Meaning of “Any sum is found credited in the books”

The meaning of any sum is found credited in the books under section 68 & 69A of the Income Tax Act is not defined in the act itself. But we can take guidance from decisions by various high courts. Here are excerpts of courts orders in which the Hon’ble High Court tried to explain the meaning of any sum is found credited in the books.

Meaning of any sum is found credited in the books defined by court

The phrase ‘any sum is found credited in the books’ used in section 68 & 69A of the Income Tax Act came up before various high courts as detailed under :

1. Hon’ble Delhi high court explained the meaning of ‘any sum is found credited in the books’ while delivering judgment in CIT vs. Sophia finance ltd. [1993] 70 Taxman 69/205 ITR 98 (Delhi)(FB) as under :

Section : 68 & 69A

Meaning : The use of the words ‘any sum found credited in the books’ in section 68 indicates that the said section is very widely worded and an ito is not precluded from making an enquiry as to the true nature and source thereof even if the same is credited as receipt of share application money.

2. Hon’ble Delhi high court explained the meaning of ‘any sum is found credited in the books’ while delivering judgment in D.C. Rastogi v. CIT [2014] 45 taxmann.Com 489/224 taxman 250/ as under :

Section : 68 & 69A

Meaning : The language of section 68 does not admit to the interpretation that the reference to ‘any sum’ which is found to ‘credited’ in the assessee’s book for any particular year can mean only one thing, i.e. The actual sum found in the books for the concerned previous year and which is unexplained.

3. Hon’ble Allahabad high court explained the meaning of ‘any sum is found credited in the books’ while delivering judgment in CIT v. Abdul haseeb, prop. M.S.J.B. Silk [2014] 51 taxmann.Com 48 as under :

Section : 194 to 206C

Meaning : The expression ‘any sum is found credited in the books of the assessee’ means all entries on the credit side as well as on the debit side in the books of account. The word ‘credited’ in relation to ‘any sum’ does not mean an entry only on the credit side but would also include an entry on the debit side as well. The word ‘credited’ means an entry of a sum in the books of account.

Section 68 of Income Tax Act

Cash credits.

68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year :

Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless—

(a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and

(b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:

Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.

In this article, you can get guidance from high courts on the meaning of any sum is found credited in the books under section 68 & 69A of the Income Tax Act.

Updated up to Finance Act 2021