Earlier-year income cannot be taxed as current-year income merely because it was later discovered in the accounts.

Income arising in earlier years from the assessee's collieries business could not be treated as income of the relevant previous year merely because it was later detected or had escaped assessment in prior years. The court distinguished the cited authority on the basis that it applied only where the assessee itself had treated the amounts as income of the relevant year in its accounts; that was not the position here, where the amounts had been carried in running accounts, transferred between accounts, or shown in the cash book before the relevant year. The sum of Rs. 92,188 was therefore not assessable as income, profits or gains of the previous year for assessment year 1938-39.

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Issues: Whether the sum of Rs. 92,188 could be deemed to be the income, profits or gains of the previous year so as to be assessable to income-tax for the assessment year 1938-39.

Analysis: The amounts in question represented profits of earlier years arising from the collieries business and were either carried in a running account, transferred between accounts, or shown in the cash book before the relevant previous year. The Court held that income received in earlier years could not be treated as income of the previous year merely because it was discovered later or had escaped assessment in earlier years. The principle in the cited authority was confined to cases where the assessee himself treated amounts as income of the relevant year in his accounts, which was not the position here.

Conclusion: The sum of Rs. 92,188 could not be deemed to be the income, profits or gains of the previous year assessable in the assessment year 1938-39, and the answer was against the Revenue and in favour of the assessee.

Ratio Decidendi: Income of earlier years cannot be assessed as income of the previous year merely because it is later detected, unless the assessee has treated it as income of that year in the accounts.

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