, J.

1. The true legislative intent in adding the Explanation to Sec.271 (1 ) (c) of the I. T. Act by the Finance Act, No.5 of 1964, as also the nature and scope thereof is the core question which has necessitated this reference to the Full Bench. Even more pointedly at issue is the correctness of the construction placed thereon by the Division Bench in Addl. CIT V/s. Karnail Singh V. Kaleran [1974] 94 ITR 505 (P and H ).

2. M/s. Vishwakarma Industries is a registered firm carrying on business in the manufacture and sale of ball-bearings. For the assessment year 1969-70 it declared a total income of Rs.99,098 in the return filed on the 5th of September, 1969. The examination of its books of account by the ITO revealed cash credits totalling Rs.30,000 in the name of M/s Jagan Nath and Sons, Ludhiana. The assessee-firm urged that these credits were genuine and in support thereof filed confirmatory letters from the said party. The ITO accepted the assessees contention and completed the assessment for the year 1969-70 on an income of Rs.1,02,437.

3. After the completion of the above assessment it came to light in the context of the assessment of other assessees that the loans a