Section 68 on share application money: credit in books for the year and failure to prove identity, capacity and genuineness sustained the addition.

Section 68 applied to share application money credited in the assessee's books in assessment year 1997-98, because the statutory burden arises in the year of credit and not merely when money is said to have been physically received earlier. The assessee failed to prove the investors' identity, creditworthiness and genuineness of the transaction, as no cogent supporting material such as balance sheets was produced to establish the source of funds or financial capacity of the four entities. On that factual basis, the addition was sustained as legally valid in assessment year 1997-98.

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Issues: Whether the addition of Rs. 80 lakh under section 68 of the Income-tax Act, 1961 was sustainable in assessment year 1997-98 on the footing that the amount had been credited in the assessee's books in that year, and whether the assessee had discharged the burden of proving the identity, creditworthiness and genuineness of the transaction.

Analysis: The assessment related to share application money allegedly received from four entities. The assessee's plea that the amount was physically received earlier did not by itself dislodge the fact that the credit appeared in the books in the relevant assessment year. No cogent evidence such as the investors' balance sheets was produced to substantiate the source of funds or establish the investors' financial capacity and the genuineness of the transaction. The statutory requirement under section 68 is attracted in the year in which the sum is credited in the books of account, and the relevant credit was found to be in assessment year 1997-98.

Conclusion: The addition under section 68 was held valid and legally sustainable in assessment year 1997-98, and the assessee failed on the substantive ground.

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