1999 (5) TMI 57 - AT - Income Tax

Summary

Issues Involved:
1. Genuineness of Share Dealing Transactions
2. Tax Avoidance

Summary:

1. Genuineness of Share Dealing Transactions:
The assessee-company's claim of share dealing loss was rejected by the Assessing Officer (AO) on the grounds that the transactions were not genuine. The AO noted peculiarities in the dates of purchase and sale, lack of independent evidence, and transactions within the same group managed by the same brain, concluding it was a colorable device. The CIT(A) upheld the AO's decision, citing the Supreme Court's decision in McDowell & Co. Ltd. v. CTO [1985] 154 ITR 148/22 Taxman 11, and noted the delay in settlement of transactions as indicative of non-genuineness. The assessee argued that transactions were at market rates and supported by contract notes and bills, but the AO and CIT(A) found these to be self-serving documents without corroborative evidence. The Tribunal analyzed the facts and found that the transactions between sister concerns, the long delay in delivery, and lack of independent evidence supported the AO's conclusion of non-genuineness.

2. Tax Avoidance:
Even if the transactions were genuine, the Tribunal examined whether they were intended to avoid tax. The transactions appeared to benefit the assessee and sister concerns by reducing taxable income. The Tribunal applied the Supreme Court's decision in McDowell & Co. Ltd., emphasizing that avoidance of taxation through colorable devices is not permissible. The Tribunal concluded that the transactions were entered into with a view to avoid tax liability.

Conclusion:
The Tribunal dismissed the appeal, upholding the AO's and CIT(A)'s findings on both the genuineness of the transactions and the tax avoidance issue. The Tribunal also upheld the charging of interest u/s 234A, 234B, and 234C of the Act.