Section 68

Section 68 — the law in short

What the courts have decided on section 68, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Dy. CIT v M.R. Shah Logistics Pvt Ltd Supreme CourtHelps department
  Another company declared the cash it put into my share capital under the Income Declaration Scheme. Does that stop the Department reopening my assessment on the same share money?
  No. The Supreme Court set aside the Gujarat High Court's order quashing a section 148 notice and allowed the assessing officer to complete the reassessment. The immunity in section 192 of the Finance Act 2016 runs to the declarant alone and only for limited purposes; a declaration by Garg Logistics could not immunise the assessee, a non-declarant. The reopening was in any case based on material seized in the search on an accommodation entry provider and correlated with the assessee's Registrar of Companies filings, not on the declaration. Where there is objective tangible material, the sufficiency of that material cannot dictate the validity of the notice.
• PCIT v NRA Iron & Steel P Ltd Supreme CourtHelps department
  How far do I have to go to prove share capital or a loan is genuine?
  Further than many assumed. Reported as tightening what a company must establish about share capital and premium — identity alone is not enough; creditworthiness and genuineness have to be shown too.
• N.K. Proteins Ltd v DCIT Supreme CourtHelps departmentNo later treatment found
  Can the whole of a bogus purchase be added, rather than a percentage?
  On this line of authority, yes. The special leave petitions were dismissed, upholding the High Court, and the effect reported is that the 25% restriction was rejected and the entire fictitious purchase amount fell to be added.
• Vijay Kumar Talwar v CIT — when a finding of fact does and does not raise a substantial question of law under section 260A Supreme CourtHelps departmentNo later treatment found
  The Tribunal has decided against my client on the evidence. Is there any route into the High Court under section 260A, and what exactly must I show?
  Only by showing that the finding is perverse in a defined sense. The Supreme Court held that an appeal to the High Court lies only where a substantial question of law is involved, and that a finding of fact gives rise to such a question only where it is based on no evidence, or where relevant admissible evidence was not taken into account, or inadmissible evidence was taken into account, or legal principles were not applied in appreciating the evidence, or the evidence was misread. Finding none of that, the Court upheld the Delhi High Court's dismissal and dismissed the assessee's appeals with costs of Rs 20,000.
• CIT v Lovely Exports P Ltd Supreme CourtHelps taxpayerSuperseded by amendment
  If the department doubts my shareholders, can it add the money to my income?
  Reported as holding that where the share applicants are identified, the department's remedy is to proceed against them individually rather than add the amount in the company's hands.
• CIT v P. Mohanakala Supreme CourtHelps department
  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.
• CIT v P.K. Noorjahan Supreme CourtHelps taxpayer
  The officer says my explanation for an investment is unsatisfactory, so the money must be my income. Is he obliged to make the addition once he disbelieves me?
  No. Section 69 says the value of an unexplained investment may be deemed to be the income of the assessee, and the Supreme Court held that the word is deliberate. The clause in the Bill used 'shall'; on the recommendation of the Select Committee it was changed to 'may'. Parliament therefore conferred a discretion on the Income-tax Officer, and he is not obliged to treat an unexplained investment as income in every case where the explanation is found unsatisfactory. Whether it should be treated as income has to be considered in the light of the facts of each case. On these facts the Tribunal had found that the assessee, a woman of about twenty during the first of the two years, could not be credited with having earned the amounts at all; the discretion had not been properly exercised, the High Court agreed, and the department's appeals were dismissed.
• Sumati Dayal v CIT Supreme CourtHelps department
  Your paperwork is in order. Can the officer still look behind it?
  Yes. The apparent is to be treated as real only until there is reason to believe that it is not, and the taxing authorities are entitled to look at the surrounding circumstances and to apply the test of human probabilities. Documentary form alone does not end the enquiry.
• CIT v Orissa Corporation (P) Ltd Supreme CourtHelps taxpayer
  I gave the lenders' names, addresses and PAN and filed their confirmations, but I cannot produce them and the summonses came back unserved. Can the loans still be added under section 68?
  Not on these facts. The Supreme Court declined to disturb the Tribunal's finding that the assessee had discharged its burden. The assessee had given the names and addresses of the creditors, the Revenue knew they were income-tax assessees and had their index numbers on its own files, and beyond issuing summonses under section 131 at the assessee's request the Revenue did nothing - it never examined the creditors' sources to see whether they were creditworthy, and made no effort to pursue them. In those circumstances the assessee could do no more, and the Tribunal's conclusion was neither unreasonable, perverse nor without evidence.
• Anantharam Veerasinghaiah & Co v CIT Supreme CourtCuts both ways
  Additions were made to my book profits in earlier years. Can I use that money to explain a cash credit or an unexplained payment in a later year?
  You can put the argument, and the Supreme Court says it is a real argument, but it does not win by itself. The Court held that when an intangible addition is made to book profits in an assessment, the amount added is the undisclosed income of the assessee, is as much a part of his real income as the profits shown in his books, has the same concrete existence, and could be available to him just as the book profits could. Secret profits of an earlier year may therefore constitute a fund, concealed but real, from which he may later draw to meet expenditure or to introduce amounts into his books. The Court then put the limit on it in the same paragraph: it is quite another thing to say that any part of that fund must necessarily be regarded as the source of a later unexplained expenditure or cash credit, and the mere availability of such a fund cannot in all cases imply that no further secret profits were earned in the later year. All the facts and circumstances have to be looked at.
• CIT v Daulat Ram Rawatmull Supreme CourtHelps taxpayer
  A fixed deposit stands in the name of a partner's son and my firm used it as security for its overdraft. The Assessing Officer says the money is really the firm's concealed income. Who has to prove what?
  The Department. The Supreme Court dismissed the Revenue's appeals and upheld the Calcutta High Court. The onus to prove that the apparent is not the real lies on the party who says so, and it was the Department that claimed the deposit standing in Biswanath's name belonged to the firm. Nothing showed the money came from the firm's coffers or went back into them; Biswanath himself drew the deposit. That his own explanation of where the money came from was false did not make it the firm's, and offering the receipt as security for the firm's overdraft did not make him anything but a surety.
• CIT v Durga Prasad More Supreme CourtHelps department
  You have a document that says so. Does that settle it?
  Only until there is reason to believe the apparent is not the real. Where you rely on self-serving recitals, it is for you to establish their truth — and the authorities are entitled to look at the surrounding circumstances.
• Baladin Ram v CIT Supreme CourtHelps department
  I made unexplained investments after the close of my accounting year. Which year can the officer tax them in, and can he reopen an earlier year to do it?
  The financial year, and yes he can reopen. The Supreme Court held that where income is found to come from an undisclosed source, for which no accounts are kept and no previous year has been chosen, the only way it can be assessed is as income of the ordinary financial year. So investments of about Rs 27,000 made in the Sarpat and bamboo business between December 1943 and February 1944 fell in the financial year 1943-44 and were assessable for 1944-45, not 1945-46. Disclosing them in the 1945-46 proceedings was no disclosure for 1944-45, so section 34(1)(a) was attracted.
• CIT v Devi Prasad Vishwanath Prasad Supreme CourtHelps department
  The officer rejected my books, estimated my profits at a flat rate, and then also added an unexplained cash credit. Can he do both, and must he say what source the credit came from?
  Yes to both, subject to the facts. The Supreme Court held there is nothing in law preventing the Income-tax Officer, in an appropriate case, from taxing both a cash credit whose source and nature are not satisfactorily explained and the business income he estimates after rejecting the books, following Kale Khan Mohammad Hanif. Whether he may do so in a given case depends on its own facts. Where a cash credit is unexplained the officer may hold it to be the assessee's income and need not show what source it came from; it is for the assessee to prove that it is income from a source already taxed.
• Kale Khan Mohammad Hanif v CIT Supreme CourtHelps department
  My business income was estimated on a percentage of turnover because my books were rejected. Can unexplained credits in those same books still be added separately as income from undisclosed sources?
  Yes, on the way the question was framed. The Supreme Court held that the onus of proving the source of a sum received is on the assessee: if he disputes liability he must show either that the receipt was not income or that it was exempt, and failing that the officer may treat it as taxable income. And the fact that the income of a disclosed business was computed on an estimate does not preclude treating a credit entry in that business's books as income from another, undisclosed source. If it is income of an undisclosed source, it is not income of the disclosed source already taxed, so there is no double taxation.
• Lakhmichand Baijnath v CIT Supreme CourtHelps department
  The credit the officer has added sits in my own business books. Does the entry being in the business books, by itself, let him tax it as business profit?
  The Supreme Court dismissed the appeals of a Calcutta Hindu undivided family of piecegoods merchants whose books carried six credits totalling Rs 2,30,346, explained as the proceeds of family ornaments sold at a partition. Every authority disbelieved the explanation on the evidence, and the Court said that when an amount is credited in business books it is not an unreasonable inference to draw that it is a receipt from business. It also held that an order under section 25A of the Indian Income-tax Act, 1922 decides only that a partition took place and how the assets were divided; it decides nothing about what the family's assessable income was. Read alongside A. Govindarajulu Mudaliar, decided seven weeks earlier, this is the case that fixes the character of an unexplained credit and not merely its taxability - the inference is that the money came out of the business.
• A Govindarajulu Mudaliar v CIT Supreme CourtHelps department
  The Assessing Officer rejected my explanation for cash credits. Must he then prove where the money actually came from before taxing it?
  No. The Supreme Court held that where an assessee fails to prove satisfactorily the source and nature of an amount of cash received during the accounting year, the Income Tax Officer is entitled to draw the inference that the receipt is of an assessable nature. The department need not adduce evidence of the source. Whether a receipt is to be treated as income depends largely on the facts of each case; here the sums stood credited to the assessee in a firm's books, his two explanations were rejected on the evidence, and it was open to the officer to treat them as concealed income.
• Mehta Parikh & Co v CIT Supreme CourtHelps taxpayer
  The officer accepted my books but still says I could not have held that much cash in high denomination notes, and has added part of it as undisclosed income. Can he do that?
  No. The Supreme Court held the addition was based on no evidence and set it aside. The cash book entries had been accepted as correct and the three affidavits explaining the receipt of notes were never challenged by cross-examination, so the Revenue could not question either. On that material it was within the range of possibility that the firm held the 61 notes, and an imaginary calculation could not displace the explanation. The Tribunal, having accepted the explanation for 31 notes, had no reason to reject it for the other 30; that was a rule of thumb and pure surmise. The High Court was wrong to treat the finding as an unassailable finding of fact.
• High Vista Buildcon P Ltd v NFAC High CourtHelps taxpayerNo later treatment found
  I asked NFAC for a video hearing in my appeal and never got a link. Can that order stand?
  No. A virtual hearing is mandatory once it is specifically requested in faceless appellate proceedings, and passing the appellate order without ever providing the video-conference link violated natural justice. The order was set aside, the appeal restored for a proper virtual hearing, and the consequential penalty orders under ss.271AAC(1) and 270A were quashed with it.
• Public Political Party v Deputy Commissioner of Income Tax High CourtHelps departmentNo later treatment found
  My client's s.80GGC deduction has been disallowed because the recipient party is alleged to be an entry provider. Has any High Court decided what the party's own position is, and does that finding bind my client?
  Yes as to the party, no as to your client. The Delhi High Court dismissed the party's own appeals, holding that the Tribunal's finding that it issued bogus donation receipts to enable donors to claim deductions under s.80GGB and s.80GGC, and paid the money back to the persons from whom it was purportedly received, is a finding of fact not open to interference under s.260A. The party also lost its s.13A exemption for failing to file the report required by the second proviso to s.13A. The Court decided nothing about any identified donor: the finding is that this party issued bogus receipts and paid the money back, not that any particular donor received a refund.
• Deepak Maratha v Union of India High CourtHelps taxpayerHigh Courts differ
  My demonetisation cash deposit was added for the year ended 31 March 2017 and taxed at 60% under section 115BBE. Can that rate reach income of that year?
  The Rajasthan High Court held that it cannot. The rate in section 115BBE was raised from 30% to 60% by the Taxation Laws (Second Amendment) Act, 2016, which received assent on 15 December 2016 and came into force at once - but the amendment to section 115BBE(1) was separately expressed to take effect from 1 April 2017. The law applicable to an assessment year is the law in force on the first day of that year, and a change made after a financial year has begun cannot govern the tax liability for that year unless it is expressly made retrospective. Nothing in the 2016 Act says section 115BBE is retrospective. Doubling a rate alters existing rights and is not a procedural or clarificatory change. So for the financial year 2016-17 the law in force on 1 April 2016 governs, at 30%, and the 60% rate applies from the financial year 2017-18 onwards; section 271AAC, which depends on section 115BBE, is prospective in the same way.
• PCIT v KRBL Infrastructure Ltd High CourtHelps taxpayerNo later treatment found
  The officer accepts my lender exists but says the lender's own purchases were bogus. Do I have to explain where the lender got the money?
  No, not for an assessment year before 2023-24. Once identity, creditworthiness and genuineness are established the assessee does not have to prove the genuineness of the funds in the lender's hands, and the officer cannot travel into the lender's own purchases without material connecting them to the assessee. The requirement to explain the source of the source of a loan came in with the Finance Act 2022 and operates from assessment year 2023-24.
• Arris Estates P Ltd v Assessment Unit High CourtHelps taxpayerNo later treatment found
  The Department admits it refused the video hearing but says limitation was about to expire. Is that a defence?
  No. The Gujarat High Court quashed an assessment where the request for a video conference hearing made on 4 March 2024 was not granted and the order followed on 15 March 2024, rejecting the plea that earlier adjournments had left the Department no time before the 31 March deadline.
• Ankit Agarwal v PCCIT High CourtHelps taxpayer
  My 148A notice says I never filed a return, but I did. Is that enough to get it quashed?
  Yes, on these facts. The Patna High Court held that where the Insight Portal flag is contradicted by the Department's own records, the 'information which suggests' escapement is missing and the s.148A(b) notice, the s.148A(d) order, the s.148 notice and the demand all fall.
• PCIT v MDLR Hotels Pvt Ltd High CourtHelps taxpayerNo later treatment found
  The Additional Commissioner approved my search assessment along with hundreds of others in a single letter that says nothing but 'approved'. Is that enough under s.153D?
  No. Where the approving authority accorded approval to 246 proposed assessments by one letter that merely directed that the orders be passed before limitation and copies sent for record, the Delhi High Court held there was no substantial question of law in the Tribunal's conclusion that the approval was mechanical, and dismissed eighteen Revenue appeals. Approval that neither mentions the seized material nor shows that the draft orders were examined is a ritual, not the safeguard s.153D creates.
• PCIT v Indravadan Jain, HUF High CourtHelps taxpayerHigh Courts differ
  SEBI has found that the broker rigged the price of the scrip I sold. Does that finding by itself make my capital gain bogus?
  No. The Bombay High Court dismissed the Revenue's appeal where the shares had been bought on the floor of the Kolkata Stock Exchange through a registered broker, paid for by cheque, held in demat for more than a year and sold on the floor of the exchange with contract notes and bills produced and the sale proceeds received from the exchange. The Assessing Officer's case was that the scrip was a penny stock, that the broker had been found by SEBI to have manipulated the price through synchronised cross-deals, and that the price had gone from Rs. 3.12 to Rs. 155.04 in two years. That was held not to be enough, because the price manipulation was the broker's conduct and nothing connected the assessee to it.
• Virdichand Bawandas HUF v National e-Assessment Centre High CourtHelps taxpayer
  You asked for time to reply to the draft order and were refused. Is the final order safe?
  No. The scheme requires an opportunity to respond to the modifications proposed in the draft order. Refusing time and then finalising was held wrong, and the assessment and the penalty notice were set aside.
• PCIT v Cinestaan Entertainment P Ltd High CourtHelps taxpayer
  The department says my DCF projections never came true. Is that enough to tax my share premium?
  No. Valuation is a question of fact and is not an exact science, so a forecast cannot be rejected by comparing it with actual revenues in hindsight. The Revenue must show the methodology adopted was demonstrably wrong.
• PCIT v Smt Krishna Devi High CourtHelps taxpayerHigh Courts differ
  The Assessing Officer has added my long-term capital gain on a share whose price rose 4,849%, relying on the Investigation Wing's penny-stock report. Is the price rise by itself enough?
  No. The Delhi High Court accepted that the price movement and the company's financials were odd, and still refused to sustain the addition. The assessee had bought online, paid through a bank, held the shares in demat form and sold through the demat account with sale proceeds received by banking channel. The officer issued notices under ss.133(6)/131 to the company and to the entity that had paid for the shares; they produced nothing and came back unserved, and he then went no further. On that record the Court held the finding that there was an arrangement to convert unaccounted money was an assumption based on conjecture, and that suspicion is not proof. Read it with the contrary Calcutta line in PCIT v Swati Bajaj, which the library also carries.
• PCIT v Ami Industries (India) P Ltd High CourtHelps taxpayer
  You proved who your investor is and that the money came by bank. Must you also prove where the investor got it?
  No. Section 68 asks for three things — identity, genuineness and creditworthiness. There is no obligation to prove the source of the source. On these facts NRA Iron & Steel was distinguished and a Rs 34 crore addition was deleted.
• PCIT (Central), Jaipur v Aacharan Enterprises Pvt Ltd High CourtHelps taxpayer
  The officer has added cash credits under s.68 and refuses to let me set my business loss against them. Can he do that for my year?
  It depends entirely on the assessment year. The Rajasthan High Court held that the bar in s.115BBE(2) on setting off any loss against income referred to in ss.68 to 69D was introduced by the Finance Act, 2016 with effect from 1 April 2017 and cannot be applied retrospectively, so for assessment year 2014-15 the set-off was allowed. From assessment year 2017-18 the statute forecloses the set-off and this decision is no help to you.
• Principal Commissioner of Income Tax-6 v Nalwa Sons Investment Ltd High CourtHelps taxpayerNo later treatment found
  My company deals in shares as part of its business, but its income comes mainly from lending. The Commissioner (Appeals) has treated the share loss as a speculation loss under the Explanation to section 73. Is the company excepted?
  Yes, if its total income mainly consists of income derived from the granting of loans and advances. The Delhi High Court held that the Tribunal was textually right to find the company within the exception carved out in the parenthesis of the Explanation to s.73, so the Commissioner (Appeals) fell into error in treating the reported loss as pertaining to a speculative transaction, and no question of law arose.
• Smt Tharakumari v ITO High CourtHelps department
  The officer refused me cross-examination of the person whose statement he used. Does that alone get the addition deleted?
  Not by itself, and this case shows why. The assessee's counsel argued in the Madras High Court that she had been denied the opportunity to cross-examine Shri Deepak Patwari, on whose sworn statement before the Investigation Wing the addition rested. The Court did not reject the principle. It dismissed the appeal because she had not co-operated in the assessment, had not appeared before the CIT(A) on any of five hearing dates, and had put no evidence on record to show that the statement was wrong or to explain how she came to identify and sell the scrip. The concurrent findings that the transaction was sham and taxable under s.68 were therefore not perverse.
• PCIT v NDR Promoters (P) Ltd High CourtHelps department
  I have PAN cards, bank statements, ROC filings and confirmations for every share subscriber. Can the Assessing Officer still add the share capital under section 68?
  Yes, where there is material showing the subscribers are paper companies. The Delhi High Court set aside the Tribunal and restored an addition of Rs.1,51,50,000 under section 68 for assessment year 2008-09. Five subscriber companies shared one address, were run by an entry operator whose search had produced statements from his employee-directors and auditors, and the assessee had no business and no assets yet issued Rs.10 shares at Rs.40 premium. The Court held the transactions were sham and make-believe with excellent paper work to camouflage their bogus nature, and that the Tribunal's approach was superficial and contrary to human probabilities.
• PCIT v Chain House International (P) Ltd High CourtHelps taxpayer
  The Assessing Officer says the premium on my share issue is far too high and has added the whole share capital under section 68 — is the amount of premium his business?
  No. The Madhya Pradesh High Court held that the premium at which a company issues its shares is a question of fact and the prerogative of the board of directors, and it is for the shareholder to decide whether to subscribe at that premium. Section 68 lays down no law about share premium; all it requires is the identity of the investors, the genuineness of the transaction and the creditworthiness of the share applicants. Those having been established before the Commissioner (Appeals) and the Tribunal, the additions of Rs 55 crore could not be revived in a further appeal on a pure question of fact.
• PCIT v Best Infrastructure (India) P Ltd High CourtHelps taxpayerUnder appeal
  The share capital addition rests on a statement I was never allowed to cross-examine. Does it stand?
  No. Statements under s.132(4) do not by themselves constitute incriminating material; a copy of the statement and an opportunity to cross-examine the deponent must be given, and where the statement is retracted or cross-examination is refused it has to be discarded. The s.68 additions fell.
• PCIT v Ramniwas Ramjivan Kasat — Circular 6/2016 binds the officer on listed shares held over twelve months High CourtHelps taxpayer
  The assessing officer says my client's share gains are business income because he traded frequently. My client held the listed shares for more than twelve months and has always shown them as investment. Does the CBDT circular stop the officer?
  Yes, on the Gujarat High Court's reading it does. Where listed shares and securities have been held for more than twelve months immediately preceding the transfer and the assessee desires to treat the gain as capital gain, clause (b) of the CBDT circular dated 29 February 2016 means the Assessing Officer shall not put that to dispute — the only rider being that the stand taken in one assessment year must be followed in later years.
• PCIT v Meenakshi Overseas Pvt Ltd High CourtHelps taxpayerSuperseded by amendment
  The reasons recorded just repeat what the Investigation Wing said. Is that enough to reopen?
  No. The satisfaction that s.147 requires is the Assessing Officer's own and cannot be borrowed. Reasons that reproduce another authority's conclusions, without showing the link from tangible material to the belief, do not sustain a reopening.
• CIT v Green Infra Ltd High CourtCuts both waysNo later treatment found
  The officer says nobody would pay this premium for shares in my company. Is that a ground for taxing it under s.68?
  No. Even if the premium at which the shares are issued defies commercial prudence, the receipt cannot be assessed as an unexplained credit where the identity of the payer, the genuineness of the transaction and the capacity of the subscriber are not disputed. Whether to subscribe at a heavy premium is the shareholder's decision, not the officer's.
• PCIT v N.C. Cables Ltd High CourtHelps taxpayer
  The sanction for my reassessment notice is just the word approved on the file. Is that enough under section 151?
  No. The Delhi High Court held that section 151 requires the competent authority to apply his mind and form an opinion, and that the mere appending of the expression approved says nothing. He need not record elaborate reasons, but satisfaction must be recorded, which can be reflected in the briefest possible manner; here the exercise was ritualistic and formal rather than meaningful, which defeats the rationale of the safeguard of approval by a higher ranking officer. The Court also upheld the concurrent findings that the Assessing Officer had made only a perfunctory inquiry before adding Rs 1.35 crore under section 68. Both questions were answered in the assessee's favour.
• Rajmandir Estates P Ltd v PCIT High CourtHelps departmentNo later treatment found
  Can the officer look past my subscriber at where the subscriber's own subscribers got their money?
  It depends on what the file shows. This is the decision the department relies on for going up the chain. Upholding a revision under s.263, the Calcutta High Court quoted the Special Bench in Sophia Finance for the width of the words 'any sum found credited in the books' and held that the officer is not precluded from enquiring into the true nature and source of a credit even where it is entered as share application money; it recorded that the submission that the source of the source is irrelevant did not appear to be correct. What it decides is that the enquiry could be directed on this file, not that the credits were bogus.
• CIT v Navodaya Castles (P) Ltd High CourtHelps department
  I have produced the share subscribers' incorporation certificates, PAN cards, bank statements and confirmations — is that enough to discharge my onus under section 68?
  Not necessarily. The Delhi High Court held that certificates of incorporation and PAN establish existence on paper but have their limitation where there is material showing the subscriber was a paper company and not a genuine investor. Identity, creditworthiness and genuineness must be tested in depth, having regard to human probabilities and the normal course of human conduct, not superficially. Creditworthiness is not proved by a cheque or a bank statement where the account merely shows cash deposited and cheques issued out. The Tribunal's order upholding deletion of a Rs 54 lakh addition was set aside and the matter remitted for fresh decision.
• DIT (Exemption) v Charanjiv Charitable Trust High CourtHelps departmentSuperseded by amendment
  My trust paid an advance to a company in which the trustees are interested, under an agreement to buy land, and the deal was later cancelled. Is that a s.13(1)(c) violation even though no money went out in the year in question?
  Yes, on these facts. The Delhi High Court held that where trust funds remain with a s.13(3) person without interest or security, that is a direct use of the funds for the benefit of a prohibited person, and s.13(2)(a) makes clear that it is enough that the money continues to be lent during the previous year — no fresh advance in that year is needed. The agreements to sell were treated as a device to take the payments out of the word 'lent', and exemption under s.11 was denied for both years.
• CIT v Nova Promoters & Finlease (P) Ltd High CourtHelps department
  I have given the Assessing Officer PAN, bank statements and ROC records for every share applicant — does Lovely Exports mean the addition under section 68 must go?
  No, not where the department holds material linking you to admitted entry operators. The Delhi High Court held on 15 February 2012 that Lovely Exports applies where the assessee furnishes complete particulars and the Assessing Officer neither enquires into them nor holds material showing them to be false. It does not apply where the Assessing Officer has the statements of self-confessed accommodation entry providers whose companies are the very subscribers, and the assessee blocks every attempt to examine them. The Court also held the Tribunal wrong in law in requiring the Assessing Officer to prove the money came out of the assessee's own coffers. The addition of Rs.1,18,50,000 and the commission addition were restored.
• CIT v Vardhman Overseas Ltd High CourtHelps taxpayerNo later treatment found
  Old sundry creditors are still in my balance sheet. Can the AO tax them as ceased liabilities?
  No. Section 41(1) needs the assessee to obtain a benefit by remission or cessation, and mere non-payment for several years is neither. Carrying the balance in the audited accounts acknowledges the debt under s.18 of the Limitation Act, so the liability remains enforceable.
• CIT v Manish Build Well P Ltd High CourtCuts both waysNo later treatment found
  The CIT(A) admitted my extra papers and deleted the addition. Can the department upset that on appeal?
  Yes. Where additional evidence is admitted on the assessee's own application, sub-rule (3) of Rule 46A makes it mandatory to give the AO a reasonable opportunity to examine it or cross-examine the witness. A deletion made without that opportunity cannot stand — which is different from the appellate authority's own power under s.250(4) to direct further enquiry.
• CIT v Oasis Hospitalities (P) Ltd High CourtCuts both ways
  What exactly do I have to file to discharge my onus on share application money under section 68, and what happens once I have filed it?
  It depends on what you can produce. The Delhi High Court set out the initial onus as three ingredients — identity of the shareholder, genuineness of the transaction and creditworthiness of the shareholder — and held that for a corporate subscriber, PAN, acknowledgement of the return, the bank statement for the relevant period and confirmations discharge it. Once they are filed the onus shifts to the Assessing Officer, who must have cogent material and cannot act on suspicion. But where the assessee produces only names and the persons produced are shown to have no capacity, the onus is not discharged. Three appeals went for the assessees and one against.
• Sarthak Securities Co Pvt Ltd v ITO High CourtHelps taxpayer
  The Assessing Officer has reopened my assessment purely on an investigation wing list saying my share application money was an accommodation entry. Can I get the notice quashed?
  Yes, on these facts. The Delhi High Court quashed the section 147 proceedings and the section 148 notice. The recorded reasons reproduced the investigation wing's information and nothing more; neither the reasons nor the order rejecting objections showed any independent application of mind by the Assessing Officer. The four investor companies were named, their existence was not disputed, they had bank accounts and paid through banking channels - all of which the Assessing Officer knew from the outset. On those facts Lovely Exports applied squarely, and the Court held it would be unwarranted to make the assessee go through the whole gamut of reassessment proceedings.
• CIT v Dwarkadhish Investment (P) Ltd High CourtHelps taxpayer
  I gave the officer the share applicants' PAN, incorporation papers, affidavits and bank statements, but he could not find them at their addresses and has added the money under section 68. Is that right?
  No. The Delhi High Court held that the onus under section 68 is not static. The initial burden is on the assessee, but once he proves the identity of the share applicants by furnishing a permanent account number or assessment particulars and shows the genuineness of the transaction by producing the money received through account payee cheque, draft or other traceable mode, the onus shifts to the Revenue. That the applicants could not be found at the addresses given does not by itself let the officer invoke section 68 - it is the Revenue that has the power and the machinery to trace people. The assessee need not prove the source of the source.
• Smt. Harshila Chordia v Income-Tax Officer High CourtHelps taxpayer
  I collect cash from my scooter buyers and pass it to my principal dealer the same day. Can the officer both disallow those cash payments under section 40A(3) and add the same cash as unexplained credits under section 68?
  No to both, on these facts. The Rajasthan High Court held that rule 6DD(j) must be liberally construed, that the circumstances listed in the Board's circular of 31 May 1977 are illustrative and not exhaustive, and that ordinarily where the genuineness of the transaction and the payment and the identity of the receiver are established the requirement of the rule is satisfied. The Rs 40,13,000 disallowance under section 40A(3) was set aside as a hyper-technical view. On the credits, where the Tribunal itself found that the assessee received money from customers against delivery of vehicles, the cash deposits become self-explanatory and section 68 is not attracted, so the addition of Rs 6,98,000 could not be sustained.
• DIT (Exemption) v Keshav Social & Charitable Foundation High CourtHelps taxpayer
  My trust could not produce all its donors. Can the Assessing Officer treat the donations as cash credits under section 68 and deny exemption under section 11?
  No, on these facts. The Delhi High Court dismissed the Revenue's appeal, holding that no substantial question of law arose. Section 68 had no application because the trust had itself disclosed the Rs.18,24,200 of donations as its income, and every receipt other than a corpus donation is income in a trust's hands. There was therefore full disclosure. The trust had filed a list of donors, and the failure to file a complete list or to produce the donors does not by itself support an inference that unaccounted money was being introduced as donations - particularly where more than 75% of the donations had admittedly been applied to charitable purposes and the trust was registered under section 12A.
• Nemi Chand Kothari v CIT High CourtHelps taxpayer
  My lender is a genuine assessee and paid me by cheque, but the Assessing Officer says the people who lent to him have no means, and has added the loan to my income. Can he do that?
  No, not on that reasoning alone. The Gauhati High Court held that the assessee's burden under section 68 stops at his own transaction: identity of the creditor, genuineness of the transaction with that creditor, and that creditor's creditworthiness. Section 106 of the Evidence Act puts on him only what is within his special knowledge, and what his creditor's own lenders did is not. The Assessing Officer may investigate the sub-creditors, but a failure by them proves nothing against the assessee. Unless there is evidence that the money was in truth the assessee's own, the addition belongs in the creditor's or sub-creditor's hands, not his.
• CIT v Metachem Industries High CourtHelps taxpayer
  There are credits in my partners' capital accounts. The officer says the partners cannot prove where the money came from and is adding it to the firm's income. Can he?
  No, once the firm has identified the depositor and he owns the entry. The Madhya Pradesh High Court answered the reference against the Revenue and held that where it is established that an amount was invested by a particular person, partner or otherwise, the firm's responsibility is over. The firm cannot be asked whether the money invested was properly taxed; it need only explain that the investment was made by that individual, and it is for him to account for it. If he owns the entry the firm's burden under section 68 is discharged, and the officer's remedy is to proceed against that person, if necessary under section 69.
• CIT v Sophia Finance Ltd High CourtHelps department
  My company received share application money. Can the Assessing Officer use section 68 on it at all, or is share capital simply a capital receipt he cannot touch?
  He can. The Delhi High Court, sitting as a Full Bench, held that section 68 is widely worded - it covers any sum found credited in the books, whatever colour the assessee gives it - so the officer has jurisdiction, and indeed a duty, to enquire whether the alleged shareholders actually exist. If they are identified and shown to have invested, the money is a capital receipt and nothing more happens. If they do not exist, there is no valid issue of share capital, because shares cannot be issued to non-existent persons, and the credit may be charged as the company's income.
• CIT v Bhaichand H. Gandhi High CourtHelps taxpayer
  An unexplained deposit appears in my bank statement but nowhere in my own cash book. Can it be added under section 68 as a cash credit in my books?
  No. The Bombay High Court held that a pass book supplied by a bank to its customer is a copy of the customer's account in the bank's own books. The relationship between banker and customer is debtor and creditor, not trustee and beneficiary, so the bank does not keep the pass book as the customer's agent or under his instructions. It is therefore not a book of the assessee, nor a book maintained by him for any previous year, and section 68 - which operates on a sum found credited in the books of an assessee maintained for any previous year - does not apply to it.
• ACIT v Antilia Venture Capital ITATHelps taxpayerNo later treatment found
  The Revenue says my lender's settlement of her own addition under the 2024 Scheme cannot be used to show her creditworthiness, because section 92(4) says a declaration is not a concession. Is that right?
  Not where the settlement is relied on only as a fact — that the source of the funds was independently examined in the lender's own reassessment and the resulting liability has attained finality. The Tribunal held that such factual reliance does not offend section 92(4) of the Direct Tax Vivad se Vishwas Scheme, 2024, upheld the CIT(A)'s deletion of a Rs 14.50 crore addition under section 68, and dismissed the Revenue's appeal.
• Anilkumar Narayanrao Mudradattu v ITO ITATCuts both waysNo later treatment found
  Interest-free loans from family, and savings built up over decades. Does the department have to accept that?
  Largely, yes, on evidence. Genuineness cannot be doubted merely because the lenders are relatives, particularly where their own returns are produced. Of the Rs 9 lakh still in dispute before the Tribunal, Rs 8 lakh was deleted and Rs 1 lakh sustained.
• ACIT v JD Ispat Pvt Ltd ITATHelps taxpayerNo later treatment found
  Same point, at Tribunal level: can taking part in a reassessment cure a missing s.143(2) notice?
  No. Section 292BB cures defects in service of notice but does not cure the complete absence of the notice. The reassessment was quashed and a Rs 2.33 crore s.68 addition went with it.
• DCIT v ACE Infracity Developers P Ltd ITATHelps taxpayer
  My lenders are NBFCs that make hundreds of loans. How much of their own affairs do I have to prove?
  Not their internal affairs. Where the lender is a non-banking finance company and lending is its regular business, identity is not in doubt, and creditworthiness is tested against its share capital, reserves and long-term advances rather than its turnover for the year. Allegations that the lender's directors were dummies do not touch the borrower unless the borrower is shown to be connected to them.
• Neeraj v PCIT — a s.263 revision directing a s.68 addition against a s.44AD return quashed for want of jurisdiction ITATHelps taxpayerNo later treatment found
  The Principal Commissioner has revised my client's assessment under s.263 and directed the officer to tax his cash deposits under s.68, although he filed under s.44AD and keeps no books. Can that order stand?
  The Delhi Bench quashed it. Once an assessee has surrendered himself to a particular statute he becomes entitled to all its attending benefits; an assessee under s.44AD computes income as a percentage of turnover and is not required to maintain books of account, so the Principal Commissioner's direction to make a s.68 addition was questionable and the revision order suffered from a lack of requisite jurisdiction. The Bench recorded that it has consistently held that invocation of s.263 is not permissible in cases where the assessee files his return under s.44AD.
• Sahyadri Erectors P Ltd v National e-Assessment Centre ITATHelps taxpayerNo later treatment found
  You missed the writ window. Can the Tribunal still strike down an assessment for breach of s.144B?
  Yes. The Mumbai Bench held an assessment void ab initio because the mandatory procedure under s.144B was not followed, no show cause notice or draft assessment order having been issued, and allowed the appeal. The Commissioner (Appeals) had brushed the procedural ground aside without analysing it, and that was held to be wrong.
• DCIT, Central Circle-3(4) v Manisha Kamal Khetan ITATHelps taxpayerNo later treatment found
  The Assessing Officer has taxed notional rent on a property that stands in the name of a company, saying I have a beneficial interest in it. Can house property income be assessed on someone who is not the owner?
  No. The Tribunal held that where the tenancy contract records a corporate entity as the owner and lessor, and the assessee is shown neither as owner nor as deemed owner within section 22 read with section 27, income from house property cannot be assessed in the assessee's hands, and notional rent cannot be assessed on a person who is neither the legal nor the deemed owner. The Revenue's appeal was dismissed.
• DCIT v Techno Industries ITATHelps taxpayerNo later treatment found
  You filed confirmations, PAN, returns and bank statements for every lender. Is that enough?
  On these facts, yes, on the section 68 limb. Identity through PAN and Aadhaar, creditworthiness through the lenders' returns and bank records, genuineness through banking channels and TDS on the interest - the burden shifted, no contrary material was produced, and the Rs 1.03 crore addition stayed deleted. Note that the Revenue's appeal was only partly dismissed: it succeeded on a separate ground restoring a Rs 3,27,846 disallowance of late-deposited employees' provident fund contributions.
• Krishnakumar Manda v DCIT, Circle-12(1), Hyderabad ITATHelps departmentNo later treatment found
  The addition under the s.68 group has been confirmed and I never showed the income in my return. Is there any discretion left to the AO not to levy the s.271AAC penalty?
  On this decision, none. The Hyderabad Bench held that once income of the s.68 to s.69D kind is brought to tax and sustained, and the conditions of the proviso are not satisfied, the levy of the s.271AAC penalty is automatic and mandatory, and the language of the section leaves the AO no discretion.
• Abhay Chordia v ACIT ITATHelps taxpayerNo later treatment found
  Cash sales on the day of demonetisation, deposited two days later. Unexplained credit?
  Not where the books were never rejected. Sales already recorded and offered as income cannot be taxed again as unexplained cash credits — that is double taxation. A Rs 4.36 crore addition was deleted in full.
• Bhikhalal Prahladrai Agarwal (HUF) v ACIT (ITAT Rajkot) — a shareholder's s.10(34A) buy-back exemption cannot be withdrawn because the Assessing Officer thinks the company underpaid s.115QA tax, and "distributed income" is measured from the ISSUE price including premium, not the shareholder's cost ITATHelps taxpayer
  My client claimed the buy-back proceeds as exempt under section 10(34A). The Assessing Officer says the company paid too little buy-back tax, so he has denied the exemption and assessed the whole gain under section 46A. Can he do that?
  No — on a buy-back before 1 October 2024, which is the regime this order is about, the ITAT Rajkot held that neither s.115QA nor s.10(34A) empowers the Assessing Officer to withdraw the shareholder's exemption on the ground that the company paid too little, and that the remedy for short payment lies against the company and its principal officer under s.115QC. The Tribunal also held that the officer had used the wrong base: "distributed income" under the Explanation to s.115QA(1) read with Rule 40BB is the buy-back consideration less the amount the COMPANY received on issue of the shares, including premium — here Rs.26 less Rs.25 — and not the buy-back price less the tendering shareholder's cost of Rs.2. The addition of Rs.46,46,469 was deleted.
• BK Educational and Welfare Society v ITO (Exemptions) ITATHelps taxpayer
  The Assessing Officer has added our cash donations under s.68 as unexplained credits. Is s.68 the right provision at all for a charitable trust's donations?
  Not where the donor is identified and confirms, and not under s.68 for the amount he cannot prove either. The Pune Tribunal deleted the addition for the donation whose donor had confirmed it on oath and stated his source, holding the burden had shifted to the Revenue. For the donation the trust could not prove, it did not sustain the s.68 addition; it treated the sum as an anonymous donation and applied s.115BBC, so that only the excess over the Rs 1 lakh limb of the threshold — Rs 10,000 out of Rs 1,10,000 — was taxable.
• Net Agri Company Pvt Ltd v ITO ITATHelps taxpayer
  The Commissioner (Appeals) accepted my explanation for the investment but then made a fresh addition for cash deposits he spotted in my bank statement, without telling me. Can he do that?
  No. The Delhi Tribunal held that the Commissioner (Appeals) cannot determine taxability from a new source, and cannot enhance without show-causing the assessee. The Assessing Officer had added the investment in property as unexplained under section 69. Having accepted the evidence and deleted most of it, the Commissioner (Appeals) went on to tax cash deposits in the bank account used to repay the bridging loan, treating them as unexplained cash credits under section 68. That was a different exercise from the one the officer had done, it went beyond the Tribunal's earlier remand, and no notice was given. The addition of Rs 1,75,50,000 was deleted.
• DCIT v Cyquator Media Services Pvt Ltd ITATHelps taxpayerNo later treatment found
  The AO says our amalgamation was a colourable device to move shares tax-free and has taxed their market value under s.56(1). Can he disregard a scheme the High Court sanctioned?
  Not on these facts. The Mumbai Tribunal reversed the finding that the scheme was a tool for evasion, holding that the High Court had approved the scheme and its terms, the Department had raised no objection at that time before the High Court, and it could not now claim the scheme was a colourable device. The exemption in s.47(vi) was therefore available and the addition of Rs.1,466.60 crore under s.56(1) went.
• DCIT v Chiripal Poly Films Ltd ITATHelps taxpayerSuperseded by amendment
  The share premium came from an overseas investor. Does s.56(2)(viib) reach it at all?
  For the years before the Finance Act 2023 took effect, no. As it then stood the clause caught consideration received 'from any person being a resident', and the Mumbai bench held that on a plain reading it therefore applies only where the subscriber is a resident; the subscriber here was a Mauritius company, so the clause did not apply. Two things follow. The point is a short jurisdictional one that does not require any valuation argument. And it does not close the file: the same subscription was separately attacked under s.68, and that attack failed only because the assessee could establish identity, creditworthiness and genuineness, here with information obtained from the Mauritius Revenue Authority under Article 26 of the treaty.
• ACIT v Hirapanna Jewellers ITATHelps taxpayer
  My cash sales are already in my books and already in my turnover. The officer has added the same money again under section 68 and taxed it at 60%. Can he?
  Not on these facts. The Tribunal upheld the deletion of an addition of Rs 4,71,31,500 made under section 68 read with section 115BBE on a jeweller's cash sales of 8 November 2016. The Assessing Officer had accepted the sales and the stock, had not disturbed the closing stock, and had found no defect in the stock register on either of two surveys; purchases, sales and stock are interlinked and inseparable, every purchase increases the stock and every sale reduces it, and where the movement matches the sales there is no basis to disbelieve them. Because the receipts had already been admitted as revenue receipts and offered as turnover, the Tribunal held there was no case for adding them under section 68 or taxing them again under section 115BBE. Suspicion, however strong, cannot decide the matter against the assessee without tangible evidence disproving the sales.
• Kokkarne Prabhakar v ITO ITATHelps taxpayer
  My return was under s.44AD. The officer has added the whole gap between my Form 26AS turnover and my declared turnover, and has also added my bank deposits under s.68. Can he do either?
  Not in that form, but read the second half of this order narrowly. On the turnover gap the Tribunal held, in its own words at para 7, that the difference between the declared turnover and the Form 26AS turnover 'is to be part of the business turnover of the assessee', that it 'should be included in the total turnover of the assessee and income of 8% is to be estimated on it', and that 'the entire undisclosed turnover of Rs.5,05,050/- cannot be considered as income of the assessee'; the Assessing Officer was directed to consider 8 per cent of that sum. On the deposits the Tribunal deleted the addition of Rs 3,00,000, saying that once the assessment of the assessee was completed under s.44AD there cannot be any application of s.68 or s.69A. The appeal was partly allowed. What the order decides on that second ground is narrower than the sentence in which it is expressed: a deposit addition of Rs 3,00,000 could not stand alongside a completed s.44AD assessment on a declared turnover of Rs 41,41,302. The sentence itself is wider than the High Court authority under it, because CIT v. Surinder Pal Anand relieves the assessee of explaining individual cash deposits only where the deposit has a nexus with the gross receipts already declared, and it is the order of a single Accountant Member. Do not take it as a general immunity from s.68 and s.69A on a presumptive return.
• Syed Maqsoodulla v ITO ITATHelps taxpayerJudgment not reachable
  You file under s.44AD. Can cash deposits still be added under s.68 and taxed at the higher rate?
  On this reasoning, no. An assessee who offers income under s.44AD is not required to maintain books, and a bank statement is the bank's record. Without books there is no foundation for s.68, and the addition was deleted.
• DCIT v Varsity Education Management P Ltd ITATHelps taxpayerNo later treatment found
  The officer accepted part of my share premium as justified by the valuation certificate and taxed the rest. Can he split it like that?
  No. The premium worked out in a valuation certificate filed for exchange control purposes is the minimum the company may collect, not a ceiling, and there is no bar on collecting more. The premium is settled between the parties on commercial considerations and the tax authorities cannot question it; once identity, creditworthiness and genuineness are accepted, the excess cannot be assessed under s.68.
• Babbal Bhatia v ITO ITATHelps taxpayer
  Cash deposits in your bank account — can they be added under s.68 if you keep no books?
  No. Section 68 applies to a sum found credited in the books of the assessee. A bank passbook is the bank's record, not yours, so where you are not required to keep books there is nothing for s.68 to attach to.
• Nand Lal Popli v DCIT ITATCuts both ways
  I return income under 44AD. Can the AO treat the balance of my receipts as expenditure actually incurred?
  No. Once income is estimated at a percentage of gross receipts, the residual percentage is a notional figure, not a finding that expenditure of that amount was in fact incurred. With the declared turnover undisturbed, an addition built on that assumption has no foundation.
• Jafferali K. Rattonsey v DCIT ITATHelps taxpayer
  I held shares in physical form for years and dematerialised them just before selling. The AO says my holding period runs from the demat date. Is he right?
  No. The date of purchase is taken from the broker's note or contract note, and the period of holding runs from that date, not from the date of dematerialisation. The Assessing Officer had converted a long-term gain into a short-term one by treating the demat date as the date of acquisition and the market price on that date as cost; the Tribunal rejected both moves.
• CBDT letter of 29 May 2026 on invoking ss.68 to 69D with s.115BBE CBDT Circulars & InstructionsHelps taxpayer
  Is there anything from the Board telling the officer he has to establish the section before he makes a deeming addition?
  Yes. Following a C&AG compliance audit that found officers were invoking the wrong section and applying the wrong rate, the Board directed field offices that the Assessing Officer "has to satisfy himself as to the true nature and source of the amounts for which such sections are invoked", that the necessary enquiry — including under s.133(6) — may be carried out, and that "Based upon inquiry and facts of the case, relevant provisions of the Act may be invoked." The same letter gives the Income-tax Act 2025 counterparts: s.195 for s.115BBE and s.252 for s.133(6), each one for one, and “section 102, 103, 104, 105 and 106” against the whole set “section 68, 69A, 69B, 69C and 69D”, which is a correspondence between two lists and not between their members in order.
• Statutory position — section 158BB: how the block figure is built, what is kept out of it, and why Abhisar Buildwell does not simply carry across CBDT Circulars & InstructionsCuts both ways
  The block assessment adds amounts for which nothing was found in the search. Can I take the Abhisar Buildwell point that there must be incriminating material?
  Not in the form in which that case decides it, because Abhisar Buildwell construes section 153A and section 158BB is worded differently. Section 158BB(1) makes the total undisclosed income of the block period the aggregate of only two things — what the assessee declares as undisclosed income in his section 158BC return, and what the Assessing Officer determines under section 158BB(2); and section 158BB(2) requires that determination to be made 'on the basis of evidence found as a result of search or survey or requisition of books of account or other documents and any other material or information as are either available with the Assessing Officer or come to his notice during the course of proceedings under this Chapter'.
• Statutory position — section 79A: no set-off against undisclosed income found in a search, requisition or survey, from AY 2022-23 CBDT Circulars & InstructionsCuts both ways
  A search threw up unaccounted stock and cash and the Assessing Officer has added it. I have a large brought-forward loss and unabsorbed depreciation sitting there. Can I set them off against the addition?
  For AY 2022-23 and every later year, no. Section 79A, inserted by the Finance Act 2022 (Act No. 6 of 2022) with effect from 1 April 2022, says that where, consequent to a search under s.132, a requisition under s.132A or a survey under s.133A other than s.133A(2A), the total income of any previous year includes undisclosed income, no set-off of any loss — brought forward or of the current year — and no set-off of unabsorbed depreciation under s.32(2) shall be allowed against that undisclosed income under any provision of the Act.
• CBDT Circular No. 11/2019 — set-off of loss against s.115BBE income CBDT Circulars & InstructionsHelps taxpayer
  Is there anything from the Board itself I can put in front of the officer on setting off losses against s.68 or s.69 additions in an old year?
  Yes. Circular No. 11 of 2019 records the Board's view that an assessee is entitled to claim set-off of loss against income determined under s.115BBE up to assessment year 2016-17. It is the department's own instruction, so an Assessing Officer cannot take a contrary view for those years — and by the same document, the position from assessment year 2017-18 is that the set-off is denied.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.