Smt. Srilekha Banerjee and Others vs Commissioner of Income-Tax, Bihar and Orissa

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 486 of 1962

Decision Date: 27 March 1963

Coram: M. Hidayatullah, S.K. Das, A.K. Sarkar

In this case the petitioner, Smt Srilekha Banerjee and others, appealed against a demand made by the Commissioner of Income‑Tax for the Provinces of Bihar and Orissa. The appeal was decided by a three‑judge bench of the Supreme Court of India comprising Justice M Hidayatullah, Justice S K Das and Justice A K Sarkar. The judgment was delivered on 27 March 1963 and is reported in 1964 AIR 697 and 1964 SCR (2) 552, with a citator reference of RF 1986 SC1849 (11). The matter concerned the provisions of the Indian Income‑Tax Act, 1922, relating to the taxability of proceeds from the sale of high‑denomination notes.

The factual matrix disclosed that the assessee had encashed fifty‑one high‑denomination currency notes, each bearing a face value of one thousand rupees, in January 1946, thereby receiving a total of fifty‑one thousand rupees. In the application for encashment the assessee explained that he was a proprietor of a colliery and also a contractor, and that in order to conduct his business and to meet weekly wage payments ranging from thirty thousand to forty thousand rupees he was obliged to keep large sums of cash readily available for emergencies. He asserted that the amount realised from the encashment was not profit nor a component of profit, but merely floating capital required for the ordinary conduct of his business. The Income‑Tax Officer rejected this explanation, treating the fifty‑one thousand rupees as profit derived from an undisclosed source and consequently levying tax on it as assessable income. The assessee contended that the burden of establishing that the amount was taxable income lay with the tax department, and that the department had failed to meet that burden.

The Court held that the department was justified in deeming the fifty‑one thousand rupees as assessable income arising from an undisclosed source. It clarified that it was not correct to say that the assessee bore no evidentiary duty and that the entire burden rested on the department to prove that the proceeds of the note encashment were income. The Court explained that when the assessee’s account books contain an entry showing receipt of a sum or conversion of notes by the assessee himself, the assessee must, if called upon, explain the source of that money and demonstrate that it does not possess the character of income. At this initial stage the department is not required to produce proof. If the nature of the business, the condition of the accounts and the manner in which the assessee conducts his affairs indicate that he may have, for convenience, retained the whole or part of the sum in high‑denomination notes, the assessee thereby satisfies his initial evidentiary burden on a prima facie basis. Once this burden is discharged, the department may not act unreasonably by rejecting the explanation and declaring the amount as income. However, if the department finds the explanation unconvincing, it is permitted to reject it and to infer that the amount represents income either from a source already disclosed by the assessee or from some undisclosed source. Before rejecting the assessee’s evidence, the department must either point out an inherent weakness in the explanation or rebut it by presenting information or evidence in its possession that contradicts the assessee’s claim.

The Court explained that once the revenue department has a record showing that the assessee either received a sum of money or converted notes, the onus initially rests on the assessee to explain the source of those funds and to demonstrate that the amount does not constitute income. The department is not required at that stage to produce any evidence of its own. If, for the sake of business convenience, the assessee keeps the whole or part of a particular sum in high‑denomination notes, the mere presence of such an entry in the books of account satisfies the assessee’s primary burden. In that situation the department may not act arbitrarily by rejecting the explanation and declaring the sum to be income. However, if the department finds the explanation unconvincing, it may reject it and may infer that the amount represents income, either from a source already disclosed by the assessee or from an undisclosed source. Before rejecting the assessee’s evidence, the department must either point out an inherent weakness in the explanation or rebut it by presenting information or evidence that it possesses. The mere receipt of money or conversion of notes constitutes prima facie evidence against the assessee, allowing the department to proceed in the absence of a satisfactory explanation. In the case before the Court, the cash involved was reportedly received from banks and subsequently sent to various locations where the assessee’s works were carried out, and the reverse flow also occurred. Nevertheless, the assessee failed to produce a central account documenting such transfers. Moreover, no account of the assessee’s personal expenditures was produced, and he could not explain why a large sum of cash was kept in one place when banks were available at each work site where he maintained accounts. Although the large sum was kept as cash, additional cheques were drawn to meet ongoing needs, and the cash remained untouched. The Court referred to several earlier decisions that illustrate the principles involved, namely Kanpur Steel Co. Ltd. v. C. I. T. (1957) 32 I.T.R. 56; Lalchand Bhagat Ambica Ram v. Commissioner of Income‑Tax, Bihar and Orissa (1959) 37 I.T.R. 288; Mahindranath v. Commissioner of Income‑Tax, Bihar and Orissa (1955) 554 I.T.R. 522; A. Govindarajulu Mudaliar v. Commissioner of Income‑Tax, Hyderabad (1958) 34 I.T.R. 807; Chunilal Ticamchand Coal Co. Ltd. v. Commissioner of Income‑Tax, Bihar and Orissa (1955) 27 I.T.R. 602; Mehta Parikh & Co. v. Commissioner of Income‑Tax, Bombay (1956) 30 I.T.R. 181; and Soyachand Baid v. Commissioner of Income‑Tax (1958) 34 I.T.R. 650.

The matter before the Court was a civil appeal, numbered 486 of 1962, filed by special leave from a judgment and decree dated 24 September 1959 pronounced by the Patna High Court in Miscellaneous Judicial Case No. 318 of 1957. Counsel for the appellants represented the parties seeking to overturn the High Court’s decision, while counsel for the respondent represented the revenue department. The appeal was heard on 27 March 1963, and the judgment was delivered by the presiding judge. The appeal concerned whether, under the facts of the case, the sum of fifty‑one thousand rupees, representing the value of high‑denomination notes encashed by the assessee, could be validly taxed as profit arising from an undisclosed business. The original assessee, Rai Bahadur H. P. Banerjee, had died, and his son, who had been substituted in his place, also died during the pendency of the High Court proceedings. Consequently, the present appeal was filed by the widow of the son together with other legal representatives. Banerjee owned several collieries in the Jharia Coal fields of Bihar and acted as a contractor for coal extraction. The dispute related to the assessment year 1946‑47, for which Banerjee had been assessed on an income of one lakh twenty‑eight thousand seven hundred thirty‑eight rupees. That assessment was later reopened under section 34 of the Indian Income‑Tax Act and enhanced, but subsequently reduced on appeal to a figure slightly below the original assessment. The present assessment arose from a second reopening under the same provision, following the encashment on 22 January 1946 of high‑denomination notes amounting to fifty‑one thousand rupees. In his application under the Ordinance that demonetised such notes, Banerjee explained that the cash was required for his business as a colliery proprietor and contractor, that he needed to make weekly payments of thirty to forty thousand rupees to labour, and that he kept a large sum as floating capital to meet emergencies. He asserted that the cash was not profit nor part of profit, but merely working capital necessary for conducting his business.

In the appeal, the assessed amount was reduced to a figure slightly lower than the original assessment. The present assessment arose from a second re‑opening of the case under section 34 of the Income‑Tax Act, and it was based on the following facts. On 22 January 1946, the assessee, Banerjee, exchanged high‑denomination notes having a total face value of Rs 51,000. In the application submitted under the Ordinance that demonetized such notes, Banerjee explained why he possessed the notes. He stated that he was engaged in the business of a colliery proprietor and a contractor for Messrs Kilburn & Co., operating under the name H.P. Banerjee & Son, and also acted as a contractor for the State Railway in the Bokaro, Swang and Hazaribagh districts, using the name Jharia Dhanbad Coal & Mica Mining Company. He further explained that, in order to conduct his business and to pay labour, he needed to make weekly payments of between Rs 30,000 and Rs 40,000 because he did not receive remuneration for work completed each week. Consequently, he kept a large sum of money on hand in order to meet emergencies. He described the money as “neither profit nor part of profit—it is very floating capital for the purpose of conducting business. It is not an excess of profit.” He also mentioned that he maintained accounts with three banks: Imperial Bank of India, Nath Bank Ltd., Jharia, and Central Bank of India Ltd., Bhowanipore Branch. However, Banerjee added that he could not recall precisely from which bank the notes had been obtained, since his transactions were frequent.

The notice issued to Banerjee under section 34 of the Income‑Tax Act was not contested on any of the usual grounds that are typically raised in such matters, and his explanation was rejected. The Income‑Tax Officer observed that, although Banerjee’s business was large and his withdrawals from the various banks were both substantial and frequent, he had not kept a central ledger that recorded the withdrawals and the subsequent remittances to his multiple business undertakings. Moreover, none of the books produced by the assessee contained a bank‑account register. On examining the statements filed by Banerjee, the Officer identified a discrepancy of nearly Rs 50,000. Accordingly, the Officer concluded that the high‑denomination notes represented profits derived from an undisclosed source and therefore treated the amount as assessable income.

Banerjee appealed this assessment first to the Appellate Assistant Commissioner and subsequently to the Income‑Tax Tribunal. Both the Appellate Assistant Commissioner and the Tribunal affirmed the assessment made by the Income‑Tax Officer. The assessee then sought a case order, which was denied, but the High Court ordered that the case be stated on the specific question that had been previously raised. The High Court subsequently decided the question against the assessee, leading to the present appeal. The appellants argued that, because the Department had issued a notice under section 34 of the Income‑Tax Act, the burden lay upon the Department to prove that the amount in question was income that had escaped assessment. They further contended that, even if the assessee were required to demonstrate the source of the high‑denomination notes, he had satisfied this requirement by showing that he possessed large sums of cash, which were retained for convenience in the form of high‑denomination notes.

The appellants argued that any burden of proof, if it existed, had already been satisfied by the assessee in the present case and that, because the evidence presented by the assessee remained unrebutted, the assessing authority could not lawfully make an additional assessment. To support this position, the appellants relied on the decision in Kanpur Steel Co., Ltd. v. C. I. T. (1), contending that in that case the Allahabad High Court had explained the nature of the burden of proof in a manner consistent with the appellants’ contentions. They cited the report of that decision, [1957] 32 I.T.R. 56, and asserted that the Allahabad judgment was applicable to the facts before this Court. The appellants further pointed out that the same ruling had been considered and approved by this Court in the matter of Lalchand Bhagat Ambica, Ram v. Commissioner of Income Tax, Bihar and Orissa (1). The department, in turn, cited other authorities in support of its position. The record showed that there are many cases dealing with the encashment of high‑denomination notes; in some of those cases the explanation offered by the taxpayer was accepted, while in others it was rejected, depending on the specific facts. The courts have stressed that the evaluation of evidence presented by the taxpayer must be based on the particular circumstances of each case. When an assessee has demonstrated, on the relevant date, that he possessed a large sum of cash sufficient to cover the number of notes that were encashed, this Court as well as the High Courts have, in the absence of any indication that the taxpayer’s explanation is inherently improbable, accepted the assertion that the assessee held the amount, or a portion of it, in high‑denomination notes. Accordingly, the assessee was deemed to have discharged the burden of proof prima facie. Conversely, where the assessee was unable to establish that, in the normal course of his business or otherwise, he possessed such a large amount of cash, the courts have held that the assessee began his case “under a cloud” and was required to remove that cloud to the reasonable satisfaction of the assessing authority. If the assessee failed to do so, the department was permitted to reject his explanation and to treat the amount as income from an undisclosed source. The assessee, however, strongly relied on the decision in Kanpur Steel Co., Ltd. v. C. I. T. (2). In that case, thirty‑two notes of Rs 1,000 each were encashed, and the assessee claimed that the notes formed part of a cash balance of approximately Rs 34,000. The Income Tax Officer examined the sales entries that preceded the encashment and, as reported in [1959] 37 I.T.R. 288, found that those sales generated sums of less than Rs 1,000 and could not have produced the accumulation of so many high‑denomination notes. The Tribunal consequently concluded that only Rs 7,000 could have been held in high‑denomination notes. Upon referral, the Allahabad High Court held that the burden of proof rested on the Department to demonstrate that Rs 32,000 represented suppressed income, and that the assessee bore no burden to disclose the source of the notes, because, before demonetisation, there was no established requirement to explain possession of high‑denomination notes.

In the earlier authority, the Allahabad High Court held that the mere possession of high‑denomination notes required an explanation. The court observed that the explanation offered was fairly satisfactory because large notes could be received even in small transactions and subsequently used as change. Consequently the court said it could not conjecture how many such notes could have accumulated. The present Court noted that this view places the burden of proof on the tax department, as the High Court indicated. In contrast, the decision in Manindranath Das v. Commissioner of Income Tax, Bihar & Orissa (1) involved a taxpayer who had encashed notes worth Rs 28,600, claiming they represented his accumulated savings. The tribunal accepted the explanation for Rs 15,000, since fifteen of the notes could be traced to a bank deposit, but rejected the explanation for the remaining balance. The Patna High Court, hearing that appeal, emphasized that whenever an assessee receives an amount during the year of account, the onus is on the assessee to demonstrate that the amount does not constitute income. The court held that the taxpayer had failed to meet this burden with respect to the untraced notes.

The reasoning of the Patna High Court found support in A. Govindaraju Mudaliar v. Commissioner of Income Tax, Hyderabad (2). In that case the Supreme Court declared that if an assessee does not satisfactorily prove the source and nature of an amount received during the accounting year, the Income Tax Officer may correctly infer that the receipts are assessable. The Court noted that the assessee’s explanation for amounts credited to his name in the books of a partnership firm was rejected as untrue, and it was held permissible for the Tax Officer and the Appellate Tribunal to treat those amounts as concealed income. From these authorities the Court extracted a clear principle: when an amount is received in the relevant accounting year, the initial duty lies with the assessee to show that the amount is not income. Failure to do so permits the Income Tax Officer to deem the amount to be income, whether from disclosed or undisclosed sources. Applying this principle to situations involving the encashment of high‑denomination notes presents difficulty when the assessee’s books of account are accepted and show a cash balance sufficient to cover the notes. The Court observed that each case must be examined on its own facts. Illustrative decisions show divergent approaches; for example, in Chunilal Ticamchand Coal Co., Ltd. v. Commissioner of Income Tax, Bihar and Orissa (1), the assessee had encashed high‑denomination notes worth Rs 68,000, and the evidence related to the case was subsequently considered.

In the first case discussed, the taxpayer was described as habitually retaining large sums of cash, keeping them intact for emergencies and meeting current requirements by withdrawing from banks. The taxpayer supported this explanation with receipts and disbursement entries recorded in the books of account. Nevertheless, the explanation was rejected in part because the accounts failed to mention the high‑denomination notes and because such notes were rarely needed to pay wages to labourers. The Tribunal, however, held that the explanation could be true for a portion of the amount and, relying on the decision reported in (1) [1955] 27 I.T.R. 602, accepted the explanation with respect to Rs 35,000 while rejecting it with respect to Rs 33,000. The Patna High Court subsequently held that an explanation deemed reasonable for a part must be considered reasonable for the whole, because there was no material upon which the balance could be shown to constitute income from an undisclosed source that would distinguish the rejected part from the accepted part.

The judgment then examined several other authorities. In Mehta Parikh and Co. v. Commissioner of Income Tax, Bombay, high‑denomination notes valued at Rs 61,000 were encashed. The taxpayer explained that the notes were part of the cash balance on hand. The accounts indicated that sustaining this explanation would require presuming that the entire balance on 1 January 1946 consisted of eighteen notes of Rs 1,000 each and that all receipts up to 18 January 1946, when the notes were encashed, were also in high‑denomination notes. Affidavits from persons who claimed to have paid amounts in Rs 1,000 notes were not accepted, and the Tribunal accepted the explanation only for Rs 31,000. This Court observed that if the account books were accepted and the deponents were not cross‑examined on their affidavits, the rejection of the explanation in part was based solely on conjecture, and the finding that Rs 30,000 represented income from an undisclosed source was unsupported by evidence. It was noted that Justice Venkatarama Ayyar, in that case, based his decision on the second ground alone, treating the finding as an error of law. In Sovachand Baid v. Commissioner of Income Tax, high‑denomination notes valued at Rs 2,28,000 were encashed. The taxpayer claimed inheritance of the amount from his father in 1942 and produced account books covering 1926 to 1942, but did not produce earlier books. The Tribunal found that the books could have been prepared at any time and did not contain full dealings even between 1926 and 1942, and there were no entries showing any receipt of such amount from business, as reported in (1) [1956] 30 I.T.R. 181 and (2) [1958] 34 I.T.R. 650. Nevertheless, the Tribunal held that Rs 1,28,000 of the amount was income from an undisclosed source. The taxpayer’s appeal before this Court was dismissed because the rejection of the account books was deemed reasonable under the circumstances, and the Court observed that the partial

In the judgment, the Court observed that the Tribunal’s refusal to accept the assessee’s explanation should be understood as a concession rather than a detailed, reasoned finding. The Court then turned its attention to the case of Lalchand Bhagat, a decision that had been heavily cited by other courts and was said to have embraced the reasoning of the Allahabad case with full approval. The Court felt it necessary to examine that decision closely to determine whether such an approval truly existed. In the Lalchand Bhagat matter, the assessee had encashed 291 high‑denomination notes amounting to Rs 2,91,000. The assessee claimed to maintain two separate cash‑keeping systems for many years: one called the “Almirah Account” and the other the “Rokar Account.” At the time the notes were encashed, the Almirah Account showed a balance of Rs 2,81,397 while the Rokar Account showed Rs 29,284, together providing enough cash to cover the value of the notes. The assessee explained that, because his business operated through numerous branches, it was customary to keep a substantial amount of ready cash at the head office to meet any unexpected emergency. The Court noted that the business was indeed extensive and that the Almirah Account had been in existence for several years, during which the numbers of high‑denomination notes had regularly been recorded. Only in the year when the notes were encashed were those numbers entered after the fact. The Tribunal rejected this explanation on several grounds: it characterized the period as one of emergency, suggested that as a grain dealer the assessee might have engaged in clandestine grain smuggling—a charge supported by the fact that he had once faced prosecution, although he had been acquitted—and pointed to the notoriety of the area for smuggling activities. The Tribunal also argued that the assessee had engaged in speculative trading during that year, even though he reported a loss from such speculation, and emphasized that the entries of the high‑denomination notes in the Almirah Account were made retrospectively.

The Tribunal, however, accepted both books of account as genuine and recognized that the assessee possessed a total balance of Rs 3,10,681. Before the Tribunal, the assessee had explained that the numbers of the high‑denomination notes were entered into the Almirah Account out of nervousness caused by the demonetisation of those notes. The Tribunal accepted this explanation insofar as it related to an amount of Rs 1,50,000 but rejected the same explanation in respect of Rs 1,41,000, without providing any reasons for distinguishing between the two portions. The Court examined the Tribunal’s reasoning and held that, apart from the fact that the numbers of notes had been inserted later, none of the other reasons offered by the Tribunal possessed any evidentiary value; they were merely conjectures and surmises. The Court further observed that if the explanation for the retrospective insertion of the numbers was deemed satisfactory to justify the Rs 1,50,000, the same explanation should logically apply to the remaining balance because there was no material distinction between the two amounts. Consequently, the Court concluded that the essential question concerning the Rs 1,41,000 was whether any material existed to support a different conclusion, and it indicated that no such material had been presented.

The Court observed that there was no material which could justify reaching a conclusion different from that which had been accepted for the sum of Rs 1,41,000. It set out the factual matrix: the assessee had shown that it required a large cash balance to be kept on the premises and had demonstrated that the almirah account was a genuine record of cash on hand. The almirah account contained entries of the numbers of high‑denomination notes for the years preceding the year under assessment. In the year in question those numbers had been entered after the fact, and the Court identified this retrospective insertion as the only substantial point of objection against the assessee. Further, the Court noted that bank statements and the accounts of the branches and the beparis evidenced that the assessee had received large sums, which together formed the balance shown in the almirah account. From 6 February 1945 to 11 January 1946, when the notes were encashed, the sum received by the assessee in excess of Rs 1,000 amounted to as much as Rs 5,00,000. Since the Tribunal had not challenged the almirah account at all, and more than half of the amount recorded was represented by high‑denomination notes, the Court posed the question whether any material on record existed that would legitimately permit the Tribunal to conclude that the source of the remaining 141 high‑denomination notes of Rs 1,000 each remained unexplained.

Concluding that, if the entries in the books of account with respect to the balance in the Rokar and the balance in the Almirah were held to be genuine, there was no logical way to escape the view that the appellant had offered a reasonable explanation for the source of the 291 high‑denomination notes of Rs 1,000 each that it had encashed on 19 January 1946, the Court accepted the assessee’s case in its entirety. The Court clarified that it was not holding that the assessee was relieved of every proof obligation; rather, the burden of proof depends on the specific facts of each case. One relevant fact might be the existence of a large floating cash balance on hand; taken together with other facts, such a balance may be sufficient to show that the high‑denomination notes formed the whole or a part of that balance. The Court referred to a decision of the Allahabad tribunal where a similar balance was proved and was accepted in part, and the High Court had held that the explanation was good for the whole amount of notes. While summarising that earlier decision, the Court stressed that the Tribunal could not merely guess the number of high‑denomination notes it could accept. Citing that case and others, the Court indicated that the proper approach is that when an entry in the assessee’s books shows receipt or conversion of high‑denomination notes, the assessee must, if required, establish the source of that money and prove that it does not constitute income, whereas the Department at that stage is not required to produce proof.

The Court explained that when the assessee himself records an entry showing receipt of a sum or conversion of high‑denomination notes, the burden shifts to the assessee to disclose the source of that money and to demonstrate that the receipt does not constitute income. At this stage the tax Department is not required to produce any proof; it may only request that the assessee produce any books of account, documents, or other evidence that bear on the explanation offered and may examine such material. If the explanation, when examined, makes clear that the receipt was not of an income nature, the Department is not permitted to act arbitrarily by rejecting that explanation and treating the amount as income. Conversely, when the explanation is unconvincing or fails to meet the standard of credibility, the Department may lawfully reject it and may infer that the amount represents income either from sources already disclosed by the assessee or from a source that remains undisclosed. The Department does not then proceed on a basis of no evidence, because the mere fact of a receipt of money itself constitutes prima facie evidence against the assessee. Unless the assessee successfully rebuts that prima facie evidence, the unrebutted inference may be used to hold that the receipt was of an income character. The expression “an undisclosed source” itself indicates that the onus of disclosure lies on the assessee and not on the Department. In situations involving high‑denomination notes, where the nature of the assessee’s business and the condition of his accounts and transactions justify a reasonable inference that he might, for convenience, have retained the whole or a part of a certain sum in such notes, the assessee initially satisfies his burden by establishing the existence of the balance and showing that it could reasonably have been kept in high‑denomination notes. Before the Department may reject that evidence, it must either point out an inherent weakness in the assessee’s explanation or rebut it by presenting information or evidence in its possession that contradicts the explanation. The Department cannot, by an unreasonable rejection of a satisfactory explanation, transform good proof into a lack of proof. The Court held that these principles delineate the proper approach for adjudicating such disputes. It further observed that the view expressed in the Allahabad case does not absolve the assessee of any burden nor does it shift the entire burden to the Department; the facts of that case do not support such a conclusion, and if they did, that would represent an erroneous view. Turning to the facts before it, the Court noted that the assessee claimed the high‑denomination notes formed part of the cash balance held at the head office. Initially, the Income Tax Officer recorded the cash on hand as Rs 1,62,022, but upon scrutiny this figure was found to be inaccurate. The assessee himself corrected the figure before the Appellate Assistant Commissioner, stating that the actual balance was Rs 1,21,875. Under ordinary circumstances, this corrected figure would have provided prima facie evidence that the assessee might have retained a portion of the balance in high‑denomination notes. However, the assessee was unable to substantiate the existence of this balance, as the relevant books of account failed to contain the necessary entries.

The Tribunal observed that the assessee’s books of account did not contain any entries relating to banks, even though cash was regularly received from banks and transferred to the various sites where work was carried out and vice‑versa; nevertheless, no central record of such transfers was produced. It also noted that there was no account of the assessee’s personal expenses and that he failed to explain why a large sum of cash was retained at a single location when each work site had its own bank accounts. The Appellate Assistant Commissioner examined the matter further and found that on the very day the high‑denomination notes were encashed, a cheque was drawn for Rs 45,000. Immediately after that, a remittance of Rs 16,000 was made to Bokaro, while Rs 17,000 had been withdrawn a few days earlier to meet that same expense. Subsequently, a withdrawal of Rs 8,000 was made the next day and another withdrawal of Rs 20,000 occurred ten days later for business purposes. It appeared that the Rs 45,000 held in cash was not utilized at all; however, on 30 January 1946 a further amount of Rs 6,000 was withdrawn and not spent, bringing the total amount of Rs 51,000 to which the high‑denomination notes corresponded. On the basis of these facts, the Tribunal concluded that the high‑denomination notes did not represent the cash balance of the assessee but rather an unexplained sum of money, and therefore treated the amount as income derived from an undisclosed source. The High Court, considering the same facts and circumstances, held that there were sufficient materials to show that Rs 51,000 did not belong to the cash balance and that the source of the money had not been satisfactorily proved; consequently, the Department was justified in treating the sum as assessable income of the assessee from an undisclosed source. In reaching this conclusion, the High Court was guided by the principles previously explained and did not accept the argument that, because the proceedings were initiated under section 34 of the Income‑Tax Act, a special burden of proof rested on the Department. While it is true that proceedings under section 34 may be commenced only under the conditions prescribed in that provision, once such proceedings are validly started there is no distinction between an ordinary assessment and an additional assessment under section 34, and the same rules on the burden of proof apply. The Court therefore found that the appeal lacked any substantive ground, dismissed it with costs, and entered an order of dismissal of the appeal.