Jyoti Saran, J.

This appeal under Section 260A of the Income Tax Act has been filed on behalf of the assessee-appellant, and is directed against the order dated 31.01.2002 (Annexure-1), passed by the Income Tax Appellate Tribunal, Patna Bench, Patna, in I.T (S.S) A. No. 35(Pat)-2001, relatable to the block period 1987-88 to 1997-98, whereby the Tribunal has dismissed the appeal preferred by the appellant, and has affirmed the assessment order dated 30.03.2001 (Annexure-2), passed by the learned assessing authority, the Deputy Commissioner of Income Tax, Central Circle-2, Patna.

2) A brief summary of facts leading to the present appeal may be indicated. The appellant company is incorporated under the provisions of the Companies Act, 1956. Though the company was incorporated on 20.01.1995, but returns of Income was not filed in respect of the assessment year 1995-96. On 27th of September, 1996, search operations under Section 132(1) of the Act were conducted in the residential premises of Shri R.R.P Sinha, one of the Directors of the appellant company, from whose possession original share certificates purported to have been issued in the name of Shri Umesh Prasad Rai, Prabhash Kumar, Neelam Devi, Raj Deo Prasad, and Ramesh Kumar, were found. No explanation was advanced by Shri Sinha as to how he came to be in possession of those share certificates. The Revenue noticed that the seized share certificates contained no entry regarding transfer of the shares, nor the company had issued the certificates. No share issue register was found in the premises of Shri R.R.P Sinha, or at the business premises of the company, which was covered under the survey operations carried out under the provisions of Section 133A of the Act. A loose sheet of paper was also found and seized in the course of search at the residence of the Director which contained the names of four investments companies based at Kolkata, namely, M/s Goldware Merchandise (P) Ltd, M/s Paramount Finco, M/s Shriya Consultant and M/s Vishisht Vyapar (P) Ltd. Perusal of the said document indicated investment of Rs. 21 lakhs in the appellant company by those companies.

3) On the heels of the search operations conducted at the residential premises of Shri R.R.P Sinha, the appellant company chose to file its returns of income for the assessment year 1996-97 on 29.11.1996 In the course of the search operations, it also came to the notice of the Revenue that the appellant company had advanced huge sums of money to several companies in the following manner:

(a) A sum of Rs. 50,00,000/- was advanced to M/s S.B.E.C Sugar Ltd., 1400 Hem Kund Tower 98, Nehru Place, New Delhi.

(b) A sum of Rs. 25,00,000/- was advanced by way of security deposit to M/s Bihar Sponge Iron Ltd., 1400 Hem Kund Tower, 98, Nehru Place, New Delhi, for securing C & F Agency.

The details gathered in the course of the search warranting a thorough investigation with regard to the sources of the funds raised by the company and its utilization, led to issuance of a notice to the appellant company under Section 158 BC of the Act, requiring the appellant to file its returns for the block period within 16 days from the date of service of notice. In response to the notice, the appellant filed its returns on 26.8.1997, declaring its undisclosed income as ‘Nil’.

4) Section 158 BC of the Act provides for the procedure for block assessment. The learned assessing authority as per the assessment order dated 30.09.1997 (Annexure-4), assessed the undisclosed income of the appellant company at Rs. 11,40,890/-. Aggrieved by the assessment order, the appellant preferred appeal before the Tribunal which was disposed of by order dated 30.4.1998 (Annexure-3), whereby the Tribunal was pleased to set aside the assessment order dated 30.9.1997, and the matter was remitted back to the learned assessing authority for passing a fresh order after proper verification of the materials, and after giving adequate opportunity to the assessee, i.e the appellant company, to defend itself by furnishing reliable and acceptable evidence in respect of the Share Capital, loans and Interest thereon.

5) On remand, the case of the appellant's case was examined afresh by the learned assessing authority in compliance of the order of the appellate Tribunal dated 30.4.1998 (Annexure-3), and fresh assessment order was passed on 30.3.2001, on a consideration of the entire materials and submissions advanced on behalf of the appellant company. The learned assessing authority as per his order dated 30.3.2001, assessed the aggregate of the total income for the block period 1987-88 to 1997-98 (upto 27.9.1996), at Rs. 63,51,168/-, and after deducting the income disclosed by the appellant company under Section 158 BB of the Act which was Rs. 9,20,491/-, the undisclosed income of the appellant company for the block period was assessed at Rs. 54,30,677/- under Section 158 BC of the Act. The tax payable on the said undisclosed income at the rate of 60 per cent was calculated at Rs. 32,58,406/-, and surcharge payable thereon was Rs. 2,44,380 at the rate of 7.5 per cent. Copy of the order dated 30.03.2001, passed by the learned assessing authority has been placed at Annexure-2 to the memo of appeal.

6) The appellant preferred appeal before the Income Tax Appellate Tribunal against the fresh assessment order dated 30.3.2001 (Annexure-2), giving rise to Case No. I.T (S.S) A. No. 35 (Pat)-2001, which was considered and dismissed by order dated 31.1.2002 (Annexure-1), giving rise to the appeal in question.

7) Mr. K.N Jain appearing on behalf of the appellant assailed the orders impugned in the appeal, inter alia, on the following grounds:

(a) The Tribunal being the last court of facts had failed in its duty to examine the materials on record;

(b) Adequate opportunity was not afforded to the appellant company to cross-examine the witnesses; and

(c) The entire proceeding had been conducted without having regard to the obligations created under the statutory provisions binding the authorities under the Act.

(d) With reference to Section 158 BA (3) of the Act, it was contended that any income entered in the books of account for which the due date had not expired could not form part of the undisclosed income of the assessee for the block period and in the present case the books of the assessee had been audited for the assessment year 1996-97 on 6.6.1996, i.e much prior to the date of search, which took place on 27.9.1996

(e) It was contended that the documents so seized during the course of search, in no manner projected the income of the petitioner, especially in the circumstances that there was no search of the premises of the appellant and following the provisions of Section 158 BA, there has to be a search for ascertainment of the undisclosed income, which did not happen in the present case rendering the proceedings illegal.

7.1) Mr. Jain further contended that the provisions of Section 158 BD mandates that where the assessing officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made and documents seized, then the learned assessing officer was under obligation to hand over the documents or assets seized or requisitioned to the assessing officer having jurisdiction over such other person and who shall proceed against the other person under Section 158 BC. The mandatory procedure has not been followed in the present case.

7.2) Mr. Jain also submitted that the Tribunal had acted illegally in confirming the enhancement of the amount of the undisclosed income by the learned assessing officer. He also contended that enhancement of the undisclosed income from Rs. 11,40,896/-, as assessed in the original order of the assessment (Annexure-4), to Rs. 54,30,677/-, as per the assessment order passed on remand on 30.03.2001 (Annexure-2), and confirmed by the Tribunal, was unsustainable in law. He relied upon judgment reported in (1990) 186 ITR 589 (Allahabad) Commissioner of Income Tax v. Pahoo Lal Ved Prakash, and submitted that the Tribunal could not relegate the appellant to a worse position than the original situation.

7.3) It was also submitted that under law the assessee-appellant was only required to disclose the source of the payee and that he was not required to provide the source of the income of the said payee. Mr. Jain cited the following judgments in support of his submission, namely,

(i) (1973) 87 ITR 349 (SC), (Cit (Central), Calcutta v. Daulat Ram Rawatmull.),

(ii) (1976) 103 ITR 344 (Patna), (Sarogi Credit Corporation v. Commissioner Of Income-Tax, Bihar., Bihar), and

(iii) (1962) 44 ITR 379 (Madras), (Dalloram Jayanarain v. Commissioner of Income-Tax, Madras).

7.4) It was further contended that the amounts invested in the company were genuine investments forming share capital of the company and could not be termed as undisclosed income of the company. In support of his submission, Mr. Jain relied upon judgments reported in (1991) 192 ITR 287 (Commissioner Of Income-Tax v. Stellar Investment Ltd.), (2001) 251 ITR 263, (Commissioner of Income-Tax v. Steller Investment) and (2006) 286 ITR 477 (Raj) C.I.T v. First Point Finance Ltd.

7.5) Mr. Jain submitted that the opinion of the assessing officer is to be formed objectively with reference to the materials available on record and that application of mind is a sine qua non for formation of opinion. He placed reliance on (2007) 291 ITR 278, (Commissioner Of Income Tax v. P. Mohanakala), with particular reference to paragraphs 7, 8 and 16.

8) Mr. Rishi Raj Sinha, learned counsel appearing on behalf of the respondent department, supported the impugned order (Annexure-1), passed by the appellate Tribunal. It was contended that the memo of appeal does not raise any question of law, much less any substantial question of law, so as to warrant any interference with the order of the Tribunal by this Court in exercise of powers under Section 260A of the Act.

8.1) Learned counsel next contended that the entire matter has been examined thread-bare by the learned assessing authority upon remand of the matter and who has passed a detailed order of assessment supported by reasons. It was further contended that the Tribunal after thorough examination of the materials on record and upon appreciation of the statutory provisions, has passed the order dated 31.03.2002, affirming the order of assessment on remand, and dismissed the appeal.

8.2) In support of his submission, Mr. Sinha relied on the judgment in the case of Commissioner of Income Tax v. P. Mohana Kala (supra), with particular reference to paragraphs 16 and 21.

8.3) Mr. Sinha also referred to the judgment reported in (2008) 300 ITR 19 (P&H), (Shiv Rice and General Mills v. Commissioner of Income-Tax), in support of his submission that there should be credit worthiness in the transaction of the company which is totally lacking in the present case. It was lastly contended that the appellant has failed to frame any substantial question of law and this Court under section 260A of the act is precluded from examining issues of facts.

9) We have considered the arguments advanced by the learned counsel appearing on behalf of the appellant and the respondent department, and have perused the materials on record. The scope of appeal before this Court under Section 260A of the Act is within narrow compass. Section 260A of the Act provides that an appeal shall lie to the High Court from every order passed in appeal by the appellate Tribunal, if the High Court is satisfied that the case involves a substantial question of law. Section 260A of the Act reads as follows:

“(1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal [before the date of establishment of the National Tax Tribunal], if the High Court is satisfied that the case involves a substantial question of law.

(2) [The Chief Commissioner or the Commissioner or an assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be-]

(a) filed within one hundred and twenty days from the date on which the order appealed against is [received by the assessee or the Chief Commissioner or Commissioner];

(b) [***]

(c) in the form of a memorandum of appeal precisely stating therein substantial question of law involved.

(3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.

(4) The appeal shall be heard only on the question so formulated, and respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question:

Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question.

(5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit.

(6) The High Court may determine any issue which-

(a) has not been determined by the Appellate Tribunal;

or

(b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1).

[(7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this Section.]”

10) The present appeal was admitted by this Court vide order dated 20.11.2006, formulating the following substantial question of law:

1. “Whether the mere possession by Shri R.R.P Sinha of the 5 Share Certificate issued by the assessee (but neither owned nor even found from the possession of the assessee) can give rise to REASONS TO BELIEVE that the same represent assessee's UDI.”

Though liberty was given to the appellant to formulate other substantial question(s) of law at the time of final hearing of appeal, no such leave was prayed on behalf of the appellant to frame any other substantial question of law, Mr. Jain endeavoured to expand the scope of the present appeal by pressing almost all the questions of law stated in the memo of appeal. We are of the view that in the absence any leave sought for to formulate any other substantial question of law, we cannot delve into all the substantial questions of law raised in the memo of appeal. Consideration of the issues raised in the present appeal has to be limited to the substantial question of laws framed by this Court at the time of admission of the appeal (supra).

11) Our view is supported by the judgment of the Apex Court reported in (2005) 273 ITR 50 (SC) :(2005) 2 SCC 324, M. Janardan Rao v. Joint Commissioner of Income-Tax, wherein it has been held that the conditions mentioned in Section 260A has to be strictly fulfilled before an appeal would be maintained and that an appeal under the said provision can only be in respect of a substantial question of law. It was held that the finding of fact of the appellate Tribunal cannot be disturbed by the High Court in exercise of powers under Section 260A.

11.1) The position has been reiterated in the judgment of the Apex Court in the case of Commissioner of Income Tax v. P. Mohana Kala (supra). Paragraphs 12, 13 and 27 of the judgment are reproduced hereinbelow:

“12. The High Court vide the impugned judgment in exercise of its jurisdiction conferred upon it under Section 260A of the Act reversed the finding of fact and allowed the appeals. The High Court virtually re-appreciated the evidence available on record and substituted its own findings for that of the Tribunal and the other authorities. The High Court came to the conclusion that the reasons assigned by the Tribunal and other authorities “are in the realm of surmises, conjectures and suspicions…the authorities under the Act have failed to draw the only conclusion that is possible legally and logically.” The judgment of the High Court is assailed in these appeals.”

“13. The learned Solicitor General strenuously contended that the approach adopted by the High Court is totally erroneous. The High Court in exercise of its jurisdiction under Section 260A of the Act may interfere with the order of the Tribunal provided a substantial question of law arises for its consideration. Re-appreciation of evidence and substitution of the findings by the High Court is impermissible. The High Court exceeded its jurisdiction in disturbing concurrent findings of facts. The learned Solicitor General further contended that once the explanation offered by the assessees is found unsatisfactory, the sums credited in the books are to be charged to income-tax as the income of the assessees. The duty is heavily cast upon the assessees to offer a reasonable explanation as regards the nature and source of the amounts found credited in the books maintained by the assessees.”

“27. No question of law much less any substantial question of law had arisen for consideration of the High Court. The High Court misdirected itself and committed an error in disturbing the concurrent findings of fact.”

12) We shall now proceed to answer the question framed by this Court at the time of admission of the appeal and test whether the appellant has been able to explain the investments which had given rise to the reasons to believe that the same represented the assessee's undisclosed income. Serious effort was made by the counsel appearing on behalf the assessee-appellant to demonstrate that the investment made in the company was genuine and the investors also were genuine investors and the amounts so invested could not be added to the undisclosed income of the assessee. Certain documents had been produced to demonstrate the confirmations given by the investor companies. It was found that all the confirmation letters were issued on the same day i.e 15.09.1997 The confirmation letter on behalf of the M/s Goldware Merchandise Private Ltd. was issued by one of its Directors Shri Janardan Sharma.

12.1) The confirmation letter on behalf of the M/s Paramount Finco & Traders Ltd. was issued by Shri K.K Goenka. The confirmation letter on behalf of the M/s Shriya Consultants Private Ltd. was issued by its Director, Shri Bijoy Kumar Goenka. The confirmation letter on behalf of the M/s Udhyan Merchandise Private Ltd. was issued again by Shri Janardan Sharma. The confirmation letter for M/s Shriya Financial Services Private Ltd. was issued by Shri Bijoy Kumar Goenka who also issued confirmation letter on behalf of the M/s Goenka Business & Finance Ltd and M/s Vishist Vyapar Private Ltd.

12.2) The addresses of most of the investing companies were 85, Metcalfe Street, 3rd Floor, Room No. 306, Calcutta. On a deeper consideration of the documents, it was found that the situation as being projected by the assessing company was not real since either the investing companies had a common address at Calcutta referred to above or had a common Director. The nexus amongst the companies emerged from the records. The facts emanating from the records demonstrated that the companies had a common link running in between them and their incorporation in different names had been done with the sole purpose of creating a legal fiction. The aforesaid opinion was further strengthened by the fact that all the investment made in the assessing company was through bank drafts drawn on Punjab Nation Bank, Ezra Street, Calcutta, issued on or about 7th September, 1995. It was apparent that the investments were disguised. Notices to the investors at the addresses from where the said companies were running their business did not yield any result nor the persons were traceable. The assessing company was called upon to furnish fresh addresses of the persons to whom notices had been issued to confirm the genuineness of the transactions, but they failed to respond to the same on the plea that the loans stood repaid way back in the assessment year 1996-97, and hence they had no contact with the said persons.

12.3) The records showed that the company had raised its share company to the tune of Rs. 2,01,000/-, by 3.3.1996, and thus the onus was on the assessing company to prove and to substantiate by evidence the share capital raised by it from the aforesaid companies so as to dispel any doubts of diversion of its own fund through the aforesaid investing companies.

12.4) The attempt on the part of the assessing company to furnish fresh addresses of the persons and the Directors of the companies named herein above created further cloud as the Directors disappeared. Faced with the situation where the genuineness of the investment of Rs. 41 lacs in the assessing company by the Calcutta based companies could not be established beyond shadow of doubt, nor could the assessing company discharge the onus of explaining the investment, there was no other option available to the revenue but to treat the said investments as undisclosed income of the assessing company having been routed through the investing companies. Although one of the Directors, namely, Shri Bijoy Kumar Goenka, during the course of enquiry at the stage of passing of the assessment order, had declared that the investments were genuine but no sooner were summons issued to him and others, they went underground. Faced with the uncomfortable position, the assessee company took a turn around and contended that the Department had failed to produce the witnesses for its cross-examination. The contention advanced on behalf of the assessee company regarding denial of opportunity of cross-examination had only to be rejected. The duty was on the assessee company to discharge the obligation and explain the investments by production of its investors. Despite opportunity being provided, the assessee company completely failed to establish the identity of the investing companies and explain the genuineness of the investment. In the circumstances, the Tribunal rightly treated the unexplained amounts received from the Calcutta based companies as undisclosed income of the assessee and which was to the tune of Rs. 41 lacs.

13) A feeble attempt was made on behalf of the appellant company to demonstrate that some investments towards its share capital was by individuals who had also given unsecured loans to the companies and to support the said contentions names of Umesh Prasad Rao, Rajdeo Prasad, Neelam Devi, Prabhash Kumar, and Ramesh Kumar along with others figured. These are the same persons who had been issued the share certificates which were seized in the course of search operations in the residential premises of Shri R.R.P Sinha. During the course of enquiry, it emerged that all the bank drafts through which investments had been made by the persons named above, had been prepared on the same day. All the applications for the said drafts had been made in the same hand writing and a common mistake had occurred in all the forms, i.e the name of the appellant company had been written as G.B Associates Private Ltd., and which had been corrected by over-writing ‘J’ over the alphabet ‘G’.

14. Upon summons being issued to these persons, they were either found untraceable or they did not respond to the summons. Two of these persons, namely, Ramesh Kumar and Umesh Prasad Rai were examined by the assessing officer and who claimed investment in the share capital of the appellant company and also claimed to have possession of the share certificates being oblivious of the fact that the share certificates, the possession of which was being claimed by them, had been seized from the residential premises of Shri R.R.P Sinha. None of the two persons explained the source of income for the investments made in the company.

14.1) It is thus clear that despite adequate opportunity being provided to the appellant-company, it completely failed to discharge the onus cast upon it to explain that the investments in the company were genuine and the investors had made those investments from their own income/funds. Faced with the situation, the respondents had no other option but to reject the contentions advanced on behalf of the appellant company explaining the investments and to treat the same as deemed income of the appellant company under Section 68 of the Act. No error of judgment or infraction of law was committed by the authorities under the Act in disallowing the interest paid by the appellant company to the creditors and in adding the same to the total income of the appellant-company.

14.2) We are of the view that the authorities under the Act have passed the impugned orders on a thorough consideration of the materials on record and the statutory provisions governing the issue, and requires no interference. We are in full agreement with the reasonings assigned by the Tribunal in rejecting the contentions advanced on behalf of the appellant-company, and in affirming the order of the learned assessee officer on remand.

14.3) Before concluding, we would like to mention that the help which Mr. Jain sought to draw while advancing his arguments with reference to Section 158 BA (3) and 158 BD of the Act, also does not salvage the situation for the appellant.

15) In the result, the substantial question of law formulated at the time of admission of the appeal is answered in favour of the respondent department, and against the appellant company. The appeal is dismissed. There shall be no order as to costs.