(a) Income Tax Ordinance (XXXI or 1979)---

----S. 62---Undisclosed income---While examining the books of accounts of the assessee, Assessing Officer noted a credit entry which was explained by the assessee to be advance deposits made by certain parties whose jobs were undertaken in subsequent year and advance payments received during the year under assessment were adjusted ---Assessee failed to establish that the said amount represented deposits made by other parties for jobs to be done in the subsequent year---Held, on the basis of the documents and evidence recorded, and Assessing Officer came to the right conclusion that the said amount represented undisclosed income of the assessee.

(b) Income Tax Ordinance (XXXI of 1979)---

----S. 62---Correct finding of the Assessing Officer based on material on record and sound reasoning was not liable to be set aside on the basis of the entries made in account books of the assessee in respect of subsequent years.

Rehan Hasan Naqvi for Applicant. Shaik Haider for Respondent.

Date of hearing: 16th March, 1992.

JUDGMENT

NASIR ASLAM ZAHID, J.---On the application of the applicant/assessee under section 130(1) of the Income Tax Ordinance, the learned Income Tax Tribunal has referred the following question for our opinion in respect of assessment year 1978-79 of the assessee:--

"Whether on the facts and circumstances of the case, the Appellate Tribunal had material on record to conclude that the amount of Rs.4,50,000 represented the applicant-assessee's undisclosed income?"

2. The relevant facts, as apparent from the statement of the case drawn up by the Tribunal, are that, while examining the books of accounts of the applicant/assessee for the assessment year in question, the Assessing Officer noted a credit entry of Rs.4,50,000 which was explained by the applicant to be advance deposits made by certain parties whose jobs were undertaken in subsequent year and the advance payments received during the year under assessment were adjusted. After making certain inquiries and hearing the applicant, the Assessing Officer held that the said amount was suppressed income earned by the applicant from processing of cloth but the same was shown by the applicant to be advances received from certain parties. The Assessing Officer noted that the names of the alleged customers who made the advances were not recorded in their respective ledger accounts. In the balance sheet also the names of the creditors were not mentioned. The said deposits having not been explained satisfactorily, the Assessing Officer added the aforesaid amount of Rs.4,50,000 as unexplained cash credit.

The matter was taken in appeal before the Appellate Assistant Commissioner, who set aside the order of the Assessing Officer on this point with the direction to the Assessing Officer that the books of accounts for the subsequent year may be examined so as to find out if the claim of the applicant was correct. Against this finding of the Appellate Assistant Commissioner, the department took the matter in further appeal before the Tribunal who allowed the appeal holding as follows:--

"On consideration of these facts we find that the learned counsel could not make out a case in favour of the respondent assessee to prove that the amount of Rs.4,50,000 did in fact represent deposit of the parties and were not unexplained cash credits. The judgment cited by the learned counsel also does not seem to be applicable on the facts of this case because the respondent failed to prove the very genuineness of the depositors and the deposits themsleves. Once the assessee fails to prove the genuineness of impugned deposits the aforementioned judgment becomes inapplicable. In fact, none of the arguments advanced by the learned counsel lend any support to the respondent assessee's case. So far as the issue of double taxation is concerned the assessing officer has himself mentioned that an amount of Rs.4,50,000 be reduced from the receipts of the subsequent year so as to avoid any implication of double taxation. We also agree with the department's view that the entries made by the assessee in a subsequent year should not be allowed to prove the genuineness of the impugned credits appearing in the books of the year under consideration. If the deposits were made by these parties in the normal course of business the assessee should have shown these amounts in their respective ledger accounts. All these facts lend support to the case of the assessing officer and there does not seem to be any room for setting aside the matter on this point and remitting the case to the Income Tax Officer to ascertain the genuineness, of the deposits with reference to the subsequent years books of accounts. We are therefore, clearly of the view 'that the learned Appellate Assistant Commissioner was not justified in setting aside the order on this point and hence we vacate his order and restore that of the Income Tax Officer:'

3. As observed, on the application of the Assessee under section 136(1) of the Income-tax Ordinance, the aforesaid question has been referred by the Tribunal to this Court for opinion. We have heard Mr. Rahan Hasan Naqvi, learned counsel for the applicant and Mr. Shaik Haider, learned counsel for the department.

4. From a perusal of the orders of the Assessing Officer and the Tribunal, it is established that the applicant could not at all substantiate its claim that the aforesaid credit entry of Rs.4,50,000 represented deposits of parties for work to be done by the assessee in the subsequent year. However, Mr. Rehan Hasan Naqvi, learned counsel for the applicant has only raised one point before us in respect of the contention that the Tribunal decided the question incorrectly. Learned counsel referred to the following observation in the order of the Tribunal:--

"So far as the issue of double taxation is concerned, the assessing officer has himself mentioned that an amount of Rs.4,50,000 be reduced from the receipts of the subsequent year so as to avoid any implication of double taxation."

According to the learned counsel, in the face of the aforesaid observation that an amount of Rs.4,50,000 is to be reduced from receipts of the subsequent years, it is established that the aforesaid amount was not income of the applicant during the assessment year in question but represented deposits received from its customers for jobs done in the subsequent year.

In the facts of this case, we find no merit in this contention. As observed, the applicant miserably failed to establish that the said amount represented deposits made by other parties for jobs to be done in the A subsequent year and on the basis of the documents and evidence recorded the Assessing Officer came to the right conclusion that the said amount represented undisclosed income of the applicant. The aforesaid observation of the Assessing Officer that the amount could be reduced from receipts of subsequent year would not render the earlier finding of the Assessing Officer incorrect or invalid. The Tribunal was correct in restoring the finding of the assessing officer on the point. We also approve the view of the Tribunal that a correct finding of the assessing officer based on material on record and sound e reasoning is not liable to be set aside on the basis of entries made in account books of the assessee in respect of subsequent years.

5. As a result, the question referred to us is answered in the affirmative.

There will be no order as to costs.

M.BA./P-243/K Question answered in the affirmative.