COMMISSIONER OF INCOME TAX Vs. DHARAMCHAND ANANDKUMAR

JUDGEMENT

(1.) THIS is a case stated under Section 256(1) of the I.T. Act, 1961, by the Income-tax Appellate Tribunal referring for our answer the following question of law :

(2.) THE facts stated are as follows. THE assessment year involved is 1960-61 for which the assessee's accounting year was the calendar year ending 31st December, 1959. THE assessee had not filed any voluntary return of the income under Section 22(1) of the Indian I.T. Act, 1922. THE ITO had also not issued notice to the assessee under Section 22(2) of that Act. After the commencement of the I.T. Act, 1961, while perusing the accounts of the assessee for the calendar year 1960, the ITO came across the following cash credits in the capital account of the assessee : <FRM>JUDGEMENT_219_ITR128_1981Html1.htm</FRM>

(3.) IT will be seen that the section has application where any sum is found credited in the books of an assessee maintained for any previous year. If the amount so credited is found to be the business income of the assessee for which the books of account are maintained, the income discovered from the credit entries would be taken to be the income of the previous year for which the accounts are maintained. This was also the law under the 1922 Act, and to this extent there is no change. However, when the amount credited in the books of the assessee maintained for any previous year is not found to be the business income of the assessee but is held to be income from undisclosed sources, the income so discovered will, under Section 68, still be deemed to be the income of that previous year for which the accounts were maintained. The position in this respect under the 1922 Act was different and, as earlier noticed, an income from undisclosed sources under that Act could be assessed only on the basis that the previous year for such income was the ordinary financial year. In the instant case, the cash credits were found in the books of the assessee maintained for the calendar year 1960, which was the previous year of the assessee for business income. If Section 68 applied, the cash credits which were found to be income from undisclosed sources would be taken as the income of the previous year for which the accounts were maintained, i.e., the calendar year 1960, and they could be assessed only as income for the assessment year 1961-62. If Section 68 was inapplicable and if the law to be applied was that which prevailed prior to the commencement of the 1961 Act, the cash credits would be taken as the income of the financial year 1959-60, assessable as income for the assessment year 1960-61.