Unexplained cash credits require proof of genuine loan nature; mere confirmations and book entries do not discharge the assessee's burden.

In unexplained cash credit matters, the assessee must prove the real nature of the credits with prima facie material, not merely the existence of the credited persons or book entries. The court noted that excluded post-reference statements could not be relied on, and the remaining letters, entries, and confirmations did not establish genuine loan transactions. The assessee had to show surrounding circumstances, including lender capacity and transaction probabilities, while the department was not required to prove the exact source of the funds before treating the amount as income from undisclosed sources. On the available material, the credits were not satisfactorily explained.

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Issues: Whether the sum of Rs. 21,500 credited in the assessee's accounts could be treated as income assessable from undisclosed sources, and whether the assessee had discharged the burden of proving that the credits were genuine loan transactions.

Analysis: In proceedings under section 66 of the Indian Income-tax Act, 1922, the High Court could not act on additional evidence recorded after the reference was called for, and the subsequent statements of the alleged lenders were excluded. On the remaining material, the assessee had only produced letters from the named persons and account entries showing deposits and repayments. Mere confirmation of the entries by the alleged lenders did not establish the real nature of the transactions. The initial onus lay on the assessee to show not merely that the persons were real, but that the credits represented genuine loans supported by surrounding circumstances, including the capacity of the lenders and the probabilities of the transaction. The refusal of the alleged lenders to appear before the Income-tax Officer, their residence outside the taxable territory, and the absence of any supporting documents beyond the books of account justified the inference that the credits were not satisfactorily explained. The department was not required to prove the precise source from which such unexplained funds arose before treating them as income.

Conclusion: The assessee had not discharged the burden of proving that the credits were genuine loans, and the amount of Rs. 21,500 was rightly treated as income from undisclosed sources; the answer was against the assessee and in favour of the Revenue.

Ratio Decidendi: In respect of unexplained cash credits, the assessee must prove the real nature of the transaction with prima facie material, and if the explanation remains unsatisfactory, the amount may be assessed as income from undisclosed sources without the department proving the exact source of the funds.

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