TMI Blog2001 (11) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company is placed on page 313 of Paper Book, copy of share capital account on page 305 of paper book, copy of allotment return of shares along with enclosures placed on pages 357 to 361 of paper book. Out of total share capital of Rs. 90,73,310 credited in the books of assessee the Assessing Officer doubted genuineness of share application money to the extent of Rs. 23,76,000 received from 17 parties and made addition in respect thereof under section 68. Similarly, out of the unsecured loans, the Assessing Officer treated the loans to the extent of Rs. 3,65,000 from six persons as non-genuine and made addition in respect thereof together with an amount of Rs. 53,845 and as interest thereon under section 60. We now take up the appeal ground-wise. 4. Ground No. 1 disputes the addition of Rs. 23,76,000 under section 68 in respect of alleged unexplained share application money deposited by the following persons: (Rs.) (i) M/s. Good Earth Indu. Limited 2,40,000 (ii) M/s. Good Earth Organics India Ltd. 2,40,000 (iii) M/s.Vinay Chem Pharma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. --------------------------------------------------------------------------------- SL. Name Notice Confirmation Outsider Bank account Any, No. of U/s. No reason statement other share 133(6) why holder returned outsider unserved Co. to which shows invest in identity of a Company investor not proved. ---------------------------------------------------------------------------------- (i) M/s.Good Confirmation Shows that for Earth not accompanied making investment Indu. by return of cash has been Ltd. income deposited in this Bank account which is not explained. ---------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opy filed but Pharma- self-serving not legible. ceutical document. P. Ltd. ------------------------------------------------------------------------------------- (vii) Farbs- Confirmation Bank statement/ toffe P. received but account not filed Ltd. evidence of being to show source of assessed to tax, funds. copy of B.S. etc. not filed. ------------------------------------------------------------------------------------- 6. As regards the remaining 10 investors being the individuals, the ld. A.R. of assessee has contended that the addition in respect of Shri Umesh Kumar Bansal mentioned at Sl. No. VIII, the addition has been made for the reason that in direct confirmation received from him by the Assessing Officer, he has denied having made any investment in share application money of the assessee-company and that his bank account was not filed. Regarding the other individuals, mentioned at Sl. Nos. ix to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has mentioned the page Nos. of paper book where on the addresses of these parties being available with Assessing Officer as also page Nos. whereon the new addresses of these parties are given. The new addresses of these parties have been given on pages 162, 178, 182, 188 and 193 of paper book respectively as mentioned on page 13 of assessee's Written Submission. Regarding Good Earth Organics (1) Limited, Bombay mentioned at SL. No. (ii), it has been contended that the notices might have returned unserved because the company has already gone into liquidation. It has also been contended that in the case of Vinay Chem Pharma Ltd, Hyderabad mentioned at SL. No. (iii), the remark of postal department is ('shifted') which shows that the party existed at that address sometime. It has been contended that there can be several reasons for non-service of notice and on that basis alone it cannot be concluded that these are non existing persons. It has been contended that the confirmations of parties, resolution passed by parties, the share application made by them, and the mode of receipt being banking channel do establish that they have made the investments. It has been contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through account-payee cheque/bank draft and so the question of identity of creditor becomes irrelevant as held by the Hon'ble Patna High Court in the case of ACIT v. Bahri Bros. (P.) Ltd. [1985] 154 ITR 244 (Pat.), Shivam Synthetics (P.) Ltd. v. ACIT 124 TW 397 (ITAT-Jodh.) has been cited with the contention that it has been held therein that once the identity of the shareholder is established and they accept the fact of investment made in shares of that company, ordinarily the burden on the said company will stand discharged. Gorawara Plastics and General Industries (P.) Ltd. v. DCIT [1999] 63 TTJ (Delhi) 329 has been cited with the contention that it has been held therein that where the investment in share capital has been made through account-payee cheque and shareholder has confirmed the facts of making such investment, the shareholders are identified and it is established that they have invested money in the purchase of shares, and the burden lying on the company will stand discharged. It has been contended in the cited case the addition made under section 68 in respect of share capital was deleted. Meera Engg. Commercial Co. (P.) Ltd. v. Asstt. CIT [1997] 58 TTJ (Jab.) 527 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction and, therefore, the same were treated as income of assessee under section 68. He has contended that it may be noted that Assessing Officer has not added the entire share application money to the total income of assessee but has added only the amount of those seventeen share applications which have remained unexplained. He has contended that the Ld. A.R.'s contention that the share application money deposited with the assessee was converted into share capital and that returned giving list of shareholders was sent to Registrar of Companies after 30-7-1996 and 30-3-1997 informing deposition of share capital are not relevant to decide the issue involved in this appeal as that is assessee's own record arid these contentions/ evidence do not prove the transaction as genuine. He has contended that these events take place after the money is deposited and not before the same is brought in books. He has contended that the Ld. A.R.'s contentions that all the persons including companies have remitted the motley through cheque/demand draft and that all the persons have admitted that they have paid the money towards share application arid they have received the shares arc not believable fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low further time. He has contended that thus the identity of the creditor could not be verified and established from independent source. He has contended that the Ld. CIT(A) has, vide para 4.2 on pages 6 to 11, elaborately discussed this issue and has upheld the Assessing Officer's action. He has contended that the assessee has no material or argument to rebut the findings of Ld. CIT(A) recorded in this para. It has also been contended that in this case, creditor's copy of bank account was filed before Ld. CIT(A) but it showed that cash was deposited on 13-3-1997 and demand draft was obtained on the same day. But the source of cash deposit was not explained. 12. In the case of Good Earth Organics Ltd., the Ld. DR. of revenue has contended that in this case also the creditor's copy of bank account was filed before CIT(A), and that in the bank account credit of Rs. 8,24,446 was made on 10-3-1997 and DD was obtained on the next day. it has been contended that the companies whose credits were obtained by the assessee are companies on paper or rather these are pocket companies having no genuine existence. It has been contended that whenever they find it necessary to make legal complia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names shares had been issued and the money may have been provided by some other persons. If the assessment of the persons who are alleged to have really advanced the money is sought to be reopened, that would have made some sense but we fail to understand as to how this amount of increased share capital can be assessed in the hands of the company itself." In Sophia Finance Ltd.'s case, Hon'ble Delhi High Court has held that under section 68 of Income-tax Act, 1961 the ITO has jurisdiction to make enquiries with regard to the nature of source of a sum credited in the books of account of the assessee, and he is not precluded from making such enquiry even if it is credited as receipt of share application money. The Hon'ble Delhi High Court has further held as under: "The ITO would be entitled, and it would be indeed be his duty to enquiry whether the alleged shareholders do in fact exist or not. If the shareholders exist then, possibly, no further enquiry need be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agent. In the fact situation, it was held that the assessee had discharged onus of establishing identity of commission. In 24 TW 397 this Bench has held that once identity of the shareholder is established and they accept the fact of investment made in shares of that company ordinarily, the burden on the said company will stand discharged. It was also held that burden of the company, in relation to share application money, is much light, In Rishi Electronics Ltd.'s case has held that assessee cannot be called upon to produce bank record, Income-tax record etc. of shareholder-. In Gorawara Plastics General Industries (P.) Ltd.'s case it has been held by ITAT Delhi that when the shareholder who is said to have invested money in shares of assessee-company has been identified and has confirmed the investment, addition of account cannot be made in the hands of the company. In Khandelwal Construction's case the assessee had furnished confirmation letters and GIR Nos. of the creditors, but the Assessing Officer did not make proper enquiry to ascertain as to whether explanation of assessee was genuine. In the situation, the Hon'ble Gauhati High Court held that the amount represented by c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. On factual appreciation it was also held by the Hon'ble High Court in the said case that the Tribunal's finding regarding the identity of the person, her creditworthiness and genuineness of the transaction to have been proved by assessee was held to have not been based on relevant material and so was perverse. 21. We may note that the judgment of Hon'ble Delhi High Court (D.B.) reported in Steller Investment Ltd.'s case was considered by the Full Bench of the Hon'ble Delhi High Court in the case of Sophia Finance Ltd. reported in Sophia Finance Ltd.'s case wherein the findings of the Hon'ble Delhi High Court in the case of Steller Investment Ltd. was partly upheld, i.e. to the extent that if the shareholders are identified and it is established that they have invested money in the purchase of shares then the amount received by the company would be regarded as a capital receipt but the observations of the Hon'ble High Court in the case of Steller Investment Ltd. to the effect that 'under no circumstances could the amount of share capital be regarded as undisclosed income of the company" were not approved and the same were over ruled. However, thereafter, the judgment of D.B. of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the High Court answered against the revenue. We are in agreement with the High Court". No doubt the Hon'ble Supreme Court also observed that "plainly the Tribunal came to a conclusion on facts and no interference is called for", yet the emphatic pronouncement of the Hon'ble Supreme Court to the effect that "we are in agreement with the High Court" does stand in its place, as we have seen above. The question posed in reference to the Hon'ble High Court for opinion did embrace clearly the investigation with regard to the genuineness and creditworthiness of the shareholders, and the Assessing Officer's failure to discharge his duties regarding the same and it was in the contexts of this question that the Hon'ble Delhi High Court made the observation quoted above and opined that no question of law arose. The decision of Hon'ble Delhi High Court cannot be read detached from the reasons for the decision. The Hon'ble Supreme Court has no doubt expressly not discussed or commented upon the aforesaid observation of the Hon'ble Delhi High Court, being its reasoning for the decision it has rendered, yet the Hon'ble Supreme Court, in agreeing with the decision of Hon'ble Delhi High Court on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to have been established. 23. As regards ten individual investors, they did respond to the notice issued to them under section 133(6) and nine out of them confirmed the fact of making investment by them in the shares of the assessee-company. The mode of payment was banking channel. As such, considering all the facts and circumstances of the case as also the legal position emanating from the judicial pronouncements discussed above, we find that the identity of nine out of above ten individual investors (excluding Shri Umesh Kumar Bansal) has been established and also the genuineness of the transactions of investment by them in the shares of the assessee-company. However, as regards Shri Umesh Kumar, no doubt, the share application is stated to have been signed by him as also the cheque to have been signed by him yet for the reason that he has denied the fact of investment in the assessee-company in the letter sent in response to notice the transaction of investment by him in the shares of assessee-company deserves to be treated as having not been proved and the primary onus lying on the assessee as having not been discharged. No doubt there may have been several reasons for subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of unsecured loan to assessee. He also stated the source of amount so given to be annual agricultural income of his father, being at Rs. 50,000 to Rs. 60,000 for nine-ten bighas of agricultural land in respect of which khasra report was also furnished by way of evidence. It has also been contended that the household expenditure was being contributed by the son and not by the father as stated by the son in his statement. It has also been contended that the copy of bank statement of the creditor was however, furnished before CIT(A) which shows that there are regular deposits in the account as the party deposits his savings in the bank account. 27. As regards creditor Shri Ratan Pal Daga, the allegations of the authorities below have been that the creditor is not assessee, he was not produced and that the confirmation did not contain evidence regarding source. In this regard the contention of the Ld. A.R. of assessee have been that Shri Ratan Pal Daga was working as a partner in the firm M/s. Daga Brothers, Bhilwara from which he derived his income from a darth business in the firm. He separated himself from the firm about five years back and received his share of capital, profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently withdrawn from that bank on 11-10-1996 and deposited in Central Co-operative Bank Limited, Bhilwara as specifically mentioned in item Nos. 24.2 and 24.9 on page 129 of paper book. The bank statement of Shri Rampal Chaplot was not furnished before Assessing Officer but the same was furnished before CIT(A) as also the copy Khasra Jetawari and the evidence of loan to assessee has been specifically mentioned at Sl. No. 22.14 on page 126 of paper book. Considering the facts and circumstances of the case and taking a circumspect view of the facts in totality together with the assessee's explanation as elaborated in assessee's Written Submission furnished before us as also in that furnished before Ld. CIT(A) placed on pages 124 to 138 of paper book, we find that apart from the identity of the above creditors, their creditworthiness also stands amply established on record. Here, we may also observe that the conclusion/ decision has to be drawn on the basis of preponderance of probability as applied to the facts brought on record and that mere suspicion will not be enough to rebut unless the same is corroborated reasonably by some material on record. Considering the facts-situation, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
