Law:

Section:

Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 2001-02 - Assessee received an amount towards share capital contribution from one of its directors, 'K' - Assessing Officer summoned said director who produced her bank statement showing that she had requisite amount for investment which she had received from bank through cheques issued by a company 'M' - Thereafter Assessing Officer issued summons to said company - Said summons were received back unserved - Thereafter, Assessing Officer being not satisfied about genuineness of said company made an addition under section 68 to income of assessee - Whether once it was established that 'K' was a genuine person and she had requisite credit worthiness, there was no occasion for revenue to go further to find out whether said company was also genuine and creditworthy as it would be stretching provisions of section 68 a little too far - Held, yes FACTS The assessee received an amount of Rs. 15 lakhs towards share capital contributions from one of its directors, 'K'. The Assessing Officer summoned the said director to ascertain the source of investment. The director produced her bank statement indicating that she had issued the three cheques of Rs. 5 lakhs each to the assessee. Prior to that, 'K' received the said cheques from the bank which were issued by a company 'M'. The Assessing Officer, therefore, issued summons to a 'M' but the said sum-mons were received back unserved. Thereafter, the Assessing Officer being not satisfied about the genuineness of 'M' added the amount of Rs. 15 lakhs as unexplained cash credit under section 68 to the income of the assessee. On appeal, the Commissioner (Appeals) upheld the view taken by the Assessing Officer. On further appeal, the Tribunal held that the credit-worthiness of 'K' was not doubted. The Tribunal further held that though 'M' was based in Calcutta, summons was issued to it on Delhi address and there was evidence to suggest that 'M' also had the requisite amount of creditworthiness on the basis of which cheques were issued to 'K' and, therefore, the assessee could not be foisted with a liability under section 68. On revenue's appeal : HELD It was…

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