Tribunal upholds tax assessment, deems share transaction a tax evasion scheme.

The Tribunal overturned the deletion of a substantial amount due to the disallowance of the assessee's claim of long term capital loss. The Tribunal found that the share transaction was a colorable device to evade tax liability, following principles established by the Supreme Court and the Karnataka High Court regarding transactions aimed at tax evasion. Consequently, the Tribunal upheld the Assessing Officer's assessment order, allowing the Revenue's appeal and reinstating the addition on account of disallowed long term capital loss.

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Issues:
Challenge to deletion of addition on account of disallowance of long term capital loss.

Analysis:
The Revenue challenged the deletion of a substantial amount on account of disallowance of the assessee's claim of long term capital loss. The facts revealed that the assessee sold a property and declared a capital gain, which was set off against the claimed loss on the sale of shares. The Assessing Officer (AO) deemed the sale of shares as a colorable device to generate loss. However, the first appellate authority accepted the transaction as genuine.

The Tribunal examined the principles established by the Supreme Court in the cases of Durga Prasad More and Sumati Dayal. These cases emphasized the need to probe apparent transactions to ascertain their genuineness. In this case, the assessee sold a property to one entity but engaged in subsequent transactions with related parties, leading to the generation of a loss to set off against capital gains. The Tribunal noted the surrounding circumstances and human probabilities, ultimately concluding that the share transaction was a sham to avoid tax liability.

Referring to the judgment of the Karnataka High Court in the case of WIPRO Ltd, the Tribunal highlighted that transactions aimed at evading tax through dubious methods are not legitimate. The High Court's stance on colorable devices to avoid tax liability was reiterated, emphasizing the need to distinguish between legitimate tax planning and schemes designed to evade taxes. The Tribunal held that the share transaction in this case was a colorable device and should be disregarded.

In light of the above analysis and legal principles, the Tribunal set aside the findings of the CIT(A) and upheld the AO's assessment order. The appeal filed by the Revenue was allowed, and the deletion of the addition on account of disallowance of long term capital loss was overturned. The judgment was pronounced on 23.08.2018.

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