Addition under section 68 for accommodation entries where no book credit existed; addition quashed to prevent double taxation

Addition under section 68 for accommodation entries was rejected because the necessary jurisdictional fact -- a sum credited in the books during the relevant year -- was absent. Ledger accounts produced by the taxpayer showed no receipt in the impugned year and the assessing officer produced no material to contradict those ledgers. Reliance solely on information from the Investigation Wing and statements recorded during search, without correlation to book entries, was insufficient. Repetition of the same addition already reflected in another assessment year would cause double taxation; consequently the addition was not sustained in favour of the assessee.

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Issues: Whether the addition of Rs. 1,18,69,619/- made under section 68 of the Income-tax Act, 1961 can be sustained for Assessment Year 2020-21 on the basis of information from investigation and statements recorded during search when the assessee's books do not show any fresh credit in the relevant previous year.

Analysis: Section 68 is invoked only in respect of sums credited in the books of the assessee during the relevant previous year; proof of actual receipt in that year is a jurisdictional requirement. The ledger accounts produced for the relevant year show repayment of earlier amounts or credit of interest and do not evidence any fresh loan or advance credited in the impugned year. The Assessing Officer and the first appellate authority relied on investigation findings and statements recorded during search, but no material was brought on record to contradict the ledger entries or to demonstrate receipt of the alleged amount in the year under appeal. Applying the legal rule that an addition under section 68 requires correlation with entries in the books for the relevant year, and having regard to the potential impermissibility of taxing the same amount in successive years, the factual foundation for invoking section 68 in the impugned year is absent.

Conclusion: The addition of Rs. 1,18,69,619/- under section 68 is unsustainable and is deleted; the appeal is allowed on merits in favour of the assessee.

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