Section 68 unsecured loan addition fails where identity, creditworthiness and genuineness are proved with bank-backed evidence.

An addition for an unsecured loan under section 68 was unsustainable where the assessee produced the lender's confirmation, bank statements, income-tax records, interest and TDS evidence, and repayment documents. The lender's director also confirmed in remand proceedings that the amount was advanced through banking channels and denied any link with the adverse statement relied on by the tax . With repayment of the outstanding balance later shown through bank records, the assessee discharged the burden of proving identity, creditworthiness and genuineness, and no contrary material supported treatment of the credit as an accommodation entry or unexplained cash credit. The addition was deleted.

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Issues: Whether the addition made under section 68 of the Income-tax Act, 1961 in respect of an unsecured loan could be sustained when the assessee furnished documentary evidence, the lender confirmed the transaction in remand proceedings, and the loan was repaid in subsequent years.

Analysis: The assessee had produced the lender's confirmation, bank statements, income-tax records, interest details, TDS evidence, and repayment documents. In remand proceedings, the lender's director confirmed that the amount was advanced through banking channels and denied any connection with the adverse statement relied upon by the Assessing Officer. The repayment of the outstanding amount in later financial years was also supported by bank records. On these facts, the assessee was found to have discharged the initial burden under section 68 by establishing identity, creditworthiness and genuineness of the credit, and no cogent material was brought on record to justify the addition as an accommodation entry or unexplained cash credit.

Conclusion: The addition under section 68 was unsustainable and was deleted, resulting in relief to the assessee.

Ratio Decidendi: Once an assessee substantiates the identity of the creditor, the creditor's capacity, and the genuineness of the loan transaction, and the creditor confirms the advance with supporting banking evidence and subsequent repayment is shown, an addition under section 68 cannot be sustained without contrary material.

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