M.A.A Khan, J.M:— This appeal by an assessee is directed against the order dt. 22nd May, 1986 passed by the CIT (A)-II, Ahmedabad in respect of asst. yr. 1981–82.

2. The assessee is a registered partnership firm manufacturing textile machineries spare-part at Ahmedabad. During the accounting period under consideration, which ended with S.Y 2036, the assessee, though effected sales amounting to Rs. 26,24,127 bringing a profit of Rs. 3,44,769 @ 13.4%, yet finally declared a loss of Rs. 1,31,264 in its return of income. Finalising the assessment under s. 143(3) read with s. 144-B of the IT Act, 1961 (the Act) the ITO assessed the assessee at a positive income of Rs. 1,01,620. Dissatisfied with the assessment order, as passed by the ITO on 29th June, 1984, the assessee approached the CIT(A) in appeal, who, though gave some reliefs to the assessee, yet left it aggrieved on the points to be discussed hereinafter.

3.1 Management Service Charges Rs. 1,30,606

The assessee had claimed management service charges amounting to Rs. 1,30,606. In support of this claim the case of the assessee was that upto the month of April, 1975 the assessee was carrying on its business by employing its own office staff for management and secretariat services like accountancy, administration and sales-purchases services. Looking to the problems arising in those areas the assessee thought it fit and proper to entrust the said duties to an independent and separate concern. The assessee, therefore entered into an agreement with Hira Lal Poonjabhai Children Trust on 24th April, 1975 for the purpose and the said Trust agreed to render necessary services to the assessee in the field of management and secretariat with effect from 1st May, 1975 against a consideration of 5 % commission on yearly sales turnover of the assessee. In pursuance to this agreement the said Trust began to render management services to the assessee through its proprietary concern known as Panchal Management Services. According to the assessee, right from asst. yr. 1976–77 and upto asst. yr. 1980–81 the department had continuously allowed service charges in the assessments of the assessee and there were no reasons for recording departure from that practice in the year under consideration.

3.2 The ITO and the IAC appear to have made a number of queries from the assessee regard ing the constitution of the said Trust, its proprietorship concern rendering services, assessee's relationship with the beneficiaries of the Trust and the nature and volume of the services stated to have been rendered to the assessee. On the facts and material supplied by the assessee, the ITO concluded that the Hira Bhai Poonjabhai Children Trust was a family trust created for the benefit of the family members and that two of the partners of the assessee firm were also the beneficiaries of the said trust. In the opinion of the ITO, therefore, the payment of commis sion at 5 % on its sales by the assessee to the said Trust was nothing but diversion of assessee's income to the said Trust with a view to avoid payment of taxes. He was further of the view that the assessee had further failed to prove as to what services were rendered to it by the Panchal Management Services and how such services helped the assessee in procuring and/or expanding, its business. With regard to the treatment given by the department to such claims of the assessee in earlier years, the ITO observed that the principle of res judicata was not applicable to proceedings under the Act. On these grounds, therefore, he disallowed these expenses. in appeal, the learned CIT(A) approving the above approach of the ITO further observed that there was no evidence either of the necessity of obtaining the management services, and the actual rendering of the services or of the justifiability of the payment claimed by the assessee. He thus confirmed the disallowance.

3.3 Mr. V.R Shah, C.A the learned representative of the assessee-firm, has mainly urged that (i) in the past the Department, after conducting necessary enquiries into all material aspects of assessee's claim, had always felt satisfied that M/s Panchal Management Services had rendered required services to the assessee and since there were no distinguishing facts this year, the de partment should not have departed from its past practice, and (ii) that though it was very difficult if not impossible to pin-point the actual services rendered by M/s Panchal Management Services to the assessee yet the assessee had pointed out from the accounts maintained by it that it was incurring no separate expenditure on items like salaries to employees and motor cars as in those fields the said Management Service had rendered services to the assessee. Mr. Shah thus submitted that the claim of the assessee should have been accepted this year too and in support of his arguments relied upon the following cases:

1. CIT v. Chandulal Keshavlal& Co., (1960) 38 ITR 601 (SC).

2. CIT v. Malayalam Plantations Ltd., (1964) 53 ITR 146 (SC)

3. CIT v. Dhanrajgiriji Raja Narasinghirji, (1973) 91 ITR 544 (SC)

4. Sassoon J. David & Co. P. Ltd. v. CIT, (1979) 10 CTR (SC) 383 : (1979) 118 ITR 261 (SC)

3.4 On the other hand, supporting the order under appeal, Mr. A.K Hajela, the learned departmental representative submitted that in the instant case expenses were claimed under s. 37 of the Act and, therefore, in view of the principle laid down in the case of Amrit Lal & Co: (P) Ltd. v. CIT, (1977) 108 ITR 719 (Bom), the ITO had a right to call for the details of particulars of the expenditure wholly and exclusively laid out or expended in the course of and for the purposes of the business of the assessee. Mr. Hajela further submitted that irrespective of the fact whether the Trust and/or its proprietary concern M/s Panchal Management Services was/were being assessed to tax or not, the ITO, in course of assessment on the assessee had to satisfy himself about the actual rendering of services to the assessee by another concern and payment of charges fpr services rendered by the former to the later. The learned departmental representative invited our attention to the assessment order and pointed out that this case was presented as one of loss whereas it was found to be of positive income and, therefore, the possibility of adoption of tax-avoidance device cannot be ruled out altogether in this case. Mr. Hajela summed up by reiterating the well known principle that each assessment year being quite separate and independent of the other the doctrine of res judicata has no place of much significance in tax proceedings.

3.5 After having heard the learned representatives for the parties at sufficient length and on study of the material brought on our record we find force in Mr. Shah's arguments.

3.6 Before we proceed to examine the merits of the claim of the assessee on the point we would like to observe that the principles of law enunciated in the cases relied upon by Mr. Shah & Mr. Hajela in support of their respective arguments are subject to no dispute. It is the fundamental principle underlying the computation of business income under the Act that all such expenditure as is laid out or expended wholly and exclusively by an assessee for the purpose of his business or profession is to be allowed to him in computing his income chargeable under the head ‘Profit and gains of business or profession’. In fact allowance of such expenses is necessary for the very progress of business or profession. Therefore, while appreciating the claim of an assessee for allowance of expenditure under s. 37(1) it is all the more necessary that the necessity and sufficiency of such expenditure be judged from the angle of a prudent business man. At the same time the nature of the expenditure claimed and the treatment given to the same by the department in the past should also be taken into account. In doing that, in our opinion, no violence would be done to the doctrine of res judicata, which is, no doubt, not applicable to the proceedings under the Act.

3.7 The doctrine of res judicata, as laid down in s. 11 of the Code of Civil Procedure, 1908 is not applicable as such to the proceedings under the Act. The reason for its non-applicability is that each assessment is quite independent of and separate from the other. But when a point or matter had been considered and adjudicated upon in a year and the same point or matter, with no change of facts and circumstances and also in law, arises for consideration in a subsequent year, following the decision recorded on or treatment given to that point or matter at the earlier occasion, would not involve adherence to the doctrine of res judicata in tax proceedings. It would simply be a step in the direction of bringing uniformity in the view of the Tribunal on the same point of issue and thus stabilising the position of the parties vis-a-vis such point or issue. And, where the position of the parties on a matter; point or issue has remained settled for considerable length of time, such position should, normally, be not disturbed without compelling reasons evidenced by material change in facts and/or in law.

3.8 Coming to the merits of the point under consideration, we find that it is an undisputed fact that right from asst yr. 1976–77 and upto asst. yr. 1980–81 the department allowed assessee's claim for payment of charges for services rendered to assessee by M/s Panchal Management Services'. It obviously means that the department approved the constitution of the Hira Lal Poonjabhai Children Trust and of the assessee firm, having full knowledge of their inter se relationship. For all these years the department found no fault with the agreement dt. 24th April, 1975 entered into between the assessee-firm and the said Trust. It follows, therefore, that it was approved by the department that the said agreement was, in practice and in reality, acted upon. In fact we find no denial to assessee's contention that its claim for such charges amounting to Rs. 46,232 in asst. yr. 1976–77 was allowed by department after thoroughly enquiring into the material and relevant aspects of the claim. In our opinion the learned CIT(A), under such circumstances, should have not lightly termed the arrangement made by the assessee as a device adopted for tax evasion, in the absence of any material changes in facts and/or in law. It may be added that the assessment orders dated 5th Feb., 1979 and 23rd Sept., 1983 for asst. yrs. 1976–77 and 1981–82 respectively, the statements of income for asst. yrs. 1976–77 and 1981–82, the orders of the AAC and the Tribunal for asst. yr. 1976–77, all relating to Trust's. assessment go a long way to support assessee's contention that at no point of time did the department doubt or dispute Trust having rendered services to the assessee-firm.

3.9 When the merits of the claim of the assessee in this year is examined in the light of above discussion it comes out clearly that the assessee did not claim any expenditure on account of salaries and motor cars in its accounts. The case of the assessee is that services in those fields were rendered to it by M/s Panchal Management Service. The claim was thus sufficiently sup ported with good material on record and the past practice adopted by the parties. We thus find no justification in the action of the authorities below, in the absence of any change in facts and in law, of disallowing the expenses in question this year. This approach of ours is also fortified by Tribunal's Ahmedabad ‘B’ Bench decision in the case of ITO v. Laxmi Talkies, ITA No. 1770.Ahd/81 asst. yr. 1981–82.

3.10 To sum up we hold that M/s Panchal Management Services had rendered services worth Rs. 1,30,606 to the assessee and the assessee had made payment of that much of amount to the said Management Service. We accordingly vacate the CIT(A)'s order in this behalf.

4. Sundry Expenses: Rs. 1,000: Though Mr. Shah tried to agitate this point before us yet from the order of the learned CIT(A) we find that the issue relating to this point was not pressed before CIT(A). We are not prepared to accept that the issue was pressed by the assessee but the learned CIT(A) stated a wrong fact in his order. The ground is dismissed.

5.1 Travelling Expenses: Out of the total travelling expenses amounting to Rs. 38,801 the ITO disallowed a sum of Rs. 2,781 and in appeal the CIT(A) confirmed the disallowance on the ground that the claim of daily allowance was in excess to that allowable under r. 6-D of the IT Rules, 1962 (the Rules) framed under the Act.

5.2 The contention of Mr. Shah is that the words “any person” used in the language of r. 6-D should not include the partners of the firm and since the tours were under taken by the partners no disallowance of any amount should have been made. Reference in this behalf was made” to the Delhi Bench ‘B’ decision in the case of CIT v. Desk Rakshak Aushadhalaya (P.) Ltd., (1984) 7 ITD 531 (Del).

5.3 In our opinion the language of r. 6-D is quite clear and unambiguous. After using the expression “an employee” the words “or any other person” have been used in the language of the Rule to cover the tours undertaken for the business purposes by all such persons who are not employees of the assessee. If such meaning is not given to the expression “or any other person” used in the language of r. 6-D the object of the said rule would be frustrated. In our opinion, therefore, the expression “any other person” is wide enough in its scope to bring ‘partners of a firm’ as well within its fold. Delhi Bench B, in the case referred to above, seems to have taken a similar view in respect to the tours conducted by the Directors of a company. The line of reasoning in that case supports our above view also.

5.4 In the alternative it was urged by Mr. Shah that the expenses be calculated in accordance with the principles and methods laid down by Bombay Bench of the Tribunal in the case of S.V Ghatalia v. Second ITO, (1983) 37 CTR (Trib) (Bom) 68 : (1983) 4 ITD 583 (Bom). Mr. Hajela did not seriously oppose this alternate submission of Mr. Shah on the point. Bombay Bench ‘A’ has approved the following method of calculating/working out travelling expenses under r. 6-D:

“The context in which s. 37(3) appears and the general scheme of the Act points to the fact that this provision had been enacted to prevent excessive travelling expenses being debited to the business carried on by the assessee, thereby reducing the legitimate tax payable by the assessee. The words ‘any other person’ have been used in contradistinction to the word “employee” preceding them and hence any body who is not an employee, which will include the assessee as well, will come under ‘any other person’ The assessee's contention that he will not come under ‘any other person’ was, therefore, not sustainable. However, he was right in contending that while determining whether the amount admissible under r. 6D had, been exceeded or not, all the tours made by the person during the previous year should be, taken together and the prescribed limit should not be applied to individual tours.”

We fall in line with the Bombay Bench and direct the ITO to recalculate the disallowance, if any, out of travelling expenses, as per method laid down by the Bombay Bench in the case of S.V Ghatalia v. Second ITO (supra).

6.1 Cash Credits: On scrutiny of the Interest Account and the Balance Sheet, as maintained by the assessee for the year under consideration, the ITO found the following sums credited in the names of the persons noted against them:

S. No. Date of Deposit Amount of Deposit Name of Creditor or depositor Rs. 1. 1st Jan., 1980 30,000 Jashwant Lal K. Vaidya (Son) 2. 1st Jan., 1980 45,000 Prakash Chandra. P. Arya (son-in-law) 75,000

On being required to explain the above deposits the assessee explained that one Sri Krishna Lal Shankarbhai Vaidya alias. Kacharabhai Shankar Lal Nai of Village Veda, Taluka Vijaypur, presently residing at Ahmedabad, had deposited the above-mentioned two sums with the; assessee firm on one and the same day in the names of his son and son-in-law, as mentioned above. An affidavit dated 12th Dec., 1983 from the said Krishna Lal Vaidya, wherein the deponent had testified to have deposited the sums in question with the assessee-firm, was alsp filed. The ITO examined the said; Krishnalal Vaidya who stated that he had agreed to sell his 2 acres 21 gunthas of agricultural land at village Veda, Tal. Vijapur for Rs. 61,000 and on receipt of the part-consideration of Rs. 60,000 on 27th. Dec., 1979 and adding Rs. 15,000 from his past savings to that he could be able to deposit the two sums totalling Rs. 75,000 with the assesses. The explanation offered by the assessee did not satisfy the ITO. He, therefore, brought the two sums to tax as unexplained cash credits under s. 68 of the Act: On appeal, the learned CIT(A) found himself in full agreement with the ITO and confirmed bis order in that behalf.

6.2 Mr. Shah has urged with much industry that by producing the depositor before the ITO the assessee had discharged the burden on it under s. 68. Referring to the contents of the affidavit of Shri Krishnalal Vaidya, depositor, the agreement for sale, the extracts from the revenue record, the statement of Sri Krishnalal Vaidya, recorded by ITO, the return of income of Sri Krishnalal Vaidya for asst. yr. 1981–82 and the accounts of Prakash P. Arya and Jaswant Lal K. Vaidya in the books of the assessee; Mr. Shah submitted that all those pieces of documentary and oral evidence satisfactorily proved that the said Sri Krishnalal Vaidya had the capacity to get a sum of Rs. 75,000 deposited with the assessee-firm. In rebuttal to that, contended Mr. Shah, the ITO had brought no evidence on record so as to justify the addition of Rs. 75,009 to the total income of the assessee from undisclosed sources. In support of his arguments Mr. Shah placed reliance on the following cases:

1. ITO v. Badiani Enterprises, (1985) 21 TTJ (Ahd) 394 (TM) : (1985) 11 TTD 132 (Ahd) (TM).

2. CIT v. Daulat Ram Rawat Mull, (1973) 87 ITR 349 (SC)

3. Sarogi Credit Corporation v. CIT, (1976) 103 ITR 344 (Pat)

6.3 Contrary to the above, Mr. Hajela emphasised that by pointing out at the inherent infirmities, improbabilities and abnormalities in the explanation offered by the assessee and the evidence in support thereto the ITO had discharged the burden shifted to him under s. 68. The cash credits in question were not at all explained by any evidence which might appeal to the reasons of a prudent mind, urged Mr. Hajela, and, therefore, there were no good reasons to disturb the concurrent findings and conclusions of the authorities below on the point.

6.4 After having given our anxious thoughts to the arguments advanced on behalf of the parties and to the material on record we have been left in no doubt that the cash credits in question are certainly bogus and as such they have been rightly given a befitting treatment by he authorities below.

6.5 A study of the cases relied upon by Mr. Shah discloses that they lay down the general principles underlying s. 68. Such principles can hardly be subject matter of any dispute. It is the clear mandate of s. 68 of the Act that the initial burden of explaining the sum found credited in his books lies on the assessee. But once the assessee has offered an explanation, satisfactorily explaining the nature and source of the credit entry in dispute, the sum so credited cannot be charged to tax. Let us take note of the language of that section which runs as under:

“68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.”

It may be noted that the sum found credited in the books of the assessee may be charged to tax under the following two eventualities only, viz.:

(1) the assessee has offered no explanation about the nature and source of cash credits; or

(2) where the assessee has offered an explanation about the nature and source of the cash credits in dispute but such explanation has not been found, in the opinion of ITO, satis factory,

It is quite evident that in order to discharge his burden under s. 68 an assessee is required to offer an explanation about the (i) nature of the cash credit and (ii) the source of such credit. Once an assessee has done that his job is over. The onus of proof shifts to the ITO. Now it is for the ITO to show that the explanation offered by the assessee is not upto his satisfaction. It is the subjective satisfaction of the ITO about the nature and source of a cash credit which is required to be made under the section. It is the satisfaction of a man of ordinary prudence. If the explanation offered by an assessee about the nature and source of a cash credit probabilises the existence of the facts which must attend on the cash credit in dispute in due course of the nature of the things, the assessee may be said to have offered a satisfactory explanation. The ITO cannot insist upon for more. But at the same time an assessee cannot get himself rid of his burden under the section by offering any sort of explanation, which might suit him. In order to be ‘satisfactory’ and as such acceptable, an explanation under s. 68 should be ‘reasonable’ probabilising the happening of the things in the manner told by the assessee. It is) not each and every sort of explanation offered by an assessee about the nature and source of a cash credit, which is required to be accepted by the ITO under s. 68. It is only such explanation which appeals to human reasons, which refers to such happenings that are quite probable to take place in the normal course of the things and which a prudent mind would feel inclined to accept under the given circumstances, that would fulfill the requirement of the word “satisfactory” qualifying the required explanation of the assessee under s. 68. Let us examine if the explanation offered by the assessee in the instant case stands the test stated in the cases cited by Mr. Shah.

6.6 In the instant case the two sums, referred to above, were found credited in the names of two such persons who, according to the assessee itself, had not deposited the said sums with it. Neiher, either of the two creditors were produced before the ITO nor any confirmatory letter from them was ever brought on record. On the face of it, therefore, according to. the assessee itself, the two sums of cash credits finding place in its books represented benami transactions. We say so on the strength of our discussion to follow.

6.7 We do not intend here to lay down a proposition that a deposit under s. 68 is necessarily required to be made in the name of the owner of the sum deposited. A father may well act as the natural guardian of his minor children, a husband may act as an authorised agent for his wife, a third person may, under given circumstances, act as next friend or guardian for a lunatic or person of unsound mind, and an agent may, within the limits of the authority under his agency, act for and on behalf of his principal. In all such cases the actual doer of the act works for and on behalf of the other. He acts for the benefit of the person represented by him. The benefit of his act is to go to the person represented by him. But if the benefit of such an act, done in the name of other person, is sought to be derived by the doer of the act for himself this circumstance would widen the scope of satisfaction of the ITO required by s. 68. Under such circumstances the very nature of the cash credit as also the source thereof would fall for consideration of the ITO before recording his satisfaction.

6.8 Reverting to our observation that the cash credits in the instant case had the character of ‘Benami Transaction’ we may point out that it is the assessee's own case that though the two sums were credited in the names of the son and the son-in-law of Shri Krishnlal S. Vaidya yet for all practical purposes it was Sri Vaidya aforesaid who was the owner of the two sums and the benefits from the deposits was intended to go to him and did in fact it so go. The affidavit of Sri Vaidya and his statement recorded by the ITO and the effort of the assessee to show from the copy of return of income filed by Sri Vaidya for asst. yr. 1981–82 that he had declared interest income in his said return, sufficiently establish that the two sums represented benami transactions. Though for book purposes the creditors were S/Shri Jashwant Lal K. Vaidya and Prakashchandra P. Arya yet for the purposes of s. 68 Shri Krishna Lal S. Vaidya was the ‘depositor’ of the two sums. In these peculiar facts and circumstances of the case the study of the capacity of Sri K.S Vaidya to deposit considerably a huge amount with the assessee and of the necessity to make benami deposits in the names of his son and son-in-law is required to be made quite objectively.

6.9 First to consider the question of capacity of Shri K.S Vaidya to make a deposit of Rs. 75,000 we find that the said Sri Vaidya is, according to his version given by him in his affidavit and the statement recorded by the ITO, a man of ordinary means. Known by two aliases, sometimes by Krishna Kant S. Vaidya, as mentioned in his statement and sometimes by Nai. Kacharabhai Sankar Lal, as mentioned in the agreement for sale and the return of income filed by him, the said Sri Vaidya is a man of more than sixty years earning income from his practice as Vaidya of Ayurvedic medicines and from his 2 acres and 21 gunthas of agricultural land situate at village Veda, Tal. Vijapur. Explaining his capacity to invest an amount of Rs. 75,000 Sri Vaidya deposed in his affidavit that he had saved that much of amount from his income “from vaidya profession and agricultural land and its income.” No specific reference was made in the affidavit that any amount had come to him by way of part consideration of his agricultural land agreed to he sold by him.

6.10 With regard to his income from Vaidya profession he claimed to be earning about Rs. 7,000 a year, though he declared an income of Rs. 3,000 only from that source in his return for asst. yr. 1981–82. That itself belies his statement regarding his income from his profession as a vaidya. Be that as it may, according to him he was saving an amount of Rs. 3,000 or 4,000 yearly out of his agricultural income from 2 acres and 21 gunthas of land, which he himself did not cultivate. He further claimed that his family (at the time of recording his statement on 27th Mar., 1984) consisted of himself, his aged wife and a daughter, necessitating yearly expenses of Rs. 8,000 approximately. He stays in a rented house carrying monthly rent of Rs. 12 and carries on his professional pursuit in a rented shop of equal rent. If this statement of Sri Vaidya with regard to his income from his practice as a vaidya and his capacity to save from his said income, is taken at its face value, then it can be stated at the very outset that it inspires no confidence at all. Declaring an income of Rs. 3,000 in his return for 1980–81 (which too appears to have been filed for the first time in that year at a non-taxable income with a view to get interest income from the assessee brought on record of his assessment) and getting his agricultural land cultivated by others itself shows that having a yearly household expenses of Rs. 8,000 he could not have been in a position to save any amount from his said two sources, what to speak of saving of Rs. 15,000 as alleged by the assessee.

6.11 Now to consider the merits in Sri Vaidya's version that he had obtained Rs. 60,000 as part consideration of the agreement for sale of his two acres and 21 gunthas of agricultural land, we find this version too hopelessly untrue and false. As stated above, no reference to the receipt of Rs. 60,000 on account of any part conside ration of agreement for sale of agricultural land by Sri Vaidya was made in his affidavit. Such a version was advanced and developed in his statement recorded on 27th, Mar., 1984 and it was at that time that a copy of banakhat dt. 27th, Dec., 1979, was filed before the ITO. It is note-worthy that the original of the alleged document was not produced either before the ITO, or the CIT(A) or before us, though the ITO had doubted the genuineness and authenticity of the document itself.

6.12 Be that as it may, the case of the alleged depositor Sri Vaidya is that on 27th, Dec., 1979 he had agreed to sell his two acres 21 gunthas of land for a consideration of Rs. 61,00.0 to one Becharbhai Kodarbhai Patel and had received Rs. 60,000 towards part-payment of the said consideration. The transaction could not materialise and later on the said Vaidya had to sell the land to the cultivator thereof viz. Sri Gandabhai Bechandas on 1st June, 1982 for Rs. 25,000. The vaidya could, however, return Rs. 30,000 only to Becharbhai so far. This version too is, on the face of it, absurd and false and may easily be rejected for more than one reasons.

6.13 In the first place it does not appeal to our reasons that a person, knowing that the land, to be purchased by him was in possession of another person, would not only agree to purchase 2 acres and 21 gunthas of land for Rs. 61,000 but would also pay Rs. 60,000 towards such an intended transaction and would not like to get the sale-deed registered at that very time by paying the remaining paltry sum of Rs. 1,000. It is difficult to believe that a person paying almost the full consideration of a sale transaction would not like to get the possession of the property intended to be purchased by him as part performance of the contract by the seller. Again, it is unbelievable that in the eventuality of breach of contract by the seller the purchaser would not insist upon repayment of the amount paid by him to the seller, as is stated to be the position in the present case. The version, on the face of it, inspires no confidence in us. The version has rightly been rejected by the authorities below.

6.14 It is not any sort of explanation offered by an assessee under s. 68 that would and should meet the satisfaction of the ITO. It must inspire confidence and must be reasonably appealing to prudent mind. Under s. 68 the assessee is required, prima facie, not only to prove the identity of the depositor but his capacity to advance, deposit or invest that much of amount as is shown standing to his credit in the books of the assessee. No doubt the assessee is not required to prove as to how the depositor managed to bring the amount of deposit to him but if the ITO brings out such circumstances on record as fatally damage the capacity of the depositor to advance the disputed amount, as is the position in the present case, then certainly he may reject the explanation offered by the assessee on the ground of the same failing to come upto his satisfaction.

6.15 On the discussion made above we are led to conclude that the ITO had successfully discharged the burden shifted to him under s. 68 of the Act. The explanation offered by the assessee about the nature and source of the two cash credits was not at all satisfactory and has been rightly rejected by the authorities below.

7. Interest under s. 217 of the Act: The assessee alleges to have challenged the charge of interest under s. 217 amounting to Rs. 980. The order under appeal does not refer to this point and thus this issue does not arise out of the order under appeal. This ground is, therefore, rejected leaving an option to the assessee to reagitate the same before the CIT(A) under s. 154, if so advised.

8. In the result this appeal partly succeeds and is allowed accordingly to the extent indicated hereinabove.