Unexplained cash credit additions on sale of investments rejected where earlier acceptance and genuineness of shares established.

Addition under unexplained cash credit was challenged on the basis that the assessee had held and purchased the contested shares in earlier years, which were reflected in the balance sheet and accepted in prior assessments; the legal basis emphasises the burden on the taxpayer to establish identity, genuineness and creditworthiness, and where such investments were earlier accepted, the same cannot be doubted upon sale. Reliance on precedent confirming that prior departmental acceptance and consistent treatment of investments negates unexplained cash credit led to relief for the taxpayer.

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Issues: Whether the additions made by the Assessing Officer under section 68 of the Income-tax Act, 1961 treating receipts as unexplained cash credits should be sustained or deleted.

Analysis: The appeals concern receipts of sale proceeds of investments reflected in the assessee's bank account and supported by sale transactions through banking channels, confirmations obtained under section 133(6), and earlier acceptance of the investments in prior assessments and balance sheets. The Assessing Officer relied on an investigation report and third-party statement implicating entry transactions without affording opportunity for cross-examination and without furnishing or corroborating the relied-upon statement. The CIT(A) examined identity, genuineness and creditworthiness parameters relevant to section 68, considered documentary corroboration and prior acceptance of investments, and found no infirmity in the assessee's evidence. The Tribunal noted binding jurisdictional authority holding that where sale of investments is shown and earlier assessments accepted such position disentitles the revenue to treat receipts as unexplained credits, and found the AO's reliance on uncorroborated investigational material and failure to allow cross-examination to be a breach of natural justice.

Conclusion: Addition under section 68 is deleted and the Revenue's appeals are dismissed; decision is in favour of the assessee.

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