Evidential Sufficiency: tribunal findings must rest on material evidence or assessments of undisclosed income will be set aside.

A tribunal must base assessment of undisclosed income on material evidence; mere mechanical calculations or rule of thumb inferences rejecting admitted books and affidavits are insufficient, and conclusions reached without indicating a material basis are unsustainable. The principle distinguishing findings of fact from inferences requires that an appellate body correct a conclusion arrived at without evidence or on a view of facts no properly instructed tribunal could reasonably entertain. Applying these principles, the impugned partial rejection of the assessee's explanation and unexplained treatment of part of the cash resulted in no material justification for the challenged assessment, favouring the assessee.

---

---

Issues: Whether there was material to justify assessment of Rs. 30,000 out of Rs. 61,000 (value of high denomination notes encashed) as income from undisclosed sources for income-tax, excess profits tax and business profits tax purposes.

Analysis: The appellants' books of account were accepted and affidavits were produced to show receipt of a large part of the high denomination notes prior to demonetisation. The Revenue and the Tribunal rejected the full explanation by applying a mechanical calculation and a rule-of-thumb to disbelieve that the noted cash entries represented high denomination notes, without further scrutiny or calling the affidavit deponents for cross-examination. The Court applied established principles distinguishing findings of fact and inferences from fact, observing that a tribunal may be corrected where a conclusion is arrived at without evidence or on a view of the facts which no judicial tribunal properly instructed could reasonably entertain. On the record, the Tribunal did not indicate the material basis for treating Rs. 30,000 as concealed profits and its partial acceptance combined with unexplained rejection of other evidence amounted to a conclusion unsupported by evidence.

Conclusion: The first question is answered in the negative. There were no materials to justify assessment of Rs. 30,000 out of Rs. 61,000 as income from undisclosed sources; the result is in favour of the assessee.

---