PCIT Vs Sanjaykumar Damjibhai Gangani (Supreme Court of India)
The matter concerns the Revenue’s challenge to the deletion of an addition relating to Long Term Capital Gains (LTCG) claimed as exempt under Section 10(38) of the Income Tax Act, 1961, on the sale of shares of Sunrise Asian Ltd. The Income Tax Appellate Tribunal, Surat Bench, by common order dated 28.03.2024 in ITA Nos. 15 & 16/SRT/2024 for AY 2015-16, had deleted the addition of Rs.46,96,881/- and the related commission addition of Rs.2,34,844/-. The Revenue thereafter filed tax appeals before the Gujarat High Court under Section 260A of the Act, raising seven proposed substantial questions of law concerning alleged bogus LTCG, the genuineness of the share investment, alleged accommodation entries and manipulation of Sunrise Asian Ltd.’s share price, deletion of commission, and the Section 154 rectification proceedings.
Before the High Court, the Revenue contended that the share-price movement was unsupported by the company’s financial fundamentals, relied upon the Investigation Wing report and alleged admissions concerning accommodation entries, and argued that the CIT(A) had upheld the Assessing Officer’s view. The Revenue also challenged the Tribunal’s findings concerning the commission addition and show-cause notice dated 10.03.2021.
The Revenue’s Senior Standing Counsel, however, fairly submitted that the questions were based on facts identical to those considered by the Gujarat High Court in Principal Commissioner of Income Tax-1 v. Divyaben Prafulchandra Parmar, where the Revenue’s appeal had been dismissed on similar proposed questions. The High Court therefore applied its reasoning in that case.
In the reasoning reproduced by the High Court, the Tribunal had considered documentary and banking evidence, including receipt of sale proceeds through RTGS and NEFT, purchase records, demat records and stock-exchange transactions. It noted that the shares had been held for approximately two and a half years and that the sale transactions occurred through a recognised stock exchange with STT and service tax paid. The Tribunal found that the Assessing Officer had heavily relied upon the Investigation Wing without an independent investigation and that no corroborative evidence or nexus was established showing that the assessee was a beneficiary of accommodation entries. It also noted that statements had been recorded at the assessee’s back and that the assessee was deprived of cross-examination.
The Tribunal further observed that the documentary evidence furnished by the assessee had not been shown to be contrary or fabricated and that there was no evidence of cash exchange or a link establishing the assessee’s involvement in alleged price rigging. It also noted that Sunrise Asian Ltd. was not among the scrips identified in the material referred to by the Tribunal as having been subjected to the relevant SEBI findings. On this basis, the Tribunal deleted the principal addition and the consequential commission addition.
The Gujarat High Court held that the Tribunal had arrived at findings of fact that the Sunrise Asian Ltd. shares could not be doubted as bogus and that the Section 10(38) exemption had been rightly availed. It further held that the Assessing Officer’s presumption was not corroborated by evidence establishing that the transaction was non-genuine. Relying on its reasoning in Divyaben Prafulchandra Parmar and referring to Jagat Pravinbhai Sarabhai, the High Court concluded that no question of law, much less any substantial question of law, arose from the Tribunal’s order. The Revenue’s appeals were accordingly dismissed.
The Revenue then approached the Supreme Court. After condoning the delay, the Supreme Court heard the Revenue and considered the material available on record. It found no good ground to interfere with the impugned order passed by the High Court and accordingly dismissed the Special Leave Petition. Pending applications, if any, were also disposed of.
Thus, the Supreme Court declined to interfere with the Gujarat High Court’s dismissal of the Revenue’s appeals. The High Court’s ruling consequently remained undisturbed, including its conclusion that no substantial question of law arose from the Tribunal’s order.
Read Also High COurt judgment in this case: PCIT Vs Sanjaykumar Damjibhai Gangani (Gujarat High Court)
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Delay condoned.
2. Having heard the learned counsel appearing for the Revenue and having gone through the materials available on record, we find no good ground to interfere with the impugned order passed by the High Court.
3. The Special Leave Petition is, accordingly, dismissed.
4. Pending application(s), if any, shall stand disposed of.
