Tribunal directs exclusion of credits under Income Tax Act section 68, emphasizing assessee's rights

The Tribunal partially allowed the appeal, directing the Assessing Officer to exclude certain credits from the addition under section 68 of the Income Tax Act. The Tribunal emphasized that if liabilities were not credited in the relevant previous year, section 68 cannot be applied. It also highlighted that consent or acceptance by the assessee does not automatically authorize the assessing authority to make an addition. The Assessing Officer was instructed to verify and exclude old credits carried forward from earlier years before making a final decision, ensuring the assessee's right to be heard.

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Issues:
1. Addition of unexplained credit under section 68 of the Income Tax Act.
2. Treatment of opening balance carried forward from earlier years in the assessment year under consideration.

Issue 1: Addition of unexplained credit under section 68 of the Income Tax Act:
The appeal was filed against an order of the Commissioner of Income Tax (Appeals) sustaining the addition of Rs. 66,98,357 made under section 68 of the Income Tax Act. The Assessing Officer had added Rs. 1,38,31,660 to the income of the assessee as the appellant could not provide addresses, confirmations, or comply with the inquiries regarding sundry creditors. Out of this amount, the Commissioner confirmed Rs. 66,98,357 under section 68 of the Act. The appellant contended that certain credits were only opening balances and should not be considered for addition in the assessment year. The Departmental Representative argued that the opening credits should be considered as income of the assessee in the relevant previous year. The Tribunal held that if liabilities were not credited in the previous year relevant to the assessment year under consideration, section 68 cannot be applied. The Tribunal directed the Assessing Officer to exclude such liabilities from the addition under section 68 after verification.

Issue 2: Treatment of opening balance carried forward from earlier years:
The appellant argued that certain credits were opening balances carried forward from earlier years and should not be considered as income under section 68. The Departmental Representative contended that the assessee had accepted these credits as unexplained and offered them as income under section 68 before the lower authorities. The Tribunal referred to a judgment stating that consent or acceptance given by the assessee cannot give jurisdiction to the assessing authority to make an addition. The Tribunal held that if liabilities were old and not credited in the books of accounts in the assessment year under consideration, section 68 cannot be applied. The Tribunal directed the Assessing Officer to exclude such credits from the addition under section 68 after providing an opportunity for the assessee to be heard.

In conclusion, the Tribunal partly allowed the appeal for statistical purposes, directing the Assessing Officer to exclude certain credits from the addition under section 68 and provide an opportunity for the assessee to be heard before making a decision.

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