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TMI Blog1999 (5) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... come of Rs. 2,620. The case was taken up for scrutiny. Assessing Officer found that the alleged transactions of purchase and sale of shares were peculiar enough, with reference to the dates of purchase and sale and the persons with whom transacted, etc., to accept the genuineness of the transactions. In this regard he observed that the copies of contracts and bills are merely self-serving documents, inasmuch as, no independent evidence has been produced to corroborate the transactions referred to in that bills. The shares were sold first and purchased later. Urgency to buy the shares at a time when the price was higher and the necessity to sell them at a price when it was lower was not brought on record. Shares have been rotated within the same group of the assessee-company and under the control of the same management, without the help or assistance of any middleman or broker. The Assessing Officer further found that M/s. Poddar Gourepore Ltd., with whom the contract was stated to have been made by the assessee on 4-5-1989 for sale of 13,500 shares of Bishnauth Tea Co. Ltd., made contract for sale of those 13,500 shares to M/s. Ishwar Prasad Dewkinandan Ltd. on 18-5-1989. Again the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of holding of shares of companies in the same group by showing only on paper change of ownership from time to time to manipulate profits and losses and the overall situation compelled him to hold that the transactions are not genuine. In this backdrop, the CIT(A) was of the opinion that the delay in settlement of the transactions is a factor which proves the non-genuineness of the transactions. It was also stated that the points made out by the Assessing Officer in the assessment as well as in the subsequent report were not properly met and explained by the assessee. As regards the submission of the authorised representative that the profit on the same transaction was accounted for in the hands of other sister concern and was assessed as such, the CIT(A) observed that it does not dislodge the Assessing Officer's finding in this case in so far as the genuineness of the loss on share dealings is concerned. He finally concluded that the Assessing Officer has made out a case to invoke the doctrine laid down by the Supreme Court in the case of McDowell Co. Ltd. 5. Further aggrieved assessee is in appeal before us. Ld. counsel, appearing on behalf of the assessee-company, submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by it is permissible as such transaction is known as, 'short-selling'. Adverting our attention to pages 22 to 26 of the paper book, ld. counsel submitted that the shares purchased by the assessee from M/s. Iswar Prasad Dewkinandan Ltd. were taken into consideration by the seller company while filing its return. M/s. Iswar Prasad Dewkinandan Ltd. earned net profit of Rs. 24,87,000 on purchase and sale of shares and the return filed by that company for the assessment year 1990-91 was accepted by the same Assessing Officer, in an order passed under section 143(3) of the Act and this proves the genuineness of the transaction and the department cannot play hot and cold i.e., accepting the transaction as genuine in the case of the seller and treating the loss as non-genuine in the case of the purchaser. He also adverted our attention to pages 27 to 29 (details of Poddar Gourepore Ltd.) and pages 30 to 32 [details of Sixteen Belvedere (I) Pvt. Ltd.] to submit that the companies to whom assessee sold shares have accounted for the transactions and filed return accordingly which were accepted by the same Assessing Officer. Ld. counsel therefore, strongly submitted that the assessee furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to come to the conclusion that the alledged such transactions have not taken-place at all and whether assessee discharged its primary onus of proving the genuineness of transactions whereas, to consider the second issue, the matter has to be looked at from a different angle; even the transactions are admitted to have taken place, whether the resultant profit or loss deserves to be accepted if it is found that such transactions are entered into to avoid payment of legitimate tax. 11. Before analysing first issue, it would be appropriate to highlight certain facts which prompted the tax authorities to reject the claim of the assessee. In the previous year, relevant to the assessment year 1990-91, assessee claimed to have dealt with 21,500 equity shares of Bishnauth Tea Co. Ltd. The contract for purchase of shares of 13,500 was dated 4-5-1989 whereas, the bill was dated 28-12-1989. The shares were said to have been sold to M/s. Poddar Gourepore Ltd., 4, Fairlie Place, Calcutta @ Rs. 87 per share, which is said to be the price quoted in the Stock Exchange as on the date of contract. M/s. Poddar Gourepore Ltd. carries on its business from the same place at which the assessee-company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Rs. 2,58,500; but for this loss, the taxable income would have been about Rs. 2 lakh. The return was, however, filed declaring a total income of Rs. 9,440 having negligible tax effect. M/s. Sixteen Belvedere (I) Pvt. Ltd. showed a net profit of Rs. 3,000 on purchase and sale of shares but declared total income of Rs. 610 in its return for the assessment year 1990-91. 12. In the case of the assessee, but for these transactions, the assessable income, as could be seen from the assessment order, is Rs. 22,29,440 whereas, the assessee filed a return declaring total income of Rs. 2,620 only. It could thus be seen that by virtue of the alleged transactions, assessee-company's taxable income was reduced by Rs. 22,26,000 M/s. Iswar Prasad Dewkinandan Ltd. could adjust its loss in the same year by showing a profit of Rs. 24,87,000 from share dealing, M/s. Poddar Gourepore Ltd. could reduce its profit by Rs. 2,58,500, and M/s. Sixteen Belvedere (I) Pvt. Ltd. could adjust its loss to the tune of about Rs. 2,000. The fact remains that all the companies function from the same place. It appears that one of the directors of the assessee-company has appeared before the assessing officer in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances further cast a doubt on the actual delivery of the shares, if not the very genuineness of the transactions itself. 13. It is well settled that under the I.T. Act, the Assessing Officer is not bound by the rigours of Evidence Act. this share transactions appeared to the Assessing Officer to be sham and, therefore, be called upon the assessee to corroborate the transactions by producing third party evidence but the assessee-company could file none of it. The reasons which prompted the assessee to enter into short-sale of Bishnauth Tea Co. shares on a low price or the reason for the long time to take delivery of the shares or the reason for purchase of the shares at very high price were not explained. It is also not known whether the share value was highly volatile during the period between April 1989 and December, 1989 as no such chart appears to have been filed before the authorities below. What prompted the assessee to purchase only on those dates can, at best be explained by showing the market quotation for considerable length of time and looking into the other factors such as the balance-sheet of M/s. Bishnauth Tea Co. the reports of the analysts, Govt. policies reflecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue notice and insist upon his appearance but the investigations were not done completely. When the share broker did not respond to the summons adverse inference was drawn wherein the factum of three months' gap between the date of contract and date of bill was also highlighted by Assessing Officer. Under these circumstances, the Tribunal observed that looking to the other material, mere gap between the date of contact and the date of bill would not tilt the issue. 15. In the case of Puja Commercial Co. Ltd. and other cases also, there were other facts which supported the case of the assessee and, therefore, Tribunal has come to the conclusion that mere gap between the date of contract and date of bill would not be material and decisive to doubt the genuineness of the transactions. 16. In the case before us, however, the delay is abnormal i.e., about 8 to 9 months and the assessee could not furnish any independent corroborative evidence. The fact that the transactions are between sister concerns rendering business from the same place and the same shares have been rotated between the sister concern and such co-incidence helped all the sister concerns, whether in its tax effect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the form of entries in the books, etc. In cases of this nature, the facts would be in the personal knowledge of the person who entered into the transaction and, therefore, asking the revenue to prove otherwise would be to expect them to do an impossibility. It is for the assessee to produce some corroborative evidence to prove the genuineness of the transaction. It should have furnished evidence in the form of analyst's report, balance-sheet, newspaper cuttings, Board's resolutions, etc. to indicate the bona fides of the assessee in taking the decision of purchase/sale of shares and also for taking long time in delivering the shares, etc. Corroborative evidence have to be taken into consideration in order to appreciate whether the primary onus that cast upon the assessee has been discharged. It is only when the primary onus is fully discharged by assessee, the burden shifts on to the revenue. In our opinion, assessee has not discharged its primary onus. 18. It will be relevant here to extract the following observation of the Hon'ble High Court of Madhya Pradesh in the case of Prafulla Kumar Tongya v. Smt. Sarla AIR 1998 MP 285.: "Truth seldom appears directly face to face. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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