Sudhindra Mohan Guha, J.:— This reference relates to the assessment year 1961-62, corresponding to the previous year ended on 31st March, 1961. The assessee is an individual. He filed a return declaring a net income of Rs. 11,827. In Section F of Part I of the return he also showed an amount of Rs. 92,575 as receipt from races and claimed exemption in respect thereof under s. 4(3)(sic) of the Indian I.T Act, 1922, read with s. 1(S) (sic) of the I.T Act, 1961. While perusing the details of winnings and losses filed by the assessee the ITO noted that the assessee had no such income in the past and that he had also won continuously on 18 out of 19 days. The ITO, therefore, examined one K.N Chakraborty, the book maker, through whom most of the winnings were stated to have been received. He also examined the betting ledger and cash book of K.N Chakraborty and found that other people had lost on the same horse on which the assessee was shown to have won. The ITO, therefore, came to the conclusion that the winnings shown by the assessee were not really made by him and added the amount of Rs. 92,575 as income of the assessee from undisclosed sources. On a scrutiny of the account books of the assessee the ITO also found several credits in the names of Multani bankers, the net peak of which came to Rs. 1 lakh. The ITO held that these cash credits have not been proved and added the sum of Rs. 1 lakh as the income of the assessee from undisclosed sources.
2. The assessee preferred an appeal to the AAC who was of the opinion that there was no admission by the assessee that the amounts standing in the account of Majula (P.) Ltd. related to him. With reference to the sum of Rs. 10,000 standing in his own personal account, the AAC held that the assessee had not proved the genuineness of the alleged loan. He, therefore, upheld the addition of Rs. 10,000 only and deleted the balance of Rs. 90,000. As regards the winnings from the races, the AAC remanded the matter to the ITO to re-examine the books of Shri Chakraborty and obtain complete particulars regarding the persons who had lost their bettings on the same horses and on the same dates on which the assessee claimed to have won. But the ITO was unable to gather any information since Shri Chakraborty claimed that his books had been stolen on 21st November, 1965. When the AAC tried to examine Shri Chakraborty himself, the summons issued came back unserved. The AAC confirmed the addition of Rs. 92,575 as income of the assessee from undisclosed sources.
3. The assessee came in further appeal to the Tribunal. It was contended that the hundi loan of Rs. 10,000 as well as winnings from races were genuine transactions and must be accepted. As to the hundi loan, the Appellate Tribunal held that the assessee had not produced any confirmatory letter or any other evidence whatsoever to prove the identity of the creditor or the genuineness of the loan and hence failed to discharge the initial burden that lay on him. The Appellate Tribunal agreed with the authorities below that in the absence of even prima facie proof of the cash credit, it must be taken as the income of the assessee from undisclosed sources.
4. With regard to the winnings from races, the Appellate Tribunal found that the claim of the assessee could not be believed as true. The Appellate Tribunal was of the view that the evidence produced by the assessee was made up to lend the colour of genuineness to the alleged transactions which must be bogus since the assessee had not disproved the finding of the ITO that other people had lost on the same horses on which the assessee had claimed to have won. The Appellate Tribunal observed that Shri Chakraborty might have corroborated the assessee's case by his confirmatory letter and deposition. There also might be corroboration by the entries in the accounts maintained by the book-maker and by the cheque issued by Chakraborty to the assessee and which the latter cleared through the bank. According to the Tribunal, the utmost that could even so be said on the basis of this was that the assessee had, by such evidence furnished, discharged the initial burden that was on him. Then the Tribunal asked itself the question whether what was sworn to by the assessee and Shri Chakraborty Was true or could reasonably be taken as true. Then the Tribunal proceeded that if it was to accept the case of the assessee and the book-maker it was to believe that in the 19 meets of the season the former emerged as a winner on as many as 18 days and lost only on one day, and that a sum of Rs. 11,225, when the winnings on all other days were much more. It was next pointed out that as the ITO had strong enough material to discredit the accounts of Shri Chakraborty, the burden against him shifted on to the assessee to prove the genuineness of the suspected entries. But then the assessee did not produce the accounts for further scrutiny, not even Shri Chakraborty for further examination. Instead, an affidavit of Shri Chakraborty was produced to the effect that the accounts had all been lost in a theft on the night of 21st November, 1965. The AAC's effort to get at Shri Chakraborty was also in vain, as he could not be traced.
5. In his affidavit, Shri Chakraborty had stated that the theft was reported by him to the police on the morning of 22nd November, 1965, and was registered by the Tollygunge Police as Case No. 618. When the assessee furnished the affidavit of Sri Chakraborty and placed reliance thereon, it was very much for him to have produced the deponent before the ITO for cross-examination to test the veracity of what he had sworn to. It transpires from the deposition of Sri Chakraborty taken in connection with another assessment proceeding on 16th December, 1965, that he had lost his books of account 8 or 9 months back and that “they were not stolen but lost after shifting from the old house to the new house”. Of course, his evidence adduced in connection with another case could not be used against the assessee. But from the surrounding circumstances the Tribunal came to the conclusion that Shri Chakraborty was not a person who could be taken as a man of truth. There was also the other fact that the Royal Calcutta Turf Club suspended the licence of Shri Chakraborty during the racing season in 1963-64 and later in 1969 withdrew outright his licence for malpractice and unprofessional conduct; of course, those enquiries related to the misdoings of Shri Chakraborty of a later period, still then they were taken into consideration for judging the character of the man and his unreliability. From the affidavit on record and from the surrounding circumstances the Tribunal agreed with the AAC that the ITO's finding that some persons had lost on the same horse on which the appellant was shown to have won was correct. The burden of showing that it was not correct was on the assessee and he had not discharged the same. The explanation given by the assessee that Shri Chakaborty's accounts were lost and Shri Chakraborty was not available to prove his stand was not believable to say the least. The Tribunal also observed that the fact that the Turf Club registers show that the horses on which the assessee was shown to have won had in fact won on those days and that the entries in the bookmaker's accounts tallied with the cheques issued to the assessee could not in the circumstances be taken serious notice of, as in manipulating a transaction it would always be the endeavour to make them appear as real and genuine. The findings of the AAC were confirmed by the Tribunal. Thereafter, at the instance of the assessee, an application under s. 256(1) of the I.T Act, 1961, was filed before the Tribunal which rejected the application by an order dated 24th August, 1974.
6. On these facts as directed by the High Court the following questions were framed for adjudication under s. 256(2) of the I.T Act, 1961:
“(i) Whether, there was any evidence or material to support the finding of the Tribunal that some persons had lost on the same horses on which the appellant was shown to have won and that the sum of Rs. 92,575 represented the assesseee's undisclosed income and that the assessee merely created a facade in the form of bank account operated by Shri K.N Chakraborty for inducing the said concealed income?
(ii) Whether the aforesaid finding and/or conclusion arrived at by the Tribunal was perverse in the sense that no reasonable man would come to it on the material on record and that the said conclusion was based on conjectures, surmises and suspicion and on a failure to consider the relevant evidence on the record?
(iii) Whether there was any evidence and/or material to support the finding of the Tribunal that the sum of Rs. 10,000 represented the income of the assessee from undisclosed sources and that the said conclusion was perverse?”
7. It was contended at the outset on behalf of the assessee that the assessee did not like to press question No. (iii). So, we decline to answer question No. (iii).
8. As regards questions Nos. (i) and (ii) Dr. Pal contends that it was the specific finding of the Tribunal that the assessee was successful in discharging the initial onus which lay on it, but still then the Tribunal came to the conclusion simply on conjectures and surmises overlooking the evidence on record. It is also contended that the assessee had received the amount in question from the book-maker, Shri Chakraborty, as confirmed by his letter, deposition and affidavit. The assessee, according to him, had identified the persons from whom he got the disputed amount and had afforded sufficient proof of the same in the form of that person's confirmation, accounts and cheques. There was no doubt that Shri Chakraborty fully corroborated the assessee's case by his confirmatory letter and deposition. This was sufficiently corroborated by the entries in the accounts maintained by the book-maker and by the cheques issued by Shri Chakraborty to the assessee and which the latter had cleared through banks. In the above circumstances, it was to be seen by the Tribunal whether Shri Chakraborty was a witness of credence and whether the books of account furnished by him could be relied on. As stated earlier, the findings of the AAC were affirmed in appeal by the Tribunal. The findings of the AAC, which are noted in para. 8 at p. 9 of the Supplementary Paper Book, are as follows:
“The appellant has challenged the presumptions of the ITO and has attacked his lack of knowledge of race betting rules and procedure. He has stated that the winnings were proved by the book-maker's books of account and should, therefore, be accepted. The finding of the ITO that some persons betting on the same horses on which the appellant had won had lost was very damaging against the appellant's case and so the case was remanded to the ITO for re-examination of the books of account and for furnishing complete particulars regarding the persons who had lost their bettings on the same horses on the same dates while the appellant had won on them. He was also directed to report why it could not be verified that it was the appellant who had made the bettings. After the case was remanded to the ITO, a strange thing happened. The account books which were directed to be re-examined were stolen from the residence of Shri K.N Chakraborty, the book-maker, on the 1st November, 1965. Shri Chakraborty filed an affidavit to this effect before the ITO and hence no further enquiries could be made with regard to the books of account which had been found to be defective by the ITO during the assessment proceedings. I myself tried to make some personal enquiries in this matter by calling Shri K.N Chakraborty u/s. 131. But the summons came back with the post remark ‘Left’. It is understood that Shri K.N Chakraborty is not traceable at the moment. In the course of my personal enquiries I also came to know that certain gross irregularities had been detected in the books of account of Shri K.N Chakraborty for the year 1968-69. On the basis of enquiries a prima facie case of bogus betting and bogus payment of prize money was discovered against the bookmaker, Shri K.N Chakraborty. It was found that Shri Chakraborty was normally accepting bets of Rs. 40 to Rs. 100 but in two cases he had accepted bets of Rs. 1,000 each. Subsequently, the licence of Shri Chakraborty was cancelled by the RCTC, whereafter Shri Chakraborty's whereabouts are not known. I have already observed that the ITO found a serious defect in the account books of Shri Chakraborty, namely, that some person had lost on the same horses on which the appellant had won. In the grounds of appeal submitted in writing, the appellant had not challenged this particular finding of the ITO. As an appellate authority I could have given a finding in favour of the appellant only if this particular remark of the ITO was found to be wrong. Because of the circumstances that Shri Chakraborty's books were stolen right at the time when they were to be re-examined in connection with this case, there is no material with the appellant to contradict the findings of the ITO. In this case, the dates of certain occurrences are very significant. The books of account of Shri K.N Chakraborty were examined on 20th February, 1964. The ITO's order was passed on 23-5-66. In the interregnum between these two dates the account books of Shri Chakraborty were stolen on 21st November, 1965, rendering any further enquiries impossible. Although the finding of the RCTC against Shri Chakraborty in the year 1968-69 and their cancellation of his licence are not relevant for the assessment year under consideration, these are circumstances which throw some light on the shadiness of the whole affair. The whole sequence of events starting from the examination of Shri Chakraborty's books by; the ITO to the theft of his books has a touch of mystery about it. Another relevant circumstance is that during these three years not only the appellant but another director of M/s. Majula (P.) Ltd., namely, Shri K.P Belani, also made considerable race winnings, Rs. 1,45,155 being the race money for the year 1961-62. When seen in the context of the ITO's findings against the books of account of Shri K.N Chakraborty and the subsequent theft thereof, the constant winnings by the appellant and his co-director of M/s. Majula (P.) Ltd. do appear to be bogus. In my opinion, the ITO's finding that some persons had lost on the same horses on which the appellant had won was correct. Being unnerved by the finding of the ITO on this point the book-maker, Shri Chakraborty, engineered the story of theft of his books of account to ward off any further enquiry for verification of the ITO's findings from his books of account. The subsequent cancellation of his licence by RCTC also shows that Shri’ Chakraborty was engaged in shady transactions. The primary evidence of the genuineness of the race winnings of the appellant was the account books of Shri Chakraborty. They were found defective. They have now been lost probably for ever. The appellant has no other material to establish the genuineness of his race winnings. The fact that the horses mentioned in Shri Chakraborty's books tally with those entered in the records of RCTC has no relevance in this connection. Since the credit is in the appellant's books, u/s. 68, it was his responsibility to prove its genuineness to the hilt. This he has failed to do. In such circumstances, the ITO was within his rights to treat it as his concealed income. It is also immaterial that the payment of race money was by cheques. I wanted to examine the genuineness of the deposits in the bank a/c. of Shri K.N Chakraborty out of which the amounts were paid to the appellant. But I am informed by the learned counsel for the appellant that the bank a/cs. were stolen along with other books of a/c. Since Shri K.N Chakraborty himself is untraceable, it would serve no purpose to call for his bank a/cs. from banks. His presence was necessary to explain the deposits preceding the issue of cheques to the appellant. In view of those circumstances, I uphold the finding of the ITO that Shri Chakraborty had accommodated the appellant in respect of introduction of his concealed income to the extent of Rs. 92,575 by bogus entries in his books of account. The addition of Rs. 92,575 is therefore sustained.”
9. It may be mentioned in this connection that Shri Chakraborty who was produced as a witness at the initial stage could not be traced for examination while the case was sent back on remand by the AAC. Dr. Pal, of course, refers to the decision of the Supreme Court in Lalchand Bhagat Ambica Ram v. CIT, [1959] 37 ITR 288. He drew our attention to pp. 292 and 293 and he argued that the circumstances relied on by the Tribunal were matters of pure conjecture, suspicions and surmises. According to him, the books of account furnished by the book-keeper were sufficiently corroborated by the record of the Royal Calcutta Turf Club. It would appear that horses mentioned in the books of the book-maker, Shri Chakraborty, tallied with those entries in the records of the Royal Calcutta Turf Club, that the horses mentioned in Shri Chakraborty's books might have won on the relevant dates, but still, it was to be proved by the assessee that on the relevant dates he had really bet on those horses. This could only be proved by the relevant books of account mentioned by Shri Chakraborty at the initial stage. Some discrepancies in the books of account were found by the ITO but thereafter at the time of rehearing after remand these books were neither produced nor Shri Chakraborty appeared personally to testify as to the genuineness of the relevant entries in the books of account. As pointed out by the authorities below there was some contradictory statement as to the actual state of affairs regarding the non-availability of the books of account.
10. Mr. Suhas Sen, the learned advocate for the; revenue, supporting the findings of the Tribunal, makes a reference to the case of Lakshmiratan Cotton Mills Co. Ltd. v. CIT, [1969] 73 ITR 634 (SC). In this case, the Supreme Court was unable to hold that the findings that no services were rendered by the managing agents for earning the remuneration lay upon the company and if no reliable evidence was forthcoming, the Tribunal was competent to reach the conclusion it did. Adopting this reasoning it is contended by Mr. Suhas Sen that the conclusion reached by the Tribunal would not be the same to be based on surmises and conjectures. It was for the assessee to adduce evidence in support of its case that the earnings in question were received from the races, but in the absence of any trustworthy evidence, the Tribunal was perfectly justified to draw its conclusion.
11. It is argued by Mr. Sen that the order of the Tribunal should be read as a whole to determine whether every material fact, for and against the assessee, has been considered fairly and with due care: whether the evidence pro and con has been considered in reaching the final conclusion and whether the conclusion reached by the Tribunal has been coloured by irrelevant considerations or matters of prejudice and that, reading the order of the Tribunal it makes it sufficiently clear that in considering the possibilities properly arisen from the facts alleged or proved, the Tribunal did not indulge in conjecture, surmise or suspicion. Reliance is also placed on the decision of the Supreme Court in the case of Homi Jehangir Gheesta v. Commissioner Of Income Tax, Bombay, [1961] 41 ITR 135.
12. Thus, on the evidence and facts and circumstances, we are in agreement with Mr. Sen that the earnings on the races on the dates claimed by the assessee could have been verified from the betting register of Shri K.N Charkraborty, but that was not available for verification. It may be mentioned that at the initial stage some discrepancies were found in the books of account and as such the ITO had considered those entries as bogus. According to Mr. Sen, because of this nature of the entries, the assessee thought it wise to keep the accounts away and with that end in view the story of loss or theft of books of account was introduced. It is argued by Dr. Pal that there was nothing on record to justify the findings of the ITO that some persons had lost on the same horses on which the assessee was shown to have won. But such contention is not, however, corroborated by the record of the Royal Calcutta Turf Club. Be that as it may, we are fully in agreement with Mr. Sen that the assessee had miserably failed to establish that the earnings by races were made on those particular dates as claimed by the assessee. As mentioned earlier, this he could have proved only by the relevant papers and books of the bookmaker Shri Chakraborty. All the authorities below not only discarded that evidence but could not place any reliance whatsoever on those books of account. In view of the foregoing findings we are of opinion that the Tribunal was justified in confirming the order passed by the AAC. Question No. (i) is answered in the affirmative and in favour of the revenue and question No. (iii) is answered in the negative and also in favour of the revenue. Question No. (iii) is not pressed by the applicant, There will, however, be no order as to costs.
Sabyasachi Mukharji, J.:— I agree.