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Issues: Whether, in an addition under Section 68 of the Income-tax Act, 1961, the assessee was required to prove the genuineness and creditworthiness of the sub-creditor from whom the lender had allegedly obtained funds, in addition to proving the identity, genuineness and creditworthiness of the immediate creditor.
Analysis: Section 68 raises only a rebuttable presumption against the assessee in respect of unexplained credits. The assessee's initial burden is confined to establishing the authenticity of the transaction with the immediate creditor and the creditor's identity, genuineness and creditworthiness in relation to that transaction. Once that burden is discharged, it is for the revenue to make further inquiry if it still doubts the source of the creditor's funds. The assessee is not required to prove the genuineness of transactions between the creditor and any sub-creditor, or the creditworthiness of the sub-creditor, because those matters are outside the assessee's burden under the provision and cannot be read so widely as to make the assessee prove sources beyond the immediate lending transaction.
Conclusion: The assessee had discharged the burden under Section 68 by proving the lender's identity, genuineness and creditworthiness. No legal requirement existed to prove the sub-creditor's genuineness or creditworthiness, and the additions were not sustainable.
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