Share capital and share premium credits must be proved with real evidence of identity, creditworthiness and genuineness.

In share capital and share premium cases, the assessee must prove the identity, creditworthiness and genuineness of the investors and the transaction under section 68. Mere filing of confirmations, return acknowledgements, bank statements and receipt through banking channels is not enough where surrounding circumstances raise doubt, such as low investor income, unexplained premium and lack of evidence of real business activity. Applying the test of human probabilities and surrounding facts, the deletion of the addition was found unsustainable, and the assessment addition for unexplained credits was restored.

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Issues: Whether the deletion of addition made under section 68 on account of share capital and share premium was justified, and whether the assessee had discharged the burden of proving the identity, creditworthiness and genuineness of the investors and the transaction.

Analysis: The assessment record showed that the assessee failed to establish the creditworthiness of the share applicants and the genuineness of the share subscription transactions to the satisfaction of the Assessing Officer. Mere filing of confirmations, return acknowledgements, bank statements and receipt through banking channels was held insufficient when the surrounding circumstances, including meagre incomes of the investor companies, unanswered questions on premium, and lack of satisfactory evidence of business activity, created doubt about the real nature of the credits. Applying the settled principles that the assessee bears the primary onus under section 68 and that tax authorities may examine human probabilities and surrounding circumstances, the deletion made by the first appellate authority was found unsustainable.

Conclusion: The assessee did not discharge the burden under section 68, and the addition made by the Assessing Officer was restored.

Final Conclusion: The order deleting the addition was set aside and the Revenue's appeal succeeded, resulting in restoration of the assessment addition on account of unexplained share capital and share premium.

Ratio Decidendi: In a case of share capital or share premium credits, the assessee must establish identity, creditworthiness and genuineness with cogent evidence, and where surrounding circumstances show lack of capacity or doubtful transactions, the addition under section 68 is sustainable.

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