Full Text of the High Court Judgment is as follows :-
This income tax appeal under Section 260 A of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) has been filed by the assessee against the order of the Income Tax Appellate Tribunal, Delhi Bench dated 26.02.2010 for the Assessment Year 2005-06. The appeal was admitted on the following questions of law:-
“1. Whether on the facts and circumstances of the case the ITAT was correct to hold that 11,000 shares of M/s Welcome Coir Industries Ltd. Purchased by the appellant on 10.11.2003 from broker M/s Elbee Portfolio Pvt. Ltd vide contract Note dated 10.11.2003 and received in the Dem-at account and thereafter sold vide Contract Note dated 26.2.2005 of the broker M/s D.N. Kansal Securities Pvt. Ltd. And sale proceeds of share credited in the bank account of the appellant, still it was rightly held that shares sold were not the same shares purchased in November, 2003?
2. Whether the ITAT rightly treated the sale price of 11,000 shares, as income from undisclosed sources and added to the income of the appellant u/s 68 of the Act on the ground that the appellant could not filed any cogent evidence why the shares purchased in November, 2003, the payment was made in February, 2004 and credited in Demat Account in November, 2004 ignoring the contract note dated 10.11.2003, sale bill dated 17.11.2003 of purchases and sale of shares by Contract Note dated 26.2.2005?
3. Whether the Tribunal rightly disallowed Rs. 11,77,000/- received from the sale of shares and being not liable to be exempted as long term capital gains, when the share were purchased in November, 2003 and sold in February, 2005 as per contract notes of purchase and sales of shares?”
Another question (no. 4) was sought to raised as below :
“Whether the Tribunal was justified in holding that purchase of 1,000 shares by assessee was unexplained, ignoring the fact that purchase of such shares was not doubted by the A.O.?”
However, in view of the finding recorded by the assessing officer for addition to be made under section 68 of the Act without allowing any deduction in respect of cost of acquisition of the shares, it necessarily flows from such finding that the assessing officer did not believe the case of the assessee of purchase of the shares in question. Accordingly, the additional question does not arise in this case.
The sole addition which is subject matter of dispute in the instant appeal relates to addition of Rs. 11,77,000/- which according to the assessee was long term capital gain arising on the sale of 11,000 shares of a company M/s Welcome Coir Industries Ltd. The Assessing Officer had disbelieved the long term capital gain and made a corresponding addition of Rs. 11,77,000/- under Section 68 of the Act.
Upon appeal the assessee adduced evidence in the shape of contract notes/bills receipt; payments made through banking channel; contract notes and; copies of passbook of its Dem-at account in support of it thus asserted its claim of long term capital gain as genuine and correct.
Qua the payment made by the assessee for purchase of shares, it was not disputed by the department that the same was made through banking channel. It is also an undisputed fact that 11,000 shares were sold in the previous year relevant to the Assessment Year 2005-06 which were of the company M/s Welcome Coir Industries Ltd. Entire sale proceeds were also received through banking channel.
The CIT (Appeals) after detailed examination of the case of the assessee and evidence thus adduced by the assessee including the entries in the Demat account passbook; evidence of the broker firms through whom the transactions were made; contract note dated 10.11.2003 etc. allowed the appeal. In his view the disallowance of the said claim was not justified. The CIT (Appeals) had further found that merely because certain transactions performed by the brokers through whom the assessee had sold those shares were doubtful, it could not be said that the transactions performed by the assessee were, therefore, for that reason alone, doubtful or not genuine. In such cases individual transactions relating to the particular assessee (in whose case genuineness of the transaction is doubted) need be examined before adverse conclusion be drawn against such assessee.
Upon appeal by the revenue the Tribunal has reversed the finding of the CIT (Appeals) and sustained the addition made by the Assessing Officer. The Tribunal’s order is one of reversal. However, the Tribunal has without directly dealing with the reasoning given by the CIT (Appeals) passed its order on a solitary reasoning of the purchase of shares having been recorded late in the Demat account of the assessee. In this regard, it is noticed while the assessee claimed to have purchased the shares in the month of February 2003 at the cost of Rs. 55,594/-. They were found recorded in the Demat account of the assessee, for the first time in November 2004.
Heard Sri Suyash Agarwal, learned counsel for the appellant and Sri Praveen Kumar, learned counsel for the respondent as also perused the record.
It cannot be denied that the fact of purchase transaction being recorded late in the Dem-at passbook raises a doubt as to its genuineness and it is also true that this evidence is relevant to the decision on the point in issue in this case, yet, this was not the only evidence relevant to the issue. There exists other evidence, adduced by the assessee in this case, in shape of contract notes; bank transactions pertaining to payment for purchase and sale of share and other material relied upon by the CIT(Appeals).
Such other relevant evidence ought to have been also looked at in entirety and thereafter conclusion as to genuineness of the transaction should have been drawn. It may have been open to the Tribunal to declare any piece of evidence relied by the CIT(Appeals) to be irrelevant or unreliable. That having not been done, it could not have side-stepped the evidence and/or the reasoning of the CIT(Appeals), especially, because the order of the Tribunal is one of reversal.
A three Judge bench of the Supreme Court, in Udhavdas Kewalram Vs. CIT (1967) 66 ITR 462 (SC) held :
“The Tribunal was undoubtedly competent to disagree with the view of the Appellate Assistant Commissioner. But in proceeding to do so, the Tribunal had to act judicially, i.e. , to consider all the evidence in favour of and against the assessee. An order recorded on a review of only a part of the evidence and ignoring the remaining evidence cannot be regarded as conclusively determining the questions of fact raised before the Tribunal.”
The Supreme Court thus laid down the test of fair and full review of evidence by the Tribunal, a final authority on fact when it reverses a finding of fact by a lower appellate authority.
In this regard, the Tribunal – the higher appellate authority has neither considered and weighed, in entirety, the evidence relied by the lower appellate authority nor it has dealt with the reasoning and findings of the lower appellate authority while passing the order of reversal. It is then difficult for this court to the uphold as correct the finding of fact recorded by the Tribunal.
We are therefore of the view that the Tribunal’s finding is not conclusive, and it has been arrived by following a faulty process. The Tribunal has not considered all relevant and other material evidence existing on record before disbelieving the claim of the assessee. The Tribunal has also not specifically dealt with the findings recorded by the CIT (Appeals).
In view of the above discussion, the finding of the Tribunal and the consequential order cannot be sustained. The order of the Tribunal is accordingly set aside and the matter is remitted to the Tribunal to reconsider the issue of genuineness of the transaction of purchase of shares as claimed by the assessee. The Tribunal may proceed to re-examine the case on this issue alone in light of evidence already existing on record.
In view of the above, the questions of law nos. 1 & 2 raised by the assessee are answered accordingly. The appeal is allowed with the direction to the Tribunal to record its finding afresh, as above, within a period of three months from the date of production of a certified copy of this order, which, the assessee undertakes to file before the Tribunal within fifteen days from today.