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2024 Supreme(Guj) 201
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, NIRAL R. MEHTA, JJ.
Principal Commissioner Of Income Tax 1 – Appellant
Versus
Divyaben Prafulchandra Parmar – Respondent
R/Tax Appeal No. 812 of 2023
Decided on : 02-01-2024
Advocate Appeared:
For the Appellant :MR KARAN SANGHANI ADVOCATE WITH MRS KALPANA K RAVAL
The main legal point established in the judgment is the requirement of evidence to prove non-genuine transactions and the significance of holding shares for a long period in determining the genuineness of investments.
Headnote:
Income Tax - Assessment of Long Term Capital Gains - Section 68, Section 10(38) of the Income Tax Act, 1961 - [Section 68, Section 10(38)] - The court discussed the genuineness of the investment in shares, the receipt of sale consideration, and the presumption of non-genuine transactions. It highlighted the importance of evidence to establish non-genuine transactions and the significance of holding shares for a long period. The court also emphasized the findings of fact and the absence of any substantial question of law.
Fact of the Case:
The appellant, Revenue, challenged the order of the Income Tax Appellate Tribunal (ITAT) regarding the addition of Long Term Capital Gains (LTCG) on the sale of shares of Sunrise Asian Ltd. The Assessing Officer made an addition of Rs.49,99,877/- towards unexplained unaccounted income and levied tax under Section 115BBF of the Act. The CIT(A) confirmed the action of the Assessing Officer. The Tribunal, however, allowed the appeal of the assessee, holding that the genuineness of the transaction of sale of shares was proved.
Finding of the Court:
The court analyzed the evidence presented by the assessee, including ledger accounts, share certificates, bank statements, and other financial documents. It found that the assessee had provided sufficient evidence to prove the genuineness of the transaction. The court also emphasized that the Assessing Officer did not refute or discredit the evidence presented by the assessee. It further highlighted the receipt of sale proceeds through electronic payment and the absence of any evidence of cash exchange. The court concluded that the addition made by the Assessing Officer was based on mere suspicion and surmises, without any direct evidence to prove non-genuine transactions.
Issues: The issues revolved around the genuineness of the investment in shares, the receipt of sale consideration, and the presumption of non-genuine transactions. The court also addressed the reliance on the judgment of the Calcutta High Court and the findings of the Investigation Wing of Kolkata.
Ratio Decidendi: The court emphasized the importance of evidence to establish non-genuine transactions and the significance of holding shares for a long period. It also highlighted the findings of fact and the absence of any substantial question of law.
Final Decision: The court held that no question of law, much less any substantial question of law, arose from the impugned order passed by the Tribunal. The appeal was dismissed.
ORDER :
BHARGAV D. KARIA, J.
[1] Being aggrieved and dissatisfied with the order dated 27th July 2023 passed by the Income Tax Appellate Tribunal, Surat Bench, Surat (for short, “the Tribunal”) in ITA No.73/SRT/2023 for Assessment Year 2014-15, the appellant - Revenue has preferred this Tax Appeal under Section 260A of the Income Tax Act, 1961 (for short, “the Act”) with the following proposed substantial questions of law:
“i) Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT was justified in deleting the addition of sale proceeds of the share of Rs.49,01,840/- on account of unexplained income u/s 68 of the Act made by the Assessing Officer arising out of sale of shares of Sunrise Asian Ltd., a penny stock and without appreciating the findings of the Assessing Officer that the price movement of the company were not supported by financial fundamentals of the company?
ii) "Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was justified in allowing the appeal of the Assessee by holding that the investment in shares was genuine, simply placing reliance upon the decision of Hon'ble High Court in the case of Jagat Pravin Sarabhai (2022) 142 taxmann.com 247 and overlooking the circumstantial evidences and preponderance of the probability in the case?
iii) "Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was justified in ignoring the fact that, one of the entry provider involved in this case Shri Anuj Agarwal has admitted that he had given entry of bogus LTCG through 19 paper companies controlled by him, and Sunrise Asian Ltd is one of them?
iv) "Whether on the facts and circumstances of the case and in law the order of the Hon'ble ITAT suffers from perversity as it ignores the facts brought on record establishing manipulation of share prices of Sunrise Asian Ltd. as the upward movement of share price was not at all justified by the economic fundamental of company during the period 2011 to 2014?
v) "Whether on the facts and circumstances of the case and in law, the order of the Hon'ble ITAT was justified in holding that the assessee was deprived off to cross examine the witnesses when the principle of natural justice have been duly followed and the assessee did not avail the opportunity provided during the assessment proceedings?
vi) "Whether on the facts and circumstances of the case and in law the Hon'ble ITAT erred in deleting the disallowance of commission of Rs. 98,038/- purportedly incurred by the Assessee towards payment to brokers who allegedly entered into the share transactions at the behest of the Assessee overlooking the fact that the entire transaction were stage managed with the object to facilitate the Assessee to plough back its unaccounted income in the form of fictitious Long Term Capital Gains of Rs.49,01,840/- and claim bogus exemption?”
[2] The respondent – assessee, who is an individual, filed a return of income on 4th March 2015 declaring total income of Rs.4,22,502/-. The case of the assessee was selected for scrutiny through CASS and notice under Section 143(2) of the Act was issued on 18th September 2015 followed by notice under Section 142(1) of the Act dated 13th June 2016. The assessee furnished the details sought for by the Assessing Officer. The assessee has also shown Long Term Capital Gains of Rs.45,01,840/- in her return of income which was claimed as exempt under Section 10(38) of the Act. It was noted by the Assessing Officer that the Long Term Capital Gains claimed by the assessee included sale transactions effected during the year on the script named “Sunrise Asian Ltd”.
[3] The Assessing Officer, thereafter, on the basis of details available on record, ascertained that the assessee sold 10,000 shares of the said company during the year under consideration on total sale prices of Rs.49,01,84
