Unsecured loan additions fail where identity, genuineness and creditworthiness are proved; source of source proof is not required.

Unsecured loan additions were deleted where the assessee produced primary evidence of identity, genuineness and creditworthiness, and the Revenue was not entitled to insist on proof of source of source. For the first lender, financial statements and surrounding facts supported the transaction, and a lawful call for material under section 250(4) defeated the Rule 46A objection. For the second lender, the amount was reflected only through a journal entry and not as a fresh credit in the year, while repayments in the books supported the explanation. Interest-related addition linked to the third lender was also treated as genuine, following the position accepted in earlier and connected matters.

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Issues: (i) Whether the addition on account of unsecured loan from M/s Dhankalash Distributors Private Limited was sustainable. (ii) Whether the addition on account of unsecured loan from M/s Sundrm Consultants Private Limited was sustainable. (iii) Whether the addition on account of interest on unsecured loan to M/s Hallow Securities Pvt. Ltd. was sustainable.

Issue (i): Whether the addition on account of unsecured loan from M/s Dhankalash Distributors Private Limited was sustainable.

Analysis: Primary documents establishing the identity, genuineness and creditworthiness of the lender were on record. The lender's financial statements showed substantial shareholders' funds and investments, and the surrounding facts supported the transaction. The first appellate authority also called for a response under section 250(4) of the Income-tax Act, 1961, so the allegation of Rule 46A violation did not survive. The assessee was not required to prove the source of source.

Conclusion: The addition was not sustainable and the relief granted to the assessee was upheld.

Issue (ii): Whether the addition on account of unsecured loan from M/s Sundrm Consultants Private Limited was sustainable.

Analysis: The amount was found to be reflected only through a journal entry and not as a fresh loan or credit in the relevant year. Repayments were recorded in the regular books, and the earlier treatment of related transactions also supported the assessee's explanation. On these facts, the adverse inference drawn by the Assessing Officer could not be sustained.

Conclusion: The addition was not sustainable and the relief granted to the assessee was upheld.

Issue (iii): Whether the addition on account of interest on unsecured loan to M/s Hallow Securities Pvt. Ltd. was sustainable.

Analysis: The issue was covered by the assessment of the assessee for an earlier year and by the accepted position regarding the same lender in connected matters. The Tribunal found the transaction to be genuine and saw no reason to disturb the finding of the first appellate authority.

Conclusion: The addition was not sustainable and the relief granted to the assessee was upheld.

Final Conclusion: The Revenue failed to establish any basis for disturbing the deletion of the additions, and the appellate relief in favour of the assessee was maintained in full.

Ratio Decidendi: Once the assessee produces primary evidence establishing identity, genuineness and creditworthiness, the Revenue cannot insist on proof of source of source, and no addition survives where the first appellate authority has lawfully called for material under section 250(4) of the Income-tax Act, 1961.

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