Share application money must satisfy identity, creditworthiness and genuineness; paper confirmations alone do not defeat section 68.

Share application money received from three corporate subscribers was treated as unexplained income under section 68 because the assessee failed to prove the identity, creditworthiness and genuineness of the transactions. Although returns, confirmations and bank details were filed, the assessee did not produce the directors despite repeated opportunities, and the record showed meagre bank balances, no evidence of share allotment, and no satisfactory explanation of the subscribers' financial capacity. The Tribunal applied the settled rule that cheque payments and paper confirmations do not by themselves discharge the burden where surrounding circumstances indicate accommodation entries.

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Issues: Whether the share application money received from three companies was liable to be treated as unexplained income under section 68 of the Income-tax Act, 1961.

Analysis: The assessee received share application money from three corporate subscribers but failed to produce their directors before the Assessing Officer despite repeated opportunities. Although copies of returns, confirmations and bank details were filed, the material on record showed meagre bank balances, no evidence of share allotment, and no satisfactory explanation of the investors' creditworthiness or the genuineness of the transactions. The Tribunal applied the settled rule that in cases of share capital receipts, the assessee must establish the identity of the shareholder, the creditworthiness of the subscriber and the genuineness of the transaction; mere payment by cheque or filing of confirmations does not discharge that burden where surrounding circumstances indicate accommodation entries.

Conclusion: The addition under section 68 was rightly sustained and the assessee's appeal was dismissed.

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