INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Assessee not having increased authorized share capital before issuing shares to non-resident -

Assessee had introduced/received share application money from non-resident on 25-3-2011 amounting to Rs. 4 crores . The share application money was pending allotment of shares in the Balance Sheet as on 31-3-2011. AO noted that authorized share capital of assessee was only Rs. 3 crore out of which the company had already issued share capital worth Rs. 1.78 crores as on 31-3-2011 and assessee could have issued and allotted the Shares to the extent of Rs.1.22 Crores only, however, the company had not increased nor filed any application for increasing authoriszed share capital even after the year under consideration. Accordingly, AO holding that capital introduced by the assessee was unexplained added the same under section 68.Held: Under section 68 the onus requirement is that transaction should be genuine and identity and credit worthiness of the party should be proved there is no requirement for increasing share capital for allotment of shares. As evident, assessee had filed all the requirements complying with RBI guidelines by filing FIRE with RBI and also filed unique identification No. from RBI. Further, it had also filed FCGPR with RBI in this connection. Hence, there was no requirement of increasing the authorized share capital and as, assessee had fulfilled all the three ingredients of section 68, no addition could be made.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12

INCOME TAX ACT, 1961

Section 68

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