Law:

Section:

Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment years 1968-69 and 1969-70 - Certain additions were made as assessee-firm's income from undisclosed sources in respect of certain cash credits from some parties - Whether in view of facts that (i) confirmatory letters from all these parties were Sled, (ii) that all creditors were assessed to income-tax and income-tax file numbers were supplied to department, and (iii) that material transactions were by account payee cheques, it could be said that ITO failed to examine genuineness of these cash credits and, thus, additions so made were to be deleted - Held, yes Facts For the assessment year 1968-69, the ITO treated as the assessee-firm's Income from other sources a certain amount representing the cash credits in respect of 4 parties on the ground that the confirmation certificates were not filed. In respect of other 8 parties, the ITO specifically admitted that the confirmatory letters were filed but these were also treated on the same facts as income from undisclosed sources on the short ground that the creditors did not respond to the summons issued by the ITO. Similarly, for the assessment year 1969-70, the ITO noticed that the confirmatory letters in respect of the cash credits from the seven parties were filed but as the assessee did not furnish the creditors with their account books, the ITO rejected the assessee's claim about the genuineness of these credits and treated the total amount of these credits as the income of the assessee from undisclosed sources. On appeal, the AAC observed that for the cash credits in respect of four parties, the assessee filed confirmatory letters and the ITO did not issue summons to them. In respect of the cash credits relating to other parties, the AAC observed that the loans were advanced by account payee cheques and the creditors were the income-tax assessees. The AAC held that the letters of confirmation were in order and, therefore, deleted the additions made by the ITO. On appeal by the revenue, the Tribunal set aside in part the order of the AAC relating to the four credits observing that the assessment records did not contain the confirmatory letters…

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