In the wake of demonetization and ongoing assessments, we had in our edition dated 22nd December, 2016, compiled latest case laws by various Courts including Supreme Court on issues covering unexplained credit, unexplained expenditure, unexplained investments and topics alike. There have been umpteen number of rulings rendered by Courts in the past one month on this issue. Considering the need of the hour, we have yet again compiled most useful and latest rulings on the topic for the benefit of our readers.

[TS-6094-ITAT-2016(MUMBAI)-O]: Sec. 68 & books of accounts : Sec. 68 cannot be invoked in case of non-maintenance of books of accounts; ITAT deletes addition u/s 68 on account of unexplained cash credits in bank account of assessee (an employee of Municipal Corporation of Greater Mumbai); Holds that assessee, being a salaried person did not maintain any books of accounts and accordingly Sec. 68 cannot be invoked since it is applicable only “where any sum is found credited in the books of an assessee...”.

[TS-5021-ITAT-2017(Pune)-O]: Penalty on passbook entries :Bank passbook is not part of books of account of the assessee, additions u/s. 68 on the basis of entries in the bank passbooks not sustainable; No penalty can be levied on an addition where the dispute is only with regard to year of taxability – ITAT deletes addition on account of unexplained cash deposits in bank accounts u/s. 68 and levy of penalty thereon u/s. 271(1)(c).

[TS-6757-ITAT-2016(Kolkata)-O]: Sec. 68 - Advance of prior years : Addition u/s 28(iv) deleted as assessee proved that gold was inherited by him from his late grandfather's money-lending business; Advance received prior to current AY credited in books in current year pursuant to conversion from single entry system to double entry system does not attract Sec. 68 - ITAT rules in favour of assessee.

[TS-5029-ITAT-2017(Chandigarh)-O]: Sec. 69A, 69C - Credit purchase, dumb documents : Addition of amounts as unexplained expenditure restricted to only amounts ‘paid’ and not applicable to amounts ‘payable’; Credit purchase cannot be treated as unexplained income u/s. 69A in absence of payment proved by the AO against the same; No addition u/s. 69C on basis of ‘dumb documents’ consisting of incomplete numbers - ITAT rules partly in favour of assessee.

[TS-6628-ITAT-2016(Panaji)-O]: Unexplained Jewellery : Inability to produce bills for purchase of jewellery cannot lead to a conclusion that jewellery is unexplained; Penalty u/s. 271(1)(c) not leviable though assessee offered the jewellery to tax pursuant to search - ITAT deletes levy of penalty u/s. 271(1)(c) on unexplained jewellery; Notes that  assessees’ returned income was high enough to substantiate the gold found during search and assessees had offered the same to tax in the course of statement recorded u/s 132(4), merely because they were unable to produce bills for their purchase.

[TS-5006-HC-2017(Mumbai)-O]: Estimation of Profit on Bogus purchases : Assessee liable to pay tax on estimated profit @12% on bogus purchases; Onus on assessee to provide one to one direct nexus between sales and purchases - ITAT rules in favour of Revenue, upholds CIT(A)’s order who held a portion of purchases as bogus as the assessee could not establish one to one nexus between the purchases and sales made, and brought to tax profit element (estimated at 12.5%) embedded in these transactions; Additions were made by AO on the basis of information received from Sales Tax Department regarding certain hawala operators who provided accommodation entries without doing any actual business and assessee’s name was in the list of beneficiaries therein.

[TS-5007-ITAT-2017(Kolkata)-O]: Dividend income - income from undisclosed sources : ITAT rules in favour of assessee (an HUF), quashes CIT(A)'s order treating the LTCG on sale of shares of a company claimed by assessee as income from undisclosed source; AO treated  assessee’s transaction of sale of shares bogus on the ground that the purchasing company was prohibited by SEBI from dealing in shares and that the said company did not file its financial statements; ITAT holds that AO should have issued notices and summons to the companies ( to whom the shares were sold ) u/s. 133(6) and 131 for the production of the necessary financial information before rejecting assessee's claim.

[TS-6915-ITAT-2016(Kolkata)-O]: Sec. 68 - Cash gifts : Cash gifts received by assessee on her 50th birthday celebrations taxable u/s 68 owing to failure on part of assessee to prove identity, creditworthiness and financial capacity of donors; Disallowance u/s 40(a)(ia) deleted as there was no liability to deduct tax u/s 194C in absence of a contract.

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