2016 (2) TMI 911 - AT - Income Tax

Addition u/s 68 - Held that - Section 68 talks of any sum found credited in the books of an assessee maintained for any previous year. As per this section if the assessee offers no explanation the section would apply. But this explanation has to be with regard to any sum found credited in the books. This is amply clear from the use of the expression about the nature and source thereof ( thereof being the operative word). Then in case the explanation offered by the assessee is not found by the Assessing Officer to be satisfactory the section can be invoked. This explanation obviously harks back to any sum found credited in the books. The words the sum so credited again relate to any sum found credited in the books so credited here being the pregnant expression. Thus a plain reading of the section establishes that it operates only where books are maintained by an assessee and a sum is found credited therein. Now in the present case it remains undisputed that the assessee has not maintained any books during the year. Thus the provisions of section 68 of the Act are not at all attracted and they have been wrongly applied by the authorities below. - Decided in favour of assessee.

Summary

Issues:
Assessee's appeal against the order of the Commissioner of Income-tax (Appeals) for the assessment year 2009-10. Grounds of appeal include addition of unexplained source of deposit in the bank account, enhancement of assessment, and rejection of explanation for deposits. Additional grounds raised regarding the application of section 68 of the Income-tax Act.

Analysis:
1. The assessee contested the addition of various amounts on account of unexplained source of deposit in the bank account. The Commissioner of Income-tax (Appeals) upheld the additions despite the assessee providing explanations during the assessment and appellate proceedings. The grounds of appeal challenged these additions, emphasizing that the sources of deposits were adequately explained. The Tribunal noted the contentions and discrepancies in the assessment, highlighting the need for proper opportunity and justification for the additions.

2. Additional grounds raised by the assessee focused on the application of section 68 of the Income-tax Act. The assessee argued that since no books of account were maintained, section 68 was incorrectly invoked. Citing the decision in the case of ITO v. Om Parkash Sharma, the assessee contended that in the absence of maintained books of account, section 68 should not be applicable. The Tribunal acknowledged the legal nature of these grounds and admitted them for consideration.

3. The Tribunal analyzed the provisions of section 68, which require an explanation for any sum found credited in the books of an assessee. The section empowers the Assessing Officer to charge unexplained sums as income if satisfactory explanations are not provided. However, the Tribunal clarified that section 68 is only applicable when books are maintained by the assessee and sums are credited therein. In the absence of maintained books, as in the present case, section 68 cannot be invoked. Relying on precedents and legal interpretation, the Tribunal concluded that the provisions of section 68 were misapplied by the taxing authorities.

4. Ultimately, the Tribunal accepted the additional grounds raised by the assessee regarding the inapplicability of section 68 due to the absence of maintained books of account. By reversing the order under appeal, the Tribunal canceled the addition made based on the misapplied provisions of section 68. The appeal was allowed, and the Tribunal pronounced the order in favor of the assessee on February 24, 2016.