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(i) There was no custom or practice prevalent in the market for any merchant to keep the number of the high denomination notes.

(ii) During the course of the business these notes were received in change for smaller notes but since we are making a presumption against the assessee for not keeping on record of flow in the business of notes, the position remained that the assessee has not been able to prove that he received high denomination notes in exchange for other notes.

(iii) When there are high denomination notes tendered for encashment the onus is on the assessee to prove the origin and source of these notes.

Having thus recorded its findings, the Tribunal went on to hold that examining strictly from the point of view of onus and legal rights, the assessee had not established by definite evidence that it received Rs. 27,000 in high denomination notes and, therefore, the assessee had not discharged the onus of showing that Rs. 27,0.00 was received in high denomination notes. It was further held that, as regards the balance of Rs, 1,40,000, the assessee had not been able to establish that it received these sums in high denomination notes from the bank, and the assessee's theory that these notes were exchanged during the course of the business into high denomination notes remained unproved ; and the assessee had not discharged the onus of proving that this money came in the form of high denomination notes.

4. Summing up the position, therefore, while: accepting the position that the assessee had on the 12th of January, 1946, a cash balance duly entered in its books of account a sum of Rs. 1,70,000 odd and accepting the genuineness of the books of account of the assessee, the matter was decided, more or less, on the applicability of the doctrine of onus. The underlying current behind the order of the Tribunal as well as those of the subordinate assessing or appellate authorities seems to be that the assessee must in such cases prove the source of receipt of the high denomination notes. This, in my view, is not the correct position in law. As has been held by an early decision of this court in the case of Sri Nilkantha Narayan Singh v. Commissioner of Income-tax, [1951] 20 I.T.R. 8 (Pat.) where account books are accepted by the fact-finding authorities as genuine and there was hence no material upon which the Tribunal could reach the inference that the high denomination notes were not the saving of the assessee and where the cash balance had not exceeded the amount of the value of the high denomination notes subsequently demonetised, it was not necessary for the assessee to explain the source of receipt of such high denomination notes covered by the cash balance showed. It was held in that case on facts more akin to the facts of the instant case thus :

"In my opinion, there is no onus thrown upon the Raja (the assessee) to indicate from whom each note to the value of Rs. 10,000 was received, and no adverse inference ought to have been drawn by the Tribunal against the assessee."

It is, in my view, a fundamental principle governing the taxation of any undisclosed income or secreted profits that the income or the profits as such must find sufficient explanation at the hands of the assessee. If the balance at hand on the relevant date is sufficient to cover the value of the high denomination notes subsequently demonetised and even more, in the absence of any finding; that the books of account of the assessee were not genuine, the source of income is well disclosed and it cannot amount to any secreted profits within the meaning of the law. What has to be disclosed and established is the source of the income or the receipt of money, not the source of the receipt of the high denomination notes which were legal tender at the relevant time. Reference in this connection and in support of the view that I have taken may be made to the case of Lalchand Bhagat Ambica Ram v. Commissioner of Income-tax, [1959] 37 I.T.R. 288 (S.C.) where the Supreme Court held that the entries in the rokar and the almirah accounts of the assessee showed that that there was an aggregate cash balance of Rs. 3,10,681 and it was highly probable that high denomination notes of the value of Rs. 2,91,000, which amount was the subject-matter of dispute in that case, were included therein. In the case being dealt with by their Lordships of the Supreme Court, the books of the assessee were not challenged in any other manner except in regard to the interpolations relating to the number of the high denomination notes, and the Tribunal had accepted these books of account as genuine and had worked up its theory on the basis of the entries which obtained in those books of account. In such circumstances it was held by the Supreme Court that it was not open to the Tribunal to accept the genuineness of those books of account and accept the explanation of the assessee in part and reject the same in regard to the sum of Rs. 1,41,000. It was further held on the facts and in the circumstances of that case which are, more or less, akin to the case with which we are dealing, that the circumstances relied on by the revenue were matters of pure conjecture, suspicion and surmises. The conduct of the assessee in that case, the notoriety he had achieved as a smuggler and the other clandestine business activities were matters lending support to a strong suspicion, but it was held that howsoever strong the suspicion may be it would be still within the realm of conjecture and surmises to treat it as a ground for rejecting the explanation which may be probable. As a matter of fact, the facts of the present case stand on a stronger footing than the case of Lalchand Bhagat Ambica Ram, which the Supreme Court was concerned with.