INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Receipt of share capital/premium - Amount reeived treated as unexplained credit based on third party statements--Assessee proved identity, creditworthiness and genuineness--No opportunity of cross-examination given to assessee

AO based on third party statement recorded by investigation wing treated share capital/premium received by assessee as bogus unexplained credit under section 68 and made addition. Held: Assessee filed various documents, viz., Form-2-Return of Share allotment filed by assessee with Registrar of Companies (RoC)), details of entities to whom shares were allotted and compliance certificate from Company Secretary regarding share allotment compliances. Copies of IT Return acknowledgements, bank and audited financial statements of investor entites. Accordingly, assessee proved identity, and creditworthiness of investor entities, and genuineness of the transactions involved. However, except for relying on a third-party statement, which was never confronted to assessee, there was no other material to support the conclusion that transactions were unexplained cash credit. No opportunity of cross-examiantion was ever provided to assessee and in fact, no further investigation was done by AO to support his conclusion. Accordingly, addition made by AO could not be sustained.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-11 & 2011-12

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