2016 (7) TMI 404 - HC - Income Tax

Additions u/s 68 - Bank credits - presumptions u/s 292C - Held that - As relying on case of Commissioner of Income Tax Vs. Bhaichand H. Gandhi 1982 (2) TMI 28 - BOMBAY High Court it is held that the entries in the Bank passbook cannot be considered as entries in the books of the assessee so as to invoke Section 68 of the Act. No substantial question of law arises. - Decided against revenue Addition on purchase of jewelry as relying on documents found during the course of search - law of presumption - ITAT deleted the addition - Held that - Section 292C of the Act only raises a presumption that the contents of books of accounts and documents found during search would be presumed to be true. In the present fact, if the contents of documents have been found on facts by two authorities to reflect only an estimate for purchase of jewellery and not evidence of purchase of jewellery. Thus presumption would not enable the appellant revenue to convert the documents indicating estimate into the documents of purchase. The authorities have further recorded the fact that no corresponding asset was found during course of search or subsequent proceedings. - Decided against revenue

Summary

Issues:
1. Interpretation of Section 68 of the Income Tax Act regarding bank credits detected during a search.
2. Application of Section 292C of the Income Tax Act in the context of deletion of addition on account of jewellery found during a search.

Analysis:

Interpretation of Section 68 - Bank Credits:
The case involved appeals challenging the order of the Income Tax Appellate Tribunal for Assessment Years 2006-07 and 2007-08. The first issue revolved around the Tribunal's decision on whether bank credits detected during a search could be treated as income under Section 68 of the Income Tax Act. The Tribunal's order noted that the Assessing Officer had made additions under Section 68 based on entries in the bank passbook without finding any corresponding sums during the search. The Tribunal relied on the decision in Commissioner of Income Tax Vs. Bhaichand H. Gandhi to establish that bank passbooks are maintained by the bank and do not constitute the books of the assessee. Therefore, the Tribunal held that the entries in the bank passbook cannot be considered as entries in the books of the assessee for invoking Section 68. The appellant argued that the decision in Bhaichand Gandhi was not applicable in this case as it was not under Section 153 of the Act. However, the court held that the principle established in Bhaichand Gandhi still applied, and since Section 292C was not invoked, no substantial question of law arose for consideration.

Application of Section 292C - Jewellery Addition:
The second issue dealt with the application of Section 292C in the context of deletion of addition on account of jewellery found during the search. Documents indicating estimates for jewellery purchase were discovered during the search, but authorities found them to be estimates and not evidence of actual purchase. The appellant relied on Section 292C to argue for the addition of these estimates to the income of the respondent. However, the court held that Section 292C only raises a presumption of truth for contents found during a search. Since the documents were determined to be estimates and not evidence of actual purchase, the presumption under Section 292C did not apply. Additionally, no corresponding asset was found during the search or subsequent proceedings. Therefore, the court concluded that the question did not give rise to any substantial question of law.

In conclusion, both appeals were dismissed, and no order was issued regarding costs.