Unexplained investments and deposits may be taxed in the depositor's hands when the source remains unproved.

Where deposits and investments stand in the names of individual assessees, the unexplained amounts may be assessed as their income if they fail to explain the source of funds. Search material, incomplete books and recorded statements did not prove the existence of a genuine firm or show that the deposits were public collections, so the burden remained on the named deposit holders. A direction to link the amounts to the books of a fictitious firm had no evidentiary basis and could not stand. The unexplained income was therefore assessable in the hands of the individual assessees, not the alleged firm.

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Issues: Whether income arising from unexplained investments and deposits was assessable in the hands of the individual deposit holders or had to be linked to the accounts of the alleged firm.

Analysis: The search and survey material, the incomplete books, and the statements recorded during assessment did not establish that the alleged firm was genuine or that the deposits represented collections from the public. The persons in whose names the deposits stood failed to explain the source of the money. In such a situation, the burden remained on the persons shown as deposit holders to explain the source of the investment, and the presumption available under the law of evidence could be applied to determine ownership of the money. The Tribunal's direction to link the deposits with the books of a fictitious firm had no evidentiary basis and could not stand.

Conclusion: The income from unexplained investments was rightly assessed in the hands of the individual assessees and not in the hands of the alleged firm; the Revenue's case succeeded.

Ratio Decidendi: Where an assessee fails to explain the source of money or investment standing in his name, the unexplained amount may be assessed as his income under the provision dealing with unexplained money, and the burden does not shift to a fictitious or unproved entity without supporting evidence.

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