Addition under section 68 for unexplained cash credit dismissed where transaction did not occur in the assessment year

Addition under section 68 was challenged on the ground that the alleged cash-credit transaction did not take place in the impugned assessment year; because the transaction was factually not within that year, no cause of action arose to treat it as unexplained credit in that year and the revenue's challenge failed. The legal point emphasises the necessity of temporal nexus between the transaction and the assessment year and the requirement that chargeability under unexplained cash credits depends on occurrence within the relevant year.

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Issues: (i) Whether the addition of Rs.2,27,18,959 made as unexplained cash credit under Section 68 of the Income-tax Act, 1961 can be sustained when the transaction (deposits with Honeyvick Enterprises Pvt. Ltd.) did not pertain to the assessment year 2017-18.

Analysis: The question involves application of Section 68 in the context of capital introduction and the temporal nexus of the alleged transaction to the assessment year. The analysis examines whether the factual record establishes that the deposits credited to the assessee's capital account occurred in the impugned year and whether documentary evidence supports treating the amount as unexplained cash credit. The Tribunal takes as decisive the finding that the impugned amount does not pertain to the assessment year; in that factual matrix the statutory requisites for making an addition under Section 68 (i.e., unexplained cash credit arising in the relevant assessment year) are not fulfilled. The requirement for documentary evidence to connect the deposit to the assessment year is thus dispositive of the Section 68 addition.

Conclusion: The addition of Rs.2,27,18,959 under Section 68 is not sustainable because the transaction in respect of which the addition was made did not pertain to the assessment year 2017-18; relief in favour of the assessee is warranted.

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