Income Tax Appellate Tribunal - Jodhpur
Shree Bharkha Synthetics Ltd. vs Assistant Commissioner Of Income Tax on 28 November, 2001
Equivalent citations: [2002]83ITD714(JODH)
ORDER
S.R. Chauhan, J.M.
1. This appeal by assessee for asst. yr. 1997-98 is directed against the order of CIT(A), Ajmer, dt. 2nd Jan., 2001.
2. We have heard the arguments of both the sides and have also perused the records including the written submission furnished by both the sides on record.
3. The facts in brief may be stated that the assessee-appellant is a public limited company engaged in manufacturing and sale of synthetic clothes at Bhilwara. During the year under consideration, the assessee went into expansion of its production activity and for this purpose, it raised share capital in two phases and thereby received subscription of Rs. 41,000 and Rs. 54.000 towards it share capital which have been credited in the share application money account.
The assessee also raised loans of Rs. 43,51,460 from different persons. All the shares were allotted during the year. The balance sheet of the company is placed on p 313 of paper book, copy of share capital account on p. 305 of paper book, copy of allotment return of shares along with enclosures placed on pp. 357 to 361 of paper book. Out of total share capital of Rs. 90,73,310 credited in the books of assessee the AO doubted genuineness of share application money to the extent of Rs. 23,76,000 received from 17 parties and made addition in respect thereof under Section 68. Similarly, out of the unsecured loans, the AO treated the loans to the extent of Rs. 3,65,000 from six persons as non-genuine and made addition in respect thereof together with an amount of Rs. 53,845 and as interest thereon under Section 68". We now take up the appeal ground-wise.
4. Ground No. 1 disputes the addition of Rs. 23,76,000 under Section 68 in respect of alleged unexplained share application money deposited by the following persons :
Rs.
(i) M/s Good Earth Industries Ltd.
2,40,000
(ii) M/s Good Earth Organics India Ltd.
2,40,000
(iii) M/s Vinay Chem Pharma 2,00,000
(iv) M/s West Bury Investiade (P) Ltd.
2,00,000
(v) M/s Rajiv Textile (P) Ltd., Mumbai 2,00,000
(vi) M/s Ruchi Pharmaceutical (P) Ltd.
2,00,000 (vil) M/s Fabstoff Private Ltd.
2,00,000 (vlii) Umesh Kumar Bansal 1,00,000
(ix) Ashok Kumar Jain 1,00,000
(x) Ashok Kumar Sodani 1,00,000
(xi) Balmukand Somani 80,000
(xii) Balmukund Kabra 92,000 Mil) Smt. Laxmi Bulchandani 88,000
(xiv) Mahendia Kumar Bulchandani 84,000
(xv) Smt. Anita Sodani 80,000 (xvi) Smt. Gita Devi Sodani 84,000 (xvii) Smt. Chanda Devi Jain 88,000 43,51,460 The learned authorised representative of assessee has contended, in his written submission that the share application money to the extent of Rs. 23,76,000, the genuineness of which has been doubted by AO and addition in respect of which has been made, is detailed as under:
Status of parties No. of parties Amount involved Public limited companies 4 8,80,000 Private limited companies 3 6.00,000 Individuals 10 8,96,000 Total 17 23,76,000
5. As regards the seven corporate investors, the allegations/objections for making addition have been stated to be as under:
Allegations/Objections as basis of addition Column No.
2.
2.
3.
4. 5
Sl.
No. Name of share holder Notice under s. 133(6} returned mserved which shows identity of investor ' not proved.
Confirmation Outsider No reason why outsider Co. to invest in a Co.
Bank account statement Any other (0 M/s Good Earth Indus. Ltd.
Confirmation not accompanied by retutn of income Shows that for making investment cash has been deposited in his bank a/c which is not explained.
(ii).
M/s Good Earth Organics (I) Ltd.
Shows that an amount of Rs.
8.24.446 is credited through FO SC before making investment no explanation for this credit.
(iii) Vinay Chem. Phaima Ltd.
Confirmation directly received lion parly but does not give distinctive number of shares; shareholders changeability to tax not stated.
Copy not filed tor verification.
(iv) Westbury Investrade (P) Ltd.
Confirmation ofparty itself serving document. No details regarding shareholders. IT file number etc provide.
Copy not filed to showsource of funds.
(v) Rajiv Textiles (PLtd.
Confirmation is self-serving document. Complete Copy filed but not legible;
on copy name o shareholder is Assessment year Expenditure shown by the assessee Expenditure as per DVO's report Difference amount Rs.
Rs.
Rs.
1995-96 2,59,717 4,84,487 2,21,750 1996-97 9,84,809 19,07,255 9,22,426
6. As regards the remaining 10 investors being the individuals, the learned authorised representative of assessee has contended that the addition in respect of Umesh Kumar Bansal mentioned at Sl. No. (viii), the addition has been made for the reason that in direct confirmation received from him by the AO he has denied having made any investment in share application money of the assessee-company and that his bank account was not filed. Regarding the other individuals, mentioned at Sl. Nos. (ix) to (xvii), the allegations/objections being basis for addition are that these investors have not furnished the copy of balance sheet, bank statement and evidence regarding availability of cash/fund, and that there is no reason why a low-paid employee should go in purchase of shares of assessee-company which is non-rewarding investment,
7. The learned authorised representative of assessee has contended that out of the 27 parties/investors, all the companies are stationed out of the State i.e., at Mumbai or Hyderabad and that other investors/individuals are local parties. He has contended that on enquiry during assessment proceedings in respect of these subscribers to shares, the assessee submitted all the information available with it in respect of the subscribers i.e., the copies of the share allotment letter filed with ROC along with complete list of shareholders, copies of share applications of all the shareholders, the copies of resolution passed by the subscriber companies and the copies of share allotment letters. He has contended that the AO issued notices under Section 133(6) to all the parties on 7th Feb., 2000, but the notices so issued to all the companies stationed outside the state were received back unserved whereas all the local individual subscribers responded to the notices. It has been contended that in compliance of AO's letter dt. 10th March, 2000 (pp 386 to 388 of paper book). The assessee obtained confirmation from 6 out of 7 corporate investors and submitted the same to the AO and that the seventh corporate investor Vinay Chem Pharma Ltd. Hyderabad, directly sent a comfirmatory letter to the AO. It has been contended that the above parties are artificial juridical persons, registered with Registrar of Companies of their state. It has been contended that the assessee has also made available the GIR No./PAN of six of the companies and that PAN of Westbury Investrade (P) Ltd. [mentioned at Sl. No. (iv)] could not be made available. It has been contended that all the seven companies have confirmed the investment in shares of assessee. It has also been contended that the notice issued to the company mentioned at Sl. No. (i) (M/s Good Earth Industries Ltd.), (iv) [M/s West Bury Investrade (P) Ltd.], (vi) [M/s Ruchi Pharmaceutical (P) Ltd.] and (vii) [M/s Farbstoffe (P) Ltd.] could not be served on them for the reason of change in address and the learned authorised representative of assessee has mentioned the page Nos. of paper book whereon the addresses of these parties being available with AO as also page Nos. whereon the new addresses of these parties are given.
The new addresses of these parties have been given on pp. 162, 178, 182, 188 and 193 of paper book respectively as mentioned on p. 13 of assessee's written submission. Regarding M/s Good Earth Organics (I) Ltd., Bombay, mentioned at Sl. No. (ii), it has been contended that the notices might have returned unserved because the company has already gone into liquidation. It has also been contended that in the case of M/s Vinay Chern Pharma Ltd., Hyderabad, mentioned at Sl. No. (iii), the remark of postal department is 'shifted' which shows that the party existed at that address sometime. It has been contended that there can be several reasons for non-service of notice and on that basis alone it cannot be concluded that these are non-existing persons. It has been contended that the confirmations of parties, resolution passed by parties, the share application made by them, and the mode of receipt being banking channel do establish that they have made the investments. It has been contended that on furnishing of letters of confirmation, particulars of creditors, CIR Nos., and where the notices to shareholders came back and the Department made no further attempt to examine the source of credits, the onus cast upon the assessee was held as discharged by Hon'ble Supreme Court in the case of CIT v. Orissa Corporation (P) Ltd. (1986) 159 ITR 78 (SC). It has been contended that the further information supplied to AO was not considered by him. Regarding the reason as to why an outsider company having no business interest in assessee should invest in the share capital of assessee and regarding non-furnishing of the return of income, etc. of shareholder-companies, it has been contended that it is none of the relevant consideration to decide the genuineness of the shareholder or creditor. It has also been contended that the assessee-company commenced its business in 1992-93 and thereafter it declared dividends at the rate of 5 per cent for Financial years, 1994-95 to 1996-97. It has been contended that it is not the duty of the assessee to go into reasons for investment made by outsider parties nor could the assessee be called upon to produce the basic records and evidence regarding financial status, bank accounts and income-tax records of the shareholder as held by Tribunal, Delhi in the case of Rishi Electronic Ltd. v. Asstt. CIT (1995) 53 ITD 10 (Del).
8. Regarding the ten individual investors, it has been contended that they all responded to the notices under Section 133(6) issued by AO. It has been contended that in such a case the identity of these persons is proved beyond doubt. It has been contended that nine out of these ten parties have confirmed the fact of making investments in the shares of assessee-company and that they are income-tax assessee and the mode of receipt has been banking channel and all these establish that they made the investment in the assessee's companies shares. It has been contended that one of the shareholders, namely, Umesh Kumar has denied the fact of investment but he himself signed the share application and the cheque to invest the money in the company. He is also an income-tax assessee. It has been contended that his subsequent denial cannot be accepted as such without enquiry and without providing any opportunity to the assessee. It has been contended that the payment in case of all the shareholders has been received through account payee cheque/bank draft and so the question of identity of creditor becomes irrelevant as held by the Hon'ble Patna High Court in the case of Asstt. CIT v. Bethri Bros (P) Ltd. (1983) 154 ITR 244 (Pat). Shivam Synthetics (P) Ltd. v. Asstt. CIT 24 TW 397 (ITAT) Jodhpur, has been cited with the contention that it has been held therein that once the identity of the shareholder is established and they accept the fact of investment made in shares of that company, ordinarily the burden on the said company will stand discharged. Gorawara Plastics and General Industries (P) Ltd. v. Dy. CIT (1999) 63 TTJ (Del) 329 has been cited with the contention that it has been held therein that where the investment in share capital has been made through account payee cheque and shareholder has confirmed the facts of making such investment, the shareholders are identified and it is established that they have invested money in the purchase of shares, and the burden lying on the company will stand discharged. It has been contended in the cited case the addition made under Section 68 in respect of share capital was deleted. Meera Engineering & Commercial Co. v. Ltd. v. Asstt. CIT (1997) 58 TTJ (Jab) 527 has also been cited for the same proposition.
9. It has been contended that all such explanations/information cannot be brushed aside on surmises and conjectures without giving cogent evidence to the effect that all the explanation/information furnished by assessee is false/forged and the money credited to share capital account represents appellants own unaccounted income. It has been contended that additions cannot be made simply on suspicion or surmises as the suspicion does not take the place of proof. Panchal Associates v. ITO (1989) 43 Taxman 295 (Ahd) (Trib), Vishnulal Kama v. ITO (1987) 32 Taxman 276 (Jp) (Trib) and CIT v. Theccanattu Films ITO v. Kaka Iron Stores (1996) 54 TTJ (Chd) 142 have been cited in this regard. It has also been contended that additions cannot be made on the basis of suspicious facts without the confirmation of the same through proper/reasonable enquiry exercising the power conferred on the IT Department. In this regard reliance has been placed, on Khandelwal Construction v. CIT (1997) 227 ITR 900 (Gau) has been cited. It has also been contended it is not the function of the Tribunal to provide further opportunity to the AO to cover up the legal laches made by restoring the matter back to his file and in this regard reliance has been placed on Asstt. CIT vs: Anima Investment Ltd. (2000) 68 TTJ 1 (Del)(TM) : (2001) 247 ITR 80 (AT) 22 (Del). The learned authorised representative of assessee has also relied on CIT v. Steller Investment Ltd. (1991) 192 ITR 287 (Del), CIT v. Steller Investment Ltd., Mather & Plant (I) Ltd. v. CIT (1987) 168 ITR 493 (Cal).
10. As against the above the learned Departmental Representative of Revenue has contended that this addition of Rs. 23.76 lacs has been made under Section 68 in respect of unexplained money deposited in the form of share capital. He has contended that Section 68 provides a fiction of law according to which if a credit is found recorded in the books of which the assessee does not furnish any satisfactory explanation to prove the genuineness thereof, such credit will be treated as income of the assessee by virtue of the said section. It has been contended that the order of AO as also of the learned CIT(A) clearly suggest that the 17 deposits of money claimed to have been received as share application money, the assessee could not satisfactorily explain the genuineness of transaction and, therefore, the same were treated as income of assessee under Section 68. He has contended that it may be noted that AO has not added the entire share application money to the total income of assessee but has added only the amount of those seventeen share applications which have remained unexplained. He has contended that the learned authorised representative's contention that the share application money deposited with the assessee was converted into share capital and that returned giving list of shareholders was sent to registrar of companies after 30th July, 1996, and 30th March, 1997, informing deposition of share capital are not relevant to decide the issue involved in this appeal as that is assessee's own record and these contentions/evidence do not prove the transaction as genuine. He has contended that these events take place after the money is deposited and not before the same is brought in books. He has contended that the learned authorised representative's contentions that all the persons including companies have remitted the money through cheque/demand draft and that all the persons have admitted that they have paid the money towards share application and they have received the shares are not believable for the detailed reasons discussed by AO whose findings have been confirmed/strengthened by learned CIT(A). He has contended that mere filing of confirmatory letters does not discharge the onus lying on assessee and for this he has relied on Bharti (P) Ltd v. CIT (1978) 111 ITR 951 (Cal). He has also contended that mere furnishing of the particulars is not enough nor the mere payment by account payee cheque is sacrosanct nor can the same make a non-genuine transaction as genuine and for this he has relied on CIT v. Precision Finance Ltd (1994) 208 ITR 465 (Cal). He has also contended that assessee's arguments and evidence given so far are inadequate and do not prove the transaction to be genuine. He has contended that as per various judicial pronouncements, the assessee's onus comprises of proving : (i) the identity of the creditor, (ii) creditworthiness; and (iii) genuineness of the transaction. He has in this regard relied on CIT v. Corley Trading Co. Ltd. (1998) 232 ITR 820 (Cal), Kant & Co. v. CIT (1980) 126 ITR 63 (Cal) and Shankar Industries v. CIT (1978) 114 ITR 689 (Cal). He has contended that in the instant case the assessee has only identified the creditors and that identity cannot be verified as correct from independent enquiries so far as share applications of seven companies are concerned. He has also contended that in view of Delhi High Court Full Bench decision in the case of CJT v. Sophia Finance Ltd. (1994) 205 ITR 98 (Del) (FB), the AO is empowered to look into the source of money received by the private limited company on share application and if the source is not proved Section 68 can be made applicable. He has contended that thus the action of AO in making enquiries from seven corporate creditors is in conformity with the above decisions.
11, Regarding Good Earth Industries, he has contended that the notice under Section 133(6) sent at the given address returned unserved. He has contended that the assessee no doubt thereafter filed confirmation letter before AO but the assessee had never stated that this company has shifted its headquarters elsewhere and that further time be given for producing evidence. He has also contended that confirmation was filed on 21st March, 2000, whereas the limitation for completing assessment was expiring on 31st March, 2000, and so the AQ had no option to allow further time. He has contended that thus the identity of the creditor could not be verified and established from independent source; He has contended that the learned CIT(A) has, vide para 4.2 on pp. 6 to 11, elaborately discussed this issue and has upheld the AO's action. He has contended that the assessee has no material or argument to rebut the findings of learned CIT(A) recorded in this para. It has also been contended that in this, case, creditor's copy of bank account was filed before learned CIT(A) but it showed that cash was deposited on 13th March, 1997, and demand draft was obtained on the same day. But the source of cash deposit was not explained.
12. In the case of Good Earth Organics Ltd, the learned Departmental Representative of Revenue has contended that in this case also the creditor's cppy of bank account was filed before CIT(A), and that in the bank account credit of Rs. 8,24,446 was made en 10th March, 1997, and DD was obtained on the next day.
It has been contended that the companies whose credits were obtained by the assessee are companies on paper or rather these are pocket companies having no genuine existence. It has been contended that whenever they find it necessary to make legal compliance the person interested in such companies gets the entire papers prepared and this gives a colour of being genuine. He has also contended that even the copies of bank account filed need investigation about their genuineness.
13. Regarding the companies mentioned at Sl. Nos. (iii) and (iv) above he has contended that the bank accounts of these two companies were also not filed and so there is no existence worth the name of these two companies. He has contended that the bank account of the company listed at Sl. No. (v) and (vi) alone were filed which are not legible and name of the company was written by hand later on; and bank account of company at Sl. No. 7 was not filed,
14. He has contended that on the face of this information the learned CIT(A) has rightly sustained the addition and that the assessee has not fulfilled any of the three requirements to prove the credits as genuine.
15. As regards the 10 individual share applicants, he has contended that Sh. Umesh Kumar Bansal has denied having purchased the shares of assessee-company. He has contended that credit in the name of Sh. Ashok Kumar Jain and Smt. Chanda Devi Jain in the form of share application money was simply admitted/confirmed before the AO but no evidence was produced to support the admission in the form of capital account, balance sheet, P&L a/c or bank account. He has contended that the action of AO was thus well justified.
16. He has contended that the bank account of Ashok Jain and Geeta Devi Sadani were produced before CIT(A) which indicated that cash was deposited in the bank account and cheque was issued on the same date. He has contended that the creditor applicant shareholders did not explain from where the cash was deposited and thus the genuineness of transaction is not proved.
17. He has contended that in respect of other creditors no evidence whatsoever was produced before AO or CIT(A) and as such the evidence now being tendered is not admissible at account, the same having been cooked after the hearing of appeal of the assessee before CIT(A).
18. We have considered the rival contentions, relevant material on record, as also the cited decisions. In (1991) 192 ITR 287 (Del) (supra), the Hon'ble Delhi High Court has held as under;
"It is evident, that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names shares, had been issued and the money may have been provided by some other persons. If the assessment of the persons who are alleged to have really advanced the money is sought to be reopened, that would have made some sense but we fail to understand as to how this amount of increased share capital can be assessed in the hands of the company itself."
In (1994) 205 ITR 98 (Del)(FB) (supra), Hon'ble Delhi High Court has held that under Section 68 of IT Act, 1961, the ITO has jurisdiction to make enquiries with regard to the nature of source of a sum credited in the books of account of the assessee, and he is not precluded from making such enquiry even if it is credited, as receipt of share application money. The Hon'ble Delhi High Court has further held as under:
"The ITO would be entitled, and it would indeed be his duty to enquiry whether the alleged shareholders do in fact exist or not. If the shareholders exist then, possibly, no further enquiry need be made. But if the ITO finds that the alleged shareholders do not exist then, in effect, it would mean that there is no valid issuance of share capital. Shares cannot be issued in the name of non-existing persons."
19. The Hon'ble High Court has also held as under:
"If the shareholders are identified and it is established that they have invested money in the purchase of shares, then the amount received by the company would be regarded as a capital receipt and to that extent the observations in CIT v. Steller Investment Ltd. (1991) 192 ITR 287 (Del), are correct, but the observations in that case to the effect that even if the subscribers to the capital were not genuine under no circumstance could the amount of share capital be regarded as undisclosed income of the (company)' are not".
In the Hon'ble Supreme Court has affirmed the judgment of Hon'ble Delhi High Court reported in (1991) 192 ITR 287 (Del) [down below at the bottom with the citation 192 ITR 287, the words "(Supreme Court)" have been mentioned incorrectly through mistake which correctly should have been "(Delhi)"].
In (1986) 159 ITR 78 (SC) (supra), the matter of cash credits was involved the assesses had furnished letters of confirmations and discharged Hundis and also gave particulars of creditors. The creditors were assessee and their index number with the Department. The notices issued to the creditors by the Department returned unserved. The Department made no further attempt to examine source of credits. In such a fact-situation the Tribunal found that assessee had discharged onus and the Hon'ble Supreme Court upheld the finding of the Tribunal that the assessee had discharged his onus. In (1985) 154 ITR 244 (Pat) (supra) the Hon'ble Patna High Court held that where, the transactions are through account payee cheque, the assessee's onus to prove identity stands discharged as the persons were having bank account and they were known not only to bank but they were introduced by a third person to the bank. Then the burden shifts on the Department who can proceed to verify whether the creditors were genuine or not. In (1987) 168 ITR 493 (Cal) (supra) the matter of payment of commission to a commission agent was involved the addresses of agents had been furnished and the payments were by bank drafts and account payee cheque and cashed through bank account of agent. In the fact-situation, it was held that the assessee had discharged onus of establishing identity of commission. In 24 TW 397 (supra) this Bench has held that once identity of the shareholder is established and they accept the fact of investment made in shares of that company ordinarily, the burden on said company will stand discharged. It was also held that burden of the company, in relation to share application money, is much light. In (1995) 53 ITD 10 (Del) (supra) Tribunal has held that assessee cannot be called upon to produce bank record, income-tax record, etc. of shareholders in (1999) 63 TTJ (Del) 329 (333) (supra) it has been held by Tribunal Delhi that when the shareholder who is said to have invested money in shares of assessee-company had been identified and has confirmed the investment, addition of account cannot be made in the hands of the company. In (199?) 227 ITR 900 (Gau) (supra) the assessee had furnished confirmation letters and GIR Nos. of the creditors, but the AO did not make proper enquiry to ascertain as to whether explanation of assessee was genuine. In the situation, the Hon'ble Gawahati High Court held that the amount represented by credits were not' assessable under Section 68, In 32 Taxman (Magz.) 276 (supra), Tribunal, Jaipur, held that:
"In the instant case, the circumstances were quite suspicious, but this by itself would not lead to the conclusion that the amount belonged to the assessee. In the absence of any other evidence to the contrary, disbelieving the evidence as such would not be proper. Accordingly, the lower authorities were not justified in making the impugned addition to the income of the assessee."
In ITO v. Padmanabh Investment Co. Ltd (1990) 38 TTJ (Bom) 555 Tribunal, Bombay, has held that:
"What Section 68 postulates is a presumption simpliciter. It does not provide that in all cases where the explanation of the assessee is not there or is not satisfactory, according to the standards of the ITO, the amount has got to be charged to income-tax as income of the assessee-company."
20. Among the decisions cited by the learned Departmental Representative of Revenue, in (1978) 111 ITR 951 (Cal) (supra) and Hon'ble Calcutta High Court has held that the confirmatory letters from lenders were produced by assesses and the notices sent by ITO to the alleged creditors returned unserved. It was held that mere filing of confirmatory letters did not discharge the onus that lay on the assessee and that there was no material on record to establish the identity of the creditor. The finding of the Tribunal treating the amounts shown as loan in the books of assessee to be concealed income of assessee was upheld by the Hon'ble Calcutta High Court observing that it was perverse nor unreasonable. In (1994) 208 ITR 465 (Cal) (supra) the Hon'ble High Court has held that it is for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. It has also been held therein that mere furnishing of the particulars is not enough and mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine. In (1980) 126 ITR 63 (Cal) (supra) and 114 ITR 689 (supra) the Hon'ble Calcutta High Court has laid down the same proposition. In (1998) 132 ITR 820 (Cal) (supra) the Hon'ble Calcutta High Court has held that mere filing of income-tax file No. of the creditor was not enough to prove the genuineness of the cash credit. There was no affidavit to this effect by the creditor on record. The creditor should be identified, there should be credit worthiness, there should be a genuine transaction. On factual appreciation it was also held by the Hon'ble High Court in the said case that the Tribunal's finding regarding the identity of the person, her creditworthiness and genuineness of the transaction to have been proved by assessee was held to have not been based on relevant material and so was perverse.
21. We may note that the judgment of Hon'ble Delhi High Court (D.B.) reported in (1991) 192 ITR 287 (Del) (supra) was considered by the Full Bench of the Hon'ble Delhi High Court in the case of Sophia Finance Ltd. (supra) wherein the finding of the Hon'ble Delhi High Court in the case of Stetter Investment Ltd. was partly upheld, i.e., to the extent that if the shareholders are identified and it is established that they have invested money in the purchase of shares then the amount received by the company would be regarded as a capital receipt but the observations of the Hon'ble High Court in the case of SteRer Investment Ltd. (supra) to the effect that "under no circumstances could the amount of share capita! be regarded as undisclosed income of the company" were not approved and the same were overruled. However, thereafter, the judgment of D.B. of Hon'ble Delhi High Court in the case of Steller Investment Ltd. has been affirmed by the Hon'ble Supreme Court vide their judgment dt. 20th July, 2000, reported in (2001) 251 ITR 263 (SC) (supra). In the instant case the learned CIT(A) has taken a different view observing that in the judgment dt. 20th July, 2000, the Hon'ble Supreme Court has not defined any periphery within which Section 68 will operate nor laid down any guidelines or the principles or law to deal with the credits of share application money in the books of a company. In our considered opinion the view taken by the learned CIT(A) is not proper/correct. It is the settled position of law that the law declared by the Hon'ble Supreme Court is the law of the land and that even obiter dicta of the Hon'ble Supreme Court is also binding on the subordinate Courts/Tribunals/judicial authorities, in the aforesaid judgment, the Hon'ble Supreme Court has affirmed the judgment of D.B. of Hon'ble Delhi High Court (1991) 192 TTR 287 (Del). In the said case the ITO assessed the company and accepted the increase in the subscribed capital. The learned CIT(A), however, came to the conclusion that the AO had not carried out a detailed investigation and had not made enquiries with regard to the genuineness of the subscribers of the share capital and he. accordingly set aside this assessment. This order of CIT was reversed by the Tribunal. The question referred to the Hon'ble High Court for opinion also contained "that the AO had failed to discharge his duties regarding the investigation with regard to the genuineness and creditworthiness of the shareholder".. The Hon'ble High Court held that no question of law arose. The Hon'ble Delhi High Court, while holding as above, also laid down the above quoted proposition that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless under no circumstances can the amount of share capital be regarded as undisclosed income of the assessee. It was in the background of this reasoning that the Hon'ble Delhi High Court rendered its decision in the case of Steller Investment Ltd. (supra). It was in the context of the above discussed background that the Hon'ble Supreme Court upheld the judgment of D.B. of Hon'ble Delhi High Court pronouncing "we have read the question which the High Court answered against the Revenue. We are in agreement with the High Court". No doubt the Hon'ble Supreme Court also observed that "plainly the Tribunal came to a conclusion on facts and no interference is called for", yet the emphatic pronouncement of the Hon'ble Supreme Court to the effect that "we are in agreement with the High Court" does stand in its place as we have seen above. The question posed in reference'to the Hon'ble High Court for opinion did embrace, clearly the investigation with regard to the genuineness and creditworthiness of the shareholders, and the AO's failure to discharge his duties regarding the same and it was in the context of this question that the Hon'ble Delhi High Court made the observation quoted above and opined that no question of law arose. The decision of Hon'ble Delhi High Court cannot be read detached from the reasons for the decision. The Hon'ble Supreme Court has no doubt expressly not discussed or commented upon the aforesaid observation of the Hon'ble Delhi High Court, being its reasoning for the decision it has rendered, yet the Hon'ble Supreme Court, in agreeing with the decision of Hon'ble Delhi Court on the question referred, shall be treated to have impliedly affirmed the aforesaid observation as being the decision of the Hon'ble Delhi High Court and also impliedly overruled the decision of the Full Bench of the Hon'ble Delhi High Court reported in (1994) 205 JTR 98 (Del)(FB) (supra) insofar as the said decision is contrary to the decision of (1991) 192 JTR 287 (Del) (supra). As such, the resultant position, that consequentially emerges is that the observations of the Hon'ble D.B. of Delhi High Court (1991) 192 ITR 287 (Del) in the case of Steller Investment Ltd. assume the position of having been upheld/confirmed by the Hon'ble Supreme Court.
22. In the instant case analysing the fact situation in its entirety we find that as regards the seven corporate investors, the return of notices unserved is not very material for the reasons that the addresses of five of them had changed and the assessee did furnish their changed addresses along with their confirmations but the AO thereafter took no further steps/efforts to pursue/effect the service of notice on them and make enquiry. The changed new addresses have been given in the paper book and the pages of the same have also been detailed on p. 13 of assessee's written submission furnished before us. One party, namely M/s Good Earth Organics (I) Ltd. Bombay has gone into liquidation. Again, the notice sent to M/s Vinay Chem Pharma Ltd. returned with the postal endorsement ''shifted'" which obviously shows that the party existed at that address some time. The GIR No./PAN of six corporate investors except M/s Westbury Investrade (P) Ltd. were furnished by assessee and these companies had confirmed the investment in shares of the appellant. In that view of the matter, considering all the facts and circumstances of the case, we find the identity of the above six corporate investors to have been established and also that they did invest in the shares of the assessee-company. The genuineness of the transactions in respect of these six corporate investors cannot, therefore, be doubted. However, neither GIR No./PAN, nor confirmation of the seventh corporate investor M/s Westbury Investrade (P) Ltd. was furnished by assessee. So the primary onus lying on the assessee in respect of the same cannot be treated to have been discharged. Accordingly, its identity as also the genuineness of transaction pertaining to this party cannot be held to have been established.
23. As regards ten individual investors, they did respond to the notice issued to them under Section 133(6) and nine out of them confirmed the fact of making investment by them in the shares of the assessee-company. The mode of payment was banking channel. As such, considering all the facts and circumstances of the case as also the legal position emanating from the judicial pronouncements discussed above, we find that the identity of nine out of above ten individual investors (excluding Sh. Umesh Kumar Bansal) has been established and also the genuineness of the transactions of investment by them in the shares of the assessee-company. However, as regards Sh. Umesh Kumar, no doubt, the share application is stated to have been signed by him as also the cheque to have been signed by him yet for the reason that he has denied the fact of investment in the assessee-company in the letter sent in response to notice the transaction of investment by him in the shares of assessee-company deserves to be treated as having not been proved and the primary onus lying on the assessee as having not been discharged. No doubt there may have been several reasons for subsequent denial on his part as has been contended by the learned authorised representative of assessee, yet the assessee having not brought on record any further cogent evidence/material explaining his subsequent denial and convincingly corroborating investment by him the transaction pertaining to him cannot be held as acceptable or genuine.
24. In view of our discussion/finding, we hold that the investments i.e., the deposit of share application money by M/s Westbury Investrade (P) Ltd. (Rs. 2,00,000) and Sh. Umesh Kumar Bansal (Rs. 1,00,000) to have not been explained/established and so the addition in respect of these two parties is found to have been rightly made. However, as regards the remaining fifteen parties the investment of Rs. 20,76,000 by them in aggregate is found to have been satisfactorily explained/established and so the addition in respect of them is uncalled for and not justified, which we delete accordingly.