You have a document that says so. Does that settle it?
Only until there is reason to believe the apparent is not the real. Where you rely on self-serving recitals, it is for you to establish their truth — and the authorities are entitled to look at the surrounding circumstances.
Decided by the Supreme Court (Supreme Court of India — K.S. Hegde and A.N. Grover, JJ.) on 1971-08-26, reported as [1971] 82 ITR 540 (SC); Civil Appeals Nos. 1898 and 1899 of 1968. It bears on section 68 of the Income Tax Act 1961, in Evidence & Burden of Proof and Cash Credits & Unexplained Money matters.
It is the older half of the human-probabilities pair and supplies the phrase officers use most: the apparent is not always the real. The practical consequence is that a deed, an agreement or a confirmation letter is a starting point, not an answer.
Binding on every court and authority in India.
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The assessee bought premises Nos. 46A and 46B, Wellesley Street, Calcutta, on 30 September 1940 for Rs 1,85,000, the conveyance reciting that he took the property as trustee of a trust created by his wife. His wife executed a deed of settlement about a year later, on 10 September 1941, reciting that the purchase had been made on behalf of a trust created by her. When the assessee first raised the point in the assessment for 1942-43 he was asked to show the source from which his wife had the two lakhs of rupees said to have funded the purchase; beyond calling it her stridhana and saying the money had all along lain with his father-in-law, he could show no independent source of income for her. The claim was rejected, and the income of the premises was assessed in his hands from 1942-43 to 1957-58, largely without objection. For assessment years 1958-59 and 1959-60 he revived the plea. The Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal all rejected it, and the Tribunal declined a reference under section 66(1) of the Indian Income-tax Act, 1922 on the ground that no question of law arose. The Calcutta High Court directed a statement of case under section 66(2) and answered the question in the assessee's favour. The Commissioner appealed by certificate.
The Court allowed the Revenue's appeals and reversed the Calcutta High Court. The Tribunal's finding that the trust put forward was unreal was a finding of fact that could not be said to rest on no evidence, so no question of law arose from its order and the High Court was not justified in directing a reference at all; the answer given by the High Court was discharged and the question answered in favour of the department (para 16). On the merits, an apparent state of affairs is to be treated as real only until there is reason to believe that the apparent is not the real. A party who relies on a recital in a deed must establish the truth of that recital, and the taxing authorities are not required to take the documents at face value: they may look into the surrounding circumstances to find out the reality behind the recitals (para 8).
The assessing authorities had disbelieved the recitals on four circumstances: the wife was not shown to have had any source from which she could have built up two lakhs by 1940; the assessee could not explain that source when asked; the sale deed preceded the trust deed; and the assessee had allowed the income to be taxed in his own hands for years after his earlier objection was rejected, although the Tribunal had told him he could raise the point again (para 4). The Court held that the Tribunal had not interpreted the documents at all — it had simply found itself unable to accept some of the recitals in them, which was within its province as the final fact-finding body, and its conclusion was neither perverse nor unsupported by evidence (para 5). On self-serving recitals, if it were enough for a party seeking to evade tax to have recitals made in a document he executes or takes in his own favour, the door would be left wide open; a little probing here was sufficient to show that the apparent was not the real, and the taxing authorities were not required to put on blinkers (para 8). On onus, the law prescribes no quantitative test for whether an onus has been discharged — it depends on the facts, and may be heavy in one case and nominal in another. The story that two lakhs had been kept neither in a bank nor on loan but safely in the father-in-law's hands did not accord with human probabilities, and once it was disbelieved the consideration had to be taken to have proceeded from the assessee (para 9). The Court said the High Court had ignored the facts of life and taken a superficial view of the onus in faulting the Income-tax Officer for not examining the wife and the father-in-law (para 10). Since science has invented no instrument to test the reliability of evidence, courts and tribunals must judge the evidence before them by applying the test of human probabilities, and in that sphere the decision of the final fact-finding authority is made conclusive by law (para 13). Neither res judicata nor estoppel applies to assessment proceedings, but the assessee's having returned the income as his own for several years after his 1942-43 objection failed was a circumstance the authorities were entitled to take into account (para 11).
The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents.
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Handle my notice → Ask a CA on WhatsAppOnly until there is reason to believe the apparent is not the real. Where you rely on self-serving recitals, it is for you to establish their truth — and the authorities are entitled to look at the surrounding circumstances. This was decided by the Supreme Court (Supreme Court of India — K.S. Hegde and A.N. Grover, JJ.) and bears on section 68 of the Income Tax Act 1961. It is reported as [1971] 82 ITR 540 (SC); Civil Appeals Nos. 1898 and 1899 of 1968. It is the older half of the human-probabilities pair and supplies the phrase officers use most: the apparent is not always the real. The practical consequence is that a deed, an agreement or a confirmation letter is a starting point, not an answer. If it applies to you, the first step is this: Do not rely on recitals in your own documents to prove the underlying facts; prove the facts separately.
The assessee bought premises Nos. 46A and 46B, Wellesley Street, Calcutta, on 30 September 1940 for Rs 1,85,000, the conveyance reciting that he took the property as trustee of a trust created by his wife. His wife executed a deed of settlement about a year later, on 10 September 1941, reciting that the purchase had been made on behalf of a trust created by her. When the assessee first raised the point in the assessment for 1942-43 he was asked to show the source from which his wife had the two lakhs of rupees said to have funded the purchase; beyond calling it her stridhana and saying the money had all along lain with his father-in-law, he could show no independent source of income for her. The claim was rejected, and the income of the premises was assessed in his hands from 1942-43 to 1957-58, largely without objection. For assessment years 1958-59 and 1959-60 he revived the plea. The Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal all rejected it, and the Tribunal declined a reference under section 66(1) of the Indian Income-tax Act, 1922 on the ground that no question of law arose. The Calcutta High Court directed a statement of case under section 66(2) and answered the question in the assessee's favour. The Commissioner appealed by certificate. The matter was decided on 1971-08-26 by the Supreme Court (Supreme Court of India — K.S. Hegde and A.N. Grover, JJ.). On those facts the Supreme Court held as follows. The Court allowed the Revenue's appeals and reversed the Calcutta High Court. The Tribunal's finding that the trust put forward was unreal was a finding of fact that could not be said to rest on no evidence, so no question of law arose from its order and the High Court was not justified in directing a reference at all; the answer given by the High Court was discharged and the question answered in favour of the department (para 16). On the merits, an apparent state of affairs is to be treated as real only until there is reason to believe that the apparent is not the real. A party who relies on a recital in a deed must establish the truth of that recital, and the taxing authorities are not required to take the documents at face value: they may look into the surrounding circumstances to find out the reality behind the recitals (para 8).
The assessing authorities had disbelieved the recitals on four circumstances: the wife was not shown to have had any source from which she could have built up two lakhs by 1940; the assessee could not explain that source when asked; the sale deed preceded the trust deed; and the assessee had allowed the income to be taxed in his own hands for years after his earlier objection was rejected, although the Tribunal had told him he could raise the point again (para 4). The Court held that the Tribunal had not interpreted the documents at all — it had simply found itself unable to accept some of the recitals in them, which was within its province as the final fact-finding body, and its conclusion was neither perverse nor unsupported by evidence (para 5). On self-serving recitals, if it were enough for a party seeking to evade tax to have recitals made in a document he executes or takes in his own favour, the door would be left wide open; a little probing here was sufficient to show that the apparent was not the real, and the taxing authorities were not required to put on blinkers (para 8). On onus, the law prescribes no quantitative test for whether an onus has been discharged — it depends on the facts, and may be heavy in one case and nominal in another. The story that two lakhs had been kept neither in a bank nor on loan but safely in the father-in-law's hands did not accord with human probabilities, and once it was disbelieved the consideration had to be taken to have proceeded from the assessee (para 9). The Court said the High Court had ignored the facts of life and taken a superficial view of the onus in faulting the Income-tax Officer for not examining the wife and the father-in-law (para 10). Since science has invented no instrument to test the reliability of evidence, courts and tribunals must judge the evidence before them by applying the test of human probabilities, and in that sphere the decision of the final fact-finding authority is made conclusive by law (para 13). Neither res judicata nor estoppel applies to assessment proceedings, but the assessee's having returned the income as his own for several years after his 1942-43 objection failed was a circumstance the authorities were entitled to take into account (para 11). In the words reproduced by the source cited on this page: "The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents."
It was decided by the Supreme Court on 1971-08-26 and is reported as [1971] 82 ITR 540 (SC); Civil Appeals Nos. 1898 and 1899 of 1968. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 68, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The Court allowed the Revenue's appeals and reversed the Calcutta High Court. The Tribunal's finding that the trust put forward was unreal was a finding of fact that could not be said to rest on no evidence, so no question of law arose from its order and the High Court was not justified in directing a reference at all; the answer given by the High Court was discharged and the question answered in favour of the department (para 16). On the merits, an apparent state of affairs is to be treated as real only until there is reason to believe that the apparent is not the real. A party who relies on a recital in a deed must establish the truth of that recital, and the taxing authorities are not required to take the documents at face value: they may look into the surrounding circumstances to find out the reality behind the recitals (para 8). It arises in Evidence & Burden of Proof and Cash Credits & Unexplained Money matters, on section 68 of the Income Tax Act 1961, and was decided by Supreme Court of India — K.S. Hegde and A.N. Grover, JJ.. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where a transaction looks unusual, explain why it happened that way, with contemporaneous material. Remember the burden here is on you once self-serving recitals are relied on.
Still good law. Still applied: the Mumbai Tribunal in Renu T Tharani reproduced the principle that authorities were entitled to look into the surrounding circumstances to find out the reality, and the Delhi Tribunal in Sanat Kumar reproduced the reported holding. A Tribunal in Janani Infrastructure has, however, held that the human-probability test cannot be applied to business transactions supported by cogent material. That finding was checked against a published source, which is linked on this page, on 2026-08-25. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Decided under the Indian Income-tax Act, 1922 on a reference under section 66(2), and the question was whether the income of the Wellesley Street premises was trust income or the assessee's own. Section 68 does not appear in the judgment; the case is authority for the evidentiary approach it states, not a decision on the cash-credit provision. One source miscites it as 'CIT v Sumati Dayal (82 ITR 540)', conflating the two authorities — that misdescription was not relied on here, and is worth watching for in submissions. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Court allowed the Revenue's appeals and reversed the Calcutta High Court. The Tribunal's finding that the trust put forward was unreal was a finding of fact that could not be said to rest on no evidence, so no question of law arose from its order and the High Court was not justified in directing a reference at all; the answer given by the High Court was discharged and the question answered in favour of the department (para 16). On the merits, an apparent state of affairs is to be treated as real only until there is reason to believe that the apparent is not the real. A party who relies on a recital in a deed must establish the truth of that recital, and the taxing authorities are not required to take the documents at face value: they may look into the surrounding circumstances to find out the reality behind the recitals (para 8).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
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