Genuineness of loan receipts upheld where banking trail and repayment corroborate creditor capacity; unexplained credit addition deleted.

ITAT treated bank statements, lender ledger, lender PAN and tax returns as sufficient evidence to establish the genuineness of a loan receipt and the creditor's capacity; the routed flow of funds and subsequent-year repayment through banking channels were held as strong corroborative circumstances negating adverse inference in the year of receipt, and thus the addition under unexplained credit was deleted with appeal allowed for the assessee.

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Issues: Whether the addition of Rs.60,00,000 made under Section 68 of the Income-tax Act, 1961 by the Assessing Officer and sustained by the Commissioner of Income-tax (Appeals) should be deleted.

Analysis: The appeal was decided on the material on record furnished during assessment and appeal proceedings, including ledger of the lender, bank statements of the lender and assessee showing receipt and repayment through banking channels, and the lender's PAN and tax return information. The transaction was routed through banking channels and the entire loan amount was repaid in the subsequent year through banking channels. There is no material on record to show that the funds credited in the lender's account belonged to the assessee. The repayment through banking channels and the established flow of funds were treated as strong corroborative circumstances supporting the genuineness of the transaction and the existence and capacity of the creditor, consistent with settled judicial principles that repayment in a subsequent year negates adverse inference in the year of receipt.

Conclusion: The addition of Rs.60,00,000 sustained under Section 68 of the Income-tax Act, 1961 is deleted and the appeal is allowed in favour of the assessee.

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