2006 (11) TMI 189 - HC - Income Tax

Court Upholds Tribunal Decision on Capital Gains Authenticity | Burden of Proof on Assessee

The High Court upheld the Tribunal's decision regarding the genuineness of short term capital gains from the sale of shares for the assessment year ... Burden of proving that Income is subject to tax is on the revenue but on facts, to show that the transaction is genuine, burden is primarily on the assessee -Assessing Officer is to apply the test of human probabilities for deciding genuineness or otherwise of a particular transaction. Mere leading of evidence that the transaction was genuine, cannot be conclusive - No substantial question of law arises – appeal of assessee is dismissed Issues:Appeal against the order of the Income Tax Appellate Tribunal for the assessment year 1998-99 regarding the genuineness of short term capital gain from sale of shares.Analysis:1. The appellant challenged the Tribunal's order, claiming that the Tribunal erred in reversing the order of the Commissioner of Income-tax (Appeals) without proper consideration of uncontroverted material on record. The appellant argued that the burden of proving the transactions genuine was on the department, and in the absence of evidence proving otherwise, holding the transactions as not genuine was impermissible.2. The Assessing Officer observed a significant rise in share prices and initiated further inquiry into the transactions. The assessing officer made additions to the appellant's income, a decision upheld by both the Commissioner of Income-tax (Appeals) and the Tribunal. The appellant incurred capital loss on gold jewellery and short term capital gain from the sale of shares, leading to scrutiny by the authorities.3. The High Court emphasized that while the burden of proving income subject to tax lies with the revenue, the burden of proving the genuineness of a transaction primarily falls on the assessee. The Assessing Officer must use the test of human probabilities to determine the authenticity of a transaction, considering evidence presented by the assessee in a reasonable manner. The court highlighted that even if the assessee presents evidence, if it is not trustworthy, the genuineness of the transaction can still be rejected.4. The court concluded that the Tribunal's finding was a factual one and not perverse, as it was based on a reasonable assessment of evidence presented. Therefore, the court dismissed the appeal, stating that no substantial question of law arose from the case. The judgment reaffirmed the principle that the burden of proving the genuineness of transactions rests primarily on the assessee, and the Assessing Officer must evaluate the evidence presented in a reasonable manner to determine authenticity.