Section 68 loan addition fails where identity, genuineness and creditworthiness are duly supported by documentary evidence.

Section 68 addition in respect of loans from related lender companies was found unsustainable where the assessee produced audited accounts, bank statements, confirmations, lender assessment orders and evidence of the source of funds. The lenders were income-tax assessees, the loans were routed through account payee cheques and reflected in their books, which satisfied the tests of identity of creditor, genuineness of transaction and creditworthiness. Once these primary facts were established, the burden shifted to the Revenue, which did not disprove the documents or show that the funds actually belonged to the assessee. The remaining disputed addition was deleted and the relief granted by the CIT(A) was upheld.

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Issues: Whether the addition under section 68 of the Income-tax Act, 1961 could be sustained in respect of loans received from related lender companies.

Analysis: The assessee produced audited accounts, bank statements, confirmations, assessment orders of the lender companies and evidence showing the source of funds used for advancing the loans. The lender companies were income-tax assessees, the transactions were through account payee cheques, and the loans were reflected in their books. Applying the settled principles that the assessee must establish the identity of the creditor, the genuineness of the transaction and the creditor's creditworthiness, the Tribunal held that the assessee had discharged the onus cast under section 68. It further held that, once these primary facts were shown, the burden shifted to the Revenue, which had not brought material to disprove the documents or establish that the money actually belonged to the assessee.

Conclusion: The addition under section 68 was not sustainable and the relief granted by the CIT(A) was upheld, resulting in deletion of the remaining disputed addition.

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