SOME MAJOR ASPECTS MISSED in case of: SWATI BAJAJ AND OTHERS Vs. PCIT - so reconsideration / appeal is desired

[DEV KUMAR KOTHARI]

SOME MAJOR ASPECTS MISSED in case of:

PRINCIPAL COMMISSIONER OF INCOME TAX FIVE, KOLKATA VERSUS SWATI BAJAJ - 2022 (6) TMI 670 - CALCUTTA HIGH COURT – so reconsideration / appeal is desired

In short:

It appears that tax authorities are in habit of doubting everything  without considering ground realities. Now there is extreme to the extent that even credential of basic and statutory documents are being doubted and considered as part of scheme of bogus transactions.

Documents like bank statements, KYC of bank account holders. PAN, company registrations etc. are doubted and are not given due credit in their recognition. Unfortunately Courts are also taking it likely and approving approach of tax authorities. A balance need to be kept in mind while weighing all aspects and evidences particularly when presumptions are applied.

Provisions of Tax laws and other relevant laws are also being applied in distorted manner or by ignoring importance to words used in provisions etc. Relevant provisions of general laws, which apply to transactions like Evidence Act, Negotiable Instruments Act, banking law and procedures followed, etc. are not considered or their importance is not understood. Case of Swati Bajaj is considered in this write up on some of such issues.

Provisions of S. 143.3  applied in distorted manner:

On reading of judgment and related judgments referred to in the judgment,  it appears that tax authorities have applied provisions of section 143.3 in distorted manner and this distortion has been accepted and applied and approved  by the  High Court.

Expression used in section  143.3 is “after taking into account all relevant material which he has gathered,

And not only word  “material” as referred by HC. Particularly in  paragraph 9 in which it is mentioned

“Further, the use of the word “material” in Section 143(3) showed that the Assessing Officer not being a Court could rely upon material which might not strictly be evidence admissible under the Indian Evidence Act, for the purpose of making an order of assessment.

In the entire judgment word ‘material’ is found for 38 times. (inclusive of use in phrase ‘relevant material’. And surprisingly while  in the  context of S.143.3,  word ‘material’ is found and expression ‘all relevant material which he** has gathered’  seems to have been ignored or not applied to full extent.

** (here he means AO)

Phrase ‘relevant material’ has been found only at two places while reproducing from some judgments in paragraph 13 and 93. However, while deciding the case, only the word  ‘material’ has been given weightage.

Investigation report cannot be considered as ‘relevant material’ while making additions or disallowances on large scale and as a general rule. Because, these are not information gathered by the AO.  

 Wrongly held Evidence Act not applicable and ignored important provisions of Evidence Act. Even S.4 and 114 have not been applied fully and correctly. Particularly

Preamble to Evidence Act.

S.  3. Interpretation-clause. Specific yet inclusive   meaning of COURT, document, evidence,

S. 34. Entries in books of account when relevant

S.59- ORAL EVIDENCE 59. Proof of facts by oral evidence. ––

All facts, except the contents of documents or electronic records, may be proved by oral evidence.

S.60. Oral evidence must be direct

Oral evidence must, in all cases whatever, be direct; that is to say –– if it refers to a fact which could be seen, it must be the evidence of a witness who says he saw it; if it refers to a fact which could be heard, it must be the evidence of a witness who says he heard it; if it refers to a fact which could be perceived by any other sense or in any other manner, it must be the evidence of a witness who says he perceived it by that sense or in that manner; if it refers to an opinion or to the grounds on which that opinion is held, it must be the evidence of the person who holds that opinion on those grounds: Provided that the opinions of experts expressed in any treatise commonly offered for sale, and the grounds on which such opinions are held, may be proved by the production of such treatises if the author is dead or cannot be found, or has become incapable of giving evidence, or cannot be called as a witness without an amount of delay or expense which the Court regards as unreasonable:

Provided also that, if oral evidence refers to the existence or condition of any material thing other than a document, the Court may, if it thinks fit, require the production of such material thing for its inspection.

Unquote – analysis and observations:

Contents of a document is evidence to prove a fact.

When there is no document, then only oral evidence can be used to prove a fact.

Thus, contents of documents cannot be disproved by any oral statement or evidence.

S. 61. Proof of contents of documents - The contents of documents may be proved either by primary or by secondary evidence.

S. 80. Presumption as to documents produced as record of evidence

85A. Presumption as to electronic agreements.

S. 102. On whom burden of proof lies. –– The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side

Observation:

If the Income Tax Department did not provide direct  evidence to disapprove evidences provided by assessee and furthermore even opportunity to cross examine witnesses relied on by department are not provided. Then as per provisions of S.102 it can be said that the department did not discharge its burden of proof to discard evidences provided by assesse.

Rule  ‘finality of fact found by Tribunal’  not followed.

 HC has wrongly applied judgment in case of P. Mohankala and others. In fact SC  in that case has held that the finding of ITAT was facts finally found and HC erred in disturbing fact found by ITAT. For this reason appeal of department was allowed and order of Tribunal was confirmed.

Just like in case of P.Mohankala and others, in case of Swati Bajaj honorable Calcutta High Court has  disturbed facts found by ITAT and not followed rule of ‘Finality of fact found by Tribunal’ .

It appears that tax authorities  doubting long term capital gains as bogus and  honorable High Court also applied   human probability by applying report of investigation wing only. The  report of investigation wing is also biased, because it did not consider surveillance measures of S/E and SEBI.  S/E regularly monitor and  revises price limits within which price of any share is allowed to move. Therefore, it is wrong to say that there was price rigging followed by investors / traders.

  S/E have real time information and it is shared with SEBI. Therefore, after few years it cannot be said that there was unwarranted movement in price of any share.

 And seems to have  ignored documentary evidences, facts found by Tribunal  in favor of assesse and relied on report of investigation wing only.

Final Fact Finding authority:

In this context it is worth to note that in reported judgement word ‘final’ find mention at six places but none of them is in context of  Final –  facts found by Tribunal.  Phrase Finality of facts is not found anywhere.

Supreme Court’s order / judgement dismissing SLP of department not considered:

Court has noted in judgement that

“reliance was placed on the decision of the High Court of Gujarat in THE PRINCIPAL COMMISSIONER OF INCOME TAX-1 VERSUS PARASBEN KASTURCHAND KOCHAR - 2020 (10) TMI 299 - GUJARAT HIGH COURT in Tax Appeal No. 204 of 2020 dated 17.09.2020 wherein the revenue was unable to prove that the transaction was pre-arranged as well as sham and was carried out through penny scripts companies/paper companies and the appeal filed by the revenue was dismissed. “

Unquote:

The SLP of revenue against above Gujarat High Court Judgment  was dismissed by the Supreme Court, but we do not find any reference about the same. Therefore, it seems that  order dismissing SLP of  department was not referred before Calcutta HC and in any case this has not been considered.

Similarly fact that SLP of department was dismissed by the Supreme Court in case of Mukesh Rati lal Gada  has  not been mentioned.

Although COMMISSIONER OF INCOME TAX, KOLKATA - III VERSUS BHAGWATI PRASAD AGARWAL - 2009 (4) TMI 138 - CALCUTTA HIGH COURT  has been considered . In this case  LTCG  was added u/s 68 and amount  deleted was Rs.34,81,165/-  Department has not filed SLP though  SLP could be filed because  tax effect was more than monetary limit applicable at that time  and the matter was not a once upon affair rather it was repetitive . So  the judgment in this  case  has attained finality  and  is binding and not hit by S. 268A. However, this aspect has not been considered and many judgments of Calcutta High Court which are binding, while considering Swati Bajaj and other cases but have not been followed.

Before the Judgement in case of Swati Bajaj there are many judgments, and it can be said that  majority of High Courts have decided issue in favor of assessee when assessee had proved transactions by way of delivery of shares and payments for transactions.

High Court has not considered the principal that when two or more views are possible a view in favor of assessee is to be applied.

 In cases before Calcutta High Court also facts were similar as in case of Bhagwati Prasad Agarwal, Parasben Kasturchand Kochar , Mukesh  Rati lal Gada etc. which have attained finality.

Therefore, judgment in case of Swati Bajaj and others need to be reconsidered.

In following recent cases, honorable Tribunal has considered case of Swati Bajaj and has not applied it:

 ITAT, Cuttack order dt. 06.07.22 in case of INCOME TAX OFFICER, WARD-1 (1) , CUTTACK VERSUS SMT. BIMALA DEVI SINGHANIA, SRI RADHESHYAM SINGHANIA [2022 (7) TMI 387 - ITAT CUTTACK]  in ITA no. 212 and 213 /CTK/ 2019 downloaded from website of ITAT Swati Bajaj ,Calcutta High Court considered.

SHRI TRIVIKRAM SINGH TOOR VERSUS THE PR. CIT, CHANDIGARH - 2022 (11) TMI 523 - ITAT CHANDIGARH

ITO, WARD-3 (3) (2) AHMEDABAD. VERSUS M/S. GOKULDHAM ENTERPRISE LLP - 2023 (1) TMI 613 - ITAT AHMEDABAD

SHRI PRAVIN C. BOKADIA VERSUS THE INCOME TAX OFFICER, WARD- 19 (2) (5) MUMBAI. - 2023 (1) TMI 119 - ITAT MUMBAI

In view of above  discussions made by author and some recent judgments , in which Swati Bajaj (supra.) has been considered  and distinguished and not followed.

Thus, the judgment in case of Swati Bajaj, need reconsideration. In view of small amounts, and assesses being mostly unorganized individuals, it may be difficult and not feasible  for them to individually file appeal before the Supreme Court. Therefore, organizations, FORUMS, Associations  who support investors and traders can come forward and take a collective measure to seek justice. Even senior Counsels can also help them in making concerted efforts in associated manner so that cost of litigation does not remain a factor in not challenging a judgment, which is a fit case for reconsideration at proper forum.