CIT Vs Lakshmangarh Estate & Trading Co Ltd (Calcutta High Court)
The case of CIT Vs Lakshmangarh Estate & Trading Co Ltd, adjudicated by the Calcutta High Court, revolves around the assessment of a significant loss claimed by the assessee company on the sale of shares. The dispute arose when the Assessing Officer disallowed the set-off of this loss against long-term capital gains, alleging the transaction to be a colourable one aimed at tax evasion.
The assessee company purchased 13,04,700 shares of M/s. Hindustan Development Corporation Ltd. in July 1994, subsequently selling them at a loss to one of its group companies. The Assessing Officer contended that the sale was orchestrated solely to offset gains, basing his argument on suspicions rather than concrete evidence.
However, both the CIT (Appeal) and the Income Tax Appellate Tribunal (ITAT) upheld the transaction as genuine, supported by:
- Contract notes and bills for purchase and sale.
- Transactions executed at prevailing market rates.
- Payments made through account payee cheques.
- Confirmation by brokers and independent inspectors appointed by the Assessing Officer.
- Discrediting of testimonial evidence against the transaction.
The ITAT specifically highlighted the lack of substantive evidence supporting the Revenue’s allegations of ulterior motives or tax avoidance. Moreover, it emphasized the absence of probative value in the Assessing Officer’s reliance on a witness statement that was later retracted and not subjected to cross-examination.
