JUDGMENT

The following two questions have been referred for our opinion in compliance with the order of this Court dated 5th February, 1953, u/s 66(2) of the Indian Income Tax Ac :

"1. The assessee company having followed the mercantile method of accounting whether the commission of Rs. 15,432 having been received in the subsequent accounting year, relevant for the assessment year 1948-49, could be brought to tax as accrued income in the assessment year 1947-4 ?

2. Whether there was any material to hold that the sum of Rs. 25,000 being the value of the high denomination noted exchanged in pursuance to the demonetisation ordinance was an income of the assessee company from some undisclosed sourc ?"

The assessee is a private limited company known as the Kanpur Steel Company Limited which, in addition, was carrying on the work of sole agency of the Aira Sugar Factory and was receiving a commission of one per cent. on the sales of sugar of that factory. The assessment year in question is 1947-48 and the relevant accounting period is from 8th November, 1945, to 27th October, 1946. No commission was received by the assessee company during the relevant accounting year.

Subsequently, however, a sum of Rs. 15,432 was received by the company, as commission accrued upon the sales for the period relevant to the assessment year in question, on 17th March, 1947. This amount was shown by the assessee company as income relating to the subsequent assessment year 1948-49. The Income Tax Officer, however, held that this income had accrued to the assessee during the previous year corresponding to assessment year 1947-48 and, consequently, added it to the income for that year and included it in the assessment.

A second point, that cropped up before the Income Tax Officer, related to the encashment of 32 high denomination currency notes of Rs. 1,000 each by the assessee company on 12th January, 1946, when the High Denomination Bank Notes (Demonetisation) Ordinance, 1946, came into force. The Income Tax Officer called upon the assessee to explain how those 32 currency notes of Rs. 1,000 each came into possession of the assessee. The assessee claimed that the currency notes represented part of his cash balance which, on 12th January, 1946, stood at the figure of Rs. 34,313-1-9. The Income Tax Officer rejected this explanation and, consequently, held that the amount of Rs. 32,000 represented by those currency notes of Rs. 1,000 each to be suppressed income of the assessee form some undisclosed source. The assessee appealed unsuccessfully before the Appellate Assistant Commissioner of Income Tax. When the appeal camp up before the Income Tax Appellate Tribunal, the assessee again failed on both the points but the Tribunal held that there was a possibility that seven high denomination currency notes of the value of Rs. 7,000 could represent part of the cash balance and, consequently, reduced the amount, which had been added back to the income of the assessee, to that extent. The Tribunal thus upheld the adding back of the sum of Rs. 25,000. The assessee then applied to the Tribunal u/s 66(1) of the Indian Income Tax Act to make a reference to this Court. That application was rejected. When the assessee moved this Court. That application was rejected. When the assessee moved this Court, this reference was called for and, consequently, the Tribunal have sent a statement of the case after framing the two questions mentioned above.

With regard to the first question, it has become unnecessary for us to enter into any discussion, as Dr. N.P. Asthana, appearing for the assessee company, made a statement that he would not press this question, particularly, in view of the facts that emerged during the discussion after the scrutiny of the statement of the case submitted by the Income Tax Appellate Tribunal and in view of the fact that the sum of Rs. 15,432 had not been included in the income of the assessee for the subsequent assessment year 1948-49 and had only been in