Holding

The Supreme Court held that the Assessing Officer’s application of Section 68 was proper and that the High Court erred in re‑appreciating evidence, so the revenue’s appeal was allowed.

Summary

The assessees received large cash credits from a foreign donor and claimed them to be gifts. The Assessing Officer rejected this explanation, treating the amounts as income under Section 68 of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal upheld this assessment, but the Madras High Court, invoking Section 260A, set aside the findings of fact and allowed the assessees' appeals. The Supreme Court held that the Assessing Officer’s opinion was based on a proper appreciation of material and that the High Court exceeded its jurisdiction by re‑appreciating evidence and disturbing concurrent findings of fact. Consequently, the revenue’s appeal was allowed and the assessment upheld.

Issues considered

Whether the Assessing Officer was correct in invoking Section 68 to treat the foreign cash credits as income when the assessees' explanation was unsatisfactory.
Whether the burden of proof under Section 68 lies on the assessee and whether it was discharged.
Whether the Tribunal’s conclusion that the alleged gifts were not genuine was reasonable and based on material evidence.
Whether the High Court exceeded its jurisdiction under Section 260A by re‑appreciating evidence and disturbing the concurrent findings of fact.
Whether any substantial question of law arose that justified the High Court’s interference.

Legislation cited

Income Tax Act, 1961s. 260A, s. 68, s. 69

Subjects

Income TaxSection 68Cash creditsForeign giftsBurden of proofAssessment yearHigh Court jurisdictionSection 260ARe‑appreciation of evidenceTax assessment

Judgment

A COMMISSIONER OF INCOME TAX
v.
P. MOHANAKALA

MAY 15, 2007

B [S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ.)

Income Tax Act, 1961-Sections 68 & 260A-Cash Credits-Assessee
~
claiming amounts received from a foreign donor during relevant assessment 4-. "
year as gifts on enquiry-Assessing Officer rejecting the explanation and
c treating the amounts as income of the assessee liable to income tax-
Commissioner ofIncome Tax (Appeals) and·Tribunal upholding the assessment
made by the Assessing Officer-High Court reappreciating the evidence and
allowing the appeal of the assessee-Correctness of-Held, on facts, the
opinion of the Assessing Officer in treating the amounts received by the
D assessee as income of the assessee was based on materials on record and
surrounding circumstances-Hence, the assessee is liable to income tax on
the amounts received-High Court erred in re-appreciating the evidence and .,.
setting aside concurrent findings offact without there being any substantial
question of law involved.

E Respondents-assessees received different amounts from a foreign donor
during relevant assessment years through banking channels. On enquiry by
Revenue about the nature of cash credits entries in their books of account,
the assessees claimed the amounts as gifts received from the donor. Assessing
Officer rejected the explanation of the assessees and treated the amounts as
income of the assessees under section 68 of the Income Tax Act, 1961.
F
Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal
upheld the findings of the Assessing Officer. The High Court allowed the .. ..
y
appeals of the assessees preferred under section 260A of the Act on the ground
that the reasons assigned by the Tribunal and lower authorities are in the
realm of surmises, conjectures and suspicions.
G
In appeal to this Court, the appellant-Revenue contended that the High
Court exceeded its jurisdiction under section 260A of the Act by disturbing
the concurrent findings of fact through re-appreciation of evidence and }-
substitution of its own findings; and that since the assessees failed to offer

H 680
COMMNR. OF INCOME TAX,.. P. MOHANAKALA 681
-". reasonable explanation about the nature of the cash credits in the books of A
accounts, the cash credits were treated as income of the assessees under
section 68 of the Act.

Respondents-assessees contended that the High Court did not exceed
its jurisdiction or committed any error in arriving at proper conclusion based
on the evidence available on record; that the conclusions of the lower B
authorities were based on surmises, conjectures and suspicion; that improper
inference drawn from proven facts definitely gives rise to substantial questions
of law; and that even if the explanation offered is not acceptable, the amounts
credited automatically cannot be treated as an income in the hands of the
..+--
""
assessees unless such a question is framed and answered that unexplained
cash credit was the income of the assessees.
c
Allowing the appeals, the Court
""'"
HELD: 1.1. The expression "the assessee offers no explanation" under
section 68 of the Income Tax Act, 1961 means where the assessees offer no
D
proper, reasonable and acceptable explanation as regards the sums found
..,. credited in the books maintained by the assessees. The opinion of the
Assessing 0 fficer for not accepting the explanation offered by the assessees
as not satisfactory is required to be based on proper appreciation of material
-.,..
and other attending circumstances available on record. The opinion of the
Assessing Officer is required to be formed objectively with reference to the E
material available on record. Application of mind is the sine qua non for
forming the opinion. [Para 15] (688-A, BJ

1.2. The assessees did not take the plea that even if the explanation is
not acceptable, the material and attending circumstances available on record
do not justify the sum found credited in the books to be treated as receipt of F
...,. an income nature. The burden in this regard was on the assessees. No such
'f
attempt has been made before any authority. In cases, where the explanation
offered by the assessee about the nature and source ofsums found credited
in the books is not satisfactory there is, prima facie, evidence against the
assessee, viz. the receipt of money, the burden is on the assessee to rebut the G
same, and if he fails to rebut, it can be held against the assessee that it was
a receipt of an income nature. [Paras 23 and 18) [691-E, F, G; 689-D, E)

--\ Sumati Dayal v. Commissioner ofIncome Tax, Bangalore, (1995) Supp.
- 2 SCC 453; Commissioner ofIncome T(L....v. Smt. P. K Noorjahan, (1999) 237
ITR 570; K.S. Kannan Kunhi v. Commissioner ofIncome Tax, Kera/a, (1969) H
682 SUPREME COURT REPORTS (2007] 6 S.C.R.

A 72 ITR 757; Commissioner of Income Tax, U.P. Bharat Engineering &
Construction Co., (1972) 83 ITR 187; Commissioner ofIncome Tax, Orissa v.
Orissa Corporation P. Ltd, (1986) 159 ITR 78 and Commissioner of Income
Tax, Bombay City II v. Deviprasad Khandelwal & Co. Ltd., (1971) 81 ITR
460, referred to.

B 1.3. The Assessing Officer found that the gifts were not real in nature.
Various surrounding circumstances have been relied upon by the Assessing
Officer to reject the explanation offered by the assessees. The Commissioner
of Appeals confirmed the findings and conclusion drawn by the Assessing
Officer. The Tribunal concurred with the findings of fact. The findings are
C based on material available on record and not on any conjectures and surmises.
They are not imaginary as sought to be contended. The findings offact arrived
at by the authorities.below are based on proper appreciation of the facts and
the material available on record and surrounding circumstances. The doubtful
nature of the transaction and the manner in which the sums were found
credited in the books of accounts maintained by the assessee have been duly
D taken into consideration by the authorities below. The transactions though
apparent were held to be not real one. No question of law much less any
substantial question of law had arisen for consideration of the High Court.
The High Court misdirected itself and committed error in disturbing the
concurrent findings of facts. (Paras 24, 25 and 26) (691-G; 692-A, C, D, E)
E Bejoy Gopa/ Mukherji v. Pratu/ Chandra Ghose, AIR (1953) SC 153
and Mis Orient Distributors v. Bank ofIndia Ltd. & Ors., AIR (1979) SC 867,
referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2540 of2007.
F From the Final Judgment and Order dated 20.03.2006 of the High Court
of Judicature at Madras in Income Tax Appeal No. 78 of 2002.

WITH

C.A. Nos. 2541, 2542, 2543, 2544, 2545, 2546, 2547 of2007.
G
G.E. Vahanvati, S.G., Dr. R.G. Padia, Sr. Adv., O.P. Srivastava, Hrishikesh
Barna, and B.V. Balaram Das for the Appellant.

T.L.V.
... Iyer, Gopalakrishnan, R., Subramonium Prasad for the Respondent. f.-
H The Judgment of the Court was delivered ?Y
COMMNR.OFINCOMETAX•.P.MOllANAKAL\[B.SUDERSllANREDDY,l.) 683

B. SUDERSHAl'I REDDY, J. I. Leave granted..
,___ - ..... ,. ~
A
2. These fill?ials have_!>een !'led _against th!J,udgment of Madras High
Court dated 29.f~06 in rC:tAJ ms.
74 to ftall{!fa to 82 of2002 whereb~ _
the following questions have been answered by th~ High Court in favour ,of_,;..:~
th: asseSs~eS:and against the reve~ue:
. - ,. . J . 3:-;;_
.,..~·'. ,leg--·~- ,.
-~·"(a) Whether in the facts .;;,d circumstant'es, the Income Tax Appellate
.·,:~ -Tribunal w;s·"co'r~ect iii law to accept the prin<;iple of
/..-· preponderar(e'of probabilities in holding that the c_~m of..!he_
~ appellant t!lac the sum of Rs. 15,62,500/-" received hi.Jn_by w~of
-.>- gifts through normal Banking Channels was not ~.liuine :'an"Utat
it was liable to be '.15Sessed under Section 68 of~e Ini:OO.eq.ax C
Act, 1961? • ;
(b) Whether in the light of the law established and based on the
facts and in the circumstances of the cas·~. the learned Income
Tax Appellant Tribunal is legally justilled in concluding that
burden of proof cast on the appellant under Section 68 of the D
Income Tax Act, 1961 has not been discharged and the iiigredients
for invoking section 68 of the Income T'f Act are pr;sent?
(c) ·Whether in the facts and circumstances of the case, the qmclusion
of the· Tribunal that the claim of gift is not genuine is reasonable
and based on relevant material and not perverse? E
These appeals relate to the assessment years 1995-96 and 1996-97. The dispute
in all these appeals essentially relates to the addition made by the Assessing
Officer in respect of several foreign gifts stated to have been received by the
assessees from one common donor namely Sarnpath Kumar. The gifts received
were from one Ariavan Thotan and Suprotoman. It is during the enquiry by F
the Revenue it is asserted that they were the aliases of Sarnpathkumar. These
..,. gifts were made to A. Srinivasan and his wife, Smt. S. Kalavathy, his son, S.
T Balaji Manikandan and to one of his brothers, Rajendran andSmt Mohanakala
Each one of them is an assessee within the jurisdiction of.~. appellant. The
foreign gifts are received by the assesses during the assessment years 1993- G
94 to 1996-97. The detail of the gifts received by each one of the assessees
is as under.

• This amount very in each assessce's case.
H
684 SUPREME COURT REPORTS (2007) 6 S.C.R.

A Assessment years

Shri/Smt. 93-94 94-95 95-96 96-97

A. Srinivasan 6,40,758 14,46,933 26,47,647 8,64,500

B S. Kalavathy 1,47,797 16,19,679 21,82,847 1,550,00

S. Balaji Manikandan 84,423 5,68,015 21,85,604 8,64,500

A. Rajendran 15,62,500
c R. Mohanakala 15,62,500

8,72,978 36,34,627 101,41,098 32,79,000

3. In all the aggregate gifts received by the assessees is to the extent
D of Rs. 1,79,27,703/-. 'The Assessing Officer did not accept the explanation
offered by the respective assessees that the amount of credit is a gift from
NRI and proceeded to add it as the income of the assessees from undisclosed
sources. The credit entries have been made during the period from 8.7.1992 ..-
to 19.10.1995. There is no dispute that the payments were made by instruments
issued by a foreign bank and credited into the respective assessee's account T
E by negotiation through a bank in India. Most of the cheques sent from abroad
were drawn on Citibank, N.A. Singapore.

4. The Assessing Officer dealt with the controversy as regards the cash
credit entries received from the foreign donor. He noticed that the gifts have
F been sent in the name of Ariavan Thottan and received by A. Srinivasan and
others who are all his family members. Each one of them is an individual
assessee.
l'
5. That all the assessees were summoned and their statements have ·y

been recorded by the Assessing Officer. Srinivasan who is the key person in
G his statement said that he knew Sampathkumar for the last 20 years and he
had been helping Sampathkumar prior to 1985 by paying Rs. 100/- to 200/-
every month as he had no source of income to get himself educated.

·6. There are material inconsistencies in the statements made by other
assessees which we are not required to notice in detail. Sampathkumar in his J..-
H own statement stated that he was in Indonesia up to the year 1992 and
COMMNR OF INCOME TAX v. P. MOHANAKALA [B. SUDERSHAN REDDY,J.] 685

employed as an Eogiqeer. Thereafter, he shifted to England and started A
consultancy profession there. Later in the end of the year 1994-95, he joined
New Century Machinery Ltd. Cheshire, SK 16 4xS and became its director in
1996. It is in his statement that he is paying taxes in England from his income
earned in England. As far as his Indian income is concerned, he stated that
he filed the returns for the assessment years 1996-97 & 1997-98 before the B
Income Tax Officer, Ward 1(4), CBE only on 23rd October, 1997. His investment
in Indian companies according to him will be around for Rs. 5 crores and made
out of his income earned in the foreign countries. He did not reveal the details
of his bank account in India and stated that he would be submitting the
details through his auditor which he did not. Except the self serving statement
there is no material evidence as regards his financial status. He stated from C
1972-73 he knew Srinivasan, Rajendran and their families. His father was a taxi
driver, and was very poor. Srinivasan and his family members were supporting
him when he was in India. To a pointed query as to whether there is any
evidence to show that he was also known by any other name other than
Sampathkumar, he stated that "no evidence. Only Mr. Srinivasan used to call
me as Suprotoman." D

7. The Assessing Officer after an elaborate consideration of the material
available on record and the statements of the assessees and as well as that
of Smapathkumar noted that all the gifts were received from Ariavan Thotan
and Suprotoman. It is only after the enquiries by the department, it was E
informed by letter dated 25.4.1996 that Ariavan Thotan and Suprotoman are
one and the same person. Even at that time, no mention was made about
Sampathkumar. For the first time Sampathkumar's name figured in the letter
dated 30.08.1996 and thereafter it was stated that the names of Ariavan
Thotan and Suprotoman are the other names of Sampathkumar. The Assessing
Officer while appreciating the contents of the letters brought on record came F
to the conclusion that Smpathkumar had obliged in giving 'gifts' to Srinivasan
and his family members. It is further held that in all probabilities Sampathkumar
may have received compensatory payments in lieu of the gifts made by him.
The letters according to the Assessing Officer suggest that Sampathkumar
reserved his right to receive suitable compensation from the respondents- G
assessees. The Assessing Officer in the circumstances came to the conclusion
that the gifts though apparent are not real and accordingly treated all those
amounts credited in the books of assessees as the income of the assessees.

8. On appeal the Commissioner of Income Tax concluded that the story
set up by the assessees is unacceptable and hard to believe and the H
686 SUPREME COURT REPORTS [2007) 6 S.C.R.

A "preponderance of probabilities, the common course of human livings point .....
to the contrary". The appeals were accordingly dismissed.

9. There was difference of opinion between two members of the Tribunal
and the matter has been referred by the President, Income Tax Appellate
Tribunal under Section 255 (4) of the Income Tax Act, 1961 (for short 'the
B Act') to the Senior Vice President to resolve the difference of opinion. In order
to resolve the difference of opinion the Tribunal (through its Sr. Vice President)
re-appreciated the entire material available on record and reheard the matter.
The Senior Vice President concurred with the findings and conclusions arrived
at by the Assessing Officer and the Commissioner oflncome Tax. The Tribunal
noticed that the letters exchanged "by the person who had sent foreign
'
-(
c exchange to the assessees only indicate that there is no love and affection
between them and that he is clearly materialistic and his statement of accepting
a reciprocation is also an indication to the fact that he is not doing anything
free but clearly the compensation was a round about manner of showing of
he having been compensated either in India or abroad." The Tribunal also
D took note of the various other attending circumstances and found it difficult
to accept the explanation offered by the assessees.
-or
10. We may at this stage profitably note that the Assessing Officer, the
Commissioner of Appeals and the Tribunal in one voice held that the ·y
explanation offered by the assessees as regards cash credit entries is not
E acceptable. The material and the evidence available on record according to
each one of the authorities lead to one and only possible inference that the
so-called gifts received by the assessees in reality are no gifts.

11. The High Court vide the impugned judgment in exercise of its
jurisdiction conferred upon it under Section 260(A) of the Act reversed the
F finding of fact and allowed the appeals. The High Court virtually re-appreciated
the evidence available on record and substituted its own findings for that of ...
the Tribunal and the other authorities. The High Court came to the conclusion T
that the reasons assigned by the Tribunal and other authorities "are in the
realm of surmises, conjectures and suspicions the authorities under the Act
G have failed to draw the only conclusion that is possible legally and logically."
The judgment of the High Court is assailed in these appeals.

12. The learned Solicitor General strenuously contended that the
approach adopted by the High Court is totally erroneous. The High Court in j, -
exercise of its jurisdiction under Section 260(A) of the Act may interfere with ._
H the order of the Tribunal provided substantial question of law arises for its
.A
/;
COMMNR. OF INCOMETAX v. P MOHANAKALA [B. SUDERS HAN REDDY,!.] 687

consideration. Re-appreciation of evidence and substitution of the findings A
by the High Court is impermissible. The High Court exceeded its jurisdiction
in disturbing concurrent findings of facts. The learned Solicitor General further
contended that once explanation offered by the assessees is found
unsatisfactory, the sums credited in the books are to be charged to income-
tax as the income of the assessees. Duty is heavily cast upon the assessees B
to offer reasonable explanation as regards the nature and source of the
amounts found credited in the books maintained by the assessees.

13. Shri T.L.V. Iyer, learned Senior Counsel appearing on behalf of the
respondents-assessees submitted that the High Court did not exceed its
jurisdiction in any manner whatsoever nor committed any error in arriving at C
proper conclusion based on the evidence available on record. The conclusions
drawn by the authorities below including the Tribunal were based on surmises,
conjectures and suspicion which cannot be equated to that of findings based
on evidence. Improper inference drawn from proven facts definitely gives rise
to substantial question of law. It was also contended that even if the D
explanation offered by the assessees is not acceptable the amounts credited
automatically cannot be treated as an income in the hands of the assessees
unless such a question is framed and answered that unexplained cash credit
was the income of the assessees.

14. In order to appreciate the contentions urged before us it would be E
appropriate to notice Section 68 of the Act which is re-produced:

Cash credits.

68. Where any sum is found credited in the books of an assessee
maintained for any previous year, and the assessee offers no explanation F
about the nature and source thereof or the explanation offered by him is not,
in the opinion of the Assessing Officer, satisfactory, the sum so credited may
be charged to income-tax as the income of the assessee of that previous year.

15. The question is what is the true nature and scope of Section 68 of
the Act? When and in what circumstances Section 68 of the Act would come G
into play? That a bare reading of Section 68 suggests that there has to be
credit of amounts in the books maintained by an assessees; such credit has
to be of a sum during the previous year; and the assessees offer no explanation
about the nature and source of such credit found in the books; or the
explanation offered by the assessees in the opinion of the Assessing Officer H
688 SUPREME COURT REPORTS (2007] 6 S.C.R.

A is not satisfactory, it is only then the sum so credited may be charged to
income-tax as the income of the assessees of that previous year. The expression
"the assessees offer no explanation" means where the assessees offer no
proper, reasonable and acceptable explanation as regards the sums found
credited in the books maintained by the assessees. It is true the opinion of
B the Assessing Officer for not accepting the explanation offered by the
assessees as not satisfactory is required to be based on proper appreciation
of material and other attending circumstances available on record. The opinion
of the Assessing Officer is required to be formed objectively with reference
to the material available on record. Application of mind is the sine qua non
for forming the opinion.
c
16. In Sumati Dayal v. Commissioner of Income Tax, Bangalore, [1995]
Supp. 2 SCC 453 this Court held:

"In all cases in which a receipt is sought to be taxed income, the
burden lies on the Department to prove that it is within the taxing
D provision and if a receipt is in the nature of income, "the burden of
proving that it is not taxable because it falls within exemption provided
by the Act lies upon the assessee. But, in view of Section 68 of the
Act, where any sum is found credited in the books of the assessee
for any previous year the same may be charged to income tax as the
E income of the assessee of that previous year if the explanation offered
by the assessee about the nature and source thereof is, in the opinion
of the Assessing Officer, not satisfactory. IN such a case there is,
primafacie, evidence against the assessee, viz., the receipt of money,
and if he fails to rebut, the said evidence being unrebutted, can be
used against him by holding that it was a receipt of an income
F nature."

(emphasis supplied) ..
17. In that case the amount was credited in the capital account in the
G books and the assessee offered her explanation about the said receipt being
her winnings from horse races. The explanation was not accepted. There was
no dispute that the amount was received by the assessee from various race
Clubs on the basis of winning tickets presented by her. This Court based on
the material available on record found _that an inference about such a purchase
has to be drawn on the basis of the circumstances available on record
H inasmuch as no direct evidence about such purchase be rarely available. This

-
COMMNR. OF INCOME TAX v. P. MOHANAKALA [B. SUDERS HAN REDDY, J.] 689

Court accordingly upheld the majority opinion of the Settlement Commission A
based on surrounding circumstances and applying the test of human
probabilities. This authoritative pronouncement in our considered opinion is
the complete answer to reject the submissions made by the learned senior
counsel on behalf of the respondents.

18. In Commissioner of Income-Tax v. Smt. P.K. Noorjahan, (1999) 237 B
IT 570, this Court while construing Section 69 of the Act observed that the
intention of Parliament in enacting Section 69 was to confer a discretion on
the Income Tax Officer in the matter of treating the source of investment
which has not been satisfactorily explained by the assessee as the income of
the assessee and the Income Tax Officer is not obliged to treat such source C
of investment as income in every case where the explanation offered by the
assessee is found to be not satisfactory. "The question whether the source
of the investment should be treated as income or not under Section 69 has
to be considered in the light of the facts of each case. The contention of Shri
Iyer was that the ratio of the decision would equally be applicable to interpret
Section 68 of the Act. There is no dispute about the same but the assessees D
in no manner raised any plea that even if their explanation is not acceptable
the same cannot be treated as an income in their hands. In cases where the
explanation offered by the assessee about the nature and source of sums
found credited in the books is not satisfactory there is, prirna facie, evidence
against the assessee, viz; the receipt of money, the burden is on the assessee E
to rebut the same, and if he fails to rebut it can be held against the assessee
that it was a receipt of an income nature. The alternative submission made
by Shri Iyer before us would not help the assessees in this case in hand.

19. In K.S. Kannan Kunhi v. Commissioner of Income Tax, Kera/a,
( 1969) 72 !TR 757, the High Court came to the conclusion that the Income Tax F
Officer and the Appellate Assistant Commissioner have not considered the
acceptability otherwise of the assessee's explanation about the credit nature,
except making an assertion that it was not acceptable. On the facts it was held
that whether it should be inferred that the amounts constituted income of the
previous year, though the explanation offered by the assessee was not
acceptable, did not receive the consideration of the authorities. On the facts G
the findings of the Tribunal were held not valid. The decision does not show
that it is the duty of the Assessing Officer to suo motu make an enquiry even
in the absence of any plea and rebuttal by the assessee. This decision is
required to be understood in the light of the ratio of the judgment in Sumati
Dayal (supra). H
690 SUPREME COURT REPORTS [2007) 6 S.C.R.

A 20. In Commissioner of income Tax, U.P Bharat Engineering & >-
Construction Co. (1972) 83 ITR 187, the facts are that the Tribunal itself found
that the cash credit entries could not represent the ~or profit of the
assessee as they were all made very soon after ~~see ~
commencecfitL --
activities. This Court observed in the circumstances Ii would be reasonable
to assume that those cash credit entries were 6pitaf receipts. It is held that
B in the absence of satisfactory explanation 'iif" the assessee the Income Tax
Officer may assume tha! cash credit entries in its books represent income from
undisclosed sources. But what mference should be drawn from the facts
proved is a question of fact and th~J!ibunal's finding OR that question is "
final. We are unable to appreciate as fO how the sa.i9 judgment renders any ..(
C assistance and supports the contention urged by the le~ed counsel for the
assessees.

21. In Commissioner of income Tax, Orissa v. Orissa Corporation P.
Ltd., (1986) 159 ITR 78, the Income tax Officer did not accept the assessee's
accounts showing cash credits which were shown to have been received by
D way of loans from three individual creditors. The I.ncome Tax Officer treated
the entire amount as unproved cash credit and added the same to the income
of the assessee. On appeal the Tribunal took the view that the assessee could
not produce those persons alleged to be creditors, but it did not follow
automatically and an adverse inference should be drawn that the amount
E represented undisclosed income of the assessee. The creditors were themselves
income tax assesses. and while being assessed, they had made statements
before the respective Income Tax Officer admitting that they were allowing
their names to be lent without giving loans as creditors of different assessees.
In those circumstances, the Tribunal came to the conclusion that the assessee
had discharged the burden that lay on him. This Court held that the Tribunal's
F conclusion was not unreasonable or perverse or based on no evidence and
accordingly further held that no question of law as such had arisen for
consideration.

22. In Commissioner of Income tax, Bombay City 11 v. Deviprasad
Khandelwal & Co. Ltd., (1971) 81ITR460, the Bombay High Court took the
G view that in every case where the Income Tax Officer rejects the explanation
submitted by an assessee in respect of unexplained cash credits in his books
of accounts, a finding against the assessee must be made that the cash credit
entry represents the assessee' s income from undisclosed sources. After the f.. _
Tax Authorities reject the explanation submitted by the assessee the further
H question that must always arise for decision would be, "whether it could
COMMNR. OF IN COMETAX"· P MOHANAKALA [B. SUDERS HAN REDDY,J .) 691

justly, in the facts and circumstances of the case, be held that the unexplained A
cash credit was the income of the assessee." The Tribunal in that case on
the basis of evidence and surrounding circumstances even after disbelieving
the explanation of the assessee still held that it cannot be held to be the
income of thiiassessee. The said finding was held to be a finding of fact not
to be interfered with by the High Court.
B
23. It is true that even after rejecting the explanation given by the
assessees if found unacceptable, the crucial aspect whether on the facts and
.. , circumstances of the case it should be inferred the sums credited in the books
>-- ~ of the assessees constituted income of the previous year must receive the
-~ consideration of the authorities provided the assessees rebut the evidence C
• and the inference drawn to reject the explanation offered as unsatisfactory.
We are dquired to notice that Section 68 of the Act itself provides, where
any sum is found credited in the books of the assessees for any previous year
the same may be charged to income tax as the income of the assessees of
the previous year if the explanation offered by the assessees about the nature
and source of such sums found credited in the books of the assessees is in D
the opinion of the Assessing Officer not satisfactory. Such opinion found
itself constitutes a prima facie evidence against the assessees, viz., the
receipt of money, and ifthe assessees fail to rebut the said'evidence the same
can be used against the assessees by holding that it was a receipt of an
income nature. In the case in hand the authorities concurrently found the E
explanation offered by the assessees unacceptable. The authorities upheld
the opinion formed by the Assessing Officer that the explanation offered was
not satisfactory. The assessees did not take the plea that even ifthe explanation
is not acceptable the material and attending circumstances available on record
do not justify the sum found credited in the books to be treated as a receipt
of an income nature. The burden in this regard was on the assessees. No such F
attempt has been made before any authority. All the decisions cited and
referred to hereinabove are required to be appreciated and understood in the
light of the law declared by this Court in Sumati Dayal (supra).

24. Whether the High Court was justified in interfering with the
concurrent finding of fact arrived at by all the authorities including the G
Tribunal? The Assessing Officer found that all the so-called gifts came from
Ariavan Thotan and Suprotoman. The assessees did not declare that they are
the alias of Sampathkumar. It is only an afterthought they have come forward
with the said plea. The Assessing Officer also found that the iifts
were not
real in nature. Various surroundings circumstances have been relied upon by H
692 SUPREME COURT REPORTS [2007] 6 S.C.R.
A the Assessing Officer to reject the explanation offered by the assessees. The
Commissioner of Appeals confirmed the findings and conclusion drawn by
the Assessing Officer. The Tribunal speaking though its Senior Vice President
concurred with the findings of fact. The findings in our considered opinion
are based on the material available on record and not on any conjectures and
surmises. They are not imaginary as sought to be contended.
-
B
25. Relying on the decisions of this Court in Bejoy Gopal Mukherji v.
Pratul Chandra Ghose, AIR (1953) SC 153 & Mis Orient Distributors v. Bank
of India Ltd. & Ors.. AIR (1979) SC 867, Shri Iyer, learned senior counsel
contended that issue relating to the propriety of legal conclusion that could
be drawn on basis of proved facts gives rise to a question of law and,
C therefore, the High Court is justified in interfering in the matter since the
authorities below failed to draw a proper and logical inference from the proved
facts. We are unable to persuade ourselves to accept the submission. The
findings of fact arrived at by the authorities below are based on proper
appreciation of the facts and the material available on record and surrounding
D circumstances. The doubtful nature of the transaction and the manner in
which the sums were found credited in the books of accounts maintained by
the assessee have been duly taken into consideration by the authorities ...
below. The transactions though apparent were held to be not real one. May
be the money came by way of bank cheques and paid through the process
of banking transaction but that itself is of no consequence.
E
26. No question of law much less any substantial question of law had
arisen for consideration of the High Court. The High Court misdirected itself
and committed error in disturbing the concurrent findings of facts.

27. No other point is urged.
F
28. The appeals preferred by the Revenue Department deserve to be
allowed and they are accordingly allowed.

29. No costs.

G B.S. Appeal allowed.