1. This is an appeal made under section 260A of the Income-tax Act, 1961 (in short, “the Act”), against the order dated March 14, 2008, passed in I.T.A No. 51/(Gau)/2008 for the assessment year 2003-04 whereby the learned Income-tax Appellate Tribunal, Guwahati Bench (in short, “the Tribunal”), has allowed the appeal of the assessee-appellant set aside the assessment order dated March 30, 2006, as well as the appellate order dated January 21, 2008, passed against the assessee.
2. The appeal has been admitted for hearing on the following substantial question of law:
“Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in setting aside the orders passed by the Assessing Officer as well as by the Commissioner of Income-tax (Appeals) and directing the Assessing Officer to accept Rs. 18,73,210 as a long-term gain of the assessee from the sale of shares of M/s. Ocean Entrade Ltd. and M/s. United Impex Ltd.?”
3. The assessee-respondent, who is an individual, filed annual return for the assessment year 2003-04 showing her income derived from salary, capital gains and also income from other sources. In the course of time, when the assessee-respondent's case was selected for scrutiny notices were accordingly issued under sections 143(2) and 142(1) of the Act. The Assessing Officer found that the assessee during the relevant assessment year had shown long-term capital gains of Rs. 18,73,210 by selling shares of two companies, namely, Ocean Entrade Ltd. and United Impex Ltd. The purchases and sales of the shares in question as reflected in the return of income, may be summarised as follows:
SI. No.
Name of the company
Sale particulars
Purchase particulars
Share
Date
S. Price
Date
Price
1
Ocean Entrade Ltd.
2200
4-7-2002
261, 360
26-3-2001
4, 510
2
Ocean Entrade Ltd.
3200
2-8-2002
379, 840
26-3-2001
6, 560
3
Ocean Entrade Ltd.
3600
8-8-2002
430, 560
26-3-2001
7, 380
4
United Impex Ltd.
1200
29-5-2002
144, 000
26-3-2001
2, 520
5
United Impex Ltd.
1800
8-8-2002
214, 200
26-3-2001
3, 780
6
United Impex Ltd.
4000
9-7-2002
476, 400
26-3-2001
8, 400
Total
16,000
1,906,360
33,150
4. In order to verify the genuineness of the transactions, as regards purchases and sales of shares, the Assessing Officer asked for certain information and materials to be furnished by the assessee including demat account, bank statement, etc.
5. According to the relevant assessment order, the Assessing Officer took the view that the assessee could not produce any documentary evidence of purchases of shares except showing the purchases of the shares in question in her balance-sheet along with the income-tax return showing purchase of shares from S.K Jain and Co., which is a share broker. Having arrived at the conclusion that the assessee had not been able to produce sufficient materials to justify the long-term gains, which the assessee had claimed, the Assessing Officer treated the income derived from sale of shares by the assessee as her income from undisclosed sources and taxed the same accordingly.
6. Aggrieved by the assessment order so made, the assessee preferred an appeal, under section 143(3) of the Act. The appellate authority was of the view that though the Assessing Officer had concluded that since the shares had been purchased in cash and had not been routed through any stock exchange, the demand of demat account or bank statement, etc., was untenable. However, the appellate authority noted, in its appellate order dated January 21, 2008, that the profits shown in the case of both the companies, whose shares had been purchased and sold by the assessee were either negligible or ended in loss and, therefore, it was illogical to take the view that the value of the shares of the companies concerned would jump to more than 57 times in a brief span of 16 months. The appellate authority also noted in its order dated January 21, 2008, that the said companies were not financially sound and, hence, their performance did not justify such an extraordinary jump, in the prices of their shares, as had been reflected by the value/prices at which the shares had been sold by the assessee. For the reasons, so assigned, the learned appellate authority concurred with the ultimate finding of the Assessment Officer and upheld the assessment order. Dissatisfied by the appellate order dated January 21, 2008, aforementioned, the assessee carried the matter in appeal to the learned Tribunal.
7. The learned Tribunal having noted in its order dated March 14, 2008, which stands impugned in this appeal that the learned appellate authority had not given relief to the assessee on the ground that since the prices of shares of the companies concerned could not have risen as high as had been claimed to have risen, the assessee's claim for profits were liable to be rejected. The observations so made by the learned appellate authority are not, according to the learned Tribunal, based on any material and can be regarded as assumption and surmises inasmuch as nothing had been brought on record to show that what the assessee had claimed, as regards the value of the shares was factually incorrect and, hence, in these circumstances, the learned appellate authority ought not to have confirmed the assessment order of Assessing Officer.
8. On the basis of the conclusion so reached, the learned Tribunal has allowed the appeal and aggrieved by the order so made by the learned Tribunal, the Revenue is in appeal before us.
9. We have heard Mr. S. Sarma, learned standing counsel, Income-tax, appearing for the appellant, and Mr. O.P Bhati, learned counsel, appearing for the assessee-respondent.
10. While considering the present appeal, what needs to be noted is that when a query had been made by the Assessing Officer directing the assessee-respondent to furnish necessary materials to show that the return of income, which the assessee-respondent had filed was correct justified and tenable in law the onus rested on the assessee-respondent to produce necessary materials and convincingly show that the value of the shares, as had been reflected in her annual return of income had gone as high as the assessee-respondent had claimed. The onus, which so rested on the assessee-respondent, was never discharged by the assessee-respondent. This aspect appears to have escaped the notice of the learned Tribunal.
11. By the order under appeal, the learned Tribunal appears to have placed the burden of proving the correctness of the return of income, which the assessee-respondent had filed, on the Revenue; whereas it was for the assessee to show, by placing all materials including the profits of the two companies aforementioned that if not arithmetically there was at least reasonable possibility of the value of shares having risen as high as had been shown by the assessee-respondent in her annual return of income.
12. Situated thus, we are clearly of the view that the impugned order suffers from non-application of mind and, therefore, the same needs to be set aside and the appeal, which had been filed before the learned Tribunal, needs to be remanded for being decided in accordance with law.
13. In the result and for the reason discussed above, this appeal partly succeeds. The impugned order dated March 14, 2008, passed by the learned Tribunal is hereby set aside and the proceeding is remanded to the learned Tribunal for its decision in accordance with law. Before parting with this appeal, we, however, make it clear that the observations, which we have made, while disposing of this appeal are our views on the basis of the materials, on record, placed before us and, hence, it would remain open to the learned Tribunal to complete the proceeding depending upon the material or materials, which may be placed before the learned Tribunal at the time of re-hearing of the appeal.
14. With the above observations and directions, this appeal shall stand disposed of.