BALADIN RAM versus COMMISSIONER OF INCOME-TAX, U.P.

Citation: [1969] 1 S.C.R. 800 · Decided: 21-08-1968 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Judgment (excerpt)

8 00 
BALADIN RAM 
v. 
COMMISSIONER OF INCOME-TAX, U.P. 
August21, 1968 
(J. C. SHAH, V. RAMAsWAMI AND A. N. GROVER, JJ.] 
Indian lncom'-la.x Act, 1922, s. 2( I) Gnd 34(1) (al-Assessment 
of int:cnne escaping assessment-Applicability of s. 34( 1) (a)-Depo.rils 
assessed ar; reprPsenting inconie from undisclosed sources-Previous year 
for. 
. 
l"he asscc;sce--a Hindu undivided fa1nily (-) \Vas a~scsscd in 194445 
for the income of its previous year ending Ocrober 30, 1943. The incon1c 
shown in the return \\ras from iron foundry business and properly, 
and 
income from these sources only was taken into account in the original 
assessment. 
The asscsscc through a son of the karta was also a partner 
in the firm Raj Narain Durga Prasad. 
The accounting 
year 
of 
the 
firm ended on April I, 1944 and the assesscc's return did not show any 
income as share of profit in the firm nor was mention made in the return 
of Lhc cxislcnce of the partnership. 
In Dcccmhcr, 
1943 
1he 
asscssce 
aJong v.·ith 
Raj 
Narain 
Durga 
Prasad started 
a 
joint venture 
of 
supplying Sarpar and bamhoo to the Government. Bct\\·ecn the commencc-
meat of rhc joint venture and Febru~ry 18, 1944, the asscsscc 
made in-
vestments in the Sarpar and hamboo business to the tune of Rs. 27,000 (as 
found by the Tribunal). 
The Income-tax Officer, when he discovered the 
asscssec's connection with the firm Rajnarain Durga Prasad gave a notice 
under s. 34 d[ the Indian Income-tax Acf, 1922 and nladc in I952 a revis-
ed ac;sessment for 1944-45, assessment year, in which he added the income 
of the assec:;see as found in the book.<i of the firm to the income already 
assessed. 
Later, he discovered 
the asc:;e'\.See's 
invcsrmcntc; in the Sarpat 
an<l hamboo buc;ine5;o; and in 1954 he made another revi<ied assessment for 
the aSJiessment year 1944-45 treating the said 
investments as representing 
income from undisclosed ~ources. ·inc 
assec:;sec 
challenged 
both 
the 
asc;essments on 
the ground that s. 34( 1) (a) was not auracted. The 
a'-.c;es'\ee's pica was rejected hy the Appellale A~sislant Commissioner and 
the Tribuna,l. 
The High Court 
in 
reference 
also 
held 
against 
the 
asses.see \\.·ho by special leave appealed t0 this Court. The cootcnrions on 
behalf of rhc appdlant wcro: (i) As regards income from firm Rajnarain 
Durga Prasad it y,.·a<; suhmitti?d that th~ accounting year or that firm ended 
on April I, 1944 which v.·as y,.·ett after the close of the assessee's previot.l"-
ve:LT \Vhich ended on Octohcr 28. 1943. 
~ci1hcr the income of the finn. 
·nor the share of ac:;sesscc had hec:n determined 
till then, 
and it \vas not 
poc;,sible for 1he asse,sce to show the said incon1e in the return for 1944-45. 
~foreover the full facts came to the kno\\'ledge of the Tncome-tax Officer 
\vhen the assessment for the next a"6C..~<;ment year \Vas made. 
·rhcrefore 
s. 34( I) (a) y,.•as not attracted. 
(ii) As regards investn1en1s in the S:trpat 
and hamboo business the as5e'sec submitted that the husincss iLo;elf com~ 
menccd in Dccen1her, 1943 and having reuard to the definition o·f 'previou<; 
rear' in s. 2( 11) as it existed at the~ relc~v:int time, the income from this 
·source could not be shown 
a..~ income of his previous year which ended 
on October 28 1941. 
The income from this source was duly disclosed 
to the lncomc.-iax Officer and was actuallv assessed in 1945-46. The;-eforc 
in the case of the 1954 revised J'Sessment also s. 34( I )(a) was not 
attracted. 
• 
A 
B 
c 
D 
• 
E 
F 
G 
H 
• 
A 
B 
c 
D 
BALADIN v. c. I. T. (Gmver, /.) 
8 OJ 
HELD : (i) The High Court had rightly observed in dealing with 
the J 952 assessment that there was no finding of the appellate tribunal 
that the share of income from the fi'rm was not known at the time when 
the return was filed. 
In view of the admitted fact that the return filed 
by the assessee did not disclose the fact of partnership 
in the firm 
Raj Narain Durga Prasad it was no longer open to the assessee to urge 
that s. 34(1) (a) was not attracted, particularly when the burden lay 
upon the assessee to show that the Income-tax Officer was aware of the 
income received from the firm. [804 G-H] 
(ii) It is now well"Settled that the only way in which income from 
undisclosed sources can be taxed is to take it as the income of the rele-
vant financial year. 
Therefore the investments made by the assessee in 
Sarpat and bamboo business between December, 1943 and February, 1944 
were rightly

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