Section 68

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 June 2014 Hi,

I have received notice from income tax dept and after proceedings for the said notice, additions were made by AO under section 68. The additions are about 17 lacs and the outstanding tax is huge on it.
I am a salaried person and want to ask if AO can make the additions under section 68 for a salaried person. I have not maintained any books of account. Also, since last 12 years I am in private job.

Also, please let me know the ways how to get penalty proceedings stopped. Because as per my knowledge there is penalty for section 68.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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13 June 2014 1. how the additions were made is normally explained in the assessment order.

so you gotta have a look at the order and if it is erroneous, then file an appeal against the same with CIT(A) along with a stay of demand application with the AO.

hire a CA or a lawyer to represent you if you are unaware of tax appeal procedures and law.

Rupesh Jain

Rupesh Jain (Expert)
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13 June 2014 pls check the assessment order and if in your bank a/c received you any amount then you can make strong basis of amount recd. and file appeal agst order. addition.

Querist : Anonymous

Querist : Anonymous (Querist)

14 July 2014 Thanks for your reply.
Right now my case is in CIT(Appeal) and I have got the stay approval from joint commissioner till 30-sept-2014.
I want to ask what if I do not get the hearing from appeal authority till 30-sept, can I apply for stay with CIT(Appeal) authority?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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23 July 2025 You've raised a very valid concern about Section 68 of the Income Tax Act, 1961, especially as a salaried individual. Let's clarify your situation step-by-step:

🔍 1. Can Section 68 Apply to a Salaried Person?
Yes, Section 68 can technically apply to any assessee (including salaried individuals) if the following conditions are met:

Unexplained credit entries (cash deposits, loan receipts, gifts, etc.) are found in your bank account or other records.

You fail to satisfactorily explain the nature and source of the credit.

Even if you're not maintaining formal books of account, bank accounts or financial records maintained by you may be deemed as 'books' under certain judicial interpretations.

🔸 So yes, even as a salaried person, Section 68 can be invoked if:
You received unexplained cash deposits, or

You could not substantiate gifts/loans/other credits.

⚖️ 2. Penalty Under Section 68
🔸 Penalty under Section 271(1)(c) or Section 270A may be levied if:
The AO proves concealment of income, or

You furnished inaccurate particulars.

But this is not automatic — you can defend yourself in penalty proceedings.

✅ Tip: If you made a genuine mistake or have some documentary evidence, you can argue that it was not a case of concealment, and request that penalty be waived.

🧾 3. Remedies You Have Right Now
✅ You already filed an appeal with CIT(A) and have a stay till 30-Sept-2014 — that's good.
❓What if the CIT(A) hearing doesn't happen before 30-Sept?
You can:

Apply for extension of stay from the same authority who granted it (Joint Commissioner or Additional Commissioner).

Alternatively, submit an application for interim stay with CIT(A) citing:

Delay in hearing,

Genuine hardship,

That appeal is already pending, and

Willingness to cooperate.

🛡️ How to Strengthen Your Case
Prepare documentation: Even if you don’t maintain books, provide:

Bank statements

Gift deeds/loan confirmations (if any)

PAN and ITR of donors/lenders

Any affidavit or declaration

Argue on legal merits:

Salaried person with no books can't be presumed to have “books” under Section 68 — cite judgments if applicable.

Absence of books makes Section 69 or 69A more appropriate than 68 — which has different penalty implications.

📚 Key Case Laws You Can Use
CIT v. Bhaichand H. Gandhi (1983): Bank passbook is not considered as “books of account” of assessee → Section 68 not applicable.

CIT v. Shivraj B. Sanghvi (2017): If books are not maintained, Section 68 can’t apply directly.

Banyan & Berry v. CIT (1996): No penalty if explanation is bona fide.

✅ Summary of Action Plan
Task Action
Appeal Stay Extension Apply for stay extension with JCIT or CIT(A)
Prepare Arguments Collect documentation, draft strong defense
Penalty Defense Prepare reply to show no concealment, invoke case laws
Legal Support Consider consulting a tax lawyer or CA to represent effectively before CIT(A)

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