Law:

Section:

Section 131 of the Income-tax Act, 1961 [Corresponding to section 37(1) of the Indian Income-tax Act, 1922] - Discovery, production of evidence, power regarding - Assessment year 1950-51 - Whether section 37(1)(b) of 1922 Act does not lay down any obligation to administer oath, though it empowers concerned officer to do so - Held, yes - Whether it would depend always on circumstances of each case as to whether an affidavit commands credit, irrespective of fact as to whether deponent turns up for examination or not - Held, yes - Whether no limit can be put to discretion of officer concerned as to whom or what document he will believe or what he will reject - Held, yes - Whether entries in books of account of assessee kept in regular course of business showing deposits in names of depositors, whose statements were not recorded under section 37 of 1922 Act, but who filed affidavits admitting amounts deposited to be their own money, could be held in law to be not genuine in absence of any rebutting evidence whatsoever on record and simply on basis of alleged statements made by other depositors under section 37 of 1922 Act - Held, yes FACTS In course of examination of account books of assessee-HUF, the ITO discovered cash deposits in the names of several persons. The assessee explained that he had taken temporary loans from those persons with a view to meet his liabilities to certain parties. The ITO issued summons to the alleged depositors under section 37 of the 1922 Act for examination, but only two of them appeared before him, who were examined by the ITO. However, they did not support the entry or the deposits shown to their entry. On an examination of the accounts submitted by the assessee and on a scrutiny of the statements made by these two persons, the ITO refused to hold that the transactions as shown in the books of account of the assessee were genuine. Accordingly said amount were treated as hidden profits of the assessee and brought to tax. During the pendency of appeal before the AAC the two persons filed two affidavits retracting their statements already made before the ITO, and asserting that it was due to some sort of threat held out by the ITO that…

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