Expression “any previous year” in Section 68 refers to Current previous year relevant to AY in question

Expression “any previous year” in Section 68 refers to previous year relevant to the Assessment Year in question – High Court

ABCAUS Case Law Citation:
ABCAUS 3287 (2020) (03) HC

Important case law relied upon by the parties:
Commissioner of Income-Tax, Poona Vs. Bhaichand H. Gandhi, 141 ITR 67
Commissioner of Income-Tax, Rajasthan Vs. Lakshman Swaroop Gupta & Brothers, 100 ITR 222
M/s Bhor Industries Limited Vs. Commissioner of Income   Tax, Bombay, AIR 1961 SC 1100

In the instant case, the appeal was file by the Assessee against the order of the Tribunal in sustaining the inter alia additions made of old outstanding     sundry     credit     balances u/s 68 of the Income Tax Act, 1961 (the Act).

Before the Hon’ble High Court, the assessee submitted that under Section 68 of the Act, is very clear that where any sum is found to be credited in the books of the assessee for the 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 (AO), satisfactory, the sum so credited may be charged to the income tax as the income of the assessee of that previous year. 

Relying upon  several decisions, it was submitted   that   since,   it   was the   case   of the Revenue  that  some  amounts  were  found   credited  in the  books  of account for a preceding financial year, there was no question of taking cognizance of such amounts for the relevant assessment year which was not related to the said previous year. 

On the contrary, the Revenue contended that the contention upon the definition of the “previous year” and the provisions of the Act were never raised by the assessee. 

The Hon’ble High Court pointed out that as per the definition of the expression “previous year” as defined in Section 3 of the Act, the “previous year” means the financial year immediately preceding the assessment year.

Further the Hon’ble High Court noted that as per the plain reading of the provisions of Section 68 of the Act, it appear that where any sum is found to be credited in the books of Account maintained for any previous year and there is no proper explanation for such credit, the sum so credited can be charged to the  income  tax as the  income  of the  assessee of “that previous year”.

The Hon’ble High Court opined that since in the instant case, the material on record indicated that the Assessing Officer had relied upon the credits for a preceding financial year not relevant to the Assessment Year, the sum so credited could not be brought to tax as the income of the appellant assessee, for the relevant assessment year in terms of the definition under Section 3 of the Act.  

The Hon’ble High Court stated that he   Hon’ble   Apex   Court   in   the context  of provisions of the Merged  States (Taxation Concessions) Order (1949) has interpreted the expression “any previous year” to mean as not referring to all the previous years, but, the previous year in relation to the assessment year concerned. 

The Hon’ble High Court stated that the crucial phrase in Section 68 of the Act, which provides that the  sum so credited in the books and  which is not sufficiently explained, may be charged to the income tax as income of the   assessee   of     “that   previous   year”  is in line with the contentions of the assessee.

The Appeal was disposed off accordingly.

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