Short Overview: A perusal of financial statement, bank statements and income tax returns of share applicants companies clearly revealed that they had no regular means to invest in the share capital of the assessee company and, therefore, AO was justified in making addition under section 68 on the ground of lack of creditworthiness and genuineness.

AO required assessee-company to prove genuineness of share application incomes received two companies based at Indore and Kolkata. Assessee furnished financial statement, bank statements and income tax returns of those companies AO not satisfied with the same, made addition of share application money under section 68

It is held that apart from furnishing financial statement, bank statements and income tax returns assessee could not produce any of the principal officer of share applicant companies. Detailed investigation was carried out by AO giving no positive results favouring assessee. A perusal of the financial statement of those companies showed that there was no turnover and no regular means to invest in the share capital of the assessee company. Petty expenses were incurred against NIL revenue in the bank statement regular transactions of huge amounts in which similar amount of debit and credit entries were appearing in short span went round the year but there was no nexus with the business activity of share applicants. Thus, genuineness of transactions of share application money and also creditworthiness of both share applicants remained unproved and accordingly, AO was justified in making addition under section 68.

Decision: Against the assessee