IT: Burden of proving that value of shares held in two companies had increased 57 times in just 16 months was on assessee and such burden could not be shifted on revenue
Sup[2013] 37 taxmann.com 286 (Gauhati)
HIGH COURT OF GAUHATI
Commissioner of Income-tax
v.
Smt. Jasvinder Kaur*
I.A. ANSARI AND DR. MRS. INDIRA SHAH, JJ.
IT APPEAL NO. 33 OF 2010†
JUNE 12, 2013
Section 69, read with section 45, of the Income-tax Act, 1961 - Undisclosed investments [Share transactions] - Assessment year 2003-04 - Assessing Officer having noticed that capital gains shown by assessee on sale of shares were more than 57 times of purchase value in just 16 months of purchase, asked assessee to furnish details of transactions including demat account, bank statement etc. - Since assessee could not produce any evidence of purchase and sale of shares, Assessing Officer treated said income as income from undisclosed sources - Tribunal allowed claim of assessee on ground that there was no material on record to show that what assessee had claimed as regards value of shares was factually incorrect - Whether Tribunal wrongly placed burden of proving correctness of return of income, which assessee had filed, on revenue, whereas it was for assessee to show, by placing all materials including profits of two companies that, if not arithmetically, there was, at least, reasonable possibility of value of shares having risen as high as had been shown by assessee - Whether impugned order suffered from non-application of mind and, therefore, same was to be set aside - Held, yes [Paras 12 & 13] [In favour of revenue]
S. Sarma for the Appellant. O.P. Bhati, T.C. Das and H.K. Bora for the Respondent.
ORDER
1. This is an appeal, made under s. 260A of the IT Act, 1961 (in short, 'the Act'), against the order dt. 14th March, 2008, passed in ITA No. 51/Gau/2008, for the asst. yr. 2003-04, whereby the learned Income-tax Appellate Tribunal, Guwahati Bench (in short, 'the Tribunal') has allowed the appeal of the assessee-appellant, set aside the assessment order dt. 30th March, 2006, as well as the appellate order dt. 21st Jan., 2008, passed against the assessee.
2. The appeal has been admitted for hearing on the following substantial question of law :
"Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in setting aside the orders passed by the AO as well as by the CIT(A) and directing the AO to accept Rs. 18,73,210 as a long-term gain of the assessee from the sale of shares of M/s Ocean Entrade Ltd. and M/s United Impex Ltd. ?"
3. The assessee-respondent, who is an individual, filed annual return, for the asst. yr. 2003-04, showing her income derived from salary, capital gains and also income from other sources. In the course of time, when the assessee-respondent's case was selected for scrutiny, notices were accordingly issued under ss. 143(2) and 142(1) of the Act.
4. The AO found that the assessee, during the relevant assessment year, had shown long-term capital gain of Rs. 18,73,210 by selling shares of two companies, namely, Ocean Entrade Ltd. and United Impex Ltd. The purchases and sales of the shares, in question, as reflected in the return of income, may be summarised as follows :
| Sl. No. | Name of the company | Sale particulars | Purchase particulars | |||
| Share | Date | Sale price | Date | Price | ||
| 1 | Ocean Entrade Ltd. | 2,200 | 04.7.02 | 2,61,360 | 26.03.01 | 4,510 |
| 2 | Ocean Entrade Ltd. | 3,200 | 02.08.02 | 3,79,840 | 26.03.01 | 6,560 |
| 3 | Ocean Entrade Ltd. | 3,600 | 08.08.02 | 4,30,560 | 26.03.01 | 7,380 |
| 4 | United Impex Ltd. | 1,200 | 29.05.02 | 1,44,000 | 26.03.01 | 2,520 |
| 5 | United Impex Ltd. | 1,800 | 08.08.02 | 2,14,200 | 26.03.01 | 3,780 |
| 6 | United Impex Ltd. | 4,000 | 09.07-02 | 4,76,400 | 26.03.01 | 8,400 |
| Total = | 16,000 | 19,06,360 | 33,150 | |||
5. In order to verify the genuineness of the transactions, as regard purchases and sales of shares, the AO asked for certain information and materials to be furnished by the assessee including demat account, bank statement, etc.
6. According to the relevant assessment order, the AO took the view that the assessee could not produce any documentary evidence of purchases of shares except showing the purchases of the shares, in question, in her balance sheet, along with the IT return, showing purchase of shares from S.K. Jain & Co., which is a share broker. Having arrived at the conclusion that the assessee had not been able to produce sufficient materials to justify the long-term gain, which the assessee had claimed, the AO treated the income, derived from sales of shares by the assessee, as her income from undisclosed sources and taxed the same accordingly.
7. Aggrieved by the assessment order, so made, the assessee preferred an appeal under s. 143(3) of the Act. The appellate authority was of the view that though the AO had concluded that since the shares had been purchased in cash and had not been routed through any stock exchange, the demand of demat account or bank statement, etc., was untenable. However, the appellate authority noted, in its appellate order dt. 21st Jan., 2008, that the profits, shown in the case of both the companies, whose shares had been purchased and sold by the assessee, were either negligible or ended in loss, and, therefore, it was illogical to take the view that the value of the shares of the companies concerned would jump to more than 57 times in a brief span of 16 months. The appellate authority also noted, in its order, dt. 21st Jan., 2008, that the said companies were not financially sound and, hence, their performance did not justify such an extraordinary jump, in the prices of their shares, as had been reflected by the value/prices at which the shares had been sold by the assessee. For the reasons, so assigned, the learned appellate authority concurred with the ultimate finding of the AO and upheld the assessment order. Dissatisfied by the appellate order dt. 21st Jan., 2008, aforementioned, the assessee carried the matter in appeal to the learned Tribunal.
8. The learned Tribunal, having noted, in its order, dt. 14th March, 2008, which stands impugned in this appeal, that the learned appellate authority had not given relief to the assessee on the ground that since the prices of shares of the companies concerned could not have risen as high as had been claimed to have risen, the assessee's claim for profits was liable to be rejected. The observations, so made, by the learned appellate authority, are not, according to the learned Tribunal, based on any material and can be regarded as assumption and surmises in as much as nothing had been brought on record to show that what the assessee had claimed, as regards the value of the shares, was factually incorrect and, hence, in these circumstances, the learned appellate authority ought not to have confirmed the assessment order of AO.
9. On the basis of the conclusion so reached, the learned Tribunal has allowed the appeal and aggrieved by the order, so made by the learned Tribunal, the Revenue is in appeal before us.
10. We have heard Mr. S. Sarma, learned standing counsel, income-tax, appearing for the appellant, and Mr. O.P. Bhati, learned counsel, appearing for the assessee-respondent.
11. While considering the present appeal, what needs to be noted is that when a query had been made by the AO directing the assessee- respondent to furnish necessary materials to show that the return of income, which the assessee-respondent had filed, was correct, justified and tenable in law, the onus rested on the assessee-respondent to produce necessary materials and convincingly show that the value of the shares, as had been reflected in her annual return of income, had gone as high as the assessee-respondent had claimed. The onus, which so rested on the assessee-respondent, was never discharged by the assessee-respondent. This aspect appears to have escaped the notice of the learned Tribunal.
12. By the order under appeal, the learned Tribunal appears to have placed the burden of proving the correctness of the return of income, which the assessee-respondent had filed, on the Revenue, whereas it was for the assessee to show, by placing all materials including the profits of the two companies aforementioned, that, if not arithmetically, there was, at least, reasonable possibility of the value of shares having risen as high as had been shown by the assessee-respondent in her annual return of income.
13. Situated thus, we are clearly of the view that the impugned order suffers from non-application of mind and, therefore, the same needs to be set aside and the appeal, which had been filed before the learned Tribunal, needs to be remanded for being decided in accordance with law.
14. In the result and for the reason discussed above, this appeal partly succeeds. The impugned order dt. 14th March, 2008, passed by the learned Tribunal is hereby set aside and the proceeding is remanded to the learned Tribunal for its decision in accordance with law.
15. Before parting with this appeal, we, however, make it clear that the observations, which we have made, while disposing of this appeal, are in our view on the basis of the materials on record placed before us and, hence, it would remain open to the learned Tribunal to complete the proceeding depending upon the material or materials, which may be placed before the learned Tribunal at the time of rehearing of the appeal.
16. With the above observations and directions, this appeal shall stand disposed of.
USPer profits from sale of shares within a short span casts onus on assessee to prove its correctness
Regards
Prarthana Jalan
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