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TMI Blog2003 (2) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... justice. 3. In the course of the fresh block assessment proceedings, the AO had issued a questionnaire to the assessee on 9th Jan., 2001, and the case was heard up to 23rd March, 2001, regularly as observed by the AO in para 3 of the impugned order. The AO completed the fresh assessment vide order dt.30th March, 2001, by making additions of Rs. 58,38,000 on account of bogus share capital on protective basis and Rs. 22,40,500 on account of bogus share capital of the appellant-company, against which the appellant has filed this appeal, raising the following grounds of appeal: "1. That the impugned order redetermining total undisclosed income of the appellant at Rs. 80,78,500 out of issued, subscribed and paid up share capital of the appellant-company (Rs. 58,38,000 on protective basis and Rs. 22,40,500 on substantive basis) is founded on unauthorised and illegal grounds. 2. The learned AO misdirected himself in law in adding Rs. 58,30,000 out of share capital of the assessee-company, subscribed and paid up by corporate shareholders during the block period on protective basis, by wrongly and improperly disregarding the proof of identity and genuineness of their investment. 2.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant craves leave of this Hon ble Tribunal to add to, alter, vary, modify or otherwise amend the grounds of appeal before the appeal is finally disposed of." 4. Shri O.P. Sapra, Shri J.K. Khanna, advocates and Shri Ashuthosh Aggarwal, CA appeared and filed synopsis besides a paper book, copies whereof were duly given to the learned Departmental Representative who too was heard. 5. The first grievance of the appellant is against the addition of Rs. 58,38,000 made on protective basis out of share capital account of the appellant-company subscribed and paid up by the following corporate shareholders: S. No. Name of the company Amount of investment in share capital of Alankit Assignments Ltd. added on protective basis Rs. 1. Real Overseas (P). Ltd. 3,00,000 2. Parul Poly Products (P) Ltd. 5,00,000 3. Garg Polymers (P) Ltd. 10,00,000 4. Alankit Imaginations (P) Ltd. 4,75,000 5. Makhni Tyagi (P) Ltd. 4,00,000 6. Vikas Polyester (P) Ltd. 3,95,000 7. Npar Drugs (P) Ltd. 15,68, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Garg Polymers (P) Ltd. was assessed to tax by the same AO. It was further submitted that Sh. Pankaj Aggarwal, director of Real Overseas (P) Ltd. was also produced before the AO and copy of his statement as recorded had been duly filed. The learned counsel, therefore, emphasized that the observations of the AO that the appellant had not produced directors of the aforesaid 8 companies were not correct. Our attention was also drawn to a letter dt. 22nd March, 2001, copy of which has been placed on record by which the appellant had made request that if inspite of the overwhelming documentary evidence filed in respect of the above companies, the AO still require production of books of accounts and records of such companies the same could be called and summoned particularly when the Directors had already sent written confirmations regarding investment made by their companies. It is, therefore, argued that no adverse inference could be drawn against the appellant in such circumstances in view of the Allahabad High Court judgment in Nathu Ram Prem Chand vs. CIT (1963) 49 ITR 561 (All). The learned counsel also emphatically argued that when all the 8 companies mentioned above had duly r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ker) 343 : (1999) 238 ITR 599 (Ker). 10. We have given our thoughtful consideration to the facts of the case and have perused the evidence filed before the AO, copies of which were filed before us in the form of paper book. We find that even the AO has not disputed the fact that all the aforesaid companies were already existing assessees and each one of them had recorded its respective investment in the share capital of the appellant-company in its account books before the date of search. No seized documents had been brought to our notice by the learned Departmental Representative to show that the appellant-company has made its own investment in the form of share capital of the aforesaid 8 companies. We, therefore, agree with the learned counsel that provisions of Chapter XIV-B of the IT Act were not applicable to the facts of this case. Even otherwise, we find that the identity of all the 8 companies having been proved by the appellant, no addition on account of share capital could be made in the hands of the appellant-company in view of Hon ble Delhi High Court (Full Bench) judgment in the case of Sophia Finance Ltd. Learned Departmental Representative could not rebut or contro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment proceedings and before the Hon ble Tribunal. To prove the genuineness of the shareholders the assessee was specifically asked again and again to produce the shareholders but he could produce only 9 shareholders as stated above. 11. Although the assessee has taken the plea that by filing the acknowledgement receipts of these shareholders they have proved the identity and relied on the judgment of Hon ble Delhi High Court in the case of CIT vs. Sofia Finance Investment Ltd. Another judgment of Hon ble Supreme Court in case of CIT vs. Steller Investment, as discussed above, the assessee has failed to produce the shareholders for examining their identity and genuineness of the transaction. Therefore, balance amount of Rs. 22,40,500 (Rs. 51,34,300 28,93,800) is treated as bogus capital of the company and added back to the income of the assessee." 12. The learned counsel placed reliance on the appellant s letters dt. 19th March, 2001 and 23rd March, 2001, filed before AO copies of which are placed at pp. 52-55 and 60-61 and also order-sheet entry dt.22nd Feb., 2001, at p. 106 of the paper book in which the AO has himself recorded that the identity of the shareholders had bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusive nature on record that the addition made by him represented undisclosed income of the appellant-company with reference to search material as found. The learned counsels again relied on the case law quoted supra. 14. The learned Departmental Representative relied on the assessment order. 15. On careful consideration of the facts as stated above and the documentary evidence placed on record, we are of the considered opinion that this addition too has to be deleted because we find that the share capital as subscribed by such individuals has been recorded in their respective account books and duly disclosed to the IT Department in their respective hands before the date of search. The AO has made the addition in respect of share capital subscribed by those individuals who according to him could not be produced before him but he having not controverted or disproved the voluminous documentary evidence was not at all justified in holding such amount as undisclosed income of the appellant-company The Supreme Court in the case of CIT vs. Orissa Corporation Ltd. (1986) 52 CTR (SC) 138 : (1986) 159 ITR 78 (SC) had held that where an assessee had given the names and addresses of the a ..... 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