2 February 2026
Section 68 empowers the Assessing Officer to treat unexplained credits in the books as income, unless the taxpayer offers a satisfactory explanation. In practice, the entire contest turns on three elements the Tribunal consistently returns to: identity, creditworthiness, and genuineness of the transaction.
Establishing the identity of a creditor or investor — through PAN, address and confirmation — is usually the easiest of the three requirements to satisfy, and Tribunals rarely dwell on it where basic documentation exists.
Where recent rulings have tightened the standard is creditworthiness. A bank statement showing sufficient balance on the date of the transaction is necessary but often not sufficient on its own; Tribunals increasingly look for the source of funds in the creditor's own hands, particularly where the amounts are large relative to the creditor's known income.
Genuineness is rarely decided on a single document. Tribunals weigh the mode of payment, the commercial rationale for the transaction, and whether the relationship and conduct of the parties is consistent with a real transaction rather than an accommodation entry.
The practical implication for taxpayers is straightforward: the paper trail should be built well before a notice arrives, not reconstructed after one. Confirmations, bank statements, and where possible the creditor's own return of income, should be part of the standing record for any material credit entry.