Section 68 additions on unsecured loans fail where creditor identity, transaction genuineness, and source of credit are proved.

An addition under section 68 cannot be sustained where the assessee proves the creditor's identity, the genuineness of the unsecured loans, and the source of the credits with satisfactory material. Here, confirmations were furnished, the loan creditors responded to summons, and the loans were repaid, showing that the transactions were real and not bogus. The assessee discharged the initial burden, and the Revenue failed to establish any basis to treat the credits as unexplained. The addition was therefore deleted.

---

---

Issues: Whether the addition made under section 68 of the Income-tax Act, 1961, in respect of unsecured loans was sustainable when the assessee furnished confirmations, the loan creditors responded to summons, and the loans were repaid.

Analysis: The assessee produced confirmations and the loan creditors either appeared personally or through representatives in response to summons issued under section 133(6). The material on record showed that the creditors existed, had acknowledged advancing the loans, and the transactions were not shown to be bogus. The assessee established the identity of the creditors, the genuineness of the transactions, and the source of the credits to the extent required under section 68. The burden placed on the assessee stood discharged, and the Revenue did not establish any basis to treat the credits as unexplained.

Conclusion: The addition under section 68 was not justified and was rightly deleted; the appeal failed.

Ratio Decidendi: Where the assessee proves the identity of the creditor, the genuineness of the loan transaction, and the source of the credit by satisfactory material, an addition under section 68 cannot be sustained merely on suspicion.

---