I. 'MAHHUD, I.-This judgment will dispose of Income-tax References Nos. 9 and 13 of 1969, in which the common question of law has been referred to the High Court for opinion by the Income-tax Appellate Tribunal, Karachi Bench by its order dated 28-2-1968 in R. A. 68-72 and R. A. 59-63 of 1967/68 under section 66;1) of the Income-tax Act, 1922 (hereinafter referred to as the Act) at the instance of the applicant in each of the two references. Three other questions were also referred, but they have not been pressed before us by applicants' counsel. The question is t "Whether on the facts and in the circumstances of the case, the tribunal was justified in holding that a cash credit of Rs. 20,000 could validly be included in the income of the applicant ?"
2. The brief facts, which have given rise to the above question, are that during the assessment year 1959-60 for which the accounting year was 4-4-58 to 3-4-59, the assessee Malik Mir Haaran Khan and Malik Mir Hazar Khan were partners of the registered firm of Messrs Mustafa R. C. C. Pipe Works, Karachi, having a 0-3-6 and 0-3-0 annas share respectively therein. Each of the partners was assessed on his respective share income from the firm and on an addition of Re. 20,000 on account of unexplained cash credit standing in his name in the books of the Arm. While assessing the firm for the said assessm ent year in question the firm's books were rejected and the profits shown therein of Rs 2,76,575 were enhanced to Rs. 8,00,152 which were allocated to the partners according to their respective shares in the income of the firm.
3. The income-tax Officer rejected the explanation of each of the applicants regarding the amount of Rs. 2(1,400 standing to his credit in his personal account in the books of the Arm on 16-4-58.
Therefore, he treated the amount as income from undisclosed sources and brought it to tax. The applicants filed appeals to the Income-tax Appellate Tribunal (hereinafter referred to as the Tribunal). Their common case before 'the Tribunal was, firstly, that their shares in the intangible additions made in the assessm ent of the firm, fully covered this cash credit and, secondly, as an alternative argument, that the amount having been treated as an income from rome undisclosed source unconnected with the profits of the firm, and being a no-account case the accounting period was to be the financial year beginning lit July 1958 ending 30th June 1959 under section 2(11) of the Act, and not in the accounting period 4th April 1958 to 3rd April 1959, for which the said amount was actually charged to tax. The Tribunal rejected the pin that intangibles in the firm's assessm ent falling to the applicant's share coveted the cash credit, because the applicant had brought no material from which the extent of such intangibles, if any, could be determined and from which h could be proved that sufficient intangibles were available to him at the material time.
The applicant's alternative plea, namely that the cash credit was not assessable to tax in the assessm ent year 1959-60, was also repelled, because there was no finding in the instant case that the impugned addition emanated from any business other than that of the firm of which the applicant was a partner and, that being a simple cash credit, it was properly asserted in - the year in which it was detected in the books of the firm, namely on 16-4-58. The Tribunal, therefore, confirmed the addition of the cash credit in each cue and rejected the appeals. Being aggrieved thereby, the applicants requested the Tribunal to refer the question set out above to this Court for opinion under sec--petition 66(1) of the Act.
4. It is now well settled by a long line of authorities that the burden of proving the course of the cash credit standing in the account boob of the assessee lies on him and, where he fails to prove satisfactorily the source and the nature of the cash credit, the Income-tax Officer is entitled to draw the inference that the amount of cash credit is concealed income of team from an undisclosed source and treat it as income of the charge year of which the previous year was the financial year, although it does no necessarily follow that because the assessee's explanation is found satisfactory, that the receipt is a revenue receipt taxable as income in a particular year. The Question must always remain a Question of fact which has to be deal on the materials available.
5. In the instant case, the tint-named applicant submitted as explanation that the amounted sales made on behalf of the firm though lying in bit name, while the second-named applicant's explanation was that the amount represented cheques drawn by the firm in his name fox meeting firm's expenses during the first applicant's absence But both explanations was not acted by the Income-tax Offer and the Tribunal agreed with him. In the statement of the Tribunal observed that there was no finding nor was it the came of the Department, that the Impugned addition emanated from any business other than that of the firm of which the assessee applicant was a partner. Therefore, the Tribunal confirmed the Depart--ment s refusal to treat it as income from an undisclosed source and to adopt the NNW year as the previous year for its assessment. The Tribunal distinguished the case of Bishewar Singh v. Commissioner of Income-tax Bass ad Orissa ((1935) 27 I W R 374) cited on behalf of the applicants on the ground that in tba t case, there was a finding that the assessor was engaged in an activity in the nature of trade and so, in the absence of account; the financial year vas adopted as the previous year Having accepted that position with regard to the source of the amount, namely that it came from the firm, the Department was fixed to that position. There for as submitted by Mr. All Athar, learned counsel for the appellant, the source of the cash credit having been attributed to the firm was covered by the intangible additions made in the assessm ent of the firm and bad already been upped and com--pletely exhausted and that the source from the same business represented by the amount of the cash credit, could not be tapped twice over, as this would amount to double taxation. Had the Income- tax Officer treated the cash credits as represanting income from some undisclosed source, unconnected with the business of the firm, the matter would have assumed a different complexion and a assessm ent would not have been assailed on this ground.
6. In support of the proposition that the amount of the cash credit which had been treated as coming from the firm, were covered by the intangible addition to the firm's income which had already been tax and, therefore, could not be taxed again in the 'land, of the applicants, he cited L.
R. Brothers v. Commissioner of income-tax. Allahabod ((1957) 311 T R III) In that case a slim of Re.
68,958 was detected acash deposit in the assessee---s personal account and loan account. The assessee's explanation was found unsatisfac--tory. Therefore the Income-tax Officer assessed the whole amount to tai as undisclosed profits without taking into consideration the fact that two sums of Ra..26,397 and Rs. 403 had been added back as profits not shown in the account and that a loan of Rs. 12,782, which had been claimed by the asessea, had been disallowed. It was held by the High Court that as the cash deposit came from no other source than to btAness of the assesses, titan it could only be taxed as income derive a from the vary business in respect of which the accounts ware submitted by the assesses. But, as the smaller sums had already been taxed by being added back, the whole of Rs. 68,958 could not be treated as undisclosed taxable profits of the previous year, merely because the assesses failed to explain its source satisfactorily. The Income-3u authorities ought to have applied them mind to the other facts of the case also, namely that the smaller sums had already been taxed by being added back, as otherwise, it would be a case of double taxation of the same income. Therefore, it held that what could be taxed on the basis of the deposits of the proprietor were only thesis items which had not been added back already, when calculating the taxable income and, therefore--- the added back sums most be excluded,
7. The Tribunal rejected the applicant's plea that his share income in the inter additions made, in- the assessm ent of the firm covered the addition. In the ground that the applicant failed to prove the availability to him of sufficient tangible assets or to produce to their notice any material from which this a tent of such tangibles could be guaged. But Mr. A.I Athar's submission is that this statement of the Tribunal is misconceived.
The Tribunal had the entire and complete file of the firm with them as the firm's appeal was simultaneously decided by the Tribunal and the figure of the intangible additions warn clearly available including the figure of applicant's share income thereof as partner which was more than the amount of cash credit. The intangible additions mist be treated as real income o(' the firm and having been so treated, the explanation of the applicant that the additions were the source from which he got the pertinent amount, which he was called upon to explain, was plausible. The only question that the Tribunal had to decide was whether the applicant could have derived the amount of Rs. 20,000 from his share of profit income in the intangible additions, and unless the Tribunal had other material for Justifying that the amount of Re 20,000 could not be so available ice the applicant of which there was no evidence on record in this earn, the availability of it to the applicant must be accepted as plausible. In SS Kurpuswami Mudallar v. Commissioner of Income- tax, Madras ((1964)51 ITR 757) the Income-tax Officer made an additions of Re. 52,230 to the assemble Income of the assessee, who carried on business as a tanner, for the years 1947-48 and 1948-49. In the assessm ent years 1949-50 and 1950-51, the Income-tai Officer added Re. 40,000 said to have been advanced by the assessee as loan in August 1948 and Re. 15,000 and Rs. 10,000 which soma were advances contributed by his wife and daughter to the firm in February 1950 as undisclosed income of the assessee. The assesses's contention was that the Investments were made out of the amount of Re. 52,230 which the Income-tax Officer had added to the income of 1947-48 and 1948-49 and on which tax was paid. The High Coast held that the Tribunal was wrong in treating the sums of Its. 40,W ands Rs. 12,230 (mating a total of Re. 52,230) as income of the assessse from undisclosed source, because the addition of Rs. S1,230 to his income in 1947-48 and I948e49 must be treated a the real income of the assesses for those years in question. The addition may be described as 'intangibles' bust nevertheless, having included this as income, It became the real income. Therefore, the explanation, of the assessee that the additions were the available source from which the investments were made later, was plausible, which the Department could not controvert.
8. For the foregoing reasons, we would answer the question referred to as in References 9 and 13 of 1969 in the negative In our opinion, the Tribunal was not justified in holding that the cash credit of Its. 20000 could validly be included in the income of each of the applicants.
9. In the circumstances--- we will make no order a to costs.