Section 68 share application money: documentary evidence and investor confirmations discharged the onus, defeating the addition.

Share application money received in cash was held not assessable under section 68 where the assessee produced PAN details, returns, bank statements, balance sheets, share application forms, allotment letters and confirmations for all applicants. The applicants also responded to notices under section 133(6) and confirmed the investments. On those records, the identity of the investors, their creditworthiness and the genuineness of the transactions were treated as established, so the initial onus under section 68 stood discharged. The addition could not be sustained merely because the cash source in the hands of the applicants was not further explained, especially without effective enquiry to rebut the documentary evidence.

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Issues: Whether the addition made under section 68 of the Income-tax Act, 1961 on account of share application money received in cash from nine individuals was sustainable when the assessee furnished PAN details, income-tax returns, bank statements, balance sheets, share application forms, allotment letters and confirmations in response to notices under section 133(6).

Analysis: The assessee produced material to establish the identity of each share applicant, their creditworthiness as reflected in their capital and financial statements, and the genuineness of the transactions as shown by the records and confirmations. The share applicants responded to the notices issued under section 133(6) and confirmed the investments. Once these primary facts were proved, the initial onus under section 68 stood discharged. In such circumstances, the Assessing Officer could not sustain the addition merely because the source of cash in the hands of the share applicants was not further explained, especially when no effective enquiry was made to disprove the documentary evidence placed on record.

Conclusion: The addition under section 68 was not justified and was deleted in favour of the assessee.

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