Law:

Section:

Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 1963-64 - Whether where an amount is credited in assessee's account on very first day of accounting year and explanation offered by assessee is not accepted such amount may be assessed as income of assessee of accounting year for which books are maintained - Held, yes FACTS The assessee-firm commenced business on 27-11-1961 and the previous year ended on 27-10-1962. The ITO found certain cash credits appearing in the books of the assessee within one month of the commencement of the business. The explanation offered by the assessee was not accepted by the ITO. He, therefore, added those cash credits in the assessment for the assessment year 1963-64. On appeal, the AAC reduced the additions made by ITO. On further appeal, the Tribunal deleted the additions. On reference: HELD Under section 68, even in a case where an amount is credited on the very first day of the accounting year and the explanation offered by the assessee is not accepted such amount may be assessed as income of the assessee of the accounting year for which the books are maintained. Therefore, the Tribunal was not right in holding that he unexplained cash credits appearing within one month of the commencement of the business in the books maintained for the relevant assessment year were not taxable as the income of the assessee of the said previous year. Note: The decision was in favour of the revenue. CASE REFERRED TO CIT v. Bharat Engineering & Construction Co. [1972] 83 ITR 187 (SC). JUDGMENT Deb, J.-In this reference under s. 256(1) of the I.T. Act, 1961, we are concerned with the following question of law: "Whether, on the facts and in the circumstances of the case, and on a correct interpretation of section 68 of the Income-tax Act, 1961, the Tribunal was right in holding that the unexplained cash credits amounting to Rs. 8,100 appearing within one month of the commencement of the business in the books maintained for the previous year relevant to the assessment year 1963-64 were not taxable as the income of the assessee of the said previous year?" The assessee is a firm. The assessee commenced business on 27th…

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