Section 68 burden shifts once identity, creditworthiness and genuineness of share subscription are proved through primary evidence.

Share application money and share premium cannot be added as unexplained cash credit where the assessee produces primary evidence establishing the subscriber's identity, creditworthiness and genuineness of the transaction, including PAN, return, audited accounts, bank statement, confirmations, allotment documents and source trail. Payment through banking channels and demonstrated availability of funds support discharge of the initial burden under section 68, after which the burden shifts to the Revenue. The amended section 68 provision for closely held companies did not apply to assessment year 2011-12. On these facts, the addition based on the premium charged and mere suspicion was not sustainable.

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Issues: Whether the addition of share application money and share premium as unexplained cash credit under section 68 was justified where the assessee produced identity particulars, audited accounts, bank statements, confirmations and source of funds of the subscriber, and whether the amended provision of section 68 applied to the assessment year involved.

Analysis: The assessee had received share application money with premium from a subscriber whose PAN, income-tax return, audited financial statements, bank statement, allotment documents and source trail were furnished before the Assessing Officer. The materials showed that the payment was made through banking channels and the subscriber had adequate funds reflected in its accounts. The amended rule relating to closely held companies and share capital, share premium or share application money was held inapplicable because the assessment year was 2011-12. On the facts, the assessee discharged the initial onus under section 68 by establishing identity, creditworthiness and genuineness of the transaction, and no adverse inference could be sustained merely on the basis of the premium charged or conjectural suspicion.

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

Final Conclusion: The disputed share capital and share premium could not be treated as unexplained income on the record produced, and the assessment addition was set aside.

Ratio Decidendi: In a section 68 enquiry concerning share application money, once the assessee proves the identity of the subscriber, the genuineness of the transaction and the subscriber's creditworthiness through primary contemporaneous evidence, the burden shifts to the Revenue and an addition cannot rest on suspicion or the mere fact of a high premium.

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