Case Law Details
PCIT Vs Ziauddin A Siddique (Bombay High Court)
In a recent judgment, the Bombay High Court upheld the decision of the Income Tax Appellate Tribunal (ITAT) regarding the treatment of Long-Term Capital Gains (LTCG) arising from penny stock transactions. The case, PCIT Vs Ziauddin A Siddique, involved a dispute over the addition of LTCG amounting to Rs. 1,03,33,925/- by the Assessing Officer under section 68 of the Income Tax Act, 1961. The HC’s affirmation of the ITAT’s decision sheds light on the legality and interpretation of tax laws concerning penny stock transactions.
Analysis: The crux of the matter revolved around the genuineness of the transactions and the source of funds involved in the purchase of shares. The appellant argued that the shares were acquired from off-market sources and questioned the legitimacy of the increase in share price of Ramkrishna Fincap Ltd. (RFL), terming the LTCG as unaccounted income. However, both the ITAT and the HC found in favor of the respondent, highlighting several key points:
- Transaction Transparency: The Tribunal observed that the purchase and sale of shares were executed through stock exchanges and registered stockbrokers. Payments were made via banking channels, and Security Transaction Tax (STT) was duly paid, indicating transparency and legality in the transactions.
- Absence of Allegations: There were no allegations against the assessee regarding participation in any price rigging activities in the market for RFL shares. This absence of suspicion further supported the authenticity of the transactions.
- Compliance with Documentation: The Assessing Officer did not criticize the documentation associated with the sale and purchase of shares, implying adherence to regulatory norms and procedures.
The HC’s analysis underscored the importance of factual findings and adherence to legal requirements in tax matters. Moreover, the reference to a previous Supreme Court judgment highlighted the distinction in facts, reinforcing the specific context of the present case.
Conclusion: In conclusion, the Bombay High Court’s affirmation of the ITAT’s decision signifies a robust judicial stance on tax matters, emphasizing the need for substantive evidence and compliance with legal formalities. The dismissal of the appeal with no order as to costs reaffirms the validity of the ITAT’s findings and underscores the importance of due diligence in tax assessments. This judgment serves as a precedent for future cases involving similar issues, providing clarity and guidance in the interpretation of tax laws pertaining to penny stock transactions.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. The following question of law is proposed:
“Whether on the facts and in the circumstances of the case and in law, the Hon’ble Tribunal was justified in deleting the addition of Rs.1,03,33,925/- made by AO u/s 68 of the I.T. Act, 1961, ignoring the fact that the shares were bought/acquired from off market sources and thereafter the same was demated and registered in stock exchange and increase in share price of Ramkrishna Fincap Ltd. is not supported by the financials and, therefore, the amount of LTCG of Rs.1,03,33,925/- claimed by the assessee is nothing but unaccounted income which was rightly added u/s 68 of the I. T. Act, 1961?”
2. We have considered the impugned order with the assistance of the learned Counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd. (“RFL”) is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax (“STT”) has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL.
3. Therefore we find nothing perverse in the order of the Tribunal.
4. Wave placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 vs. NRA Iron & Steel (P.) Ltd.1 but that does not help the revenue in as much as the facts in that case were entirely different.
5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.
6. The appeal is devoid of merits and it is dismissed with no order as to costs.
Notes
12019(103) taxmann.com 48 (SC).
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