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Arunkumar J. Muchhala vs. CIT (Bombay High Court)
September, 11th 2017

S. 68: Argument that the assessee did not maintain "books of account" and so s. 68 will not apply is not acceptable. It is incumbent on every assessee doing business to maintain proper books of account. It may be in any form. If the assessee has not done so, he cannot be allowed to take advantage of his own wrong. Burden lies on the assessee to show from where he has received the amount and what is its nature

(i) The facts as emerged before the Assessing Officer appears to be not in dispute. The Appellant has not denied that he has received the said loan amount / cash deposits from those persons whose list has been given in the order of Assessing Officer. He has revealed those names from the Bank account of the Appellant. Now, Appellant intends to say that he has not maintained books of accounts and therefore, those amounts can not be considered. When Appellant is doing business, then it was incumbent on him to maintain proper books and/ or books of account. It may be in any form. Therefore, if he had not maintained it, then he can not be allowed to take advantage of his own wrong. Burden lies on him to show from where he has received the amount and what is its nature. Unless this fact is explained he can not claim or have deduction of the said amount from the income tax. Sec. 68 of I. T. Act provides that where the assessee offers no explanation about the nature and source of the credits in the books of account, all the amounts so credited or where the explanation offered by the assessee is not satisfactory in relation to the same then such credits may be charged to tax as income of the assessee for that particular previous year. It is to be noted here in this case that huge amounts have been credited in the account of the Appellant and he has not explained the nature of the same. The source of the said amount has been discovered by the Assessing Officer from Bank Pass Book. It is to be noted that when the source and nature has been held to have been explained, the said amount has been deleted by the appellate forums. Now the dispute has remained in respect of amount of Rs.9,00,000/from M/s. Pooja Corporation, Rs.7,00,000/from M/s. Pooja Enterprises, Rs.24,00,000/from Shri. Ashok Mehta, Rs.18,00,000/from Mr. Ajay Shah. No document was produced in respect of these transactions nor the amounts have been confirmed from those persons, who are shown to have lent them. The authorities below have therefore, rightly held that nature of the transaction has not been properly shown by the Appellant.

(ii) The ratio of the authorities relied by the learned Counsel appearing for Appellant is not applicable here. In those cases, either the entries were confirmed by the parties in whose name they were standing or books of accounts were showing the cash credits from undisclosed source. Here in this case, at no earlier point of time, a firm stand was taken by the Appellant that he has not maintained books of account. Whenever a direction was given to produce the same in any form, it was replied by the Appellant that he wants time to prepare. Many opportunities were given by the Assessing Officer for the production of relevant documents including books of account in the form of ledger, balance sheet, etc. However, such documents were never produced. Non-production of the document is different from not maintaining the Books of Account. The Appellant has raised the said point of “books of accounts not maintained” for the first time before this Court. The facts in the case of Sudhir Kumar Sharma (supra) are almost similar and therefore, the observations are binding.

(iii) When even after giving opportunities, the Appellant had failed to produce relevant documents and explain the nature and source of the amount received by him as narrated above; the order of the Assessment officer and the appellate authorities in respect of those amounts is justified.


Cases referred:

Commissioner of Income Tax v/s. Taj Borewells reported in 2007 (291) ITR 232

Sudhir Kumar Sharma (HUF) v/s. Commissioner of Income Tax – III, Ludhiana reported in [2014] 224 Taxmann 178.

Commissioner of IncomeTax, Poona v/s. Bhaichand H. Gandhi reported in 1983 (141) ITR 67,

Anand Ram Raitani v/s. Commissioner of IncomeTax reported in 1997 (223) ITR 544,

Commissioner of IncomeTax v/s. Smt. Usha Jain reported in 1990 (182) ITR 487.

Baladin Ram v/s. Commissioner of IncomeTax, U. P. reported in 1969 (71) ITR 427;

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