Section 68 share capital additions fail where identity, creditworthiness and genuineness are proved through banking and record evidence.

Share capital and share premium additions under section 68 were found unsustainable where the assessee produced PAN details, return acknowledgments, audited accounts, share application forms, allotment letters, bank statements and confirmations for the shareholders. Payments were made through account payee cheques, the bank records showed no cash deposits before remittance, and material was placed to show the source of the subscribers' funds. The assessee therefore discharged the initial burden on identity, creditworthiness and genuineness; the onus shifted to the Revenue. Mere non-appearance of some directors or shareholders, without effective contrary enquiry from their assessing officers, was insufficient to justify the addition, and the deletion was upheld.

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Issues: Whether the addition made under section 68 of the Income-tax Act, 1961, on account of share capital and share premium was justified when the assessee produced the shareholders' identity documents, confirmations, bank statements and financial records.

Analysis: The share applicants were shown to be income-tax assessees, and their PAN details, return acknowledgments, audited accounts, share application forms, allotment letters, bank statements and confirmations were on record. The payments were made through account payee cheques and the bank statements did not show cash deposits before the remittances. The assessee also furnished material to show the source of funds of the subscribers. In such circumstances, the assessee discharged the initial burden to establish identity, creditworthiness and genuineness of the transactions. Once that burden was discharged, the onus shifted to the Revenue. Mere non-appearance of some directors or shareholders in response to summons was not enough, by itself, to sustain the addition, particularly when no effective contrary enquiry was made by the Assessing Officer from the concerned assessing officers of the subscribers.

Conclusion: The addition under section 68 was not sustainable and the deletion made by the first appellate authority was upheld. The appeal of the Revenue failed.

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