Summary and Review of Case Laws Decided by Income Tax Appellate Tribunals
Saturday, 22 August 2015 16:07

Section 68 - Unexplained Credits in the Bank A/c not disclosed in the books of accounts - AO cannot make addition only of the credit entries without considering debit entries - Additions deleted by the Ahmedabad Tribunal

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1. AO should consider debit and credit entries both to arrive at Unexplained Credits u/s 68. It is unfair to consider only credit entries in the account and add it as income of the assessee.

2. When the borrowed money is proved to be used for the purpose of the business the corresponding interest is an allowable expenditure


1. Assessee's case was selected for scrutiny assessment u/s 143(3)

2. AO added Rs. 24,82,150/- u/s 68 for unexplained credits in the bank account not declared in the regular books of accounts

3. AO added Interest on Bank Loan Rs. 1,95,470/- and Rs. 5,000/- on account of excess payment made to the related party by invoking the provisions of section 40A(3) of the Act.

4. Assessee appealed to CIT(A)

5. CIT(A) partly allowed the appeal  and restricted the addition to the extent of Rs. 3,30,150/- out of Rs.24,82,150/- made on account of deposits in the bank and restricted the disallowance to Rs.65,090/- out of disallowance of Rs.1,95,470/- in respect of the interest expenditure claimed by the assessee. According to CIT(A) the AO failed to consider the corresponding debits in the bank accounts and merely added credits as unexplained credits.

6. Revenue moved to the Tribunal

7. Tribunal confirmed the view of the CIT(A) for the unexplained credits by saying that there are debit as well credit entries in the bank account and this fact is not controverted by the Revenue by placing any contrary material on record

8. The appeal of the Revenue is dismissed


1. For Cash Credits in the Bank Account not disclosed to the AO : The finding of the ld. CIT(A) that there were transactions of cash deposit and withdrawal. This fact is not controverted by the Revenue by placing any contrary material on record. We are of the considered view where there are deposit and withdrawal entries into the bank account, it would be presumed that the amount withdrawn was available with the assessee for depositing the same. Therefore, it cannot be concluded that the entire deposits were from unexplained source. We do not see any reason to interfere with the finding of the ld.CIT(A), the same is hereby upheld

2. For Bank Interest : The above finding of the ld.CIT(A) is not controverted by the Revenue by placing any contrary material on record. The contention of the Revenue is that the ld.CIT(A) has violated the Rule 46A of the IT Rules. There is no specific submission as what were the evidences which were considered by the ld.CIT(A) without giving opportunity to the AO and/or the evidences which were not available before the AO. Therefore, this contention of the Revenue is also devoid of any merit. Thus, we do not see any reason to interfere with the order of the ld. CIT(A), same is hereby upheld and Revenue’s ground No.2 is rejected.

Cases referred to


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Read 15096 times Last modified on Saturday, 13 February 2016 16:10
Anil B.

A practicing Chartered Accountant Anil B. acquired CA, CS and LL.B degrees with over 12 years of rich and diverse management experience across Banking & Financial Services, Insurance and the Logistics industry spanning various markets and geographies globally.

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  • Comment Link Amit Sunday, 23 August 2015 13:06 posted by Amit

    I did not say that there is a fallacy in the Tribunal order. I just wanted to say that there was a bank account which was not declared by the assessee so something concrete was expected to be relied by the A.O. in the similar circumstances. I do not want to see a situation where the assessee start taking advantage. May be a detailed guideline to deal with the similar circumstances would have definitely helped the assessing Officers in future orders.

  • Comment Link Anil Saturday, 22 August 2015 17:45 posted by Anil

    just to add that the additional evidences under Rule 46A were submitted to the CIT(A) by the assessee which were admitted. CIT(A) duly verified and examined before coming to final conclusion...

  • Comment Link deepakkumar Saturday, 22 August 2015 17:33 posted by deepakkumar

    Regarding non disclosure of the account assessee has clarified as under -

    "submitted that the omission to include the bank account in question in the book of accounts was unintentional mistake on the part of the Accountant. He submitted that the AO failed to appreciate the fact that there was no reason to
    conceal the account, which is over-draft account because the source of credit in this account will be the transfer from bank. He further submitted that the AO failed to appreciate the cash deposits made in this
    account were not unexplained but re-deposits out of the previous withdrawals. He further submitted that recording the transactions in the books has nothing to do with the correlating the withdrawals with the redeposit because once he account is not recorded in the books the
    corresponding redeposit will automatically remain unrecorded in the books."

    Honb. Tribunal has accepted this explanation and fair also that nobody would purposely hide an overdraft account specially when there are only deposits and withdrawals. The CIT(A) was also of the same view and Tribunal simply decided not to interfere in the matter.

    Nothing wrong with the order of the Honb. Tribunal.

  • Comment Link Amit Saturday, 22 August 2015 16:46 posted by Amit

    Tribunal did not clarify that what an AO is suppose to do when he comes across with a bank account not at all disclosed in the regular books of accounts ?

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