TMI Blog1998 (7) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... y on the ground that confirmations from the concerned shareholders were not available in the assessment record, in spite of the fact that the assessing officer had admittedly stated in his remand report dated 31-1-1990, that as a consequence to the directions of the Commissioner (Appeals), letters were issued to the parties who had invested in the shares and confirmations were received from the parties and were placed on the record. (b) That having regard to the aforesaid remand report, the omission on the part of the learned Commissioner (Appeals) to make enquiries from the assessing officer about the confirmations from the share subscribers alleged to be missing from the assessment record has resulted in a grave miscarriage of justice. (c) That the action of the learned Commissioner (Appeals) in upholding the aforesaid addition without confronting the appellant company with the remand report of the assessing officer and without giving to it an opportunity of inspecting the relevant records is patently vocative of the principles of natural justice. 7. That the learned Commissioner (Appeals) has erred grossly in not adjudicating on ground No. 10 of the appeal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 50 lakh was received by way of share capital during the year under consideration. Out of these 12 shareholders, one was an industrial shareholder, namely, Raj Kumar Kedia from whom a subscription of ₹ 7,88,000 was received by an account payee demand draft dated 28-3-1985, in April 1985. The other 11 shareholders were corporate entities from whom the total amount of share subscriptions received in April, 1985 during the year under consideration, amounted to ₹ 42,12,000. Thus an aggregate sum of ₹ 50 lakh was received by account payee cheques/demand drafts. The appellant company had complied with all formalities relating to grant of the approval from the Calcutta Stock Exchange Ltd. and it had also furnished various statutory returns as required under the provisions of Companies Act in respect of the aforesaid right issue of shares. 4. The appellant company filed a return of income declaring loss of ₹ 7,450 and claimed a refund of TDS from its interest income to the tune of ₹ 46,654. This return was duly accompanied with the audited statements, etc. The assessment was initially completed under section 143(1) but the return was later on chosen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were issued to 12 parties, who had invested ₹ 50 lakh for purchase of the right shares issued by the assessee- company. After quoting the names of the 12 parties, who had contributed a total sum of ₹ 60 lakh, the assessing officer stated as under : confirmation of the parties are placed on record. Thereafter it appears that the jurisdiction over the aforesaid appeal from the Commissioner (Appeals)-V, was transferred to Commissioner (Appeals)-XV who disposed of the said appeal vide order dated 17-12-1990. The Commissioner (Appeals) in the impugned order has observed that the assessing officer has, however, not discussed the fact as to from whom such confirmations had been received. He, Therefore, examined the assessment records and gave the following findings : The assessment records which have been made available to me now contain the letters which have been sent by the assessing officer to the various parties. The postal acknowledgement slips which are available on record show that the enquiries were made by him. The confirmations are available in respect of the following parties only : 1. India Factors Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of any iota of supporting tangible evidence in this behalf, wholly unwarranted and untenable. (iv) It is altogether inconceivable that in the accounting year 1984-85, prior to the issue of its rights share capital to which subscriptions were received in April, 1985, the assessee-company which had an issued, subscribed and paid up share capital of ₹ 24.90 lakh only, held by it mostly as bank deposits and advances, could have been in a position to earn income from undisclosed sources of the magnitude of ₹ 50 lakh. (v) All the share subscriptions in question were tendered and received by the assessee-company through account payee bank cheques/drafts from the concerned share subscribers. The names and addresses of each of the share subscribers, of whom 11 subscribers were corporate entities, are borne on the record. It is also an admitted fact that the postal acknowledgment slips of all the letters of inquiry issued to them by the assessing officer are borne on the assessment record. The assessing officer also reported to the Commissioner (Appeals) in his letter dated 31-3-1990 (vide copy at p. 18 of the paper-book) that Confirmations of the parties are placed on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er (Appeals). He submitted that burden lies on the assessed to prove the credits including the credits on account of share capital received during the year under consideration. He drew our attention towards the judgment of the Hon'ble Full Bench of the Delhi High Court in the case of CIT v. Sophia Finance Ltd. (supra) to support his contention. The learned Departmental Representative also submitted that the Commissioner (Appeals) after going through the letter dated 31-1-1990, sent by the assessing officer to the Commissioner (Appeals) has himself called for the assessment records and has given a definite finding of fact that only confirmations from three parties were available in the assessment records. It is, Therefore, clear that the remaining shareholders did not even send their confirmations to the assessing officer in spite of issue of notice under section 131 to them. The learned Departmental Representative placed reliance on the judgment CIT v. United Commercial Industrial Co. Ltd. [1991]187ITR596(Cal) and Ramkumar Jalan v. CIT [1976]105ITR331(Bom) . He also submitted that the judgment of the Hon'ble Supreme Court in the case of CIT v. Orissa Corpn. (P) Ltd. (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt for the assessed to obtain certified copies of the balance sheets of such corporate shareholders from the office of the respective Registrar of Companies and could prove the fact those 11 corporate shareholders had in fact invested money for purchase of right shares and such investments made by them are duly reflected in their respective balance sheets. The Commissioner (Appeals) has mentioned that notices sent to the remaining parties (other than the three parties from whom confirmations were received by the assessing officer) have remained un complied with. He, Therefore, confirmed the action of the assessing officer with regard to the remaining shareholders. As regards those three parties from whom confirmations were received, the matter was restored back to the file of the assessing officer for making enquiries with reference to their assessment records. 9. The various arguments submitted by the learned counsel for the assessed which have been reproduced hereinbefore would not automatically lead to the conclusion that the addition made on account of unexplained share capital should be cancelled because the share capital was claimed to have been contributed by the existing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se notices were duly served at the given addresses. Whether any replies were received from those shareholders in response to such notices. 10.1 On a careful consideration of the entire relevant facts and material, we are of the view that it would be just and proper to set aside the order of the Commissioner (Appeals) in relation to the aforesaid ground and the matter should be restored back to the file of the Commissioner (Appeals) for deciding the aforesaid issue afresh after providing copies of the remand reports submitted by the assessing officer, to the Commissioner (Appeals), to the appellant and also after allowing inspection of the entire relevant assessment records. In case it is found after inspection of the entire relevant assessment records that only three shareholders had in fact sent the confirmations in response to the notices issued to them by the assessing officer, the burden will lie on the assessed to prove the genuineness of the share capital claimed to have been contributed by the remaining shareholders. The assessed will be at liberty to furnish evidence before the Commissioner (Appeals) to prove the genuineness of such share capital contributed by the remai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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