IN THE HIGH COURT OF DELHI AT NEW DELHI 
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         ITA No.340/2009  
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 CIT                                   ..... Appellant through 
 Ms. P.L. Bansal with 
 Mr. M.P. Gupta and 
 Mr. Sanjeev Rajpal, Advs. 
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 versus 
 TDI MARKETING PVT. LTD.        .....Respondent through 
 None 
 CORAM: 
 HON'BLE MR. JUSTICE VIKRAMAJIT SEN 
 HON'BLE MR. JUSTICE RAJIV SHAKDHER 
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 O R D E R 
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                      19.05.2009 
 This Appeal under Section 260A of the Income Tax Act, 1961 assails the 
 concurrent findings of CIT(A) as well as the ITAT. Forty persons had applied for 
 the share capital of the Respondent furnishing complete details of their name, 
 address, PAN No. and bankers. These details were forwarded to the Assessing 
 Officer who has failed to give an account of his inquiries pertaining to them, 
 except for the nine shareholders residing in Bombay. The Assessing Officer has 
 not given adequate details as to why additions have been made in respect of all 
 the shareholders, even though all of them had confirmed the transaction. The 
 ITAT has applied the ratio in CIT ?vs- Sophia Finance Ltd., 205 ITR 98 where the 
 Full Bench had had held that as soon as the shareholders are identified and that 
 they have established that they have invested monies for the purchase of the 
 shares, no additions would be justified.  The ITAT has opined that the Assessing 
 Officer has treated the share capital as unexplained cash credit merely on 
 surmises and conjectures. It has concluded that the assessee has discharged the 
 onus and has kept in view the absence of material with the Assessing Officer. It 
 has, therefore, observed that the CIT(A) has rightly deleted the additions made 
 by the Assessing Officer. 
 The factual matrix in the impugned Order has been set out as follows:- 
 Firstly it is to be noted that the issue though under section 68 is not 
 of the simply cash credit but is in the form of share capital. The assessee 
 received application for allotment of shares from 40 persons. All these parties 
 made necessary application and their complete details like name, address, PAN 
 number, bank details etc. are available and were filed before the Assessing 
 Officer. The Assessing Officer is silent about the enquiries conducted with the 
 parties other than 9 shareholders stationed at Bombay. However, the addition is 
 made in respect of all the shareholders. This is not only surprising but is 
 disturbing. If the shareholders have appeared and confirmed having entered into 
 transaction, in absence of any contrary material, the Assessing Officer could 
 not merely on presumption treat the share capital as unexplained cash credit. 
 The Full Bench of Delhi High Court in the case of CIT ?vs- Sophia Finance Ltd., 
 205 ITR 98 have held that if the shareholders are identified and it is 
 established that they have invested money in the purchase of shares, then the 
 amount received would be regarded as capital receipt and to that extent the 
 . 
 . 
 observations of the Hon?ble Delhi High Court in the case of CIT ?vs- Stellar 
 Investment Ltd., 192 ITR 287 are correct. The Full Bench of the Hon?ble Delhi 
 High Court also held that if the shareholders exist, then possibly no further 
 enquiry need be made but if the Assessing Officer finds that the alleged 
 shareholders do not exist, then in fact it would be mean that there is no valid 
 issuance of share capital. In the present case it is seen that the assessee have 
 not only filed all the requisite details but to the extent possible produced the 
 shareholders also.  The Assessing Officer has not given his comments as regards 
 shareholders other than 9 shareholders stationed at Bombay. Even these 9 
 shareholders have confirmed having applied and having invested in the share 
 capital. In such circumstances, there is no material before the Assessing 
 Officer except the surmises and conjectures for treating the share capital as 
 unexplained cash credit. It is settled law that suspicion how so far strong, 
 cannot be considered as evidence and no addition can be made merely on the basis 
 of surmises, suspicion and conjectures. The assessee having discharged the onus 
 and in absence of any material in the possession of the Assessing Officer, the 
 addition was rightly deleted by the learned CIT(A). 
 . 
 It will be useful to clarify that CIT ?vs- Divine Leasing and Finance 
 Ltd., [2008] 299 ITR 268(Delhi) has been affirmed by the Supreme Court of India 
 in CIT -vs- Lovely Exports (P) Ltd., 6 DTR (SC) 308. Their Lordships have 
 succinctly commented that there was no merit in the Special Leave Petition ?for 
 the simple reason that if the share application money is received by the 
 assessee company from alleged bogus shareholders, whose names are given to the 
 assessing officer, then the department is free to proceed to reopen their 
 individual assessments in accordance with law. Hence, we find no infirmity with 
 the impugned judgment?. 
 In the present case we share the concern of the ITAT on the failure of the 
 Assessing Officer to give his specific comments concerning the several 
 shareholders, other than the 9 shareholders stationed at Bombay who had appeared 
 before him, none of whom have disowned the transaction. We agree with the ITAT 
 that, apart from failing to appreciate the correct legal position, so far as the 
 facts are concerned, the Assessing Officer has acted on surmises and 
 conjectures. 
 Appeal is dismissed. It deserves to be dismissed with exemplary costs but 
 we decline to do so. 
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 . 
 VIKRAMAJIT SEN, J 
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 . 
 RAJIV SHAKDHER, J 
 MAY 19, 2009 
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