Case Law Details
Chandan Gupta Vs Commissioner of Income Tax (Panjab Haryana high court)
Punjab and Haryana High Court dismissed the appeals filed by Chandan Gupta against the order of the Income Tax Appellate Tribunal (ITAT), Chandigarh. The core issue was the addition of ₹51,87,680 under Section 68 of the Income Tax Act, 1961, which the Assessing Officer (AO) and subsequently the ITAT deemed to be unexplained cash credit, despite the assessee claiming it as long-term capital gains from share trading. The AO concluded that the sale transaction of shares of M/s Citigold Credit Capital Limited was bogus and a sham, designed to introduce the assessee’s own unexplained money while avoiding taxes.
The AO’s assessment was based on inquiries and available material, leading to the finding that no actual share transactions took place. The assessee could not satisfactorily explain the receipt of the alleged share profits credited to his bank accounts. The AO determined that the purported share sale was a fabricated transaction. The Commissioner of Income Tax (Appeals) upheld the AO’s findings, noting sufficient material evidence to demonstrate the sham nature of the share transactions, distinguishing it from cases where such evidence was lacking. The Tribunal also rejected the assessee’s contentions, concluding that the assessee had manipulated accounts, with mere entries of capital gains made upon receipt of cash, without any actual sale or purchase of shares. The assessee’s inability to produce the broker for verification further supported the AO’s independent inquiries. The Tribunal held that once the purchase and sale transactions were deemed bogus, the sale proceeds, credited in the assessee’s books, remained unexplained income under Section 68.
The High Court upheld the concurrent findings of fact by the lower authorities, as the assessee failed to demonstrate any error or perversity in their conclusions. The court distinguished the case relied upon by the assessee, where the genuineness of the share sale was established as a finding of fact by the Tribunal. Finding no merit in the appeals, the High Court affirmed the ITAT’s order, effectively treating the claimed capital gains as unexplained cash credit under Section 68 of the Income Tax Act.
FULL TEXT OF THE JUDGMENT/ORDER OF PUNJAB AND HARYANA HIGH COURT
1. This order shall dispose of ITA Nos. 196 and 197 of 2014 as according to the learned counsel for the appellant, the issue involved therein is identical. For brevity, the facts are being taken from ITA No. 196 of 2014.
2. ITA No. 196 of 2014 has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 26.9.2013 (Annexure A-3) passed by the Income Tax Appellate Tribunal, Chandigarh Bench ‘A’, Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No. 161/CHD/2008, relating to the assessment year 2005-06, claiming the following substantial questions of law:-
“ i) Whether in the present facts and circumstances of the case, the Ld. ITAT was justified in confirming the addition of Rs.51,87,680/- under Section 68 of the Act, wherein the said income has already been shown by the assessee in his return of income as income under the head Capital Gains?
ii) Whether in the present facts and circumstances of the case the order passed by the Ld. ITAT is perverse in confirming the addition of Rs.51,87,680/- under section 68 of the Act?
iii) Whether in the facts and circumstances of the case, the Ld. ITAT was justified in arriving at the conclusion that the sale and purchase of shares by the assessee was a bogus transaction when there was no material on record on which such apprehensions could be based?
3. Put shortly, the facts necessary for adjudication as narrated in the appeal are that the during the assessment year in question i.e. 2005-06, the assessee filed his return of income on 31.10.2005 declaring an income of ` 58,32,924/- which included long term capital gains on trading of shares amounting to ` 47,65,180/- and on this amount also paid long term capital gain at the rate of 10%. The Assessing Officer vide assessment order dated 7.12.2007 (Annexure A1) after terming the sale transaction of the shares as bogus, made an addition of ` 51,87,680/-. The Assessing Officer had even treated the cost of shares as unexplained cash credit under Section 68 of the Act. Feeling aggrieved by the assessment order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [for brevity “the CIT(A)”] who vide order dated 26.11.2008 (Annexure A-2) dismissed the appeal. Being dissatisfied with the CIT(A)’s order dated 26.11.2008 (Annexure A-2), the assessee filed an appeal before the Tribunal. The Tribunal vide order dated 26.9.2013 (Annexure A-3) dismissed the appeal. Hence, the present appeals.
4. Learned counsel for the assessee submitted that the capital gains on sale of shares was a genuine transaction whereas the Assessing Officer, the CIT(A) and the Tribunal have erred in treating the same to be unexplained cash credit under Section 68 of the Act. Support was drawn from the judgment of the Rajasthan High Court in Commissioner of Income Tax v. Smt. Pushpa Malpani (2011) 242 CTR (Raj) 559.
5. After hearing learned counsel for the appellant, we do not find any merit in the submission made by the learned counsel for the appellant.
6. The Assessing Officer after deliberating the enquiries made by him and appreciating the material available on record concluded that the transaction of sale of shares of M/s Citigold Credit Capital Limited (changed from name of M/s Country Credit Capital Ltd. on 16.2.2004) by the assessee to be bogus and sham in the following words:-
“In view of the above discussion the alleged claim of sale of shares is false and concocted as no actual transactions of shares took place. The assessee introduced his own unexplained money in the garb of sale of shares and has avoided giving his due taxes.
According to Section 68 if any sum is found credited in the books of assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the AO, satisfactory, the sum so credited may be charged to income tax as income of the assessee of that previous year.
In this case also the assessee could not explain the receipt of alleged share profits credited in his bank accounts. The explanation given by the assessee is not at all satisfactory as can be seen from the various enquiries mentioned above. It is proved beyond doubt that the share transactions entered into by the assessee are sham transactions and own money has been introduced to get share profits. Hence the amount of Rs.5129625/- equivalent to the alleged sale value of shares of the Company i.e., assessee from undisclosed sources u/s 68 of the I.T. Act, 1961. The documents furnished were test checked.”
7. The CIT(A) while affirming the findings of the Assessing Officer, after referring and discussing the evidence on record had concluded as under:-
“Coming to the case of the Hon’ble Punjab & Haryana High Court in the name of Anupam Kapoor (supra), in that case there was no material before the A.O. which could lead to the conclusion that the transactions in that case were simpliciter a device to camouflage activities to defraud the revenue. However, in the case of the appellant, the A.O. has plenty of material which is duly discussed in the assessment order to show that the transactions of sale and purchase of shares by the appellant were sham transactions. Ratio of these decisions would, therefore, also not apply to the fact & circumstances of appellant’s case. In view of the above discussions the grounds of appeal of the appellant are dismissed and the appeal of the appellant is also dismissed.”
8. The Tribunal while rejecting the contention of the assessee had come to the conclusion that the assessee had manipulated the accounts. It was held that no sale or purchase of the shares was done by the assessee but only entries of the capital gains were given to the assessee on receipt of cash payment. It was recorded that since the assessee had only filed copy of sale and purchase bill and showed inability to produce the broker, the Assessing Officer was right in conducting the enquiries on his own. Further, the bogus capital gains have been generated by the assessee and, therefore, the quotations in a Gujarati Diary was of no help to the assessee. From a perusal of questions and answers, it appeared that the assessee had not done any share business before financial year 2003-04 and after financial year 2004-05 in which he had earned capital gains of ` 51 lacs. On appreciation of the evidence, the Tribunal held that the assessee had failed to prove the genuineness of the transaction of sale and purchase of shares. Once the transaction of purchase and sale was found to be bogus then the sale proceeds had to be added as income of the assessee under Section 68 of the Act because the money received on the basis of bogus transaction had been credited by the assessee in the books of account which remained unexplained.
9. In view of the findings of fact recorded by the authorities below which could not be demonstrated to be erroneous or perverse in any manner, no interference is called for.
10. The judgment in Pushpa Malpani’s case (supra) on which reliance has been placed by the learned counsel for the appellant was on its own facts. In that case, the Tribunal had come to the conclusion that the sale of shares was genuine and, therefore, being finding of fact, no question of law arose. The said pronouncement, thus, does not lend any support to the argument of the learned counsel for the appellant.
11. Accordingly, we find no merit in these appeals and the same are hereby dismissed.
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