Unexplained credits in bank statements are taxable under section 69 – High Court

Unexplained credits in bank statements are taxable under section 69 – High Court

In a recent judgment, Hon’ble Madras High Court has held that unexplained credits in bank statements are taxable under section 69 as this provision applies to unexplained investments that are not recorded in books of account, if any, maintained by an assessee. 

ABCAUS Case Law Citation:
4304 (2024) (11) abcaus.in HC

In the instant case, the Petitioner assessee had filed a Writ Petition challenging the addition made u/s 69 of the Income Tax Act, 1961 (the Act) with respect to unexplained credits in bank account and subjecting it to higher rate of tax u/s 115BBE of the Act.

A search and seizure operation was carried on related to the husband of the Petitioner. The seized materials, which were found to be related to the petitioner, were handed over to the jurisdictional assessing officer of the Petitioner.

In first round of litigation, assessment orders were quashed by the Hon’ble High Court by granting liberty to the Revenue to proceed afresh against the petitioner in accordance with law.

Thereafter, satisfaction notes were recorded and notices under Section 153C was issued. Pursuant thereto, the impugned assessment orders were made by making additions on the basis of unexplained credits in the bank accounts.

One of the contentions of the Petitioner was that the Act does not create a charge on additions made under section 69 thereof in terms of section 115BBE. Since the additions are in respect of credits in bank statements, such credits cannot be treated as unexplained investments and taxed under Section 69 read with 115BBE.

The assessee relied on the judgment of the Bombay High Court and the judgment of the Hon’ble Supreme Court to contend that section 69 could not have been invoked in respect of credits in the petitioner’s bank accounts because such accounts do not qualify as the petitioner’s books of account.

The Hon’ble High Court observed that in both the Bombay High Court and the Hon’ble Supreme Court courts were dealing with section 68 i.e. cash credits, which only applies to cash credits in the books of an assessee. Whereas, in the instant case, section 69 i.e. unexplained investment was invoked and this provision applies to unexplained investments that are not recorded in books of account, if any, maintained by an assessee.

The Hon’ble High Court observed that the use of the expression “if any” in section 69 indicates that that it would also apply to unexplained investments in cases wherein the assessee does not maintain books of account, as in this case.

Therefore, it was held that section 69 read with section 115BBE was applicable in this case and the computation of total income and tax liability on such basis, wherever applicable, was in order.

Accordingly, the Writ Petition was dismissed.

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