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TMI Blog2003 (3) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... s and in the circumstances of the case, the Tribunal was justified in deleting the entire addition made on account of income from undisclosed sources? 3. Whether, the findings of the Tribunal leading to the conclusion that the share loss has been established by the assessee-company to be genuine is based on relevant evidence or otherwise perverse?" From the above questions, it appears that there are two parts in this case. One part relates to the subscription to share capital and the other part relates to loss in share transaction. So far the capital part is concerned, the same can be divided into two parts. One in respect of promoters' quota and the other in respect of public issue. Loss of share: Question No. 3: We may deal with the loss in share transaction first. The grounds disallowing share loss by the Assessing Officer affirmed by the Commissioner of Income-tax (Appeals), were those that out of the four blocks of shares delivery of three blocks were received after five months and the price was also paid after five months, but were immediately sold at a loss. The other grounds were that the share broker only in respect of one group was produced but the other share bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said case the shares were transacted through noted share brokers at the rates quoted in the stock exchange. The claim of the assessee was accepted. Such an acceptance was found favour by this court in the said decision. Mr. Khaitan had then relied on the decision in CIT v. Currency Investment Co. Ltd. [2000] 241 ITR 494 (Cal). In this case, it was held that merely because the assessee could not produce the broker through whom the shares were sold, the same did not affect the genuineness of the transactions when the assessee disclosed the identity of persons from whom the shares were purchased and to whom sold. Even when two views are possible, if the view taken by the learned Tribunal is possible, it cannot be said to be perverse. Having regard to the proposition of law as discussed above and the facts and circumstances of the case, we find that in the present case, the view taken by the learned Tribunal cannot be said to be erroneous or perverse. Therefore, we answer question No.3 in the negative in favour of the assessee. Section 68: The principle: Respective contentions: Mr. Khaitan had relied on the decision in CIT v. Orissa Corporation (P) Ltd. [1986] 159 ITR 78 (SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponded the Assessing Officer could not jump to a conclusion that the transaction was ingenuine. Mr. Khaitan then relied on CIT v. Korlay Trading Co. Ltd. [1998] 232 ITR 820 (Cal). In this decision, it was held that once the assessee had discharged its initial burden, no investigation or proper steps had been taken by the Income-tax Officer to bring on record the materials to controvert the claim of the assessee. The claim of the assessee could not be denied merely because the broker through whom the transaction was effected had failed to produce his books. The creditors should be identified, their creditworthiness should also be established and the genuineness should be proved. In this case the identity had admittedly been established but for establishing the creditworthiness, no further steps were taken by the income-tax authority nor proper opportunity was given to the assessee. Mr. Khaitan then relied on K.M. Sadhukhan and Sons (P.) Ltd. v. CIT [1999] 239 ITR 77 (Cal). Relying on the decision, he contended that reliance placed on this decision by Mr. Agarwal does not help Mr. Agarwal in view of the distinguishing facts of the case. Mr. Agarwal had relied on CIT v. Precision Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this case, notices under section 133(6) were issued to the subscribers who were outside the State. Notice upon ten shareholders could not be served. The balance 48 did not respond. These facts were communicated to the assessee by the Assessing Officer. The Assessing Officer could do no further. There was no other material on the basis of which it could have enquired into the matter. Neither the income-tax file number was available to cross check, nor there was any prayer on the part of the assessee to issue summons under section 131 of the Act. Therefore, the Assessing Officer did nothing further. It is an admitted proposition that the burden lies on the assessee. After this was communicated to the assessee that these persons were not responding, it was the responsibility of the assessee to prove the creditworthiness of the subscribers or the genuineness of the transactions, but it had done nothing. Therefore, the finding of the learned Tribunal with regard to the public issue in respect Of these 30 per cent. subscribers seems to be perverse. Therefore, we are unable to accept the learned Tribunal's finding with regard to the public issue. We affirm the decision of the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per inspectors report. 5. Mohan Lal Colecha 2,500 No such file in the blue book of the ward. 6. Sitaram Khaitan 5,000 -do-. 7. Shantilal Jain 2,500 No such file in the blue book of the ward. 8. Chand Ratan Mohta 4,500 -do-. 9. Inderchand Daga 4,300 Summons under section 131 could not be served company also failed to produc the shareholder. --------------------------------------------------------------------------------------- The Assessing Officer had disbelieved the genuineness of the subscription of the above nine persons on account of the reasons stated against each of the nine subscribers. The Commissioner (Appeals) had accepted the genuineness of the transaction in respect of five of them at serial Nos. 4, 6, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of the transaction cannot be proved. Therefore, the finding of both the Commissioner (Appeals) and the learned Tribunal appears to be perverse. The concept of assessment at the hands of the subscriber when the subscription cannot be verified from their accounts after the subscription is con firmed by the subscriber is no more a good law. Under section 68, the Income tax Officer is empowered to lift the veil of corporate identity and find out as to whether the apparent is real. It is the assessee on whom the onus lies. Unless sufficient materials are produced, the onus does not shift on the Revenue. But once the materials are scrutinized and the result of the scrutiny is communicated to the assessee, the onus shifts from the Revenue to the assessee. Then the assessee has to take appropriate steps for proving its case. Unless there are sufficient materials after such communication, produced by the assessee, the Income-tax Officer can do no further. So far as the subscribers in serial Nos. 5, 6, 7 and 8 are concerned, the file numbers disclosed could not be found in the blue book of the ward. There fore, the material having been found insufficient, the onus shifted from the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer. Such stand was upheld by the Tribunal. Therefore, it cannot be said that the assessee did not take any steps after he was intimated about the situation by the Assessing Officer. Since he was relying on a particular principle of law having regard to a decision cited by him, namely, Stander Cylinder (P.) Ltd.--Appeal No. 3024 (Delhi) of 1986 and Kalyani Investment Co. (P.) Ltd.--Appeal No. 921 (Cal) of 1970-71, therefore, it was on such understanding that he did not take steps so as not to prejudice his case pending before the Tribunal. It seems that there was sufficient substance in the submission of Mr. Khaitan to the extent about the belief with regard to particular proposition of law. We had occasion to deal with this question in the case of Hindusthan Tea Trading Co. Ltd. v. CIT [2003] 263 ITR 289 (Cal)--I.T. Reference No. 20 of 1996, disposed of on March 11 and 12 of 2003 and in the case of CIT v. Ruby Traders and Exporters Ltd. [2003] 263 ITR 300 (Cal)--I.T. Reference No. 78 of 1995, disposed of on March 12, 2003, where we had negatived the contention that such amount is to be added at the hands of the subscriber or that the assessee has no responsibility to produce a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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