The burden of proof shifts to the Department when a cash credit is in the name of a third party, and the Department must show by material that the amount does not belong to the third party but to the assessee.

1. In this case the assessee is a Hindu undivided family called Messrs. Radhakrishna Biharilal, consisting of two brothers of whom Radha Krishna is the Karta. The business of the family was trade in rice and grain and besides this the family had share in other partnership concerns. For the assessment year 1944-45 the Income-tax authorities found an item of cash credit in the books of the assessee in the name of one Kedarnath Agarwala. The amount of the cash credit was Rs. 35,000 and the claim of Kedarnath was that he deposited the amount in two lots, one of Rs. 15,000 on 16-4-1943 and the other of Rs. 20,000 on 2-5-1943. The Income-tax authorities treated the amount of cash credit as belonging to Kedarnath and interest of Rs. 1,120 was allowed to be deducted from the taxable income of the assessee. When the assessment for the year 1945-46 was taken up the Income-tax . authorities noticed that the amount of Rs. 35,000 was transferred by Kedarnath to his daughter Mt. Chandra Kumari Devi. It was explained on behalf of the assessee that there was a registered deed of gift dated 3-4-1944 by which Kedarnath transferred the deposit in the name of his daughter. The Income-tax Officer allowed the deduction of Rs. 1,596/- as interest paid to Mt. Chandra Kumari Devi on the deposit but the order was made subject to verification. An enquiry was later on made from the Incometax authorities at Calcutta. A reply was received that Kedarnath could not be found at the address given in the books produced by the assessee. On receipt of the reply the Income-tax Officer started proceedings under S. 34, Indian Income-tax Act against the assessee. In the course of this proceeding Kedamath was examined and the registered deed of gift made by Kedarnath in favour of Mt. Chandra Kumari Devi was also produced before the Income-tax Officer, who, however, came to the conclusion that the amount of Rs. 35,000/- shown in the books of the assessee for the assessment year 1944-45 was really secreted profit and that the amount did not belong to Kedarnath or to his daughter Mt. Chandra Kumari Devi. The assessee took the matter to the Appellate Assistant Commissioner who allowed the appeal upon the finding that there was no material to hold that the amount of Rs. 35,000 represented the secreted profit of the assessee. The Income-tax Department preferred an appeal to the Appellate Tribunal who allowed the appeal and restored the order of the Income-tax Officer and held that the amount of Rs. 35,000.00 was secreted profit of the assessee and should be assessed to income-tax under the provisions of S. 34, Income-tax Act.

2. In this state of facts the Income-tax Appellate Tribunal has referred the following question of law for the opinion of the High Court

"Whether on the facts and circumstances of the case there was definite information to the Department in consequence of which discovery was made that a sum of Rs. 36,120 escaped assessment in the Assessment year 1944-45?"

3. After hearing counsel for the parties we think that the question should be reframed in the following manner in order to bring out more effectively the real point in controversy between the parties:

"Whether there was any material before the Income-tax authorities to hold that a sum of Rs. 36,120.00 belonged to the assessee and should be assessed to income-tax under the provisions of S. 34, Indian Income-tax Act?"

4. In the approach to this question it is necessary to bear in mind the distinction between a case where there is cash credit in the name of the assessee and a case where the cash credit is found not in the name of the assessee but in the name of a third party. If the cash credit stands in the assessees name the burden of proof is upon the assessee to show that the item of receipt is not of an income nature. It is for the assessee in such a case to prove positively the source and nature of the amount shown in the item and if the assessee fails to furnish satisfactory explanation th