Unexplained share application money cannot be taxed as assessee's income absent evidence linking deposits to him.

Share application money credited in a company's books in the names of an assessee's wife and major sons could not be treated as the assessee's undisclosed income merely because the source was questioned. The rule used for unexplained deposits in the assessee's own account was inapplicable, since the amount was not credited in his personal books. In the absence of material showing that the company was a device to evade tax, or that the corporate form could be ignored under piercing the corporate veil, and with no evidence that the deposits were made by the assessee, the addition was not sustainable.

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Issues: Whether the addition of Rs. 40,500 as income from an undisclosed source, being share application money credited in the books of the company in the names of the assessee's wife and major sons, was justified.

Analysis: The amount in question was not credited in the assessee's own books but in the books of the company, where it stood in the names of the wife and major sons. The rule applicable to unexplained deposits in the assessee's own account, where a false explanation may justify treating the amount as his income, did not apply on these facts. There was also no material showing that the company was a mere device to evade tax or that the corporate form could be disregarded on the principle of piercing the corporate veil. In the absence of evidence that the deposits made in the names of the wife and sons were made by the assessee, the addition could not be sustained.

Conclusion: The addition of Rs. 40,500 was rightly deleted and the answer was in favour of the assessee.

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