1960 (3) TMI 63 - HC - Income Tax

Court rules undisclosed income wrongly taxed, favors assessee for assessment year 1945-46.

Bishan Dutt Versus Commissioner of Income-tax

The court held that the sum treated as the assessee's income from an undisclosed source should not have been included in the income for the accounting ... - Issues:- Whether the sum treated as the assessee's income from an undisclosed source should be included in the income for the accounting period of the cloth business.Analysis:The judgment pertains to a case where the Income-tax Appellate Tribunal referred a question regarding the treatment of a sum of Rs. 9,800 as the assessee's income from an undisclosed source. The sum in question appeared as a credit in a suspense account in the account books of the cloth business for the assessment year 1945-46. The Tribunal held that this amount was income from an undisclosed source, but since it was entered in the cloth business's account books, it could be included in the income for the same previous year as the cloth business. However, the assessee contended that this amount should have been taxed in the assessment year 1944-45 instead, as there was no material to support the inclusion of this sum for the assessment year 1945-46.The court analyzed the facts and held that the income from the undisclosed source was incorrectly taxed for the assessment year 1945-46. The court emphasized that the entry in the cloth business's account books did not constitute proper accounting for the income from the undisclosed source. The court rejected the Tribunal's view that including the income in the cloth business's accounts made it taxable for that year, stating that separate accounts for the undisclosed source may have been kept concealed. The court highlighted that the previous year for taxation should align with the provisions of the Income-tax Act applicable to the undisclosed source, not the cloth business.Furthermore, the court noted that the conditions for a different previous year were not met, as there was no evidence of separate accounts or the assessee exercising the option for a different period. The court emphasized that the assessee denying the existence of the source altogether precluded the possibility of exercising such an option. Citing a decision of the Patna High Court, the court concluded that the inclusion of the amount in the assessment for the year 1945-46 was unjustified. As a result, the court answered the question in the negative, ruling in favor of the assessee and awarding costs to them.