2026 (4) TMI 111 - AT - Income Tax

Unexplained cash credit under section 68 fails when customer details and supporting records are filed without meaningful verification.

An addition as unexplained cash credit under section 68 could not be sustained where the assessee furnished complete customer-wise particulars, supporting ... Unexplained cash credit - initial onus u/s 68 - verification of customer advances - Cash advances received from customers on the date of demonetisation - HELD THAT: - The Tribunal held that the addition was founded only on the AO's disbelief that such a large number of customers could have paid cash advances in a single day. The assessee had, however, furnished names, full addresses, contact numbers, customer-wise amounts and supporting sale-related particulars, thereby discharging its initial onus. Once such primary details were placed on record, the AO was required to undertake verification, including by issuing notices to the customers or making sample checks and verifying the vehicle registration particulars with the concerned authorities. In the absence of any such inquiry, the addition u/s 68 could not be sustained merely on surmise as to business improbability. [Paras 7, 8] The addition made on account of the customer advances was held unsustainable and was directed to be deleted. Final Conclusion: Tribunal allowed the assessee's appeal and deleted the addition. It held that, after the assessee had furnished complete customer details and supporting particulars, the addition could not be sustained without proper verification by the AO. Issues: Whether the addition made as unexplained cash credit under section 68 of the Income-tax Act, 1961 was sustainable when the assessee furnished the names, addresses, contact details and supporting records of the customers and the Assessing Officer made no independent verification.Analysis: The assessee produced customer-wise particulars, sample invoices, bank records, cash book and other supporting documents showing receipt of advances from 611 customers. The Assessing Officer rejected the claim mainly on the ground that such collections on a single day during the demonetisation period appeared improbable, but did not carry out basic verification, including issuing notices under section 133(6) of the Income-tax Act, 1961 or making sample inquiries from the customers or other relevant authorities. On these facts, the assessee was held to have discharged the initial onus placed upon it, and the addition could not be sustained without proper enquiry by the Revenue.Conclusion: The addition under section 68 of the Income-tax Act, 1961 was deleted and the issue was decided in favour of the assessee.Ratio Decidendi: Where the assessee furnishes complete particulars and supporting material establishing the identity and source of cash receipts, an addition under section 68 of the Income-tax Act, 1961 cannot be sustained in the absence of meaningful verification by the Assessing Officer.