Section 68 unexplained income addition deleted after identity, fund movement and genuineness were established

An addition as unexplained income under section 68 was deleted where ledger entries, bank statements and a bank certificate traced the funds through the company, its directors and the assessee. The record showed the movement of cash and its return when the transaction did not materialise, while the Department produced no material to rebut the transaction sequence or the identity and financial capacity of the originating company. Once identity, fund movement and genuineness were established, the assessee was not required to prove the source of source. The addition was held unsustainable.

---

---

Issues: Whether the addition of Rs. 4 crores made by the CIT(A) as unexplained income of the assessee was sustainable under section 68 of the Income-tax Act, 1961.

Analysis: The amount was traced through the ledger accounts of M/s OEC Diascans Ltd., the two directors, and the assessee company. The bank statements and bank certificate supported the movement of cash and its return when the transaction did not materialise. The Department did not bring any material to rebut the sequence of transactions or to disprove the identity and financial capacity of the company from which the money had originated. Once the assessee established the identity of the parties, the movement of funds, and the genuineness of the transaction, it was not required to prove the source of source.

Conclusion: The addition of Rs. 4 crores was not justified and was deleted; the issue was decided in favour of the assessee.

---