Previous year for undisclosed income follows the statutory financial year where no separate accounting period is adopted.

Undisclosed cash credits were treated as income from a source different from the assessee's disclosed business, and no separate accounting period had been adopted for that income. The Court held that unexplained receipts are not presumed to arise from the same business; that is a factual question. On the facts found, the statutory rule governing the previous year applied, so the relevant accounting period for the undisclosed income was the financial year ending on 31 March 1946. The reference was answered in favour of the assessee.

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Issues: Whether, in respect of undisclosed sources of income, the assessee's previous year was the financial year ending on 31 March, or some other accounting period.

Analysis: The assessment concerned cash credits treated as income from an undisclosed source, and there was no account maintained for such income and no option exercised by the assessee for any different accounting period. The Court held that there is no legal presumption that unexplained cash receipts necessarily arise from the same business as the disclosed business; that is a question of fact. On the facts found, the undisclosed income was from a source different from the vermilion and sindoor business, and in the absence of any adopted system of accounting for that income, the statutory rule governing the previous year applied, making the financial year the relevant period.

Conclusion: The previous year for the undisclosed income was the financial year ending on 31 March 1946, and the reference was answered in favour of the assessee.

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