Unexplained cash credit can be taxed as undisclosed income, with the assessee bearing the burden of proof.

An unexplained cash credit in an assessee's books may be treated as income from an undisclosed source when the explanation is not satisfactorily proved, and the burden of establishing the source lies on the assessee. The tax authorities may also, where the facts justify it, assess both the unexplained credit and estimated business or partnership income after rejection of the books. On the facts stated, the assessee did not show that the credit was already covered by income from another source, so the addition of the cash credit was sustained along with the estimated share income.

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Issues: Whether an unexplained cash credit in the assessee's books could be treated as income from undisclosed sources while also adding the estimated share income from the partnership firm.

Analysis: Where a cash credit entry is not satisfactorily explained, the revenue is entitled to reject the explanation and treat the amount as the assessee's income from an undisclosed source. The burden of proving the source of the credit lies on the assessee. There is also no rule of law preventing the income-tax authorities, in an appropriate case, from taxing both the unexplained cash credit and the business income estimated after rejection of the books, if the facts justify such treatment. On the facts found, the assessee failed to establish that the cash credit formed part of income already included in the business profits.

Conclusion: The addition of the unexplained cash credit was valid and was rightly sustained, along with the estimated share income from the firm.

Ratio Decidendi: An unexplained cash credit may be assessed as the assessee's income from an undisclosed source, and it is for the assessee to prove that such amount is already covered by income taxed from another source.

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