Repayment of share application money through third-party records defeats unexplained income addition where documentary proof establishes discharge.

Share application money could not be treated as unexplained income where contemporaneous confirmations, ledger accounts and bank statements showed that the liability was repaid through Nath Group entities on behalf of the assessee. The fact that the amount continued to appear outstanding in the assessee's books did not override the documentary record, and incomplete cooperation from some recipient companies was insufficient to displace evidence of actual discharge. On these facts, the addition was deleted because the repayment through a third party was established.

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Issues: Whether the addition of share application money as unexplained income was sustainable when the assessee produced documentary evidence showing repayment through Nath Group of Companies.

Analysis: The share application money credited in the assessee's books remained outstanding, while the recipient companies had reflected repayment in the relevant financial year. The dispute after remand was confined to verifying whether the repayments shown by Nath Group were in fact made on behalf of the assessee. The assessee produced confirmations, ledger accounts and bank statements of the payer and payee entities, showing that the larger cheques issued by Nath Industrial Chemical Ltd. and Nath Papers & Pulp Ltd. included the amounts of Rs. 17,20,000/-, Rs. 17,00,000/- and Rs. 17,00,000/- attributable to the assessee's liability. The absence of complete cooperation from some recipient companies did not outweigh the contemporaneous documentary record, and the takeover agreement was not decisive once actual repayment through Nath Group was established.

Conclusion: The addition was not sustainable and was deleted. The issue was decided in favour of the assessee.

Ratio Decidendi: Where repayment of share application money is established by contemporaneous confirmations, ledger accounts and bank records showing discharge of the liability through a third party, an addition for unexplained income cannot be sustained merely because the assessee's books continued to show the amount outstanding.

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