Section 68 cash credit proof must rest on actual investor capacity and records, not returned income alone.

In a section 68 cash credit enquiry involving share capital and share premium from investor companies, the assessee discharged the initial onus by producing investor financial statements, balance sheets and bank records. The investors' sources had been accepted in their own assessments, so creditworthiness had to be judged on actual financial capacity and supporting evidence, not on returned income alone. On that basis, the addition was held unsustainable and deletion was upheld in favour of the assessee.

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Issues: Whether the addition made under section 68 on account of share capital and share premium received from the three investor companies was sustainable.

Analysis: The assessment status of the investor companies was examined along with their financial statements, balance sheets and bank records. The materials showed that the investors' sources had been accepted in their respective assessments, and the creditworthiness of a company could not be judged only from the returned income. Since the source of funds in the hands of the investors stood verified and accepted on scrutiny, the assessee was held to have discharged the initial onus under section 68.

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

Ratio Decidendi: For a cash credit enquiry under section 68, creditworthiness and source of funds must be examined on the basis of the investors' actual financial capacity and supporting records, and not merely on returned income alone.

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