14 May 2010
Dear members I have a query one of my cleint a pvt ltd co. has taken share application money rom some of the shareholders, now the case has been fixed for sruitny and the AO wants the creditworthiness of the applicants, In my opinion there are some case laws in which AO cannot ask for the creditworthiness of the applicants of share application, pls give me the citation
14 May 2010
Your assessing officer is 100% right in asking the details. If you are unable to explain properly or provide the source of income for the applicants then that will be treated as unexplained credits and will be added to income of the assessee.
14 May 2010
Share application money constitutes 'credit' within the meaning of section 68 of the IT Act,1961,therefore, the assessee has to prove the identity and creditworthiness of the subscribers and the genuineness of the transaction. If not proved,share application money was held to be income from undisclosed sources of the company taxable in its hands.
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