1999 (12) TMI 689 - AT - Income Tax

Assessees win appeal as ITAT rules cash credits not undisclosed income under Income-tax Act

Sudhir Kumar Potdar Versus Deputy Commissioner of Income-tax

The appeals challenged the Assessing Officer's treatment of cash credits as undisclosed income under Chapter XIV-B of the Income-tax Act. The assessees ... Block assessment in search cases Issues:Challenge to the finding of the Assessing Officer treating cash credit as undisclosed income under Chapter XIV-B.Analysis:The appeals by the assessees were against the orders of the Dy. CIT (Asstt.), Spl. Range, Jabalpur, under section 158BC of the Income-tax Act, 1961. The common issue in all appeals was the treatment of cash credits as undisclosed income for Chapter XIV-B. The search under section 132 on December 21, 1996, revealed cash credits in the assessees' accounts. The Assessing Officer considered these credits as undisclosed income, leading to the appeals challenging this decision.The assessees argued that only undisclosed income detected as a result of the search could be assessed under Chapter XIV-B. They contended that the credits were duly recorded in the books of account, and returns of income were filed before the search. The assessees also produced the creditors before the Assessing Officer, who confirmed the deposits. The assessees emphasized that the small sums deposited and the confirmation by the creditors should exclude the credits from being treated as unexplained.On the other hand, the Departmental Representative (DR) supported the Assessing Officer's decision, stating that the creditors were individuals with limited means, justifying the classification of credits as unexplained. The DR argued that the Assessing Officer was correct in treating the credits as undisclosed income upon finding them non-genuine.After considering the arguments and evidence, it was noted that the ITAT Jabalpur Bench had previously ruled on a similar issue. The judgment clarified that assessments under Chapter XIV-B should pertain to undisclosed income detected during the search. Since the credits were properly recorded and no evidence of non-genuineness was found during the search, the credits could not be deemed undisclosed income discovered as a result of the search. Consequently, the additions of Rs. 24,000, Rs. 69,200, and Rs. 42,000 in the respective cases were deleted. The Revenue was granted the liberty to assess the genuineness of the credits in the regular assessments of the assessees in the relevant years.In conclusion, the appeals of the assessees were allowed, emphasizing the distinction between undisclosed income detected during a search and properly recorded credits in the regular books of account.