Section 68 share capital evidence defeats unexplained cash credit addition where source and investor documents are on record.

Section 68 could not be applied to share capital and share premium received in earlier assessment years, and the addition was unsustainable for that portion. For the balance amount, the assessee produced the investor's return, audited accounts, bank statements, share application form, response to notice under section 133(6), and source of funds, which sufficiently supported the transaction. The addition was not justified merely because directors of the subscriber companies did not comply with summons under section 131. The article therefore states that documentary evidence establishing the investment and source defeats an unexplained cash credit addition under section 68.

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Issues: Whether the addition made as unexplained cash credit under section 68 of the Income-tax Act, 1961, in respect of share capital and share premium could be sustained when a substantial part of the amount had been received in earlier assessment years and the remaining amount was supported by documentary evidence.

Analysis: The amount of share capital and share premium included Rs. 1.33 crore received in earlier assessment years, and therefore section 68 could not be invoked for that portion. For the balance Rs. 10 lakh, the assessee had furnished the investor's return of income, audited accounts, bank statements, share application form, reply to notice under section 133(6), and source of funds before the lower authorities as well as before the Tribunal. The addition was sustained only on the ground that summons under section 131 were not complied with by the directors of the subscriber companies, which was found insufficient in the face of the evidence already on record.

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

Ratio Decidendi: Section 68 cannot be applied to share capital or share premium amounts not received during the relevant year, and where documentary evidence satisfactorily establishes the transaction and source, an addition cannot be sustained merely for non-compliance with summons by third parties.

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