Law:

Section:

Section 297 of the Income-tax Act, 1961 - Repeals and savings - Assessment year 1962-63 - ITO added certain amounts to income of assessee as income from undisclosed sources - Admittedly, said entries pertained to period prior to 31-3-1961 - Assessee's case was that income-tax authorities erred in treating said sums as income assessable during assessment year 1962-63 because they being incomes attributed to undisclosed sources during financial year 1960-61 and there being no accounts regarding alleged undisclosed sources, were assessable as income of assessee only in assessment year 1961-62, if at all these were assessable - Whether impugned order treating said amounts as taxable in assessment year 1962-63 was to be set aside - Held, yes FACTS In the course of the proceedings relating to the assessment of income of assessee in respect of the assessment year 1962-63, the ITO found that there were certain discrepancies regarding the stock held by the assessee during the relevant year and that a sum of Rs. 1,75,000 shown in the books of the assessee as borrowings on hundies had not been established. He was also of the opinion that there was a credit of Rs. 9,000 in suspense account regarding which there was no proper explanation. Therefore, the ITO added a sum of Rs. 3,40,970 as income from undisclosed sources to the income declared by the assessee in his profit and loss account. The appeal filed against the order of the Income-tax Officer was dismissed. Thereafter, the assessee filed a petition under section 264 before the Commissioner. The Commissioner modified the order of assessment to a small extent. On writ : HELD The Supreme Court in Baladin Ram v. CIT [1969] 71 ITR 427 , observed that in the absence of any accounts in respect of the undisclosed source or when there was nothing to show that the assessee had exercised any option under section 2(11)(i )(a) of the 1922 Act, the only possible way in which income from an undisclosed source could be assessed or reassessed was to make the assessment on the basis that the previous year for such an income would be the ordinary financial year and had to be assessed in the immediately following financial year. A…

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