INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Assessee proved creditworthiness genuineness of investor - Need to prove source of source

Assessee had reported receipt share application money on account of issue of fresh capital on premium. A notice was issued to investor under section 133(6) who confirmed transaction together with its ITR and other relevant documents such as bank statements, etc. AO was of opinion that investor had received money from sources known as accommodation entry providers. He accordingly disallowed share application money and brought it to tax under section 68. Held: Principle applicable to decide whether amount could be brought to tax under section 68 are identity of investor/creditor, its creditworthiness and genuineness of transactions. Initial burden of discharging this is upon assessee. The investor in this case had sufficient resources. Only ground on which genuineness of transactions was doubted was that investor also received some amounts from dubious sources. Assessee was not under a duty to enquire or satisfy revenue about source of source. No substantial question of law therefore, arose.

Applied:CIT v. Lovely Exports (P) Ltd. (2009) 319 ITR 5 (SC) : 2009 TaxPub(DT) 261 (SC), CIT v. Divine Leasing And Finance Ltd., General Exports and Credits Ltd., Lovely Exports (P) Ltd. (2008) 299 ITR 268 (Del-HC) : 2008 TaxPub(DT) 400 (Del-HC).