Telescoping of unexplained credits fails where excess amounts are found to arise from undisclosed sources distinct from business income.

Income treated as from undisclosed sources was held to be a distinct source, separate from the assessee's known business income. Estimated business profits did not, by themselves, establish that excess credit in the anamat khata arose from the same source or could be telescoped against those additions. Because the taxing authorities had found the sum to be unconnected with the business, further tax on the excess credit did not amount to double taxation. The question was therefore answered against the assessee.

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Issues: Whether the excess credit in the anamat khata could be treated as explained to the extent of the estimated business profits already added to income, so that further tax on the excess credit would amount to double taxation.

Analysis: The income found by the taxing authorities to be from undisclosed sources was treated as income from an unknown source unconnected with the assessee's business. The mere fact that the assessee had been assessed on estimated business profits did not establish that the excess credit represented the same business income. Where the authorities record a finding that a sum is from undisclosed sources, that finding does not, by itself, mean that the assessee had no other source of income or that the amount must be telescoped into the business additions. The legal distinction is between income attributable to the same known business source and income from a distinct undisclosed source.

Conclusion: The excess credit was not explained by the estimated business profits, and the question was answered in the affirmative against the assessee.

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