Assessing Officer Not Required To Examine Commercial Expediency Of Transaction When Evaluating Assessee's Explanation U/S 68 Of IT Act: Delhi HC

The Delhi High Court ruled that once an assessee offers an explanation about the nature and source of a credit transaction, the burden of proof shifts to the Assessing Officer (AO) to show that the explanation is unsatisfactory. The AO cannot examine the commercial viability of the transaction but must accept it unless there is cogent material proving it is not genuine. This ruling came in a case where the AO included ₹67.50 crores in the assessee’s total income under Section 68 of the Income Tax Act, suspecting the transactions with Unitech. The court emphasized that the AO must base their opinion on proper appreciation of material and circumstances, citing the Supreme Court’s decision in CIT v. P. Mohanakala (2007). The High Court upheld the assessee’s explanation and ruled in favor of the assessee, stating that the AO’s rejection of the explanation was not justified.