2015 (1) TMI 745 - HC - Income Tax

Addition under Section 68 deleted by ITAT - sum of ₹ 57,65,419/-, which the assessee-respondent claimed as capital gains along with original acquisition of ₹ 4,86,750/- aggregating to ₹ 61,25,169/- was erroneously held to be a wrong addition under Section 68 of the Income Tax Act - Held that - In line with the judgment of CIT V. Lovely Exports (P) Ltd. (2008 (1) TMI 575 - SUPREME COURT OF INDIA) the initial onus to disclose the source of credit is upon the assessee. That judgment clearly states that once this burden is discharged in a reasonable manner, the burden of establishing that the source of the income is unaccounted or that the explanation afforded is unreasonable or not capable of investing or not lies upon assessing officer. In the present case, the assessee had clearly disclosed all relevant particulars i.e. the name and addresses of the share brokers to whom it has transacted, particulars of the company, the rates at which the shares were brought and the relevant quotations from the concerned stock exchanges etc. In these circumstances to expect the assessee to even produce the brokers physically before the assessing officer was unreasonable. After all, the assessing officer could have used his powers if he thought there was any reason to suspect the materials produced before him were dubious or otherwise unacceptable. - Decided in favour of assessee.

Summary

Issues:
1. Appeal by Revenue against ITAT order on addition under Section 68 of the Income Tax Act.
2. Classification of capital gains claimed by the assessee.
3. Consideration of materials by ITAT in the impugned order.
4. Examination of brokers and quotations by the ITAT.
5. Burden of proof on the assessee in disclosing the source of credit.

Analysis:
1. The Revenue appealed against an ITAT order regarding the addition of a sum under Section 68 of the Income Tax Act. The Revenue contended that the amount claimed as capital gains by the assessee was erroneously held to be a wrong addition. The original cost of acquisition of shares was challenged by the assessing officer, leading to the addition under Section 68. The ITAT accepted the assessee's appeal, prompting the Revenue to approach the High Court, which remitted the matter back to the ITAT for reconsideration.

2. The ITAT, in the impugned order, considered the materials available during the proceedings, showing the acquisition and sale of shares of four companies by the assessee. The shares were acquired between January 1997 and August 1999 and subsequently sold on different dates at various stock exchanges. Details of brokers and confirmation from the companies were provided by the assessee. After reviewing these materials, the ITAT concluded that the addition under Section 68 was unjustified.

3. The Revenue argued that the ITAT erred by not examining the brokers and failing to produce quotations from the Guwahati Stock Exchange. However, the Court referenced the judgment in CIT v. Lovely Exports (P) Ltd., stating that the initial burden of disclosing the source of credit lies with the assessee. The Court noted that the assessee had provided all relevant particulars, making it unreasonable to expect physical presence of brokers before the assessing officer. The assessing officer could have utilized powers if doubts arose regarding the materials presented.

4. The Court found no question of law for consideration and dismissed the appeal, emphasizing that the burden of proof regarding the source of income rested with the assessee, who had adequately disclosed relevant details, including broker information and stock exchange quotations. The assessing officer's role was to investigate further if necessary, rather than demand physical presence of brokers.