On an examination of the books of account of the assessee and its group companies the Assessing Officer noted that enormous funds had obtained under the head “loans and advances” from the Kolkata businesses. These loans were non-interest bearing and remained in the books for periods ranging from one to three years. Taking the view that such substantial amounts loaned by businesses with meagre income lacked credibility even though obtained through banking channels and that these funds were the income of the assessee, the Assessing Officer added the difference between the opening and closing balance as income of the assessee under section 68 of the Income-tax Act, 1961. The Commissioner (Appeals) found that a search had taken place at the premises of the managing director of the assessee, but no evidence regarding round tripping had been found and that the creditors were identifiable Income-tax paying assessees. The subject transactions were through banking channels, adding credibility to the transaction. Since the assessee had furnished an explanation with supporting evidences and the Assessing Officer had not been able to disprove the explanation, he deleted the addition as it was on the basis of mere suspicion. On appeal, the Tribunal held that the addition made by the Assessing Officer was mainly based on the statement recorded of a person, who later retracted his statement and much credence could not be given to it as there was no corroborative evidence. The Assessing Officer had not given opportunity of cross-examination of these persons to the assessee. The books of account of these concerns were duly audited and they had filed the returns of income. The revenue authorities having accepted their returns of income, it was not possible to reject certain entries without bringing in any contra evidence against those entries. Suspicion could not be a reason for making additions and it could not replace the evidence on record. Neither the Assessing Officer nor the investigating authorities had brought on record any incriminating documents to suggest that the assessee was holding unaccounted income which was lent to certain persons and got it back as loans and advances. Not allowing the assessee to cross-examine the parties whose statements were relied upon to make addition in the assessment order was a serious flaw which made the order null and void inasmuch as it amounted to violation of the principles of natural justice because of which the assessees were adversely affected. Therefore, the addition made on account of these alleged transactions treating them as unexplained credits under section 68 was deleted. (AY. 2010-11, 2011-12)