Court Upholds Addition of Rs.10 Crores to Assessee's Income; Emphasizes Strict Burden of Proof Under Section 68 and Limits Scope of Review
The Division Bench of the Madras High Court, comprising Chief Justice Mr. Sushrut Arvind Dharmadhikari and Justice G. Arul Murugan, on 28th September 2026 dismissed a review application filed by Mr. V. Babu, an individual engaged in civil contract business, challenging the treatment of Rs.10 crores credited in his bank account as unexplained cash credit under Section 68 of the Income-tax Act, 1961.
The case originated from the Assessment Year 2007-08, when during a survey under Section 133A of the Income-tax Act, the Income Tax Department discovered a substantial credit of Rs.10 crores in the assessee's bank account dated 9th February 2007. The assessee claimed that the sum was an accommodation entry from Commercial Buildwell Private Limited at the behest of a friend and that he had merely retained a commission of Rs.3 lakhs before transferring the balance to a third party, Mohanlal Jewellers.
The Assessing Officer, unconvinced by this explanation, reopened the assessment under Section 147 and issued a notice under Section 148, eventually adding the Rs.10 crores to the assessee's income as unexplained cash credit. This addition was upheld by the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal (ITAT), Chennai `C' Bench.
The assessee's subsequent Tax Case Appeal was dismissed by the Madras High Court in 2016, which found no substantial question of law to entertain. Further, the Supreme Court dismissed the Special Leave Petition filed by the assessee in 2017.
In the present review application, the assessee sought to rely on newly obtained documents under the Right to Information Act, including sale deed documents and ITAT orders from a related party's case, to establish the genuineness of the transaction. The counsel argued that the review was maintainable as these were new and important matters discovered post-judgment, citing the Supreme Court's judgment in Malleeswari v. K. Suguna (2025 SCC Online SC 1927).
However, the Revenue's counsel argued that the documents cited were publicly available during the original proceedings and that the review application was essentially a disguised appeal seeking a re-hearing, which is impermissible under Order XLVII Rule 1 and Section 114 of the Civil Procedure Code.
The Court meticulously analyzed the facts and legal principles. It reiterated that under Section 68 of the Income-tax Act, the burden lies on the assessee to establish the identity, creditworthiness of the creditor, and the genuineness of the transaction for any unexplained credit. The Court noted that the explanation by the assessee-of the money being an accommodation entry and further transferred to a third party-was found unsatisfactory by the authorities. Mere routing of funds through the personal bank account does not discharge the statutory burden.
Regarding the scope of review, the Court emphasized that review jurisdiction is limited and cannot be used as a forum for re-arguing the case or introducing evidence that was available during the original proceedings but not produced due to lack of due diligence.
Consequently, the Madras High Court dismissed the review application, affirming the original decision that the Rs.10 crores credited to the assessee's account was rightly treated as income. The Court found no error apparent on the face of the record or any genuinely new evidence warranting review.
This judgment underscores the strict scrutiny applied by Indian courts on unexplained cash credits under the Income-tax Act and clarifies the limited scope of review applications in tax litigation, emphasizing adherence to procedural safeguards and evidentiary standards.
Bottom Line:
Income-tax Act, 1961 - Section 68 - Burden of proof on assessee to establish identity, creditworthiness of the creditor, and genuineness of the transaction - Unexplained cash credits rightly treated as income - Review application dismissed due to lack of error apparent on the face of the record or discovery of genuinely new evidence.
Statutory provision(s):
Income-tax Act, 1961 Section 68, Section 133A, Section 147, Section 148; Civil Procedure Code, 1908 Order XLVII Rule 1, Section 114
