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Judgment
Heard learned counsel appearing for the appellant and learned counsel appearing for the respondent. The respondent-Assessee-company received Share Applications worth Rs. 41.10 Lakhs from 19 different persons. When return for the assessment year 2004-05 was submitted, income was shown as ''NIL''. Thereupon letters of enquiry were issued to all the share applicants to which they except four persons, whose names have been disclosed In the assessment order, responded and submitted relevant documents showing investment of the money. Since, those four persons were shown to have invested a sum of Rs. 17.50 Lakhs in the assessee company, the Assessing Officer made the addition of Rs. 17.50 Lakhs on account of non-proving of the existence and the identify of those four persons, as those four persons did not respond to notice issued in terms of Section 133(6) of the Income Tax Act, 1961.
That order was challenged before the appellate authority where necessary documents such as copies of audited account, copy of returns etc., showing investment by those four persons were filed. The appellate authority, having taken into account those documents did find the share-holders as genuine persons, thus, having satisfied with their credit worthiness, deleted the addition which had been made by the assessing authority.
Being aggrieved with that order, second appeal was filed before the Tribunal but the Tribunal did not find any illegality with the order passed by the appellate authority. Hence, dismissed the appeal. That order is under challenge.
Learned counsel appearing for the appellant submits that admittedly, those four persons had not produced any documents, showing Investment of Rs. 17.50 Lakhs before the Assessing Officer, rather the documents with respect to investment of the money were filed before the appellate authority, which the appellate authority in terms of Rule 46(A) of the Income Tax Rules should not have allowed the assessee company (respondent) to adduce in evidence and thereby the said amount should not have been deleted from the income of the assessee, but the Tribunal without considering this aspect of the matter, did affirm the order passed by the first appellate authority, which is quite illegal and hence, it is fit to be quashed.
However, Mr. B. Poddar, learned senior counsel appearing for the respondent submits that it is not that no documents with respect to investment by those persons were filed before the Assessing authority rather the documents showing identity of those persons and even PAN numbers had been filed whereas only the additional materials were filed before the appellate authority, which were rightly taken into account, particularly in view of the fact that it is never the case of the appellant that those four persons were "fictitious or bogus persons and in such event, the Tribunal, has rightly passed the order in terms of the observation made by the Delhi High Court in the case of Commissioner of Income Tax Vs. Divine Leasing and Finance Ltd., Furthermore, orders impugned never suffer from any illegality in view of the decision rendered in the case of Commissioner of Income Tax Vs. Chhinmastika Coke Industries (P) Ltd. and therefore, the orders passed by Tribunal as well as by the appellate authority never warrant any interference particularly when the appellant has not come forward with any substantial question of law, involved in the case.
Having heard learned counsel appearing for the parties, it does appear, from the order passed by the Tribunal that the respondent-assessee-company had submitted the documents showing their-addresses as well as respective PAN numbers of the share applicants Including four share applicants. Out of them, four persons did not respond to the notices issued to them in terms of Section 133(6) of the Income Tax Act. Therefore, assessing officer included a sum of Rs. 17.50 Lakhs, which had been shown to have been Invested by them in the income of the company, but when the appeal was preferred, certain documents were placed, showing investment of the money in the assessee company. Thereupon, the appellate Court having satisfied with the genuineness of share-holders, set aside the order of the assessing authority.
Thus it appears that Initial burden, which was upon the assessee company had already been discharged. Had the assessee-company been failed to file even primary documents then he, in terms of Rule 46-A(1) would not have been allowed to produce those documents.
Since primary documents had already been filed, the first appellate Court, in exercise of the power, as contained in sub-rule (4) of Rule 46-A seems to have taken into account those documents and thereby, neither the appellate Court nor the Tribunal seems to have committed any illegality.
Further more, it be stated that it has never been the case of the appellant that four persons were fictitious or bogus persons. In this context, it would be relevant to refer Section 68 of the Income Tax Act, which reads as follows:-
Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to Income Tax as the income of the assess of that previous year.
On taking into account the said provision, it has been held in the case of Commissioner of Income Tax Vs. Stellar Investment Ltd., and also in the case of Commissioner of Income Tax Vs. Sophia Finance Ltd., that placing a burden upon the assessee company to trace the source and the credit-worthiness of the share applicants would be almost an impossible task, especially for large companies having large share capital. Normally, the Courts lean against placing any practical or impossible burden upon any person.
It further lay down that where the share applicant Is actually an existing person and not a bogus person, there, if the creditworthiness or the capacity to invest in the share is not established, it would be for the department to proceed against such person, who had applied for share without having such capacity. However, where the share applicant is a fictitious or bogus person whose identity cannot be traced, in such an event, the amount of application money may be added as undisclosed income.
But here in the instance case, it is never the case of the appellant that four persons were fictitious or bogus persons. Accordingly, we do not find any merit in this application and hence, it is dismissed.