Section 68 additions stand where the assessee fails to prove creditors’ creditworthiness.

The appellant, an individual proprietor of M/s Kailash Engineers, challenged an addition of ₹7,00,000 under Section 68 of the Income Tax Act, 1961, representing unsecured loans.

The Assessing Officer had added ₹9,00,400 as unexplained credits; the CIT(A) deleted ₹2,00,400 and sustained ₹7,00,000, and the ITAT affirmed that decision

The sustained amount comprised loans attributed to Pawan Kumar (₹50,000), Santosh Rani (₹4,50,000), Vimla Arora (₹1,00,000), and S. L. Magoo (₹1,00,000).

The authorities found that the creditors either denied advancing loans or could not satisfactorily explain the source of the funds, including cash deposits in their bank accounts.

Whether the ITAT’s finding that the appellant had failed to prove the creditworthiness of the creditors was perverse?

Section 68 of the Income Tax Act, 1961 permits a sum credited in an assessee’s books to be treated as income where the assessee offers no explanation, or the Assessing Officer considers the explanation unsatisfactory.

Under CIT v. NRA Iron & Steel (P) Ltd., (2019) 15 SCC 529, the assessee bears the initial onus of establishing the identity and creditworthiness of the creditor and the genuineness of the transaction through cogent evidence; proving identity alone is insufficient.

Where that initial onus is discharged, the Assessing Officer must make further inquiry, but an unsatisfactory explanation of the nature and source of the credit may justify treating it as the assessee’s income.

The Court considered the creditors’ statements and the concurrent findings of the Assessing Officer, CIT(A), and ITAT.

Pawan Kumar and S. L. Magoo denied advancing loans, while Santosh Rani and Vimla Arora did not satisfactorily explain the funds advanced, including relevant cash entries in their accounts.

Applying the Section 68 principles in NRA Iron & Steel, the Court held that the appellant had not established the creditors’ creditworthiness.

It found no basis to characterize the authorities’ assessment of the evidence as perverse.

The Court distinguished Principal Commissioner of Income-Tax v. KRBL Infrastructure Ltd., (2026) 486 ITR 88, because that case involved accepted creditworthiness and concurrent findings in the assessee’s favour, unlike the present case.

The appeal and pending application(s), if any, were dismissed.