2026 (2) TMI 161 - AT - Income Tax

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 ... Addition u/s 68 - onus to prove - assessee had received accommodation entries from three concerns - year of assessment - addition has been made merely on the basis of information received from the Investigation Wing and the statement recorded during the course of search HELD THAT:- It is well-settled that the provisions of section 68 of the Act can be invoked only in respect of a sum credited in the books of the assessee during the relevant previous year. In the absence of any such credit entry in the year under appeal, the very jurisdictional fact for invoking section 68 fails. AO has not brought on record any material to controvert the ledger accounts produced by the assessee or to demonstrate that any amount was, in fact, received by the assessee from the said parties during the year under consideration. The addition has been made merely on the basis of information received from the Investigation Wing and the statement recorded during the course of search, without correlating the same with the actual entries appearing in the books of the assessee for the relevant year. We also find merit in the contention of the assessee that similar addition has already been made in AY 2019–20 in respect of transactions with the very same parties and the appeal for that year is pending before the first appellate authority. In such a situation, making the same addition again in the present year, when no fresh credit has arisen, would result in taxing the same amount twice, which is impermissible in law. As primary evidence in the form of ledger accounts demonstrates that no such receipt has taken place in the impugned year. In the absence of any contrary material brought by the Revenue, the addition cannot be sustained merely on surmises and general allegations of accommodation entry business. Decided in favour of assessee. 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.