Bhutt, C. J.
1. The Income Tax Appellate Tribunal, Bombay was directed by this Court to submit a statement of case under Section 66(2) of the Income-tax Act, 1922 on the following question:
'Whether in the facts and circumstances of the case there was any material on record to hold that the assessee failed to explain the excess credit in the anamat account to the extent of Rs. 10,230/-in view of the addition made by the Department itself to the extent of that amount as the estimated profits to his income?'
The above question has accordingly been referred to this Court for judgment.
2. The assesses is a Hindu undivided family carrying on money-lending business and business in Kirana, gur, sugar, betel nuts, sweet oil, etc. The accounts are maintained by him according to the Diwali year, the material previous year for the purpose of assessment year 1951-52 being 22-10-1949 to 9-11-1950. The Income Tax Officer made the following four additions to his income viz.
Income fromundisclosed sources as distinguished from 'business'
Profit in sweet oilbusiness
Additional profitin kirana business
Profit in othergoods accounts
In appeal the Appellate Assistant Commissioner upheld the additions of Rs. 5,530/- and Rs. 5,000/-but reduced the amount of Rs. 11,000/- to Rs.6,400/-. In regard to the addition of Rs. 40,389/-the Appellate Assistant Commissioner accepted theexplanation of the assessee in respect of Rs. 9,937/-which was said to be the income from agriculturalsources and reduced the amount to Rs. 30,452/-.
3. The assessee then came up in second appeal to the Income Tax Appellate Tribunal, Rom-bay, where he did not contest the addition of Rs. 6,400/- on account of the estimated profits of sweet-oil business. The Tribunal, however, excluded the addition of Rs. 5,000/- on account of profits in other goods accounts. In other respects the additions made by the Appellate Assistant Commissioner were maintained. As regards the amount of Rs. 30,452/- on account of income from undisclosed, sources as distinguished from 'business' the Tribunal observed as follows:
'4. Before us it was stated by Mr. Oza that the anamat account is a fluctuating capital account; it also records agricultural income. Mr. Oza has not explained to us as to why we should delete the-addition of Rs. 30,452/- finally directed by the Appellate Assistant Commissioner and in what manner any of the figures considered by the Appellate Assistant Commissioner which were the figures given to him by assessee himself, were incorrect. There being no further explanation with regard to this item, we see no reason to delete this addition.'
It would thus appear and Shri Thakkar for the petitioner accepts before us that it was not the case of the assessee before the Income Tax Authorities or before the Tribunal that the excess credit of Rs. 30,452/- in the anamat khata was connected with the business from which the income of Rs. 6,400/-or of Rs. 3,830/- total Rs. 10,230/- was made. However, the submission of the assessee on the point was that since the Income Tax Authorities added to his income the amount of Rs. 10,230/- on account of estimated profits under the head 'business', excess credit in the anamat khata stood explained to that extent. On this basis it was urged that to tax the amount of Rs. 10,230/- on account of estimated profits would amount to double taxation.
4. The first case of this kind arose in Messrs.. Srinivas Ramkumar v. Commissioner of Income-tax., : 16ITR254(Patna) . In that case the Income Tax Authorities assessed profits of the business of the assesses at a flat rate. In ascertaining the net amount of losses they treated a sum of Rs. 33500/- entered in the suspense account in the books of the assessee's head office asundisclosed profit of the speculative transactions. On those facts it was held by their Lordships of the Patna High Court that although the Income-tax authorities applied flat rates to cover suppressed income, they were entitled to include the sum of Rs. 3,500/- as secreted profits, of the firm and the addition of the sum did not amount to double taxation inasmuch as it was brought into account not as profit of the trading transactions but as undisclosed profit of business in speculation.
This decision was approved by this Court in Kalekhan Mahomed Hanif v. Commissioner of Income-Tax, M. P. and Bhopal, Nagpur : 34ITR669(MP) , in which it was held that where the assessee explained the cash credit deposits in a particular way but the Income-tax Officer discarded the evidence tendered by theassessee as worthless, or where no evidence was tendered be would be justified in taking the evidence of the books showing the cash deposits as conclusive of the fact that some income was made and relatedto an undisclosed source and he was not bound to indicate what that source was.
5. The next case is again of the Patna High Court viz. Ramcharitar Ram Harihar Prasad v. Commissioner of Income-Tax, Bihar and Orissa : 23ITR301(Patna) . In this case the income Tax Authorities held that the trading ac-count maintained by the assessee did not show his true profits and estimated that a sum of Rs. 15,644should be added as profit to the amount shown in the books of account. They also held that a sumof Rs. 85,000 shown as cash credits in the personal accounts of the partners should be added to the income from business. Although in the question that was referred to the High Court the amount of Rs. 85,000 was described as income from undisclosed sources, it was found by their Lordships that there was no material whatever in the statement of the case to support the argument that the amount of Rs. 85,000 was income derived not from the business of the assessee but from some undisclosedsources.
It was on this basis that it was held that Rs. 15,644 could not be taxed over again. It would thus appear that the distinctive feature of these cases is that where the secreted income can be related to some source although unknown which is unconnected with the assessee's business, the case would not be of double taxation; whereas it would he of that kind if the assessee had no other source of income. This distinction was noticed by the Calcutta High Court in D. C. Auddy and Brothers v. Commissioner of Income-Tax, West Bengal : 28ITR713(Cal) and also by the Andhra High Court in G.M. Chenna Basappa v. Commissioner of Income-Tax, Hyderabad. : 34ITR576(AP) . In the latter case it was observed as below:
'The correct legal position seems to be that if the two additions are traceable to two distinct heads, namely, one attributable to the business activities of the assessee and is thus an undisclosed profit from the known source, and other to profits from an undisclosed source, i.e. some profit earning activity of the assessee which is altogether unknown, they are legally sustainable. The position will be different if the cash credits also were treated as part of theundisclosed profits of the same business. It will not be permissible for him to estimate the gross profits from the business and again to add to it the cash credits shown in the books in some disguise, as part of the income of the same business.'
We are in respectful agreement with this view.
6. In the case of : 28ITR713(Cal) what is meant by income from undisclosed source was considered in these terms:
'Taking up the question on its merits, it is pertinent to enquire what income from undisclosed sources means. Popularly speaking, it may mean income from an undisclosed item of a known line of activities or it may mean income from some source which was unconnected with any of the known sources or lines of profit-earning activity followed by the assessee and altogether unknown. If, for example, in the present case, the Income-tax Officer had added the amount of the cash credits to the profits of the business as a part of the undisclosed profits, it would not be profit or income from an undisclosed source. The reason is obvious. Since the Income-tax Officer found himself in a position to attribute this income to the business activities of the assessee, it would be undisclosed income from the known source, that is the business and in the terminology of the Income-tax Act, income from an undisclosed source or undisclosed income from other sources must necessarily mean income from some source which is altogether unknown, taking the word 'source' in the larger sense and not income from some undisclosed item or transaction in a known source of income which is exploited by the assessee.'
When the Income-tax Officer comes to the finding that the income shown in the books of account is related to an undisclosed source, he is not bound to indicate, as held by this Court in the case of : 34ITR669(MP) , what other sources the assessee has got. Accordingly where other sources are not indicated by the Income-tax Authorities it does not follow that an assessee has no other source of income and the income which is found to be related to an undisclosed source must be the income from the assessee's business.
It is true that their Lordships of the Patna High Court in the case of : 23ITR301(Patna) inferred from the statement of case that the assessee had no other sources, but that is only a finding of fact and not a statement of law. In our opinion, where the Income-tax Authorities find as a fact that certain income is from undisclosed sources, that is not a finding that, in the absence of any statement that the assessee has got other sources of income, he has no other source of income. For, if it was known that an assessee has other sources of income, there would be no finding that a certain income is from undisclosed sources which must from their very nature remain unknown to the Income-Tax Authorities,
7. In this view the finding that the amount of Rs. 30,452/- was an income from undisclosed sources implies that it is unconnected with the business of the assessee. Consequently it must be held that on the facts and circumstances of the case the assessee failed to explain the excess credit in the anamat khata to the extent of Rs. 10,230/-.
8. Our answer to the question, in the viewthat we have taken, is in the affirmative. The assessee shall bear the costs. Counsel's fee Rs. 100/-.