Law:

Section:

Section 68 read with section 256(1) of the Income-tax Act, 1961 - Cash credits - ITO found assessee was recording cash purchases as credit purchases - Since credits remained unexplained he made additions - First Appellate Authority reduced additions by admitting evidence of five alleged vendors who admitted transaction as recorded in books of assessee - On revenue's appeal Tribunal while upholding action of ITO held that aggregate of purchase amount as well as cash credits yet remaining unexplained would be fully covered by intangible additions of preceding two years - Whether Tribunal's order was self contradictory and Tribunal having not bore in mind section 68 question of law did arise from order of Tribunal - Held, yes FACTS While scrutinising the books of account, it came to the notice of the ITO that certain purchases which were described as credit purchases were in fact cash purchases and the assessee wrongly and with an ulterior motive gave a deceptive picture of the purchases. The alleged credit purchases were not paid for during the year, but the amounts were carried forward to the subsequent years. The ITO considered that it was inconceivable that those persons with very small means of income and living in far off places would sell their goods on credit to the assessee and keep quiet without making any attempt to draw the sale proceeds from the assessee. They were described by the ITO as street hawkers. The ITO attempted to make cross-verification of those purchases by issue of summons to the vendors. Except one (A), summons could not be served on others. 'A' testified that he had given Rs. 2,000 to the assessee and the source thereof was traced down to his savings. The evidence of this person was not believed by the ITO on the ground that the deponent was a tinker by profession and his daily income ranged from Rs. 1 to 2. In addition to the aforesaid purchases, the ITO noticed certain unexplained cash credits. Taking the totality of the credits in the accounts, he estimated a total income. On assessee's appeal, the alleged vendors were examined by the ITO and on completion of the examination, a remand report was submitted. On a perusal of the…

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