Unexplained cash credit under section 68 cannot stand when bank trail and supporting documents establish the loan transaction.

An addition as unexplained cash credit was found unsustainable where the loan was supported by bank statements, confirmation from the lender, PAN details, cheque entries and a response to notice under section 133(6). On that material, the identity of the creditor and the genuineness of the transaction were established, and the banking trail supported the assessee's explanation. Mere non-production of the lender's income-tax return, by itself, was held insufficient to dislodge the explanation under section 68 when surrounding evidence showed an actual loan transaction.

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Issues: Whether the addition of the loan amount as unexplained cash credit under section 68 could be sustained when the transaction was supported by bank statements, confirmation from the lender, PAN details and other supporting material, but the lender's income-tax return was not produced.

Analysis: The record showed that the loan transaction was reflected in the bank accounts of both parties, the lender responded to notice under section 133(6), and the transaction was supported by confirmation and corresponding cheque entries. On this material, identity and genuineness of the transaction stood established. The only basis for doubting the creditworthiness was non-filing of the lender's return, despite availability of bank account details and PAN. The absence of a copy of the return, by itself, was held to be insufficient to dislodge the assessee's explanation where the surrounding evidence supported the loan transaction.

Conclusion: The addition was not sustainable and the issue was decided in favour of the assessee.

Final Conclusion: The disputed loan amount could not be treated as unexplained merely for want of the lender's return when the banking trail and supporting evidence established the transaction.

Ratio Decidendi: Once the assessee establishes the identity of the creditor, the genuineness of the transaction and a banking trail, mere non-production of the creditor's income-tax return is not sufficient, by itself, to reject the explanation under section 68.

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