Share application money under section 68: identity, creditworthiness and genuineness were proved, so the addition failed.

Share application money could not be treated as unexplained cash credit where the assessee produced audited financial statements, bank statements, confirmation, income-tax return acknowledgement and evidence of refund through banking channels. The investor's assessed status established identity, its audited accounts showed substantial share capital, reserves and profits supporting creditworthiness, and the surrounding material discharged the three ingredients of section 68. The addition was therefore not justified merely because notice under section 133(6) was allegedly not served or not responded to, and the addition was deleted.

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Issues: Whether the addition of share application money of Rs. 2 crores as unexplained cash credit under section 68 of the Income-tax Act, 1961 was justified.

Analysis: The investor company had furnished audited financial statements, bank statements, confirmation and income-tax return acknowledgement in response to the notice issued under section 133(6) of the Income-tax Act, 1961. The assessee also produced material showing that no shares were ultimately allotted and that the amount was refunded through banking channels. The investor company's audited accounts reflected substantial share capital, reserves and profits, supporting its creditworthiness, and its assessed status established identity. On the record, the three ingredients required under section 68 of the Income-tax Act, 1961 stood discharged and the addition could not rest merely on the alleged non-service or non-response to notice under section 133(6) of the Income-tax Act, 1961.

Conclusion: The addition of Rs. 2 crores under section 68 of the Income-tax Act, 1961 was not sustainable and was deleted.

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