You gave particulars, paid by cheque and got a confirmation. Has the burden shifted?
Not by itself. Furnishing particulars, payment by account payee cheque, or a confirmatory letter from the creditor is not enough on its own to shift the onus onto the Revenue under s.68.
Decided by the Supreme Court (Supreme Court of India — B. Sudershan Reddy and S.H. Kapadia, JJ. (judgment delivered by B. Sudershan Reddy, J.)) on 2007-05-15, reported as (2007) 291 ITR 278 (SC); AIR 2007 SC 2116; (2007) 6 SCC 21; [2007] 161 Taxman 169 (SC); [2007] 210 CTR 20 (SC); Civil Appeal Nos. 2540 to 2547 of 2007. It bears on section 68, section 260A of the Income Tax Act 1961, in Evidence & Burden of Proof and Cash Credits & Unexplained Money matters.
It is the counterweight to the three-limb checklist. Producing PAN, bank statement and a confirmation is where you start, not where you finish — creditworthiness still has to be shown.
Binding on every court and authority in India.
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Eight appeals concerned foreign gifts said to have been received by A. Srinivasan, his wife, his son, his brother and Smt. Mohanakala, each an individual assessee, aggregating Rs 1,79,27,703 credited between 8 July 1992 and 19 October 1995. The remittances came in the names of Ariavan Thotan and Suprotoman, mostly on cheques drawn on a Singapore bank, and it was only after the department's enquiries that the assessees said those were aliases of one Sampathkumar, whose name first appeared in correspondence in August 1996. Sampathkumar's own statement was that the family had supported him when he was poor; he claimed substantial foreign earnings but produced no material about his financial standing and did not give details of his Indian bank account. The Assessing Officer, reading the correspondence as showing that Sampathkumar had reserved a right to suitable compensation, held the gifts to be apparent but not real and added the credits as income from undisclosed sources. The Commissioner (Appeals) dismissed the appeals. In the Tribunal the two members differed and the matter went to the Senior Vice President under section 255(4), who reheard it and concurred with the authorities below. The Madras High Court, on appeal under section 260A, reappreciated the evidence, held the reasons given below to be in the realm of surmises, conjectures and suspicions, and decided for the assessees. The Revenue appealed.
The Court allowed the Revenue's appeals and reversed the Madras High Court. On section 68, adopting Sumati Dayal, where the explanation offered about the nature and source of a credit is found unsatisfactory there is prima facie evidence against the assessee — namely the receipt of money — and if the assessee fails to rebut it, it may be used to hold the receipt to be of an income nature. The Assessing Officer's opinion must be formed objectively on the material on record, and application of mind is a sine qua non. Where an assessee wishes to say that even an unacceptable explanation does not justify treating the sum as income of the year, that plea must be raised and the burden of it lies on him; these assessees never took it before any authority. On the facts, the concurrent findings that the gifts were apparent but not real rested on the material and on surrounding circumstances, not on conjecture, and the fact that the money came through banking channels was of no consequence. No question of law, much less a substantial question of law, arose, and the High Court misdirected itself in disturbing concurrent findings of fact under section 260A.
The Court set out section 68 and asked what triggers it: a sum credited in the books for a previous year, and either no explanation of its nature and source or an explanation which in the Assessing Officer's opinion is not satisfactory. 'No explanation' means no proper, reasonable and acceptable explanation. The officer's opinion must rest on a proper appreciation of the material and attending circumstances and be formed objectively, application of mind being a sine qua non. It then treated Sumati Dayal as the complete answer to the assessees' case, setting out that judgment at length: once the explanation is not accepted, there is prima facie evidence against the assessee, and unrebutted it can be used to hold the receipt to be income. P.K. Noorjahan, decided on section 69, was accepted as showing that an unsatisfactory explanation does not automatically make the sum income — but the assessees had never raised that plea, and the burden of raising and making it out was theirs. The other authorities relied on for the assessees were distinguished as turning on their own facts and were to be read in the light of Sumati Dayal. On the jurisdictional question, the Court held that the authorities' findings were based on the material and on the doubtful nature of the transactions, that the transactions though apparent were not real, and that payment through banking channels did not by itself help; the High Court had reappreciated evidence and substituted its own findings, which section 260A does not permit in the absence of a substantial question of law.
The transactions though apparent were held to be not real one. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence.
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Handle my notice → Ask a CA on WhatsAppNot by itself. Furnishing particulars, payment by account payee cheque, or a confirmatory letter from the creditor is not enough on its own to shift the onus onto the Revenue under s.68. This was decided by the Supreme Court (Supreme Court of India — B. Sudershan Reddy and S.H. Kapadia, JJ. (judgment delivered by B. Sudershan Reddy, J.)) and bears on section 68, section 260A of the Income Tax Act 1961. It is reported as (2007) 291 ITR 278 (SC); AIR 2007 SC 2116; (2007) 6 SCC 21; [2007] 161 Taxman 169 (SC); [2007] 210 CTR 20 (SC); Civil Appeal Nos. 2540 to 2547 of 2007. It is the counterweight to the three-limb checklist. Producing PAN, bank statement and a confirmation is where you start, not where you finish — creditworthiness still has to be shown. If it applies to you, the first step is this: Go beyond the standard pack: show the creditor's capacity from their own accounts and returns.
Eight appeals concerned foreign gifts said to have been received by A. Srinivasan, his wife, his son, his brother and Smt. Mohanakala, each an individual assessee, aggregating Rs 1,79,27,703 credited between 8 July 1992 and 19 October 1995. The remittances came in the names of Ariavan Thotan and Suprotoman, mostly on cheques drawn on a Singapore bank, and it was only after the department's enquiries that the assessees said those were aliases of one Sampathkumar, whose name first appeared in correspondence in August 1996. Sampathkumar's own statement was that the family had supported him when he was poor; he claimed substantial foreign earnings but produced no material about his financial standing and did not give details of his Indian bank account. The Assessing Officer, reading the correspondence as showing that Sampathkumar had reserved a right to suitable compensation, held the gifts to be apparent but not real and added the credits as income from undisclosed sources. The Commissioner (Appeals) dismissed the appeals. In the Tribunal the two members differed and the matter went to the Senior Vice President under section 255(4), who reheard it and concurred with the authorities below. The Madras High Court, on appeal under section 260A, reappreciated the evidence, held the reasons given below to be in the realm of surmises, conjectures and suspicions, and decided for the assessees. The Revenue appealed. The matter was decided on 2007-05-15 by the Supreme Court (Supreme Court of India — B. Sudershan Reddy and S.H. Kapadia, JJ. (judgment delivered by B. Sudershan Reddy, J.)). On those facts the Supreme Court held as follows. The Court allowed the Revenue's appeals and reversed the Madras High Court. On section 68, adopting Sumati Dayal, where the explanation offered about the nature and source of a credit is found unsatisfactory there is prima facie evidence against the assessee — namely the receipt of money — and if the assessee fails to rebut it, it may be used to hold the receipt to be of an income nature. The Assessing Officer's opinion must be formed objectively on the material on record, and application of mind is a sine qua non. Where an assessee wishes to say that even an unacceptable explanation does not justify treating the sum as income of the year, that plea must be raised and the burden of it lies on him; these assessees never took it before any authority. On the facts, the concurrent findings that the gifts were apparent but not real rested on the material and on surrounding circumstances, not on conjecture, and the fact that the money came through banking channels was of no consequence. No question of law, much less a substantial question of law, arose, and the High Court misdirected itself in disturbing concurrent findings of fact under section 260A.
The Court set out section 68 and asked what triggers it: a sum credited in the books for a previous year, and either no explanation of its nature and source or an explanation which in the Assessing Officer's opinion is not satisfactory. 'No explanation' means no proper, reasonable and acceptable explanation. The officer's opinion must rest on a proper appreciation of the material and attending circumstances and be formed objectively, application of mind being a sine qua non. It then treated Sumati Dayal as the complete answer to the assessees' case, setting out that judgment at length: once the explanation is not accepted, there is prima facie evidence against the assessee, and unrebutted it can be used to hold the receipt to be income. P.K. Noorjahan, decided on section 69, was accepted as showing that an unsatisfactory explanation does not automatically make the sum income — but the assessees had never raised that plea, and the burden of raising and making it out was theirs. The other authorities relied on for the assessees were distinguished as turning on their own facts and were to be read in the light of Sumati Dayal. On the jurisdictional question, the Court held that the authorities' findings were based on the material and on the doubtful nature of the transactions, that the transactions though apparent were not real, and that payment through banking channels did not by itself help; the High Court had reappreciated evidence and substituted its own findings, which section 260A does not permit in the absence of a substantial question of law. In the words reproduced by the source cited on this page: "The transactions though apparent were held to be not real one. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence." The decision followed or applied Sumati Dayal v. CIT [1995] Supp (2) SCC 453 (SC).
It was decided by the Supreme Court on 2007-05-15 and is reported as (2007) 291 ITR 278 (SC); AIR 2007 SC 2116; (2007) 6 SCC 21; [2007] 161 Taxman 169 (SC); [2007] 210 CTR 20 (SC); Civil Appeal Nos. 2540 to 2547 of 2007. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 68, section 260A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The Court allowed the Revenue's appeals and reversed the Madras High Court. On section 68, adopting Sumati Dayal, where the explanation offered about the nature and source of a credit is found unsatisfactory there is prima facie evidence against the assessee — namely the receipt of money — and if the assessee fails to rebut it, it may be used to hold the receipt to be of an income nature. The Assessing Officer's opinion must be formed objectively on the material on record, and application of mind is a sine qua non. Where an assessee wishes to say that even an unacceptable explanation does not justify treating the sum as income of the year, that plea must be raised and the burden of it lies on him; these assessees never took it before any authority. On the facts, the concurrent findings that the gifts were apparent but not real rested on the material and on surrounding circumstances, not on conjecture, and the fact that the money came through banking channels was of no consequence. No question of law, much less a substantial question of law, arose, and the High Court misdirected itself in disturbing concurrent findings of fact under section 260A. It arises in Evidence & Burden of Proof and Cash Credits & Unexplained Money matters, on section 68, section 260A of the Income Tax Act 1961, and was decided by Supreme Court of India — B. Sudershan Reddy and S.H. Kapadia, JJ. (judgment delivered by B. Sudershan Reddy, J.). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Be ready to explain the source of the source where the assessment year and the entity attract that requirement. Make the explanation a commercially plausible one; an explanation that is technically complete but implausible will not do.
Still good law. Applied by the Bombay High Court (Goa Bench) in CIT v Sadiq Sheikh on s.68 cash credits, where the Court relied on it to hold that documentation alone does not shift the onus to the Revenue. No source located showed it doubted or overruled. That finding was checked against a published source, which is linked on this page, on 2026-08-25. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The case is usually cited for what an assessee must do under section 68, but its actual ground of decision is narrower and more useful: the High Court had no jurisdiction under section 260A to reappreciate evidence and displace concurrent findings that the gifts were apparent but not real. Two points follow. The Court accepted, on the authority of P.K. Noorjahan, that an unsatisfactory explanation does not automatically make the credit income — but held that the plea has to be taken, and the burden of taking it is the assessee's; it failed here because it was never raised below. And the observation about banking channels is directed at the reality of the transaction, not at any general rule that particulars or confirmation letters are insufficient. The judgment is internally inconsistent about the years: early in the text it states that the appeals relate to assessment years 1995-96 and 1996-97, while the table in the same passage and the report's heading cover assessment years 1993-94 to 1996-97. The judgment carries no paragraph numbers, so the passage is described rather than cited. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Court allowed the Revenue's appeals and reversed the Madras High Court. On section 68, adopting Sumati Dayal, where the explanation offered about the nature and source of a credit is found unsatisfactory there is prima facie evidence against the assessee — namely the receipt of money — and if the assessee fails to rebut it, it may be used to hold the receipt to be of an income nature. The Assessing Officer's opinion must be formed objectively on the material on record, and application of mind is a sine qua non. Where an assessee wishes to say that even an unacceptable explanation does not justify treating the sum as income of the year, that plea must be raised and the burden of it lies on him; these assessees never took it before any authority. On the facts, the concurrent findings that the gifts were apparent but not real rested on the material and on surrounding circumstances, not on conjecture, and the fact that the money came through banking channels was of no consequence. No question of law, much less a substantial question of law, arose, and the High Court misdirected itself in disturbing concurrent findings of fact under section 260A.
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