Kandhari Seeds Pvt. Ltd., has credited the following amounts in the books as share application amount : S.No. Name Residential Status Amount (₹) 1. A Resident 5 lakh 2. B Resident 10 lakh 3. C Non-resident 22 lakh The ca

Answer 5(e) Unexplained cash credit Section 68(1) of the Income Tax Act, 1961 provides that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year: 2 nd proviso to section 68 further provides that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless: (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Since, Assesses has not offered satisfactory explanation about the source & credit worthiness with respect to B&C, hence addition can be made in respect of unexplained cash credit from both B & from C.