2013 (10) TMI 837 - HC - Income Tax

High Court overturns Tribunal order on share value assessment, emphasizes burden of proof on assessee.

COMMISSIONER OF INCOME TAX Versus SMT JASVINDER KAUR

The High Court set aside the Tribunal's order in an appeal concerning the assessment of long-term gains from the sale of shares of two companies. The ... Genuineness of long term capital gain (LTCG) – income from undisclosed sources - AO took the view that the assessee could not produce any documentary evidence of purchases of shares except showing the purchases of the shares, in question, in her balance sheet, along with the income tax return - ITAT deleted the addition - Held that:- when a query had been made by the Assessing Officer directing the assessee-respondent to furnish necessary materials to show that the return of income, which the assessee-respondent had filed, was correct, justified and tenable in law, the onus rested on the assessee-respondent to produce necessary materials and convincingly show that the value of the shares, as had been reflected in her annual return of income, had gone as high as the assessee-respondent had claimed. The onus, which so rested on the assessee-respondent, was never discharged by the assessee- respondent. This aspect appears to have escaped the notice of the learned Tribunal - Impugned order suffers from non-application of mind and, therefore, the same needs to be set aside and the appeal, which had been filed before the learned Tribunal, needs to be remanded for being decided in accordance with law. Issues:Appeal against the order under Section 260A of the Income Tax Act, 1961 for the assessment year 2003-04 regarding long term gain from the sale of shares of two companies.Analysis:1. The appeal raised the substantial question of law regarding the justification of the Income Tax Appellate Tribunal in setting aside the orders passed by the Assessing Officer and the Commissioner of Income Tax (Appeals) and directing the Assessing Officer to accept Rs. 18,73,210/- as a long term gain of the assessee from the sale of shares of two companies.2. The Assessing Officer found discrepancies in the documentation provided by the assessee regarding the purchases and sales of shares of two companies, Ocean Entrade Limited and United Impex Limited. The Officer treated the income from sales of shares as undisclosed income due to lack of sufficient evidence to justify the long term gain claimed by the assessee.3. The Appellate Authority upheld the assessment order, noting that the profits shown by the companies were negligible or resulted in losses, making it illogical for the share values to increase significantly in a short period. The Authority found the companies financially unsound, questioning the extraordinary rise in share prices claimed by the assessee.4. The Tribunal, in its impugned order, disagreed with the Appellate Authority's reasoning, stating that the rejection of the assessee's profit claim was based on assumptions without concrete evidence. The Tribunal found no proof that the claimed share values were factually incorrect and allowed the appeal against the assessment order.5. The High Court observed that the Tribunal had erred in placing the burden of proof on the Revenue instead of the assessee. The Court noted that the assessee failed to discharge the onus of proving the correctness of the return of income filed, especially regarding the significant increase in share values claimed.6. Consequently, the High Court set aside the Tribunal's order, remanding the matter for a fresh decision in accordance with the law. The Court emphasized the need for the assessee to provide convincing evidence to support the claimed increase in share values and directed the Tribunal to consider all materials presented during the re-hearing of the appeal.This detailed analysis highlights the issues raised in the appeal, the findings of the Assessing Officer, Appellate Authority, and Tribunal, and the High Court's decision to remand the matter for further consideration based on the burden of proof and evidence presented by the assessee.