Section 68 requires a credited sum; documented work-in-progress purchases, share capital and agricultural income remain explained.
Section 68 is inapplicable where purchases are capitalised as construction work-in-progress, no corresponding credit appears in the books, and purchase records are supported by tax filings, supplier evidence, invoices and audited accounts. Share application money is explained when the applicant's identity, creditworthiness and transaction genuineness are established through corporate, financial and banking records, absent material linking the assessee to alleged entry operators. Declared agricultural income is not unexplained credit where land ownership, production, sales and expenditure evidence substantiate cultivation and higher realisation is supported by the nature of the produce. The three additions were deleted.
Issues: (i) Applicability of section 68 to purchases capitalised as work-in-progress; (ii) Sustainability of the section 68 addition for share application money; (iii) Sustainability of the section 68 addition for declared agricultural income.
Issue (i): Applicability of section 68 to purchases capitalised as work-in-progress.
Analysis: The disputed purchase value was capitalised in work-in-progress for construction of a maize plant and was not debited to the profit and loss account. No corresponding sum of money was found credited in the books. VAT returns, ledgers, supplier confirmations, invoices containing transport details, and audited accounts supported the recorded purchases, while the work-in-progress had been accepted.
Conclusion: Section 68 was inapplicable to the purchases; deletion of the addition was sustained, in favour of the assessee.
Issue (ii): Sustainability of the section 68 addition for share application money.
Analysis: Corporate records, audited financial statements, incorporation documents, share application and allotment records, and bank statements established the identity and creditworthiness of the share applicant and the genuineness of the transaction. The material concerning alleged entry operators did not identify the assessee as a beneficiary, and the documentary evidence was not disproved.
Conclusion: The share application money was satisfactorily explained; deletion of the addition was sustained, in favour of the assessee.
Issue (iii): Sustainability of the section 68 addition for declared agricultural income.
Analysis: Land ownership documents, production and sales records, and vouchers for agricultural expenditure substantiated the declared income. The produce consisted of maize seed, rather than ordinary maize, and the higher sale realisation was supported by its distinct nature. The contrary estimate rested on average rates and yield assumptions without rebutting the evidence produced.
Conclusion: The agricultural income was substantiated and could not be treated as unexplained credit; deletion of the addition was sustained, in favour of the assessee.
Final Conclusion: The deletions of all three additions made under section 68 were sustained.
Ratio Decidendi: Section 68 cannot be invoked for a transaction that does not represent a credited sum in the books, and an addition for share capital cannot survive once identity, creditworthiness and genuineness are established without contrary material.