2016 (2) TMI 1182 - AT - Income Tax

Addition u/s 68 - transaction recorded on the basis of which peak credits were worked out were accepted to be belonging to Chetan Gupta - Held that - Before making any addition u/s 68, it is necessary to prove on the part of the revenue that there is a sum found credited in the books of the assessee. The Pen Drive found from Chetan Gupta cannot be regarded to be the books maintained by the assessee. In view of sum not being found credited in the books of the assessee, it is of the view that provisions of section 68 cannot be applied in this case. Book will always mean systematic recording of the financial data from which financial accounts i.e. profit & loss account and balance sheet can be made at the close of the period for which these books are maintained. Set aside the order of the CIT (A) and delete the addition made. - decided in favour of assessee.

Summary

Issues Involved:
Sustenance of addition under section 68 of the Income-tax Act, 1961 based on transactions in a Pen Drive recovered by Punjab Vigilance Bureau.

Analysis:
The appeal was filed against the order of the CIT (Appeals) regarding the addition of Rs. 8,80,000 made by the AO under section 68 of the Act. The Pen Drive recovered contained transactions related to the assessee, leading to the addition. The CIT (A) upheld the addition based on the peak credit worked out. However, the Tribunal's decision in a related case highlighted that the transactions in the Pen Drive belonged to another individual, Chetan Gupta. Section 68 requires a sum to be found credited in the books of the assessee, which was not the case here as the Pen Drive was not part of the assessee's books. Therefore, the provisions of section 68 could not be applied, leading to the deletion of the addition.

The Tribunal emphasized that section 68 is a deeming provision with specific conditions that must be met for an addition to be made. These conditions include the sum being found credited in the assessee's books, the books being maintained by the assessee, the assessee offering no satisfactory explanation about the sum, or the explanation being deemed unsatisfactory by the AO. Since the Pen Drive was not part of the assessee's maintained books, the requirements of section 68 were not fulfilled, warranting the deletion of the addition.

The judgment concluded that the Pen Drive, not being part of the assessee's maintained books, could not be considered for invoking section 68. The definition of 'books' was clarified as systematic records for financial data, enabling the preparation of financial accounts like profit & loss and balance sheet. As the sum was not found credited in the assessee's books, the application of section 68 was deemed inappropriate. Consequently, the order of the CIT (A) was set aside, and the addition was deleted, resulting in the allowance of the assessee's appeal.

In summary, the judgment revolved around the interpretation and application of section 68 of the Income-tax Act, emphasizing the necessity of the sum being found credited in the assessee's maintained books for invoking the provision. The decision underscored the importance of meeting the specific conditions outlined in the section before making any additions, ultimately leading to the allowance of the assessee's appeal in this case.