1980 (4) TMI 65 - HC - Income Tax

Summary

Issues:
- Interpretation of provisions of section 68 of the Income Tax Act, 1961.
- Taxability of cash credits of Rs. 9,000 for assessment year 1960-61.
- Applicability of section 297(2)(d)(ii) in reassessment proceedings.
- Characterization of section 68 as substantive or procedural provision.

Analysis:
The case involved the interpretation of section 68 of the Income Tax Act, 1961, regarding the taxability of cash credits totaling Rs. 9,000 for the assessment year 1960-61. The assessee, a Kirani Store proprietor, had cash credits in the name of another person, which the Income Tax Officer (ITO) deemed as the assessee's income from undisclosed sources. The assessee contended that section 68 was merely procedural and could only apply for the assessment year 1961-62. The Appellate Assistant Commissioner (AAC) disagreed, stating that the cash credits were assessable for the relevant year. The Tribunal held that section 68 applied, rejecting the assessee's argument based on section 297(2)(d)(ii) of the Act.

The court analyzed whether section 68 was a substantive or procedural provision. The assessee argued that the provision was procedural, akin to the Indian Income Tax Act, 1922, and could only apply for the subsequent assessment year. However, the court held that section 68 was a charging provision, determining the tax liability on unexplained cash credits found in the books of the assessee for any previous year. The court emphasized that section 68 created a statutory liability for the assessee to pay income tax on such amounts, making it a substantive provision of law.

Furthermore, the court distinguished a previous decision related to sections 69 and 69A, highlighting that the applicability of procedural provisions in reassessment proceedings under the old Act did not affect the substantive nature of section 68 under the new Act. Citing a Calcutta High Court decision, the court reinforced that section 68 was substantive, making unexplained cash credits taxable income for the assessee.

Ultimately, the court ruled that the sum of Rs. 9,000 was assessable for the assessment year 1960-61, rejecting the assessee's argument that it should be taxed for the subsequent year. The court answered the question in the affirmative, in favor of the revenue, and directed the assessee to pay costs.