2021 (12) TMI 716 - HC - Income Tax

Court affirms Tribunal's decision on Income Tax Act Section 68, stresses limited interference

The High Court upheld the Tribunal's decision to delete the addition under Section 68 of the Income Tax Act for Long Term Capital Gain and commission paid ... Addition u/s 68 - bogus LTCG - Penny stock purchases - ITAT deleted the addition - HELD THAT:- Tribunal has held that no enquiry had been conducted and the assessee’s broker had not even been examined by the authorities below before passing the impugned orders. The ITAT also held that the scrips of M/s CCL International Ltd. were freely traded at the Bombay Stock Exchange between the years 2011 and 2014 and the assessee had purchased the shares in 2011 and sold the same in 2012. ITAT also found that the revenue from the operation of M/s CCL International Ltd. from March, 2010 to March, 2012 was between ₹ 55.25 crores to ₹ 79 crores and the share price during the period 2010 to 2014 had increased from ₹ 50 per share to ₹ 609 per share. This Court is of the view that there is no perversity in any of the findings given by the Tribunal. The Supreme Court in the case of Ram Kumar Aggarwal & Anr. vs. Thawar Das [1999 (8) TMI 1008 - SUPREME COURT] has reiterated that under Section 100 of the Code of Civil Procedure, the jurisdiction of the High Court to interfere with the orders passed by the Courts below is confined to hearing on substantial question of law and interference with finding of the fact is not warranted if it involves re-appreciation of evidence. Supreme Court in Hero Vinoth (Minor) vs. Seshammal [2006 (5) TMI 478 - SUPREME COURT] has also held that “in a case where from a given set of circumstances two inferences of fact are possible, the one drawn by the lower appellate court will not be interfered by the High Court in second appeal. Adopting any other approach is not permissible.” It has also held that there is a difference between question of law and a “substantial question of law”. Consequently, this Court finds that there is no perversity in the findings of the ITAT. Appeal dismissed. Issues:Challenge to ITAT order on deletion of addition under Section 68 of the Income Tax Act for Long Term Capital Gain and commission paid for accommodation entry.Analysis:The appeal challenges the ITAT order deleting the addition of Rs. 1,77,25,158 under Section 68 of the Income Tax Act for bogus Long Term Capital Gain on penny stock and Rs. 1,77,251 for commission paid for obtaining accommodation entry. The Appellant argues that the ITAT erred in considering the transactions for purchase of shares of CCL International Ltd. as bogus, resulting in substantial capital gain. The Appellant contends that the ITAT failed to acknowledge the evidence provided by the Assessing Officer, including an inquiry report indicating accommodation entries by certain brokers. Moreover, the Appellant asserts that the company's financial position did not justify the significant price increase of its shares.The Tribunal's decision was based on various grounds. It noted that no proper inquiry was conducted, and the assessee's broker was not examined before passing the orders. The Tribunal found that the shares of M/s CCL International Ltd. were actively traded at the Bombay Stock Exchange during the relevant period. Additionally, it highlighted the revenue generated by the company and the substantial increase in share price over the years. The Tribunal's analysis led to the conclusion that the findings were based on cogent reasoning and factual assessment.The High Court, in its judgment, upheld the Tribunal's decision, emphasizing that there was no perversity in the Tribunal's findings. Referring to legal precedents, the Court reiterated the limited scope of interference in matters involving substantial questions of law and the importance of not re-evaluating evidence. Citing previous judgments, the Court emphasized that if two factual inferences are possible, the lower appellate court's decision should not be disturbed. Consequently, the High Court found no grounds to overturn the Tribunal's findings and dismissed the appeal accordingly.