INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Applicability of proviso to section 68 -

Assessee received share subscription amounts and was of the view that it was able to establish the identity, genuineness and creditworthiness of its shareholders. Thus, section 68 would have no application. The grievance of Revenue was that, assessee failed to establish the source of source, i.e., source of the funds invested by the 13 shareholders in the assessee's company. Held: The requirement to explain the source of source of funds in respect of amounts credited in the books of a company in which the public are not substantially interested as share application money was brought in the statute with the introduction of proviso to section 68 by Finance Act, 2012. This proviso was introduced with effect from 1-4-2013. Thus, it would have no application in respect of receipt of share application money received prior thereto. In the present case, the issue was in dealt with respect to issue of share application money in the previous year relevant to assessment year 2008-09. Therefore, the proviso to section 68 would have no application. Further in CIT v. M/s. Gagandeep Infrastructure (P) Ltd. [Income Tax Appeal No. 1613 of 2014, decided on 20-3-2017] : 2017 TaxPub(DT) 1238 (Bom-HC) it was also held that the proviso to section 68 was not introduced with retrospective effect nor does the proviso indicates that it was introduced for removal of doubts.

REFERRED : CIT v. M/s. Gagandeep Infrastructure (P) Ltd. [Income Tax Appeal No. 1613 of 2014, decided on 20-3-2017] : 2017 TaxPub(DT) 1238 (Bom-HC)

FAVOUR : In assessee's favour.

A.Y. :

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