D.K.SETH, J. - (1.) IN this reference, three questions have since been referred to viz. : "1. Whether the findings of the Tribunal leading to the conclusion that the entire share capital of the assessee-company was genuine are based on relevant material or otherwise perverse ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the entire addition made on account of income from undisclosed sources ? 3. Whether the findings of the Tribunal leading to the conclusion that the share loss has been established by the assessee-company to be genuine is based on relevant evidence or otherwise perverse ?"
(2.) FROM the above questions, it appears that there are two parts in this case. One part relates to the subscription to share capital and the other part relates to loss in share transaction. So far the capital part is concerned, the same can be divided into two parts. One in respect of promoters' quota and the other in respect of public issue. Loss of share : Question No. 3 We may deal with the loss in share transaction first. The grounds disallowing share loss by the AO affirmed by the CIT(A) were those that out of the four blocks of shares delivery of three blocks were received after five months and the price was also paid after five months, but were immediately sold at a loss. The other grounds were that the share broker only in respect of one group was produced but the other share brokers did not appear despite notice. The books of accounts of the share broker, who appeared, also show some discrepancies in the entries made. On these grounds this transaction was held to be ingenuine. Whereas the Tribunal had found that all relevant documents relating to contract notes, bills, the quoted price and other materials were produced. The transactions were made through cheques. All the shares related to the reputed companies and were quoted shares in the stock exchanges and were purchased and sold at the prevalent quoted market rates, which was verified from the statement of the stock exchanges. On these basis, the learned Tribunal found that the CIT(A) had proceeded on the basis of suspicion that there might be some ingenuinity in the transactions. On the basis of the materials produced, the learned Tribunal came to a finding of fact, which in our view does not seem to be perverse. Whether the share could be sold immediately on the date of purchase or not was a question of business expedience. Whether the decision was correct or wrong cannot be a question, which can be a subject-matter of decision in such a case. In order to find out whether the transaction is genuine or ingenuine, it is neither the expedience or correctness of the decision nor the business expertise of the person to be considered. It is to be considered on the basis of the materials that there was no such transaction and that these share transactions were paper transactions. The suffering of loss could not be a factor for such purpose. Mr. Khaitan had relied on the decisions in CIT vs. Emerald Commercial Ltd. and Anr. (2001) 171 CTR (Cal) 193 : (2001) 250 ITR 539 (Cal) where a Division Bench of this Court has held that non- production of share broker by the assessee did not disentitle the assessee from claiming loss in genuine transaction of shares. In this case the learned Tribunal having come to a finding on the basis of the materials that the transaction was genuine, sitting in reference, unless it is found perverse, this Court cannot intervene. In the said decision, it was further found that the findings of the ITO and the CIT(A) were based on presumption and not warranted by facts of the case as in the present case. Mr. Khaitan then relied on the decision in CIT vs. Dhawan Investment and Trading Co. Ltd. (1999) 238 ITR 486 (Cal). In the said case the shares were transacted through noted share brokers at the rates quoted in the stock exchange. The claim of the assessee was accepted. Such an acceptance was found favour by this Court in the said decision. Mr. Khaitan had then relied on the decision in CIT vs. Currency Investment Co. Ltd. (2000) 158 CTR (Cal) 361 : (2000) 241 ITR 494 (Cal). In this case, it was held that merely because the assessee could not produce the broker through whom the shares were sold, the same did not affect the genuineness of the transaction when the assessee disclosed the identity of persons from whom the shares were purchased and to whom sold. Even when two views are possible, if the view taken by the learned Tribunal is possible, it cannot be said to be perverse.
(3.) HAVING regard to the proposition of law as discussed above and the facts and circumstances of the case, we find that in the present case, the view taken by the learned Tribunal cannot be said to be erroneous or perverse. Therefore, we answer the question No. 3 in the negative in favour of the assessee. Sec. 68 : The principle : Respective contentions Mr. Khaitan had relied on the decision in CIT vs. Orissa Corporation (P) Ltd. (1986) 52 CTR (SC) 138 : (1986) 159 ITR 78 (SC) to support his contention where it was held that there was no effort made to pursue the so-called alleged creditors and that after the materials were produced by the assessee, they could not do anything further. Therefore, it was incumbent on the Revenue to scrutinize and find out the real nature of the transaction. It cannot proceed on the basis of surmises and conjecture. He had also relied on the decision in Bharati (P) Ltd. vs. CIT 1975 CTR (Cal) 40 : (1978) 111 ITR 951 (Cal). In this case, it was held that mere filing of confirmatory letters would not discharge the onus that lay on the assessee unless the identity of the creditors is established. Here, according to him, the identity of the creditors was established in respect of 67 per cent of the public issue as well as the directors' quota and, therefore, relying on this decision, he contends that the assessee had nothing, which it could do further. He then relied on the decision in CIT vs. W.J. Walker and Co. (1979) 117 ITR 690 (Cal). In this case, it was held that after the assessee has proved positively that the failure to return correct income did not arise from any fraud, gross or wilful neglect on his part, the Department was bound to prove that the assessee was guilty of concealment of income or had furnished inaccurate particulars relying on CIT vs. Anwar Ali (1970) 76 ITR 696 (SC). But this decision does not help Mr. Khaitan in view of the fact that it relates to a proceeding under s. 271(1)(c). The principle of mens rea laid down in Anwar Ali's case is not more a good law by reason of subsequent decision in Addl. CIT vs. Jeevan Lal Sah (1994) 117 CTR (SC) 130 : (1994) 205 ITR 244 (SC) and as such we may not gain any benefit out of the said decision. Mr. Khaitan had next relied on the decision of CIT vs. Precision Finance (P) Ltd. (1994) 121 CTR (Cal) 20 : (1994) 208 ITR 465 (Cal). In this case, it was held that enquiries were conducted and it was found that either the files did not exist or the records did not tally with the facts mentioned by the assessee. Apart from having enquiries made, several letters were issued to the assessee bringing to its notice that the loans could not be verified and adequate proof was required. But the assessee did not respond. In such circumstances, the assessee's case was disbelieved. Relying on the principle, he contends that without giving sufficient opportunity when the subscribers have not responded the AO could not jump to a conclusion that the transaction was ingenuine. Mr. Khaitan then relied on CIT vs. Korlay Trading Co. Ltd. (1999) 152 CTR (Cal) 17 : (1998) 232 ITR 820 (Cal). In this decision, it was held that once the assessee had discharged its initial burden, no investigation or proper steps had been taken by the ITO to bring on record the materials to controvert the claim of the assessee. The claim of the assessee could not be denied merely because the broker through whom the transaction was effected had failed to produce his books. The creditor should be identified, their creditworthiness should also be established and the genuineness should be proved. In this case the identity had admittedly been established but for establishing the creditworthiness, no further steps were taken by the IT authority nor proper opportunity was given to the assessee. Mr. Khaitan then relied on K.M. Sadhukhan and Sons (P) Ltd. vs. CIT (2000) 162 CTR (Cal) 448 : (1999) 239 ITR 77 (Cal). Relying on the decision, he contended that reliance placed on this decision by Mr. Agarwal does not help Mr. Agarwal in view of the distinguishing facts of the case. Mr. Agarwal had relied on CIT vs. Precision Finance (P) Ltd. (supra). which was distinguished by Mr. Khaitan as discussed hereinbefore. Mr. Agarwal had also relied on the decision in CIT vs. Ashwani Kumar Liladhar (1997) 143 CTR (All) 449 : (1997) 225 ITR 576 (All), Mr. Khaitan had distinguished the same on the ground that there the assessee itself had not taken steps but here it is not a case and on facts, this decision does not apply. Share capital : Public issue;