“Addition Based on Assumptions Under Section 68 of Income Tax Act Deemed Unsustainable: Case Study”

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“Addition Based on Assumptions Under Section 68 of Income Tax Act Deemed Unsustainable: Case Study”

In the case of Himanshu Botadara vs. Income Tax Officer (ITAT Indore), it has been established that the addition made under section 68 of the Income Tax Act, solely based on assumptions, is not legally sustainable.

Section 68 of the Income Tax Act pertains to unexplained cash credits. This provision allows the tax authorities to make an addition to the taxpayer’s income if any sum is found credited in the books of the taxpayer for which the nature and sources are not explained satisfactorily.

However, in this particular case, the Income Tax Appellate Tribunal (ITAT) Indore ruled that an addition made under section 68 cannot be solely based on assumptions. Instead, there needs to be substantial evidence or material to support the addition. Merely making assumptions without any concrete evidence is considered legally unsustainable.

This ruling clarifies the importance of having proper evidence and material to support any addition made under section 68. The tax authorities cannot solely rely on assumptions to justify such additions.

 

The copy of the order is as under:

 

adobe-scan-13-dec-2023-511357

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