TMI Blog2017 (5) TMI 1115X X X X Extracts X X X X X X X X Extracts X X X X ..... us liabilities. The submission is that the entry of credit in the books of accounts may be relevant only when there is a cash transaction and not where the payment is through the cheques unless the cheques are cleared and encashed. Section 68 of the Act is clear enough as it uses the term "sum is found credited in the books of accounts of the assessee". It does not make any distinction between any cash or cheque transaction. The sum found credited in the books of accounts of the assessee includes within its fold, the entry either by way of cash or by cheque irrespective of the encashment of the cheques. Thus both the essential conditions for applicability of Section 68 of the Act stands fulfilled. Despite non-encashment of the che ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y assessee admittedly were not presented for collection in Bank, can it be said that amount mentioned in the cheques is found credited in the books of assesee attracting Section 68 of Income Tax Act, 1961. We have heard Sri Nikhil Agarwal, learned counsel for the assessee and Sri Krishna Agarwal, learned counsel for the respondent. Sri Nikhil Agarwal has argued that in view of the findings recorded by the authorities the payment of the aforesaid amount of ₹ 15,00,000/- shown as unsecured loan was received by means of different cheques but these cheques were never presented and encashed and, as such, the entry in the books of accounts regarding the sum only shows hypothetical income which cannot be subjected to tax. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision lays-down that where sum is credited in the books of accounts and the assessee fails to offer a satisfactory explanation regarding the said entries, the sum so credited may be charged to income tax as the income of the assessee. Therefore, for applying Section 68 of the Act for treating the sum credited in the books of accounts to be income of the assessee chargeable to tax, two conditions are necessary to be satisfied; (i) there has to be an entry credited in the books of accounts of the assessee, and (ii) secondly, either there is no explanation regarding the said entries by the assessee or the explanation, if any, is not found to be satisfactory by the Assessing Officer. In the case at hand, there is no dispute that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal. The Apex Court, in connection with the said question, has quoted from its earlier decision in laying down the general preposition that income tax is a levy on income and not on any hypothetical income. The aforesaid authority would have no application where a legal fiction is created under law and on the basis of such legal fiction an entry in the books of accounts is deemed to be income of the assessee chargeable to tax. In the same manner, the decision in Sutlej Cotton Mills Limited v. Commissioner of Income Tax, West Bengal 1979 Vol. 116 ITR Page 1 is of no assistance to the assessee. The aforesaid decision only observes that the entries made by the assessee in his books of accounts is not determinative of the question whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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