Section 68 cash credit addition fails where creditor identity, creditworthiness, and cheque-based loans are proved.

Addition as unexplained cash credit under section 68 was held unsustainable where the assessee proved the identity and creditworthiness of the creditors and the loans were advanced by account payee cheques. The creditors were income-tax assessees, their identities were not disputed, and the only remaining issue was the genuineness of the transactions. In the absence of material showing that the credits actually belonged to the assessee or supporting an adverse finding on genuineness, no inference could be drawn merely on suspicion. The Tribunal's rejection of the transactions was held to be unsupported by evidence and perverse, and the addition was deleted.

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Issues: Whether the addition of Rs. 8,35,000 as unexplained cash credit under section 68 was sustainable when the assessee had established the identity and creditworthiness of the creditors and the loans were advanced by account payee cheques.

Analysis: The disputed sum was examined as a cash credit case under section 68. The creditors were shown to be income-tax assessees, their identities were not in dispute, and the transactions were supported by account payee cheques. The court held that the only remaining controversy was the genuineness of the transactions. In the absence of any further material to show that the credits tally belonged to the assessee or that the Tribunal had evidence to disbelieve the transactions, no adverse inference could be drawn merely on suspicion. The finding rejecting genuineness was therefore unsupported by evidence and could not stand as a question of fact immune from scrutiny where it was perverse or based on no material.

Conclusion: The addition under section 68 was not justified and the finding of the Tribunal sustaining it was set aside in favour of the assessee.

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