Undisclosed-source receipt cannot be treated as business income for excess profits tax without supporting material.

A receipt assessed as income from undisclosed sources cannot be recharacterised as business income for excess profits tax unless the record contains material supporting that specific connection. The assessment material here did not state any reason showing that the sum arose from business activity, and the appellate material likewise only showed income from an undisclosed source. In the absence of a factual basis linking the receipt to business operations, the inference of business income was unwarranted and unsustainable. Prior treatment of a similar amount in the earlier year also indicated that it had not been treated as excess profits tax business income.

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Issues: Whether the sum of Rs. 75,000, admittedly assessable as income from undisclosed sources, could be treated as income from business for excess profits tax purposes.

Analysis: The finding that the amount represented business income was unsupported by any stated reason in the excess profits tax assessment order. The income-tax assessment did not contain a clear conclusion that the amount arose from business, and the appellate material likewise showed only that it was income from some undisclosed source. In the absence of any factual basis connecting the receipt with business activity, the inference that it was business income was unwarranted. The earlier proceedings also indicated that the Department had treated a similar amount in the preceding year as taxable to income-tax but not liable to excess profits tax, which further negatived the assumption that the receipt necessarily constituted business income.

Conclusion: The question was answered in the negative. The amount of Rs. 75,000 could not be treated as income from business on the material on record.

Ratio Decidendi: A receipt assessed as income from undisclosed sources cannot be treated as income from business for excess profits tax unless there is material on record supporting that specific characterisation; an unsupported and inconsistent inference is arbitrary and unsustainable.

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