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TMI Blog2009 (7) TMI 821X X X X Extracts X X X X X X X X Extracts X X X X ..... panies Act, 1956. Though the company was incorporated on January 20, 1995, but return of income was not filed in respect of the assessment year 1995-96. On September 27, 1996, search operations under section 132(1) of the Act were conducted in the residential premises of Shri R. R. P. Sinha, one of the directors of the appellant-company, from whose possession original share certificates purported to have been issued in the names of Shri Umesh Prasad Rai, Prabhash Kumar, Neelam Devi, Raj Deo Prasad, and Ramesh Kumar, were found. No explanation was advanced by Shri Sinha as to how he came to be in possession of those share certificates. The Revenue noticed that the seized share certificates contained no entry regarding transfer of the shares, nor had the company issued the certifi- cates. No share issue register was found in the premises of Shri R. R. P. Sinha, or at the business premises of the company, which was covered under the survey operations carried out under the provisions of section 133A of the Act. A loose sheet of paper was also found and seized in the course of search at the residence of the director which contained the names of four investment companies based at Kolkat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in compliance with the order of the Appellate Tribunal dated April 30, 1998 (annexure 3), and fresh assessment order was passed on March 30, 2001, on a consideration of the entire materials and sub- missions advanced on behalf of the appellant-company. The learned assessing authority as per his order dated March 30, 2001, assessed the aggregate of the total income for the block period 1987-88 to 1997-98 (up to September 27, 1996), at Rs. 63,51,168, and after deducting the income disclosed by the appellant-company under section 158BB of the Act which was Rs. 9,20,491, the undisclosed income of the appellant-company for the block period was assessed at Rs. 54,30,677 under section 158BC of the Act. The tax payable on the said undisclosed income at the rate of 60 per cent. was calculated at Rs. 32,58,406, and surcharge payable thereon was Rs.2,44,380 at the rate of 7.5 per cent. Copy of the order dated March 30, 2001, passed by the learned assessing authority has been placed at annexure 2 to the memo of appeal. 7. The appellant preferred an appeal before the Income-tax Appellate Tri- bunal against the fresh assessment order dated March 30, 2001 (annexure 2), giving rise to Case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e original order of the assessment (annexure 4), to Rs. 54,30,677, as per the assessment order passed on remand on March 30, 2001 (annexure 2), and confirmed by the Tribunal, was unsustainable in law. He relied upon the judgment reported in Pahulal Ved Prakash v. CIT [1990] 186 ITR 589 (All) and submitted that the Tribunal could not relegate the appellant to a worse position than the original situation. 11. It was also submitted that under law the assessee-appellant was only required to disclose the source of the payee and that he was not required to provide the source of the income of the said payee. Mr. Jain cited the following judgments in support of his submission, namely :- (i) CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC) ; (ii) Sarogi Credit Corporation v. CIT [1976] 103 ITR 344 (Patna) ; and (iii) Dalooram Jayanarain v. CIT [1962] 44 ITR 379 (Mad). 12. It was further contended that the amounts invested in the company were genuine investments forming share capital of the company and could not be termed as undisclosed income of the company. In support of his submission, Mr. Jain relied upon the judgments reported in CIT v. Stellar Investment Ltd. [1991] 192 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt from every order passed in appeal by the Appellate Tribunal, if the High Court is satisfied that the case involves a substantial question of law. Section 260A of the Act reads as follows : "(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal before the date of establishment of the National Tax Tribunal, if the High Court is satisfied that the case involves a substantial question of law. (2) The Chief Commissioner or the Commissioner or an assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be- (a) filed within one hundred and twenty days from the date on which the order appealed against is received by the assessee or the Chief Commissioner or Commissioner . . . ; (c) in the form of a memorandum of appeal precisely stating therein substantial question of law involved. (3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question. (4) The appeal shall be heard only on the question so formulated, and respondents shall, at the hearing of the appeal, be all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned in section 260A have to be strictly fulfilled before an appeal would be maintained and that an appeal under the said provision can only be in respect of a substantial question of law. It was held that the finding of fact of the Appellate Tri- bunal cannot be disturbed by the High Court in exercise of powers under section 260A. 22. The position has been reiterated in the judgment of the apex court in the case of CIT v. P. Mohanakala [2007] 291 ITR 278 (SC). Paragraphs 12, 13 and 27 of the judgment are reproduced hereinbelow (pages 284 and 289) : "12. The High Court, vide the impugned judgment in exercise of its jurisdiction conferred upon it under section 260A of the Act reversed the finding of fact and allowed the appeals. The High Court virtually reappreciated the evidence available on record and substituted its own findings for that of the Tribunal and the other authorities. The High Court came to the conclusion that the reasons assigned by the Tribunal and other authorities `are in the realm of surmises, conjec- tures and suspicions...the authorities under the Act have failed to draw the only conclusion that is possible legally and logically.' The judgment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rivate Ltd. was issued again by Shri Janardan Sharma. The con- firmation letter for M/s. Shriya Financial Services Private Ltd. was issued by Shri Bijoy Kumar Goenka who also issued confirmation letter on behalf of M/s. Goenka Business and Finance Ltd. and M/s. Vishist Vyapar Private Ltd. 25. The addresses of most of the investing companies were 85, Metcalfe Street, 3rd Floor, Room No. 306, Calcutta. On a deeper consideration of the documents, it was found that the situation as being projected by the assessee-company was not real since either the investing companies had a common address at Calcutta referred to above or had a common director. The nexus amongst the companies emerged from the records. The facts emanating from the records demonstrated that the companies had a com- mon link running in between them and their incorporation in different names had been done with the sole purpose of creating a legal fiction. The aforesaid opinion was further strengthened by the fact that all the invest- ments made in the assessee-company was through bank drafts drawn on Punjab National Bank, Ezra Street, Calcutta, issued on or about September 7, 1995. It was apparent that the investments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the investment. In the circumstances, the Tribunal rightly treated the unexplained amounts received from the Calcutta based companies as undisclosed income of the assessee and which was to the tune of Rs. 41 lakhs. 28. A feeble attempt was made on behalf of the appellant-company to demonstrate that some investments towards its share capital was by individuals who had also given unsecured loans to the companies and to support the said contentions names of Umesh Prasad Rao, Rajdeo Prasad, Neelam Devi, Prabhash Kumar, and Ramesh Kumar along with others figured. These are the same persons who had been issued the share cer- tificates which were seized in the course of search operations in the res- idential premises of Shri R. R. P. Sinha. During the course of enquiry, it emerged that all the bank drafts through which investments had been made by the persons named above, had been prepared on the same day. All the applications for the said drafts had been made in the same handwriting and a common mistake had occurred in all the forms, i.e., the name of the appellant-company had been written as G. B. Associates Private Ltd., and which had been corrected by overwriting "J" over th ..... 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