2016 (8) TMI 766 - HC - Income Tax

Long Term Capital Gain - what is the cost of acquisition of 1665 shares in Yashomal Leasing and Finance (P) Ltd. (now merged in Lavasa Corporation Ltd.) which have been admittedly sold by the respondent assessee along with other preference shares during the subject assessment year for the purpose of computing the capital gains - Held that - The fact that Mr. and Mrs.Bhale, the vendors of 1665 shares to the respondent assessee had not disclosed the receipt of consideration of sale in their returns of income and had not offered the same for tax cannot lead to the conclusion that no consideration was received by them. This is an issue which the Revenue is to take up with Mr. and Mrs.Bhale. The purchasers of shares cannot be held responsible for default made by the vendors of shares in filing their return of income and not disclosing consideration received by them for sale of their shares. It is also to be borne in mind that the Assessing Officer completely ignored the confirmation letter given by vendors of 1665 shares. Further fact that the respondent assessee had paid the consideration for the sale of 1665 shares by account payee cheques is also significant. It is also pertinent to note that before the Tribunal the grievance of the revenue is that the CIT (A) has accepted explanation of the respondent assessee. It has been correctly observed by the Tribunal that the explanation given by any party has to be taken into consideration and if the same is found to be acceptable and correct, the authority has to accept the same. The consequences would follow. In view of the fact that there are concurrent findings of fact recorded by the CIT(A) and the Tribunal accepting the purchase of 1665 shares of Lavassa Corporation Ltd. in the assessment year 2002-03 for a consideration of ₹ 41.25 lakhs as claimed by the respondent assessee. Nothing has been shown to us which would lead us to a conclusion that the finding of fact arrived at by the CIT(A) and the Tribunal are perverse. The view taken by both authorities on the basis of evidence and explanation made available before them was a possible and reasonable view. In the above view the question as posed for our consideration does not give rise to any substantial question of law.

Summary

Issues:
1. Long Term Capital Gain - Proof of cost of acquisition of shares
2. Sale of shares - Reflecting transfer in Share Transfer Register

Issue 1 - Long Term Capital Gain - Proof of cost of acquisition of shares:
The appeal questions whether the Tribunal was justified in allowing the claim of Long Term Capital Gain without proof of the cost of acquisition of 1665 shares of a company. The Assessing Officer had disputed the purchase of shares in 2001, leading to the entire receipt on the sale of shares being treated as short term capital gain. The respondent-assessee claimed to have purchased the shares in 2002-03 for ?41.25 lakhs, which was accepted by the CIT(A) based on the explanation provided. The Tribunal upheld this decision, noting that the vendors' failure to show receipts for tax purposes did not negate the purchase. The Revenue argued the shifting stand of the respondent, but the Tribunal found the explanation satisfactory, leading to the dismissal of the appeal.

Issue 2 - Sale of shares - Reflecting transfer in Share Transfer Register:
The second question raised whether the Tribunal was justified in directing the Assessing Officer to allow the claim regarding the sale of shares without the transfer being reflected in the Share Transfer Register. The Tribunal upheld the CIT(A)'s decision, emphasizing that all payments for the shares were made through account payee cheques, and confirmation letters from the vendors were not considered by the Assessing Officer. The Tribunal found no fault in accepting the explanation provided by the respondent for discrepancies in their income return. The Revenue raised concerns about the vendors not disclosing the sale of shares, but the Tribunal held that the responsibility for tax compliance lay with the vendors, not the purchasers. The Tribunal found the concurrent findings of the CIT(A) and itself reasonable and dismissed the appeal.

In conclusion, the High Court of Bombay upheld the decisions of the lower authorities, dismissing the appeal and emphasizing that no substantial question of law arose from the issues presented.