Section 68 unsecured loan evidence: identity, creditworthiness and genuineness proved through banking records are sufficient.

Section 68 requires the assessee to establish the creditor's identity, creditworthiness and the genuineness of the transaction. Where unsecured loan funds were supported by bank certificate, bank statement, lender affidavit and return of income, and the credit was shown to have moved through banking channels from an NRE account, the documentary record was sufficient. The assessee is not required to prove the source of the creditor's source. A Revenue objection based only on non-production of the lender's foreign bank account does not displace otherwise credible evidence of the loan transaction.

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Issues: Whether the addition made under section 68 of the Income-tax Act, 1961 on account of an unsecured loan was sustainable where the assessee produced banking evidence, confirmation, and material showing the lender's identity, creditworthiness, and the genuineness of the transaction.

Analysis: The assessee produced a bank certificate, bank statement, affidavit of the lender, and the lender's return of income to show that the loan was advanced through banking channels from the lender's NRE account. The record established the lender's identity and demonstrated that the credited amount came from abroad into the NRE account. The Court held that, for purposes of section 68, the assessee is required to prove the identity of the creditor, the creditor's capacity to advance the money, and the genuineness of the transaction. It further held that the assessee is not required to prove the source of the source. On the facts, the Revenue's objection that the assessee had not produced the lender's foreign bank account did not dislodge the documentary evidence already produced.

Conclusion: The addition under section 68 was not justified and was deleted; the issue was decided in favour of the assessee.

Ratio Decidendi: Once the assessee proves the creditor's identity, creditworthiness vis-a -vis the transaction, and genuineness of the banking transaction, an addition under section 68 cannot be sustained merely because the assessee has not proved the source of the creditor's source.

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