Law:

Section:

Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 1976-77 - In respect of various deposits standing in names of different persons assessee explained that patients coming for treatment at his place were required to make a deposit, part of which was adjusted towards fees and expenses and remaining part was treated as deposit till such time as it was refunded to depositor - Tribunal held that deposits in question were deposits and not an income of assessee and that it was in nature of security deposit which had been fully explained - Whether in view of Tribunal's findings, provision of section 68 was not applicable - Held, yes FACTS In respect of various deposits in the names of certain persons, the assessee explained that patients used to come for treatment at his place and were required to make a deposit. Part of the deposit was adjusted towards the fees and expenses and the remaining part was treated as deposit till such time as it was refunded to the depositors. The ITO, however, added the entire amount from unexplained sources by invoking section 68. The addition was deleted by the Commissioner (Appeals) on the ground that they were mere deposits and could not be treated as income. He found that the assessee had been maintaining regular accounts of patients for the moneys deposited by them, for the fee charged from them and refund of balance allowed to them. The revenue's appeal before the Tribunal failed. On reference : HELD The Tribunal had held that the deposits in question were deposits and not an income of the respondent assessee. It was in the nature of security deposit which had been fully explained and, therefore, it should not have been added. In view of the findings recorded by the Tribunal, the provision of section 68 was not applicable in the instant case. Therefore, the Tribunal was justified in deleting the addition. Note : The case was decided in favour of the assessee. Shambhu Chopra for the Applicant. Shakeel Ahmed for the Respondent. JUDGMENT The Income-tax Appellate Tribunal, Allahabad, has referred the following question of law under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"),…

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