Identity of lender and banking-channel evidence defeats unexplained cash-credit additions when loan receipt and repayment are documented.

Where a loan is supported by bank statements showing receipt and repayment through banking channels, ledger confirmations from the lender and documentary proof of repayment, additions as unexplained credits cannot be sustained; the analysis emphasises that identity of the lender substantiated plus banking-channel transactions and repayment evidence rebut unexplained cash-credit treatment, and isolated credit entries cannot be assessed without considering corresponding debit/repayment entries. The legal effect is deletion of the impugned additions and dismissal of the revenue appeal where these documentary proofs are established.

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Issues: Whether the additions made under section 68 and section 69C of the Income-tax Act, 1961 in respect of an alleged loan from M/s. Aneri Fincap Ltd can be sustained.

Analysis: The assessee produced bank statements showing receipt and repayment of the alleged loan through banking channels within the same financial year, ledger confirmation from the lender and documentary evidence of repayment. The impugned additions were deleted by the appellate authority relying on precedents holding that when identity of the lender is established and the loan is received and repaid through banking channels (including repayment within the same year), the assessee cannot be treated as the beneficiary for making additions under section 68. The Revenue's reliance on authorities distinguishing share application money and on the paper-company nature of the lender was considered; the facts showed repayment in the same year and available confirmations. The tribunal followed the line of decisions holding that documentary proof of identity and banking channel receipt and repayment rebut unexplained cash credit under section 68 and that isolated credit entries cannot be looked at in isolation when debit/repayment entries are proved.

Conclusion: Additions under section 68 and section 69C are not sustainable and are deleted; the appeal filed by the Revenue is dismissed (decision in favour of the assessee).

Ratio Decidendi: Where a loan is received through proper banking channels, identity of the lender is substantiated and the loan is repaid (in the same year or with documentary proof of repayment), the addition under section 68 of the Income-tax Act, 1961 cannot be sustained.

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