2013 (1) TMI 572 - HC - Income Tax

Addition u/s 68 - assessee could not discharge his onus of providing the genuineness of the share transaction - ITAT deleted the addition by assessing the income under the head LTCG as shown by the assessee - Held that - The assessee was in possession of the shares in question and had sold the said shares in course of ordinary transaction of sale of shares at stock exchange and if the broker did not file any evidence since the same were seized by the Revenue Department, there is no fault lies with the assessee. From the aforesaid facts it is clear that the shares in question were allotted to the assessee in the public issue which were held in demat a/c of Stock Holding Corporation of India Ltd. The shares were transferred to Abhipra Capital Ltd. The sale consideration was received by demand draft. Therefore, the transaction in question cannot be said to be fake and is a genuine transaction. The Tribunal has not committed any error in upholding the order of CIT(Appeals) by deleting the addition - in favour of assessee.

Summary

Issues:
1. Whether the ITAT was legally correct in confirming the deletion of the addition made by the AO under section 68 of the IT Act, 1961?
2. Whether the ITAT was legally correct in confirming the deletion of the addition made by the AO under section 68 of the IT Act despite the assessee's alleged failure to discharge the onus of providing the genuineness of the share transaction?

Analysis:
1. The case involved an appeal against the order of the Income Tax Appellate Tribunal (ITAT) regarding the deletion of an addition of Rs.19,51,038/- made by the Assessing Officer (AO) under section 68 of the IT Act, 1961. The assessee had declared income from long term capital gain arising from the sale of shares. The AO disallowed the claim of long term capital gains, considering the transaction as fake due to lack of documentary evidence from the broker. However, the CIT(A) accepted the plea of the assessee and deleted the addition. The Tribunal upheld the CIT(A)'s decision, emphasizing that the shares were held by the assessee, sold in a regular stock exchange transaction, and the absence of evidence from the broker was not the fault of the assessee. The Tribunal concluded that the transaction was genuine, and the addition was rightly deleted.

2. The second issue pertained to whether the assessee had discharged the onus of proving the genuineness of the share transaction. The CIT(A) noted various key points presented by the assessee's representatives, including the direct allotment of shares from the company, payment through a demand draft, transfer to a Demat account, sale through a registered broker, and receipt of sale consideration through demand drafts. The CIT(A) highlighted that the AO's objections were unfounded as the assessee had provided extensive evidence, including share broker bills, contract notes, Demat account statements, and bank statements. The CIT(A) also referenced a previous Tribunal decision and Supreme Court rulings emphasizing the burden of proof on the department and the need for concrete evidence to disprove the genuineness of transactions. The Tribunal concurred with the CIT(A)'s findings, stating that the appellant had sufficiently demonstrated the genuineness of the share transaction, and the AO's action in adding the amount as undisclosed income was not legally justified.

In conclusion, the High Court dismissed the appeal, affirming the decisions of the CIT(A) and the Tribunal. The judgment underscored the importance of providing substantial evidence to establish the genuineness of transactions and highlighted the burden of proof on the tax department to refute such evidence effectively.