Judgement

N. H. BHAGWATI J. : These are two connected appeals with special leave granted by this Court under Art. 136 of the Constitution and arise out of the appellant s assessment to Income-tax for the assessment year 1946-47 and Excess Profits Tax for the chargeable accounting period 9-1-1945 to 2-2-1946.

2. The appellant is a Hindu undivided family carrying on extensive business in grain as merchants and commission agents. It is one of the premier grain merchants and wholesalers of Sahibganj in the District of Santhal Parganas in the State of Bihar. It has branches at Nawgachia in the District of Bhagalpur and at Dhulian in the District of Murshidabad in West Bengal.

3. The appellant filed its Income-tax Return for the assessment year 1946-47 showing a loss of Rs. 46,415 in the business. The Income-tax Officer, Patna, however, in the course of the assessment noticed that the appellant had encashed high denomination notes of the value of Rs. 2,91,000 on 19-1-1946. The Income-tax Officer asked for an explanation which the appellant gave stating that these notes formed part of its cash balances including cash balance in the Almirah account. The cash balances of the appellant on 12-1-