2014 (12) TMI 977 - HC - Income Tax

Court affirms Tribunal's decision on genuine share transactions under IT Act Section 68. Appeals dismissed.

Commissioner of Income Tax-13 Versus Mr. Shyam R. Pawar

The Court upheld the Tribunal's decision to delete the addition confirmed by the Commissioner under section 68 of the IT Act, finding that the ... Addition u/s 68 – Genuineness of transaction in shares - genuine or sham and bogus – CIT concluded that certain operators and brokers devised a scheme to convert the unaccounted money of the Assessee to accounted income and the Assessee utilized this scheme. - Tribunal deleted the additions on the ground that onus was not discharged by the department. Held that:- The Commissioner extensively referred to the correspondence and the contents of the report of the Investigation carried out, what was important and vital was whether the transactions in shares were genuine or sham and bogus - the Tribunal rightly concluded that there was something more which was required, which would connect the present Assessee to the transactions and which are attributed to the Promoters/Directors of the two companies - the Tribunal referred to the entire material and found that the investigation stopped at a particular point and was not carried forward by the Revenue - There are 1,30,000 shares of Bolton Properties Ltd. purchased by the Assessee during the month of January 2003 and he continued to hold them till 31 March 2003. The present case related to 20,000 shares of Mantra Online Ltd for the total consideration of ₹ 25,93,150. The contract notes in Form-A with two brokers were available and which gave details of the transactions - The contract note is a system generated and prescribed by the Stock Exchange - this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment - The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to - that itself is not enough to prove that the transactions in the impugned shares were bogus/sham - The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus - inquiry was not carried forward and with a view to discharge the initial or basic onus, then the conclusion of the Tribunal cannot be termed as perverse – thus, no substantial question arises for consideration – Decided against revenue. Issues involved:1. Whether the ITAT was correct in deleting the addition confirmed by the CIT (A) under section 68 of the IT Act 1961Rs.2. Whether the finding recorded by the Tribunal contrary to the record and thus perverseRs.3. Whether the Tribunal was correct in law in deleting the disallowance of claim of loss incurred on the sale of share capital market Ltd.Rs.Analysis:Issue 1:The Revenue contended that the Tribunal erred in reversing the finding of fact by the Commissioner and the Assessing Officer, based on a report from the Investigation Branch of the Department. The Commissioner concluded that certain operators and brokers devised a scheme to convert unaccounted money to accounted income, disallowing the Assessee's claim of earning capital gain. The Tribunal's decision to delete the addition under section 68 of the IT Act was challenged by the Revenue, arguing that the Tribunal should not have reversed the concurrent finding and should have considered the specific findings of the Commissioner.Issue 2:The Assessee's counsel argued that the Tribunal rightly allowed the Assessee's appeal as there was no concrete evidence connecting the Assessee to the suspected brokers and companies involved in the alleged scheme. The Tribunal interfered with the concurrent orders because the Commissioner and Assessing Officer failed to consider relevant material, not just because another view was possible. The Assessee's counsel maintained that the Appeals did not raise any substantial question of law and should be dismissed.Issue 3:Upon reviewing the concurrent findings, the Court observed that the crucial aspect was whether the transactions in shares were genuine or sham. The Tribunal found that the investigation did not connect the Assessee to the transactions attributed to the Promoters/Directors of the companies involved. The Tribunal concluded that the transactions were not merely an accommodation of cash but genuine transactions, based on the material presented, including DMAT account details and contract notes. The Court upheld the Tribunal's decision, stating that the conclusions were not vitiated by any error of law apparent on the face of the record.In conclusion, the Court dismissed the Appeals, stating that they did not raise any substantial question of law. The additional question raised was also deemed not substantial as it pertained to the same transactions and investigation, with no distinguishable features from the main issue discussed in the judgment.