Rule of consistency in income-tax additions requires full consideration of probabilities, surrounding facts, and prior accepted explanations.

In income-tax proceedings, an addition for undisclosed income cannot be sustained where the books of account were not rejected, the assessee's explanation was plausible, and an earlier accepted explanation existed for an identical matter in the preceding year. The Tribunal was required to consider the rule of consistency, the lapse of time, fading memory, surrounding circumstances, and the totality of probabilities before rejecting the explanation. On those facts, the Tribunal was not justified in affirming the addition of undisclosed income, and the issue was decided in favour of the assessee.

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Issues: Whether the Tribunal was justified in upholding the addition of Rs. 90,000 as income from undisclosed sources and in reversing the order of the Appellate Assistant Commissioner.

Analysis: The explanation furnished by the assessee had to be tested in the light of the lapse of time, the fading of human memory, the surrounding circumstances, and the totality of probabilities. The books of account had not been rejected, and the assessee's earlier explanation had been accepted in an identical matter for the preceding year. The Tribunal failed to consider the rule of consistency and did not adequately examine the alternative explanation or the surrounding facts before rejecting the assessee's case.

Conclusion: The Tribunal was not justified in affirming the addition of Rs. 90,000; the question was answered in the negative, in favour of the assessee.

Ratio Decidendi: In income-tax proceedings, where the books are not rejected and a plausible explanation is supported by surrounding circumstances and consistency with an earlier accepted view, an addition as undisclosed income cannot be sustained without proper consideration of human probabilities and all material facts.

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