Unexplained share capital credits upheld where bank records contradicted filed statements and penalty followed for inaccurate particulars.

Share capital and share premium credits were held unexplained under section 68 because the assessee's bank statements did not match records obtained directly from the banks, showing cash deposits in subscriber accounts before cheques were issued. The assessee failed to prove identity, creditworthiness and genuineness of the share applicants with reliable evidence, and discrepancies in the surrounding records supported the finding that the receipts were not genuine. On the same facts, penalty under section 271(1)(c) was also upheld because the assessee had furnished forged and unreliable particulars, so the explanation was not bona fide and amounted to inaccurate particulars.

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Issues: (i) Whether the addition of Rs. 50,00,000 made under section 68 on account of share capital and share premium was sustainable; (ii) Whether penalty under section 271(1)(c) was sustainable for furnishing inaccurate particulars in relation to the same credits.

Issue (i): Whether the addition of Rs. 50,00,000 made under section 68 on account of share capital and share premium was sustainable.

Analysis: The credit entries were supported by bank statements and confirmations filed by the assessee, but the Assessing Officer obtained bank records from the banks themselves and found that the statements produced by the assessee did not match the actual bank records. The records received from the banks showed cash deposits in the subscriber accounts before issue of cheques to the assessee, while the assessee's documents showed transfer or clearing entries. The assessee also failed to satisfactorily establish the identity, creditworthiness and genuineness of the share applicants by reliable supporting evidence. The surrounding circumstances, including discrepancies in balance sheets and failure to produce convincing primary evidence, showed that the transactions were not genuine share capital receipts.

Conclusion: The addition under section 68 was upheld and is against the assessee.

Issue (ii): Whether penalty under section 271(1)(c) was sustainable for furnishing inaccurate particulars in relation to the same credits.

Analysis: The penalty was founded on the finding that the assessee had furnished forged bank statements and other unreliable particulars to explain the share application money. Since the quantum addition was sustained on the basis that the explanation was false and the documents were doctored, the explanation could not be regarded as bona fide. On these facts, the case was held to involve furnishing of inaccurate particulars rather than a mere unsustainable claim.

Conclusion: The penalty under section 271(1)(c) was upheld and is against the assessee.

Final Conclusion: The appellate tribunal sustained both the quantum addition and the penalty, holding that the share capital receipts were not genuine and that the assessee had furnished inaccurate particulars in support of the credits.

Ratio Decidendi: In a case of share application money, the assessee must establish the identity, creditworthiness and genuineness of the transaction with reliable evidence; where the documents produced are found to be forged or inconsistent with bank records, the credit can be treated as unexplained and penalty may follow for furnishing inaccurate particulars.

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