Section 68 burden shifts to Revenue after credible loan evidence; third-party statements alone cannot sustain bogus loan additions.

Addition under section 68 for alleged bogus unsecured loans was unsustainable because the assessee produced PAN, returns, confirmations, bank statements, audited accounts and affidavits to establish identity, creditworthiness and genuineness, and the creditors responded to notices under section 133(6). The Revenue relied mainly on investigation material and third-party statements from a tainted group, but made no independent enquiry or rebuttal and did not show movement of unaccounted cash. On these facts, the burden had shifted to the Revenue and was not discharged, so the section 68 addition was deleted and the consequential disallowance of interest on the loans also could not survive.

---

---

Issues: Whether the addition made under section 68 on account of alleged bogus unsecured loans was sustainable, and whether the consequential disallowance of interest on those loans was also sustainable.

Analysis: The assessee had produced documentary evidence to establish the identity, creditworthiness and genuineness of the lenders, including PAN, income-tax returns, confirmations, bank statements, audited accounts and affidavits. The transactions were routed through banking channels and the creditors had responded to notices issued under section 133(6). The addition was made largely on the basis of investigation material and statements of third parties from a tainted group, without any independent enquiry to rebut the assessee's evidence or to show movement of unaccounted cash. The first appellate authority had correctly applied the settled principles governing section 68 and the shifting of onus once the assessee discharges the primary burden.

Conclusion: The deletion of the addition under section 68 was upheld and the Revenue's challenge failed on this issue. The disallowance of interest, being consequential to the loan addition, also could not survive.

Final Conclusion: The Revenue's appeal was rejected after holding that the assessee had discharged the burden under section 68 and that no independent material justified treating the loan transactions as bogus.

Ratio Decidendi: Once the assessee produces credible evidence establishing identity, creditworthiness and genuineness of the credit, the burden shifts to the Revenue, and an addition under section 68 cannot rest merely on uncorroborated third-party statements or general investigation findings without independent rebuttal.

---