Bank credit additions require verification of reconciliation and source before tax treatment; matter remitted for fresh adjudication.

Assessment additions based on bank credits could not be sustained without verifying the assessee's reconciliation of internal transfers and receipts from companies, and the nature of the cash deposits and other credits required factual examination. The Assessing Officer had treated bank credits, after excluding cash deposits, as turnover and taxed cash deposits under section 69A without adequate verification of source and nature. Because the record also indicated inadequate opportunity of hearing, the matter was remitted to the Assessing Officer for fresh adjudication after affording the assessee an opportunity to be heard.

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Issues: Whether the assessment and additions could be sustained without proper verification of the assessee's reconciliation of bank credits and without adequate opportunity of hearing, or whether the matter required fresh adjudication by the Assessing Officer.

Analysis: The assessee produced a reconciliation statement showing that substantial credits in the bank accounts arose from internal transfers between his own bank accounts and receipts from companies. The record showed that the Assessing Officer treated the total bank credits, after excluding cash deposits, as turnover and also brought the cash deposits to tax under section 69A without verifying the reconciliation or the source and nature of the credits. The material also indicated that the nature of the transactions and certain credits required factual verification. In these circumstances, and considering the complaint of inadequate opportunity, a fresh examination by the Assessing Officer was considered necessary.

Conclusion: The matter was remitted to the Assessing Officer for fresh adjudication after affording the assessee an opportunity of hearing. The additions were not finally upheld.

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