Case Law Details
PCIT Vs Parasben Kasturchand Kochar (Gujarat High Court)
Introduction: In a significant judgment that reverberated through the corridors of tax law and policy, the Gujarat High Court delivered a decisive verdict in the case of PCIT -1 Vs Parasben Kasturchand Kochar. This case centered around the contentious issue of the legitimacy of long-term capital gains (LTCG) claimed as exempt under Section 10(38) of the Income Tax Act, 1961. The Revenue’s appeal challenged the Income Tax Appellate Tribunal, Ahmedabad Bench’s decision dated February 20, 2020, which had deleted the addition of Rs.9,70,468 made on account of LTCG.
Detailed Analysis
The crux of the dispute was whether the transactions through which the assessee claimed to have earned long-term capital gains were genuine or were merely sham transactions carried out through “penny scripts companies/paper companies.” The Revenue contended that these transactions were pre-arranged and not genuine, thereby questioning the exemption claimed under Section 10(38) of the Act.
The Income Tax Appellate Tribunal (ITAT), after a thorough examination of the facts and evidence presented, found in favor of the assessee. Key points leading to the ITAT’s decision included the assessee’s ability to furnish all relevant details regarding the transactions, including bank statements and Demat account records maintained with ICICI Securities Ltd. Notably, the Tribunal acknowledged that some shares remained in the appellant’s account after the gain, further substantiating the genuineness of the transactions.
Moreover, the Tribunal highlighted procedural lapses on the part of the Assessing Officer (AO), such as the failure to provide the assessee with an opportunity to cross-examine the person whose statement led to the issuance of the notice for the alleged bogus long-term capital gain. This failure was deemed critical in the Tribunal’s decision to rule in favor of the assessee, citing a precedent in the case of Mohan Polyfab Pvt. Ltd. Vs. ITO.
Conclusion: The Gujarat High Court, upon reviewing the findings and observations of the ITAT, concurred that the Tribunal had recorded factual findings demonstrating that the assessee had discharged the onus of proving the genuineness of the transactions. The Court also noted the lack of a substantial question of law that would warrant overturning the Tribunal’s decision. Consequently, the appeal was dismissed, thereby upholding the ITAT’s ruling that favored the taxpayer.
This judgment is a landmark in the realm of tax litigation, underscoring the importance of procedural fairness and the need for the Revenue to meet its burden of proof when challenging the genuineness of transactions claimed to result in tax-exempt long-term capital gains. It reinforces the principle that taxpayers, when they provide sufficient evidence of the authenticity of their transactions, can successfully claim exemptions provided under the law.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. This appeal under Section 260A of the Income Tax Act, 1961 (for short ‘the Act 1961”) is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench dated 20-2-2020 in the ITA No.549/Ahd/2018 for the A.Y. 2014-15. The Revenue has proposed the following question of law for the consideration of this Court:-
“Whether the Appellate Tribunal was right in law and on facts in deleting the addition of Rs.9,70,468/- made on account of LTCG claimed as exempt u/s. 10(38) of the Act without appreciating the fact that the transaction was pre-arranged as well as sham and was carried out through penny scripts companies / paper companies?”
2. We take notice of the fact that the issue in the present appeal is whether the assessee earned long term capital gain through transactions with bogus companies. In this regard, the finding of fact recorded by the Tribunal in paras 9, 10 and 11 reads thus:-
“9. In our considered opinion, in such case assessee cannot be held that he earned Long Term Capital gain through bogus company when he has discharged his onus by placing all the relevant details and some of the shares also remained in the account of the appellant after earning of the long term capital gain.
10. Learned A.R. contention is that no statement of the Investigation Wing was given to the assessee which has any reference against the assessee.
11. In support of its contention, learned A.R. also cited an order of Coordinate Bench in ITA No.62/Ahd/2018 in the matter of Mohan Polyfab Pvt. Ltd. Vs. ITO wherein ITAT has held that A.O. should have granted an opportunity to cross examine the person on whose statement notice was issued to the assessee for bogus long term capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the learned A.O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee.”
3. Thus, the Tribunal has recorded the finding of fact that the assessee discharged his onus of establishing that the transactions were fair and transparent and further, all the relevant details with regard to such transactions were furnished before the Income Tax authorities and the Tribunal also took notice of the fact that some of the shares also remained in the account of the appellant.
4. We take notice of the fact that the assessee has a Demat Account maintained with the ICICI Securities Ltd. and has also furnished the details of such bank transactions with regard to the purchase of the shares. In the last, the Tribunal took notice of the fact that the statements recorded by the investigation wing of the Revenue with regard to the Tax entry provided were informed to the assessee despite giving him opportunity to meet such an allegation. In the overall view of the matter, we believe that the proposed question cannot be termed as a substantial question of law for the purpose of maintaining the appeal under Section 260-A of the Act, 1961.
5. In the result, this appeal fails and is hereby dismissed.
