2006 (8) TMI 266 - AT - Income Tax

Income From Undisclosed Sources - unsubstantiated claim - bogus transaction - HELD THAT - In the present case, the transaction was between a member and a non-member and therefore, such transactions were not reported in the stock exchange. Further, the credit in the bank account of Shri J.K. Jain is by clearance. Therefore, the allegation of the AO that the amount was deposited in cash has no basis. The assessee has accepted having invested her funds on the advice of her father-in-law. The burden of proving a transaction is always on the person asserting it to be bogus and this burden has to be strictly discharged by adducing legal evidence of a character which would either directly prove the fact of bogusness or establish circumstances unerringly and reasonably raising an inference to that effect. The assessee made payment for the purchase from her own sources through banking channel. The shares were transferred in the name of the assessee and were held by her for more than one year. There is no relationship between the party from whom the assessee purchased the shares and the party to whom these were sold. The shares were delivered after its sale and the assessee did not remain in possession of those shares. Thus, it is established that the assessee acquired the shares to earn profit. There is no evidence except speculation that this profit is not from the sale of shares. The AO has failed to establish his case and to discharge the requisite burden cast on him. We are of the considered opinion that the learned CIT(A) has correctly come to the conclusion that the assessee has dealt in these shares and these transactions cannot be held bogus. We confirm the findings of the learned CIT(A) and confirm the deletion of an addition. This conclusion results in rejecting ground of appeal raised by the Revenue. In the result, the appeal of the Revenue stands dismissed.

Summary

Issues:
Appeal against deletion of addition under section 69 based on unsubstantiated claims by the assessee.

Analysis:
The Revenue appealed against the CIT(A) order deleting an addition of Rs. 4,99,062 made under section 69 for the assessment year 1997-98. The assessee declared income of Rs. 1,07,358, including long-term capital gain of Rs. 4,99,062 on the sale of 9000 shares of a company, claimed exempt under section 54F. The AO sought detailed information on share transactions, purchase details, expenses, and balance sheets, which the assessee provided. The AO, unsatisfied, requested further details and recorded the assessee's statement. The AO alleged the transactions were to introduce unexplained income as an investment in property to claim tax benefits under section 54. The CIT(A) disagreed, citing evidence that the transactions were genuine, and the profit from share sale was invested in property, thus deleting the addition under section 69.

The assessee cooperated with the Department, providing documents like contract notes, bills, stock exchange quotations, and payment proofs related to share transactions. The Department failed to prove the transactions were bogus, as evidenced by the legitimate purchase of shares, payment through banking channels, and sale to a stock exchange member. The burden under section 69 to prove the transactions as bogus was not met by the Department. The CIT(A) upheld the genuineness of the transactions based on the provided evidence, including the confirmation of sale transactions and share transfers, leading to the deletion of the addition under section 69.

The Tribunal confirmed the CIT(A)'s decision, emphasizing the evidence presented by the assessee, such as share transaction details and transfer of share certificates, to support the legitimacy of the transactions. The Tribunal found no basis for the AO's allegations of cash deposits or unexplained income, as the transactions were conducted through legitimate banking channels. The Tribunal upheld the deletion of the addition, rejecting the Revenue's appeal and dismissing it accordingly.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the addition under section 69, as the Department failed to prove the transactions as bogus, and the assessee provided substantial evidence supporting the genuineness of the share transactions and investments, resulting in the dismissal of the Revenue's appeal.