1990 (5) TMI 59 - AT - Income Tax

Tribunal rules for assessee in capital gains dispute, finding no evidence for additional consideration.

SMT. GEETA S. MAYOR. Versus INCOME TAX OFFICER.

The tribunal partly allowed the appeal, ruling in favor of the assessee by deleting the addition made by the ITO in the capital gains calculation. The ... - Issues: Validity of revised return, computation of capital gainsValidity of Revised Return:The appeal raised the issue of the validity of the revised return, but the counsel for the assessee decided not to press this ground. As a result, the tribunal rejected consideration of this issue.Computation of Capital Gains:The main issue in the appeal was the computation of capital gains amounting to Rs. 70,400, categorized as short-term and long-term. The Income Tax Officer (ITO) determined that the transfer of 10 shares to a partnership firm and the sale of 40 shares attracted tax under section 52(2) as long-term and short-term capital gains, respectively. The fair market value of the shares was assessed by the ITO, resulting in capital gains calculations.The Commissioner of Income Tax (Appeals) upheld the ITO's decision on both computations, citing the Supreme Court's ruling in Sunil Siddharthbhai vs. CIT. The CIT(A) deemed the transactions as a tax avoidance measure and confirmed the application of section 52(2) for both transfers.The assessee contested the decisions before the tribunal, arguing that there was no evidence to support doubts on the genuineness of the transactions. The counsel highlighted that if the transactions were not genuine, the value of the shares should have been taxed earlier. The assessee also challenged the application of section 52(1)/52(2) and emphasized the nominal difference in share values.The Departmental Representative supported the tax authorities' orders, citing the ITO's reasons for treating the transactions as tax avoidance measures. The representative referenced the Supreme Court's decision in Mcdowell & Co. Ltd. vs. CIT to justify the authorities' stance.After examining the submissions and orders, the tribunal ruled in favor of the assessee. They found no evidence to support additional consideration beyond the declared values, leading to the deletion of the addition in the capital gains calculation for the sale of 40 shares. Regarding the transfer of 10 shares to the firm, the tribunal concluded that since the firm was accepted as genuine, there was no basis for taxation. They referenced the Gujarat High Court's observations in Harikishan Jethalal Patel's case to support their decision.The tribunal dismissed the Departmental Representative's arguments based on the McDowell case, emphasizing the lack of action by the department to revise the assessment order of the firm. They concluded that the capital gains tax did not apply due to the absence of consideration in the share transfer. The tribunal relied on the Supreme Court's decision in Sunil Siddharthbhai to support their decision.In the final analysis, the tribunal partly allowed the appeal, deleting the addition made by the ITO and ruling in favor of the assessee based on the application of relevant legal principles and lack of substantial evidence supporting the tax authorities' position.