Appeal dismissed; addition under section 68 for share application money deleted as assessee proved applicants' identity and payments.

HC dismissed the Revenue's appeal and upheld deletion of addition under s. 68 on account of share application money. It affirmed the concurrent findings of CIT(A) and Tribunal that the assessee had established the identity of the share applicants, who were income-tax assessees with valid PAN and had remitted amounts through banking channels. Applying the ratio of SC in a precedent on bogus shareholders and share capital, HC held that once the assessee furnishes names and details of share applicants, any further inquiry must be directed against such applicants, and the share application money cannot be treated as the assessee's undisclosed income.

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Issues: Whether share application money received by a company can be treated as undisclosed income under Section 68 of the Income-tax Act, 1961 where the company furnished details of shareholders (including PAN), confirmations and bank evidence, but the Assessing Officer made additions without bringing adverse material to displace the primary evidence.

Analysis: The authorities below found that the company produced lists of shareholders with addresses, PANs, cheque numbers and bank details, confirmations from shareholders, bank statements evidencing receipts and copies of shareholders' returns and audited balance sheets. In these circumstances the company discharged its primary onus of proving identity and genuineness of the receipts. The Assessing Officer failed to place any adverse material on record or afford opportunity for rebuttal or cross-examination based on any purported reports or operator lists. Binding precedent establishes that where share application money is received from named persons whose identities are disclosed, the department's remedy is to investigate or reopen the assessments of those individuals rather than treat the amount as undisclosed income of the recipient company under Section 68. The concurrent factual findings by the appellate authorities that the payments were by cheque and the shareholders were assessed remained uncontroverted.

Conclusion: The share application money cannot be regarded as undisclosed income of the company under Section 68; the addition made by the Assessing Officer is not justified and is to be deleted (conclusion in favour of the assessee).

Final Conclusion: On the facts and law, the appellate findings upholding deletion of the addition are sustained and the appeal is dismissed.

Ratio Decidendi: Where a company produces credible evidence of the identity and genuineness of shareholders (including PAN, confirmations and bank cheques), and the Assessing Officer does not produce adverse material to rebut that evidence, share application money cannot be treated as undisclosed income under Section 68; the proper course is investigation or reopening of the individual shareholders' assessments.

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