Topic
Section 68 of the Income Tax Act, 1961, addresses unexplained cash credits in a taxpayer's books, allowing the tax authorities to treat such amounts as income if the source is not satisfactorily explained.
The ITAT ruled that an unsecured loan taken and fully repaid within the same financial year cannot be treated as unexplained income under Section 68, provided the assessee furnishes satisfactory documentary evidence. This prevents automatic tax additions on short-term loans and safeguards businesses from unwarranted tax liability.
ITAT Kolkata set aside ₹13.5 lakh addition under Section 68 for unexplained share capital after the assessee furnished investor details, PANs, and source of funds. The ruling clarifies the evidentiary burden required to rebut Section 68 presumptions in share premium cases.
The ITAT Delhi has ruled that cash deposits made during demonetization, if fully supported by genuine, audited cash sales recorded in the books of account and already taxed as turnover, cannot be reclassified as unexplained income under Section 68. This protects businesses with transparent cash-based operations from double taxation and reinforces that proper bookkeeping is a valid defense against presumptive tax additions.
ITAT Jaipur rules that unexplained cash can be fully telescoped against unrecorded sales, deleting Rs.8.67L addition, and deletes Rs.15.52L addition for cash loans based on dumb documents.
The ITAT Delhi has ruled that where the Assessing Officer has accepted the genuineness of purchases, sales, and closing stock, no disallowance under Section 68 can be made merely because trade creditors failed to respond to notices. This shields legitimate trade credit from being treated as unexplained cash credits, offering critical relief to traders with high-volume supplier networks.
The ITAT Bangalore has set aside a CIT(A) order for violating natural justice by dismissing an appeal without examining the assessee’s written submissions or evidence, reinforcing that appellate authorities must engage with arguments presented - not merely rubber-stamp assessments. This ruling protects taxpayers from summary rejections and mandates reasoned appellate decision-making under the Income Tax Act.
The ITAT Delhi has ruled that tax authorities cannot impose additions for accommodation entries based on mere suspicion or circumstantial links to search-seized entities. Concrete, verifiable proof of fictitious transactions is mandatory, protecting businesses from arbitrary assessments grounded in procedural shortcuts rather than substantive evidence.
ITAT Delhi rules that interest-free advances to wholly owned subsidiaries are justified under commercial expediency, rejecting Revenue's notional interest addition. The tribunal also deleted ad-hoc disallowances, emphasizing documentary evidence over presumptive additions, reinforcing tax treatment of intra-group transactions.
ITAT Kolkata has ruled that once cash deposits are accepted as part of business turnover, they cannot be doubly taxed under Section 68 as unexplained income. This ensures consistent profit computation and prevents arbitrary double assessment, directly benefiting small businesses and traders who rely on cash-based accounting. The decision reinforces the principle that tax treatment must align with the nature of income already disclosed and verified.
The ITAT Delhi has ruled that cash credits arising from non-taxable NRE fixed deposit interest and documented personal savings accumulated over ten years are not unexplained income under Section 68. This sets a critical precedent for NRIs and returning residents who rely on foreign-sourced savings, affirming that credible, traceable sources-even if cash-deposited-do not trigger presumptive taxation.
The ITAT Delhi has struck down a 35% ad hoc addition under Section 68, ruling that mere suspicion of unexplained cash deposits during demonetization cannot substitute for concrete evidence of bookkeeping defects. This reinforces that tax authorities must identify specific irregularities in accounts - not rely on broad assumptions - when taxing cash inflows, protecting honest taxpayers in the informal sector from arbitrary assessments.
ITAT Agra ruled that cash deposits totaling Rs. 17.74 lakh by a rural insurance agent are satisfactorily explained through documented agricultural income, past savings, and genuine family contributions, rejecting the presumption of unexplained income under Section 68. This sets a vital precedent for small taxpayers in non-urban areas who rely on informal financial networks and non-salaried earnings.
The ITAT Mumbai has struck down the practice of imposing automatic 10% disallowance on short-term borrowings under Section 68, ruling that tax authorities must conduct a substantive verification of the lender’s identity, genuineness, and creditworthiness. This sets a critical precedent for businesses relying on third-party loans, ensuring assessments are grounded in evidence, not arbitrary percentages.
The ITAT Delhi has ruled that cash deposits made during the demonetization period, when fully documented through audited financial books, VAT returns, and stock records, cannot be taxed as unexplained income under Section 68. This sets a critical precedent for small and medium retailers who rely on cash transactions, affirming that proper bookkeeping overrides mere suspicion of undisclosed income.
The Himachal Pradesh High Court held that a will purportedly executed the day after the testator’s death, with beneficiary involvement and conflicting medical records, is invalid regardless of registration. This reinforces that registration is procedural, not substantive - and suspicious circumstances, including timing and collusion, can nullify even a registered will under Section 63 of the Indian Succession Act. Succession planners and executors must now scrutinize timing and witness integrity beyond mere documentation.