TMI Blog2005 (3) TMI 397X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The AO issued letters calling for information under s. 133(6) of the IT Act, 1961, to the share applicants. The information called for were as under: (i) The amount invested in the shares of the assessee-company during the financial year 1995-96 along with details of sources thereto; (ii) Particulars of income-tax assessment along with copies of acknowledgement for latest IT return filed; (iii) Copies of the balance sheet as on31st March, 1996, along with schedule thereto. 4. In most of the cases, the letters sent were received back with the remarks that no such firm exists at the given address. The assessee-company was therefore informed of this fact. The assessee was also informed that the address of the companies except M/s Confluence Leasing and Credits Ltd., were either incomplete or did not have any office at the given address. The assessee-company was asked to furnish the necessary evidence to prove the genuineness of the investment made by the shareholders. The AO deputed the inspector for making necessary enquiries in connection with the investments made by the said companies. The AO narrated the detailed facts and result of enquiry made in respect of each of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vested Rs. 5 lakhs. In this case also the pay order of Rs. 5 lakhs was got made from the account of M/s M.G. Investment by depositing cash on the same date. (iii) M/s Lorence Distributors (P) Ltd. (LDPL): The investment made by this company was Rs. 5 lakhs vide pay order No. 014562 dt.11th Nov., 1995. In this case too, pay order was got made from account of M/s M.G. Investment by depositing the cash on the same date. (iv) M/s Confluence Leasing Credits Ltd. (CLCL): This company made investment of Rs. 5 lakhs vide demand draft No. 00826 dt. 12th Nov., 1995, which was got made from the Bank of India, Bank Street, Karol Bagh, New Delhi. Information under s. 133(6) was called for. However, the same remained uncomplied with. A summon under s. 131 was issued for furnishing the information as asked for vide letter seeking information under s. 133(6) of the IT Act, 1961. The reply was received in which the acknowledgement for filing the return for asst. yr. 1995-96 was filed but no acknowledgement for filing return for asst. yr. 1996-97 or any further return was filed. A bank statement was also filed for the period1st Nov., 1995to11th Nov., 1995, in which there was deposit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med this fact. A perusal of the bank account reflected a cash deposit of Rs. 51akhs on14th Nov., 1995. (ix) V.V. Consultants (P) Ltd.: Like in the case of ATL, this company had made investment of Rs. 5 lakhs by way of banker cheque No. 025205 dt. 14th Nov., 1995, drawn on the same bank The balance sheet of the company reflected investment of Rs. 6.83 lakhs as on 31st March, 1995 and Rs. 6.25 lakhs as on 31st March, 1996, but it was not clear as to whether the company had invested Rs. 5 lakhs in this year or not. The enquiry conducted through ADI, Rohtak, revealed that the genuineness of both the companies were doubtful. However, the AO had not denied the possession of bank statement of both the companies. (x) M/s Blue Home Co. (P) Ltd. (BHBL): This company made investment of Rs. 5 lakhs by way of pay order No. 35029 dt.13th Nov., 1995, drawn on State Bank ofBikanerand Jaipur, Karol Bagh,New Delhi. The inspector reported that existence of this company was at a different address. The statement of the bank account revealed a deposit of Rs. 5 lakhs on the day on which the pay order was made. In this case also bank furnished the information that the banker cheque for Rs. 5 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sufficient enough to reveal the identity of the investors, which would prove their existence as they were assessees of the Department and the Department had jurisdiction over them. For any further clarification, the Department has ample powers to proceed under s. 133 with the ROC and have knowledge as regards to their directors, their addresses and the existence of the companies, etc. 7. In respect to the genuineness of the transaction, it was submitted that all the payments had been received by crossed bankers cheques/pay order or drafts. Fresh affidavits as well as confirmation from shareholders had also been filed. 8. Regarding creditworthiness, it was submitted that the assessee-company was not required to prove the source of source as has been held in the case of CIT vs. Daulatram Rawatmull 1972 CTR (SC) 411 : (1973) 87 ITR 349 (SC). It was further argued that applicability of s. 68 of the Act to the share capital was very limited as had been held in as the case of CIT vs. Sophia Finance Ltd. (1993) 113 CTR (Del)(FB) 472 : (1994) 205 ITR 98 (Del)(FB). Therefore, it was submitted to accept the share capital received by the assessee-company. The AO after having considered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers wherever available (ix) Form No. 32 filed with ROC showing their directors wherever available. (x) Form No. 18 filed with the ROC by the applicant companies showing their registered offices. 10. The Authorised Representative has further submitted that by providing all the above details, the assessee-company has fulfilled its obligation of proving the existence of these companies as also their complete whereabouts available with it and furnished details of investors as provided to the assessee by the investors were also submitted to the AO to show the creditworthiness of the investors. It has further mentioned that all the details about the investors were provided to the AO as were received from them and the assessee has neither the ability nor the authority to verify the authenticity or otherwise of the information provided by the investors. 11. The Authorised Representative has further submitted that the principles laid down in the various rulings, the assessee-company has to establish that the shareholders exist and they have invested in the share capital of the assessee-company. The assessee had led substantial evidence before the AO and established all these grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not for the assessee to enquire into the source of the source of the investor. If the Department feels that it has sufficient material to justify further enquiry into the source of the investor, it has all liberty to do so. Any shortcoming on the part of the investor cannot be a case for regarding the capital receipt to treat it as the income of the assessee in the present case. He has further argued that all the parties, which are private limited companies, have confirmed that they have applied for these shares. Private limited companies are registered with the ROC and their existenct3 is never in doubt. The relevant addresses and the income-tax assessment particulars have also been submitted to the AO. This clearly shows that all the applicant companies have been identified, their existence has been proved beyond doubt and it has been established that they have invested money in the purchase of shares. 13. As regards the discrepancy pointed out by the AO in the amounts invested by the investors when compared with the balance sheet, the learned counsel for the assessee has submitted that none of the creditors or shareholders of the assessee-company are interested in any of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. vs. CIT (2003) 182 CTR (Cal) 585 : (2003) 263 ITR 289 (Cal), CIT vs. Ruby Traders Exporters Ltd. (2003) 182 CTR (Cal) 596 : (2003) 263 ITR 300 (Cal) and CIT vs. Nivedan Vanijya Niyojan Ltd. (2003) 182 CTR (Cal) 605 : (2003) 263 ITR 623 (Cal) has argued that the ratio decided in the Steller Investment Co. is no more good law as it was overruled by the Full Bench decision in the case of CIT vs. Sophia Finance Ltd. He has further pointed out that it has been held by the Calcutta High Court in the above named cases, and that though the SLP against the decision of Steller Investment has been dismissed by the apex Court as reported in CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287 : (2001) 251 ITR 263 (SC) but the said dismissal of Special Leave Petition is not a ratio decendi biding under Art. 141 of the Constitution. Thus, he has argued that since the assessee has failed to establish the identity and creditworthiness of the investor companies and the genuineness of the transactions, the AO was justified to make the impugned addition. He has further relied upon the order passed by the AO. 18. On the other hand, the learned counsel for the assessee has submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crepancy the assessee cannot be held responsible inasmuch as the assessee-company furnished the copy of accounts of the said companies as were provided by them. Reliance has been made upon the decision in the case of CIT vs. Sophia Finance Co. Asstt. CIT vs. Anima Investment Co. (P) Ltd. (2000) 68 TTJ (Del)(TM) 1 : (2000) 73 ITD 125 (Del)(TM), L.N. Bradley India Ltd. vs. CIT (2002) 74 TTJ (Del) 604 : (2002) 80 ITD 43 (Del), CIT vs. Steller Investment Co. and CIT vs. Steller Investment and CIT vs. Achal Investment Ltd. (2004) 187 CTR (Del) 475 : (2004) 268 ITR 211 (Del). 20. We have heard the parties and perused the materials and the case law to which our attention was drawn during the course of hearing. The AO had made the impugned addition as according to him the investor companies do not exist as the information called for under s. 133(6) of the Act returned unserved by postal authorities and the report of the inspector found that no such firms existed at the given addresses. Balance sheets of some investor companies had not reflected the investment of share application money with the assessee-company. The documents filed on behalf of the investor companies were found to have c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me to the conclusion on the facts and no interference is called for." It may however be mentioned that the Hon'ble Calcutta High Court in the case of Hindusthan Tea Trading Co. and Nivedan Vanijya Niyojan Ltd. has held that the decision in CIT vs. Steller Investments Ltd. is no longer good law in view of the decision in CIT vs. Sophia Finance Ltd. In CIT vs. Steller Investment, the Supreme Court had not entered into the question involved nor decided the ratio laid down. It has plainly held that it was a question of fact. The Supreme Court had not laid down any proposition with regard to the question. It was purely a question of facts. A decision becomes binding as a precedent only when the Court decides a particular question of law or lays down the ratio through conscious adjudication. Agreement with the finding of fact without adverting to the ratio laid down does not create a precedent. In this connection, it is relevant to mention that the jurisdictional High Court of Delhi has recently followed the decision of Steller Investment and (2000) 164 CTR (SC) 287 : (2001) 251 ITR 263 (SC) in the case of CIT vs. Achal Investment Ltd., wherein it has been held: " Held , that the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blic limited companies, invite subscriptions it is neither legally possible nor practicable for such companies to insist upon the sources of share subscriptions being made known to the company. Even regarding the proof of the existence and identity of the shareholders, the public limited companies can only provide the AO with the information contained in the statutory share applications/documents/registers maintained by the companie. In this connection, it is worthwhile to appreciate the following comprehensive law laid down under the Companies Act, 1956, regarding the issue and allotment of shares by companies." 22. Further the assessee is not required to explain the source of source as has been held in the case Sarogi Credit Corporation vs. CIT 1975 CTR (Pat) 1 : (1976) 103 ITR 344 (Pat). In the said case it has been held that once the identity is established and the creditor pledged with oath that they have advanced the amount in question to the assessee, the burden shifts to the Department to show as to why it must be held that entry, though purporting to be in the name of third party, still represented the income of the assessee from suppressed sources. However, in the insta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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