2012 (6) TMI 32 - HC - Income Tax

Tribunal upholds deletion of cash credits under Income Tax Act for 2007-2008 assessment year

The Tribunal affirmed the decision to delete additions made by the Assessing Officer under Section 68 of the Income Tax Act for the assessment year ... Unexplained cash credits - addition made u/s 68 of cash credits, related to the earlier previous year - Held that:- The phrase 'previous year' is very relevant. This indicates that the cash credits which has not been found satisfactorily explained can be added in the income of the assessee of that previous year in which those cash credits were recorded in the account books. The cash credits made in the earlier financial years could not be added in the income of the assessee. Also, in view of non-rejection of books of accounts by Assessing officer, it is held that Tribunal has committed no illegality in confirming the order passed by the CIT(A) deleting the additions - Decided in favor of assessee. Issues:Challenging order of Income Tax Appellate Tribunal regarding assessment year 2007-2008.1. Correctness of deleting additions despite carrying forward balances without transactions.2. Error in law by only allowing additions for fresh credits, ignoring subsequent cash payments.3. Correctness of deleting addition of unverifiable creditors without confirmation.4. Correctness of deleting addition on account of wastage despite no business activities.Analysis:1. The Assessing Officer accepted no business transactions during the relevant assessment year but made additions under Section 68 of the Income Tax Act due to unexplained cash credits. The CIT(A) found these credits were from earlier years and not relevant. The appeal was allowed, and additions were deleted.2. The Department appealed to the Tribunal, arguing that the additions were justified as cash transactions benefited the assessee. However, the Tribunal found the cash credits were from previous years and not the relevant year, thus confirming the CIT(A)'s decision to delete the additions.3. Section 68 allows adding unexplained sums in the income of the relevant previous year. In this case, cash credits were from financial years 2001-2002 to 2005-2006, not the assessment year 2007-2008. Therefore, the Tribunal correctly upheld the deletion of additions by the CIT(A).4. The Tribunal dismissed the appeal, stating no question of law was involved, and other points were not pressed. The appeal was ultimately dismissed, affirming the decision to delete the additions made by the Assessing Officer under Section 68 of the Income Tax Act.