Section 68 of the Income Tax Act
The decision most relied on for Section 68 is Sumati Dayal v. CIT (214 ITR 801), cited in 1,964 of the 7,580 judgments on BharatTax that turn on this section.
Leading authorities on Section 68
The Revenue is entitled to look behind the apparent form of a transaction to discover its true nature, applying the test of human probabilities and surrounding circumstances. If transactions defy logic or are unnatural, they can be treated as bogus, even if supported by some documentation, especially in cases of cash credits or unexplained investments.
In Section 153A proceedings, the scope of assessment extends to abated proceedings, enabling an assessee to raise fresh legal claims that could have been made in regular assessment proceedings.
An Assessing Officer cannot initiate reassessment proceedings under Section 147 of the Income Tax Act based on a mere change of opinion. Reassessment is permissible only when there is fresh tangible material leading to the belief of income escapement, not merely a review of existing facts.
Tax authorities must judge evidence using the test of human probabilities and consider the apparent as real until there are reasons to believe it is not. They can rely on circumstantial evidence and the preponderance of probabilities to determine the genuineness of transactions.
When a notice under Section 148 of the Income Tax Act is issued, the Assessing Officer is bound to furnish reasons for reopening upon the assessee's request and must dispose of the assessee's objections to the notice by passing a speaking order.
No income can be quantified or disallowance made under Section 153A of the Income-tax Act unless it is justified on the basis of material seized during the course of the search.
In assessments under Sections 153A and 153C, the Assessing Officer's jurisdiction to make additions for completed or unabated assessments is limited to income based on incriminating material found during the search and seizure operation. No additions can be made for these assessment years in the absence of such material.
Income Tax Authorities, despite having wide powers, cannot make an assessment based on mere guess, suspicion, or conjecture without any evidence or material. An assessment must rest on principles of law and avoid presumptions of evasion.
For initiating reassessment proceedings under Section 147, the Assessing Officer needs only prima facie material providing a reason to believe that income has escaped assessment. Conclusive proof or the sufficiency/correctness of the material is not required at the stage of issuing the notice under Section 148.
When an assessee provides the identity and address of a creditor or investor for a cash credit or share capital under Section 68, the burden shifts to the Department to establish lack of genuineness or creditworthiness, requiring it to conduct further inquiries; mere non-compliance by third parties to summons cannot be the sole basis for an adverse inference against the assessee.
Judgments on Section 68
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