Section 68 share capital addition fails when documentary evidence is furnished and revenue makes no meaningful enquiry.

Where an assessee supports share capital and share premium credits with PAN, audited financials, bank statements and other subscriber evidence, the burden under section 68 is discharged if the revenue fails to make a meaningful enquiry. Here, notices to subscribers elicited replies and most subscribers had been assessed under section 143(3), yet no effective verification was made even after remand. An ad hoc estimate of part of the credits as profit was therefore unsustainable because identity, creditworthiness and genuineness had not been disproved on proper evidence. The addition under section 68 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 could be sustained where the assessee had furnished PAN, audited financial statements, bank statements and other supporting evidence of the subscribers, and the authorities below had not carried out meaningful enquiry.

Analysis: The assessee had produced the relevant documentary evidence before the Assessing Officer as well as the appellate authority, and notices issued to the share subscribers had elicited replies with supporting material. The record also showed that most of the subscribers had been assessed under section 143(3) of the Income-tax Act, 1961. Despite the earlier remand by the Tribunal for fresh verification of the evidence, no effective enquiry was made in the set-aside proceedings. The appellate authority's estimate of 50% of the credits as profit was held to be unsustainable because it was not founded on any proper examination of the evidence or legal finding on the identity, creditworthiness or genuineness of the transactions.

Conclusion: The assessee had discharged the burden cast upon it, and the addition under section 68 of the Income-tax Act, 1961 was directed to be deleted. The assessee's appeal was allowed and the Revenue's appeal failed.

Ratio Decidendi: Where an assessee furnishes primary evidence establishing the share applicants' identity, financial capacity and transaction genuineness, and the revenue authorities fail to conduct meaningful enquiry despite available material, an addition under section 68 cannot be sustained on or ad hoc estimation.

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