Unexplained Cash Credit: addition under Section 68 deleted where identity, bank entries and lender financials corroborated the loan.

Where an assessee furnished identity, lender confirmation, bank entries, ledger extracts and the lender's financial statements showing sources and third party borrowings, an addition under Section 68 treating the loan as unexplained cash credit could not be sustained without further verification; the tribunal found the authorities erred in treating the entire receipt as unexplained and directed deletion of the addition of Rs. 15,74,850, allowing the appeal. The decision emphasises verifying actual peak credit and lender particulars when detailed corroborative particulars are produced.

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Issues: (i) Whether the addition of Rs. 15,74,850 made under Section 68 of the Income-tax Act, 1961 treating loan from Smt. Mani Bala as unexplained cash credit can be sustained where the assessee furnished identity, PAN, lender confirmation, bank statements and the lender's financial statements for AY 2021-22.

Analysis: The records furnished included confirmation of loan, bank statement entries showing receipts/payments, ledger extracts, and financial statements and computation of income of the lender. The highest loan balance outstanding during the year, as per the assessee's books and ledger extracts, was lower than the total additions made by the Assessing Officer. The authorities below treated the entire sum as unexplained on the ground that the lender had not filed ITR and that her creditworthiness was not proved. Consideration of the lender's financial statements and corresponding sources for her borrowings showed turnover and profit figures and corroborative ledgers evidencing third-party borrowings to the lender.

Conclusion: The addition of Rs. 15,74,850 under Section 68 of the Income-tax Act, 1961 is deleted and the appeal is allowed in favour of the assessee.

Ratio Decidendi: Where an assessee furnishes identity, confirmation, bank entries and the lender's financial statements showing sources and liabilities, an addition under Section 68 of the Income-tax Act, 1961 cannot be sustained without further verification; tax authorities should consider actual peak credit and verify the lender when detailed particulars are produced.

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