COMMISSIONER OF INCOME-TAX Vs. SHIV SHAKTI TIMBERS

JUDGEMENT

(1.) THIS is a reference at the instance of the Revenue under Section 256 (1) of the Income-tax Act, 1961, and the following two questions have been referred by the Tribunal for answer by this court :

(2.) THE brief facts giving rise to this reference are that the assessee is a firm and during the year under consideration, was dealing in timber, fuel, wood and bhusa. Books of account were maintained. The Assessing Officer found Rs. 45,000 recorded in the books in the names of several partners. He required the assessee to explain the genuineness of the credits in terms of the provisions of Section 68 of the Income-tax Act, 1961. The Assessing Officer, after taking into consideration the entire material including the explanation of the assessee, found that the explanations were not satisfactory and he made an addition of Rs. 45,000 as per the provisions of Section 68 of the Act. The assessee preferred an appeal against the order of the Income-tax Officer to the Commissioner of Income-tax (Appeals ). The Commissioner of Income-tax (Appeals) considered the material on record and found that the addition of Rs. 17,000 alone could be sustained since the explanation to the extent of Rs. 28,000 had to be considered as satisfactory. Against the order of the Commissioner of Income-tax (Appeals), the assessee preferred an appeal before the Tribunal which allowed the assessee's appeal and set aside the order of the Commissioner of Income-tax (Appeals) on the ground that cash credits were in the names of partners and Section 69 of the Act was applicable, but not Section 68. In that connection, the Tribunal made a reference to the case of Sundar Lal jain v. CIT [1979] 117 ITR 316 (All ). Hence, the Department approached the Tribunal for making a reference to this court and, accordingly, the Tribunal has referred the aforesaid questions for answer by this court.

(3.) WE have heard learned counsel for the parties. Section 68 of the Income-tax Act reads as under :