Assessed income treated as available source for later investments; revenue must prove the funds were unavailable.

Amounts earlier added to an assessee's income as unexplained additions, once assessed and taxed as income, are treated as available funds for later investment or advances unless the revenue proves they were diverted or otherwise unavailable. The Madras HC rejected the Tribunal's view that such intangible additions were merely notional and could not represent hard cash. On the facts, the assessee's explanation that later advances were made out of the earlier assessed amounts was consistent with the department's own treatment of those sums as income, so the further additions as income from undisclosed sources were unsustainable.

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Issues: Whether amounts earlier added to the assessee's income as unexplained additions could be treated as the source of later investments and advances, so as to justify further additions as income from undisclosed sources.

Analysis: The prior additions were made in computing the assessee's assessable income and were treated by the department itself as income earned in the relevant earlier years. Once such additions had been made and tax levied, the department could not deny that the amounts were available to the assessee unless it showed that the money had been diverted elsewhere or was otherwise unavailable. The Tribunal's view that so-called intangible additions were merely notional and not hard cash available for investment was rejected. The explanation that later advances came out of the earlier additions was therefore consistent with the department's own treatment of those sums as income.

Conclusion: The additions of Rs. 40,000 and Rs. 12,230 as income from undisclosed sources were not sustainable, and the answer was in favour of the assessee.

Ratio Decidendi: Amounts once assessed as income cannot, without contrary proof, be treated by the revenue as unavailable to the assessee for later expenditure or investment; the burden lies on the revenue to show that such assessed income was not in fact available.

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