Tribunal removes Rs. 3,30,000 addition under IT Act Section 68, assessee's appeal allowed

The Tribunal, with the majority view of the Third Member, concluded that the assessee had successfully proven the identity, genuineness, and creditworthiness of the loan creditors. Consequently, the addition of Rs. 3,30,000 under section 68 of the IT Act, 1961 was removed, leading to the allowance of the assessee's appeal.

---

---

Issues: Whether the addition made under section 68 of the Income-tax Act, 1961 in respect of loans received from two creditors was sustainable when the assessee produced confirmations, bank statements, income-tax particulars and the creditors were examined on oath.

Analysis: The assessee had maintained regular books of account and the trade results were not disturbed. The creditors were identifiable, the loans were advanced through account payee cheques, confirmations and bank records were filed, and the creditors or their representatives were produced before the Assessing Officer. On these facts, the assessee discharged the initial burden to explain the nature and source of the credits and to establish identity, genuineness and creditworthiness. The further insistence on proving the source of deposits in the creditors' bank accounts amounted to requiring proof of source of source, which was not warranted in the absence of material showing that the assessee's own unaccounted money had been routed through those accounts.

Conclusion: The addition under section 68 was not justified and was deleted. The appeal was allowed in favour of the assessee.

Ratio Decidendi: Once an assessee proves the identity of the creditor, the genuineness of the loan transaction and the creditor's creditworthiness through primary evidence, the burden shifts to the Revenue, and the assessee cannot be compelled to prove the source of source absent material showing that the credit is really the assessee's own money.

---