Wrong tax section citation does not vitiate addition, but unexplained credit or expenditure must still be proved on facts

A mere wrong invocation of section 68 instead of section 69C did not, by itself, invalidate the addition where the assessee was informed of the factual basis and no prejudice was shown; section 292B protected the proceedings from such technical defect. On merits, the amount could not be sustained without proper proof that it was a fresh credit or unexplained expenditure, as the material indicated a cheque issued towards interest liability in a running loan account rather than a new unexplained inflow. The substantive tax issue was therefore remitted for limited factual verification.

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Issues: (i) Whether the addition could be deleted merely because the Assessing Officer invoked section 68 instead of section 69C of the Income-tax Act, 1961, and whether section 292B cured such defect; (ii) Whether the impugned amount of Rs. 2,73,43,083/- was sustainable on merits as unexplained cash credit or unexplained expenditure.

Issue (i): Whether the addition could be deleted merely because the Assessing Officer invoked section 68 instead of section 69C of the Income-tax Act, 1961, and whether section 292B cured such defect.

Analysis: The factual foundation of the addition and the nature of the transaction had been put to the assessee, and a mere mistake in quoting the provision did not, by itself, invalidate the assessment. The defect was technical in nature and did not defeat the substance of the proceedings where no prejudice was shown. Section 292B protects proceedings that are otherwise in conformity with the intent and purpose of the Act.

Conclusion: The deletion could not be sustained solely on the ground of wrong invocation of section 68, and the Revenue succeeded on this issue.

Issue (ii): Whether the impugned amount of Rs. 2,73,43,083/- was sustainable on merits as unexplained cash credit or unexplained expenditure.

Analysis: Section 68 applies only where a sum is found credited in the books, while section 69C requires proof of unexplained expenditure. On the material on record, the amount represented a cheque issued towards interest liability in a running loan account, which was not shown to be a fresh credit inflow. The assessment order did not properly examine the accounting treatment or establish actual unexplained expenditure, and the assessee's reconciliation required limited factual verification of subsequent realization.

Conclusion: The addition was not sustainable on merits in its existing form, and the matter required limited verification by the Assessing Officer.

Final Conclusion: The appeal was disposed of by upholding the legal principle that an incorrect section by itself does not vitiate an addition, while restoring the matter for restricted verification on the substantive tax liability.

Ratio Decidendi: A mere error in citing the charging provision does not nullify an addition if the substance of the case was conveyed to the assessee, but deeming additions under sections 68 and 69C can survive only when the foundational facts of a credited sum or unexplained expenditure are established on evidence.

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