TMI Blog2014 (1) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... unding circumstances, to find out the reality of the recitals made in the documents. In the present case, there is an obvious and plain transaction of tax evasion which has been clothed with the smoke-screen of subterfuges, by the assessee appellants - The facts of the present case clearly reveal that such trading transactions of purchase and sale of shares, had not been effected, for commercial purpose but to create artificial loss, with a view to reducing tax liability – Such transactions are not genuine and natural transactions but preconceived transactions, demonstrating creation of such short term capital loss – The appellants restored to a preconceived scheme, to procure short term capital loss, for the purpose of neutralizing the short term capital gains by way of price differential, in the said share transactions not supported by market factors – The findings of the CIT(Appeals) are not based on relevant, cogent and credible material or evidence - Such share transactions were not quoted and consequently, were not traded through stock exchange - When all the facts and circumstances of the case are viewed, in totality, it is evident that the assessee appellants failed to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the same? G. Whether, the Income Tax Appellate Tribunal was justified in law, in reversing the action of the Commissioner of Income Tax (Appeals) in deleting the disallowance made by the Assessing Officer of the claim of short term capital loss, without giving due considerations to the reasoning/findings given by the Commissioner of Income Tax (Appeals) and the submission of the assessee? 4. The relevant facts necessary for adjudication of controversy involved herein as available on record may be noticed. The appellant is an agriculturist. She sold her land shares in the financial year 2007-08 relevant to the instant assessment year 2008-09 and filed her return of income accordingly. During the course of assessment proceedings, notice dated 1.12.2010 was issued to the assessee alleging that the loss so incurred on the shares was bogus and therefore not allowable. The assesse submitted reply to the notice. After examining the matter, vide order dated 22.12.2010, Annexure A.1, the Assessing Officer held that genuineness of the transactions of shares of M/s Arcee Ispat Udyog Limited Hisar was not proved and thus the loss of Rs. 22,50,000/- claimed by the assessee could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares were sold. The transactions of purchase and sale of shares of M/s Arcee Ispat Udyog Limited in the present case cannot be held to be genuine. The Hon ble Apex Court in McDowell and Co. Limited v. CTO (1985) 154 ITR 148 deprecated the method where the assesse attempts to evade payment of income tax. 8. Examining the findings recorded by the Tribunal on appeal, it is noticed that the Tribunal while setting aside the order of the CIT(A) had observed as under:- 7. A bare perusal of the relevant records, findings of the lower authorities, as contained in their respective orders clearly reveals that the assessee appellants sold land which resulted in short capital gain, as is evident from the chart reproduced above. The assessee appellants namely Smt.Harjit Kaur, Smt.Surinder Kaur, Smt.Gurdeep Kaur and Shri Avtar Singh claimed short term capital loss at Rs. 22.50 lacs, Rs. 18.00 lacs, Rs. 45.00 lacs and Rs. 22.50 lacs respectively emanating from sale of shares, allotted by the said unlisted Hissar based company namely M/s Arcee Ispat Udyog Limited. The AO disallowed the impugned loss, in respect of each appellant assessee and accordingly recomputed the taxable income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out, in accordance with the common intention of the assessee appellants and the said company who allotted the shares to the appellants, the nature and effect of the whole scheme has to be taken into consideration, in determining the true intent and nature of such share transactions. However, learned CIT(Appeals) disregarded such integrity of the said transactions. The learned CIT(Appeals) completely ignored the factum that the true nature of such share transactions lacked commercial contents, being structured transactions, entered into with the sole intent, to reduce the tax liability. The facts and circumstances of the case, as recorded above, clearly suggest that the revenue cannot take or accept such make-believe transactions, as presented by the appellants. Truth or genuineness of such transactions must prevail over the smoke screen, created by way of pre-meditated series of steps taken by the appellants, with a view to imparting a colour of genuineness and character of commercial nature, to such share transactions. Needless to say that one has to look at the whole transactions and a series of steps taken to accomplish such share transactions, in an integrated manner, with a vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not been framed on the basis of voluntary admission made by the assessee appellants. Therefore, reliance placed by the CIT(Appeals), on such case laws is misplaced. It is further added that Hon ble Supreme Court in Phullangode Rubber Produce Co. (supra) [(91 ITR 18 (SC)] held that confession is a significant evidence but not a conclusive one. In view of this, self admission and consequent offer of surrender made by assessee appellants, in respect of impugned short term capital loss, further supports the findings recorded by the AO in the matter. xx xx xx xx xx xx xx 15. It is essential on the part of the revenue authority, to look into the real nature of transaction and what happens in the real word and contextualize the same to such transactions in the real market situation. It is pertinent to state here, the judicial wisdom of Hon ble Supreme Court in CIT v. Arvinda Raju (TN) 120 ITR 46 (SC) wherein it was held that one day, in our welfare state geared to social justice, this clever concept of avoidance as against evasion may have to be exposed. In the present case, there is an obvious and plain transaction of tax evasion which has been clothed with the smoke-screen o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to dislodge such finding. Having regard to the peculiar fact situation of the present case, it is evident that such share transactions were closed circuit transactions and clearly structured one. Therefore, in the light of judicial precedents of jurisdictional High court and Hon ble Supreme Court, as discussed above, we do not find any merit in the findings of the CIT(Appeals). 16. Having regard to the above legal and factual discussions, including judicial precedents discussed above, of the Hon ble Supreme Court and jurisdictional High Court, the findings of the CIT(Appeals) cannot be sustained and hence the same are reversed. Further, an offer to surrender the impugned loss, subject to no penal action, made by the appellants before the AO, in the course of assessment proceedings, is an important piece of evidence, hence, cannot be ignored lightly. Consequently, the findings of the AO, as recorded in the impugned assessment order, are restored. 9. Adverting to the judgment relied upon by learned counsel for the appellant in Porrits and Spencer (Asia) Limited's case (supra), in that case the bonafide of the transactions was not doubted and in those circumstances, this court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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