Cash credit genuineness and section 68 findings based on evidence were treated as factual, not referable questions of law.

Cash credits may be treated as income from undisclosed sources where the assessee fails to prove the identity and capacity of the lenders and the genuineness of the loans. The Tribunal's finding that the credits were not genuine was supported by the material on record, rested on appreciation of facts and probabilities, and was neither perverse nor unsupported by evidence. On that basis, the proposed issues were held to be factual rather than referable questions of law, and the addition as undisclosed income was sustained.

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Issues: Whether the Tribunal was justified in sustaining the addition made on account of cash credits as income from undisclosed sources, and whether the questions framed on that issue gave rise to referable questions of law.

Analysis: The assessee failed to establish the identity and capacity of the lenders and the genuineness of the loans. The Tribunal had examined the material on record, applied the principle underlying section 68 of the Income-tax Act, and returned a finding that the cash credits were not genuine. That finding was based on material, was not shown to be perverse or without evidence, and rested on appreciation of facts and probabilities. Since the proposed questions centred on the factual finding regarding genuineness of the credits, they did not constitute questions of law referable to the court.

Conclusion: The addition of Rs. 1,65,000 as income from undisclosed sources was sustained, and the request to direct reference of the proposed questions was rejected.

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