2010 (9) TMI 81 - HC - Income Tax

Appeals dismissed after documentary proof showed listed-company share trades at prevailing market rates; off-market deals not sham or undisclosed income

Commissioner of Income-tax Versus. Smt. Jamnadevi Agrawal

The HC affirmed the Tribunal's factual findings and dismissed the Revenue's appeals, holding that documentary evidence established that the assessee ... Long-term capital gains (LTCG) - Undisclosed income - sale of shares of various listed companies - Held that:- From the documents produced before us, which were also in the possession of the Assessing Officer, it is seen that the shares in question were in fact purchased by the assessees on the respective dates and the company has confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However, the purchase and sale price of the shares declared by the assessees were in conformity with the market rates prevailing on the respective dates as is seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off-market transactions cannot be a ground to treat the transactions as sham transactions. The documentary evidence clearly shows that the transactions were at the rate prevailing in the stock market and there was no question of introducing unaccounted money by the assessees. Thus, the decision relied upon by the counsel for the Revenue is wholly distinguishable on the facts. Thus, we hold that the decision of the Tribunal is based on findings of fact. Accordingly, all these appeals are dismissed. Issues:1. Discrepancy in filing appeals by Revenue for different assessees.2. Treatment of long-term capital gains on sale of shares post search proceedings.3. Application of section 153A of the Income-tax Act, 1961.4. Disallowance of long-term capital gain and addition of sale proceeds as income from undisclosed sources.5. Decision of the Commissioner of Income-tax (Appeals) and subsequent appeal to the Income-tax Appellate Tribunal.6. Allegations of sham transactions and undisclosed income by Revenue.7. Evaluation of evidence and findings by the Tribunal on the genuineness of transactions.8. Comparison with precedent case Sumati Dayal [1995] 214 ITR 801.1. Discrepancy in Filing Appeals:The Income-tax Appellate Tribunal disposed of 70 appeals by the Revenue, who filed appeals under section 260A of the Income-tax Act, 1961 for only 43 assessees out of the 70. The Revenue cited reasons like small tax effect and lack of substantial legal questions for not filing appeals for the remaining 27 assessees.2. Treatment of Long-term Capital Gains:Assessees claimed long-term capital gains on the sale of shares, which were initially accepted by the Assessing Officer. However, post search proceedings under section 153A of the Act, the Assessing Officer disallowed the gains and added the sale proceeds as income from undisclosed sources.3. Application of Section 153A:The Assessing Officer issued notices under section 153A and passed assessment orders disallowing long-term capital gains based on seized material, leading to disputes and subsequent appeals.4. Disallowance of Gains and Addition as Income:The Commissioner of Income-tax (Appeals) deleted the addition under section 68 of the Act, holding it inapplicable to the case, which was further challenged by the Revenue in appeals to the Income-tax Appellate Tribunal.5. Decision and Appeals to Tribunal:The Income-tax Appellate Tribunal dismissed all 70 appeals by the Revenue, leading to specific appeals for 43 cases, with the primary contention being that the capital gains were undisclosed income.6. Allegations of Sham Transactions:The Revenue alleged sham transactions based on similar sales through a common broker, off-market transactions, and unexplained cash credits in buyers' accounts, claiming conversion of black money to white through long-term capital gains.7. Evaluation of Evidence and Tribunal Findings:The Tribunal found the transactions genuine based on documentary evidence, confirming the purchases and sales of shares at market rates, refuting the allegations of sham transactions and undisclosed income.8. Comparison with Precedent Case:The Tribunal distinguished the current case from Sumati Dayal [1995] 214 ITR 801, emphasizing the genuine nature of transactions with proper documentation, thereby dismissing the appeals by the Revenue based on factual findings and absence of substantial legal questions.This comprehensive analysis of the judgment covers the various legal issues involved, detailing the sequence of events, arguments presented, and the final decision rendered by the High Court Bombay.