Section 68 and source of credit: relative gift through banking channels accepted, but unsupported firm credit sustained.

A gift received through foreign inward remittance from a close relative was treated as a genuine receipt where the donor-recipient relationship and banking trail were accepted, and the addition under section 68 was deleted because suspicion alone could not justify treating it as unexplained cash credit. By contrast, a credit of Rs. 40,000 said to have come from partnership firms was sustained because the assessee failed to produce withdrawal details, liquidity evidence, or proof of debit from the firms' bank accounts. The material distinction was the absence of supporting evidence for the second credit, which left its source unsubstantiated.

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Issues: (i) Whether the addition under section 68 could be sustained in respect of the gift received through foreign inward remittance from a close relative. (ii) Whether the addition of Rs. 40,000 received from partnership firms could be sustained for want of supporting evidence.

Issue (i): Whether the addition under section 68 could be sustained in respect of the gift received through foreign inward remittance from a close relative.

Analysis: The relationship between the donor and the assessee was accepted, and the receipt of funds through banking channels as foreign inward remittance was not disputed. The same donor and similar facts had already led to deletion of an identical addition in the connected matter. In these circumstances, the gift was treated as a genuine receipt from a relative, and the addition could not be sustained merely because further evidence about the donor's foreign income was not produced.

Conclusion: The addition under section 68 was deleted and this issue was decided in favour of the assessee.

Issue (ii): Whether the addition of Rs. 40,000 received from partnership firms could be sustained for want of supporting evidence.

Analysis: The assessee did not produce partnership withdrawal details, the liquidity position of the firms, or proof of actual debit from the firms' bank accounts. In the absence of such material, the explanation was not accepted.

Conclusion: The addition of Rs. 40,000 was confirmed and this issue was decided against the assessee.

Final Conclusion: The appeal succeeded only in relation to the gift addition, while the balance addition was sustained, resulting in partial relief to the assessee.

Ratio Decidendi: A gift received through banking channels from a close relative cannot be treated as unexplained cash credit under section 68 merely on suspicion when the relationship and remittance are established, but a credit remains taxable where the assessee fails to substantiate its source with supporting evidence.

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