In the first round of appeal before ITAT, the Tribunal deleted the addition on account of share capital and premium as unexplained cash credit u/s. 68. The revenue filed appeal before High Court, and the High Court  set aside the matter back to ITAT to consider the matter afresh and pass a reasoned order. In the assessment proceedings, the AO issued summons to the directors of the company to whom the share capital was issued, however none of the parties appeared before the AO. The assessee has submitted all the details and response to notice issued u/s. 133(6) was also replied to. The main reason to make addition was that on the date of receipt, there was a similar amount which was also debited from the bank account of the assessee and that the huge premium is not justified by the financials of the assessee company. It was held that though there is no standard operating procedure.

stated under the Act adhering to which one can prove the nature and source of such sum but in the past Hon’ble Apex Court in the case of the land mark judgment of Kale Khan Mohammad Hanif v. CIT (1963) 50 ITR 1 (SC) and Roshan-Di-Hatti v. CIT (1977) 107 ITR 938 laid down the proposition that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and creditworthiness, then the AO must conduct an inquiry, and call for more details before invoking Section 68.  The ITAT after looking into complete documentation submitted during the assessment proceedings concluded that the assessee had submitted everything to prove the onus. Further, it was also observed that all those companies that had invested were also subject to assessment proceedings, where the amounts were taxed. It was held that source of source of such share application has already been taxed in those companies, if the addition is sustained in the assessee company, it would tantamount to double additions and taxation. (AY: 2012-13)