1. The assessee in this case is Rai Bahadur S.N Ganguli who owns two cinema houses in the town of Ranchi. He also is a partner in two firms, and holds a major part of shares in the United Motor Works, Ltd. He has invested money in several concerns, and owns Government securities and several house properties. For the assessment year 1947-1948, Rai Bahadur S.N Ganguli returned an income of Rs. 24,815/-. The Income-Tax Officer did not reject the account books produced by the assessee, but he added a sum Rs. 15,000/- which was the amount of high denomination notes encased by the assessee on 19-1-1946, through the Ranchi Branch of the Bengal Central Bank, Ltd. The amount encashed was not mentioned in the books of account produced by the assessee. The Income-Tax Officer called upon the assessee to explain the source of the high denomination notes. Not being satisfied with the explanation, the Income-Tax Officer treated the amount of Rs. 15,000/- as secreted profit of the assessee. The assessee appealed to the Appellate Commissioner; but the appeal was dismissed on 24-1-1949. A further appeal was taken by the assessee to the Income-Tax Appellate Tribunal. At this stage, the assessee's wife, Hemprabha Ganguli, filed an affidavit stating that a sum of Rs. 11,000 was encashed to her name on 19-1-1946, that this amount was her own property, and that she had an independent source of income apart from that of the assessee. This explanation was rejected by the Income-Tax Appellate Tribunal, and the appeal was dismissed on the finding that the entire amount of Rs. 15,000/, was secreted income in the hands of the assessee.
2. The Income-Tax Appellate Tribunal has formulated the following question of law for the opinion of the High Court:
“Whether there is any material to justify the assessment of Rs. 15,000/- representing the value of High Denomination Notes or any part of it as the income of the Assessee?”
3. In the approach to this question, it is necessary to bear in mind that the amount of Rs. 15,000/, is made up of two amounts of Rs. 11,000/- and Rs. 4,000/-, Rs. 11,000 being the value of the high denomination notes encashed in the name of the assessee's wife & Rs. 4,000 being the value of the high denomination notes encashed in the name of the assessee. As regards the amount of Rs. 4,000/- which was the value of the high denomination notes encashed, in the name of the assessee, we are of opinion that there was material to justily the action of the In-come-tax authorities. In the first place, it has been found that the amount encashed finds no place in the books of account produced by the assessee. It has been rightly pointed out by Mr. S.N Dutt, who ably argued the case on behalf of the assessee, that the authorities have not disbelieved the books account which the assessee produced. That circumstance, however, has no bearing on the question whether the amount of Rs. 4,000/-, which the assessee admittedly encashed on 19-1-1943, was secreted income. The principle to be applied in a case of this description is well settled. When the assessee fails to prove positively the source and nature of a certain amount which he received in the accounting year, the revenue authorities are entitled to draw an inference that the receipts are of an income nature, unless the assessee proves the source and nature of the particular receipt. The burden of proof in such a case is not upon the revenue autnorities, but the burden of proof is upon the assessee to show that the item of the receipt was not of an income nature. This principle is supported by two authorities — ‘Jadunandan Sahu v. Commissioner of Income-Tax B & O’, AIR 1949 Pat 215 (A) and — ‘G.M Madappa v. Commr. of Income-tax, Madras’, A.I.R 1949 Mad 245 (B). Applying this principle to the amount of Rs. 4,000/-, in the present case it is clear enough that the assessee has not furnished any explanation as to the source and nature of this sum of Rs. 4,000/-. The Income-tax Appellate Tribunal has observed that it is not the assessee's case that these high denomination notes came out of the balance in the account boots is on 12-1-1946, on which date the Ordinance was promulgated; it was, on the contrary, the assessee's case that the money came out of past savings, etc. whatever it may be. But the Income-tax authorities observed that this explanation was not acceptable. When the matter is judged in the light of the principle that the burden was on the assessee to prove the source and the nature of the receipt, the conclusion must follow that there was material before the revenue authorities to justify the assessment on Rs. 4,000/- which was the amount of the high denomination notes encashed in the assessee's name. As regards this amount of Rs. 4,000/-, therefore, the question formulated by the Income-tax Tribunal must be answered against the assessee and in favour of the Income-tax Department.
4. But the position is different with respect to the amount of Rs. 11,000/- which was the amount of high denomination notes encashed in the name of the assesee's wife, Hemprabha Ganguli. As regards this amount, the Income-tax Appellate Tribunal has observed that an affidavit has been filed by the assessee's wife, Hemprabha Ganguli, claiming that the notes encashed by her were her own property, and that her independent source of income was a house in Ranchi, and further that she had received from time to time cash gifts from her relations on various occasions. This explanation of Hemprabha Ganguli was not accepted by the Income-tax authorities on the ground that no evidence was adduced by the assessee to support the truth of this explanation. The Income-Tax Appellate Tribunal was of opinion that the amount of Rs. 11,000/- was secreted profit in the hands of the assessee, and was liable to be taxed. The finding of the Income-tax Appellate Tribunal on this point is, in our opinion, vitiated by an error of law. It is true that the onus of proof in the case of an item of cash credit in the accounts of the assessee is upon the assessee who must adduce evidence to show the source and nature of the amount of cash credit received during the accounting year. Unless the assessee furnishes satisfactory explanation, the Income-tax authorities are, entitled to draw an inference that the receipts are of an income nature.
5. But, in the present case, this principle can be) applied only if there is material to suggest that the amount of Rs. 11,000,/-, which was encashed in the name of Hemprabha Ganguli, really belonged to the assessee. On this point, the onus is certainly not upon the assessee to show that the apparent state of things is not the real state of things. To put it differently, there is no presumption in law that the amount standing in the name of the wife belongs to the husband. Unless there are some materials before the Income-tax Department to suggest that the amount of Rs. 11,000/- really belonged to the assessee, there would be no justification on the part of the Income-tax authorities to tax this amount. The principle to be applied is a different principle, namely, that, in the absence of evidence to the contrary, the money standing in the name of the wife must be presumed to belong to her, and an assessee cannot be taxed in respect of the amount standing in the name of the wife. The onus of proof in such a case will be not on the assessee but on the Income-tax Department to show by at least some material that the amount standing in the name of the wife does not belong to then wife but belongs to the assessee. In this connection, the Appellate Tribunal has said that the close relationship of husband and wife would be a circumstance to indicate that the amount of Rs. 11,000/- really belonged to the assessee. In our opinion, this cannot be held to be any material at all. There must be some material, apart from the existence of the close relationship of husband and wife, to suggest that the amount of Rs. 11,000/- did not really belong to the wife.
6. There was an affidavit in this case filed on behalf of the wife that she had an independent source of income which was a house property in Ranchi alleged to fetch a rent of Rs. 70/- per month. The wife had also alleged in the affidavit that she had received presents in cash from relations which she, had converted into high denomination notes for the sake of convenience. There is nothing to show that the Income-tax Appellate Tribunal rejected this explanation filed on behalf of the assessee. In any event, the onus of adducing evidence on the question was not upon the assessee, and no adverse inference ought to have been drawn by the Income-tax Appellate Tribunal against the assessee for this reason. In this connection, reference may be made to the decision of this High Court in — ‘Ram Kinkar Banerji v. Commissioner of Income-tax, B & O’, AIR 1936 Pat 237 (C). On the particular facts presented in this case, we are of opinion that there was no material before the Income-tax authorities to justify the assessment on Rs. 11,000/- which represented the value of high denomination notes encashed in the name of the assessee's wife, Hemprabha Ganguli.
7. In the result, we hold that there was no material before the Income-tax authorities to justify the assessment on Rs. 11,000/- representing the value of the high denomination notes encashed in the name of the assessee's wife, Hemprabha Ganguli. We also hold that there was material before the Income-tax authorities to justify the assessment on Rs. 4,000 representing the value of the high denomination notes encashed in the name of the assessee, Rai Bahadur S.N Ganguli.
8. We, accordingly, answer the question formulated by the Tribunal in the manner indicated above.
9. There will not be any order as to costs of hearing of this reference.
B/D.H.Z
10. Answer accordingly.
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