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Assessment of undisclosed income for the assessment year 1947-48 based on encashment of high denomination notes in 1946. Analysis: The case involved an assessment of undisclosed income by the Income Tax Officer, amounting to Rs. 22,000, derived from the businesses of mica, cloth, and grain during the assessment year 1947-48. The Income Tax Officer initiated proceedings under Section 34 after discovering the encashment of high denomination notes by the assessee. The Appellate Assistant Commissioner allowed Rs. 3,000 as non-secreted income but upheld Rs. 19,000 as secreted profits. The Tribunal concurred that the amount was secreted profits but opined that it should not be taxed in the assessment year 1947-48. The Tribunal raised the question of law regarding the inclusion of the Rs. 19,000 in the assessee's total income for the assessment year 1947-48. The Income Tax Department argued that the Tribunal erred in not taxing the amount for that assessment year, as the assessee's accounting years for the businesses of mica and cloth and grain were different from the financial year. The High Court agreed with the Department, stating that the Tribunal should not have disregarded the assessee's accounting years and should have assessed the secreted profits for the accounting year shown in the books of account. The High Court rejected the argument that the profitable deals constituted a separate source of income, emphasizing that the undisclosed income was derived from the mica and cloth and grain businesses, as per the Income Tax Officer's findings. The Court referred to Section 2(11)(a) of the Income Tax Act, highlighting that the assessee had chosen the accounting years as per the respective businesses. Therefore, the Court held that the Rs. 19,000 should have been included in the assessee's total income for the assessment year 1947-48, ruling in favor of the Income Tax Department and ordering the assessee to bear the costs of the reference.
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