Unexplained cash credit cannot be treated as undisclosed sales without positive proof linking it to taxable turnover.

For sales tax purposes, an addition to taxable turnover on the basis of concealed sales requires positive material showing both that the amount is the firm's income and that it arose from transactions liable to sales tax. A mere unexplained cash credit standing in the name of a partner's wife, without further evidence linking it to undisclosed sales, is insufficient. The department cannot rely solely on the absence of a satisfactory explanation by the assessee, the partner, or the wife, because sales tax liability does not arise by presumption from unexplained money in the way sometimes seen in income-tax matters. The addition was therefore not sustainable, and the referred question was answered in favour of the assessee.

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Issues: Whether a cash credit entry of Rs. 10,000 standing in the name of the wife of a partner could, without further material, be treated as the assessee-firm's income from undisclosed sales and added to taxable turnover.

Analysis: To sustain an addition to sales tax turnover on the footing of concealed sales, the department had to establish not only that the amount represented the income of the firm, but also that it arose from transactions liable to sales tax. A mere failure by the assessee, the partner, or his wife to offer a satisfactory explanation for the source of the money did not discharge that burden. Unlike income-tax cases involving unexplained money, sales tax liability required some positive material connecting the money with taxable sales. No presumption arose, merely because the entry stood in the wife's name, that the amount was the firm's income from undisclosed business.

Conclusion: The addition could not be sustained. The answer to the referred question was properly in the negative and in favour of the assessee.

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