2026 (1) TMI 606 - AT - Income Tax

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; ... Addition u/s 68 - Unexplained cash credit - year of assessment - HELD THAT:- Since the transaction in relation to which addition was made in the hands of the assessee did not, as a matter of fact, take place in the impugned year no cause of action arises for making any addition in the hands of the assessee u/s.68 of the Act as unexplained credit. Appeal filed by the Revenue is dismissed. 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.