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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC-I’ : NEW DELHI
Before: SHRI P.K. BANSAL
This appeal has been filed by the assessee against the order of the CIT (Appeals) dated 16.02.2015.
Since the ground no.2 was not pressed by the assessee, therefore, the only issue involved in ground no.1 remains for my adjudication is the sustenance of the addition of Rs.8,80,000/- by the CIT (A) which was made by the AO by invoking the provisions of section 68 of the Income-tax Act, 1961 (hereinafter ‘the Act’).
The brief facts of the case are that a Pen Drive was recovered by Punjab Vigilance Bureau from the possession of the partner of the assessee, Shri Chetan Gupta which was passed over to the Income-tax Department and consequently, proceedings u/s 148 were initiated against the assessee. The AO was of the view that there were certain transactions in the said Pen Drive and these transactions relate to the assessee and accordingly, he made the addition u/s 68 of the Act for Rs.8,80,000/- for the impugned assessment year. When the matter went before the CIT (A) the CIT (A) confirmed the said addition. The addition u/s 68 has been made by working out the peak credit.
I heard the rival submissions and carefully considered the same along with the orders of the tax authorities below. I have also gone through the decision of the Bench ‘B’ of the Tribunal in the case of Chetan Gupta vs. DCIT – 144 ITD 344 and under para 6.2 of this decision, I noted that the Tribunal has given a finding about pen drive contains transactions of Chetan Gupta and ultimately, in the subsequent paragraphs of this order, the addition son the basis of the peak credit worked out by the assessee were accepted in the hand of the assessee as its income. The transaction recorded on the basis of which peak credits were worked out were accepted to be belonging to Chetan Gupta. On this basis itself, the addition is bound to be deleted, in my view, in the hands of the firm. From the order of the Tribunal, it is proved that the Pen Drive belongs to Chetan Gupta. Even otherwise, I noted that section 68 lays down as under :-
“68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.”
Section 68, in my opinion, lays down a rule of law. From the perusal of the section, it is apparent that this is deeming provision and the addition under this section can be made if the following conditions are satisfied:- (i) There must be sum found credited in the books of assessee; (ii) The books must be maintained by the assessee for the previous year; (iii) The assessee offers no explanation about the nature and source of such sum; or (iv) The explanation offered by the assessee is not satisfactory in the opinion of the AO. Thus, before making any addition u/s 68, it is necessary to prove on the part of the revenue that there is a sum found credited in the books of the assessee. The Pen Drive found from Chetan Gupta cannot be regarded to be the books maintained by the assessee. In view of sum not being found credited in the books of the assessee, I am of the view that provisions of section 68 cannot be applied in this case. Book will always mean systematic recording of the financial data from which financial accounts i.e. profit & loss account and balance sheet can be made at the close of the period for which these books are maintained. I, therefore, set aside the order of the CIT (A) and delete the addition made.
In the result, the appeal of the assessee is allowed. Order pronounced in open court on this 17th day of February, 2016.