The burden of proof lies upon the assessee to show that the amount in question does not bear the character of income. If the assessee fails to do this, the Income-tax Officer may hold that it represents income of the assessee either from the sources he has disclosed or from some undisclosed source.

Judgment

HIDAYATULLAH, J.: This is an assessee s appeal by special leave of this Court against an order of the High Court of Patna answering in favour of the Department the question whether in the circumstances of the case the amount of Rs. 51,000 being the value of high denomination notes encashed by the assessee, has been validly taxed as profits from some undisclosed business. The original assessee, Rai Bahadur H. P. Banerjee is dead. His son, who was substituted in his place, also died during the pendency of the proceedings in the High Court. The present appeal has been filed by the widow of the son and other legal representatives

2. Banerjee was the owner of several collieries in the Jharia Coal fields in the State of Bihar, and was also a contractor for raising coal. This matter relates to the assessment year 1946-47. For that year, Banerjee was assessed on an income of Rs. 1,28,738. The assessment was then reopened under S. 34 of the Indian Income Tax Act, and was enhanced, but subsequently on appeal, it was reduced to a sum a little below the original assessment. The present assessment was made on a second re-opening of the case under S. 34 in the following circumstances.

3. On January 22, 1946, Banerjee encashed high denomination notes of the value of Rs. 51,000. In his application under the Ordinance which demonetized high denomination notes, Banerjee gave the reason for the possession of the notes as follows:-

"I am engaged in business as colliery proprietor, contractor under Messrs. Killburn and Co. in the name and style of H. P. Banerjee and Son and also under the State Rly. Bokaro, Swang, Hazaribagh district in the name of Jharia Dhanbad Coal and Mica Mining Co.,.......For conducting the business and payment to labour I have to pay every week between 30/40 thousand. As I did not get payment for work done every week I had to keep large sum of money to meet emergency.......It is neither profit nor part of profit- it is very floating capital for purpose of conducting business. It is not an excess of profit.

He stated that he had accounts with (1) Imperial Bank of India. (2) Nath Bank Ltd., Jharia, and (3) Central Bank of India Ltd., Bhowaniporoe Branch, but added that he did not remember exactly from which Bank the notes came into his possession as his transactions were frequent. The notice which was issued to him under S. 34 of the Income-tax Act, was not questioned on any of the grounds which are usual in such cases. Banerjee s explanation was not accepted. The Income-tax Officer pointed out that although his business 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 Income-tax Officer found a discrepancy of nearly Rs. 50,000 in the statements filed by the assessees. He, accordingly, treated the high denomination notes as profits from some undisclosed source and assessed them as assessable income. Banerjee appealed to the Appellate Assistant Commissioner and further to the Tribunal. Both the authorities upheld the order of the Income-tax Officer. The assessee demanded a case which was refused, but the High Court directed a statement of the case on the question already quoted. The High Court decided the question against the assessee, and hence this appeal.

4. The contention of the appellants is that since the Department had issued a notice under S. 34 of the Income-tax Act, it was incumbent on the Department to establish that the amount in question was income which had escaped assessment. The appellants also contend that even if the assessee was required to prove the source of the high denomination notes, he had sufficiently proved it by showing that he had large amounts on hand, which were held for convenience in high denomination notes. The appellant s thus subm