AI Drafter 
TaxTMI 
TaxTMI 
2003 (5) TMI 17
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 98 [FB]. The Tribunal has relied on another decision of the Delhi High Court in CIT v. Stellar Investment Ltd. [1991] 192 ITR 287 as affirmed by the Supreme Court in the case of CIT v. Steller Investment Ltd. [2001] 251 ITR 263 and also on the decision of the Delhi High Court in Sophia Finance Ltd.'s case [1994] 205 ITR 98 [FB] on which reliance has been placed by learned counsel for the appellant also. Having considered the contentions of learned counsel for the appellant and perused the order of the Tribunal and other material placed before us, we are of the opinion that no question of law arises on account of deleting the addition made by the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t 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 paper book and the pages of the same have also been detailed on page 13 of the assessee's written submission furnished before us. One party, namely, M/s. Good Earth Organics (I) Ltd., Bombay, has gone into liquidation. Again, the notice sent to M/s. Vijay ChemPharma Ltd. returned with the postal endorsement 'shifted' which obviously shows that the party existed at that address sometime. The GIR No./PAN of six corporate investors except M/s. Westbury Investrade (P.) Ltd. were furnished by the assessee and these companies had confirmed the investment in shares of the appellant. In that view of the matter, considering all the facts and circumstances of the case, we find the identity of the above six corpo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hese 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 which the assessee has given names and addresses of the alleged creditors. In the aforesaid decision of Orissa Corporation P. Ltd. [1986] 159 ITR 78 (SC), the three amounts were shown to have been received by way of loans from three individual creditors of Calcutta under hundis. By way of explanation, the respondent produced before the Income-tax Officer the letters of confirmation and the discharged hundis and gave particulars of those creditors, who were assessees and whose general index numbers were with the Department. Since the respondent, after making attempts, could not produce the parties, the Income-tax Officer, on its request issued summons under section A 131 of the Income-tax Act....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aving 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 addresses. But, no attempt was made by the Department to pursue the enquiry thereafter, notwithstanding the remark about shifting of addresses prima facie established genuineness of such companies as existing persons. It has come on record that another company did exist and was under liquidation, the existence of which at relevant time could not be doubted. One company whose particulars were not furnished by the assessee and the notices have been returned unserved, in respect of that company, the Tribunal found that the share application amount invested by the said company, namely; M/s. West bury Investors (Pvt.) Ltd. was not explained satisfactorily and sustained the additions of Rs. 2 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lleged 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 case in which for the assessment year 1984-85, the assessee has claimed loss of Rs. 1,50,520 on account of purchase and sale of 4,000 shares of a company through a broker. The Income-tax Officer summoned the broker and the broker asked for time to produce its books of account and when the broker failed to produce the books, the Income-tax Officer disallowed the claim of loss. Having failed before the Commissioner of Income-tax (Appeals), on appeal before the Tribunal, the Tribunal found that the assessee furnished the name of the company, number of shares purchased, date of sale, amount of purchase money, amount of sale money and that being so, the assessee has discharged its initial ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-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 by persons whose existence have been shown and in which existence has not been established. We have noticed above that the Tribunal has found that six out of seven companies and nine out of ten individual investors in share application money of the company have been shown to exist. Thus, the initial burden has been discharged by the assessee. But, no further enquiry having been held by the Assessing Officer to find the genuineness of material by those existing investors, it cannot be made a subject-matter of addition in the income of the assessee as unexplained cash credits to the extent such material has come on record. We may notice that in the judgment of the Full Bench of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reditor 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 agricultural land in respect of which khasra report was also furnished by way of evidence. It has also been contended that the household expenditure was being contributed by the son and not by the father as stated by the son in his statement. It has also been contended that the copy of bank statement of the creditor was, however, furnished before the Commissioner of Income-tax (Appeals) which shows that there are regular deposits in the account as the party deposits his savings in the bank account. As regards the creditor, Sh. Ratan Pal Daga, the allegation of the authorities below have been that the creditor is not an assessee, he was not produced and that the confirmation did not contain evidence regarding source. In this regard....