Law:

Section:

Section 68, read with section 143, of the Income-tax Act, 1961 – Cash credits – Assessment year 1960-61 – Assessee was assessed as legal representative of her deceased father-in-law – ITO having found various amounts shown as loans in books of account, added peak credit as income from undisclosed sources – ITO, while making said addition, did not make enquiry in respect of amount standing to credit of 'C' which came under a cheque and complete particulars of which were supplied – AAC as well as Tribunal upheld assessment – Whether enquiry should have been made out to find out genuineness of loan standing in name of 'C' and if that was accepted, addition would have stood reduced by amount which came under cheque – Held, yes – Whether, therefore, Tribunal was not justified in upholding addition – Held, yes [Matter remanded to Tribunal] FACTS The assessee was assessed as the legal representative of her deceased father-in-law. The Income-tax Officer found that in the books of account there were different amounts stated to be loans taken against hundis. The Income-tax Officer wanted production of the discharged hundis and confirmation letters from the creditors. The assessee expressed her inability to produce the same on the ground that the original assessee who had privity with the creditors had dead and there was a long lapse of time and in many cases the creditors had changed their addresses and it would be difficult to contact them. The assessee, however, stated that Rs. 50,000 standing to the credit of 'C' came under a cheque and complete particulars for this amount were supplied and, therefore, the transactions could be verified. The ITO instead of making any verification treated the peak credit of Rs. 10,000 as income from unexplained sources. Both the AAC and the Tribunal confirmed the addition. On reference : HELD The reasoning given by the Tribunal to refuse to interfere with the assessment particularly with reference to the addition of Rs. 50,000, was wholly unsustainable. An enquiry should have been made to find out whether the genuineness of that loan had been established, and, if that was accepted, addition would have stood reduced by a further sum of…

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