SC: Cash-credit addition under Section 68 of the Income Tax Act set aside—affidavits of unregistered dealers proved genuine marble purchases

Case Name: Basir Ahmed Sisodiya v. The Income Tax Officer

Citation: Civil Appeal No. 6110 of 2009

Date of Judgment: 24 April 2020

Bench: Justice A.M. Khanwilkar and Justice Dinesh Maheshwari

Held: The Supreme Court held that the addition of ₹2,26,000 as unexplained cash credits under Section 68 of the Income Tax Act could not stand once the assessee produced affidavits and statements of unregistered dealers confirming genuine marble-purchase transactions. The Court noted that the Commissioner of Income Tax (Appeals) had, in later penalty proceedings, accepted the dealers’ identity and transactions, finding no concealment or inaccuracy. Since the factual foundation of the addition stood disproved, the High Court and Tribunal erred in upholding it.

Summary: For Assessment Year 1998-99, the Assessing Officer treated ₹2,26,000 shown as credits from fifteen unregistered marble dealers as bogus and added it to the assessee’s income. The CIT(A) and ITAT sustained the addition; the High Court also dismissed the appeal. During subsequent penalty proceedings, however, the assessee produced affidavits and voter-ID evidence of the dealers, and the Officer himself recorded their statements acknowledging credit sales. The CIT(A) found these purchases genuine, cancelled the penalty, and the Department accepted that order. Considering this undisputed later development, the Supreme Court held that the earlier addition lacked factual basis, as the explanation was now fully substantiated.

Decision: Appeal allowed. The addition of ₹2,26,000 under Section 68 was set aside; the rest of the assessment order remained undisturbed. No order as to costs.