Foreign-exchange remittance immunity bars section 68 addition and unsupported reassessment where basic conditions are shown.

A receipt credited to a capital account was treated as protected by a statutory foreign-exchange remittance immunity scheme where the basic material showed payment through an NRE account and the Department produced no positive contrary evidence. On that footing, addition as unexplained income under section 68 was held unsustainable, and the binding CBDT circular was applied to bar enquiry once the basic conditions were shown. Reassessment also could not be sustained because it was founded on suspicion and retracted statements rather than material meeting the standard of reason to believe; reopening on mere conjecture was invalid in law.

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Issues: (i) Whether the amount credited to the assessee's capital account was liable to addition as unexplained income under section 68 of the Income-tax Act, 1961 despite the claim of immunity under the foreign exchange remittance scheme; (ii) whether the reassessment proceedings were validly initiated on the material available.

Issue (i): Whether the amount credited to the assessee's capital account was liable to addition as unexplained income under section 68 of the Income-tax Act, 1961 despite the claim of immunity under the foreign exchange remittance scheme.

Analysis: The assessee produced basic material showing receipt of the amount through the NRE account of Shri Vinod Goel and claimed coverage under the statutory immunity scheme relating to remittances in foreign exchange. The Tribunal noted that the Department had not brought positive material to show that the particular receipt was outside the protection of the scheme. It also relied on the binding CBDT circular clarifying that no enquiry was to be made into remittances covered by the scheme once the basic conditions were shown.

Conclusion: The addition under section 68 was not sustainable and was deleted.

Issue (ii): Whether the reassessment proceedings were validly initiated on the material available.

Analysis: The Tribunal found that the reopening rested essentially on suspicion drawn from statements in foreign exchange proceedings, while the relevant statement had been retracted and there was no material directly showing that the assessee's receipt was not genuine or not covered by the immunity scheme. It held that the statutory standard of reason to believe was not met and that the Department could not reopen merely on conjecture where the scheme itself barred enquiry into the protected remittance once the basic facts were disclosed.

Conclusion: The reassessment was held to be invalid in law.

Final Conclusion: The assessee's receipt was treated as covered by the statutory immunity framework, and the impugned addition was set aside on the footing that reopening was not justified on the available material.

Ratio Decidendi: Where a receipt is shown, on the basic material produced, to fall within a statutory foreign-exchange immunity scheme and the binding departmental circular prohibits enquiry into such protected remittances, reassessment cannot be sustained on mere suspicion and an addition under section 68 cannot be made without positive contrary evidence.

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