Taxable secreted profit must be supported by disclosed material; unexplained apportionment of cash notes was unsustainable.

A taxing finding that part of an admitted cash amount represented secreted profit must rest on disclosed material and a reasoned basis. Where the tribunal merely apportioned encashed high denomination notes and treated one portion as business cash balances without explaining the evidence supporting the balance as taxable hidden profit, the inference was unsustainable. The assessee's explanation for possession of the notes was reasonable on the materials referred to, and the adverse conclusion against the remaining amount could not stand. The question was therefore answered in favour of the assessee.

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Issues: Whether there was any material to justify the conclusion that Rs. 33,000 out of the Rs. 68,000 represented by encashed high denomination notes constituted secreted profit liable to tax.

Analysis: The Tribunal had apportioned the total value of the encashed notes and treated only Rs. 35,000 as cash balances of the business, but it gave no reasons showing what material supported the further conclusion that the balance of Rs. 33,000 was secreted profit. A judicial tribunal must record the basis of such a conclusion, and a finding that imposes tax cannot rest on an unreasoned overall impression. On the materials referred to in the case, the assessee had offered a reasonable explanation for possession of the notes, and the adverse inference drawn against Rs. 33,000 was not supported by any disclosed material.

Conclusion: There was no material to justify the conclusion that Rs. 33,000 was secreted profit, and the answer to the referred question was in favour of the assessee.

Ratio Decidendi: A taxing finding must be supported by disclosed material and reasoned basis; an unexplained apportionment treating part of an admitted cash amount as secreted profit is unsustainable.

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