ORDER
R.L. Sangani, Judicial Member
1. These two appeals by the department relate to the assessment years 1980-81 and 1981-82. The assessee is an individual. He carried on business of construction of buildings in the relevant accounting years which ended on 31-3-1980 and 31-3-1981 respectively. He also derived income from salary in those two years. In the trading account for the assessment year 1980-81, the assessee disclosed sales of Rs. 2,05,22,750 which included cash amount of Rs. 23,90,000. In the trading account for the assessment year 1981-82, he disclosed sales of Rs. 43,78,000, which included cash amount of Rs. 25,75,000. The submission of the assessee before the ITO was that the cash amounts in both the years represented amounts received in cash from the parties to whom the show-rooms have been sold, over and above, the price mentioned in the sale agreements, and as such, those amounts represented trading receipts of the business. The ITO requested the assessee’s representative to intimate the names of the parties from whom the each item of cash had been received. The assessee had died in 1980. The assessee’s representative stated that since the assessee had died, it was not possible to furnish the names of the parties from whom the said amounts had been received. The ITO treated the two amounts, vis. Rs. 23,90,000 and Rs. 25,75,000 as income from other sources under Section 68 of the Income-tax Act, 1961 and rejected the plea of the assessee that these amounts should be treated as part of the trading receipts. The assessee filed appeals before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) relied on certain decisions. He found that the above amounts appeared in the books of account of the business of the assessee and that the said amounts had been credited by the assessee to the sales account. The assessee had no income from any other source except business and salary and since the amounts involved were big they could have only be earned from business of construction. The Commissioner of Income-tax (Appeals) noted that in the business of sales of flats and show-rooms, there was widespread practice of charging on money and therefore, there was every like-lihood that the assessee had received these amounts in cash, over and above, the said price mentioned in the agreements. Taking’ into account all these facts, and considering the principles laid down in several decisions, the Commissioner of Income-tax (Appeals) held that the said amounts were liable to be assessed under the head income from business or profession and not under the head income from other sources. He, therefore, directed the Income-tax Officer to assess the said amounts under the head Income from business. The department is now in appeal before us and the common ground for both the years is that the Commissioner of Income-tax (Appeals) had erred in directing the Income-tax Officer to treat the said sums of Rs. 23,90,000 and Rs. 25,75,000 as income from business or profession and not as income from other sources as had been assessed by the Income-tax Officer.
2. We have heard the parties. Section 68 of the Income-tax Act, 1961, on which the Income-tax Officer has relied lays down that where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. In the present case, the assessee has offered an explanation about the nature and source of the sums credited in the books of the assessee. It is submitted on his behalf these cash amounts were received as price of the showrooms sold and that they represented amounts which were, over and above, the amounts mentioned in the agreements with the purchasers. There was absolutely no reason to disbelieve the said explanation. Consequently, the amounts in question should have been treated as trading receipts as pleaded by the assessee.
3. Even if we hold that the explanation of the assessee about the nature and source of those amounts was not satisfactory, as has been held by the Income-tax Officer, the only consequence thereof would be that sums credited in the books of the assessee would be liable to be charged to income-tax, as the income of the assessee of the previous year in which the books were maintained. Section 68 does not expressly state as to under what head the said income should be assessed. Section 68 is silent about the head under which the said income should be assessed. Consequently, the assessing authority has to look to the surrounding circumstances in order to determine as to under what head the said income should be assessed.
4. In the present case, the admitted fact is that the assessee had two sources of income, one was salary and the other was business of construction and selling of show-rooms in question. There was no other major source of the income of the assessee. The business of construction and selling of flats and show-rooms involved huge turnover. The assessee has filed the paper book giving details of the parties to whom the show-rooms have been sold and the dates of agreements with those parties. The assessee has also given in the paper book the details about the dates on which the cash amounts have been received. He has also filed the balance sheets. The sums in question have been credited in the books of account maintained for the business of construction. In the circumstances, the natural presumption would be that those sums represented income from the business of construction and selling of flats and show-rooms. On the facts of the present case, the presumption would not be that the amounts in question represented income from other sources.
5. In Lakhmichand Baijnath v. CIT [1959] 35 ITR 416, the Supreme Court has observed that when an amount is credited in the business books, it is not an unreasonable inference to draw that it is a receipt from business. It was also observed that as the credits were found in the business accounts of the assessee and the explanation as to how the amounts came to be received was rejected by the Income-tax authorities, the Income-tax authorities were entitled to treat the credits as business receipts chargeable to tax. In Daulatram Rawatmull v. CIT [1967] 64 ITR 593, it has been held by the Calcutta High Court that where a credit entry is found in the business accounts of an assessee and the explanation as to how the amount came to be received is rejected by the Income-tax authorities and the amount is taken to be income from an undisclosed source, such income can be treated as business income, if the assessee has no other source of income.
Similar view has been taken by the Calcutta High Court in Mansfield and Sons v. CIT [1963] 48 ITR 254. In Nalinikant Ambalal Mody v. S.A.L. Narayan Row, CIT [1966] 61 ITR 428, the Supreme Court has held that whether an income falls under one head or another has to be decided according to the common notions of practical man because the Act does not provide any guidance in the matter.
6. On the basis of the principles laid down in these decisions irresistible inference in the present case on the facts found is that the amounts in question represented income from business of construction and selling flats and show-rooms and not income from other sources. The Commissioner of Income-tax (Appeals) was justified in directing the Income-tax Officer to treat the amounts as income from business and not as income from other sources.
7. The appeals are dismissed.