TMI Blog1990 (1) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... apital of Rs. 8 lakhs and share application money at Rs. 6,29,250 comprising Rs. 5 each paid on 1,25,850 equity shares. The detailed scrutiny of application forms, from the public was done. It was found that many of the applicants in public issue made payments in cash for the shares applied for. Such cash amounts collected during the year amounts to Rs. 97,500. With a view to verify the genuineness of the cash receipts letters under s. 133(6) were issued to such applicants requesting them to furnish details of the cash payments, source of their income and confirmation that they have in fact applied for the shares. It is interested to note that almost in all cases where payments were received in cash either letters issued were received back unserved with the postal remarks 'Not Known', 'Not Found' etc. Or replies were received stating that the applicants did not apply for shares of the company. In fact many of the applicants had not even heard of the name of the assessee company. They also denied to have paid any money for the shares applied for. Some applicants confirmed in writing that some known persons obtained their signatures on the blank application forms, but, no money were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts collected in each case and genuineness thereof is discussed in the following paragraphs. (A) Shri Shankarlal Agarwal Shri Rajkumar Agarwal The first named shareholder has contributed Rs. 3,50,000 and the second named shareholder has contributed Rs. 45,000 for allotment of shares from promoter's quota. Shri Shantilal Agawar vide his statement under s. 131 has admitted that he has declared nominal income of Rs. 10,000 to Rs. 15,000 in last five years. It is, therefore almost impossible that he could have saved such huge amount and invested the same as his share holding in this company (assessee company). It may also be mentioned here that his present capital in his proprietary business is about Rs. 1,00,000 to Rs. 1,25,000. He has never applied for shares in any other company in his lifetime. He also does not know how to fill up the application form for applying shares. He stated that he issued the cheque on Bank of Baroda, but the application form showed that the cheque was issued on Central Bank of India. Further, he stated that he was also required to sign 10 to 12 times in the application forms issued to him. This fact comes to prove that he was required to sign a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forms in the office of Shri S.S. Bagai and they only managed to get me the cheque from the broker Shri Brijmohan Agarwal. I got the cheque of Rs. 1,18,5000 from the share broker which I returned to them in cash which was withdrawn from the books after making withdrawal from the bank. I did not get any commission etc. for helping them. I agreed to the above only because I was interested in making advantages of losses". (B) Mr. Nilesh K. Shah The above mentioned applicant applied for 5,000 shares from the promoter's quota and paid Rs. 50,000. The statement on oath was recorded. Although, initially he could not give satisfactory reply, he came out with confession and stated that a sum of Rs. 50,000 was paid to him in cash by Shri S. Bagai and he was asked to issue cheques for similar amounts with the understanding that at a future date the shares will be sold to benami or to Shri S. Bagai and cheque will be exchanged for cash. In similar confession, he was also told that he will be in a position to claim benefit of loss on sale of shares at a subsequent date. It is interested to note that although shares were sold by him subsequently, he continues to be shown as shareholder o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. (F) (i) Ashok Jain Rs. 10,000-1,000 shares (ii) Ajay Jain Rs. 25,000-2,500 shares (iii) Madangopal Jain Rs. 15,000-1,500 shares (iv) Smt. Indumati Jain Rs. 25,000-2,500 shares All the above mentioned applicants belong to the same family and they have contributed above mentioned amounts for the purchase of shares. The statement on oath of Mr. Ashok Jain, Mr. Ajay Jain and Shri Madangopal Jain were taken/recorded. Smt. Indumati Jain failed to attend in response to summons under s. 131 of the IT Act. The statements on oath recorded separately in the case of Shri Ashok Jain and Shri Madangopal Jain, both have admitted that they do not know anything about shares of the assessee company and the entire investment made in the assessee company was handled by Shri Ajay Jain on their behalf. Shri Ashok Jain is not even aware of the fact that he has signed the application forms and whether share certificates for the shares allotted to him. He is also not aware as to how the shares were sold and at what price. Similarly, Shri Madangopal Jain stated that he does not know about the shares of the assessee company. Statement of Shri Ajay Jain, who, stated as above, has handled th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee company from undisclosed sources. (7) As regards, amounts by cheque for allotment of shares of public issue, the company has furnished a list of applicants and their addresses. However, in view of the detailed examination of cheque payments held out in the case of promoter's quota, I have no hesitation to come to conclusion similar to as mentioned above. Besides, it is found that many of the applicants belong to far away like Ludhiana, Murpurnagar, Delhi, etc. It is therefore not been possible for me to examine them individually. I would therefore be justified to come to the same conclusion and hold that all the amounts collected by cheques from applicants participated in public issue actually represented cash exchange for cheques, as in other cases. Therefore, a sum of Rs. 5,31,750 collected on this account will be taken as income of the assessee company from undisclosed sources. (8) However, investment made by Shri Sukhinder Bagai of Rs. 1,930 towards share capital is found to be genuine. (9) Finally, since the share application money of Rs. 97,500 received in cash, Rs.531,750 received by cheque and also share capital of Rs. 7,98,070 is credited in the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on of the business of the assessee-company. Accounts were closed on 30th June, 1982. The reasoning in the assessment order does cast grave suspicion that contributions were not genuine and have been made by persons other than those who are shown therein as shareholders. The subsequent information placed on our file vis-a-vis transfer of shares (at our behest) also supports the said suspicion of the Assessing Officer. But on these facts, could it be said that it is the income of the assessee-company. First of all, it is a case of a public issue and the assessee is an investment company (public limited). The Assessing Officer has also reasoned that the contribution has been made by directors and not by those who are shown as shareholders in some cases. From this it also follows that it is not the income of the assessee-company, since the contribution has been made by others although persons shown as shareholders may or may not be genuine. Now, on these facts, it cannot be said that capital contribution, which was the initial receipts by the assessee-company on its incorporation, is income, or, else, the receipt is in the nature of income. The Revenue cannot treat all/any item of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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