1968 (8) TMI 17 - SC - Income Tax

Income From Undisclosed Sources - If the amount of Rs.2, 20, 000 represented income of the assessee of the previous year it was liable to be included in the total income of the assessee and an enquiry whether for the purpose of bringing the amount to tax the income was from a business activity or from other source was not relevant - revenue s appeal allowed

Summary

Issues:
1. Assessment of income remitted from Nawalgarh to Calcutta for the assessment year 1945-46.
2. Disbelief of the assessee's explanation regarding the source of remitted amount.
3. Justification for treating the remitted amount as income from undisclosed sources.
4. Interpretation of the nature of income and its taxability in British India.
5. Relevance of proving the source of income for tax liability determination.

Analysis:
The case involved the assessment of an individual resident's income for the year 1945-46, where the Income-tax Officer added an amount remitted from Nawalgarh to Calcutta to the total income. The assessee claimed the remittance was from his cash balance sent from Calcutta in 1941, but this explanation was disbelieved by the authorities. The High Court was asked to determine if the remitted amount constituted income from undisclosed sources and if the rejection of the assessee's evidence was justified. The High Court found evidence to reject the explanation but noted a lack of proof that the amount represented profit from an undisclosed business activity in British India.

The Appellate Assistant Commissioner and the Tribunal affirmed the Income-tax Officer's decision, treating the remitted amount as income from undisclosed sources. The High Court agreed with this characterization but highlighted the absence of evidence linking the income to undisclosed business activity in British India. The High Court emphasized the statutory duty of the assessee to disclose worldwide income, indicating that undisclosed income, whether earned in India or abroad, is taxable in India. The High Court disagreed with the assumption that the income was from undisclosed business activity in British India, as the Tribunal did not make such a finding.

The Supreme Court clarified that if income accrued to the assessee in British India, it was liable to be included in the total income for tax purposes, irrespective of its source. The Court cited precedent to emphasize that once income is established, the revenue need not pinpoint its exact source. The assessee failed to argue that the source of income affected its tax liability, leading the Court to overturn the High Court's decision. The appeal was allowed, and the High Court's answer on the first question was discharged in favor of the Commissioner. The assessee was directed to bear the costs of the appeal.