This appeal filed by assessee for assessment year 1978-79 has three grounds. main ground is in regard to inclusion of Rs. 1,02,000 as income from undisclosed sources. facts, as observed by ITO in his order, are: 2. assessee's sources of income are from horse racing, share of profit from firm Tulshan Enterprises. In year, assessee had declared high denomination notes of Rs. 1,02,000 on 19-1-1978. survey was conducted in assessee's premises on 23-9-1980, at which time assessee had given statement regarding high denomination notes. It was stated that Rs. 1,25,000 was received from firm in which he is partner which included 102 high denomination notes of Rs. 1,000 each. It was also explained that firm Tulshan Enterprises was carrying on business of advancing loans to parties. ITO was not satisfied with reasonings advanced by assessee and since addition was over Rs. 1 lakh, he made draft order under section 144B of Income-tax Act, 1961 ('the Act'). 3. IAC considered objections of assessee filed against draft order. IAC in his directions to ITO, observed thus: In declaration made on 19-1-1978 tendering high denomination notes, reasons stated are 'Business contingency, requirements, particularly for company in which I am one of managing directors'. Against column--when and from what source did bank notes come into possession-- assessee had stated 'In course of business transactions during past years'. assessee, by way of explanation, submitted that on 13-1-1978 he received from Tulshan Enterprises Rs. 1,25,000, which included 102 notes of Rs. 1,000 each. This cash was withdrawn specially for depositing in Navrang Cine Centre (P.) Ltd., in which he is managing director. Before amount could be deposited, Rs. 1,000 notes were demonetised and he had to deposit same with banks on 19-1-1978. In support of his statement, he had filed copies of cash book transactions from 1-1-1978 to 31-1-1978 of firm and his personal accounts as well as certificate of firm Tulshan Enterprises. It was also submitted that Rs. 1 lakh was deposited with Navrang Cine Centre (P.) Ltd. on 31-1-1978. 4. IAC, after considering all above submissions and supporting documents, pointed out settled differences in statement of assessee. differences are On 19-1-1978, at time of declaration of high denomination notes, reason for holding these notes was given as business contingency requirements, particularly for company in which he is managing director and in column for possession of these notes was given as in course of business transactions during past years; while on 23-9-1980, at time of survey and during section 144B proceeding, assessee states that amount came from firm which was carrying on finance business. 5. IAC also noted inconsistencies in version of assessee. assessee had stated that amount was withdrawn from firm as company in which he was managing director required funds but could not explain as to why lie retained same for six days (i.e., from 13-1-1978 to 19-1- 1978) before depositing same with State Bank of India and even after amount was given for credit by bank on 25-1-1978, another six days gap was existing and amount of Rs. 1 lakh only was deposited with company. This led IAC to conclude that there was no urgent need of funds by company and explanation was only afterthought. 6. IAC also observed that firm Tulshan Enterprises, in which assessee is partner, were in possession of high denomination notes of value of Rs. 6,10,000 and as they were unable to explain possession of this huge cash, had filed their settlement petition with Settlement Commission on 24-1- 1978. 7. IAC, while rejecting all explanations, observed that had high denomination notes come from cash withdrawal from firm, nothing prevented assessee to put forth this reason even in declaration made originally on 19-1-1978. He, therefore, upheld ITO's addition, treating reasons submitted by assessee as made up affair. 8. Aggrieved, assessee preferred in appeal to Commissioner (Appeals). In appeal, assessee stated that firm was carrying on sarafi/finance business and submitted all statements and supporting documents as were filed before IAC. 9. Commissioner (Appeals) observed that no light is thrown by appellant on question of amounts stated to have been withdrawn from t h e partnership firm on 13-1-1978, not being deposited with Navrang Cine Centre (P.) Ltd. in which appellant has business interest. As regards actual source for receipt of high denomination notes, no positive proof is produced and appellant's own statement cannot be said to be fully consistent with appellant's own statement contained at declaration stage. There was no material evidence produced at hearing to reach positive conclusion that fact mentioned in assessment order as also directions of IAC under section 144B, were wrong or not related to actual facts. He, therefore, dismissed appeal filed before him by assessee. 10. Aggrieved, assessee has come up in appeal before us. 11. Mr. V.H. Patil, learned representative of assessee, brought to our attention following facts: 1. Tulshan Enterprises is firm in which appellant and three of his nephews are partners. firm has its offices in Bombay, Bangalore and other places. 2. extract of cash book of firm shows that on 13-1-1978, Rs. 1,25,000 was withdrawn by assessee. 3. extract of assessee's personal cash book filed at pages 8 to 13 shows that on 13-1-1978, Rs. 1,25,000 received from firm; on 19-1-1978, Rs. 1,02,000 deposited as high denomination notes with State Bank of India; on 25-1-1978, draft for Rs. 1,02,000 received from State Bank of India in lieu of high denomination notes and on 31-1-1978, Rs. 1 lakh deposited with Navrang Cine Centre (P.) Ltd. 4. copy of certificate of firm at page 7, wherein it has been mentioned that Rs. 1,25,000 was given to assessee on 13-1-1978 which mentioned that Rs. 1,25,000 was given to assessee on 13-1-1978 which included 102 notes of Rs. 1,000 each and as firm has been carrying on sarafi/finance business mostly on high denomination notes, as such it is impossible to correlate receipts of notes with particular entry. 5. At page 15 is assessee's statement before ITO on 23-9-1980 at t h e time of survey under section 133A of Act, where assessee had narrated that amount was withdrawn from firm and source lies with business transactions in past years. 6. Regarding cash, being from cash balance of firm, reliance was placed on Mehta Parikh & Co. v. CIT [1956] 30 ITR 181 (SC), Supreme Court in case of Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288, Anil Kumar Singh v. CIT [1972] 84 ITR 307 (Cal.) and Lakshmi Rice Mills v. CIT [1974] 97 ITR 258 (Pat.). 12. Mr. Mahadeshwar, learned departmental representative, submitted that assessee had filed certificate from firm in which he was partner and that money was withdrawn from firm. This certificate, according to Mr. Mahadeshwar, is only self-serving statement. He further submitted that departmental authorities have confirmed addition on various counts and one of them was that firm itself had gone to Settlement Commission in regard to high denomination notes of Rs. 6.10 lakhs. Therefore, he pleaded that assessee's appeal needs only to be rejected. 13.1 We have heard parties. From records before us, we notice that assessee made his first statement on 19-1-1978, at time of declaration of high denomination notes. In this declaration, against column 'source', it had been mentioned as, 'in course of business transactions during past years'. reason for holding high denomination notes was mentioned as 'Business contingency, requirements particularly of company in which I am managing director'. There is no reference to moneys having been withdrawn from partnership firm. [Emphasis supplied] 13.2 second statement is on 23-9-1980 at time of survey under section 133A. submission was that Rs. 1,25,000 was withdrawn from firm Tulshan Enterprises on 13-1-1978 for giving loan to Navrang Cine Centre (P.) Ltd. amount so withdrawn contained 102 notes of Rs. 1,000 each. As support of this statement, undated certificate from firm's (in which assessee is partner) office at Bangalore was filed. 13.3 certificate on which much reliance has been placed, is from firm in which assessee is partner. This certificate does not even bear date. certificate has been issued by partner who is sitting in Bangalore, whereas assessee is partner-in-charge of office at Bombay. This certificate is very general certificate which states "Our firm is having business of sarafi/finance to persons in various cities in India. This being position, most of business transactions are in case and were done in high denomination notes only. It is not possible to correlate exact receipt of high denomination notes with particular entry." 14. two statements, one of 19-1-1978 before RBI and second on 23-9-1980, clearly indicate contradiction in assessee's theory. reference to two statements also indicate that assessee was unable to state precisely source of these high denomination notes encashed by him on 19-1-1978. Had source of these high denomination notes been from his past profits as stated by him on 19-1-1978, there was no necessity of stating that it was out of withdrawal from firm. If cash was out of assessee's past profits, it could not have come from withdrawal from firm on 13-1- 1978 and vice versa is also true. assessee, therefore, is in two minds and there is no valid or reasonable explanation offered for this patent contradiction in his statement either before departmental authorities or even before us. 15. present case of assessee, before department as well as before us, is that these notes have come from out of his withdrawal from firm. Is it at all probable or true? answer is clearly 'no' for following reasons: 1. contradiction in assessee's statement referred to above. 2. unreliable nature of certificate of firm as discussed above which is nothing but self-serving statement. 3. Absence of any other contemporaneous evidence to corroborate assessee's case. 4. firm in which assessee is partner, has been unable to explain source of high denomination notes of Rs. 6.10 lakhs and has gone in for settlement before Settlement Commission. 16. Much reliance has been placed by assessee on account books of firm. firm's account books are also kept by assessee himself as he was partner-in-charge of Bombay office. cash book that has been filed for month of January 1978 indicates that opening cash balance was Rs. 25,727 only and till 13-1-1978, there was no other cash transaction. On 13- 1-1978, there is entry in cash book stating that Rs. 1 lakh was received in cash from Darshan Distributors (P.) Ltd. On 13-1-1978, assessee states that he withdrew Rs. 1,25,000 from firm. assessee's statement on 23-9-1980 as well as certificate of firm which is undated mentioned that it is not possible to correlate exactly receipt of high denomination notes with particular entry. obvious conclusion, therefore, is that 102 high denomination notes could not have come from opening balance of firm which is just Rs. 25,727. It is also not assessee's case that high denomination notes were received from Darshan Distributors (P.) Ltd. If that was case of assessee, then assessee would have obtained certificate from Darshan Distributors (P.) Ltd., stating that they had paid cash in high denomination notes. fact that assessee was partner in firm, Tulshan Enterprises, cannot be ignored and onus clearly lies on him to explain these entries in firm's book with cogent evidence, which he had failed to do in present case especially, when his case is being ceased on firm's, book. Instead of presenting cogent evidence, he makes statement and supports this statement with another certificate from firm itself. In these circumstances, entries in firm's books cannot be accepted as proving assessee's case as probable or true. Considering evidence produced by assessee in its totality, they do not lead to conclusion that these high denomination notes could have come from assessee's withdrawal from his partnership firm. 17. Supreme Court in case of Sreelekha Banerjee v. CIT [1963] 49 ITR 112 have observed as under: "If there is entry in account books of assessee which shows receipt of sum on conversion of high denomination notes tendered for conversion by assessee himself, it is necessary for assessee to establish, if asked, what source of that money is and to prove that it does not bear nature of income. department is not at this stage required to prove anything. It can ask assessee to produce any books of account or other documents or evidence pertinent to explanation if one is furnished, and examine evidence and explanation. If explanation shows that receipt was not of income nature, department cannot act unreasonably n d reject that explanation to hold that it was income. If, however, explanation is unconvincing and one which deserves to be rejected, department can reject and draw inference that amount represents income either from sources already disclosed by assessee or from some undisclosed source. department does not then proceed on no evidence, because fact that there was receipt of money is itself evidence against assessee. There is thus, prima facie, evidence against assessee which he fails to rebut, and being unrebutted, that evidence can be used against him by holding that it was receipt of income nature. very words 'an undisclosed source' show that disclosure must come from assessee and not from department. In cases of high denomination notes, where business and state of accounts and dealings of assessee justify reasonable inference that he might have for convenience kept whole or part of particular sum in high denomination notes, assessee, prima facie, discharges his initial burden when he proves balance and that it might reasonably have been kept in high denomination notes. Before department rejects such evidence, it must either show inherent weakness in explanation or rebut it by putting to assessee some information or evidence which it has in its possession. department cannot by merely rejecting unreasonably good explanation, convert good proof into no proof" 18. other cases relied upon by assessee also go to indicate that it is for assessee to establish and explain that high denomination notes could have come from out of cash balance of firm and it must also be could have come from out of cash balance of firm and it must also be established that firm was in possession of cash and high denomination notes could have come from out of cash balance of firm. 19. We have already clearly observed in earlier paragraphs that assessee has not been able to establish with cogent and unimpeachable evidence that firm was in possession of sufficient cash balance and that 102 high denomination notes could have come out of firm's coffers. We have already observed that on 13-1-1978, firm received in cash Rs. 1 lakh from Darshan Distributors (P.) Ltd. assessee has not produced any confirmation or certificate from said party to support its case because as on 1-1-1978, opening cash balance was only Rs. 25,727. We have examined entire evidence filed by assessee, keeping in mind principles laid down by Supreme Court in case of Sreelekha Banerjee and in other High Court cases, and we have to come to one and only conclusion that high denomination notes were never part of firm's cash and assessee has not established this fact at all and thereby confirm decision of Commissioner (Appeals). 20. In result, assessee's appeal is, therefore, dismissed. *** NARESH KUMAR TULSHAN v. INCOME TAX OFFICER