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Issues Involved:
1. Whether the source of the credits of Rs. 60,000 appearing in the account of Arjundas Pokardas was from disclosed sources, i.e., business. 2. Whether the cash credits were attributable to the concealed income from business when it was not the assessee's case that there was suppression of business income and when it was unable to conclude that the suppression of production occurred before September to November in the previous year. Detailed Analysis: Issue 1: Source of Credits from Disclosed Sources The Income-tax Officer (ITO) observed a sudden fall in the production of cut mica during September, October, and November of the assessment year 1958-59, which was not satisfactorily explained by the assessee. Consequently, he estimated the deficit production value at Rs. 1,20,000. Additionally, the ITO found three cash credits amounting to Rs. 60,000 in the account of Arjundas Pokardas, which were treated as income from "other sources" due to the unsatisfactory explanation provided by the assessee. The Assistant Commissioner upheld the ITO's findings but merged the additions, granting the assessee relief of Rs. 61,350. Upon appeal, the Tribunal also found the yield of cut mica understated and estimated the deficit yield at Rs. 60,000. However, it held that the cash credits, despite being unexplained, need not be separately added as they could be attributed to the concealed income from business. The Tribunal reasoned that the cash credits were part of the business income, given the lack of other ostensible sources and the unreliability of the books of account. The High Court, however, found that the Tribunal misdirected itself by placing the onus on the department to prove that the cash credits were not from business income. It emphasized that the presumption is that unexplained cash credits are income from "other sources" unless the assessee provides satisfactory evidence to the contrary. The High Court concluded that the cash credits should be treated as income from other sources, not business income. Issue 2: Attribution of Cash Credits to Concealed Income from Business The Tribunal initially found that the cash credits could not be conclusively linked to the suppressed production of mica in September, October, and November, but nonetheless merged the additions. The department argued that the cash credits appearing in June, July, and August could not relate to the suppressed production in later months, and therefore, both items should be separately added to the income. The High Court agreed with the department, stating that the cash credits appearing in earlier months could not be connected to the suppressed yield of mica in later months. The Tribunal's decision to merge the additions was incorrect because the suppression of yield and the cash credits occurred in different periods. The High Court cited Supreme Court precedents, emphasizing that unexplained cash credits should be treated as income from other sources unless the assessee proves otherwise. The High Court reformulated the question to focus on whether the Tribunal was justified in making only one addition of Rs. 60,000. It concluded that the Tribunal erred in merging the additions and that both the cash credits and the suppressed yield should be separately added to the income. Conclusion: The High Court ruled in favor of the department, holding that the cash credits amounting to Rs. 60,000 and the suppressed yield of mica amounting to Rs. 60,000 should be separately added to the assessee's income. The department was entitled to its costs, with an advocate's fee of Rs. 250.
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