Law: Income Tax Act, 1961

Section: 68

Income-tax-----Cash credits---Undisclosed sources---Condition precedent for treating cash credit as income from undisclosed sources---Cash credit should be in assessees books of account not in anybody elses ---Assessee partner in firm---Cash credit in firms books---Cannot be added as income from undisclosed sources in hands of assessee---Indian Income Tax Act, 1961, S.68. For the assessment year 1982-83, the Assessing Officer made an addition of Rs.2 lakhs in the assessment of the assessee under section 68 of the Income Tax Act, 1961, on the basis of cash credits, because the assessee did not produce the creditors. On appeal, the Commissioner of Income-tax (Appeals) deleted the addition holding the creditors were independent assesses. However, on further appeal by the Department, the Tribunal restored the addition holding that the assessee-had not discharged his burden of proving that the creditors were genuine. The Tribunal made a reference to the High Court of the question whether section 68 was applicable. to the facts. The High Court called for a supplementary statement of the case indicating clearly, whether the assessee maintained and produced the books of account before the Assessing Officer, and whether the amount of Rs.2,00,000 was shown as cash credits in the said books of account. In the supplementary statement of the case, the Tribunal mentioned that the Departmental representative submitted that nothing could be said about the production of the books of account at the assessment stage but that it was clear from the assessment order that the assessees account in respect of the income from other sources and his capital account with the partnership firms were scrutinized and cash credits were found. The Department objected that the question did not arise out of the Tribunals order: Held, (i) that the Assessing Officer before invoking the power under section 68 of the Act must be satisfied that there are books of account maintained by the assessee and the cash credit is recorded in the said books of account and if the assessee fails to satisfy the Assessing Officer, the said sum so credited has to be charged to income-tax as the income of the assessee…

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