The burden of proof lies on the assessee to explain cash credits in its account books, whether in the name of the assessee or in the name of a third party. In the absence of a satisfactory explanation, the department can infer that the moneys belong to the assessee and represent suppressed income.

R.N.MITTAL and P.C.PANDIT JJ.

1. The facts of the present reference are as follows : The assessee is a registered firm and derives income from arhat and karyana business. It has five partners, namely, Dharam Chand, Sat Parkash, Ram Naranjan, Ved Parkash and Nand Lal. The share of Dharam Chand, who is the father of the other partners, is four annas and that of Sat Parkash and other is three annas each. The Income-tax Officer, while examining the account books making an assessment for the assessment year 1954-55, found cash credits totalling to Rs. 47,996 to the credit of four ladies as detailed below Sl. No.AmountDate Name

(1) Rs. 11,980 16-7-1953Smt. Shanti Devi, wife of Shri Ved Parkash, partner.

(2) Rs. 11,980 17-7-1953Smt. Raj Rani, wife of Shri Nand Lal, partner.

(3) Rs. 11,980 30-12-1953Smt. Lajjya Wanti, wife of Shri Ram Naranjan, partner.

(4) Rs. 11,980 22-1-1954Smt. Suhag Wanti, wife of Sat Parkash, partner.

2. The explanation given by the assessee was that Bhagwanti Devi, wife of Dharam Chand, died on April 12, 1953. After her death, her almirahs and trunks were ransacked and jewellery, gold and cash in addition to her wearing apparel were found. They were distributed amongst her daughter and daughter-in-law on April 14, 1953, in the presence of a panch. The three daughters received the jewellery and little cash and the daughter-in-law received the aforesaid amounts as cash. The Income-tax Officer disbelieved the version of the assessee and added the aforesaid amount of Rs. 47,996 as income from undisclosed sources. The assessee went up in appeal against the order of the Income-tax Officer to the Appellate Assistant Commissioner who uphold the assessment. The assessee then filed an appeal before the Tribunal. The Tribunal felt that the explanation given by he assessee was improbable and, therefore, rejected the appeal. The assessee made an application under sub-section (1) of section 66 of the Indian Income-tax Act, 1922 (hereinafter referred to as "the Act") for making a reference to the Tribunal which was rejected by it. It then moved this court under sub-section (2) of section 66 of the Act for directing the Tribunal to make a reference. This court accepted the application and directed the Tribunal to refer the following question for decision to this court :

"Whether, on the facts and circumstances of the case, the income-tax authorities were justified in treating Rs. 47,996 as income of the assessee-firm from undisclosed sources ?"

It is contended by the learned counsel for the assessee that the amount was credited in the account books of the assessee in the names of third persons. In case the amount stands in he names of third persons, the onus of proof is not on the assessee to show the source of nature of the cash credit but it lies on the department to show by some evidence that the amount standing in the name of a third party does not belong to it but belongs to the assessee. He further submits that in the present case the department did not lead any evidence to how that the amount standing in the names of third persons, namely, Suhag Wanti, etc., in the account books of the assessee-firm belonged to the assessee. He also urges that unless there was any evidence to show that, in fact, the amount belonged to the assessee, the same could not be added to its income. On the other hand, the learned counsel for the revenue has vehemently urged that the burden of proof is on the assessee to show that the amounts deposited in its books belong to the persons in whose means they stand. If they fail to show, then the assessing authority can safely infer that the amount is liable to be taxed as an income in the hands of the assessee form undisclosed sources. The question argued by the learned counsel for the parties is not res integra. The same question came up before a Division Bench consisting of Subba Rao C.J. (as he then was) and Viswanatha Sastri J. of the Andhra Pradesh High Court in P. V. Raghava Reddy v.