Section 68 addition fails when documentary evidence supports a joint venture receipt and third-party statements remain untested.

An addition under section 68 was treated as unsustainable where the assessee supported a joint venture receipt with contemporaneous documents, including the agreement, correspondence, board resolutions, project records, land conversion papers, bank entries and repayment evidence on cancellation. The adverse third-party statements relied on were found unreliable because one was recorded without furnishing the full material or allowing cross-examination, and the other was retracted by affidavit and complaint. As the revenue did not carry out independent inquiry to discredit the documents or establish that the transaction was a sham, the addition was deleted.

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Issues: Whether the addition made under section 68 of the Income-tax Act, 1961, in respect of Rs. 17.46 crores received under the alleged joint venture arrangement was sustainable.

Analysis: The assessee produced the joint venture agreement, contemporaneous correspondence, board resolutions, project report, land conversion documents, bank records, tax records of the counterparty, and evidence of repayment on cancellation of the project. The material showed that the arrangement was initiated before the search on the third party and was supported by documentary evidence. The adverse statements relied upon by the Assessing Officer were not found reliable because one was recorded behind the assessee's back without furnishing the complete material or allowing cross-examination, and the other was retracted by affidavit and complaint. The revenue also did not conduct independent inquiry to discredit the documents or establish that the transaction was a sham.

Conclusion: The addition under section 68 could not be sustained and was deleted in favour of the assessee.

Ratio Decidendi: An addition under section 68 cannot rest solely on untested third-party statements or retracted statements when the assessee has produced contemporaneous documentary evidence establishing the genuineness of the transaction and the revenue has failed to disprove it through independent inquiry or by affording cross-examination.

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