2017 (5) TMI 1222 - HC - Income Tax

Addition u/s 68 - undisclosed cash credit - Held that - The facts of the present case are similar and identical to that of Pancham Dass Jain (2006 (8) TMI 582 - ALLAHABAD HIGH COURT) and the credit purchases reflected in the books of accounts of the assessee of raw-hide from petty dealers even if not confirmed would not mean that it is concealed income or deemed income of the assessee, which can be subjected to tax in view of Section 68 of the Act. In respect of an earlier assessment year, 2005-2006 as opined that trade amount due to the trade creditors in the books of accounts of the assessee cannot be added towards the income of the assessee under Section 68 of the Act. The aforesaid decision of the tribunal in respect of the previous year is said to be final and conclusive, as there is no material on record to show that any appeal was preferred against it rather Sri R.P. Agarwal states at the bar that no appeal against the same was ever filed. It is not considered appropriate to allow the revenue to change the position, which it has taken in one such assessment year, in the subsequent years - Decided in favour of assessee.

Summary

Issues:
- Interpretation of Section 68 of the Income Tax Act regarding unexplained cash credit.
- Assessment of credit purchases of raw hide by the assessee.
- Applicability of previous tribunal decision on a similar matter.

Interpretation of Section 68:
The High Court analyzed Section 68 of the Income Tax Act, which deals with unexplained cash credit. They referred to the Supreme Court's explanation in Commissioner of Income Tax Vs. P. Mohan Kala (2007) 291 ITR 278 (SC), emphasizing the conditions for adding credited amounts to the income of the assessee. The court highlighted that the burden to rebut the presumption of such credits being taxable lies with the assessee.

Assessment of Credit Purchases:
The case involved the assessee's credit purchases of raw hide from small vendors, where confirmation for a specific amount was lacking. The tribunal suggested that cash payments might have been made from undisclosed sources, leading to the addition of the amount under Section 68. However, the court found this conclusion to be based on conjectures and surmises, overlooking the acceptance of purchases by the Assessing Officer and the trade practice of subsequent payments for raw hide.

Applicability of Previous Tribunal Decision:
The court referred to a previous tribunal decision regarding a similar matter in the assessment year 2005-2006. In that case, the tribunal had ruled in favor of the assessee, stating that trade amounts due to trade creditors cannot be added as income under Section 68. The court emphasized the importance of maintaining consistency in tax assessments unless there is substantial material to justify a different view. Citing Radhasomi Satsang Vs. Commissioner of Income Tax (1992) 193 ITR 321(SC), the court upheld the principle that revenue should not change positions taken in earlier assessments without valid reasons.

In conclusion, the High Court set aside the tribunal's order and allowed the appeal, ruling in favor of the assessee regarding the addition of the amount under Section 68 of the Income Tax Act.