Unexplained cash credits fail when identity, creditworthiness, and genuineness are supported by records and unrebutted evidence.

Unsecured loan credits were held explainable where the assessee produced loan confirmation, PAN, bank statements, Form 16, tax audit disclosures, and the lender's reply under section 133(6) showing the source of funds. The Tribunal found that the lender's identity, creditworthiness, and the genuineness of the transaction were established on record, and the Revenue brought no contrary material to rebut the explanation. It further held that the addition could not be sustained merely because the lender had not filed a return for the relevant year, as the assessee had discharged the burden required for cash credit verification.

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Issues: Whether the addition made under section 68 on account of unsecured loan was sustainable in view of the evidence produced to prove the identity of the lender, the lender's creditworthiness, and the genuineness of the transaction.

Analysis: The assessee produced loan confirmation, PAN, bank statements, Form 16, tax audit disclosures, and the lender's reply to notice under section 133(6), which explained the source of the credited sums. The Tribunal found that the lender's identity was established, the lender's capacity was supported by the material on record, and the transaction was reflected in the books and bank accounts. It held that, on the facts of this case, the Revenue had not brought contrary material to rebut the explanation, and the addition could not be sustained merely because the lender had not filed a return for the relevant year. The Tribunal also noted that the assessee had discharged the burden contemplated by section 68 by proving the three essential ingredients.

Conclusion: The addition under section 68 was deleted and the assessee succeeded on the effective ground.

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