COMMISSIONER OF INCOME TAX Vs. P DAROLIA AND SONS

JUDGEMENT

(1.) In this case the assessee is a Hindu undivided family which carries on the business of the sale and manufacture of vermilion. The assessment year is 1947-48 and the corresponding accounting year is Diwali year commencing on 4-11-1945 and ending "on 24-10-1946. In his return the assessee showed a gross profit of Rs. 8,814 and a net profit of Rs. 402 from the business of vermilion and sindoor. The Income-tax Officer rejected the account book of the assessee on the ground that there was no manufacturing account or any stock account maintained by the assessee and verification was impossible. The Income-tax Officer therefore estimated the net profit of the assessee to be Rs. 10,877 at a flat rate of 25 per cent, on the amount of the sale. The Income-tax Officer also noticed unexplained cash credits in the account books of the assessee as follow: <FRM>JUDGEMENT_478_AIR(PAT)_1955Html1.htm</FRM> The assessee gave an explanation with regard to the cash credits but his explanation was rejected by the Income-tax Officer who treated the amount of Rs. 15 000 as secret profits from an undisclosed source- The assessee preferred an appeal to the Appellate Assistant Commissioner but the appeal was dismiss 1 and the order of the Income-tax Officer was confirmed' When the matter came before the Appellate Tribunal it was argued on behalf of the assessee that the amount of Rs. 15,000 could not be taxed in the assessment year 1947-48 as there could be no previous year for the undisclosed income except the financial year 1945-46. The argument was accepted by the Tribunal who expressed the view that the cash credits to the extent of Rs. 15,000 could not be included in the total income of the assessee for the assessment year 1947-48.

(2.) At the instance of the Income-tax Department the Tribunal has stated a case on the following question of law:

(3.) On behalf of the Income-tax Department Mr. Bahadur put forward the submission that the Tribunal was not right in holding that the amount of Rs. 15,000 was income derived by the assessee from a source of business different from that of Sindoor and vermilion. The argument of the learned counsel was that the amount of Rs. 15,000 should be treated as an undisclosed profit for the accounting year corresponding to the period from 4-11-45 to 24-10-46 and not the financial year 1945-46. It was contended by the learned counsel that the onus was upon the assessee, to give an explanation as to the source and nature of the cash credit and in the absence of a satisfactory explanation the Income-tax authorities were entitled to presume that the cash credit was a secret income from the same source of business, viz., the business of Sindoor and vermilion. I am unable to accept this argument as wholly correct. It is of course a well-established principle that in respect of an amount of cash received during the accounting year the burden of proof is upon the assessee to show positively the source and nature of the receipt, and in the absence of an adequate explanation the Revenue authorities are entitled to draw the inference that the receipts are! of an income nature and liable to be taxed. But there is no presumption in such a case that the cash receipt is income of the same business tor which the assessee has kept regular business of account. The question is really a question of fact, to be decided upon the material furnished in each particular case. The cash receipt may be income either from the same business carried on by the assessee or from a different business. As I have said the question will turn upon the special facts ot each particular case and there is no presumption of law involved In a matter of this description. In the present case there is a. definite finding of the Appellate Assistant Commissioner that the receipt of Rs. 15,000 was not derived from the business of Sindoor and vermilion but was income derived from a different source. In the course of his order the Appellate Assistant Commissioner has stated as follows: