2009 (8) TMI 804 - AT - Income Tax

Capital gain Vs Other sources - Exemption u/s 54F - Reopening u/s 148- treatment of income from sale of shares as Income from other sources Accommodation entries - money laundering - bona fide reasons which has led to escapement of income within the provisions of s. 147 of the IT Act, 1961. - Held that - The only reason to make the addition is that confirmation from the share brokers could not be filed by the assessee and summons issued to the said persons were not served and returned unserved and the names and addresses of the buyer to whom the ultimately shares were sold through the broker were not known to the assessee. The assessee was not in a position to compel the share broker for confirming the transaction, she being neither a director nor having large scale dealings with the brokers over the years so as to show that she was personally in a position to compel them on account of the magnitude of transaction done through them. It was her father who knew the brokers and she acted on his advice and had no contact thereafter. The reasoning that summons issued to the parties came back unserved cannot by itself be held against the assessee. - The Department has thus proceeded entirely on suspicion and surmises if seen in the light of the orders of the Tribunal. The claim of the assessee in regard to the first issue is to be allowed. Exemption u/s 54F - residential premises or commercial premises - even if ultimate buyer of the shares is not known, the claim for s. 54F cannot be denied - held that - The assessee, has put no sufficient material on record and had not demonstrated that house was used as a residence of the assessee. It may be a well furnished house with bedrooms, kitchen and toilets but that is not sufficient because to claim deduction it must be shown to have used for residence. - Assessee has also not produced ration card, voters identification card or other evidence for residence. There is no such current scenario that residential premises in a commercial premises has been or becoming a general trend.

Issues Involved:
1. Legality of proceedings under Section 148 of the IT Act.
2. Treatment of long-term capital gains on the purchase and sale of shares.
3. Reliance on statements recorded behind the back of the assessee.
4. Eligibility for exemption under Section 54F of the IT Act.
5. Charging of interest under Sections 234A, 234B, and 234C.

Detailed Analysis:

1. Legality of Proceedings Under Section 148 of the IT Act:
The Tribunal upheld the initiation of proceedings under Section 148, citing that the AO had bona fide reasons based on specific information from the Dy. Director of IT (Inv.), Gurgaon, indicating that the assessee had earned bogus capital gains on the sale of shares. The reopening was deemed valid as it was based on definite information, and the AO had reasons to believe that income chargeable to tax had escaped assessment. The Tribunal referenced the case of CIT vs. Vipin Batra, which supported the AO's jurisdiction to reopen the assessment.

2. Treatment of Long-Term Capital Gains on the Purchase and Sale of Shares:
The Tribunal found that the assessee had not discharged the initial burden of proving the genuineness of the transactions in shares. The AO had confronted the assessee with material indicating that the transactions were accommodation entries and not genuine. The Tribunal noted inconsistencies in the dates and amounts of transactions and found that the assessee had not provided confirmations from the brokers or companies involved. The Tribunal concluded that the transactions were not genuine and upheld the treatment of the income as "income from other sources."

3. Reliance on Statements Recorded Behind the Back of the Assessee:
The Tribunal acknowledged that the statements of Shri Shankar Hari Maheshwari and Shri Praveen Mittal were recorded at the back of the assessee and that these individuals were not made available for cross-examination. The Tribunal found that the statements lacked credibility and were not supported by evidence. The Tribunal emphasized that the burden of proof lay on the Revenue to substantiate the allegations, which was not adequately done. The Tribunal relied on the case of Kishinchand Chellaram vs. CIT, which mandates that evidence used against the assessee must be subject to cross-examination.

4. Eligibility for Exemption Under Section 54F of the IT Act:
The Tribunal found that the assessee had not provided sufficient evidence to prove that the property was used for residential purposes. The property was located in a commercial complex, and the assessee had given a different address in her return of income. The Tribunal upheld the CIT(A)'s decision to deny the exemption under Section 54F, noting that the assessee failed to produce documentary evidence such as a ration card, bank passbook, or driving license to substantiate her claim.

5. Charging of Interest Under Sections 234A, 234B, and 234C:
The Tribunal upheld the charging of interest under Sections 234A, 234B, and 234C, stating that the levy of interest is mandatory. The quantum of interest, however, would be consequential and dependent on the final determination of the additions sustained.

Conclusion:
The Tribunal dismissed the appeal concerning the legality of proceedings under Section 148, the treatment of long-term capital gains, and the charging of interest. However, it found in favor of the assessee regarding the reliance on statements recorded behind her back. The Tribunal upheld the denial of exemption under Section 54F due to insufficient evidence of the property being used for residential purposes. The appeal was thus partly allowed.

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