JUDGMENT V. Balakrishna Eradi, J. 1. The Income-tax Appellate Tribunal, Cochin Bench has referred to this court the following question of law under section 256 (1) of the Income-tax Act, 1961 (hereinafter referred to as the Act): "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in restoring the order of the Income-tax Officer with regard to the addition of Rs. 11,000 as income from undisclosed sources by holding that there was no burden on the department to establish that the intangible addition of Rs. 11,000 for the assessment year 1966 -67 was not available for subsequent credit?" 2. The assessee, an individual, was engaged in the business of operating passenger bus services and he had derived income from the said business during the relevant accounting period, namely the Malayalam year 1140 which ended on 16th August 1968. While completing his assessment for the year 1968-69 the Income-tax Officer noticed in the assessee's books certain cash credits amounting to Rs. 19,000 which, according to the assessee, represented sums borrowed from six persons mentioned in the accounts. Those parties were summoned by the Income-tax Officer and after considering the statements given by such of them who appeared before him, a long with the other materials available on record, the Income-tax Officer came to the conclusion that those parties were financially incapable of advancing such loans and that the explanation given by the assessee regarding the source of the credits could not be accepted as true. He therefore assessed the credits aggregating to Rs. 19,000 as income from other sources in the hands of the assessee for the year in question. 3. The assessee took up the matter in appeal before the Appellate Assistant Commissioner of Income-tax, Ernakulam. The Appellate Assistant Commissioner confirmed the finding of the Income-tax Officer that none of the parties shown as creditors in the assessee's books was in a position to make the advances and that the assessee had failed to prove the genuineness of the credits. Before the Appellate Assistant Commissioner the assessee put forward a new contention that in view of the fact that in the assessment made against him for 1966-67 an unexplained credit for Rs. Before the Appellate Assistant Commissioner the assessee put forward a new contention that in view of the fact that in the assessment made against him for 1966-67 an unexplained credit for Rs. 11,000 had been brought to tax treating it as his income from other sources, the said amount should be regarded as available with him during 1140 M.E. and set off against the cash credit figure of Rs. 19,000 in case the explanation furnished by the assessee that the cash credits represented genuine borrowings was found to be unacceptable. This plea appealed to the Appellate Assistant Commissioner as valid and tenable. He accordingly held that the aforesaid amount of Rs. 11,000 should be set off against the unexplained cash credits of Rs. 19.000 and directed that only Rs. 8,000 be added as the assessee's income from other sources in making the assessment for the year 1969-70. 4. Against the said order of the Appellate Assistant Commissioner the department filed an appeal before the Tribunal. The Tribunal agreed with the Income-tax Officer that the assessee had failed to discharge the burden that lay on him of proving the nature and source of the credits in question. The Tribunal held that merely on account of the fact that in making the assessment for an earlier year some amount had been added as undisclosed income derived by the assessee from other sources, the law does not cast any burden on the department to establish that the said amount was not available with the assessee during a subsequent accounting period and that even in such cases it is the duty of the assessee to explain the source of every credit noticed in his accounts for such subsequent period. In the opinion of the Tribunal, if the credits in question had really come out of the additions made in the earlier year, such an explanation would have been given by the assessee in the first instance itself before the Income-tax Officer and since that had not been done and the said plea was taken by the assessee for the first time only before the Appellate Assistant Commissioner it could have been only the result of an afterthought. In the light of the above conclusions arrived at by it, the Tribunal allowed the department's appeal, set aside the order of the Appellate Assistant Commissioner and restored that of the Income-tax Officer. In the light of the above conclusions arrived at by it, the Tribunal allowed the department's appeal, set aside the order of the Appellate Assistant Commissioner and restored that of the Income-tax Officer. On application made to it by the assessee under section 256 (1) of the Act the Tribunal has referred the aforesaid question of law for determination by this court. 5. According to the assessee's books of account the cash credits aggregating to Rs. 19,000 represented amounts borrowed by him from six different creditors on various specified dates. The names of the creditors and the dates of borrowings as given in the books of account have been extracted in the statement of case furnished by the Tribunal. The only explanation put forward by the assessee before the Income-tax Officer was that the book entries were true and that the credits represented genuine borrowings made from those parties. An enquiry was conducted by the Income-tax Officer into the truth of the said plea put forward by the assessee after issuing summons to the six persons shown as creditors in the assessee's books. On a consideration of all the materials including the statements given by such of those parties who appeared before him in answer to the summons, the Income-tax Officer came to the conclusion that those parties were financially incapable of advancing such loans and that hence the plea of the assessee could not be accepted as true. He accordingly held that in as much as the assessee had not satisfactorily explained the source of the credits the amount of Rs. 19,000 had to be assessed as representing the assessee's income from "other sources''. The Income-tax Officer's finding that the explanation furnished by the assessee that the amount represented genuine borrowings made by him from the six persons mentioned in the books could not be accepted as true was confirmed by the Appellate Assistant Commissioner. When the case came before the Tribunal the assessee totally gave up the said plea. The position therefore is that the only explanation that had been put forward by the assessee before the Income-tax Officer regarding the source of the credits has been found to be untrue. When the case came before the Tribunal the assessee totally gave up the said plea. The position therefore is that the only explanation that had been put forward by the assessee before the Income-tax Officer regarding the source of the credits has been found to be untrue. The question that falls to be decided is whether in such a case the mere fact that in making an assessment against the said individual for an earlier year an amount representing an unexplained credit had been treated as undisclosed income derived by the assessee from other sources would operate to cast a burden on the department to establish that the said amount was not available with the assessee during the subsequent period of account relevant to the present assessment so as to cover wholly or in part the credits noticed in the assessee's books of account for the period now under assessment. 6. It is contended on behalf of the assessee that in as much as a sum of Rs. 11,000 had been added to his income while making the assessment for the year 1966-67 on the ground unexplained cash credits the department was bound to treat the said amount for all purposes as income actually derived by the assessee during that year and proceed on the basis that it was available in the hands of the assessee during the subsequent years also unless there be evidence to show that the said amount had been either invested or expended by the assessee. According to assessee's counsel, in cases where such addition had been made to the income returned by the assessee in respect of a previous assessment year the assessee is relieved of the obligation to explain the source of any credits noticed in his book far a subsequent year to the extent to which they can be off set against the amount added in the earlier year and the burden is on the department to make out that the said amount was not actually available with the assessee during the relevant accounting period and that the credits cannot be legitimately regarded as having come out of that amount. We are unable to accept this contention. 7. We are unable to accept this contention. 7. It is well-established that when cash credits are found in the account books of the assessee for the relevant period of account it is the assessee who should give a satisfactory explanation in regard to those entries and if the explanation furnished by the assessee is found to be not acceptable those cash credit entries may be taken to represent the income that had accrued to the assessee during that year of account. This principle is in no way rendered inapplicable merely because it is found that the assessee had earned some undisclosed income in some year anterior to the period of account in respect of which an admission had been made in the course of his assessment for that year. If the assessee has a case that the cash credits noticed during the relevant accounting period have come out of the amount which had been added to his income for the earlier year it is undoubtedly open to him to put forward such a plea while furnishing his explanation about the source of the cash credits and in the event of any such plea being raised by the assessee the same will fall to be carefully considered by the assessing authority. While the fact of such an amount having accrued to the assessee as his income during the earlier year is undoubtedly a matter to be taken note of by the Income-tax Officer in considering the question whether the source of the cash credits has been satisfactorily explained by the assessee, the burden of proof rests squarely on the shoulders of the assessee to establish the truth and tenability of the explanation furnished by him. 8. Strong reliance was placed by the counsel for the assessee on two decisions of the Madras High Court reported in S. Kuppuswami Mudaliar v. Commissioner of Income-tax Madras (1964) 51 I.T.R. 757 and B. Abdul Quadir v. Commissioner of Income-tax, Madras (1964) 52 I.T.R. 364. Although some of the observations contained in those two rulings would prima facie appear to support the contention of the assessee it is manifest on a careful study of the judgments that those observations have to be understood as having been made against the background of the special facts of those cases. Although some of the observations contained in those two rulings would prima facie appear to support the contention of the assessee it is manifest on a careful study of the judgments that those observations have to be understood as having been made against the background of the special facts of those cases. In both those cases the fates and circumstances brought out in evidence were considered by the court as establishing that the so-called undisclosed income of the subsequent year could reasonably be held to relate to the sum which had been added and brought to tax as the undisclosed income of the assessee for the earlier year. We are unable to regard these decisions as laying down any general principle that in all cases where an addition has been made to the income of the assessee in making the assessment for an earlier year the amount so added should be presumed to be available in the hands of the assessee during subsequent years and that to that extent the assessee is relieved of the obligation to furnish an explanation regarding the source of cash credits appearing in his accounts for a subsequent accounting period. This court while considering a similar question which arose in I.T.R. No. 61 of 1965 had occasion to examine the scope of the aforesaid two decisions of the Madras High Court and observed thus: " We have been referred to two decisions of the Madras High Court in S. Kuppuswami Mudaliar v. Commissioner of Income-tax, Madras, reported in 1964 (51) I.T.R. 757 and B. Abdul Quadir v. Commissioner of Income-tax, Madras reported in 1964 (52) I.T.R. 364. We do not understand these decisions as laying down a principle that whenever an estimate had been made of income for any particular year the amount added by that estimate as income from the business disclosed and additions to income from undisclosed sources because of unexplained credits must be taken to be available with the assessee for being with the assessee. If these decisions imply the casting of any such, burden on the department with great respect we are unable to agree with that view." We are in complete agreement with the above observations. We find that a similar view has been expressed by the Madras High Court also in a later decision reported in S. Govindan Chettiar v. Commissioner of Income-tax, Madras A.I.R. 1966 Madras 263. 9. We find that a similar view has been expressed by the Madras High Court also in a later decision reported in S. Govindan Chettiar v. Commissioner of Income-tax, Madras A.I.R. 1966 Madras 263. 9. In the light of the above discussion we have no hesitation to reject the plea advanced by the assessee that the burden on the department to establish that the amount of Rs. 11,000 which had been added as the assessee's income from other sources for the assessment year 1966-67 was not available with the assessee during the accounting year 1140 M.E. 10. Before the Income-tax Officer the assessee had no case at all that any portion of the cash credits of Rs. 19,000 had come out of the aforesaid amount. On the other hand, the plea categorically put forward by him from six credits represented amounts borrowed by him from six creditors on the several dates shown in the accounts. The assessee attempted to prove that the parties, who were said to have advanced these loans, are persons of means and that the borrowings are genuine. After a consideration of the evidence adduced before him the Income-tax Officer came to the conclusion that the said case put forward by the assessee could not be accepted as true. Before the Appellate Assistant Commissioner the assessee shifted his stand and contended for the first time that the cash credits of Rs. 19,000 should be set off against the addition of Rs. 11,000 made for the assessment year 1966-67. There was no attempt at all made by the assessee to establish satisfactorily that, as a matter of fact, the said amount was available with him and that at least to some extent the cash credits had come out of the said amount. Instead, the stand taken by the assessee was that unless the department was able to show that the amount of Rs. 11,000 was not available in the hands of the assessee during the accounting period a set off to the extent of Rs. 11,000 had to be made from out of the aggregate amount of cash credits noticed in his accounts for 1140 M.E. This contention was rightly rejected by the Tribunal and it was held that there was no burden on the department to establish that a sum of Rs. 11,000 had to be made from out of the aggregate amount of cash credits noticed in his accounts for 1140 M.E. This contention was rightly rejected by the Tribunal and it was held that there was no burden on the department to establish that a sum of Rs. 11,000 had been spent away by the assessee and was not available to him for a subsequent credit. On the facts and circumstances of the case the Tribunal was fully justified in concluding that the assessee had failed to discharge the burden that lay on him of proving the nature and source of the credits. 11. In the result we answer the question referred to us in the affirmative, that is against the assessee and in favour of the department. The assessee will pay the costs of the department. Counsels fee Rs. 200. 12. A copy of this judgment under the seal of the High Court and the signature of the Registrar will be forwarded to the Appellate Tribunal as required by subsection (1) of section 260 of the Act.