2017 (4) TMI 1150 - HC - Income Tax

Bogus purchase/sale of shares - sham share transactions - Held that - AO was not able to contradict the facts regarding purchase of shares and sale thereof. Further, it was recorded that the assessee had sold shares through MTL shares and Stock Broker limited which is a SEBI registered Stock Broker. The payment for sale of shares was received through banking channels. All the documentary evidence being in favour of assessee, the deletion of the addition made by the CIT(A) was correctly upheld by the Tribunal. The findings recorded by the CIT (A) and the Tribunal are pure findings of fact which have not been shown to be illegal, erroneous or perverse by the learned counsel for the appellant. He has also not been able to produce any material on record to controvert the said findings. - Decided against revenue

Summary

Issues involved:
1. Whether the Income Tax Appellate Tribunal erred in upholding the deletion of addition made by the Assessing Officer on account of sham share transactions.
2. Whether the Income Tax Appellate Tribunal erred in ignoring the circumstances indicating nongenuineness of the share transactions.

Detailed Analysis:
1. The appellant-revenue filed an appeal under Section 260-A of the Income Tax Act against the order of the Income Tax Appellate Tribunal (ITA) regarding the addition of ?2,78,26,685 as long term capital gain on the sale of shares. The Assessing Officer treated the share transaction as nongenuine due to lack of substantiation and source of investment. The Commissioner of Income Tax (Appeals) deleted the addition, stating that the department failed to prove the transaction as sham. The Tribunal upheld this decision, emphasizing the documentary evidence in favor of the assessee, including dematerialization of shares, receipt of dividends, and payment through banking channels.

2. The CIT(A) examined the facts, noting the physical transfer of shares, dematerialization, receipt of dividends, and payment of Securities Transaction Tax (STT). The Tribunal concurred with the CIT(A), highlighting that the Assessing Officer failed to contradict the facts related to share purchase and sale. The Tribunal emphasized the documentary evidence supporting the genuineness of the transactions, such as the involvement of a SEBI registered Stock Broker, payment through banking channels, and acceptance of dividend claims. The Tribunal found no infirmity in the CIT(A)'s order and upheld the deletion of the addition.

3. The findings of the CIT(A) and the Tribunal were factual and not proven to be illegal or erroneous. The appellant's counsel could not challenge these findings with any contradictory evidence. As no substantial question of law arose, the appeal was dismissed by the High Court.