CIT Vs. FROSTAIR P LTD

JUDGEMENT

(1.) This common judgment will dispose of Revenue's two appeals directed against the judgment and order of the Income Tax Appellate Tribunal (ITAT) dated 30.10.2001 in ITA No.1868/DEL/2001 and further order dated 11.05.2006 in ITA- 4691/DEL/2002, and cross-objection nos.113/DEL/2006.

(2.) The question of law framed in these two cases was:

(3.) The brief facts necessary to decide the cases are that the assessee company had filed its return declaring the income @ Rs. .10,986/- on 29.11.1996. The Revenue received information alleging that assessee had accepted share capital from companies engaged in providing bogus entries in the form of loan and share application money to interested parties. Accordingly, the AO called for information under Section 142 (1) by letter dated 29.12.1998. The assessee filed a list of shareholders who contributed share capital including premium aggregating to Rs. .95 Lakhs. It transpired that the assessee had increased its share capital by Rs. .95 Lakhs to which end it had issued 9500 shares of a face value of Rs. .100/-, at a premium of Rs. .900/- each. The total amount was invested by 18 companies who were share applicants. The AO felt that the nature of the assess company and its business was not such as to attract a premium of Rs. .900/- per share. He also was of the opinion that the share applicants were not known to the assessee or its management and investment of Rs. .5 Lakh by each of them except M/s Kanpur Properties and Finance Ltd. - which had invested Rs. .10 Lakhs was improbable. The concerned Assessing Officers in respect of the 18 shareholders were notified. The AO was informed that in most of the cases, no such company existed in their ward or circle. The AO accordingly issued summons to all shareholders at their given address. None of the addresses were found to be correct. On the other hand, during the course of enquiries, one Shri R.C. Goela accepted summons on behalf of six parties. He did not, however, acknowledge any of the summons personally; they were acknowledged by six different persons in his office. He appeared before the AO on 5.3.1999 and admitted that he represented all companies and one M/s Devlok Finance Ltd. Separate summons were issued to R.C. Goela asking him to produce the principal officers of the companies with their books of accounts. This was not complied with and instead six envelopes containing information and copies of bank accounts in respect of five concerns (who he claimed to represent) were sent. All of them were sent from one post office by R.C. Goela. The AO inferred that the identity and credit worthiness of those five concerns have not been proved. The AO went into great details about the bank accounts and related details of the companies and found that they were operated from Vaish Cooperative Adarsh Bank Ltd; the bank accounts were opened due to an introduction by R.C. Goela. The assessee's arguments were that the identity of the companies or other persons could be ascertained through GIR/PAN, was rejected since the share applicants who were contributed monies were not filing IT returns. The availability of particulars of 18 share applicants with the Registrar Of Companies was held to be insufficient. In his order, the AO noticed that out of 18 share applicants, 9 companies were account holders with the Vaish Cooperative Adarsh Bank Ltd in Karol Bagh and Darya Ganj. He also noticed certain common features which emerged from their account opening forms. The introduction of all these were either by M/s Sukriti Foundations, Devlok Finance Pvt. Ltd, Shri R.C. Goela or Akashdeep Offset Printers. The Karol Bagh branch of the Vaish Cooperative Adarsh Bank Ltd. supplied the AO with the list of accounts from where credit entries were made through transfers. The account numbers used for transfer of the amounts were listed and the AO noticed that "in fact the cash was deposited in one account and from this account, the amount transferred to the account from where the cheques for share application monies were cleared".