Section 68 cannot apply to an earlier year's business advance reflected as an asset, not a current-year credit.

Section 68 applies only where a sum is credited in the books of account of the relevant previous year; an amount shown as an advance paid in an earlier year and reflected as an asset cannot be treated as an unexplained liability. On the facts, the amount in the name of Santosh Trust was paid through banking channels in an earlier assessment year, and the first appellate authority's factual finding to that effect was not displaced by any cogent material. The addition was therefore deleted, and the Revenue's appeal failed on this issue.

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Issues: Whether the addition made under section 68 of the Income-tax Act, 1961 as an unexplained liability in respect of the amount shown in the name of Santosh Trust was sustainable.

Analysis: The amount in question was found to be an advance paid by the assessee through banking channels in an earlier assessment year and not a credit received during the year under consideration. The factual verification accepted by the first appellate authority was not displaced by any cogent material. Section 68 applies only where a sum is found credited in the books of account of the relevant previous year, and the present entry did not represent such a credit but a business advance shown as an asset.

Conclusion: The addition under section 68 was rightly deleted and the assessee succeeded on this issue.

Final Conclusion: The impugned addition could not be sustained in the absence of any credit in the relevant year, and the Revenue's appeal failed.

Ratio Decidendi: Section 68 can be invoked only for sums credited in the books in the relevant previous year, and an advance paid in an earlier year and reflected as an asset cannot be taxed as an unexplained liability of the year under consideration.

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