1979 (11) TMI 96 - HC - Income Tax

Summary

Issues involved:
The issue involves the interpretation of section 68 of the Income Tax Act, 1961 regarding the treatment of cash credits and the requirement for the assessee to provide a satisfactory explanation about the nature and source of such credits.

Judgment Details:

Interpretation of Section 68:
The court emphasized the necessity for the assessee to provide a factual explanation regarding the nature and source of cash credits as required by section 68 of the Income Tax Act. The court highlighted that the explanation must be a statement of fact and not merely a legal argument. The factual explanation given by the assessee in this case was that the cash credit represented loans advanced by various parties, which was not accepted by the assessing authorities.

Legal Argument vs. Factual Explanation:
The court distinguished between a legal argument and a factual explanation under section 68. It noted that the alternative contention presented by the assessee, claiming that the cash credit should be treated to have come out of intangible additions made in previous years, was purely a legal argument and not a factual explanation. The court held that a mere legal argument is not sufficient as an explanation under section 68.

Precedent and Supreme Court Decision:
The court referred to previous decisions and a Supreme Court ruling to support its interpretation of section 68. It highlighted that the Supreme Court had rejected the argument that income from undisclosed sources should be linked to intangible additions made in the income of the assessee. The court emphasized that the requirement of section 68 remains the same whether intangible additions were made in previous years or the same year.

Conclusion:
Based on the interpretation of section 68 and relevant legal principles, the court answered the referred question in the negative, indicating that the assessee had not provided a satisfactory explanation for the cash credit as required by the law. No costs were awarded in this matter.

Separate Judgment:
No separate judgment was delivered by the judges in this case.