Unexplained cash credit under section 68 requires proper enquiry and fair opportunity before additional evidence is rejected.

An addition as unexplained cash credit under section 68 cannot rest on an drawn only from an interest claim under section 24(b) without adequate enquiry into when the loan was raised and its source. Where the assessee asserts that the borrowing relates to earlier years and seeks to file supporting documents and confirmations as additional evidence, the matter should be verified on the record and the assessee must be given a fair opportunity under Rule 46A. Denial of that opportunity is inconsistent with natural justice, and the issue requires fresh consideration after due hearing and production of relevant evidence.

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Issues: Whether the addition made as unexplained cash credit under section 68 of the Income-tax Act, 1961, based on estimated borrowing linked to interest claimed under section 24(b), could be sustained, and whether the matter required fresh verification after considering additional evidence under Rule 46A of the Income-tax Rules, 1962.

Analysis: The addition was founded on an estimate drawn from the interest claim, while the assessee asserted that the borrowing related to earlier years and that supporting documents and confirmations were available for production as additional evidence. The record did not clearly establish whether the loan was raised in the relevant year or in earlier years, and no adequate enquiry had been made on that aspect. The appellate authority also decided the matter without granting the requested opportunity to adduce additional evidence. On these facts, the addition was held to rest on inadequate material and the denial of opportunity was found inconsistent with natural justice.

Conclusion: The addition under section 68 could not be sustained on the existing record and the issue was required to be reconsidered afresh after allowing production of additional evidence and affording a reasonable hearing.

Final Conclusion: The assessment on this issue was set aside and the matter was remitted to the Assessing Officer for fresh decision in accordance with law after due opportunity to the assessee.

Ratio Decidendi: An addition under section 68 cannot be upheld when it is based on ary inference without adequate enquiry into the year and source of borrowing, particularly where the assessee is denied a fair opportunity to produce relevant additional evidence.

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