Section 68 proof of share capital receipts requires identity, creditworthiness and genuineness; RBI approval alone is insufficient.

Share capital and share premium received from a Mauritius entity were held taxable under section 68 because the assessee did not satisfactorily prove the investor's identity, creditworthiness, and the genuineness of the transaction. The supporting papers were incomplete and unsigned, with no reliable authentication or annexures, and further evidence was not furnished despite being called for. RBI approval for inward remittance did not satisfy the distinct evidentiary burden under the Income-tax Act. The deletion of the addition was therefore found unsustainable, and the section 68 addition was restored to the Revenue.

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Issues: Whether the deletion of addition made under section 68 of the Income-tax Act, 1961, in respect of share capital and share premium received from a Mauritius entity was justified.

Analysis: The assessee was required to establish the identity of the investor, its creditworthiness, and the genuineness of the share subscription transaction. The documents filed before the Assessing Officer were incomplete and unsigned, lacking supporting features such as annexures, seal, and authentication, and the assessee failed to furnish further satisfactory evidence despite being called upon to do so. Approval by the Reserve Bank of India for inward remittance did not amount to compliance with the requirements of section 68, since the regulatory scrutiny under foreign exchange law was distinct from the evidentiary burden under the Income-tax Act, 1961.

Conclusion: The deletion of the addition was held to be unsustainable and the addition under section 68 was restored, in favour of the Revenue.

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