COMMISSIONER OF INCOME TAX versus P. MOHANAKALA

Citation: [2007] 6 S.C.R. 680 · Decided: 15-05-2007 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

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 
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4-. 
c year as gifts on enquiry-Assessing Officer rejecting the explanation and 
treating the amounts as income of the assessee liable to income tax-
Commissioner of Income 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 of fact 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 
F income of the assessees under section 68 of the Income Tax Act, 1961. 
Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal 
.. 
upheld the findings of the Assessing Officer. The High Court allowed the 
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appeals of the assessees preferred under section 260A of the Act on the ground 
y 
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 
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substitution of its own findings; and that since the assessees failed to offer 
H 
680 
COMMNR. OF INCOME TAX, .. P. MOHANAKALA 
681 
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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 
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credited automatically cannot be treated as an income in the hands of the 
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assessees unless such a question is framed and answered that unexplained c 
cash credit was the income of the assessees. 
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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 F 
do not justify the sum found credited in the books to be treated as receipt of 
...,. 
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 

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