1. ANWARUL HAQ, C. J.-This judgment will dispose of Civil Appeals bearing Nos. 19 and 20 of 1976, which raise identical questions of law and fact, concerning the assessment of income-tax against the appellant for the assessm ent years 1962-63 and 1966-67.
2. On the 12th of July, 1969, the appellant filed wealth tax returns for the assessm ent years 1963-64 to 1968-69 under the provisions of Martial Law Regulation No. 33 of 1969. She had not filed any previous income-tax or wealth tax returns. In the statements filed by her she showed cash in hand to the extent of Rs. 5,25,000 on the 30th of June, 1963, said to have been received by her by way of salamis or gifts on the occasion of her marriage on the 11th of November, 1961. She further claimed to have received an amount of Rs. 15,000 in 1965 on the occasion of the birth of her first daughter; and again another sum of Rs. 50,000 on the occasion of the birth of her son in 1966.
3. On the basis of these wealth tax returns, she was called upon by notice dated the 13th of July. 1971, to furnish particulars of the salamis and the gifts alleged to have been received by her by disclosing the names and other particulars of the persons from whom they were received alongwith the amounts given by each of them. The assessee replied that as about ten years had passed, she did not recollect the names of the persons who had given these salamis to her. The same reply was made with regard to the amounts received as presents or gifts on the birth of her two children. The Income-tax Officer was not satisfied with these replies. However, he allowed her a sum of Rs. 1,00,000 on account of .Salamis on the occasion of her marriage, Rs. 5,000 on the occasion of the birth of her daughter and Rs. 10,000 on the occasion of the birth of her son. The remaining amounts were assessed to income-tax during the relevant years, namely, 1962-t;3 and 1966-67.
4. The appellant thereupon filed appeals before the Income-tax Appellate Tribunal, which upheld the assessm ent of the Income-tax Officer regarding the amount of gifts received at marriage, but allowed the full amount of Rs. 15,000 as claimed by the appellant to have been received on the occasion of the birth of her daughter; and also increased the amount of the presents and gifts received on the birth of the male child from Rs. 10,000 to Rs. 25,000.
5. As the appellant was not satisfied with the orders made by the Tribunal, a reference was made on her behalf to the Peshawar High Court under section 66(1) of the Income-tax Act, 1922. Various questions, including the question as to whether "in the facts and circumstances of the case the Tribunal was right in holding these amounts as income of the assessee chargeable to income-tax and not as casual and non-recurring receipts specially exempt under section 4(3)(vii) of the Act of 1922," were formulated. The High Court has not directly answered any of the questions either in the affirmative or in the negative, but has simply observed that none of the questions framed in these two cases had any force. Both the references were, accordingly, rejected, and the assessments made by the Tribunal were upheld, although it was also observed that: "there is no denying the fact that when the assessee was married, she was a young girl of 15 years of age and had no source of income".
6. Leave to appeal was granted in these cases to consider the following contentions:
(a) That the High Court having held that the assessee had at the time of her marriage no source of income, it was wrong in its approach to the questions posed before it, as it should have first considered as to whether in the circumstances the amounts involved could be income at ail before considering as to whether they were exempt under the Income-tax Act;
(b) That the liability purporting to have been imposed on the assessee under subsections (2-A) and (2-B), introduced in section 4 of the Income-tax Act in 1965 could not have been applied retrospectively to income which had arisen before that date ; and
(c) That similarly subsection (2-D), which was added to section 4 of the Income-tax Act only in 1972, could not have been applied in the case of the appellant.
7. On behalf of the Department Mr. Amirzada Khan, the learned Assistant Advocate-General, contends that the questions now sought to be raised on behalf of the appellant were not agitated at any stage either before the Income-tax authorities, or even before the High Court, and, therefore, they should not be allowed to be raised at this late stage. He further submits that the provisions contained in subsections (2-A), (2-B) and (2-D) of section 4 of the Income-tax Act have not been applied in this case as such, and, therefore, the question of considering whether they are retrospective in operation or not does not arise; and that, in any case, these provisions being the nature of machinery provisions, intended for the purpose of ensuring proper application of the law, and not creating any substantive liability against the assessee, they would apply retrospectively to all pending cases decided after their promulgation. Finally, the learned Assistant Advocate- General contends that the Income-tax authorities having rightly recorded a finding of fact that the amounts in question were income from undisclosed sources, the learned Judges in the High Court were clearly right in refusing to interfere with the same.
8. After hearing the learned counsel for the parties at some length, we have formed the view that the two questions, formulated in the leave granting order, regarding the retrospective application of subsections (2-A), (2-B) and (2.D) of section 4 of the Income-tax Act do not really arise in the case.
9. A perusal of the orders made in this case by the Income-tax Officer as well as by the Tribunal and the High Court shows that there is no reference at all therein to the provisions of subsections (2-A), (2-B) and (2-D) added to sec--petition 4 of Income-tax Act in the years 1965 and 1972, respectively; and accord--ingly, the learned counsel for the Income-tax Department seems to us to be right in contending that the impugned assessments are not based on any retrospective application of these provisions of law. It is also clear that it was for this reason that the question of the retrospective application of these provisions was not raised on behalf of the appellant at any stage in the proceedings before the appellate Tribunal or in the High Court. In the circumstances, it is not at all necessary to deal with the arguments addressed at the Bar by Mr. Mumtaz Hussain in support of his contention that these provisions could not be applied retrospectively. For the same reason, it is also not necessary to discuss whether these provisions are in the nature of substantive provisions creating a new liability, or whether they are merely in the nature of machinery provisions, which could apply to all pending assessments. The -liability of the appellant having been determined by the Income-tax authorities on the basis of the law, as it stood before the introduction of these provisions, the real question before the Court is whether the amount of cash found in the hands of the appellant has been rightly treated as income assessable to income-tax.
10. The term `income' has not been defined in the Income-tax Act of 1922, although it occurs in several sections of the Act, namely, sections 3, 4, 6, 12 and 23. As observed by their Lordships of the Privy Council in Commissioner of Income-tax, Bengal v. Shaw Wallace & Company (AIR 1932 P C 138"the object of the Indian Act is to tax income, a term which it does not define ---------Income in this Act connotes a periodical monetary return "coming in" with some sort of regularity, or expected regularity, from definite sources. The source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return, excluding anything in the nature of a mere windfall. Thus income has been likened pictorially to the fruit of a tree, or the crop of a field. It is essentially the produce of something which is often loosely spoken of as "capital". But capital, though possibly the source in the case of income from securities, is in most cases hardly more than an element in the process of production."
11. This view was re-affirmed by the Privy Council in the subsequent case of Commissioner of Income- tax, Bengal v. Mercantile .Bank of India Limited and others (AIR 1936 P C 238and it was held that where a company by resolution capitalises accumulated profits by issue of fully paid-up shares to shareholders pro rata, the transaction does not amount to payment of dividends or income, gains or profits: Again, in Raja Bahadur Kamakshya Narain Sing of Ramgarh v. Commis--sioner of Income-tax, Bihar & Orissa (1943) 1 T R 513the Privy Council referred with approval to this definition of the term `income', but added that "picturesque similies cannot be used to limit the true character of income in general---....Income is not necessarily the recurrent return from a definite source, though it is generally of that character. Income again may consist of a series of separate receipts, as it generally does in the case of professional earnings. The multiplicity of forms which `income' may assume is beyond enumeration. Generally, however, the mere .Fact that the income flows from some capital assets, of which the simplest illustration is the purchase of an annuity for a lump sum, does not prevent it from being income, though in some analogous cases the true view may be that the payments, though spread over a period, are not income, but instalments payable at specified future dates of a purchase price . . . . . . ."
12. A full Bench of the Allahabad High Court in Commissioner of Income--tax v. Indra Sen Raizada, Meerut (AIR 1940 All. 154), observed that "the term `income' as used in subsection (3) of section 4 of the Act embraced every form of receipt of the kind which, but for the exemption, would, or might have been embraced by the words "income, profits or gains". It was added that the word "casual" in section 4(3) (vii) must be read as meaning the antithesis of that which is governed by something more than mere chance-something out of which, according to the probabilities of business' or to the known sources of practical experience, a rational expectation of profit arises".
13. Two cases decided by the Karachi Bench of the West Pakistan High Court;in the year 1963 appear also to be relevant in the present context. In Commissioner of Income-tax v. Messrs Universal Engineering Co. (PLD 1963 Kar. 487the learned Judges, while dealing with the question whether a cash credit entry of Rs. 15,000 in an account styled as "Deposit Account" in the books of the assessee could be regarded as income, observed' that it was purely a question of fact and the acceptance of the assessee's explanation depended on facts and circumstances of the case. They did not regard this as a question of law, and, accordingly, did not interfere with the finding recorded by the Income-tax- Appellate Tribunal in favour of the assessee. In the second case, namely, Messrs Ellahi & Co. v. Commissioner of Income-tax (PLD 1963 Kar. 490the same Division Bench again upheld the view of the Income-tax authorities that a cash credit entry in the name of the assessee's wife could legitimately be regarded as secreted profits of the assessee in the absence of any satisfactory explanation. In other words, in both these cases the view taken was that a cash credit entry standing in the name of an assessee could be regarded as income of the assessee, if no satisfactory explanation of the source of its accrual was furnished by the assessee, who was in the best position to explain its origin.
14. Auto Stores v. Commissioner of Income-tax East Pakistan (PLD 1964 Dacca 433it was held that "the words "income from undisclosed source" may mean income from undisclosed item of a known line of activities or it may mean income from source which was unconnected with any of the known sources or lines of profit-earning activities followed by the assessee altogether unknown. In the case of the first category it would be a case of undisclosed profit of the known business, and in the case of second category it will be an income from a business altogether different from the business under consideration, absolutely unconnected". It was added that the Income-tax Officer may presume an unexplained amount to be an income of the assessee. The learned Judges were dealing with an entry in the account books of the assessee showing a sum of Rs. 24,000 as' Amanat or deposit from his father. The Income-tax Officer did not accept this explanation, and his action in treating this amount as income from an undisclosed source was upheld. The learned Judges also referred with approval to the view expressed by the Supreme Court of India in A. Gobindarajulu Madaliar v. Commissioner of Income-tax, Hyderabad ((1958) 34 1 T R 807), to the effect that : "Whether a receipt is to be treated as income or not must depend very largely on the facts and circumstances of each case. Where an assessee fails to prove satisfactorily the source and nature of certain amounts of cash receipts during; the accounting year, the Income-tax Officer is entitled to draw the inference that the receipts are of an assessable nature."
15. Finally, the reference may also usefully be made to recent judgments of our own Court, namely, Messrs Muhammad Akbar Muhammad Afzal v, Income-tax Appellate Tribunal (PD 1979 SC 949and Miss Assia v. Income-tax Appellate Tribunal (1972 SCMR 409 ). In the first mentioned case, in the return submitted by the assessee for the year in question a sum of Rs. 30,000 was shown as credit balance in the name of one Muhammad Younis Kelawala. The Income-tar Officer, after considering the material placed before him, came to the conclusion that Kelawala was not acting on behalf of his father Wilayat A.I and that the ;sum in question, in fact, represented the income of the assessee firm. This view of the Income-tax Officer was upheld by the Appellate Tribunal as well as by the High Court. It was observed by this Court that the question involved in the case Was obviously a question of fact and, as such, not amenable to the jurisdiction of the High Court under section 66(2; of the Income-tax Act. In the second case, it was stated that section 23(3; of the Income-tax Act gives wide discretion to the Income-tax authorities in the matter of assessment, and if they decide to treat the accounts to be fictitious and unreliable, then such a finding cannot be disturbed unless it is shown to be altogether capricious and injudicial.
16. It will be seen that the term `income', as used in the Income-tax Act is, indeed, a term of wide significance, and generally and ordinarily it connotes a periodical monetary return, coming in with some sort of regularity, or expected regularity, from a definite source ; but, as observed by the Privy Council, the multiplicity of forms which income may assume is beyond enumeration ; and income need not necessarily be the recurrent return from a definite source, though it is generally of that character. It may consist of a series of separate receipts, as for instance happens in the case of professional earnings. In the last analysis, the question whether a particular kind of receipt is income or not would depend for its answer on the peculiar facts and circumstances of the case. If the nature of the receipt and its source are not satisfactorily explained by the assessee, - facts which are generally within his peculiar knowledge, the Income-tax Officer may legiti--mately presume that the amount in question is an income of the assessee from an undisclosed source.
17. Now, in the present case. The appellant declared in the first return filed by her under Martial Law Regulation No. 33 of 1969, ;at she was in possession of a large amount of cash, namely, Rs. 5,25,000,.
18. To which there were additions in subsequent years. The Income-tax authorities accepted her explanation with regard to a part of these amounts as .Having been received by her as gifts, but the balance remained unexplained. It is true that a finding was recorded that the appellant had got married at a very young age and did not have any independent source of income, but this finding did not absolve the appellant from explaining the presence of such a large amount of cash in her hands during the relevant years. In the facts and circumstances, as the Income-tax Authorities as well as the High Court, .Were right in taking, the view that these amounts were income from an undisclosed source, and, there--fore, liable to be taxed. These were findings of fact recorded by the relevant) authorities after a full consideration of the explanation furnished by the appellant, and all the surrounding circumstances of the case. The High Court was, accordingly, right in not interfering with these findings, and no exception can be taken in this behalf by this Court.
19. It now remains to consider whether the amounts in question could be exempt from taxation in terms of clause (vii) of subsection (3) of section 4 of the Act for the reason that they were not receipts arising from business or from the exercise of a profession, vocation or occupation, and were of a casual and non-recurring nature.
20. Once a finding is recorded that the amounts in question could be treated as income within the meaning of the charging section, namely, section 3 0 the Income-tax Act, the burden of proving that the income qualified for exemption under any of the clauses of section 4 of the Act was one the assessee. Subsection (1) of section 4 of the Act provides that "subject to the provisions of this Act, the total income of any previous year of any, person includes all income, profits and gains from whatever sources derived .
21. Subsection (3) of the same section then enumerates exemptions, and the operative words are "any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them . . . . .". Ft was for the appellant to show that she was covered by the exemption ,granted by clause (vii) of subsection (3). This she clearly failed to do, 'for the reason that she could not satisfactorily explain the source of the entire amount of cash found in her hands ; nor of the total accretions thereto in subsequent years.
22. It does not need much reasoning to see that if the source of income I not disclosed or satisfactorily explained, then it is not possible to hold that the income was not from business or from the exercise of a profession, vocation or occupation ; oar that it was of a casual and non-recurring nature,. All these factors and attributes can be ascertained only if the assessee place all the relevant facts before the Income-tax authorities, for otherwise the nature of the income and its source are clearly left in the realm of :peculation. Not a single case was cited at the Bar to show that the exemption granted by clause (vii) of subsection (3) of section 4 of the Act would be available in the case of income from an undisclosed source. The stringent requirements spelt out in this clause can only be satisfied by the disclosure of all the relevant facts, and not otherwise. In the circumstances, the High Court appears to us to be right in taking the view that the appellant had failed to make out a case for the grant of exemption under this clause.
23. For the foregoing reasons, we are satisfied that the amounts in question have been rightly treated as income in the hands of the appellant, and they were not exempt from tax under clause (vii) of subsection (3) of section 4 of the Act. Both the appeals, therefore, fail and are hereby dismissed.
24. However, in, view of the legal questions involved, the parties are left to bear their own costs.