INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Receipt of share capital/premium -

Assessee-company received share capital along with premium. As assessee could not produce shareholders for examination and recording of their statements on oath under section 131, AO was of the view that the assessee failed to prove identity and creditworthiness of shareholders, as well as the genuineness of the trasactions of receipt of equity share capital and share premium from them. Thus, AO taxed the amount received as unexplained credit under section 68. Held: Assessee by filing copy of companies data from MCA website [including their names, addresses and director information], copy of form filed with ROC for allotment of shares and balance sheets of investors; copy of Board Resolution, share application money ledger account ; valuation certificate of shares of assessee company; incorporation certificate, Memorandum and Articles of Association of shareholder companies; and bank statements highlighting transactions under consideration, duly substantiated identity and creditworthiness of shareholder companies, as well as the genuineness of transactions under consideration. Further, proviso to section 68 which requires the person in whose name credit of share capital, premium is recorded to put forth an explanation about the 'name' and 'source ' of such sum, introduced vide Finance Act, 2012 with effect from 1-4-2013, was effective only from assessment year 2013-14 onwards, thus, same was not applicable to the year under consideration, i.e., assessment year 2010-11. Accordingly, amount received by assessee from shareholder companies could not be treated as unexplained cash credit under section 68.

Relied:CIT v. Creative World Telefilms Ltd. (2011) 333 ITR 100 (Bom-HC) : 2011 TaxPub(DT) 96 (Bom-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-11

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