B.R Tuli, J.:— This judgment will dispose of Income Tax Reference No. 31 of 1969 Basant Lal Om Parkash v. Commissioner of Income Tax and Income Tax Case No. 6 of 1969, Commissioner of Income Tax v. Basant Lal Om Parkash, as they relate to the same matter.
2. The assessee, a registered firm by the name and style of Basant Lal Om Parkash, carries on business in arhat and foodgrains at Hansi. During the previous year relating to the assessment year 1959–1960, the Income Tax Officer found a sum of Rs. 20,000/- as deposit in the name of Rameshwar Dass in its books of account. He was not satisfied about the genuineness of this deposit and called upon the assessee to produce necessary evidence in support of that entry. The assessee pleaded that this amount was deposited by one Rameshwar Dass who was a Cashier of the Co-operative Society, Puthi Mangal Khan Rameshwar Dass was examined by the Income Tax Officer at the instance of the assessee and he gave the following statement:—
“That I am the treasurer of Co-operative Society of Puthi Mangal Khan. This Society keeps regular accounts. I have brought the cash book of this Society. On 11th July, 1968, I took Rs. 29,850/- from the Central Co-operative Bank, Hissar, in the account of this Society and I credited this amount in the cash took. I kept Rs. 20,000/- out of it with Basant Lal Om Parkash, Hansi, for safe custody, but I did not make any entry of it in the cash bock of the Society. I took back place this amount by and by within about one and a half months. But, I did not make any entry in the cash book of the Society. The whole of the money was taken back within one or 1¼ months. The details are not remembered as to on what dates how much money was taken, I had deposited this amount with this firm because my village is about seven miles from Hansi and I could not keep such a huge amount with me as in the village I had no cash box”
3. The Income Tax Officer was not satisfied with this explanation by the assessee and Rameshwar Dass and, therefore, added Rs. 20,000/- to the income of the assessee as income from undisclosed sources and made the assessment order accordingly. The assessee filed an appeal against that order which was dismissed by the Appellate Assistant Commissioner of Income Tax on August 3, 1960. The assessee filed an appeal before the Income Tax Appellate Tribunal which was dismissed on July 19, 1963. The assessee then filed an application under section 66(1) of the Indian Income Tax Act, 1922 (hereinafter called the Act), for referring certain questions of law to this Court for opinion. That application was rejected. The assesseee then filed an application (Income Tax case No. 10 of 1964 J under section 256(2) of the Act and this Court directed the Income Tax Appellate Tribunal to draw up the statement of the case and refer the following question for opinion:—
“Whether under the facts and circumstances of the case there was any material to hold that the cash credit of Rs. 20,000/- in the account of Rameshwar Dass was income of the assessee from undisclosed sources.”
4. The only point argued before the Appellate Tribunal was that the amount of Rs. 20,000/- had been unjustifiably included in the income of the assessee. The Appellate Tribunal considered in detail the explanation furnished by the assessee supported by the statement of Rameshwar Dass but rejected the same. It was found that the amount of Rs. 29,850/- was taken by Rameshwar Dass from the bank in order to disburse the same by way of loans amongst the agriculturists and the loans in entirety were disbursed within a week of the withdrawal of the amount whereas, according to the assessee, Rameshwar Dass had withdrawn Rs. 5,000/- on July 16, 1958, and another Rs. 7,000/- before the end of July while the remaining amount was withdrawn in August, 1958. The entries in the account books of the Co-operative Society were in the hand of Rameshwar Dass and the Appellate Tribunal naturally believed those entries in preference to the entries in the account books of the assessee-firm. It was pleaded before the Appellate Tribunal by the assessee that Rameshwar Dass was a man of means because he purchased land worth Rs. 15,000/- during the year and it could not be believed that he did not possess enough money of his own to make the advance to the assessee. The learned counsel for the assessee has stated that Rameshwar Dass purchased land worth Rs. 5,000/- on September 17, 1957, about ten months before the deposit and another land for Rs. 10,000/- on September 16, 1959, that is, after about thirteen months of the entire withdrawal of Rs. 20,000/- from the assessee-firm. Evidently, this purchase of land before and after the deposit has no connection with the deposit. After considering all the material on the record, the Tribunal came to the conclusion that the amount of Rs. 20,000/- was not deposited by Rameshwar Dass but had been brought into the books by the partners of the firm themselves and it was rightly considered as the income of the firm. This is a finding of fact based on the meterial on the record and the legitimate inferences which can be drawn from the facts found. It cannot be said that there was no material on the record to hold that the cash credit of Rs. 20,000/- in the account of Rameshwar Dass was the income of the assessee from undisclosed sources. The learned counsel for the assessee his relied on a Division Bench judgment of the Assam High Court in Nabadwin Chandra Roy v. Commissioner of Income Tax, Assam . 44 I.T.R 591. in which one of the points for determination was whether she sum of Rs. 10,000/- in the name of Nisi Kanta Saha was his amount or the amount of the assessee. The Income Tax Officer rejected the explanation of the assessee as to the source of the cash credit and added the amount to his total income from some undisclosed source. The Appellate Assistant Commissioner as well as the Income Tax Appellate Tribunal concurred in the view that it represented the assessee's income from some hidden source and the money actually did not belong to Nisi Kanta Saha as was alleged. The learned Judges referred to a decision of the Patna High Court in S.N Ganguly v. Commissioner of Income Tax . 1953 24 I.T.R 16., wherein it was held that—
“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 authorities, but is upon the assessee to show that the item of receipt was not of an income nature. But, the position is different in regard to a sum which is shown in the assessee's book in the name of a third party. In such a case the onus of proof is not upon the assessee to show the source of nature of the cash credit, but the onus shifts to the department to show by at least some material that the amount standing in the name of the third party does not belong to that individual but it belongs to the assessee.”
5. The learned Judges of the Assam High Court accepted this principle and applied it to the facts of the case before them and held that—
“the department had produced no material whatsoever counteracting the version given by the assessee. The assessee had further produced some materials in support of his statement that the money belonged to his son-in-law. There is no material by which the version is directly or indirectly negatived except that the department did not believe the materials produced by the assessee. This would only mean that the onus of proof was placed on the assessee and the department did not share it. There is no material to show that Nisi Kanta Saha, the alleged creditor, had not at the material time or even earlier carried on any business, nor had collected any amount. His letter also bore some testimony to the version given by the assessee. But, the department has not come forward with any material to show that the version is wrong. We must, therefore, hold that the department was wrong in assessing the assessee for a hidden income of Rs. 11,000/- because of the cash credit entry.”
6. There is no quarrel with the proposition of law enunciated by the learned Judges but those observations do not apply to the facts of the present case. In the instant case, there was material on the record in the form of the account books of the Co-operative Society of which Rameshwar Dass was the Cashier, which showed that kameshwar Dass could not have deposited Rs. 20,000/- with the assessee firm as was alleged. He had withdrawn the sum of Rs. 29,850/- from the bank on July ???, ??? and had disbursed the same by way of loans amongst the agriculturists within a week thereafter. The entries with regard to disbursement as loans made in the account books of the Co-operative Society by Rameshwar Dass in his own belied the verson of the assessee that he took the money on different dates between July 16, 1958, and August 29, 1958. In that cast, he would not have been able to giant loans to the agriculturists from July 12, 1958, to July 19, 1958 Kameshwar Dass was drawing a salary of Rs. 100/- as Cashier from the Co-operative Society and he would certainly not have taken any risk of giving the money to the assessee firn with which he had no previous dealings. I had also not understood what benefit did the assessee-firm derive by this deposit, alleged to have been made by Rameshwar Dass and what was the reason for entering into this transaction. The only inference available is that the amount shown as a deposit in the name of Rameshwar Dass on July 12, 1958, was the money of the partners of the assessee firm itself. The learned counsel for the assessee than relied on a judgment of a Division Bench of the Allahabad High Court in Ram Kishan Dass Munnu Lal v. Commissioner of income Tax, U.P and V.P . 1961 41 I.T.R 452., which is also distinguishable on facts as the Assam case. We are, therefore, of the opinion that the order passed by the income Tax Appellate Tribunal was justified on the material on the record. We accordingly answer the question referred to us in the affirmative, that is, in favour of the Revenue and against the assessee. In the circumstances, we make no order as to costs.
7. The Income Tax Officer also took proceedings for the levy of penalty against the assessee-firm and a penalty of Rs. 4,000/- was levied by the Income Tax Officer under section 28(1)(c) of the Act for the concealment of the income up to Rs. 20,000/-. The assessee filed an appeal against that order which was dismissed by the Appellate Assistant Commissioner who held that this was not a case of mere rejection of an explanation as improbable but one of making false entries in the books and that it was established that the assessee committed an offence within the meaning of section 28(1)(c) of the Act. The assessee filed a further appeal before the Income Tax Appellate Tribunal which was accepted and the order imposing penalty was cancelled. In the course of its order, the Tribunal observed:—
“It is settled law that when cash is found in the accounts of a stranger in the assessee's books, the onus is upon the department to establish that it is not a genuine deposit. We are unable of find any material on which it could be held that the department had discharged the onus in the instant case.”
8. The contention on behalf of the Revenue before the Tribunal was that the department had proved by sufficient material that the deposit of Rs. 20,000/- shown in the name of Rameshwar Dass was not genuine and that the Tribunal itself had held in its order on the assessee's appeal against the assessment that—
“the Revenue has succeeded in proving that the deposit in the name of Rameshwar Dass is not a genuine one. In the circumstances, we uphold the addition of Rs. 20,000/- on the ground that it represented assessee's income from undisclosed sources of the previous year.”
9. This contention of the department was not accepted by the Tribunal and an application under section 66(1) of the Act was made for referring the following question of lay to this Court for opinion:—
“Whether on the facts and in the circumstances of the case, the Tribunal was right in cancelling the order levying penalty under section 28(1)(c) of the Indian Income Tax Act, 1922?”
10. The Income Tax Appellate, Tribunal, by its order dated April, 26, 1969, rejected that application with the following observation:—
“Having regard to these principles and the fact that there was no material placed by the department on record, justifying the inference that the cash credit in question was the income of the assessee, we held that the imposition of penalty on the assessee was not called for. The levy of a penalty is not a matter of guess work. As the order in question was passed keeping in view the absence of evidence to connect the cash credit in question with any undisclosed income of the assessee, it is clear that no question of law arises out of our order and we decline to make a reference on any question to the High Court”
11. This application has been made under section 66(2) of the Act for directing the Tribunal to refer the question of law, set out above, to this Court for opinion. Under section 28 of the Act, there is no statutory obligation on the Income Tax authorities to impose a penanlty in every case. A case for the imposition of penalty has to be found on the material on the record and it is essentially a question of fact whether in a certain case penalty is called for or not. The Tribunal gave valid reasons in support of its order cancelling the order of penalty imposed by the Income Tax Officer and upheld by the Appellate Assistant Commissioner. We agree with the Income Tax Appellate Tribunal that no question of law arises. We accordingly dismiss this petition with no order as to costs.
12. Petition dismissed.