Share capital additions under section 68 fail where identity, creditworthiness and genuineness are proved by documentary evidence.

Share capital and share premium additions under section 68 were unsustainable where the subscriber companies responded to section 133(6) notices with income-tax acknowledgments, audited accounts, bank statements, share application details and confirmations. The documentary record established the identity, creditworthiness and genuineness of the share subscription transactions, with funds routed through banking channels and no cash deposited before issue of cheques. Mere non-appearance of directors in response to section 131 summons, without contrary material or further Revenue investigation, was insufficient to rebut that evidence. The amended source-of-source requirement inserted from 01.04.2013 was inapplicable to the assessment year, and the deletion of the addition was upheld.

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Issues: Whether the addition made under section 68 of the Income-tax Act, 1961 in respect of share capital and share premium was justified.

Analysis: The share subscribing companies were corporate assessees and had responded to notices under section 133(6) of the Income-tax Act, 1961 by furnishing income-tax acknowledgments, audited financial statements, bank statements, share application details and confirmations. The record showed that the investment amounts were routed through banking channels, no cash was deposited before issuance of cheques, and the subscribers had sufficient own funds reflected in their balance sheets. The material placed before the Assessing Officer established the identity of the subscribers, their creditworthiness and the genuineness of the share subscription transactions. Mere non-appearance of directors in response to summons under section 131 of the Income-tax Act, 1961, without any contrary material or investigation by the Revenue, was insufficient to dislodge the documentary evidence already on record. The amended requirement regarding source of source in section 68, inserted with effect from 01.04.2013, was held inapplicable to the assessment year in question.

Conclusion: The addition under section 68 was not sustainable and was rightly deleted.

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