9911796707
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Issues:
1. Addition of cash credits under section 68 of the Income-tax Act for the assessment year 1988-89. 2. Interpretation of section 68 regarding unexplained cash credits. 3. Assessment of deemed income in the year of introduction in the books of account. 4. Consideration of source and nature of cash credits in determining tax liability. 5. Application of legal principles in assessing income based on available evidence. Detailed Analysis: 1. The appeal by the Revenue challenged the deletion of cash credits of Rs. 82,000 and Rs. 78,000 in the names of two individuals added by the Assessing Officer under section 68 of the Income-tax Act for the assessment year 1988-89. The individuals claimed to have received gifts from close relations, deposited cash in bank accounts, and brought it into the books of the assessee-firm. The Assessing Officer treated the cash credits as the assessee's income due to lack of creditworthiness of the creditors and a perceived device by the assessee. 2. The CIT(A) considered the documentary evidence showing that the funds deposited with the firm were in possession of the depositors in the immediately preceding year. The CIT(A) held that the funds could not be treated as income of the subsequent year based on the principle that funds emanated in a preceding year cannot be considered income of a subsequent year. The CIT(A) also referenced a decision of the ITAT supporting the appellant's claim that the deposits could not be treated as unexplained cash credits under section 68. 3. The Revenue contended that the cash credits were added under a deemed provision and should be considered income in the year introduced in the books of account, regardless of prior deposits in bank accounts. However, the Tribunal found that the explanation provided by the assessee regarding the cash credits was satisfactory, as the credits were introduced through account payee cheques, and the genuineness of the transaction and identity of the payee were proved. The Tribunal held that the disputed sums were in existence before the assessment year 1988-89 and could not be treated as the assessee's income for that year. 4. The Tribunal emphasized that the explanation regarding the source and nature of the cash credits must be objectively considered. It noted that the immediate source of the credits in the books of account was transfer through cheques from bank accounts, and the sums in dispute were found credited in the creditors' bank accounts before being introduced in the books of account. The Tribunal concluded that the sums could not be added as income for the assessment year 1988-89, as they were earned by someone before that period. 5. The Tribunal upheld the CIT(A)'s order, emphasizing the legal principles related to assessing income based on available evidence and the requirement to consider the source and nature of cash credits objectively. It concluded that the sums of cash credits could not be added as income for the assessment year 1988-89 based on the evidence presented and the legal interpretation of section 68 of the Income-tax Act.
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