The assessee has the burden of proving that a cash credit is not its income.

S.A.MASUD, J.

1. THE facts in this reference under s. 66(2) of the IT Act, 1922, are stated as follows : THE assessee, a limited liability company with its registered office at Kalimpong, carries on substantial business at Kalimpong with Tibetan traders in the purchase and sale of wool and textiles. THE assessment year under consideration of this reference is the year 1950-51 and the corresponding year of account is 2006 R. M. In the year of account, a sum of Rs. 70,000 was found credited in the assessee's books of account in the name of a Tibetan, Kunjo Amdo Bhutia. THE assessee explained this cash credit as sum deposited by Kunjo Amddo who being an illiterate and simple Tibetan did not believe in doing business through banks. THE ITO did not accept the assessee's explanation as to the genuineness of the alleged deposit of Rs. 70,000. On appeal before the AAC, Kunjo Amdo gave evidence on 9th April, 1957. THE AAC found his evidence unsatisfactory and dismissed the assessee's appeal. THEreafter, the matter went up to the Tribunal who also dismissed the assessee's second appeal. On the facts set out above, the following three questions are referred to this Court :

"(1) Whether, on the failure of the depositor to satisfy the IT authorities about the nature of the sums and source from which he came in possession thereof, the IT Tribunal was justified in drawing an inference that this amount represented the undisclosed profits of the company assessable for the year 1950-51 ? (2) Whether, on the facts and circumstances of the case, the said Tribunal erred in law in finding that the onus of proof lay on the petitioner to prove that the said item of cash credit which stood in the name of a third party was in fact not the petitioner's income ? (3) Whether the Tribunal should have held that, in the facts and circumstances of this case, the burden of proof lay upon the IT authorities to show that the item of cash credit was really a part of the petitioner's income ?"

2. THE learned counsel for the assessee, Mr. Tarun Bose, has submitted before us that his client has given a good explanation as to the source and nature of the said cash credit amounting to Rs. 70,000 and, as such, the assessee has discharged the onus of proving that the said amounts belonged to a third person and, as such, could not be assessed as the assessee's income. Mr. Bose has stated that the evidence given by Kunjo Amdo Bhutia, a Tibetan trader, is a possible and believable story and it cannot be rejected by the Department without some positive evidence. According to Mr. Bose, these Tibetan traders are persons, who bring raw materials from Tibet to Kalimpong carrying them on the shoulders of mules. THEy did not believe in doing transactions through banks as they could not sign their names in any Indian language. Various certificates were produced before the ITO to show that, in the peculiar circumstances of the case, the assessee acted as bankers for Kunjo Amdo with . THE clear case of the assessee was that the said sum of Rs. 70,000 was deposited by Kunjo Amdo with him on 7th April, 1949. This amount was supposed to be the sale proceeds of wool brought by Kunjo Amdo from Tibet to Kalimpong, and Kunjo Amdo, according to the assessee's case, got back the money through cheques on the Central Bank of India Ltd., at Kalimpong. According to Mr. Bose there was nothing unusual or unnatural in such explanation and the Revenue authorities should not have rejected such explanation.

In our opinion, Mr. Bose's contention cannot be accepted in the facts and circumstances of this case. It is not correct to say that as soon as the initial burden of proof on the part of the assessee is discharged, the ITO is not entitled to reject the assessee's explanation without some other positive evidence falsifying the assessee's case. It cannot be true that any possible explanation which an assessee puts forth for clarifying the source and nature of a cash receipt must have to be acce