2019 (6) TMI 1125 - HC - Income Tax

Scope of appeal u/s 260A - Disallowance of loss on sale of securities - Whether transaction in securities has no nexus and corelation with the deal in land transaction? - as per CIT-A assessee had entered the transactions to reduce the taxable income and thereby artificial loss had been created which cannot be allowed to be set off against the land deal income - as per AO admitted that he was engaged in providing accommodation entries to a number of persons/entities in the form of LTCG unsecured loans, bogus purchases etc. vide his statement on oath given by him before the DDIT - ITAT allowed the appeals of the assessee holding that although the Assessing Officer entertained a serious doubt as regards the genuineness of the transactions, yet such doubt was not fortified with some concrete materials to take the view that the transactions were bogus - HELD THAT - We are of the view that substantially, the submissions canvassed on behalf of the Revenue, while criticizing the order passed by the Appellate Tribunal, are based on facts rather than on any question of law much less a substantial question of law. The scope of appeal under Section 260A before the High Court is limited. The Appellate Tribunal took notice of something very important. It took notice of the fact that the loss in trading of the lands had occurred much before the assessee earned profit on the sale of land. The Appellate Tribunal took notice of the fact that the loss in trading of lands was suffered by the assessee on 1st January 2013, whereas he derived profit on the sale of land on 24th January 2013. In such circumstances, there was no good reason for the C.I.T. (A) to doubt the bona fide of the assessee and take the view that the transactions were not fair and genuine. In the instant case, there is no substantial question of law which could be said to be arising from the order of the Tribunal. It cannot be argued on behalf of the Tribunal that the findings recorded by the Tribunal are based on no evidence and or while arriving at a said finding relevant admissible evidence has not been taken into consideration or inadmissible evidence has been taken into consideration or legal principles have not been applied in appreciating the evidence or the evidence has been misread. Supreme Court in the case of Commissioner of Income Tax, West Bengal vs. Calcutta Discount Co. Ltd 1973 (4) TMI 6 - SUPREME COURT wherein taken the view that if a trader transfers his goods to another trader at a price less than the market price and the transaction is otherwise found to be bona fide , the Taxing Authority cannot take into account the market price of those goods ignoring the real price fetched to ascertain the profit from the transaction. We are of the opinion that on a conspectus of the factual scenario, noted above, the conclusion of the Tribunal that the Assessing Officer had raised number of doubts about the genuineness of the transactions without any supporting substantial question of law. The Tribunal, being a final fact finding authority, in the absence of demonstrated perversity in its finding, the interference therewith by this Court is not warranted. - Decided against revenue

Summary

Issues Involved:
1. Disallowance of loss on sale of securities.
2. Nexus and correlation between the securities transaction and the land transaction.

Detailed Analysis:

1. Disallowance of Loss on Sale of Securities:

The Revenue contended that the assessee engaged in transactions to create artificial losses to reduce taxable income. The Assessing Officer (A.O.) observed that the assessee sold land for ?6,19,20,000, earning a profit of ?4,60,34,650. However, the assessee showed a net loss of ?4,57,29,090 in securities trading, specifically in 9% BOM bonds. The A.O. argued that the transactions were not genuine, as the bonds were sold at prices inconsistent with market rates and not reported to NSE/BSE, indicating a possible tax evasion scheme. The CIT(A) upheld this view, stating that the transactions were structured to reduce taxable income.

The Appellate Tribunal, however, allowed the assessee's appeal, noting that the A.O. did not provide concrete evidence to prove the transactions were bogus. The Tribunal highlighted that the transactions were conducted through demat accounts and settled via online banking, with all necessary documentation provided. The Tribunal emphasized that the A.O. failed to investigate or bring material evidence proving the transactions were not genuine.

2. Nexus and Correlation between Securities Transaction and Land Transaction:

The Revenue argued that the transactions in securities were designed to offset the profit from the land sale, thereby reducing the taxable income. The A.O. noted that the loss in bonds occurred before the profit from the land sale, suggesting a deliberate attempt to create artificial losses. The CIT(A) supported this view, asserting that the transactions lacked commercial purpose and were intended to evade taxes.

The Tribunal, however, disagreed, pointing out that the loss in securities trading occurred on 01/01/2013, while the land sale profit was realized on 24/01/2013. The Tribunal found no evidence of a nexus between the two transactions, noting that the A.O. did not prove the transactions were sham. The Tribunal stressed that the assessee provided all relevant details and the A.O. did not demonstrate that the transactions were not genuine.

Court's Conclusion:

The High Court dismissed the Revenue's appeal, stating that the Tribunal's findings were based on facts and not on any substantial question of law. The Court emphasized that under Section 260A of the Income Tax Act, an appeal to the High Court is limited to substantial questions of law. The Court referred to several Supreme Court judgments, highlighting that the findings of fact by the Tribunal are conclusive unless there is a misdirection in law or no evidence to support the findings.

The Court noted that the Tribunal's conclusion that the A.O. failed to prove the transactions were bogus was based on a thorough examination of the facts. The Tribunal observed that the loss in securities trading occurred before the land sale profit, and there was no evidence to suggest the transactions were not genuine. The Court affirmed that the Tribunal's findings were not perverse and did not warrant interference.

Final Judgment:

The High Court dismissed the Tax Appeals, upholding the Tribunal's decision to allow the assessee's appeal and rejecting the Revenue's arguments.