Commissioner Of Income Tax vs Adonis Finance Limited
2007 Latest Caselaw 1246 Del

JUDGMENT

V.B. Gupta, J.

1. Present appeal under Section 260A of the Income Tax Act, 1961 (for short as 'Act') has been filed by the Revenue against the order dated 17th November, 2006 passed by the Income Tax Appellate Tribunal (for short as 'Tribunal'), New Delhi in ITA No.1700/Del/2003 for the assessment year 1995-96.

2. The assessed is a public limited company and is carrying on the business in finance, investments and leasing. While completing the assessment under Section 143(3) of the Act, the Assessing Officer noted that the assessed had raised share capital to Rs. 75 lacs by a public issue made on 23rd January, 1995. In the public issue, 7,50,000/- equity shares were offered to the public at the face value of Rs. 10 per share. The promoters of the company made a private contribution of Rs. 2,25,05,000/-. The assessed was called upon to prove the genuineness of the share capital. The assessed adduced evidence in support of his claim. The Assessing Officer came to the conclusion that out of the total share contribution of Rs. 3,00,05,000/-, the assessed could establish the genuineness of only Rs. 1,41,69,865/- and in respect of the balance of Rs. 1,58,35,135/- the assessed could not discharge the onus to prove genuineness of the investment and as such he treated the amount as assessed's income from undisclosed sources.

3. On appeal, the Commissioner of Income Tax (Appeals) sustained the addition of Rs. 25,24,000/- out of the addition of Rs. 1,58,35,135/- made by the Assessing Officer which consists of following amounts:

(i) Contribution by 17 persons to whom summons were issued by the A.O.

     which were returned unserved               Rs. 2,30,000/-
(ii) Contribution by 66 persons on whom
     summons were served but from whom
     no reply was received                      Rs.22,94,000/-
                                          ----------------------
                                          Total Rs.25,24,000/-
                                          ----------------------
 

4. Order of the Commissioner of Income Tax (Appeals) was challenged by the assessed before the Tribunal. The Tribunal vide its impugned order deleted the addition of Rs. 25,24,000/-. Hence the present appeal.
 

5. It has been contended by the learned Counsel for the Revenue that as per Section 68 of the Act, onus is on the assessed to establish the identity of the subscribers of the shares and the alleged investors were not existing at the given address and thus the assessed has failed to discharge the onus which was upon him and has failed to prove the creditworthiness and genuineness of the transaction.

6. The Tribunal after considering the evidence as well as submissions of the parties, decided the matter in favor of the assessed and against the Revenue holding that:

We are of the view that so far as the share contribution of Rs. 25,24,000/- is concerned, the assessed has discharged its onus to prove the same under Section 68 of the Act. The complete list containing the folio number, names and addresses of the applicants and the total number of shares applied for is contained in pages 10 to 25 of the paper book. The details of the allotment containing such details as the bank code/serial number, applicants' number and name, the number of shares applied for and allotted, the folio number, the distinct numbers of the shares allotted, the share certificate number, the application amount, the amount adjusted against allotment and the amount refundable or payable etc. All these details regarding the entire 7,50,000 shares have been furnished. Pages 34 to 75 contain the statements received by the assessed from the banks containing the total summary of the amounts collected on behalf of the assessed. Page 34 is a letter written by the Delhi Stock Exchange Association Limited on 21.2.1995 to the assessed approving the scheme of allotment sent to the assessed. Pages 76 to 142 contain the postal receipts for the dispatch of the share certificate to all the allottees of the shares. There is no finding that any of the shares allotted have been returned to the assessed. Thus, copious details about the public issue have been furnished by the assessed at the assessment stage with regard to the entire share contribution including the contribution of Rs. 25,24,000/- received from different persons. With specific reference to the 17 cases where the summons issued by the Assessing Officer came back unserved, the assessed had furnished, vide written submissions filed before the Commissioner of Income Tax (Appeals), certain details which show that 12 of the 17 persons have been found to have changed their addresses and hence could not be traced by the assessed, as pointed out on behalf of the assessed. This fact has been highlighted by the assessed in para 1.4 of the written submissions and though this aspect was referred by the Commissioner of Income Tax (Appeals) to the Assessing Officer for his comments, no comments were received raising an interference that what the assessed has stated is not disputed. Four persons had refused to receive the summons and the reasons for such refusal are not known but the fact that they refused to take the summons shows that their identity is proved. As regards the single persons remaining, the position is not very clear. Similarly with regard to the 66 persons to whom the summons were served, no one had denied the share contribution. Considering the evidence in is entirety and having regard to the fact that the assessed had adduced whatever evidence which was in its possession to the income tax authorities and also taking into account the fact that no clinching evidence contra has been brought on record by the income tax authorities with regard to the 83 persons from whom a total share contribution of Rs. 25,24,000/- was received, we hold that there is no justification for sustaining the addition.

7. An appeal under Section 260A of the Act can be only in respect of a 'substantial question of law'. The expression 'substantial question of law' has not been defined anywhere in the statute. But it has acquired a definite connotation through various judicial pronouncements. In Sir Chunilal V. Mehta & Sons Ltd. v. Century Spinning & Mfg. Co. Ltd. , the Apex Court laid down the following tests to determine whether a substantial question of law is involved. The tests are : (1) whether directly or indirectly it affects substantial rights of the parties, or, (2) the question is of general public importance, or, (3) whether it is an open question in the sense that issue is not settled by pronouncement of the Supreme Court or Privy Council or by the Federal Court, or, (4) the issue is not free from difficulty, and (5) it calls for a discussion for alternative view.

8. Following the above principles, the Kerala High Court in M. Pappu Pillai v. ITO held that:

There is no scope for interference by this Court on a finding recorded when such finding could be treated to be a finding of fact. A finding of fact must, therefore, be held to have become final.

9. In the present case, these findings of the Tribunal are purely of fact as to how many applications for shares were made; how many persons have refused to receive the summons; how many persons have been unserved and whether the share holders have changed their addresses or not. The conclusion with regard to these findings made by the Tribunal is essentially factual and as such no substantial question of law is involved in the present case.

10. Under these circumstances, we find no reason to differ with the finding given by the Tribunal which is purely a finding of fact and as such the present appeal is not maintainable and the same is, hereby, dismissed.