2018 (3) TMI 1208 - HC - Income Tax

Bogus purchases - Non considering the statement of Shri Mukesh M Chokshi taken on oath u/s. 132(4) - Held that - Tribunal observed that the entire assessment was based on the statement of one Mukesh M Chokshi, a copy of which was not supplied to the assessee nor opportunity of cross-examining him was granted. Tribunal also gave independent reasons for overturning the orders of the Revenue authorities. It was noticed that the consideration for purchase of shares was paid by cheque. The shares were transferred in the names of the assessee and thereafter to the demat account of the assessee. It was from such demat account the shares were sold. The issue is primarily based on appreciation of evidence on record. No question of law arises.

Summary

Issues:
- Consideration of statement under oath as evidence
- Treatment of off-market transactions as illegal and fraudulent

Consideration of statement under oath as evidence:
The appeal was against the judgment of the Income Tax Appellate Tribunal, where the Revenue raised questions regarding the consideration of a statement taken on oath under section 132(4) of the Act as binding evidence. The Tribunal reversed the orders of the Revenue authorities, noting that the entire assessment was based on a statement that was not supplied to the assessee for cross-examination. Additionally, the Tribunal provided independent reasons for overturning the orders, emphasizing that the consideration for share purchases was paid by cheque, shares were transferred to the assessee's demat account, and then sold from there. Ultimately, the issue was deemed to be primarily based on the appreciation of evidence, with no question of law arising, leading to the dismissal of the Tax Appeal.

Treatment of off-market transactions as illegal and fraudulent:
Another issue raised in the appeal was whether the Appellate Tribunal was correct in deleting additions without appreciating that the share transactions were carried out off the market, potentially making them illegal and fraudulent. The Assessing Officer had initially made additions on the grounds of bogus purchases, which were upheld by the CIT(Appeals). However, the Tribunal disagreed and reversed the orders of the Revenue authorities. The Tribunal highlighted that the transactions involved payment by cheque, transfer to the assessee's demat account, and subsequent sale from there. This detailed process indicated a legitimate transaction flow, leading the Tribunal to dismiss the appeal based on the lack of evidence supporting the transactions being illegal or fraudulent.