( 1 ) IN this reference under Section 256 (1) of the Income-tax Act, 1961, at the instance of the Commissioner of Income-tax, West Bengal-I, Calcutta, the facts found and/or admitted are as follows :

( 2 ) MESSRS. Bhowanipur Motor Accessories Agency Private Ltd. , the assessee, was assessed to income-tax for the assessment year 1962-63, the relevant accounting year being the year ending on the 13th April, 1962. The assessee had filed a return showing an income of Rs. 1,490. While examining the accounts the Income-tax Officer noticed a number of cash credits which were stated to be loans taken against hundis. At the close of the accounting year a total sum of Rs. 40,000 was shown outstanding from five persons.

( 3 ) THE Income-tax Officer called upon the assessee to prove these cash credits and also served notices under Section 131 on the alleged creditors. Only two of them appeared before the Income-tax Officer and gave evidence. The Income-tax Officer did not accept that the said two persons were moneylenders and held that they were merely name-lenders. Accordingly, the Income-tax Officer treated the sum of Rs. 40,000 as the assessee's income from undisclosed