2010 (9) TMI 212 - HC - Income Tax

Long term capital gains and sale of shares - for different assessment years - sale was done through one broker namely M/s R.N. Agarwal & Co - Assessing Officer held then to be bogus transaction on the statement of Sri RN Agrawal - RN Agrawal not made available for the cross examination - Held that - Tribunal rightly did not rely upon the statement of Sri RN Agrawal as he was not made available for the cross examination despite the facts that the respondents were present for cross examination on two different dates - Appeal is dismissed

Summary

Issues:
Defective Income Tax Appeals involving family members, purchase and sale of shares through a broker, assessment of transactions as bogus by Assessing Officer, reversal of findings by CIT (Appeals) and Tribunal, reliance on statement of broker RN Agrawal, cross-examination of witness, dismissal of department's appeals.

Analysis:
1. Defective Income Tax Appeals: Fourteen Income Tax Appeals were filed involving family members after a search was conducted at their residence on 1.9.2005. The appeals related to long term capital gains and sale of shares for different assessment years, each appeal specifying the case number, party name, and assessment year.

2. Purchase and Sale of Shares: The controversy revolved around the purchase and sale of shares of different companies through a broker named M/s R.N. Agarwal & Co. The transactions spanned different years, leading to appeals for various assessment years.

3. Assessment as Undeclared Income: The Assessing Officer, through separate orders on 31.12.2007, deemed the purchase and sale transactions of shares as bogus and assessed them as undeclared income instead of long term capital gains.

4. Reversal of Findings: The respondents filed appeals against the Assessing Officer's orders, which were subsequently allowed on 16.6.2008 by separate orders. However, the department filed appeals against these decisions, which were dismissed by the Tribunal through a common order dated 22.10.2008, leading to the present appeal.

5. Reliance on Broker's Statement: The main issue before the income tax authorities was whether the shares' transactions were genuine or bogus. The Assessing Officer relied on the statement of broker RN Agrawal to deem the transactions as bogus. However, the CIT (Appeals) and the Tribunal reversed these findings, citing the unavailability of RN Agrawal for cross-examination as a reason not to rely on his statement.

6. Cross-Examination and Findings: The Tribunal's decision not to rely on RN Agrawal's statement due to lack of cross-examination support was deemed appropriate. The respondents were available for cross-examination on two occasions, highlighting the importance of providing an opportunity for cross-examination to maintain the credibility of statements.

7. Legal Conclusion: The High Court found no illegality in the findings of the CIT (Appeals) and the Tribunal. Therefore, the appeals lacked merit and were dismissed, upholding the decisions that reversed the Assessing Officer's assessment of the transactions as undeclared income.

This detailed analysis of the judgment highlights the key issues, arguments, and legal reasoning involved in the Income Tax Appeals related to the purchase and sale of shares, emphasizing the importance of cross-examination and the reliability of witness statements in such cases.