COMMISSIONER OF INCOME TAX Vs. SUMITRA DEVI

JUDGEMENT

(1.) BY way of this appeal under s. 260A of the IT Act, 1961 ('the Act'), the Revenue seeks to question the order dt. 15th Dec, 2011, passed by the Income -tax Appellate Tribunal, Jodhpur Bench, Jodhpur ('the Tribunal') in ITA No. 490/Jd/2009 [reported as Asstt. CIT vs. Sumitra Gaur : (2012) 145 TTJ (Jd)(UO) 26 - - Ed.] relating to the asst. yr. 2006 -07 whereby, the Tribunal has dismissed its appeal after finding justified the order dt. 2nd June, 2009 passed by the Commissioner of Income -tax (Appeals), Udaipur ['the CIT(A)'] deleting the additions made by the AO in the assessment order dt. 31st Dec, 2008 to the tune of Rs. 37,77,847 towards the transactions of purchase and sale of shares and another Rs. 1,88,890 towards the alleged undisclosed commission paid in cash. Put in brief, the relevant facts and background aspects of the matter are that the respondent -assessee's total income, as shown in the return of income for the asst. yr. 2006 -07, consisted of the income from salary, long -term capital gain ('LTCG'), interest and other income. In the computation, assessee had shown LTCG to the tune of Rs. 37,77,847 from the sale of shares; and it was also shown that commission was paid to the broker to the tune of Rs. 1,88,890. LTCG was claimed as exempt under s. 10(38) of the Act. The AO, however, observed that the companies, whose shares were allegedly dealt with, were not very well -known and it was entirely unlikely that there was a huge rise in the prices of their shares in a very short span of time. The AO, ultimately, treated this huge rise in the price as being of manipulation by the stock broker and, while treating the transaction as sham, proceeded to make the additions in the income of the assessee.

(2.) AGGRIEVED by the assessment order so passed on 31st Dec, 2008, the respondent -assessee preferred an appeal that was considered and allowed by the CIT(A) by the impugned order dt. 2nd June, 2009. The CIT(A), inter alia, noted that the same issue had been decided in favour of the appellant for the asst. yr. 2004 -05 by the appellate order dt. 21st Feb., 2007 in Appeal No. 458 of 2006 -07. The CIT(A) took note of the transactions and observed that the appellant had furnished the requisite evidence; and payment of purchase consideration was made from out of the available cash balance with the appellant, as was appearing in the cash flow statements. The CIT(A) also observed that the shares were sold by the appellant for consideration through the named stock broker/s and the appellant had furnished all the evidence like broker's note, contract note, extract of cash book, balance -sheet, share certificate etc., which were in possession, to establish the genuineness of transactions. The CIT(A) found that the AO had failed to bring any evidence in rebuttal nor was it proved that the documents produced by the assessee were false, fabricated or fictitious. After thorough and detailed consideration of the matter, the CIT(A) found that the AO proceeded only on presumptions but without any basis; and held that the AO was not justified in making additions under s. 68 of the Act. The detailed consideration of CIT(A) on the principal issue could be usefully reproduced as under :

(3.) SEEKING to question the orders so passed by the CIT(A) and the Tribunal, it is contended on behalf of the appellant -Revenue that the Tribunal was not justified in confirming the deletion of the additions while ignoring the discrepancies pointed out by the AO. It is submitted that the assessee cannot use dubious method of tax planning to bring the money in the books; and colourable devices cannot be considered to be of legitimate tax planning. The decision of the Hon'ble Supreme Court in the case of McDowell & Co. Ltd. vs. CTO : (1985) 47 CTR (SC) 126 : (1985) 154 ITR 148 (SC) has been relied upon. It is submitted that truthfulness could not have been assumed on the self -serving recitals in the documents referred by a party. The AO, according to the appellant, recorded the finding after being satisfied that the referred transactions were sham and were of the accommodation entries provided by the broker in lieu of cash; and the fact is clearly seen from the phenomenal growth rates of shares within short span of time without any strong fundamentals.