Law:

Section:

Section 143, read with section 145 of the Income-tax Act, 1961 [Corresponding to section 23, read with section 13 of the Indian Income-tax Act, 1922] - Assessment - Additions to income - Assessment year 1941-42 - ITO rejected books of account of assessee and assessed him on a flat rate on ground that books of account was unreliable - ITO also treated certain amount in suspense account of assessee-HUF as undisclosed profits of its speculation business rejecting assessee's explanation that it represented deposit made by a member of assessee - HUF-assessee contended that if it was undisclosed profits, it should be held to have been included in profits of business which was ascertained on flat rate basis and that to bring it into account again amounted to double taxation - Whether since amount in question was not brought into account as profits of ordinary trading transactions of assessee, revenue was entitled to include amount in question as its secret profits though it had already applied flat rates to cover suppressed incomes and same did not amount to double taxation - Held, yes FACTS The assessee was an HUF which owned property and also carried on business. For the relevant assessment year the assessee's return showed income from property and a loss from business. With regard to the income from property the ITO assessed it at Rs. 3,000. With regard to the business of the assessee the ITO found the books unreliable, and, therefore, assessed the profits of the business at a flat rate. Against the income so ascertained the assessee claimed to set off certain losses alleged to have been incurred in speculative transactions. The total amount of these losses was alleged to be Rs. 19,900. The ITO ascertained the net amount of losses to be Rs. 3,861 by setting off against the sum of Rs. 19,900 three items totalling Rs. 16,039. Of these three items, one was an item of Rs. 8,300 which was entered in the suspense account in the books of the assessee's head office at Gaya. The ITO treated this as undisclosed profits. According to the assessee this sum represented deposits made by one 'K', a member of the family. On appeal, the AAC held that a part of said amount could not…

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