Failure To Produce Share Certificate Is No Basis To Doubt Share Purchase Transaction: Mumbai ITAT Refers Art 265 Of Constitution
Pankaj Bajpai
17 March 2024 1:30 PM IST
Referring to Article 265 of the Constitution of India, the Mumbai ITAT remanded the case to the file of AO with direction to verify factual aspects, pertaining to the purchase of the shares in consideration and re-compute the liability accordingly.The Bench of the ITAT comprising of Narender Kumar Choudhry (Judicial Member) and Padmavathy S. (Accountant Member) observed that, “May be...
Referring to Article 265 of the Constitution of India, the Mumbai ITAT remanded the case to the file of AO with direction to verify factual aspects, pertaining to the purchase of the shares in consideration and re-compute the liability accordingly.
The Bench of the ITAT comprising of Narender Kumar Choudhry (Judicial Member) and Padmavathy S. (Accountant Member) observed that, “May be the Assessee is at fault as she did not produce the relevant documents pertaining to the purchase of the shares before the authorities below specifically before the Assessing Officer, mainly on the ground that the same were not traceable. As the mandate of the Article 265 of the Constitution of India is that no tax shall be levied or collected except by authority of law.” (Para 5)
As per the brief facts of the case, the assessee's return was selected for scrutiny, wherein AO observed that the assessee has derived income from Other Sources, Salary and House property. Further, the assessee as per working of short-term capital gain attached with the return of income has earned a short-term capital gain. Though the assessee had shown different purchase cost for purchase of the shares. However, not given the date of purchase. Therefore, the AO on verification of the information available on record doubted the transaction of the assessee and accordingly, asked the assessee to furnish the details of the purchase of shares. In response, the assessee claimed that details related to purchase of equity shares were lost due to the shifting of the residential home of the assessee. However, the assessee has communicated with the Registrar maintaining the share details of the company to provide the records related to ownership of shares. The same shall take time.
The AO in the absence of details of the purchase of shares and on the basis of investigation carried out by the investigation wing of IT observed “that cost of purchase of aforesaid shares taken by the Assessee in her books were pre-arranged method to evade tax and launder money and the cost of purchase of shares is manipulated and reduced the capital gain to avoid tax” and ultimately, treated the amount {being difference between the sale proceeds (-) the purchase price of shares } as bogus and consequently disallowed the same being purchase price of the shares and added the amount as sale proceeds, in the total income of the assessee.
The Bench noted that both the authorities doubted the transaction of the assessee mainly on the ground that the assessee has failed to bring on record the details of the purchase of shares.
The Bench observed that nothing appears from the impugned order that the assessee has ever produced the share certificate as claimed.
The Bench further observed that it appears from the share certificates filed, that the assessee has purchased equity shares, therefore, it goes to show that the assessee in fact earned long term capital gain but not the short-term capital gain as computed by the AO.
Therefore, on finding that the income has to be assessed in accordance with law, ITAT allowed the assessee's appeal for statistical purposes.
Counsel for Appellant/Taxpayer: Viraj Mehta
Counsel for Respondent/Department: Srinivas
Case Title: Shantaben Fathechand Mehta verses Income-tax Officer
Case Number: I.T.A. No.6698/Mum/2019
