2021 (4) TMI 270 - HC - Income Tax

Bogus LTCG - Penny stock purchases - Claim made u/s 10(38) denied - ITAT remanded the matter back by setting aside the additions - HELD THAT - As decided in MRS. MANISH D. JAIN (HUF) 2020 (12) TMI 740 - MADRAS HIGH COURT not only the AO but also the CIT(A) examined the modus operandi of the assessee and held that the shares were purchased through off market and not through Stock Exchange and that the selling rates were artificially hiked later on. The above findings have not been set aside by the Tribunal and there is no reason for the Tribunal to remand the matter to the AO for a fresh consideration. As pointed out in the decision of this Court in the case of Cholamandalam MS General Insurance Co. 2013 (7) TMI 90 - MADRAS HIGH COURT we find in the instant case that there was no material, which necessitated the remand of the case to the Assessing Officer and it is a clear case where the Tribunal had failed to exercise its jurisdiction in the manner known to law.Tribunal, being a last fact finding Authority, is under the legal obligation to record a correct finding of fact. Where all the evidence had been produced and the CIT(A), after full investigation of the evidence and examination of the accounts, had given a definite finding on the question in issue, the Tribunal's order of remand was held to be invalid. In the recent decision in the case of Tharakumari Vs. ITO 2019 (3) TMI 647 - MADRAS HIGH COURT the appeal filed by the assessee in a case relating to penny stock was dismissed after noting the factual findings rendered by the AO, the CIT(A) and the Tribunal. Thus, for all the above reasons, we hold that the order passed by the Tribunal calls for interference. - Substantial questions of law framed are answered in favour of the Revenue

Summary

Issues Involved:
1. Whether the Tribunal was right in setting aside the order passed by the Assessing Officer for re-examination.
2. Whether the Tribunal was right in remitting the issue back to the file of the Assessing Officer by quoting the decision in the case of Kanhaiyalal and Sons (HUF).
3. Whether the finding of the Tribunal is perverse, especially when the decision is contrary to the principle that the person who asserts a fact has to discharge the initial burden of proof.

Detailed Analysis:

1. Tribunal's Decision to Set Aside the Order for Re-examination:
The Tribunal set aside the order of the Assessing Officer (AO) and remanded the matter for reconsideration. The High Court noted that the AO had conducted a detailed enquiry and afforded an opportunity to the assessee, who was represented by an authorized representative. The CIT(A) had approved the AO's findings. The High Court cited the case of Commissioner of Income Tax vs Manish D.Jain (HUF) where it was held that the Tribunal erred in remanding the matter back to the AO when a detailed enquiry had already been conducted. The High Court emphasized that the Tribunal, being the last fact-finding authority, is under a legal obligation to record a correct finding of fact and should exercise the power to remand the case on judicial principles.

2. Tribunal's Reliance on Kanhaiyalal and Sons (HUF) Case:
The Tribunal relied on its earlier decision in Kanhaiyalal & Sons (HUF) Vs. ITO and remitted the issue back to the AO. The High Court found this reliance misplaced, as in the case of Manish D.Jain (HUF), it was established that the Tribunal should not remand the matter when the AO and CIT(A) had already conducted a thorough investigation. The High Court reiterated that the Tribunal should have exercised its jurisdiction appropriately and recorded a correct finding of fact rather than remanding the matter.

3. Tribunal's Finding Contrary to Established Principles:
The High Court found the Tribunal's decision perverse, noting that it contradicted the principle that the person asserting a fact must discharge the initial burden of proof. The High Court referred to several cases, including NRA Iron & Steel Private Ltd., where it was established that the AO had conducted a detailed enquiry, and the CIT(A) had upheld the findings. The Tribunal's decision to remand the matter was deemed unnecessary and invalid, as it failed to consider the detailed findings and evidence already on record.

Conclusion:
The High Court allowed the appeal, set aside the Tribunal's order, and restored the order passed by the CIT(A). The substantial questions of law were answered in favor of the Revenue and against the assessee. The High Court emphasized that the Tribunal should not remand cases where a detailed enquiry has been conducted and should exercise its jurisdiction appropriately, recording correct findings of fact based on the evidence presented.