Unexplained Cash Credits cannot be sustained where mandated independent enquiries into shareholder genuineness and source were not conducted.

Whether an addition under the unexplained cash credits doctrine can be sustained where revision directions mandated independent enquiries into the genuineness and source of shareholder funds; the tribunals found the AO and lower authorities failed to conduct those enquiries and did not consider documentary evidence filed by the taxpayer, making the consequential assessment unsustainable. Result: matter remitted for a fresh de novo assessment to examine genuineness and source of the share application/premium in accordance with the revision directions; appeal allowed for statistical purposes.

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Issues: Whether the share application/premium amount of Rs. 13,94,00,000 received by the assessee can be sustained as unexplained cash credits added under section 68 of the Income-tax Act, 1961, without conducting fresh, independent enquiries into the genuineness and source of funds of the shareholders as directed under the revision proceedings.

Analysis: The appellate order under challenge affirmed the addition under section 68 treating the amount as unexplained cash credits, while the revision directions required examination of the genuineness and source of share capital for all shareholders by independent enquiries. The lower authorities did not undertake the full enquiries mandated by the revision directions and did not consider documentary evidence filed by the taxpayer; the consequential assessment order failed to address those materials before making the addition. In these circumstances a fresh, de novo assessment is necessary to comply with the revision directions and to allow proper examination of the source and genuineness of the funds credited as share application/premium.

Conclusion: The matter is restored to the Assessing Officer for fresh de novo assessment in accordance with the revision directions; the appeal is allowed in favour of the assessee for statistical purposes.

Ratio Decidendi: Where revision directions require independent examination of the genuineness and source of shareholder funds, an addition under the provision for unexplained credits cannot be sustained unless such mandated enquiries are carried out and relevant evidence is appropriately considered.

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