2013 (2) TMI 600 - HC - Income Tax

Sale of shares - ITAT affirmed the deletion of a sum by the CIT(Appeals) on account of long term capital gains assessed by the AO on sale of shares - survey u/s 133A - Jamil A. Khan had admitted that the additional income of Rs.10 cores surrendered by him included an income of Rs.6.29 crores being the amount paid by M/s Samiah International Builders Pvt. Ltd. for the purchase of the shares during the financial year 2005-06 - Held that - Both the CIT (A) and also the Tribunal have founded their conclusion essentially on the premise that the respondent-assessee had requested for an opportunity of cross-examining Jamil A. Khan and that such an opportunity had not been provided by the assessing officer. However, from the record no finding that there was any such request made by the respondent-assessee for cross-examining Jamil A. Khan. In fact, found rather intriguing as to why would the respondent-assessee request for cross-examining Jamil A. Khan when the respondent-assessee himself had furnished affidavits to Jamil A. Khan in support of his case. The observations of the CIT (Appeals) as also of the Tribunal that despite the request of the respondent-assessee, the assessing officer had not provided opportunity of cross-examining Jamil A. Khan, are contrary to the record. The Tribunal had completely overlooked the fact that Jamil A.Khan had filed a revised return after he had made a surrender of Rs.10 crore during the survey operation. In that return an amount of Rs.6.29 crores has been shown as the cash component of the purchase of shares of R.S. Builtwell Pvt. Ltd. from the assessee and his relatives. That aspect of the matter has been ignored by the Tribunal. Consequently, having answered the question in favour of the revenue,the impugned order and remit the matter to the Tribunal for considering the same afresh on all grounds - against assessee.

Summary

Issues:
1. Whether the Tribunal erred in upholding the deletion of a sum of Rs.1,51,27,450 on account of long term capital gains?
2. Whether the impugned order passed by the Income Tax Appellate Tribunal affirming the deletion of the sum was contrary to the record and/or perverse?

Issue 1:
The case involved the sale of shares by the assessee to a company and individuals. The assessing officer computed the share value based on a statement by one of the buyers, resulting in an addition to the capital gains. The CIT (Appeals) deleted this addition, emphasizing the lack of defects in the evidence provided by the assessee and the absence of an opportunity for cross-examination. The Tribunal upheld this decision, noting the absence of cash payments for the shares and the unquoted nature of the company. However, the High Court found discrepancies in the conclusions drawn by the lower authorities. It highlighted the absence of a formal request for cross-examination by the assessee and the oversight of the revised return filed by one of the buyers. Consequently, the High Court set aside the Tribunal's order and remanded the matter for fresh consideration.

Issue 2:
The High Court scrutinized the Tribunal's decision and found discrepancies in its reliance on the lack of cross-examination opportunity for one of the buyers. The Court noted that the assessee had not formally requested such an opportunity and had submitted affidavits supporting their case. Additionally, the Tribunal overlooked the revised return filed by one of the buyers, which detailed the cash component of the share purchase. These oversights led the High Court to conclude that the Tribunal's decision was flawed. As a result, the High Court set aside the Tribunal's order and directed a fresh consideration of the matter on all grounds.

In summary, the High Court reviewed a case involving the computation of capital gains on share sale and the subsequent deletion of an addition by the CIT (Appeals). The Court found discrepancies in the lower authorities' conclusions regarding evidence, cross-examination opportunities, and revised returns filed by one of the buyers. Consequently, the High Court set aside the Tribunal's decision and remanded the matter for fresh consideration, emphasizing the need for a comprehensive review of all aspects of the case.