TaxTMI 
TaxTMI 
2003 (11) TMI 300
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd justify the genuineness of creditor companies, it was stated that the assessee raised share capital by way of issue of 15 lakhs equity shares of Rs. 10 each. Out of this Rs. 150 lakhs, the promoters' contribution was Rs. 60 lakhs and the balance amount was raised by an issue of shares to public. The aforesaid 8 companies have applied for Rs. 1.60 lakhs shares out of public quota and remitted Rs. 8 lakhs to the assessee. In order to prove the facts, the assessee filed the photocopies of application forms of these companies. On examination, the AO noticed that all the 8 companies are based in Muzaffarnagar (UP) and a person named S.L. Garg has signed applications for 5 companies. The address of the 3 companies was the same. The application forms have been deposited with the Bank of India,Parliament Street,New Delhi, on24th April, 1984, after the close of the issue as the public issue was opened on21st Feb., 1984and was closed on24th Feb., 1984. No acknowledgement receipt was given to these eight companies. Some of the applications were incomplete inasmuch as the occupation of the applicant was not mentioned. The AO further noticed that all these 8 companies have denied receiving a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt has been stated to have been made. No reasons for not possessing the share certificates has been given by the director of the company. This is further important to note that this is a case of the investment/finance companies of the Muzaffarnagar on which search and seizure operations were conducted on17th June, 1985.' 'In support of the above claim no documentary evidence have been filed. Moreover, it has already been held that the assessee-company was not doing any business of investment and in earlier years also, no share certificates, etc., were furnished to prove the fact that the company was actually engaged in share dealings. No satisfactory explanation was, however, given as to why the company sold its shares on such throwaway price. As the assessee-company was not engaged in investment of share, etc., and has been doing hawala transaction which has already been held in earlier years, the loss of Rs. 9,03,792 is disallowed. In fact, the assessee-company must have received commission or premium for providing hawala entries in the form of these investments which have finally been transferred into the hands of real investors at very nominal price.' The same finding has....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ete knowledge of the affairs of the company. It was submitted before the AO that both of the directors of Magnet Trading & Chit Fund (P) Ltd. were, in fact, only Benamis of Mr. S.K. Garg and were signing all the documents as per instructions of Mr. S.K. Garg. They submitted that they never dealt with the affairs of funds of the company and stated that Mr. S.K. Garg and M.M. Mighlani were engaged in such activities of Benamis in the name of various other companies. 7. The same findings have been made by the AO in the case of M/s Shree Ganesh Chawla (P) Ltd. in respect of all the assessment years, since incorporation of the company. In this case also, the directors admitted before the AO that the company did not process any share certificate in respect of its alleged investment or subscription of share capital of different companies. It has been found that the company did have no funds to invest and did not really invest in share subscription. It was only a "hawala transaction" company. 8. Similar findings and observations have been made by the AO in case of M/s Alakhnanda Alloys Castings (P) Ltd. 9. Apart from similar observations and findings by the AO in case of M/s Bijno....
X X X X Extracts X X X X
X X X X Extracts X X X X
....after the close of the issue and deposit the same with bank subsequently-this is why acknowledgements for receipt of share applications were not issued to the eight appellant (sic-applicant) companies yet it is for the assessee to prove the nature and source of credit entries appearing in its books of account. The CIT(A) further examined various judicial pronouncements on this issue but was not satisfied with his contention that the AO cannot make an inquiry into the genuineness of the transaction. He further observed that the assessee claims to have allotted the share to eight companies whereas these companies have denied having received any share certificate. He, accordingly, asked the assessee how a demand for balance of Rs. 5 per share was made but no evidence in this regard was filed before him. He further noticed certain facts from the documents that a company, namely, JHV Investment Services (P) Ltd. has requested the assessee-company in November, 1996, to transfer certain shares in its name which stood registered/allotted in the name of these eight companies. Vide its letter dt.28th Nov., 1986, the assessee wrote to JHV that shares cannot be transferred in their name as the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hange. Learned counsel for the assessee has invited our attention that the share application along with the application money was received through the banking channels and in support of this contention, reliance was placed upon the certificate of the stock exchange according to which allotment of shares under the public issue is considered only on the basis of certificate issued by the bankers to the issue regarding application money received by them under the said public issue. It was also stated through this certificate that the application for allotment of shares on public issue needs to be deposited with the bankers to the issue and the application money for such issue cannot be deposited directly with the company. Since no transaction in this regard was undertaken directly by the assessee with the disputed 8 companies, no inference can be drawn that whatever share application money came from these 8 companies, was an unexplained or undisclosed money of the assessee. He has also invited our attention to the list of share applicants in which the names of these 8 companies are figured in support of his contention that this list was received from the banks and on the basis of this....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as all companies are bogus and were controlled by Shri S.L. Garg and M. Mighlani. Even before the Tribunal, the assessee could not furnish any evidence how this balance money was paid to the assessee-company before the allotment of shares as at the time of submitting the applications, share applicants were required to pay Rs. 5 per share whereas its cost was quoted at Rs. 10 per share. The queries raised by the lower authorities in their respective orders remained unanswered even before the Tribunal. In these circumstances, the order of the CIT(A) deserves to be upheld. 8. Having considered the rival submissions and from a careful perusal of record, we find that the Revenue has raised a dispute with regard to the share applications received from 8 companies for allotment of shares worth Rs. 8 lakhs. Admittedly, the issue was opened on21st Feb., 1984, and was closed on24th Feb., 1984. It is also not disputed that the share applications from these 8 companies have been deposited with the bank on24th April, 1984, after two months from the close of the issue and later on, shares worth Rs. 8 lakhs were allotted to these eight companies. Now, the question arises whether the share app....