Unexplained cash credit under section 68 upheld where surrounding circumstances and reason to believe disproved claimed source.

Addition under section 68 challenged as unexplained cash credit was sustained by ITAT on the ground that the AO had relevant material to form a reason to believe at reopening and the assessee failed to discharge the burden to satisfactorily explain the credit; the Tribunal applied the tests for reopening and for assessing disputed receipts, emphasising surrounding circumstances, contemporaneous evidence, timing and modality of transfers, struck-off/non-filer status of the alleged creditor and inconsistencies in confirmations, and concluded the receipt represented unexplained/undeclared money, upholding the addition in favour of Revenue.

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Issues: (i) Whether the addition of Rs. 10,00,000/- made under section 68 of the Income-tax Act, 1961 as unexplained cash credit stand sustained on the facts and material on record.

Analysis: The Tribunal examined the material relied upon by the Assessing Officer and the Commissioner (Appeals), including banking transactions showing RTGS transfer of Rs. 10,00,000/- from M/s AB Agrotech Pvt. Ltd. to the assessee, confirmations and sale invoice, and the departmental findings about the struck-off/non-filer status and cash deposits in the third party's account during demonetization. Applying the settled legal tests for reassessment initiation and for evaluation of disputed receipts, the Tribunal considered authorities holding that at the stage of reopening the AO requires relevant material to form a reason to believe (not conclusive proof), and that the reality of transactions may be tested by surrounding circumstances and the test of human probabilities. The Tribunal found the contemporaneous facts (questionable source of funds, striking-off/non-filer status of the transferor, timing and modality of transfers, and inconsistencies in confirmations) sufficient to sustain the AO's conclusion that the amount represented unexplained/undeclared money and that the assessee failed to discharge the onus to satisfactorily explain the nature and source of the credit.

Conclusion: The addition of Rs. 10,00,000/- under section 68 of the Income-tax Act, 1961 is upheld against the assessee (in favour of Revenue).

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