M. C. DESAI, C.J. - This is a statement of a case submitted to this court by the Income-tax Appellate Tribunal, Allahabad Bench, under section 66(2); the question formulated by the Bench is :
'Whether by reason of the assessee having chosen to have his income from undisclosed sources assessed by reference to the accounting periods of his business in earlier assessment, the amounts of cash credits found in these years could be assessed by reference to those accounting periods in the assessment years in question under the proviso to section 2(11)(i)(a) of the Income-tax Ac ?'
The statement relates to the assessment years 1949-50 and 1951-52. The assessee does the business of sarrafa and of speculation. Its accounting year for this business is the Diwali year. In its accounts of the Diwali year relevant to the assessment year 1948-49, there were certain cash credit entries, The Income-tax Officer found that the amount of the entries was its income and included it in the assessment for 1948-49. The assessee took up the matter up to the Tribunal and it maintained the assessment. Though the Income-tax officer had treated the income as from an undisclosed source, the Tribunal held that it was its income from the disclosed business It held that its main business was sarrafa business and the concealed income must have been from it and later observed that there was no doubt as to the source of the concealed income. Since the Diwali year was the accounting year for the business, the Tribunal held that the concealed income had rightly been included in the assessment for 1948-49. It distinguished Commissioner of Income-tax v. Darolia (P.) & Sons on the ground that the income in that case had been not from the disclosed business but from an undisclosed source and, consequently, it could not be treated as income derived in the accounting year selected by the assessee for its disclosed business. Then it proceeded further on the assumption that the income had not been from the disclosed business but from an undisclosed source and held that even then it was rightly included in the assessment for 1948-49 because previously also the assessee had allowed itself to be assessed on undisclosed income as if the Diwali year was the accounting year.
In the two assessment years in question, namely, 1949-50 and 1951-52 also the Income-tax Officer found cash credit entries in the assessees accounts, They were in the relevant Diwali years and, therefore, in the previous years relevant to the assessment years but outside the previous years relevant to the assessment years if the financial year, instead of the Diwali year, was the previous year. The Income-tax Officer observed in the assessment orders that the incomes were from 'unclosed sources' and not that they were undisclosed incomes from the disclosed source. In the assessment order for 1949-50 he treated the income as business income and in the other assessment order he treated it as income from an undisclosed source. Though the incomes were outside the relevant financial years, he included them in the assessments because they were within the relevant Diwali years. Appeals were filed from the two assessment orders and were dismissed by the Appellate Assistant Commissioner. He observed in his orders that the incomes had been treated by the Income-tax Officer as business incomes but this was certainly incorrect for the assessment year 1951-52. The assessee took up the matter before the Tribunal. It took the incomes to be from an undisclosed source and not from the disclosed business; yet it included them in the assessment for the reasons given by it in its order relating to the assessment for 1948-49. It is to be noted that it did not hold the income to be undisclosed incomes from the disclosed business.
The question that has been formulated by the Tribunal assumes that the assessee had chosen the Diwali year as the previous year for its income from 'undisclosed sources'. We are not concerned with the question whether it had done so or not or whether there was any material for the Tribunals finding that it had done so. We are to answer the question on the footing that it had done so. Now, what we have to assume is that it had chosen the Diwali year as the previous year for its income form undisclosed sources. Under the proviso to section 2(11)(i)(a) as it stood from 1949 to 1951. the previous year in respect of 'any separate source of income, profits and gains' means the immediate preceding financial year or, if the assessees accounts have been made up to a date within the preceding financial year, then at his option, the year ending on the date up to which the accounts have been so made up. But 'where in respect of a particular source of income... an assessee has once been assessed... he shall not in respect of that source... exercise the option given by this sub-clause so as to vary the meaning of the expression previous year as then applicable to him except with the consent of the Income-tax officer'. It was contended by Sri Das that, as the assessee had been assessed in 1948-49 and earlier on its income from undisclosed sources, it could not change the meaning of the previous year for the income from undisclosed sources in 1948-49 and earlier without the consent of the Income-tax Officer. We are unable to accept this contention. An undisclosed source means an unknown source. There are innumerable sources of income and they are grouped for the purpose of assessment in six heads enumerated in section 6 of the Act. Sources from which salaries are derived from head No. (i), different securities yielding interest are sources forming head No. (ii), different properties yielding income are sources forming head No. (iii), different business, professions and vocations yielding income form head. No. (iv) and all the remaining sources form head No. (v). The (vi) head is of capital gains. Now an undisclosed source can come under any of the first five heads and not necessarily under head No. (v). For a source to come under head No. (v), it must be a source not coming under any of the first four. If the nature of a source is unknown, it cannot be said that it is not a source coming under any of the first four heads and, therefore, cannot necessarily be said to be a source coming under head No. (v). Head No. (v). is of income from 'other sources', provided they are known or disclosed. Undisclosed sources do not mean other sources within the meaning of head No. (v). There is no separate head of 'undisclosed sources' and, even if there were one, undisclosed source may be different from another undisclosed source and a previous year for one undisclosed source is not necessarily a previous year for another undisclosed source. Whatever year becomes a previous year under section 2(11)(i)(a), for one source cannot be said to be a previous year for another source. That two incomes are derived from the same source can be predicated only when the source is known. Two undisclosed sources can never be said to be identical with each other for the simple reason that their nature is not known at all. Just as one known source differs from another known source, so also one undisclosed source may differ from another undisclosed source. Two incomes, the sources of which are not known, may be from the same undisclosed source, but they also may be from two undisclosed sources. Since they can be from two undisclosed sources, one cannot proceed on the assumption that they are from the same undisclosed source and that what is a previous year for one is the previous year for the other also. Every source has its own previous year and a previous year for one source cannot be said to be the previous year for an income unless it is shown to be from that source. When the sources themselves are not known, it is impossible to say that an income is from a source for which a particular year is the previous year. There is nothing like one previous year for all undisclosed sources; all undisclosed sources do not constitute one source within the meaning of the proviso. Therefore, even if the assessee had been assessed on income from an undisclosed source treating a particular year as the previous year for that source, without anything to suggest that the undisclosed source for the assessment years in question is the same undisclosed source, it cannot be said that the previous year for the purpose of the earlier assessment year is the previous year for the assessment years in question. The proviso to section 2(11)(i)(a) refers to the case where an assessee was assessed for an earlier assessment year on income from a particular source; whatever was the previous year with reference to that source for that earlier assessment year will be the previous year for any income form that source in a subsequent assessment year. The words 'particular source' in the proviso refer to a known or disclosed source; an undisclosed source can never be said to be a particular source. Therefore, the latter clause of the proviso is not applicable when an assessee was assessed for an earlier assessment year on income from an undisclosed source. The reason for this clause is that a previous year for income from an undisclosed source is the financial year and there is no question of the assessees having an option in respect of it. The law has fixed the financial year as the previous year for income from an undisclosed source and it is not variable at all. The first clause of the proviso applies to previous years for all sources, whether disclosed or undisclosed, but the latter clause applies only to a previous year for a disclosed source because only such a source can be said to be a particular source and only on respect of a previous year for a disclosed source there arises any question of varying the meaning of the expression 'previous year'. As the sources of income in the two assessment years in question are not known and the source of the income in the earlier years also is not known, it cannot be said that whatever was the previous year for the undisclosed source in the earlier year is the previous year for the undisclosed source for the assessment years in question. The question must, therefore, be answered in the negative and in the assessees favour.
We direct that a copy of this judgment shall be sent under the seal of the court and the signature of the Registrar to the Income-tax Tribunal as required by section 66(5) of the Income-tax Act.
The assessee shall get his costs of the reference, which we assess at Rs 200 from the Commissioner of Income-tax. Counsels fee is assessed at Rs. 200.
Question answered in favour of the assessee.