Section 68 addition on bank credits deleted where books and breakup showed explained receipts, transfers and reimbursements.

Bank credits were treated as unexplained under section 68, but the assessee produced a breakup and supporting books showing that the amounts represented accounting income, bank interest, salary, client receipts, reimbursements, journal entries and inter-account transfers. As the credited sums were reflected in the books or explained as related receipts and transfers, the basis for treating the entire credit as unexplained was rejected. The addition under section 68 was therefore held unsustainable and deleted in favour of the assessee.

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Issues: Whether the addition sustained under section 68 in respect of bank credits of Rs. 7,28,363 was justified when the assessee claimed that the credits represented accounting income, bank interest, salary, client receipts, reimbursements, journal entries and inter-account transfers.

Analysis: The assessee produced a breakup of the credits and the supporting books of account. The credited amounts were found to have been incorporated in the books and reflected as income or related receipts, while the remaining items were shown as reimbursements or transfers. In these circumstances, the basis adopted by the lower authorities for treating the entire amount as unexplained credit was not accepted.

Conclusion: The addition under section 68 was held to be unsustainable and was directed to be deleted, in favour of the assessee.

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