Section 68 unsecured loan additions fail where identity, creditworthiness and genuineness are proved without evidence of routed-back funds.

Unsecured loan additions under section 68 were held unsustainable because the assessee furnished confirmations, returns, bank statements and audited financials to establish the lenders' identity, creditworthiness and transaction genuineness. The Tribunal accepted that the lenders were active, regularly assessed companies with financial capacity, and the Assessing Officer brought no concrete material to show that the assessee's own unaccounted money had been routed back as loans. In the absence of evidence beyond suspicion or conjecture, and on the facts of the year in question, the assessee was not required to prove the source of source, so the Revenue's challenge failed.

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Issues: Whether the additions made under section 68 of the Income-tax Act, 1961 in respect of unsecured loans were justified.

Analysis: The assessee produced confirmations, income-tax returns, bank statements, audited financial statements and other material to establish the identity, creditworthiness and genuineness of the lender entities. The appellate authority found that the lenders were active companies, regularly assessed to tax, and had sufficient financial capacity; it also noted that the Assessing Officer did not bring any concrete material to show that the assessee's own unaccounted money had been routed back as loans. The Tribunal accepted these factual findings and held that the primary onus stood discharged. In the absence of evidence beyond suspicion, conjecture or surmise, and without any requirement in the facts of the case to prove the source of source, the additions could not be sustained.

Conclusion: The addition under section 68 was held unsustainable and the Revenue's challenge failed.

Ratio Decidendi: Once the assessee furnishes credible evidence to establish the identity and creditworthiness of the creditor and the genuineness of the transaction, an addition under section 68 cannot rest merely on suspicion or on an unproved allegation of accommodation entry, and the assessee is not required to prove the source of source on the facts of the year in question.

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