Section 68 addition fails where cheque entry was only a routed accommodation transaction with no fresh cash shown.

A section 68 addition for an alleged accommodation-entry unsecured loan was deleted where seized material, the entry operator's statement, the cash flow chart and settlement records showed that the cheque received by the assessee was only a later routing of an already disclosed transaction. The records indicated no fresh cash introduction in the assessee's hands, and the related cash component had already been owned up in settlement proceedings. In the absence of independent evidence of unexplained money passing when the cheque was issued, the addition could not rest on suspicion or duplicate taxation of the same component.

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Issues: Whether the addition of Rs. 30,00,000 under section 68 of the Income-tax Act, 1961, in respect of an unsecured loan treated as an accommodation entry, was sustainable when the assessee claimed that the same cheque amount was only a rotation of an earlier transaction already disclosed in settlement proceedings and no fresh cash was introduced in its hands.

Analysis: The seized material, statement of the entry operator, cash flow statement and movement chart showed one accommodation arrangement that first travelled to another group concern and was thereafter routed by cheque to the assessee. The contemporaneous seized noting referred to a single entry, and the related cash component had already been owned up in settlement proceedings. In the absence of any independent material showing that fresh unexplained money changed hands when the cheque was issued to the assessee, the addition rested only on suspicion. The same accommodation component could not be taxed again in the assessee's hands merely because the banking entry passed through another group entity.

Conclusion: The addition under section 68 was not sustainable and was directed to be deleted, in favour of the assessee.

Ratio Decidendi: Where seized material and connected settlement records establish that a cheque entry is only a later circulation of an already disclosed accommodation transaction and no fresh cash payment to the assessee is shown, an addition under section 68 cannot be sustained on suspicion or on a duplication of the same taxable component.

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