Unexplained cash credits can be assessed as undisclosed income even after estimating business profits; addition upheld.

Where an assessee's business profits have been estimated, unexplained cash credits and bank deposits may still be separately assessable as income from undisclosed sources if the assessee fails to give a satisfactory explanation; the legal principle distinguishing disguised parts of estimated profits from independent undisclosed income was applied, and the Appellate Tribunal's finding that the disputed credits were unexplained and not part of the estimated profits was accepted. Consequently the further addition of the disputed amount as income from undisclosed sources was held lawful and the reference against that addition was dismissed.

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Issues: Whether, having made an estimated addition to the assessee's business profits, the Revenue could lawfully make a further addition of Rs. 17,402 representing unexplained credits and bank deposits as income from undisclosed sources.

Analysis: The Court examined authorities on whether estimated profits of a disclosed business are exhaustive so as to preclude separate assessment of unexplained cash credits or bank deposits. Earlier decisions were considered distinguishing situations where unexplained credits are merely a disguised part of the same business profits from situations where they indicate income from an independent, undisclosed source. The Court noted that where the assessee gives no satisfactory explanation for cash credits or deposits, the Income-tax Officer may treat those amounts as income from undisclosed sources distinct from the estimated business profits. The Appellate Tribunal had found that the Rs. 17,402 did not represent part of the profits already estimated and that the credits and deposits were unexplained; the Court proceeded on that footing and applied the principle that unexplained cash credits may be assessable as income from undisclosed sources even though an estimate of business profits has been made.

Conclusion: The addition of Rs. 17,402 as income from undisclosed sources is lawful and the assessee's reference is dismissed; decision is in favour of the Revenue.

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