TMI Blog2003 (5) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Appellate Tribunal, Jodhpur Bench, Jodhpur, dated November 28, 2001, the following two substantial questions of law arise for consideration: "1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in deleting the addition of Rs. 21.76 lakhs on account of unexplained share application money by relying on the judgment of the hon'ble Supreme Court which is distinguishable in the facts of the case? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in deleting the addition of unsecured loan and interest paid thereon without discussing the issue on merits of the material and evidence available?" The first question relates to that part of the order of the Tribunal by which it has deleted the addition made on account of unexplained cash credit in respect of money received as share application on expansion of share capital to the extent of Rs. 21.76 lakhs. For contending that the aforesaid contention is a question of law, learned counsel for the appellant relies on the decision of the Delhi High Court in CIT v. Sophia Finance Ltd. [1994] 205 ITR 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividual investors excluding Mr. Umesh Kumar has been established and about the genuineness of the transaction of the share of the assessee-company no further enquiry was directed by the Assessing Officer. As regards Umesh Kumar, the Tribunal found that the assessee has failed to explain the said investment made by Umesh Kumar and to that extent the additions were retained amongst investment by individual investors. Likewise, additions made in respect of investment alleged to have been made by Westbury Investors (Pvt.) Ltd. were also sustained for the same reason. The finding of the Tribunal in this regard can be best known by reproducing the order of the Tribunal in that regard: "In the instant case analysing the fact situation in its entirety we find that as regards the seven corporate investors, the return of notices unserved is not very material for the reasons that the addresses of five of them had changed and the assessee did furnish their changed addresses along with their confirmations but the Assessing Officer thereafter took no further steps/efforts to pursue/effect the service of notice on them and E make enquiry. The changed new addresses have been given in the pape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing not been discharged. No doubt there may have been several reasons for subsequent denial on his part as has been contended by the learned authorised representative of the assessee, yet the assessee having not brought on record any further cogent evidence/material explaining his subsequent denial and convincingly corroborating investment by him the transaction pertaining to him cannot be held as acceptable or genuine. In view of our discussion/finding, we hold that the investments, i.e., the deposit of share application money by M/s. Westbury Investrade (P.) Ltd. (Rs. 2,00,000) and Sh. Umesh Kumar Bansal (Rs. 1,00,000) to have not been explained/established and so the addition in respect of these two parties is found to have been rightly made. However, as regards the remaining fifteen parties the investment of Rs. 20,76,000 by them in aggregate is found to have been satisfactorily explained/established and so the addition in respect of them is uncalled for and not justified, which we delete accordingly." In this connection, we may notice that the Tribunal has referred to the decision of the Supreme Court in CIT v. Orissa Corporation P. Ltd. [1986] 159 ITR 78. It was a case in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises." The facts of the present case are somewhat similar. Like the assessee having been asked to furnish explanation about the receipt of capital money on account of share application has furnished the details of the identity of persons who had made such investments. The particulars of the receipt and GIR number of the persons, who had made such investments in the matter of companies registered under the Companies Act, were furnished. Notices of five companies out of seven companies were received unserved with the remark of the postal department that they have shifted their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the ground that the Assessing Officer has failed to discharge his duty regarding investigation with regard to the genuineness of the shareholders. The Delhi High Court rejected the contention and held that in these circumstances no question of law arises. It said: "It is evident that even if it be assumed that the subscribers to the increased 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." The aforesaid decision has been affirmed on appeal by the Supreme Court in the case of CIT v. Steller Investment Ltd. [2001] 251 ITR 263. To somewhat same conclusion the Bench of the Calcutta High Court reached in CIT v. Korlay Trading Co. Ltd. [1998] 232 ITR 820. It was a ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for consideration in this appeal. The decision relied on by learned counsel for the appellant in the case of CIT v. Sophia Finance Ltd. [1994] 205 ITR 98 (Delhi) [FB] also does not help the case of the Revenue. A Full Bench decision of the Delhi High Court said in that case: "The mere fact that the (assessee) company chooses to show the receipt of the money as capital does not preclude the Income-tax Officer from going into the question whether this is actually so. Where, therefore, an assessee-company represents that it had issued shares on the receipt of share application money then the amount so received would be credited in the books of account of the company. The Income-tax Officer would be entitled, and it would indeed be his duty, to enquire whether the alleged shareholders do in fact exist or not. If the shareholders exist then, possibly, no further enquiry need be made. But if the Income-tax Officer finds that the alleged shareholders do not exist then, in effect, it would mean that there is no valid issuance of share capital. Shares cannot be issued in the name of non-existing persons." It is apparent that the Full Bench drew the distinction between investment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpat Pal Daga 50,000 4,845 (iv) Sh. Komal Jain 30,000 4,800 (v) Mamta Devi 1,00,000 17,250 (vi) Kedar Mal Baheti 1,00,000 17,250 As regards the cash creditor Sh. Ram Pal Chaplot, it is revealed from the record that the allegations/objection for non-acceptance of cash credit in respect of him has been that he is not an assessee, was not produced before the Assessing Officer and that his bank pass book was not produced and the immediate source of issuing the cheque to the company is cash deposit. In this regard the contention of the learned authorised representative of the assessee has been that because of injuries due to accident, this creditor could not be produced. His medical prescription was furnished and his son, Sh. Daulat Ram Chaplot was produced whose statement was also recorded wherein he has stated the reason of inability of his father to come before the Assessing Officer and also confirmed giving unsecured loan to the 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 agricul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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