Material Relating to Accounting Year required before estimating undisclosed income; past capital alone does not justify additions.

An assessing officer may not estimate undisclosed income for a particular accounting year solely from prior undisclosed capital; the Revenue must produce contemporaneous material from the accounting year which, together with past history, reasonably supports an inference of income. Absent such accounting year evidence or specific basis for estimation, the evidential burden does not shift to the taxpayer and estimation is unlawful. Applying this principle, the impugned additions based only on past capital were not sustained and the confirmations of those additions were erroneous.

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Issues: Whether the Income-tax Appellate Tribunal was right in confirming additions of Rs. 10,291 and Rs. 10,000 as income "outside the books" in the assessments for the years 1944-45 and 1945-46 respectively.

Analysis: The assessments for the years in question rested on past undisclosed capital and the absence of a filed wealth statement, with the Revenue relying on "past history" dating prior to the accounting years. Material relied upon by the Revenue must be relatable to the accounting year under assessment; mere existence of past undisclosed capital, without contemporaneous accounting-year facts from which an inference of income can reasonably be drawn, is insufficient to justify an estimate of income for that year. The initial burden of producing some material indicative of income in the accounting year lies on the Revenue; only where such material exists may an assessment proceed by reasonable inference and, if necessary, estimation. Authorities and prior admissions relevant to the accounting year may shift evidential burden, but no such accounting-year material is present here and the assessment orders do not show estimation on a specific basis such as interest on past capital.

Conclusion: The Tribunal erred in confirming the additions of Rs. 10,291 and Rs. 10,000 for the assessment years 1944-45 and 1945-46 respectively; the additions are not sustained.

Ratio Decidendi: An assessment estimating undisclosed income for a specific accounting year must be founded on material relating to that accounting year which, together with past history, reasonably supports an inference of income; absent such contemporaneous material the burden does not shift to the assessee and estimation on mere past capital is unlawful.

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