TaxTMI 
TaxTMI 
2012 (7) TMI 390
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....7,53,003/-. The assessment was completed under section 143(3) on 17.12.2008 determining the loss at Rs..36,05,552/- by the Assessing Officer. While computing the loss, the Assessing Officer made addition of Rs..47,01,519/- under section 68 of the Act observing as under: (i) It was found that the assessee was not able to produce creditor confirmation to the tune of Rs..47,01,519/-. The same is disallowed and added back to total income as Unexplained Cash credits u/s 68 of the Income-tax Act, 1961." 3. The Assessing Officer, in the assessment order allowed set off of this addition of Rs..47,01,519/- against business loss of Rs..87,53,003/- and computed the business loss at Rs..36,05,552/- for the assessment year 2006- 07. 4. The assessee accepted the addition made under section 68 by the Assessing Officer by not filing further appeal to the Commissioner of Income Tax (Appeals). As the things stood thus, the Commissioner of Income Tax III, Coimbatore issued notice under section 263 to revise the assessment order passed under section 143(3) on 17.12.2008 since the Commissioner of Income Tax is of the view that as per provisions of section 68, the unexplained cash credit is deemed in....
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....41(1) of the Act. The counsel submitted that at the time of framing assessment, since the assessee did not produce confirmation of the creditors, the said sum was added as unexplained cash credit under section 68 instead of under section 41(1) of the Act. The counsel submitted that according to section 68 any sum found credited in the books for which the nature and sources remained unexplained could be charged as income of that previous year. In other words, the deeming fiction could apply only when the nature and source of a credit remains unexplained and the credit could be regarded as income of the previous year in which such credit is found. The counsel submitted that as the credits in the said accounts during the year were only for purchase of raw materials, the provisions of section 68 do not apply to the present case. He submitted that the Assessing Officer added of Rs..41,01,519/- being the closing balances of the credits by wrongly quoting section 68 instead of section 41(1) of the Act. The counsel submitted that as the income determined after setting off of losses remained NIL, the assessee did not file any appeal against the addition made under section 68 even though it ....
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....every person. He submitted that section 5 defines the scope of total income and as per section 14, all the income shall, for the purpose of charge of income tax and computation of total income be classified under five heads. He submitted that by harmonious construction of section 4, 5 and 14, all income must be brought under any one of the five heads only. According to section 56(1), income which is not otherwise chargeable under heads specified in A to E of section 14 shall be chargeable under the head "income from other sources". The counsel submitted that the unexplained credit deemed as income under section 68 is also income chargeable to tax and shall form part of total income. Therefore, he submits that it is to be assessed in any one of the five heads. He submits that if the assessee is able to prove that the credit must fall under any particular head then the deemed income shall fall under that particular head. In case, the assessee is unable to prove so, then the deemed income would fall under the head "other sources". The counsel relied on the decision of the Hon'ble Andhra Pradesh High Court in the case of CIT v. Maduri Rajaiahgari Kistaiah [120 ITR 294] for this proposi....
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....f transaction of the creditors during the year 2005- 06. The assessee also filed a detailed submissions before the Commissioner of Income Tax contending that the addition of Rs..47,01,519/- made under section 68 of the Act by the Assessing Officer in the assessment order represents only closing balance in the trade creditor's account and therefore, the addition, if at all can be made is only under section 41 of the Act , but not under section 68. Inspite of the assessee submitting these details before the Commissioner of Income Tax, the Commissioner of Income Tax rejected the contention of the assessee that the Assessing Officer wrongly added the closing balance in creditors account under section 68 instead of under section 41(1) and simply holding that the Assessing Officer invoked the provisions of section 68 and therefore this order became final. We are unable to agree with the view of the Commissioner of Income Tax because the assessee has proved that the creditors are only trade creditors and the addition made under section 68 represents closing/opening balance in the creditors accounts in some of the creditors accounts, the opening and closing balances for the accounting year....
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....puted on the basis of the estimate but not on the return filed by the assessee, not only does not prevent the ITO from treating, but entitles him to treat, the unexplained cash credits as income from an undisclosed source which falls under the head "Income from other sources" unless the assessee, by independent and satisfactory evidence, establishes that those amounts relate or are referable to the undisclosed income of the very known or disclosed source, namely, the business whose income had already been estimated. We may add that a Division Bench of this court consisting of one of us (Kondaiah J.) and Sriramulu J in C1T v. Janab Mohd. Suleman (Referred Case No. 13 of 1968 dated 11-11- 1970) and Kesarimal Sohanraj v. CIT expressed the same view on similar facts and circumstances." As could be seen from the above decision of the Hon'ble Andhra Pradesh High Court, the ITO is not only prevented, but also entitles him to treat the unexplained cash credits as income from an undisclosed source which falls under the head "income from other sources" unless the assessee, by independent and satisfactory evidence, establishes that those amounts falls in any other source namely busine....