Section 260(1) — the law in short
What the courts have decided on section 260(1), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Anantharam Veerasinghaiah & Co v CIT
Supreme CourtCuts both ways
Additions were made to my book profits in earlier years. Can I use that money to explain a cash credit or an unexplained payment in a later year?
You can put the argument, and the Supreme Court says it is a real argument, but it does not win by itself. The Court held that when an intangible addition is made to book profits in an assessment, the amount added is the undisclosed income of the assessee, is as much a part of his real income as the profits shown in his books, has the same concrete existence, and could be available to him just as the book profits could. Secret profits of an earlier year may therefore constitute a fund, concealed but real, from which he may later draw to meet expenditure or to introduce amounts into his books. The Court then put the limit on it in the same paragraph: it is quite another thing to say that any part of that fund must necessarily be regarded as the source of a later unexplained expenditure or cash credit, and the mere availability of such a fund cannot in all cases imply that no further secret profits were earned in the later year. All the facts and circumstances have to be looked at.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.
