Genuine loan evidence prevails where bank records and documents support cash credits despite non-production of creditors.

Cash credits supported by promissory notes, receipts and bank records were treated as genuine loans because the cheque transactions were verified through scheduled banks and no discrepancy appeared in the bank records. The non-production of the creditors, who were not traceable and whose availability was not within the assessee's control, did not by itself justify rejection of the documentary evidence. Alleged admissions by the creditors as name-lenders were not shown to specifically cover the assessee's transactions, so an addition based only on suspicion and conjecture was not sustainable. The related interest was therefore allowable.

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Issues: Whether the cash credits shown in the names of the alleged lenders could be treated as the assessee's unexplained income and the related interest disallowed when the transactions were supported by promissory notes, receipts and bank records but the creditors were not produced.

Analysis: The evidence showed that the cheque transactions were verified through scheduled banks and no discrepancy was found in the bank records. The absence of the creditors' physical production, in the circumstances that they were not traceable and the assessee had no control over their availability, did not by itself justify rejection of the documentary evidence. The material on record did not show that the alleged admissions by the creditors as name-lenders specifically covered the assessee's transactions. On these facts, an addition based only on suspicion and conjecture could not stand, and no adverse inference was warranted merely because the creditors were not produced.

Conclusion: The cash credits were rightly treated as genuine loans and the related interest was allowable.

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