Share capital and premium credits must be proved with source of funds; bare facilitator claims do not defeat unexplained credit additions.

In respect of share capital, share application money and share premium credited in the books of a closely held company, the assessee must explain the nature and source of the credit, including the source of the investor's funds where the statute so requires. Mere filing of documents is insufficient if they do not establish the genuineness, creditworthiness and source of funds in the hands of the applicant. An unsubstantiated claim that the company acted only as a facilitator, or that the same amount was assessed elsewhere, does not by itself defeat the addition under the unexplained credit provisions.

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Issues: (i) Whether the addition of Rs. 1.87 crore made under section 68 in respect of share application money and premium received during the year was sustainable. (ii) Whether the plea that the assessee merely acted as a facilitator and that the same amount had already been assessed in the hands of another entity could displace the addition.

Issue (i): Whether the addition of Rs. 1.87 crore made under section 68 in respect of share application money and premium received during the year was sustainable.

Analysis: The statutory burden under the post-amendment section 68 required the assessee-company, in relation to share application money, share capital and share premium, to explain not only the nature of the credit but also the source of the sum in the hands of the resident applicant. The assessee furnished documents, but they did not establish the nature of the funds received by the share applicant companies, and the explanation regarding the source of source remained incomplete. On the material on record, the identity, creditworthiness and genuineness requirements were not satisfactorily discharged.

Conclusion: The addition of Rs. 1.87 crore under section 68 was rightly sustained and is against the assessee.

Issue (ii): Whether the plea that the assessee merely acted as a facilitator and that the same amount had already been assessed in the hands of another entity could displace the addition.

Analysis: The record did not conclusively prove that the assessee was only a conduit for routing another entity's unaccounted money. The fact that a related amount was also subjected to assessment elsewhere did not, by itself, nullify the statutory obligation resting on the assessee to explain the credited sum in its own books. In the absence of reliable material establishing the asserted routing arrangement, the alternative plea could not be accepted.

Conclusion: The double-taxation and facilitator plea was rejected and is against the assessee.

Final Conclusion: The appellate challenge to the sustaining of the addition failed, and the impugned addition remained undisturbed.

Ratio Decidendi: In respect of share capital, share application money and share premium credited in the books of a closely held company, the assessee must satisfactorily explain the nature and source of the credit, including the source of the investor's funds where required by the statute, and an unsubstantiated plea of mere facilitation or alleged assessment in another case does not defeat section 68.

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