2013 (11) TMI 841 - HC - Income Tax

Addition u/s 68 of the Income tax act Addition on account of sale of shares Held that - It is well established by the appellant regarding genuineness of share transaction and he has sufficiently discharged the onus cast upon him. AO s action is not well founded in position of law in adding entire amount of sale of shares as income from undisclosed and unexplained sources u/s 68 of I.T. Act - Deleted the entire amount of Rs.19,51,038/-. There is no evidence on record as referred in assessment order, to prove that the proceeds received against sale of shares represent appellant s undisclosed income. Hon ble Apex Court in the case of Kishan Chand Chella Ram vs CIT rep orted in 1980 (9) TMI 3 - SUPREME Court has held that the burden is on the Department to prove that the money belongs to the assessee by bringing proper evidence on record and the assessee could not be excepted to call the concerned person in evidence to help the Department to discharge the burden that lay upon it . Assess 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 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 Decided against the Revenue.

Summary

Issues involved:
1. Validity of the findings of the Income Tax Appellate Tribunal regarding the genuineness of share transactions.
2. Burden of proof on the assessee to establish the genuineness of share transactions under section 68 of the Income Tax Act, 1961.

Analysis of the Judgment:

Issue 1: Validity of the findings of the Income Tax Appellate Tribunal regarding the genuineness of share transactions:

The case pertains to an appeal against the order of the Income Tax Appellate Tribunal, Agra Bench, regarding the genuineness of share transactions. The Commissioner of Income Tax, Agra raised substantial questions of law concerning the confirmation of the findings by the CIT (A) and ITAT. The appellant, an individual, declared income from long-term capital gains on the sale of shares. The assessing officer disallowed the claim, considering the transaction 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 this decision, emphasizing that the shares were held by the assessee, sold in the ordinary course, and the absence of evidence from the broker was due to seizure by the Revenue Department. The Tribunal concluded that the transaction was genuine, as the shares were allotted in a public issue, held in a demat account, and sold with proper consideration, thus dismissing the appeal.

Issue 2: Burden of proof on the assessee to establish the genuineness of share transactions under section 68 of the Income Tax Act, 1961:

The CIT (A) and Tribunal found that the appellant had discharged the onus of proving the genuineness of the share transactions. The appellant provided various pieces of evidence, including share application details, payment through demand drafts, demat account transfers, sale through a registered broker, and compliance with notices issued to the broker. The Tribunal highlighted that the burden of proving a transaction's genuineness lies with the party asserting it to be bogus, and the appellant had successfully provided legal evidence to support the transactions. The Tribunal cited precedents emphasizing that suspicion alone cannot undermine the evidence presented by the appellant. Ultimately, the Tribunal upheld the CIT (A)'s decision to delete the addition of income from undisclosed sources, directing the AO to assess the long-term capital gains as declared by the appellant.

In conclusion, the High Court dismissed the appeal, affirming the Tribunal's findings on the genuineness of the share transactions and the appellant's fulfillment of the burden of proof under section 68 of the Income Tax Act, 1961.