Law: Income Tax Act, 1961

Section: 256(1)

Income-tax-----Accounting---Rejection of accounts---Estimate of income---Tribunal justified in holding that books of account should not again be relied on for working out peak credit. The assessee had returned a loss for the assessment year 1973-74 being his share income from a firm. The Income-tax Officer found that in the assessment for 1972-73, the assessee became the proprietor of the business. The Income-tax Officer assessed the business income at Rs.3,75,000. The Income-tax Officer found that in the capital account according to the balance¬ sheet there was a credit of Rs.3,54,110. But according to the seized books the credit worked out to Rs.4,47,741. Since no explanation had been offered for this credit, the Income-tax Officer added this amount of Rs.4,47,741 to the income of the assessee under the head "other sources". In the opinion of the Appellate Assistant Commissioner, since the Income-tax Officer had not relied on the books seized from the assessee's premises for the purpose of estimating the business income, there was no reason why he should depend upon these books for working out the peak credit. The Appellate Assistant Commissioner, therefore, held that the cash credits as found in the capital account of the assessee according to the balance-sheet, i.e., Rs.3,54,110 should be taken for the purpose of considering it as income of the assessee under "other sources". In that view of the matter, he gave a reduction of Rs.93,631 being the difference between Rs.4,47,741 and Rs.3,54,110. The Tribunal confirmed the order passed by the Appellate Assistant Commissioner. On a reference: Held, that the conclusion was arrived at by the First Appellate Authority and the Tribunal on the basis of the facts and circumstances arising in this case. The Tribunal was justified in directing the Income-tax Officer to accept the amount of Rs.3,54,110 towards unexplained cash credit. CIT v. Devi Prasad Vishwanath Prasad (1969) 72 ITR 194 (SC); CIT v. Maduri Rajaiahgari Kistaiah (1979) 120 ITR 294 (AP) and Kale Khan Muhammad Hanif v. CIT (1963) 50 ITR 1 (SC) ref. JUDGMENT THANIKKACHALAM, J. ---At the instance of the Department, the Tribunal referred the following two…

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