Whether Profit and loss account can be books of account for the purpose of section 68 of Income Tax ?



Whether Profit and loss account can be books of account for the purpose of section 68 of Income Tax ?

Whether Profit and loss account can be books of account  for the purpose of section 68 of Income Tax  ( if Books of account not maintained  )  :-
CIT vs. Taj Borewells, [2007] 291 ITR 232 (Madras)     If a profit and loss (P&L) account is maintained and credits are found in such an account, can we consider the same to be books of account?  It was taken up for detailed consideration by the Madras High Court in CIT vs Taj Borewells (291 ITR 232 Madras).
Taj Borewells did not maintain books of account since the gross receipts were below Rs 5 lakh. The partners of the firm had brought in Rs 5,25,00 as investments. The assessing officer (AO) did not accept the claim about the investment by partners. He concluded that the amount represented the undisclosed income of the firm and added the same under Section 68 of the I-T Act. The Income Tax Appellate Tribunal (ITAT) annulled the addition and the department took up the matter in appeal before the Madras High Court. .
The High Court observed that books of account will mean any book which formed an integral part of a system of book keeping employed in any particular business and included the ledger and the books of original entry. After explaining the object behind the making of a P&L account, the court observed that the balance-sheet listing the assets and liabilities and equity accounts of the company is prepared “as on” a particular day and the accounts reflected the balances that existed at the close of business on that day.
4.6 Hon’ble Madras High Court held that “7. Section 68 is a charging section and it is also a deeming provision. Unless the following circumstances exist, the Revenue cannot rely on section 68 of the Act.
(a)Credit in the books of an assessee maintained for the year.
(b)The assessee offers no explanation or if the assessee offers explanation and if the Assessing Officer is of the opinion that the same is not satisfactory, the sum so credited is chargeable to tax as “income from other sources”

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