GUL MUHAMMAD KHAN, J.-The Income-tax Appellate Tribunal vide its order dated 20th October 1970 turned down the request of the petitioner to make a reference to this Court under section 66
(I) of the Income-tax Act (hereinafter referred to as the Act), on the ground that no question of law arose out of its appellate order. The petitioner has now made an application under section 66 (2) of the Act for a direction to the Income-tax Appellate Tribunal (hereinafter called the Tribunal) to draw up a statement of the case and refer the following question of law, arising out of its order, for the decision of this Court "Whether in the circumstances of the case and having regard to the nature of the business carried on by the assessee in the past and future years was there any material before the Tribunal to hold that the initial capital investment of Rs. 30,000 made in March 1964 was not his capital and represented the applicant's income liable to tax in the year 1965-66?".
2. The petitioner was deriving income from his profession as a goldsmith. He used to execute the work on labour basis at his house up to 3rd of March 1964. On that date, he got on lease a shop at a monthly rental of Rs. 300. He paid a sum of Rs. 2,500 as advance rent and made an investment of Rs. 30,000. Regular business in the shop was thus started by him in March 1964.
3. The Income-tax Officer assessed the income of the petitioner in the sum of Rs.7,000 for 1963-64 assessm ent year. In the year in question the petitioner declared a not income of Rs. 4,000. He was asked to explain by the Income-tax Officer, the source of his initial investment of Rs. 30,000 shown by him in his books but the petitioner failed. The Income-tax Officer, therefore, assessed the entire sum of Rs. 30,000 as income for the year. He also estimated his income as Rs. 6,000 for the period from 3rd of March 1964 to 30th of June 1964.
4. Feeling, aggrieved the petitioner filed an appeal before the Appellate Assistant Commissioner but the same was dismissed on 12th of February 1968. A second appeal before the Income-tax Appellate Tribunal, however, succeeded partly. The sum of Rs. 6,000 assessed for the period from 3rd of March 1964 to 30th of June 1964 was adjusted in the sum of Rs. 30,000. The Tribunal held that since the petitioner had failed to discharge his onus of proving the origin and nature of investment of Rs. 30.000 in the year of account, the said amount shall be taken to be the income for the year.
The petitioner then applied to the Tribunal for making a reference to this Court as stated above.
5. It is now contended by the learned counsel for the petitioner that the Income-tax Officer as well as Appellate Assistant Commissioner thought that a sum of Rs. 6,000 has been earned by the petitioner for the period from 3rd of March 1964 to 30th of June 1964 but did not take into account the other 8 month: He further submitted that the Appellate Assistant Commissioner also did not objectively go into the question as to bow much amount had been earned by the petitioner for the year in question. The findings given by the Tribunal, it is contended are only presumptive without application of mind arid without laying down any basis.
6. The learned counsel also argued that as the sum of Rs. 30,000 was considered to be an income from undisclosed sources in the past and as section 4 (2-B) was found to be inapplicable by the Tribunal at the relevant time it should have either remanded the case to the Income-tax Officer for fresh orders or should have itself found out the income of the petitioner under section 23 read with section 13 of the Act. The Income-tax Officer in turn could, if it came to the conclusion that the sum of Rs. 30,000 was a past income out of an undisclosed source, proceed under section 34 of the Act but could in no case treat that amount as income of the year in question without holding that it had in fact been earned in that year. Reliance was placed on Edwards (Inspector of Taxes) v.
Bainstow and another (28 1 T R 579), where it was held that even a pure finding of fact could be set aside if the Commissioner had acted without any evidence or upon a view of the facts which could not be reasonably entertained. The learned counsel also cited Mitho Lal Tek Chand v. C. I. T. ((1953)
23 I T R 494), wherein a Division Bench of the Allahabad High Court observed that it was not at all reasonable to expect that a huge profit of Rs. 65,000 could be made on the first day of the relevant accounting year. The learned counsel also referred to page 1158 of the 1976 Edition of Kanga to support the same plea. The submissions made by the learned counsel, however, do not help to resolve the controversy before us as will be discussed hereafter.
7. The learned counsel for the respondent submitted that after holding that section 4 (2-B) was not applicable, the Tribunal did give its own finding to the effect that the sum of Rs. 30,000 bad been earned in the year in question. In this respect he referred to the following portions of the order; "The fact, therefore, remains that since the appellant has failed to discharge his onus of proving the origin and nature of the investment of Rs. 30,000 in the year of account, it shall be taken to be his income for the year. This prop9sition finds ample support from numerous decisions, the latest being the case reported as (1970) 21 Taxation 10 (Trib.), as earlier referred to. Considering, however, that the assessee who maintained no accounts was assessed to a business income of Rs. 6,000 for the year, and that there might be a possibility of double taxation if the entire unexplained investment is brought to tax in the year. We order the exclusion of Rs. 6.000 from the addition of Rs.
30,000." .
8. The order of the Income-tax Officer shows that the amount in question was invested with effect from 3rd March 1964. Ornaments worth 200/225 Tolas were found in stock by the Inspector on his survey. The Income-tax Officer did not accept the explanation of the source of that income and assessed it as the income of that year. He added a sum of Rs. 6,000 to it as the income of the period from 3-3-1964 to 30-6-1964. The Income-tax Officer thus treated the sum of Rs. 30,000 as income of 8 months. The Appellate Assistant Commissioner also did not accept the explanation of the assessee about the source of that amount and assessed it under section 4 (2-B). Both these authorities had a common reason for their orders i.e. The assessee did not give a plausible or correct explanation for the source of that sum of Rs. 30,000 though they assessed it under different provisions.
9. The Tribunal found that the sum of Rs. 30,000 said to have been invested by the petitioner on the start of his business was not invested on the first day of the accounting year. The Tribunal, however, shared the view of the two lower authorities that the assessee had failed to discharge his onus of proving the origin and nature of his investment of Rs. 30,000 in the year of account. No reason was, however, given by it to assess the entire amount as the income of the said year, though the sum of Rs. 6,000 added by the Income-tax Officer was struck off on the ground that the sum of Rs. 30,000 should be deemed to have also included Rs 6,000 as well.
10. It is well established position of law that if an assessee is found in possession of some receipt or asset the onus is on him to prove its origin. A In Commissioner of Income-tax v. Gartapathi Mudalian ((1964) 53 I T R 623) the Indian Supreme Court held that the principle that once it is found that a receipt by the assessee was income of the assessee, it is not necessary for the revenue to locate its exact source. It was also held that the principle applies alike to cases in which an entry is found in the books of account of the assessee as to cases in which no such entry is found. The same view was taken by the Indian Supreme Court in case of Commissioner of Income-tax v.
Durya Prasad More (1974 PTD 180) in respect of a sum of Rs. 2,20,000 remitted in favour of the assessee from a place outside British India to British India. The assessee's explanation that the amount represented his cash balance sent in 1941 from Calcutta to a place outside British India and brought back in the year of account was disbelieved. It was found up to the Tribunal that it was an income from undisclosed sources. In the reference brought before it, the High Court accepted the Department's view point that it was an income from undisclosed source but held that the Income-tax Officer had no evidence before it to support his conclusion that the disputed sum was a profit from a business activity in British India. The Supreme Court did not agree with the High Court as according to it in the final order of the Tribunal out of which the reference arose, no finding had been given that the disputed amount was an income from some undisclosed business activity in British India. The Supreme Court expressed its view as:- "If the amount of Rs. 2,20,000 represented income of the assessee of the previous year, it was liable to be included in the total income of the assessee, and an enquiry whether for the purpose of bringing the amount to tax the income was from a business activity or from other source was not relevant. The principle laid down by this Court in Commissioner of Income-tax v. M. Ganapathi Mudaliar (1964) 53 I T R 623 (SC) that `once it is found that `a receipt by the assessee' was income of the assessee it was not necessary for the revenue to locate its exact source' applies in our judgment alike to cases in which an entry is found in the books of account of the assessee, and to cases in which no such entry is found. It was not the plea of the assessee that the demand drafts represented income, which upon that plea it was for him to prove such a plea. It was not even attempted to be argued before the Tribunal that the source of the income affected its eligibility to tax. We are, therefore, unable to uphold the answer recorded by the High Court."
11. The responsibility of the Revenue arises only in a case where no acceptable account is maintained or where there is no account. In such a case, the tax authority must give a basis for its decision. That means that it should apply its mind to the facts of the case and must have before it some data, criteria or evidence on which to rest the liability. Reference be made to a judgment of this Court in Rajput Metal Works Ltd. v. Commissioner of Income-tax (PLD 1976 Lah. 223) where it was held as under; "In the instant case before us the Tribunal on further appeal adduced cogent reasons for rejecting the accounts and the declared version based on them, but has at the same time made an ad hoc addition of Rs. 30,000 in the Pak Pipe Industries Accounts, and Rs. 15,000 in the Asian Steel Re- Rolling Account. In this respect the Tribunal did not make the computation of the income of the assessee on any basis whatsoever. These additions appear to have been made arbitrarily and on no relevant considerations. The Income-tax Officer relied on the past history of the case in making the addition to the Pak Pipe Industries Account. But the Tribunal singularly failed to even advert to it in making the addition to the extent of Rs.20,000 in that account. It did not evolve any basis for the addition of Rs. 15,000 to the Steel Re-Rolling Account. In the circumstances we find that the additions thus made by the Tribunal cannot be sustained under the proviso to section 13 of the Act and the Tribunal is required to make a fresh computation in this behalf."
12. In the case in hand all the authorities below applied their mind to hold, that the assessee's explanation, that the sum of Rs. 30,000 was either his earnings of the past years or it devolved on him otherwise, was not acceptable. It was, therefore, an income from undisclosed sources. The question whether this amount could be taken to be an income for the year or for the past years required resolution. Though the learned counsel for the parties were not able to refer to any case- law on the point, yet we found that it is not at all such a barren field. The point came to be considered by a number of Indian Courts who have fully resolved it leaving back no controversy.
13. The Calcutta High Court in Sushil Chandra Ghose v. Income-tax Officer (1959) 35 I T R 379) held that an assessee who declares his option under section 2 (11) of the Income-tax Act and indicates "the previous year" in respect of income disclosed by him, cannot be said to have exercised his option in respect of an income from a separate source which is wholly undisclosed and is not only referred to in any manner whatsoever in his return. The only possible .Way in which undisclosed income is assessed or re-assessed is in accordance with the financial year. In Commissioner of Income-tax v. Sheolal Ramlal ((1958) 33 1 T R 47), a Division Bench of Madhya Pradesh High Court held that the sum of Rs.26,000 realised by the assessee by encashing high denomination notes in January 1946 represented concealed profits from purchase and sale of notes, is source undisclosed and that in the absence of an option exercised by the assessee, the income fell within the year 1946-47 and not the previous year 1947-48.
14. A similar case came up before the Patna High Court, Commissioner of Income-tax v. Darolia & Sons ((1955) 271 T R 515). There the accounting year of the assessee corresponded to 4th November 1945 and 25th October 1946. The Income-tax Officer rejected the books of the assessee and ascertained its income from business at an estimate. He also added to that estimate certain cash credits found to have been entered in the accounts books of the assessee on 22nd and 27th of November 1945 as secret profits from undisclosed sources in the assessment year 1947-48. It 'was found that the amount in question was not from the business of the assessee but from another source for which neither an account had been maintained nor any option exercised as regards the previous year. It was held that in the absence of any system of accounting attempted by the assessee and in the absence of an option on its part, the only course open to the Income- tax Authorities was to take the financial year ending on 31-3-1946 as the previous year for the income from undisclosed sources and that the amount in question could not be included in the assessee's income for the assessm ent year 1947-48.
15. The Mysore High Court in India in L. B. Belamkar v. Commissioner of Income-tax (1971 PTD 929), also expressed the same view while holding that the gold of the value of Rs. 73,320 seized, from the assessee's employee on 30th of January 1958 was an income from undisclosed sources and could be included in the total income of the assessee in the year ended on 31st of March 1958 for assessm ent year 1958-59 and not for the assessment year 1959-60.
16. The Indian Supreme Court in Raja Sharda Narain Singh v. Commissioner of Income-tax ((1968) I T R 209) also approved the view that the sum of Rs. 2 lacs credited on 3-11-1947 in the estate treasury of the assessee, was income from undisclosed sources and could not be assessed in the assessm ent year 1949-50 on the basis of accounting period. It was further found that the said amount was assessable only for the year 1948-49 with reference to the financial year.
17. The same view was taken by the Supreme Court of India in 1969 where it was held that the only possible way in which an income from an undisclosed source could be assessed is to make the assessm ent on the basis that the previous year of such income is the ordinary financial year.
Reference be made to Baladin Ram v. Commissioner of Income-tax ((1969) 71 I T R 427).
18. We have very carefully gone through the above dicta of the India Courts arid feel inclined to accept the same as the correct enunciation of law as it then existed. We are also of the view that the subsequent amendment brought about by the induction of section 4 (2-B) in the Income tax Act could be to allow assessm ent of such undisclosed amounts of income in the 'previous year' than in the relevant financial year.
19. In the case in hand, all the tax authorities below declined to accept the explanation rendered by the petitioner with regard to the sum of Rs. 30,000 invested by him in his business in March 1964. We therefore, I cannot accept the contention of the learned counsel for the petitioner that the said amount represented petitioner's savings over a number of years in the past. We shall rather be going into questions of fact if we do so. A case of somewhat similar nature, Mst. Khatija Bai v.
Commissioner ofd Income-tax (PLD 1978 Kar. 395) came up before a Division Bench of Sind High Court. The findings of their Lordships are as under; "In coming to the conclusion that the assessee had falsely claimed that she had brought cash and ornaments from India at the time of migration, the I. T. O. Not only considered the circumstances that the assessee had failed to produce any evidence before him in support of the purchase of jewellery in India or elsewhere or to prove that it had remained in her possession since 1948, but he also referred to the contradictory wealth statement filed by the assessee. It appears that she made 3 such statements. The first of those statements was filed on 31-3-1954, wherein she showed her total assets at Rs. 6,000, being Rs. 1,000 in cash and Rs. 5,000 in jewellery. In her second wealth statement, she showed her assets as on 31-12-1954 as Rs. 1,89,573 while in the third statement she gave the value of her assets at Rs. 2,29,538. From these- 'varying wealth statements, and the other circumstances of the case, the I. T. O. Came to the conclusion that the assessee had been wholly unable to show that she had brought a large amount of money and jewellery from India, as claimed by her, and that her claim was totally unfounded.
15. The question being purely of fact and the decision taken by the I. T. O. And the Tribunal being on the basis of tangible evidence produced before the Income-tax Authorities, it cannot be determined by the High Court, whose jurisdiction under section 66 is limited only to questions of law arising from the order of the Tribunal."
20. There is, in this case, no material other than the one already considered by the tax authorities.
There has been no grievance that any material or evidence had been omitted from consideration.
The finding of fact arrived at by all the tax authorities that the assessee failed to prove the source of the disputed amount, therefore, is unexceptionable. As the assessee himself disclosed being in possession of that amount, it was his duty to have explained how it came to him. The revenue is not obliged, in such a situation, to locate the exact source. We, therefore, find no illegality in the view taken by the Tribunal.
21. The next question to be considered is if the sum in question could have been assessed in the `previous year' or the `financial year'. Here again we agree with the learned Judges of the Indian Courts and hold that the disputed amount could be taken to be a receipt for the relevant `financial year' and not the 'previous year'. However, we believe that 3rd March 1964 when the disputed amount was entered as investment in the books of account of the assessee, falls within the same financial and previous years. The orders passed by the tax authorities are, therefore, quite valid.
The result of the whole discussion is that we agree with the view taken by the Tribunal and dismiss this application with costs.