Section 68 addition on unsecured loan deleted where lender identity, banking trail and confirmations were duly established.

An addition under section 68 could not be sustained where the assessee produced loan confirmation, audited accounts and banking records, and the lender confirmed the unsecured loan. A third-party statement alleging accommodation entries was retracted by affidavit and was not reliable enough to form the sole basis for the addition. The assessee had established the lender's identity and the banking channel of the transaction, and was not required to prove the source of source. Any alleged defect in the lender's share-capital or share-premium affairs had to be examined in the lender's hands, not in the hands of the borrower. The addition was deleted.

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Issues: Whether the addition under section 68 of the Income-tax Act, 1961, could be sustained in respect of the unsecured loan received by the assessee from the lender company.

Analysis: The assessee produced the loan confirmation, audited accounts, and banking documents, and the lender confirmed the loan. The stated basis for the addition was a third-party statement alleging accommodation entries, but that statement was retracted by affidavit and was not treated as reliable enough to be the sole foundation for the addition. The assessee had shown the identity of the lender, the transaction moved through banking channels, and the assessee was not required to prove the source of source. Any alleged infirmity in the share-capital or share-premium affairs of the lender company, if at all, had to be examined in the hands of that company and not in the hands of the borrower assessee.

Conclusion: The addition under section 68 was unsustainable and was deleted; the appeal was allowed.

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