TMI Blog2008 (5) TMI 678X X X X Extracts X X X X X X X X Extracts X X X X ..... examined by the AO with reference to the nature and source. The assessee objected to the proceedings under s. 263 but they were rejected by the CIT who directed the AO to pass a fresh order after hearing the assessee with reference to the nature and source of the aforesaid amount. The CIT passed the order on 26th March, 2002 against which the assessee filed an appeal to the Tribunal in ITA No. 1660/Del/2002. The Tribunal by order dt. 23rd Sept., 2005 dismissed the appeal holding that the CIT was right in directing the AO to consider the matter afresh as he had not carried out the necessary enquiries in the assessment proceedings. Pursuant to the order of the CIT, the AO has now passed the assessment order and it is this order which has given rise to the present appeal. In this order, the AO has added the amount of ₹ 50 lacs after discussing the issue in para 3 of the order. Briefly stated, he called upon the assessee to establish the identity and creditworthiness of the aforesaid five persons. Summons were also issued to those persons which were returned unserved. The inspector who made local enquiries stated that those persons have left the place in the last two years and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed the capacity and creditworthiness of the applicants and the genuineness of the transactions as well. At our instance, the details of the Stockinvest scheme were furnished. Strong reliance was placed on the judgment of the Delhi High Court in CIT vs. Divine Leasing Finance Ltd. (2007) 207 CTR (Del) 38. It was pointed out that the special leave petition (SLP) filed by the Department against the judgment of the High Court has been dismissed by the Supreme Court by order dt. 21st Jan., 2008 in CC 375/2008 and that the Supreme Court has passed a reasoned order which contains the statement of law and, therefore, the same is binding as a precedent on all Courts. It has been observed by the Supreme Court that if the share application money is received by the assessee company from alleged bogus shareholders whose names are given to the AO then the Department is free to proceed to reopen the individual assessments of the shareholders in accordance with law and that s. 68 cannot be invoked in the case of the company. The learned counsel for the assessee strongly relied on the order of the Supreme Court and submitted that since the assessee has adduced the essential evidence to prove th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identity may be taken as having been established, there is nothing to show his creditworthiness or sources of income. Our attention was drawn to p. 44 of the paper book which is a certificate issued by the Vasant Vihar branch of Punjab National Bank showing a balance of ₹ 3,596.51 paise in the account of Deepak Parti (HUF). Similarly in the case of K.B. Parti, the certificate issued by the same bank (p. 42 of the paper book) showed only ₹ 10.73 as balance. As regards Sonia Parti, there was nothing to show her creditworthiness. In the case of Vivek Parti, he has stated that he applied only for 10 shares and this statement belies the assessee's claim that he invested ₹ 9,50,000 for 3,80,000 shares. It was thus submitted that neither the identity nor the creditworthiness of the share applicants was proved by the assessee company. 5. In reply, the learned counsel for the assessee drew our attention to the prospectus issued by the assessee company in which Deepak Parti, Chandrashekhar and K.B. Parti have been shown as members of the board of directors and that full details such as their educational qualifications, positions held, experience etc. have been given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 6 lacs received from others we are not adjudicating upon the same. So far as the identity of Deepak Parti, K.B. Parti and Chandrashekhar are concerned, even in the prospectus which is strictly regulated by the Companies Act, their details, educational qualifications, work experience, etc. are given. No action has been taken against the assessee company for having issued a false prospectus. In fact, K.B. Parti is shown to have held a senior position in the Indian army. All the three are shown as members of the board of directors. Further, in the interim order passed by the Tribunal on 25th Jan., 2008, the Tribunal has referred to the copy of the Form No. 32 filed by the company with the RoC under the Companies Act, 1956 wherein Chandrashekhar has been shown as appointed as director of the company. The Tribunal has also referred to an order of the Sub-Judge, Greater Mumbai in MA No. 310 of 2002 in the case of Vivek Parti as also a police complaint filed against him in the police station Defence Colony, New Delhi. These documents have been admitted as additional evidence. They also prove the identity of Chandrashekhar and Vivek Parti. All the five persons have applied for shares in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The Stockinvest bears 'account payee' and 'not negotiable' crossing and will be payable to the account of the payee on cancellation. There are number of terms of issue and payment indicated on the reverse of the form which are intended to protect the interests of the parties to the Stockinvest. It is under the Stockinvest scheme that the five applicants had applied for shares in the assessee company through their representative and power of attorney holder, namely, Alpha. These details are given in the applications themselves. There is no mystery behind the credit of ₹ 50 lacs on 1st Aug., 1996 in the assessee company's account with Central Bank of India, Adyar Branch, Chennai. Under s. 73 of the Companies Act, the application monies can be retained by the company for a period not exceeding two months from the date on which the public issue closes. In the meantime, the allotments are decided and the monies are either appropriated to the allotments or returned to, the partly or wholly, unsuccessful applicants. Under the Stockinvest scheme, once the allotment is made, the guarantee takes effect and it is at that time that the monies are actually credited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment. Subject to the above, special leave petition is dismissed. The well-settled legal position is that the refusal to grant leave does not mean that the impugned judgment of the High Court is affirmed on merits. However, as held by the Supreme Court in Kunhayammed Ors. vs. State of Kerala Anr. (2000) 162 CTR (SC) 97: (2000) 245 ITR 360(SC), where reasons are given by the Supreme Court for dismissing the SLP they would attract the applicability of Art. 141 of the Constitution if there is a law declared by the Supreme Court. It seems to us from a reading of the order of the Supreme Court while dismissing the SLP of the Department in the case of Divine Leasing (supra) that the statement of law contained therein is that if the shareholders are alleged to be bogus then the addition should be made in their hands and s. 68 cannot be invoked in the case of the company. In the present case, it is not necessary to enter into this controversy because we have held that the company has proved the identity and creditworthiness of the sha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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