Appeal partially allowed, Rs. 3,000 added to income under Section 68. Satisfactory explanation for Rs. 3,30,000.

The Tribunal partially allowed the appeal, modifying the assessment to add Rs. 3,000 as unexplained cash credits to the assessee's income under Section 68 of the IT Act. The explanation provided by the assessee was deemed satisfactory for Rs. 3,30,000 but not for the remaining Rs. 3,000, resulting in a reduction of the addition from Rs. 3,33,000 to Rs. 3,000.

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Issues Involved:
1. Addition of Rs. 3,33,000 as the assessee's income from undisclosed sources.
2. Validity of the explanation provided by the assessee regarding the source of the amounts in question.
3. Relevance of the confirmatory letter from M/s. H.M. Films.
4. Impact of the search and seizure on the assessee's ability to explain the entries.

Detailed Analysis:

1. Addition of Rs. 3,33,000 as the assessee's income from undisclosed sources:
The Income Tax Officer (ITO) added Rs. 3,33,000 to the assessee's income as undisclosed sources based on certain entries in the assessee's cash book, which were written in pencil without any narration and were not ledgerised. The CIT (Appeals) deleted this addition, leading to the Department's appeal.

2. Validity of the explanation provided by the assessee regarding the source of the amounts in question:
The assessee explained that the amounts were received from M/s. H.M. Films in connection with an agreement dated 7th April 1973 for financing the production of the picture "Lafange." The assessee had a running account with M/s. H.M. Films, showing transactions amounting to Rs. 28,94,124, of which Rs. 3,33,000 was a part. The CIT (Appeals) accepted this explanation, noting that the bulk of the transactions in the account were accepted as genuine by the ITO.

3. Relevance of the confirmatory letter from M/s. H.M. Films:
The CIT (Appeals) found that the confirmatory letter from M/s. H.M. Films supported the entries in the cash book, despite the absence of proper narration. The CIT (Appeals) held that the lack of proper books of accounts by M/s. H.M. Films or the timing of their income tax return filing was not relevant. The CIT (Appeals) referred to the decision in Kedarnath Jute Mfg. Co. Ltd. vs. CIT (1971) 82 ITR 383 (SC), stating that income is not made or unmade by mere book entries.

4. Impact of the search and seizure on the assessee's ability to explain the entries:
The assessee argued that the search and seizure of books and documents, along with the absence of the accountant, hindered his ability to explain the entries initially. The CIT (Appeals) accepted this explanation, noting that the assessee was under pressure due to the reopening of assessments for several years and the need to finalize accounts for multiple years simultaneously.

Conclusion:
The Tribunal considered the facts and circumstances, including the confirmatory letter from M/s. H.M. Films, the terms of the agreement, and the nature of the assessee's business. It found that the explanation provided by the assessee was satisfactory for Rs. 3,30,000 but not for the remaining Rs. 3,000. Therefore, the Tribunal directed that the addition be reduced to Rs. 3,000 from Rs. 3,33,000.

Judgment:
The appeal was partly allowed, and the assessment was modified to add Rs. 3,000 as unexplained cash credits to the income of the assessee under Section 68 of the IT Act.

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