During a search conducted on a group and its associates, the Investigation Wing found that the group had admitted to providing accommodation entries. Based on this admission, the AO formed the opinion that MGL was linked to the accommodation provider, and subsequently, the AO reopened the assessment and made additions u/s. 68 as unexplained credit with respect to the loan taken by the assessee from MGL.

The Tribunal observed that the loan transaction was supported by genuine documents and was conducted through proper banking channels. The identity of the lender, the genuineness of the transaction, and the creditworthiness of the lender were established, and no evidence was provided by the AO to disprove these factors. The loan repayment was also made through banking channels, and there was nothing in the records to suggest that the loan was actually the assessee’s unaccounted money channeled through the alleged lender.

Held that the all essential elements of a genuine loan were clearly demonstrated. The loan was taken through proper banking channels, and there was no evidence suggesting that the loan was anything other than legitimate. The identity of the lender, the genuineness of the transaction, and the creditworthiness of MGL were not disputed by the AO, and the assessee had provided sufficient documentation and evidence. Nothing was brought on record to suggest that the loan received by the assessee was part of any unaccounted money or that it had any illicit origins. The loan could not be considered unexplained credit.(AY. 2018-19)