Peak credits in business books may be treated as business receipts, while benami ownership remains a factual finding.

Unexplained peak credits in an account maintained in the course of business may be inferred as business receipts and, on the facts, were treated as undisclosed business income. If the amount were instead income from other sources, it would not fall in the relevant assessment year. Each assessment year is a separate proceeding, so an earlier departmental view on the business's separateness did not bind a later year. The concurrent finding that the wife was only a nominal owner and the business belonged to the assessee was treated as a question of fact. Where the business belongs to the assessee, properly ascertained past losses may be set off against current income.

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Issues: Whether the peak credit in the anamath account represented undisclosed business income; whether, if treated as income from other sources, it was taxable for the relevant assessment year; whether the department could take a different view in a later year despite its earlier acceptance of the business as separate; whether the business was carried on by the wife as benamidar of the assessee; and whether past losses of that business had to be allowed as a set-off if the business belonged to the assessee.

Issue (i): Whether the peak credit in the anamath account represented undisclosed business income.

Analysis: The account was maintained in the course of the assessee's business and was closely connected with that business. In the absence of contrary evidence, credits in such business books gave rise to the inference that the amounts were business receipts. The Tribunal's view that the peak credit formed part of business income was supported by the surrounding facts and by the principle that unexplained entries in business books may be treated as receipts from business.

Conclusion: Yes. The peak credit was properly treated as undisclosed business income, against the assessee.

Issue (ii): Whether, if the sum was income from other sources, it was taxable for the relevant assessment year.

Analysis: It was common ground that if the amount were income from other sources, it would not fall within the taxable assessment year in question. The timing of chargeability therefore depended entirely on the character of the receipt.

Conclusion: No. On that footing, it was not taxable for the assessment year, against the department.

Issue (iii): Whether the department was bound by its earlier acceptance of the business as separate in previous years.

Analysis: Each assessment year is a separate proceeding under the Indian Income-tax Act, 1922, and an earlier departmental view does not bind the department for a later year. A different conclusion may be reached if the materials justify it, even without new evidence.

Conclusion: No. The department was not precluded from taking a different view, against the assessee.

Issue (iv): Whether the wife was carrying on the business as benamidar of the assessee.

Analysis: The concurrent finding of the income-tax authorities was that the business belonged to the assessee and the wife was only the nominal owner. The inference of benami ownership was treated as a pure question of fact, not giving rise to a referable question of law.

Conclusion: Yes. The business was held to belong to the assessee, against the assessee.

Issue (v): Whether past losses of the business had to be allowed as a set-off if the business belonged to the assessee.

Analysis: If the business was the assessee's own business, its past losses were allowable against the current assessment, but the exact loss figure required scrutiny and proper computation before allowance.

Conclusion: Yes. The assessee was entitled to set-off of properly ascertained past losses, against the department.

Final Conclusion: The reference was answered predominantly in favour of the Revenue on the main income-characterisation and benami issues, while recognising the assessee's entitlement to a properly computed set-off of past losses on the business-found-to-belong-to-assessee basis.

Ratio Decidendi: Where an account is maintained in the course of business and is intimately connected with that business, unexplained peak credits may be inferred to be business receipts; each assessment year is a separate proceeding; and a benami inference based on the evidence is a question of fact.

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