Survey-surrendered income treated as business income where the source was linked to regular business activity, not unexplained income.

Additional income surrendered during survey was held to be assessable as business income where the assessee's regular receipts arose from business and the surrendered amount was linked, on the facts, to that business activity. The character of the income was determined by its source, not by its end use or the fact that it was declared during survey. Because the amount was not shown to originate from an unknown source, it could not be taxed as unexplained income under the higher-rate provisions.

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Issues: Whether the additional income surrendered during survey was assessable as business income or as unexplained income liable to taxation under the higher-rate provisions.

Analysis: The assessee's regular receipts were principally from business, and the statement recorded during survey showed that the additional amount was offered over and above normal business profits. The decisive factor was the source of the income and not its end use. On the facts recorded, the surrendered amount was linked to the business activity and was not shown to be from an unknown source.

Conclusion: The additional income was to be assessed as business income and not as unexplained income.

Ratio Decidendi: Where surrendered income is shown, on the facts, to arise from the assessee's business activity, its character is determined by its source and it cannot be taxed as unexplained income merely because it was declared during survey.

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