Section 68 applies to bank credits and requires proof of genuine gifts and donor capacity to sustain the claim.

Section 68 can be invoked for credits reflected in a bank account, even where the assessee does not maintain self-made books of account, because the inquiry remains directed to the nature and source of the credit. In claimed gift cases, the assessee must prove genuineness, donor creditworthiness, and the true source of funds through credible evidence. Here, failure to produce the donors, unserved summons, and the donors' meagre financial capacity left the gift claims unsubstantiated, so the gifts were treated as not genuine and the addition was sustained.

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Issues: (i) Whether section 68 could be invoked in respect of the gifts received by the assessee, including the objection that no books of account were maintained; (ii) Whether the assessee proved the genuineness of the gifts and the creditworthiness of the donors.

Issue (i): Whether section 68 could be invoked in respect of the gifts received by the assessee, including the objection that no books of account were maintained.

Analysis: The objection that section 68 applies only where credits are found in books of account was rejected by following the view that deposits reflected in a bank account can also attract the provision, and that the statutory inquiry is into the nature and source of the credit. The absence of self-maintained books of account did not, by itself, disable the addition where the bank entries and surrounding material disclosed unexplained credits.

Conclusion: The applicability of section 68 was upheld against the assessee.

Issue (ii): Whether the assessee proved the genuineness of the gifts and the creditworthiness of the donors.

Analysis: The donors were not produced despite opportunities, the summons issued to them remained unserved, their financial capacity appeared meagre in relation to the amounts gifted, and the surrounding circumstances did not support a genuine gift transaction. The evidence on record was found insufficient to establish natural love and affection, capacity to gift, or the true source of the funds credited.

Conclusion: The gifts were held to be not genuine and the addition was sustained.

Final Conclusion: The addition made on account of gifts was sustained and all the appeals were dismissed.

Ratio Decidendi: A credit reflected in a bank account may be examined under section 68, and the assessee must establish the genuineness and source of the credit by credible evidence, including donor capacity where the credit is claimed as a gift.

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