Section 68 unsecured loan addition fails where lender identity, genuineness and creditworthiness are proved; double taxation protection applies.

Where an assessee substantiated an unsecured loan with confirmations, PAN, ITR acknowledgments, bank statements and financial records showing the lender's identity, creditworthiness and transaction genuineness, ITAT Mumbai held that the burden under section 68 was satisfied and the assessee was not required in that year to prove the source of source. The addition was also unsustainable because the same amount had already been assessed substantively in another concern's hands, so a protective addition could not survive again in the assessee's case. The section 68 addition was therefore deleted.

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Issues: Whether the addition made under section 68 of the Income-tax Act, 1961 in respect of the unsecured loan was sustainable when the assessee had furnished documentary evidence of the lender's identity, genuineness and creditworthiness and the alleged source of funds traced to a third party shell company; and whether a protective addition could survive when the same transaction was already the subject of substantive addition in another case.

Analysis: The documentary record showed that the assessee had borrowed from an intermediary lender and had produced financial statements, confirmations, PAN, ITR acknowledgments and bank statements to establish the lender's identity, creditworthiness and the genuineness of the transaction. The tribunal treated the assessee's burden as confined to proving the source from which it received the credit and held that, for an unsecured loan in the relevant assessment year, the assessee was not required to prove the source of source. The tribunal also noted that the underlying amount had already been brought to tax in the hands of another concern on a substantive basis, and therefore the same amount could not be sustained again in the assessee's hands on a protective basis.

Conclusion: The addition under section 68 was not sustainable and was rightly deleted; the Revenue's challenge failed.

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