Law:

Section:

Section 68 of the Income-tax Act, 1961 - Cash credits - On account of certain unexplained cash credits ITO made addition of Rs. 16,950 as income from undisclosed sources in income of assessee - He also made addition of Rs. 18,117 to trading results of assessee - It was an admitted fact that in preceding 3 years, substantial additions amounting to Rs. 32,797 had been added - Whether in view of aforesaid fact, Tribunal was right in treating unexplained cash credit entries to extent of Rs. 16,950 as covered by added gross profit in sum of Rs. 18,117 and, thus, deleting addition of Rs. 16,950 - Held, yes Facts While examining the accounts of the assessee-company, it was found by the ITO that amount of Rs. 16,950 In respect of deposits made by various parties were shown in the books and the same were paid to various parties before closing of the same accounting year. After going through the explanation of the assessee given in writing and examining the accounts, the ITO came to the conclusion that the said deposits remained unexplained and would be treated as the assessee's income from undisclosed sources and also made additions of Rs. 18,117 to the trading results of the assessee. On appeal, the AAC deleted the additions of Rs. 16,950 but sustained addition of Rs. 18,117 holding that the quality of cash credits and trading receipts were not different. On appeal by the revenue, the Tribunal also confirmed the order of the AAC and held that as even during the present assessment the additions of Rs. 18,117 had been which would sufficiently cover any unexplained Income to the extent of Rs. 16,950. It also held that substantial additions of Rs. 32,797 had been made in the earlier three years and, therefore, the decision of the AAC could not be characterized as unreasonable or perverse. On reference: Held In the present case, the ITO was within his right to tax the amount of Rs. 16,950 as income from undisclosed sources even though he had added the amount of Rs. 18,117 in addition to the profits shown by the assesses in its account books. However, the assessee was well within its right to plead that the amount of Rs. 16,950 was covered from the intangible income assessed…

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