Unexplained cash credit under section 68 sustained where lender's creditworthiness and transaction genuineness were not proved.

An unsecured loan was treated as an unexplained cash credit under section 68 because the assessee failed to prove the lender's identity, creditworthiness and the genuineness of the transaction. The reassessment relied on Investigation Wing material linking the lender to an accommodation-entry network, and the Assessing Officer's verification notice under section 133(6) was not complied with. The assessee also could not produce the lender or supporting books and records despite opportunity. Bank entries and an affidavit were insufficient to rebut the adverse material. The Tribunal upheld the addition because the assessee did not discharge the burden of proof.

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Issues: Whether the addition made under section 68 of the Income-tax Act, 1961, treating the unsecured loan as an unexplained cash credit arising from an accommodation entry, was sustainable.

Analysis: The reassessment was founded on information from the Investigation Wing regarding accommodation entries routed through concerns controlled by the Bhanwarlal Jain group. The Assessing Officer issued notice under section 133(6) to the lender to verify identity, creditworthiness and genuineness, but the lender did not furnish the required details. The assessee was also unable to produce the lender with the books and supporting records despite opportunity. Although bank entries and an affidavit were relied upon, the financial position of the lender and its connection with the accommodation-entry network cast doubt on creditworthiness and genuineness. The Tribunal held that the assessee had not rebutted the material gathered in reassessment or discharged the burden of proving the transaction.

Conclusion: The addition under section 68 was upheld and the challenge to it failed.

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