R.V. EASWAR, VICE PRESIDENT ORDER This appeal by assessee relates to asst. yr. 1997-98. assessee is public limited company. appeal arises out of assessment made on 28th March, 2003 by order passed under s. 143(3) r/w s. 263 of IT Act. 2 . In this case, original assessment was completed on 31st March, 2000 under s. 143(3) of Act on income of Rs. 5,39,265 against loss of Rs. 25,13,258 declared by assessee. This assessment order was considered to be erroneous and prejudicial to interests of Revenue by CIT and action for revision thereof was taken by CIT under s. 263. It was opinion of CIT that amount of Rs. 50 lacs received by assessee as share application money from K.B. Parti, Vivek Parti, Deepak Parti, Sonia Parti, S. Chandrashekhar and 6 others was not properly examined by AO with reference to nature and source. assessee objected to proceedings under s. 263 but they were rejected by CIT who directed AO to pass fresh order after hearing assessee with reference to nature and source of aforesaid amount. CIT passed order on 26th March, 2002 against which assessee filed appeal to Tribunal in ITA No. 1660/Del/2002. Tribunal by order dt. 23rd Sept., 2005 dismissed appeal holding that CIT was right in directing AO to consider matter afresh as he had not carried out necessary enquiries in assessment proceedings. Pursuant to order of CIT, AO has now passed assessment order and it is this order which has given rise to present appeal. In this order, AO has added amount of Rs. 50 lacs after discussing issue in para 3 of order. Briefly stated, he called upon assessee to establish identity and creditworthiness of aforesaid five persons. Summons were also issued to those persons which were returned unserved. inspector who made local enquiries stated that those persons have left place in last two years and their present whereabouts were unknown except in case of Vivek Parti who was understood to be residing at A-166, Second Floor, Defence Colony, New Delhi. AO also noted that assessee had bank account with Central Bank of India in Adyar, Chennai in which amount of Rs. 50 lacs was found to have been credited. assessee could not produce counterfoil for paying-in-slip for deposit of Rs. 50 lacs, which entry appeared on 1st Aug., 1996. Vivek Parti appeared before AO and stated that money was given by Phi Alpha Investment (P) Ltd. (hereinafter referred to as Alpha) on behalf of all five persons which amounted to Rs. 44 lacs and also gave another sum of Rs. 6 lacs for certain other persons, as share application monies. He was however unable to produce any agreement between five persons and Alpha. AO also found that assessee had withdrawn amount of Rs. 50 lacs from bank account by issuing cheque no. 111421 in favour of M/s Prime Advance towards cost of database. details of Prime Advance were not furnished by assessee. AO had called upon assessee to give details of Alpha which was found to have been registered in state of Tamilnadu but except stating that details of company can be found in website of Department of Company Affairs (www.dca.nic.in), no other particulars were furnished. Vivek Parti could not also give particulars about present status and whereabouts of K.B. Parti, Deepa Parti and Chandrashekhar. Taking all these into consideration, AO held that assessee has failed to establish three ingredients of s. 68, namely, identity of creditors, their creditworthiness and genuineness of transactions. He accordingly added amount of Rs. 50 lacs in assessment under s. 68 of Act. assessee s appeal to CIT(A) on this point having failed matter is before us. 3. main contention of learned counsel for assessee is that identity of five persons was established and in this connection drew our attention to interim order passed by Bench on 25th Jan., 2008 admitting certain additional evidence to prove identity of share applicants. He further submitted that shares subscriptions were made through instrument called "Stockinvest" which established capacity and creditworthiness of applicants and genuineness of transactions as well. At our instance, details of Stockinvest scheme were furnished. Strong reliance was placed on judgment of Delhi High Court in CIT vs. Divine Leasing & Finance Ltd. (2007) 207 CTR (Del) 38. It was pointed out that special leave petition (SLP) filed by Department against judgment of High Court has been dismissed by Supreme Court by order dt. 21st Jan., 2008 in CC 375/2008 and that Supreme Court has passed reasoned order which contains statement of law and, therefore, same is binding as precedent on all Courts. It has been observed by Supreme Court that if share application money is received by assessee company from alleged bogus shareholders whose names are given to AO then Department is free to proceed to reopen individual assessments of shareholders in accordance with law and that s. 68 cannot be invoked in case of company. learned counsel for assessee strongly relied on order of Supreme Court and submitted that since assessee has adduced essential evidence to prove identity of share applicants as also their sources for investment no addition can be made under s. 68 in hands of company. It was clarified by him in course of arguments that appeal is confined to addition of Rs. 44 lacs received from five persons named earlier and addition of amount of Rs. 6 lacs received from others is not in dispute. 4 . On other hand, learned CIT Departmental Representative, besides strongly relying on findings given in para 3.8 of assessment order, submitted that assessee did not disclose bank account in Adyar branch of Central Bank of India. In this connection, he drew our attention to finding of CIT in para 2 of his order under s. 263 to effect that copy of bank account was obtained by IT authorities from Chennai, which implied that assessee did not furnish same. He also pointed out that amount of Rs. 50 lacs was deposited in account on 1st Aug., 1996 with narration "by clearing" and was withdrawn on same day by issue of cheque to Prime Advance, which gave rise to suspicion. He pointed out that last day for closure of public issue was 30th May, 1996 according to prospectus issued by assessee and, therefore, amount of subscription should have come on or before this date and could not have come o n 1st Aug., 1996 by credit to assessee s bank account. He contended further that there was no evidence to show that money has come from Alpha and there was no confirmation from Alpha. Strong reliance was placed on fact that even counterfoil of paying-in-slip in respect of deposit of Rs. 50 lacs was not available with assessee. very existence of Alpha, according to learned CIT Departmental Representative, was in doubt since no correspondence or other particulars, such as, address etc. which normally ought to have been in assessee s possession were furnished. As regards identity and creditworthiness of share applicants, learned CIT Departmental Representative submitted that Chandrashekhar s identity cannot be said to have been proved by investor registration card issued by OTC Exchange of India (p. 46 of paper book) in absence of details as to who identified him. As regards Deepak Parti, though his identity may be taken as having been established, there is nothing to show his creditworthiness or sources of income. Our attention was drawn to p. 44 of paper book which is certificate issued by Vasant Vihar branch of Punjab National Bank showing balance of Rs. 3,596.51 paise in account of Deepak Parti (HUF). Similarly i n case of K.B. Parti, certificate issued by same bank (p. 42 of paper book) showed only Rs. 10 .73 as balance. As regards Sonia Parti, there was nothing to show her creditworthiness. In case of Vivek Parti, he has stated that he applied only for 10 shares and this statement belies assessee s claim that he invested Rs. 9,50,000 for 3,80,000 shares. It was thus submitted that neither identity nor creditworthiness of share applicants was proved by assessee company. 5. In reply, learned counsel for assessee drew our attention to prospectus issued by assessee company in which Deepak Parti, Chandrashekhar and K.B. Parti have been shown as members of board of directors and that full details such as their educational qualifications, positions held, experience etc. have been given. Our attention was also drawn to fact that prospectus itself permitted shares to be applied for by Stockinvest and contained detailed provisions regarding disposal of such applications. It was thus contended that applicants were merely following procedure permitted by company in its prospectus. Our attention was also drawn to s. 73 of Companies Act which permitted retention of share application monies for period of two months from date on which public issue closed before allotments are made and this is reason why amount of Rs. 50 lacs is found credited in assessee s bank account on 1stAug., 1996, public issue having closed on 30th May, 1996. It was also submitted that agreement between share applicants and Alpha was matter between them and it was not relevant for company and, therefore, non-production of agreements in assessment of assessee company is irrelevant factor. Strong reliance was placed on judgment of Hon ble Delhi High Court in case of CIT vs. Glocom Impex (P) Ltd. (2006) 205 CTR (Del) 571 as well as on order passed by Supreme Court in special leave petition filed by Department against judgment of Delhi High Court in CIT vs. Divine Leasing (supra). 6 . On careful consideration of matter, we are of view that identity and creditworthiness of share applicants have been proved by assessee as also genuineness of transactions and, therefore, there is no basis for addition of Rs. 44 lacs under s. 68 of Act. addition has been made as under : Name of No. of Amount shareholder shares applied paid (i) K.B. Parti 3,60,000 9,00,000 (ii) Vivek Parti 3,80,000 9,50,000 (iii) Deepak Parti 3,60,000 9,00,000 Mrs. Sonia (iv) 3,40,000 8,50,000 Parti S. (v) 3,20,000 8,00,000 Chandrashekhar Since we are not concerned with addition of Rs. 6 lacs received from others we are not adjudicating upon same. So far as identity of Deepak Parti, K.B. Parti and Chandrashekhar are concerned, even in prospectus which is strictly regulated by Companies Act, their details, educational qualifications, work experience, etc. are given. No action has been taken against assessee company for having issued false prospectus. In fact, K.B. Parti is shown to have held senior position in Indian army. All three are shown as members of board of directors. Further, in interim order passed by Tribunal on 25th Jan., 2008, Tribunal has referred to copy of Form No. 32 filed by company with RoC under Companies Act, 1956 wherein Chandrashekhar has been shown as appointed as director of company. Tribunal has also referred to order of Sub-Judge, Greater Mumbai in MA No. 3 10 of 2002 in case of Vivek Parti as also police complaint filed against him in police station Defence Colony, New Delhi. These documents have been admitted as additional evidence. They also prove identity of Chandrashekhar and Vivek Parti. All five persons have applied for shares in assessee company and copies of their share applications have been filed in paper book. Pages 88 to 212 of paper book is copy of share application register maintained by Registrars to public issue and names of five applicants are included therein. Vivek Parti actually appeared before AO. Taking all these into consideration, it cannot be said that assessee has not proved identity of share applicants. 7. So far as creditworthiness is concerned, all five applicants have applied for shares and in share applications they have given name of Alpha as their representative and power of attorney holder. They were having arrangement with Alpha under which Alpha would provide funds with clear stipulation that they would be acting as power of attorney of applicants and shares will be held by them as security for amounts advanced by Alpha to them. Such arrangement has been adverted to in statements of Sonia Parti (p. 51 of paper book) and of Vivek Part (p. 55 of paper book) filed before AO. applications were accompanied by Stockinvest documents. According to Stockinvest scheme filed by learned counsel for assessee at our instance (source SEBI Press release dt. 2nd Jan., 1992 published in yearly Company Law Digest and SEBI Yearbook 1998), Stockinvest scheme is in conformity with provisions of ss. 69 and 73 of Companies Act. scheme was basically introduced as investor protection scheme and to avoid any complaint about non-payment or delay in refund of share application money in terms of s. 73 of Companies Act from investing public. Stockinvests are available with banks and they are guaranteed instruments. investor s account will get debited only after basis of allotment has been decided. He will be debited with full amount if he is fully successful or with part amount if he is partly successful. In respect of unsuccessful applicants, funds will continue to remain in their account with banks and earn interest which was otherwise not possible because funds would have been transferred and parked in account of company. entire scheme and benefits thereof to public as well as issuing bank have been given in papers filed by learned counsel for assessee. Stockinvest bears account payee and not negotiable crossing and will be payable to account of payee on cancellation. There are number of terms of issue and payment indicated on reverse of form which are intended to protect interests of parties to Stockinvest. It is under Stockinvest scheme that five applicants had applied for shares in assessee company through their representative and power of attorney holder, namely, Alpha. These details are given in applications themselves. There is no mystery behind credit of Rs. 50 lacs on 1st Aug., 1996 in assessee company s account with Central Bank of India, Adyar Branch, Chennai. Under s. 73 of Companies Act, application monies can be retained by company for period not exceeding two months from date on which public issue closes. In meantime, allotments are decided and monies are either appropriated to allotments or returned to, partly or wholly, unsuccessful applicants. Under Stockinvest scheme, once allotment is made, guarantee takes effect and it is at that time that monies are actually credited to account of company which floats public issue. Till then, monies are guaranteed to it by bank issuing Stockinvest on behalf of share applicant. Thus, on 1st Aug., 1996 when all five applicants were allotted shares applied for, guarantee under Stockinvest came into effect and amount of Rs. 50 lacs which includes Rs. 44 lacs from five applicants was credited to assessee s bank account with narration "by clearing". Since it was credit of funds directly from bank issuing Stockinvest, there is no question of assessee depositing any cheque in its account. That is reason why there i s no counterfoil of paying-in-slip. Therefore, there is no question of assessee not producing counterfoil to prove source of credit. Any arrangement between share-applicants with Alpha is private arrangement between them to which assessee company is not party. All that assessee company is concerned is receipt of correct amount of money along with share applications. This has been proved. Therefore, it is wholly irrelevant that assessee was unable to produce agreements between share applicants and Alpha. It is also irrelevant that assessee was unable to produce proof as to existence of Alpha. Thus, assessee has satisfactorily proved nature and source of amount of Rs. 44 lacs received from five share applicants, their identity and their creditworthiness. very fact that all these have been proved and monies have also come to account of assessee under Stockinvest, which is SEBI authorised scheme, proves genuineness of transactions also. 8 . judgment of Hon ble Delhi High Court in case of Divine Leasing (supra) was taken up in appeal and special leave was sought before Supreme Court. Supreme Court dismissed SLP filed by Department and passed following order : "UPON hearing counsel Court made following order Delay condoned. Can amount of share money be regarded as undisclosed income under s. 68 of IT Act, 1961 ? We find no merit in this special leave petition for simple reason that if share application money received by assessee company from alleged bogus shareholders, whose names are given to AO, then Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with impugned judgment. Subject to above, special leave petition is dismissed." well-settled legal position is that refusal to grant leave does not mean that impugned judgment of High Court is affirmed on merits. However, as held by Supreme Court in Kunhayammed & Ors. vs. State of Kerala & Anr. (2000) 162 CTR (SC) 97 : (2000) 245 ITR 360 (SC), where reasons are given by Supreme Court for dismissing SLP they would attract applicability of Art. 141 of Constitution if there is law declared by Supreme Court. It seems to us from reading of order of Supreme Court while dismissing SLP of Department in case of Divine Leasing (supra) that statement of law contained therein is that if shareholders are alleged to be bogus then addition should be made in their hands and s. 68 cannot be invoked in case of company. In present case, it is not necessary to enter into this controversy because we have held that company has proved identity and creditworthiness of shareholders and genuineness of transaction also stands established. Therefore, s. 68 has no application in assessment of company. 9. For above reasons, we delete addition of Rs. 44 lacs out of addition of Rs. 50 lacs made under s. 68 of IT Act taking note of clarification made by learned counsel for assessee that addition of Rs. 6 lacs has become final in earlier proceedings. first two grounds are partly allowed. 10 . Ground No. 3 which is against levy of interest under s. 234B was not argued. assessee would however be eligible for consequential relief, if any. 11. Ground No. 4 challenges proceedings as without jurisdiction but no arguments were advanced in support of ground. same is dismissed. 12. Ground No. 5 is general and requires no decision. 13. In result, appeal is partly allowed. *** SMART CAPITAL SERVICES LTD. v. JOINT COMMISSIONER OF INCOME TAX