Commissioner Of Income-Tax v. Anupam Kapoor

Vijender Jain, C.J:— By this order, we propose to dispose of I.T As. Nos. 356 of 2004, 378 of 2004 and 308 of 2005, as common questions of law are sought to be raised by the Revenue. The facts, however, have been extracted from I.T.A No. 378 of 2004.

2. The Revenue has filed this appeal. Aggrieved by the order passed by the Income-tax Appellate Tribunal, the following question of law was framed by the Revenue:

“Whether the hon'ble Income-tax Appellate Tribunal, on the facts and circumstances of the case, has erred in law in confirming the order of the learned Commissioner of Income-tax (Appeals) in deleting the addition of Rs. 1,74,552 by holding that the assessee discharged his onus of proving the genuineness of the transaction made by him, whereas, the assessee could not establish even the identity of the company whose shares the assessee alleged to have purchased and sold ?”

3. The assessment in this case was completed by the Assessing Officer under section 143(3) read with section 147 of the Income-tax Act, 1961. The said assessment was reopened on receipt of the intimation from the DDIT (Investigation), Gurgaon, stating that the long-term capital gain declared by the assessee was false and the transaction was not genuine. A cheque had been taken by the beneficiary, i.e, by paying cash equivalent to the cheque amount and the premium thereon. The Assessing Officer recorded reasons and issued notice under section 148 of the Act. The assessee filed a return and during the course of the reassessment proceedings, the assessee submitted his reply and furnished evidence in support of his claim of long-term capital gain. However, the Assessing Officer held that the assessee failed to lead evidence to support his claim of the long-term capital gain. The Assessing Officer passed an order and the amount of Rs. 1,74,552 was considered as unexplained credit and the same was added in the income. The assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals), vide order dated December 30, 2003, deleted the addition and further held that the Assessing Officer has not discharged his onus.

4. The Commissioner of Income-tax (Appeals) further held that there was no material or evidence with the Assessing Officer to come to the conclusion that the transaction shown by the assessee was a bogus transaction. The Commissioner of Income-tax (Appeals) further held that if a company was not available at the given address, it cannot conclusively prove that the company was nonexistent. The decision of the Commissioner of Income-tax (Appeals) was challenged by the Revenue before the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal, on the basis of the material on record, held that purchase contract note, contract note for sales, distinctive numbers of shares purchased and sold, copy of share certificates and the quotation of shares on the date of purchase and sale were sufficient material to show that the transaction was not bogus but a genuine transaction. The purchase of shares was made on April 28, 1993, i.e, the assessment year 1993-94 and that assessment was accepted by the Department and there was no challenge to the purchase of shares in that year. The shares were sold through a broker, who was a registered broker of the stock exchange on the relevant date. It was also placed before the relevant Assessing Officer as well as before the Income-tax Appellate Tribunal that the sale proceeds have been accounted for in the accounts of the assessee and were received through account payee cheque. The Income-tax Appellate Tribunal took into consideration that the Assessing Officer had not dealt with all the documents placed before him and had simply presumed that the transaction was bogus.

5. The Income-tax Appellate Tribunal was right in rejecting the appeal of the Revenue by holding that the assessee was simply a shareholder of the company. He had made investment in a company in which he was neither a director nor was he in control of the company. The assessee had taken shares from the market, the shares were listed and the transaction took place through a registered broker of the stock exchange. There was no material before the Assessing Officer, which could have led to a conclusion that the transaction was, simpliciter a device to camouflage activities, to defraud the Revenue. No such presumption could be drawn by the Assessing Officer, merely on surmises and conjectures. The Income-tax Appellate Tribunal rightly relied on C. Vasantlal and Co. v. CIT, [1962] 45 ITR 206 (SC); M.O Thomakutty v. CIT, [1958] 34 ITR 501 (Ker) and Mukand Singh and Sons v. Presiding Officer, Sales Tax Tribunal, [1997] 107 STC 300 (P & H). It was for the Assessing Officer, who has reopened the assessment to have sought some evidence on record, to substantiate his formulation of consideration that the assessee has not filed a return bona fide. The Income-tax Appellate Tribunal also took into consideration that it was only on the basis of a presumption that the Assessing Officer concluded that the assessee had paid cash and purchased the cheque. In the absence of any cogent material in this regard, having been placed on record, the Assessing Officer could not have reopened the assessment. The assessee had made an investment in a company, evidence whereof was with the Assessing Officer. Therefore, the Assessing Officer could not have added income, which was rightly deleted by the Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal. It is settled law that suspicion, howsoever, strong cannot take the place of legal proof, as has been held by the hon'ble Supreme Court in the case of Umacharan Shaw and Bros. v. CIT, [1959] 37 ITR 271.

6. Learned counsel for the Revenue has contended that the controversy in the present case, is covered by a decision of this court in I.T.A No. 256 of 2006 decided on September 15, 2006, Jaspal Singh v. Commissioner Of Income-Tax, [2007] 290 ITR 306. We are afraid that the submission of learned counsel for the Revenue does not hold good. In I.T.A No. 256 of 2006 (Jaspal Singh v. Commissioner Of Income-Tax, [2007] 290 ITR 306 (P & H)), the following questions of law were framed (page 307):

“(a) Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was justified in confirming the action of the authorities below by upholding the addition made on account of impugned gifts of Rs. 2 lakhs, Rs. 1.70 lakhs and Rs. 0.30 lakh?

(b) Whether, on the facts and circumstances of the case, the findings of the Income-tax Appellate Tribunal are perverse and against the evidences on record thus unsustainable in law.

(c) Whether the Income-tax Appellate Tribunal has misdirected itself in being influenced by irrelevant factors and applying erroneous criteria while deciding the issue of genuineness of the impugned gifts ?”

7. In the aforementioned judgment, this court held that onus to establish 6 that the gift was genuine and bona fide lay upon the assessee. The matter at issue was the nature of the gifts of money received by the assessee from non-resident Indians and as there was sufficient material before the Assessing Officer, to doubt the bona fides of the transactions, it was rightly held that the onus to establish the identity of the donor and the genuineness of the gifts lay upon the assessee. The situation in the present case, as noticed herein above, is entirely different and relates to the transactions of sale of shares, purchase whereof was never challenged by the Revenue. Consequently, we are satisfied that no question of law, much less a substantial question of law arises for adjudication. Dismissed.