TMI Blog2014 (4) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation offered by the assessee as regards long-term capital gain was rejected unreasonably and that the finding that the amount was not on account of long-term capital gain is based on no evidence – thus, the transaction was bogus and it was simply a sort of modus operandi to convert the undisclosed income into a long-term capital gain claiming the same to be exempted. The AO had not committed any error in rejecting the claim of the assessee and, in fact, applying the test of human probabilities, the AO rightly concluded that the assessee's claim about the amount, being the long term capital gain is not genuine and that the finding arrived at by the AO cannot be said to be a finding, which is not based on no evidence – thus, the order of the Tribunal is set aside – Decoded in favour of Revenue. Addition of undisclosed source of income - Whether the Tribunal was justified and correct in directing the AO to delete the addition as income from undisclosed source – Held that:- The Tribunal rightly held that the assessee had established the identity of the creditor, namely, Venus Hospital Ltd. - The assessee has also discharged its burden, which rested on her, under section 68 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax Act, 1961 ? (iii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified and correct in law in directing the Assessing Officer to delete the addition of Rs. 15 lakhs as income from undisclosed source from the income of the respondent and is not the said decision perverse ? (iv) Whether, on the facts and in the circumstances of the case, the Tribunal was justified and correct in law in directing the Assessing Officer to delete the addition of Rs. 80,000 as income from undisclosed source from the income of the respondent and is not the said decision perverse ? Question Nos. 1 and 2 Since both these questions are closely interwoven, both these questions are being discussed and decided together. The material facts and various stages, which have given rise to the present appeal, may, in brief, be set out as under : (i) The assessee filed return of her income for the assessment year 2001-02, showing a total income of Rs. 1,49,348 and the assessment was completed under section 143(3) of the Act on March 25, 2004, determining the total income to be Rs. 2,10,630. The said order of assessment was set aside by the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 67.97 within a span of one year. The share broker was also examined under section 131 of the Act and, in the course of examination, he stated that all records relating to purchase and sale of shares in question were lost and, therefore, the actual purchase and sale could not be verified from the broker. The assessee submitted her return of income for the assessment year 2000-01 relevant to the year of purchase on December 22, 2000, i.e., after the shares were shown to have been sold on December 4, 2000. (vi) The Assessing Officer, in the order of assessment, noted that though the shares were sold through bank account of the assessee, purchase of shares were not made through the bank account of the assessee. The Assessing Officer observed that since the return for the assessment year 2000-01 relevant to the year of purchase was filed after the date of sale and that purchase of shares was not done through the bank account of the assessee the actual event of purchase of the shares of the assessee could not be verified and, therefore, it was apparently an afterthought and a modus operandi adopted to convert the undisclosed income into capital gain. The director of the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the same as bogus as well as in confirming the rejection of exemption under section 54F of the same amount. The learned Income-tax Appellate Tribunal set aside the orders of the Revenue authorities and directed the Assessing Officer to treat the said transaction as genuine and deleted the addition made on this account. The learned Tribunal, in its order, observed that neither the Assessing Officer nor the Commissioner of Income-tax (Appeals) had pointed out that the documents filed by the assessee were either false or not supported by evidence. The learned Tribunal observed that the Revenue authorities had not considered the papers and documents filed by the assessee for both purchase as well as sale of shares. The learned Tribunal, on the basis of copies of documents filed by the assessee, i.e., copies of bills, credit notes, contract notes, party ledgers, quotations of shares as on December 4, 2000, and undertaking from the assessee to the effect that original share certificates were not in the possession of the assessee came to the conclusion that the transaction was not bogus. The learned Tribunal, therefore, held as under : Since, in the present case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he broker stated that all the records were lost. It is the further submission of Dr. Saraf that the power of a Tribunal remains confined to the subject matter of appeal and a Tribunal can decide the issue on the basis of the facts, which were placed before the appellate authority. It is Dr. Saraf's contention that no new case could have been made out suo motu by an Income-tax Appellate Tribunal as has been done in the present case. While supporting the order of the learned Tribunal, Mr. Mazumdar, learned counsel for the assessee, has submitted that since the learned Tribunal, on the basis of the documents and papers, came to the conclusion that the transaction was not bogus, no interference is called for by this court. Mr. Mazumdar has also submitted that simply because the transaction was off market transaction, the same cannot be treated to be a sham transaction. Mr. Mazumdar, learned counsel, has further submitted that since the transaction of purchase and sale of the shares was through broker but merely because the company was not found located at the given address the transaction cannot be treated to be bogus. The learned counsel for the assessee has contended that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. (2) The Appellate Tribunal may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer : Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this sub-section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard : Provided further that any application filed by the assessee in this sub-section on or after the 1st day of October, 1998, shall be accompanied by a fee of fifty rupees. (2A) In every appeal, the Appellate Tribunal, where it is possible, may hear and decide such appeal within a period of four years from the end of the financial year in which such appeal is filed under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d parties, who may be affected, has had sufficient opportunity of being heard on that ground. The Supreme Court, in Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232 (SC), while examining the power of the Appellate Tribunal, under section 33(4) of the Indian Income-tax Act, 1922, held that while the word thereon restricts the jurisdiction of the Tribunal to the subject matter of appeal, the words pass such order as the Tribunal thinks fit includes all power except possibly the power of enhancement, which are conferred upon the Commissioner by section 31 of the said Act. The Tribunal has, therefore, jurisdiction to go into every aspect of the assessment proceeding and also determine if the question as to whether such assessment was made in accordance with the law or not provided a ground is taken before the Tribunal or additional ground, by amendment, is allowed to be taken by the Tribunal. The Tribunal has also jurisdiction to decide the question of law, which arises from the facts as found by the taxing authority, which has a bearing on the taxable liability of the assessee. Moreover, the Supreme Court, in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC), held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Departmental authorities. On the basis of the principles laid down by the Supreme Court, it must be held in this case that the assessee was not precluded from raising a new contention and the learned Tribunal was not precluded from examining and determining that contention merely on the ground that the same had not been put forward at the earlier stages of the proceedings in assessment and in the first appeal. Thus, the subject matter of appeal may be capable of challenge on various grounds some of which might have been raised and some might not have been raised earlier. Some grounds raised might have been dealt with or some of them might not have been dealt with but a decision on the subject matter is an implied decision on all matters, which are raised and which could have been raised, whether dealt with or not. Merely because a ground has not been raised, though could have been raised in support of the reliefs sought for in the appeal, it cannot be said that it cannot be raised before the Tribunal. The matter can be viewed from a different angle also. It might happen that before the assessee came to the Tribunal, the assessee had not viewed the question urged by him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subject matter as was in appeal before the first appellate authority. It was further held (page 514) : It is evident, therefore, that the attempt of the Tribunal in every case, where it is called upon to consider the question whether the new approach should be permitted should be to determine whether the subject matter would remain the same, even if the new ground is permitted to be raised . . . Speaking of subject matter, it may happen that substantially a claim is urged by an assessee assuming that he is entitled to that claim under a certain provision of law indicated by him. It may be that he is entitled to relief in respect of such claim or part of it not because of that provision, but of some other provision of law. For the mere reason that he does not refer to or advert to the provision appropriately applicable will be no reason to deny him the right to urge his case, since, in such a case also, the subject matter will not change by reason of allowing the question to be raised. In the present case, the subject matter of appeal was rejection of longterm capital gain of Rs. 18,33,160 on sale of shares treating the same as bogus. Whether the said rejec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as income, the burden lies on the Revenue to prove that it is within the taxing provision but once that burden is discharged, the burden of proving that it is not taxable because it falls within exemption provisions under the Act lies on the asseesse. If the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory and there are evidence and circumstances pointing out to the effect that what had been shown was not real and if the assessee fails to controvert such facts and circumstances then such facts and circumstances can certainly be used against the assessee by holding that the said receipt was in the nature of income. In the present case, the assessee has not been able to prove that the shares were purchased on November 12, 1999, inasmuch as there is no documentary evidence proving the said fact inasmuch as the said purchase was made in cash. Further, the assessee has also not been able to show that the said shares were listed in the stock market at Rs. 2.50, on the day of purchase, inasmuch as the assessee has produced the quotation of the shares as on the date of sale issued by the Guwahati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the stock market on the date of sale but no documentary evidence were produced to show that on the date of purchase, the market price of the shares was the same at which the shares were claimed to have been purchased. No doubt apparent must be considered real until it is shown that there are reasons to believe that the apparent is not real and for that purpose, taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be examined and considered by applying the test of human probabilities. In the present case, the facts that two different addresses were given of the companies, one in the Gauhati Stock Exchange and the other in the office of Registrar of Companies, no such company was found to be in existence at both the places, the assessee had failed to furnish the address of the company and when the notice sent to the director of the company was returned on the ground that no such person was found available at the address of the company, the claim that shares of the company rose from Rs. 2.50 to Rs. 67.97 within a span of one year, when the profit, upon payment of tax of the company for three years, was negli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to show that a particular transaction was not a genuine order passed by the Tribunal without enquiring into all relevant facts and evidence would not be valid. The High Court has indeed the jurisdiction to interfere with the findings of the Appellate Tribunal if it appears that either the Tribunal has misunderstood the statutory language because the proper construction of the statutory language is a matter of law, or it has arrived at a finding based on no evidence or where the finding is inconsistent with the evidence or contradictory thereto or it has acted on material, partly relevant and partly irrelevant, or where the Tribunal draws upon its own imagination and imports facts and circumstances not apparent from the record, or bases its conclusions on mere conjectures and surmises or where no person judicially acting and properly instructed as to the relevant law could have come to the determination reached. In all such cases, the findings arrived at are vitiated. The learned Tribunal, in the present case, without examining the surrounding circumstances and without applying the principle of human probability, came to a conclusion that the assessee had established both purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, director of the company, whose statement was recorded under section 131(1) of the Act. The director of the company stated that the agreement of purchase of the flat was cancelled in the year 2003 and that the company had also received back Rs. 6 lakhs. The Assessing Officer asked the director as to why the payment, for purchase of flat was made in cash and repayment of Rs. 3.5 lakhs was received in cash and the balance of Rs. 2.5 lakhs was received in selfcheque of the assessee and not received in crossed account payee cheque in the name of M/s. Venus Hospitals Pvt. Ltd. despite having the bank accounts of the company and the assessee, the director could not give any satisfactory reason for the same. The cancellation agreement of the said flat was also on a plain sheet of paper without having any proper documentary value. The Assessing Officer enquired from the director of the company the reason for the proposed purchase of flat and the director replied that it was proposed to set up a laboratory/diagnostic centre. The said director could not give any satisfactory reply to the question as to why a residential flat was proposed for setting up of a laboratory/diagnostic centre for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were recorded in the books of account of the company, the Assessing Officer was not justified in treating the transaction as bogus and in adding back the amount received as advance on account of sale of flat as undisclosed income. The learned counsel for the assessee submits that the advance given to the assessee was duly reflected in the books of account of Venus Hospital Ltd. and the said hospital cannot be said to be not in existence inasmuch as it had filed all relevant records like balance-sheets, etc., proving the genuineness of the transaction. The learned counsel for the assesseerespondent has, in this regard, relied upon the decision in Nemi Chand Kothari v. CIT reported in [2003] 264 ITR 254 (Gauhati) ; [2004] 1 GLR 504, wherein it has been held that the creditor's creditworthiness has to be judged vis-a-vis the transactions which have taken place between the assessee and the creditor and it is not the business of the assessee to find out the source of money of his creditor or of the genuineness of the transaction, which took place between the creditor and the sub-creditor and/or the creditworthiness of the sub-creditors for these aspects may not be within the spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e creditor actually belonged to, and was owned by, the assessee himself. If there is direct evidence to show that the loan received by the assessee actually belonged to the assessee, there will be no difficulty in assessing such amount as the income of the assessee from undisclosed source but if there is no direct evidence in this regard, then the indirect or circumstantial evidence has to be conclusive in nature and must, in such circumstances, unerringly point to the assessee as the person from whom the money had actually flown to the hands of the sub-creditor and, then, routed through the hands of the sub-creditor to the hands of the creditor. For this purpose, the circumstantial evidence has to be not only consistent with the hypothesis that the money belonged to the assessee, but that this hypothesis must also be inconsistent with the hypothesis that none other than the assessee owned the said money. If the conclusion be that the money received, as loan, by the assessee may or may not belong to him or if the possibility exists that the money received, as loan, by the assessee may not belong to him, then, in none of such two cases, the loan amount can be conclusively treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Income-tax Appellate Tribunal on this score and we, therefore, held that the learned Tribunal was justified in deleting the said addition of Rs. 15 lakhs. Question No. 4 The assessee claimed to have taken advance of Rs. 80,000 in cash on October 30, 2000, against the sale of car. On examination of the returns filed up to 2004-05, the Assessing Officer observed that the said advance |still remained in the hands of the assessee without any car being delivered to the purchaser. The Assessing Officer in the order of assessment noted that as per the returns of income filed for the assessment years 2001-02 to 2004-05, by the assessee, there was no car belonging to the assessee for sale. The assessee did not submit any returns after the assessment year 2004-05 till the date of assessment and the said advance amount remained with the assessee. The purchaser of the car was summoned under section 131 of the Act to verify the genuineness of the transaction but he failed to appear. In view of the above, the Assessing Officer added back the aforesaid amount of Rs. 80,000 as undisclosed income. The Commissioner of Incometax (Appeals) upheld the addition made by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
