COMMISSIONER OF INCOME TAX vs. GANGOUR INVESTMENT LIMITED

2.3 The Assessing Officer completed the assessment under Section 143(3) of the Act vide order dated 31.03.1999. By the said assessment order additions were made in respect of monies advanced by way of subscription to share capital, in particular, the amount of Rs 71 lakhs received from T.T. Finance Ltd. These additions were made under Section 68 of the Act. It is important to note that, in so far as, T.T. Finance Ltd is concerned the only observation that the Assessing Officer made with respect to the addition of the said amount of Rs 71 lakhs is as follows:- “…..In the case of amount received from M/s T.T. Finance Ltd., it is clear that assessee‟s own fund has come back in the form of share capital. All the entries are book entry and merely routed through T.T. Finance Ltd and therefore the amount of Rs 71 lakh is added u/s 68 of the Income Tax Act. This company M/s T.T. Finance Ltd has been used to route the assessee‟s own unaccounted money……..”

2.4. The assessee being aggrieved by the aforesaid order passed by the Assessing Officer preferred an appeal to the CIT(A). The CIT(A), by his order dated 31.01.2000, allowed the assessee‟s appeal subject to certain remarks made in paragraphs 5 and 7 of the appeal. In respect of the issue at hand the CIT(A) noted that the assessee had discharged its onus in satisfying the requirements of Section 68 of the Act. He particularly noted that the assessee had filed copies of the applications made by the subscribers to the issue and bank pass books of the investors. He further noted that the applications clearly indicated the identity of the 2009:DHC:316-DB

well as PAN numbers held by them with the Department. He further noted the fact that even though T.T. Finance Ltd was a group company of the assessee having common shareholders and Directors, it was a widely held company having a paid up share capital of Rs 3.4 crores. In these circumstances, the CIT(A) was of the view that the assessee had discharged its onus and there was no evidence on record to support the findings of the Assessing Officer to show that the assessee‟s own money had been routed in the form of share capital justifying the addition under Section 68 of the Act. 2.5 The Revenue being aggrieved by the order of the CIT(A) preferred an appeal only with respect to deletion of addition pertaining to the investment made by T.T. Finance Ltd in the sum of Rs 71 lakhs. The Tribunal by the impugned judgment sustained the order of the CIT(A). In doing so, the Tribunal noted the fact that apart from the information made available by the assessee at the stage of assessment in the form of names, addresses and PAN numbers of the subscribers of the share capital, the money had been received through banking channels. In these circumstances, it came to the conclusion that the assessee had been able to establish the identity of the investors and the initial burden which rested on the assessee had been shifted. In view of the fact that the share capital money have been received through a cheque, the Tribunal concluded that the share capital money could not be treated as undisclosed income of the assessee as there was neither any direct nor 2009:DHC:316-DB

2.6. The Revenue being aggrieved has preferred the present appeal. The learned counsel appearing for the Revenue, Smt. Prem Lata Bansal submitted that the appeal deserves to be admitted in view of the fact that the Tribunal failed to take into account the fact that the assessee had not established all the ingredients necessary to steer clear of the ambit of the provisions of Section 68 of the Act, which are, the identity, the credit worthiness and the genuineness of the transaction. It was further contended that the Tribunal failed to appreciate that the investment in issue, by T.T. Finance Ltd, was by a group company. The assessee and the investor i.e., T. T. Finance Ltd had common Directors and operated from the same office. 2.7 We must point out at this stage that when it was put to the learned counsel for the Revenue that the assessment order did not disclose any basis, whatsoever, as to how the Assessing Officer had come to the conclusion that funds invested by T.T. Finance Ltd were nothing but assessee‟s own funds which had been routed through the said investor except the bald statement to that effect, she fairly conceded that the Assessing Officer‟s observations were cryptic and hence to cure the defect the proceedings be remanded back to the Assessing Officer to pass a speaking order. 2.8 Before we proceed further we must get this submission of the learned counsel for the Revenue out of the way. We may note that in paragraph 3 of the CIT(A)‟s order it has been categorically noted that the 2009:DHC:316-DB

paper book filed and the submissions made by the assessee on 01.11.1999, were forwarded by him to the Assessing Officer vide letter dated 03.11.1999 requesting him to furnish his comments/reports on or before 16.11.1999. He further noted that on 01.12.1999 the assessee‟s counsel appeared before him and submitted a letter with certain enclosures. These were also forwarded by the CIT(A) to the Assessing Officer vide letter dated 01.12.1999. The Assessing Officer‟s report was sought on or before 14.12.1999. Thereafter, the counsel for the assessee put in an appearances before the CIT(A) on 15.12.1999, 05.01.2000 and 21.01.2000. The Assessing Officer, however, did not submit any report. As a matter of fact the CIT(A) records that both on 24.01.2000 and 27.01.2000 the Assessing Officer orally informed the CIT(A) to decide the appeal based on the facts available on record. 2.9. Given the afore-mentioned circumstances, we find it difficult to accept the submission made by the learned counsel for the Revenue, that the matter be remanded to the Assessing Officer for passing a speaking order 3. Coming back to the case, in so far as the learned counsel for the assessee Shri Rajiv Bansal was concerned, he relied upon the order passed both by the CIT(A) as well as the Tribunal. It was his statement that there are concurrent findings of fact returned by the CIT(A) as well as the Tribunal which ought not to be disturbed by this Court as no substantial question of law has arisen for consideration of this Court 2009:DHC:316-DB

CIT v. Divine Leasing & Finance Ltd; (2008) 299 ITR 268 in paragraphs 12 and 13 at pages 278 and 279 and paragraphs 18 and 19 at pages 282 and 283. It is important to note that in the said judgment the Division Bench has taken note of the judgment of the Full Bench of this Court in CIT v. M/s Sofia Finance Ltd; (1994) 205 ITR 98. The Division Bench in Divine Leasing & Finance Ltd (supra) was considering a batch of petitions which included, amongst others, an appeal titled CIT v. Lovely Exports P. Ltd. The judgment of the Division Bench was carried in appeal to the Supreme Court. The Supreme Court by a speaking order dated 11.01.2008 passed in Special Leave to Appeal No. 11993/2007 dismissed the appeal of the Revenue in the case of Lovely Exports P. Ltd (supra). The said order is reported in (2008) 216 CTR (SC) 195. 8. In the circumstances, we are of the view that no question of law, much less, a substantial question of law has arisen for our consideration. The Revenue‟s appeal fails and hence, is dismissed. No order as to costs.

RAJIV SHAKDHER, J

January 30, 2009/da

BADAR DURREZ AHMED, J 2009:DHC:316-DB