TMI Blog1959 (3) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... books and deposits in the bank in the account year, is lawful? The assessee, S. Kumaraswamy Reddiar, is a wholesale and also retail piece-goods merchant carrying on business at Alleppey and Quilon. In computing the profits on the assessee's business for the assessment year 1123 M.E., the Income-tax Officer found that the accounts maintained by the assessee were unreliable and the profits had therefore to be estimated. Accordingly he made an addition to the book version of the profits to the extent of ₹ 26,418 in respect of the Alleppey business and ₹ 11,438 as regards the Quilon business. He further found that certain deposits in banks and certain advances entered in the books of account at the head office totaling ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business which the petitioner had. Learned counsel referred in this connection to the passage in the order of the Appellate Assistant Commissioner where after referring to the contention raised on behalf of the assessee, that both turnover and the gross profit thereon having been taken at rates considered reasonable it cannot be held that in addition to such profits the appellant had derived other unaccounted profits from the same business during the same year and on the same turnover , the observation was made, I cannot say that this contention is without force since the Income-tax Officer has assessed the alleged profits (secret) as part of the appellant's income from his cloth trade but not from any undisclosed sources . So if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash credits in the personal accounts of the partners should be added to the income from business. On the question whether the assessee was liable to be taxed on the sum of ₹ 15,644 as extra estimated profit and also on the sum of ₹ 85,000 shown as cash credits but which had been found by the taxing authorities to be income from undisclosed sources, the learned judges of the Patna High Court held that it was not open to the income-tax authorities to add up both the cash credits and the estimated excess of the profits over the amount shown in the books of account and to hold the amount so added up was taxable in the hands of the assessee. That according to the judges would amount to double taxation. According to the learned judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .T.R. 254 would appear to have been treated as peculiar on its facts and distinguished in all the later cases that have arisen on the subject. Thus in Auddy and Brothers v. Commissioner of Income-tax [1955] 28 I.T.R. at 724 before the Calcutta High Court the case of Ramcharitar Ram Harihar Prasad v. Commissioner of Income-tax [1953] 23 I.T.R. 301 was referred and distinguished and the learned judges observed: Indeed, unless there be strong reasons to connect unexplained cash credits with the undisclosed profits derived from a known source of income, it is not possible to see how the taxing authorities can follow any course other than ringing them under assessment as income from other undisclosed sources. As has so often been pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m undisclosed sources was legally justified even though an estimate of the gross profit on the turnover of the business had already been made and the sum of ₹ 50,000 had been added as suppressed income from business. The next case in Chenna Basappa v. Commissioner of Income-tax [1958] 34 I.T.R. 576 before the Andhra Pradesh High Court also distinguished the case in Ramcharitar Ram Harihar Prasad v. Commissioner of Income-tax [1953] 23 I.T.R. 301. In that case the Income-tax Officer had rejected the accounts of the assessee and estimated the profits and made an addition to the disclosed profits and further added amounts represented by cash credits in the accounts for which the assessee did not furnish any satisfactory explanation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from another source. if the assessee does not disclose that source and the existence of such hidden source is deducible from the proceedings and the account books, then the Department is not required to deduct the amount from the income which has been deduced at an enhanced flat rate on the ordinary business of the assessee. The principle is, therefore, deducible that where the assessee gives no satisfactory explanation of a cash credit or bank deposit it is open to the Income-tax Officer to hold that it represents an income from an undisclosed source. It is not a question of suspicion or conjecture. He can only act on the evidence which is tendered before him, and where the evidence tendered is worthless or not tendered he would be j ..... X X X X Extracts X X X X X X X X Extracts X X X X
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