2017 (4) TMI 122 - HC - Income Tax

Addition u/s 68 - unexplained purchase of shares - Tribunal has reversed the finding of the CIT (Appeals) and sustained the addition made by the Assessing Officer - Held that - Tribunal has without directly dealing with the reasoning given by the CIT (Appeals) passed its order on a solitary reasoning of the purchase of shares having been recorded late in the Demat account of the assessee. In this regard, it is noticed while the assessee claimed to have purchased the shares in the month of February 2003 at the cost of ₹ 55,594/-. They were found recorded in the Demat account of the assessee, for the first time in November 2004. It cannot be denied that the fact of purchase transaction being recorded late in the Demat passbook raises a doubt as to its genuineness and it is also true that this evidence is relevant to the decision on the point in issue in this case, yet, this was not the only evidence relevant to the issue. There exists other evidence, adduced by the assessee in this case, in shape of contract notes; bank transactions pertaining to payment for purchase and sale of share and other material relied upon by the CIT(Appeals). Such other relevant evidence ought to have been also looked at in entirety and thereafter conclusion as to genuineness of the transaction should have been drawn. It may have been open to the Tribunal to declare any piece of evidence relied by the CIT(Appeals) to be irrelevant or unreliable. That having not been done, it could not have side-stepped the evidence and/or the reasoning of the CIT(Appeals), especially, because the order of the Tribunal is one of reversal. Tribunal s finding is not conclusive, and it has been arrived by following a faulty process. The Tribunal has not considered all relevant and other material evidence existing on record before disbelieving the claim of the assessee. The Tribunal has also not specifically dealt with the findings recorded by the CIT (Appeals).he order of the Tribunal is accordingly set aside and the matter is remitted to the Tribunal to reconsider the issue of genuineness of the transaction of purchase of shares as claimed by the assessee. - Decided in favour of assessee

Summary

Issues Involved:
1. Dispute regarding addition of long term capital gain under Section 68 of the Income Tax Act.
2. Assessment of genuineness of share transactions based on evidence presented.
3. Evaluation of Tribunal's decision in reversing CIT (Appeals) findings.

Analysis:
1. The appeal was filed against the addition of ?11,77,000 as long term capital gain by the Assessing Officer under Section 68 of the Income Tax Act. The assessee contended that the gain was genuine, supported by evidence like contract notes, bills, and banking transactions. The CIT (Appeals) allowed the appeal, finding the claim justified. However, the Tribunal reversed this decision without adequately addressing the evidence presented by the assessee.

2. The Tribunal's primary reason for reversal was the delayed recording of share purchase in the Demat account. While this raised doubts, other evidence like contract notes, bank transactions, and material relied upon by the CIT (Appeals) supported the genuineness of the transactions. The Tribunal failed to consider this additional evidence comprehensively, as required by judicial principles laid down by the Supreme Court.

3. The High Court, following the precedent set by the Supreme Court, emphasized the need for a fair and full review of evidence by the Tribunal. It noted that the Tribunal did not weigh all relevant evidence or address the CIT (Appeals) findings adequately before reversing the decision. As a result, the High Court set aside the Tribunal's order and remitted the matter back for reconsideration, instructing the Tribunal to re-examine the genuineness of the share transactions based on the existing evidence on record.

Overall, the High Court found the Tribunal's decision lacking in a comprehensive review of evidence and directed a fresh examination of the issue. The appeal was allowed, and the Tribunal was given a timeframe to reassess the genuineness of the share transactions based on the evidence already available.