Section 68

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

05 September 2011 The assessee recd notice u/s.68 based on cash deposited by him of approx 16 lacs in its savings bank a/c. The savings account is in the joint names with wife and major son.
The assessee is engaged in the buss of fish trading in small quantities. The cash net profit is approx. 2 lacs.

My question is-
The wife files its own return and she deposited cash of approx. 3 lacs out of her cash flow.
It has two sons and both of them has salary income in cash and they deposited their salary amount and balance lying with them in the joint a/c.

It has taken sundry small loans of approx 20000 from 10 friends and relatives and paid back at the end of the yr.

Approx Rs.7 lacs is recd from wife, two sons and sundry loans. Remaining Rs.9 lakhs was from the cash withdrawals. The cash withdrawals was mainly from cheq deposits from friends and relatives.

Can this be explained to ITO? or further details should be given. I have also prepared monthly cash summary. Whether amount depsosited by wife and sons can be treated as income?

Pl help and advise.

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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06 September 2011 Kindly check the section under which notice has been issued. It might pertain to section 68 but notice cannot be issued u/s 68.
Anyhow, if you have received any notice than it is your duty to explain where from you received the amount deposited. You are planning to take some loan in cash amounting to Rs.20,000/- to cover the deposited amount. This will not work as the ITO may issue 131 to those persons and their capacity to pay is also important. The section 68 deals as below:
SECTION 68 OF INCOME TAX ACT ABOUT CASH CREDIT
Where any sums is found credited in the books of an assessee maintained for previous year, and the assessee offers no explanation about the nature and source of that income or found no satisfaction answer in the opinion of the assessing officer, the amount of that sum can be credited in the accounts of the assessee as his personal income for the previous year according to section 68 of income tax act.

Conditions of the amount deemed as the income of the assessee.

1- Cash credit need to be in the books of the assessee: - first condition is that the amount should be in the books of the assessee. And the books should be maintained and presented by the assessee himself and not by any other person. In contrast of the partnership firm, where books presented by a partner, the amount of cash credit can not deem as the income of that partner. [Sunderlal vs. CIT 117 ITR 316]. Books maintained are the ledger of the firm and not the bank pass book [CIT vs. Bhaichand 141 ITR 67].

2- No deduction available for any head: - if there is a cash credit available in the books of the assessee and the assessee has no explanation about this income, the income will be treated the income of the assessee and no rebate or deduction will be entertained to the assessee from any head of income and this income will be treated as the taxable income of the assessee. [Faquir Mohmed Hazi Hasan vs. CIT 247 290].

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