Section 68 burden on loan credits requires identity, creditworthiness and genuineness; banking channels alone are insufficient.

Section 68 requires an assessee to explain the nature and source of a credited sum by proving the creditor's identity, creditworthiness, and the genuineness of the transaction. Mere proof that loans came through account payee cheques, or that some creditors were identifiable in books, does not by itself satisfy that burden. The court rejected the contention that the Assessing Officer had to make an independent enquiry into the creditors' own sources, and distinguished share application money cases as inapplicable to loans from known lenders. The additions as unexplained credits were sustained.

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Issues: Whether the assessee, in respect of loans shown as credits in the books, discharged the burden under Section 68 by proving only the identity of the creditors and receipt through account payee cheques, or whether proof of creditworthiness and genuineness of the transactions was also required.

Analysis: Section 68 permits addition where a credit remains unexplained unless the assessee offers a satisfactory explanation of the nature and source of the sum credited. The settled position applied was that the assessee must establish the identity of the creditor, the creditor's creditworthiness, and the genuineness of the transaction. On the facts, the materials relied on by the assessee were treated as showing, at best, identity of some creditors. Receipt through banking channels and entries in the lenders' accounts did not by themselves discharge the statutory burden. The argument that the Assessing Officer had to independently enquire into the source of the creditors was rejected, and the distinction drawn in share application money cases was held inapplicable to loans from known lenders.

Conclusion: The assessee failed to discharge the burden under Section 68, and the additions as unexplained credits were sustained.

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