Share capital identity and genuineness evidence defeated section 68 addition on investor funds routed through banking channels.

Share capital and share premium received from three investor companies could not be taxed under section 68 where the assessee produced share application forms, ROC records, PAN details, audited financial statements, income tax returns, bank statements and related material to establish the investors' identity, creditworthiness and genuineness. The amounts were routed through banking channels, and no cash deposit by the assessee before issuance of cheques was shown. The Tribunal noted that the amended rule applicable to closely held companies from assessment year 2013-14 did not apply for the year in question. Once the assessee discharged the initial onus with primary evidence, the burden shifted to the Revenue, which failed to rebut the material. The addition was deleted.

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Issues: Whether the addition made under section 68 of the Income-tax Act, 1961 in respect of share capital and share premium received from three investor companies was sustainable.

Analysis: The assessee produced share application forms, ROC records, PAN details, audited financial statements, income tax returns, bank statements, and other supporting documents to establish the identity, creditworthiness, and genuineness of the investor companies. The investors had remitted the amounts through banking channels, and the record did not show any cash deposit by the assessee before the cheques were issued. The Tribunal noted that for the assessment year in question, the amended position applicable to closely held companies from assessment year 2013-14 did not apply. It further held that once the assessee had discharged the initial onus by furnishing primary evidence, the burden shifted to the Revenue to disprove the material or bring contrary evidence, which had not been done.

Conclusion: The addition under section 68 was not sustainable and was deleted.

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