Law:

Section:

Section 147 of the Income-tax Act, 1961 [Corresponding to section 34 of the Indian Income-tax Act, 1922] - Income-escaping assessment - General - Assessment year 1946-47 - Whether if there is entry in account books of assessee which shows receipt of sum on conversion of high denomination notes tendered for conversion by assessee himself, it is necessary for assessee, if asked, what source of that money is and to prove that it does not bear nature of income - Held, yes - Whether where assessee contended that high denomination notes represented not cash balance but some other money and he failed to explain source of said money, department was justified in treating value of said high denomination notes as income of assessee from undisclosed sources - Held, yes FACTS The assessee was the owner of several collieries-coal fields and was also a contractor for raising coal. For the assessment year 1946-47, the assessment of the assessee was completed. However, subsequently, the ITO reopened the assessment on finding that the assessee was in possession of some high denomination notes. The assessee contended that for conducting the business and payment to labour he had to pay every week in thousands; that as he did not get payment for work done every week he had to keep large sum of money to meet emergency and that .............it was neither profit nor part of profit-it was very floating capital for purpose of conducting business. He also stated that he had accounts with India, at some banks, but added that he did not remember exactly from which bank the notes came into his possession as his transactions were frequent. The ITO pointed out that although the business of the assessee was large and the withdrawals from the various banks were large and frequent, he had not maintained a central account showing withdrawals from the banks and remittances made to his various businesses, and that none of the books maintained by the assessee, and produced by him, contained a bank account. The ITO found a discrepancy in the statements filed by the assessee. He, accordingly, treated the high denomination notes as profits from some undisclosed source and assessed them as assessable…

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