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TMI Blog2014 (4) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the case, the Tribunal was justified and correct in law in directing the Assessing Officer to delete the addition of Rs. 15 lakhs as income from undisclosed source from the income of the respondent and is not the said decision perverse ? (iv) Whether, on the facts and in the circumstances of the case, the Tribunal was justified and correct in law in directing the Assessing Officer to delete the addition of Rs. 80,000 as income from undisclosed source from the income of the respondent and is not the said decision perverse ?" Question Nos. 1 and 2 Since both these questions are closely interwoven, both these questions are being discussed and decided together. The material facts and various stages, which have given rise to the present appeal, may, in brief, be set out as under : (i) The assessee filed return of her income for the assessment year 2001-02, showing a total income of Rs. 1,49,348 and the assessment was completed under section 143(3) of the Act on March 25, 2004, determining the total income to be Rs. 2,10,630. The said order of assessment was set aside by the Commissioner of Income-tax in exerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er share. Thus, the share of the company was shown to have risen from Rs. 2.50 per share to Rs. 67.97 within a span of one year. The share broker was also examined under section 131 of the Act and, in the course of examination, he stated that all records relating to purchase and sale of shares in question were lost and, therefore, the actual purchase and sale could not be verified from the broker. The assessee submitted her return of income for the assessment year 2000-01 relevant to the year of purchase on December 22, 2000, i.e., after the shares were shown to have been sold on December 4, 2000. (vi) The Assessing Officer, in the order of assessment, noted that though the shares were sold through bank account of the assessee, purchase of shares were not made through the bank account of the assessee. The Assessing Officer observed that since the return for the assessment year 2000-01 relevant to the year of purchase was filed after the date of sale and that purchase of shares was not done through the bank account of the assessee the actual event of purchase of the shares of the assessee could not be verified and, therefore, it was appare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; "For that the learned Commissioner of Income-tax (Appeals) had erred in law and in facts in confirming the rejection of income earned by way of long-term capital gains of Rs. 18,33,160 on sale of shares considering the same as bogus as well as in confirming the rejection of exemption under section 54F of the same amount." The learned Income-tax Appellate Tribunal set aside the orders of the Revenue authorities and directed the Assessing Officer to treat the said transaction as genuine and deleted the addition made on this account. The learned Tribunal, in its order, observed that neither the Assessing Officer nor the Commissioner of Income-tax (Appeals) had pointed out that the documents filed by the assessee were either false or not supported by evidence. The learned Tribunal observed that the Revenue authorities had not considered the papers and documents filed by the assessee for both purchase as well as sale of shares. The learned Tribunal, on the basis of copies of documents filed by the assessee, i.e., copies of bills, credit notes, contract notes, party ledgers, quotations of shares as on December 4, 2000, and undertaking from the assessee to the effect that original ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and documents were submitted but not considered by the Revenue authorities. This apart, submits Dr. Saraf, the Assessing Officer has clearly recorded in the order of assessment that the transaction of purchase and sale of shares could not be verified as the broker stated that all the records were lost. It is the further submission of Dr. Saraf that the power of a Tribunal remains confined to the subject matter of appeal and a Tribunal can decide the issue on the basis of the facts, which were placed before the appellate authority. It is Dr. Saraf's contention that no new case could have been made out suo motu by an Income-tax Appellate Tribunal as has been done in the present case. While supporting the order of the learned Tribunal, Mr. Mazumdar, learned counsel for the assessee, has submitted that since the learned Tribunal, on the basis of the documents and papers, came to the conclusion that the transaction was not bogus, no interference is called for by this court. Mr. Mazumdar has also submitted that simply because the transaction was off market transaction, the same cannot be treated to be a sham transaction. Mr. Mazumdar, learned counsel, has further submitted that sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal. The powers of the Tribunal, in dealing with appeals, are expressed under section 254 of the Act, in widest possible terms inasmuch as section 254 of the Act reads as under : "254. Orders of Appellate Tribunal.-(1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. (2) The Appellate Tribunal may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer : Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this sub-section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard : Provided further that any application filed by the assessee in this sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the above, rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963, provides that the appellant shall not, except with the leave of the Tribunal, urge or be heard in support of his ground not set forth in the memorandum of appeal or taken by leave of the Tribunal provided parties, who may be affected, has had sufficient opportunity of being heard on that ground. The Supreme Court, in Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232 (SC), while examining the power of the Appellate Tribunal, under section 33(4) of the Indian Income-tax Act, 1922, held that while the word "thereon" restricts the jurisdiction of the Tribunal to the subject matter of appeal, the words "pass such order as the Tribunal thinks fit" includes all power except possibly the power of enhancement, which are conferred upon the Commissioner by section 31 of the said Act. The Tribunal has, therefore, jurisdiction to go into every aspect of the assessment proceeding and also determine if the question as to whether such assessment was made in accordance with the law or not provided a ground is taken before the Tribunal or additional ground, by amendment, is allowed to be taken by the Tribunal. The Tribunal has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal's appellate jurisdiction in the widest terms possible, when it said that all questions, whether of law or of fact, which relate to the assessment of the assessee may be raised before the Tribunal and there is nothing in the Act which restricts the Tribunal to determine those questions only, which were raised before the Departmental authorities. On the basis of the principles laid down by the Supreme Court, it must be held in this case that the assessee was not precluded from raising a new contention and the learned Tribunal was not precluded from examining and determining that contention merely on the ground that the same had not been put forward at the earlier stages of the proceedings in assessment and in the first appeal. Thus, the subject matter of appeal may be capable of challenge on various grounds some of which might have been raised and some might not have been raised earlier. Some grounds raised might have been dealt with or some of them might not have been dealt with but a decision on the subject matter is an implied decision on all matters, which are raised and which could have been raised, whether dealt with or not. Merely because a ground has not been rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Full Bench, observed (page 513) : "In all these situations, in an appeal before the Tribunal, he is free to make a fresh approach, present his case from a different perspective and raise new grounds in support of the relief sought by him. The fact that he has failed to make that approach before the first appellate authority should not stand in the way of his making the new approach. But all this must be related to the same subject matter as was in appeal before the first appellate authority." It was further held (page 514) : "It is evident, therefore, that the attempt of the Tribunal in every case, where it is called upon to consider the question whether the new approach should be permitted should be to determine whether the subject matter would remain the same, even if the new ground is permitted to be raised . . . Speaking of subject matter, it may happen that substantially a claim is urged by an assessee assuming that he is entitled to that claim under a certain provision of law indicated by him. It may be that he is entitled to relief in respect of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 131 of the Act after a lapse of almost five years. An FIR was also lodged before the police on the subsequent date on which the books were lost, the share broker replied to almost all the queries asked by the Assessing Officer, thus, the learned counsel submitted that it is evident that shares were transacted through registered share broker and transaction were made through bank." The genuineness of a transaction, such as the case at hand, has to be examined from the surrounding circumstances. It is no doubt true that in all cases in which receipt is sought to be taxed as income, the burden lies on the Revenue to prove that it is within the taxing provision but once that burden is discharged, the burden of proving that it is not taxable because it falls within exemption provisions under the Act lies on the asseesse. If the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory and there are evidence and circumstances pointing out to the effect that what had been shown was not real and if the assessee fails to controvert such facts and circumstances then such facts and circumstances can certainly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also does not support the case of the assessee inasmuch as the transaction of sale and purchase of shares, in the said case, were as per the value prevalent in the stock exchange and the said finding of fact was recorded on the basis of evidence produced on record. There is no dispute that simply because the transactions are off market transaction, the same cannot be a ground to treat the transaction as a sham transaction. However, in the case in hand, the assessee although has produced documentary evidence to show that shares were sold at a price prevailing in the stock market on the date of sale but no documentary evidence were produced to show that on the date of purchase, the market price of the shares was the same at which the shares were claimed to have been purchased. No doubt apparent must be considered real until it is shown that there are reasons to believe that the apparent is not real and for that purpose, taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be examined and considered by applying the test of human probabilities. In the present case, the facts that two different addresses were given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly in the sense that it has to consider with due care all material facts in favour of and against the assessee, and then record its findings on the contentions raised by the assessee and the Commissioner in the light of evidence and the relevant law. The Supreme Court in Nawabganj Sugar (supra) also held that an order, recorded on a review of only one part of the evidence ignoring the remaining evidence cannot be regarded as having conclusively determined the questions of fact raised before the Tribunal. Hence, when the Revenue adduced evidence to show that a particular transaction was not a genuine order passed by the Tribunal without enquiring into all relevant facts and evidence would not be valid. The High Court has indeed the jurisdiction to interfere with the findings of the Appellate Tribunal if it appears that either the Tribunal has misunderstood the statutory language because the proper construction of the statutory language is a matter of law, or it has arrived at a finding based on no evidence or where the finding is inconsistent with the evidence or contradictory thereto or it has acted on material, partly relevant and partly irrelevant, or where the Tribunal draws up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossession of the flat was not handed over to the company because the company had failed to pay the remaining amount of Rs. 1 lakh. In order to verify the genuineness of the company, the principal officer of the company, M/s. Venus Hospitals Pvt. Ltd., was summoned under section 131 of the Act but the notice was returned unserved on the ground that no such company was found in existence at the said address. The assessee was asked to produce the principal officer of the company and, accordingly, the assessee presented, Sri Sanjay Kumar Kabra, director of the company, whose statement was recorded under section 131(1) of the Act. The director of the company stated that the agreement of purchase of the flat was cancelled in the year 2003 and that the company had also received back Rs. 6 lakhs. The Assessing Officer asked the director as to why the payment, for purchase of flat was made in cash and repayment of Rs. 3.5 lakhs was received in cash and the balance of Rs. 2.5 lakhs was received in selfcheque of the assessee and not received in crossed account payee cheque in the name of M/s. Venus Hospitals Pvt. Ltd. despite having the bank accounts of the company and the assessee, the direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , without controverting the findings of the Assessing Officer, is not legally tenable. Dr. Saraf has further submitted that various circumstantial evidence supported the findings of the Assessing Officer in adding back the amount to the income of the assessee being undisclosed income and thereby the order of the learned Tribunal on this score too is liable to be set aside. Mr. Mazumdar, learned counsel for the assessee, on the other hand, has supported the decision of the learned Tribunal and submitted that since the transactions were recorded in the books of account of the company, the Assessing Officer was not justified in treating the transaction as bogus and in adding back the amount received as advance on account of sale of flat as undisclosed income. The learned counsel for the assessee submits that the advance given to the assessee was duly reflected in the books of account of Venus Hospital Ltd. and the said hospital cannot be said to be not in existence inasmuch as it had filed all relevant records like balance-sheets, etc., proving the genuineness of the transaction. The learned counsel for the assesseerespondent has, in this regard, relied upon the decision in Nemi Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the source from which he has received the money, he must also establish that so far as his transaction with his creditor is concerned, the same is genuine and his creditor had the creditworthiness to advance the loan, which the assessee had received. When the assessee discharges the burden so placed on him, the onus, then, shifts to the Assessing Officer if the Assessing Officer wishes to assess the said loan as the income of the assessee from undisclosed source, to prove either by direct evidence or indirect/circumstantial evidence that the money, which the assessee received from the creditor actually belonged to, and was owned by, the assessee himself. If there is direct evidence to show that the loan received by the assessee actually belonged to the assessee, there will be no difficulty in assessing such amount as the income of the assessee from undisclosed source but if there is no direct evidence in this regard, then the indirect or circumstantial evidence has to be conclusive in nature and must, in such circumstances, unerringly point to the assessee as the person from whom the money had actually flown to the hands of the sub-creditor and, then, routed through the hands of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction have been proved. The burden, therefore, shifted to the Assessing Officer to prove the contrary. The Assessing Officer has failed to show either directly or with the help of circumstantial evidence that the said amount belonged to the assessee. In the absence of any such evidence on record, more particularly, the identity of the creditor and the genuineness of the transaction in question having been proved the Assessing Officer could not have treated the said amount as income derived from undisclosed sources. We, therefore, find no infirmity in the finding arrived at by the learned Income-tax Appellate Tribunal on this score and we, therefore, held that the learned Tribunal was justified in deleting the said addition of Rs. 15 lakhs. Question No. 4 The assessee claimed to have taken advance of Rs. 80,000 in cash on October 30, 2000, against the sale of car. On examination of the returns filed up to 2004-05, the Assessing Officer observed that the said advance |still remained in the hands of the assessee without any car being delivered to the purchaser. The Assessing Officer in the order of assessment noted that as per the returns of income filed for the assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X
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