the Income-tax Officer in the year 1954; the entry in the accounts made long before that date on 1st August, 1950, transferring the balance to Messrs. Surajmal Nagarmal, could not be said to have been made in view of the said assessment proceedings. In our opinion, the assessee has sufficiently discharged the burden which lay upon it to explain the nature and source of the cash credits appearing in its accounts and the burden clearly shifted in the present case on to the department to prove to the contrary and hold that in spite of the assessee's explanation, the entries could still be held to represent the assessee's income from undisclosed sources. There is no material whatsoever on the record on the basis of which the department can be said to have discharged that burden. The solitary circumstance of a difference of three days in the record of the entries with regard to the items of Rs. 2,00,000 and Rs. 40,000 in the books of account of the assessee and those of Messrs. Surajmal Nagarmal is not in view of the rest of the material on record sufficient to reject the assessee's case. Mr. Kolah has pointed out that the fact that the entries occur at a difference of three days in each case suggests that the difference may be due to the method of transmitting the amounts employed by Messrs. Surajmal Nagarmal or due to the particular method adopted by the parties of making entries in their accounts and this militates against any adverse inference which can be drawn against the case of the assessee. The explanation offered by Mr. Kolah cannot be accepted as the true explanation of the difference in the dates in the absence of any evidence relating to the method of transmission adopted by Messrs. Surajmal Nagarmal or with regard to any particular mode adopted by the parties in making entries in their accounts. It, however, supports our appreciation of the said solitary circumstance against the assessee that it is not of such a conclusive nature or tendency as to suffice to reject the assessee's case in the face of the other evidence on the record. According to us, therefore, it must be held that the amount of Rs. 2,50,000 standing in the books of the assessee to the credit of Rampratap Agarwal on the 10th October, 1942, and the further entries of Rs. one lakh and of Rs. 40,000 occurring in the said account on 16th March, 1948, and 19th July, 1948, did not belong to the assessee and did not constitute his undisclosed income.

7. In view of our conclusions, the first of the two questions framed for each of the three years under consideration must be answered in the negative. As we have already pointed out earlier, the answer to the said question being in the negative and in favour of the assessee, the second question does not arise for consideration and need not be answered. The second question for each of these years is not, therefore, answered. The assessee will get its costs from the department.

8. First question answered in the negative.