THE PR COMMISSIONER OF INCOME TAX LUDH vs. HITESH GANDHI BHATTI COLONY CHD ROAD NAWANSHAHAR

ITA/18/2017HC Punjab & HaryanaPHHC01117369201716 February 2017Author: MR. JUSTICE SURINDER GUPTA,MRS JUSTICE DAYA CHAUDHARY7 pages
AI SummaryDismissed

What were the facts?

The appellant-revenue challenged an order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year 2008-09. The ITAT had upheld the order of the CIT(A) which deleted an addition of ₹2,78,26,685 made by the Assessing Officer (AO) on account of alleged sham share transactions. The assessee, Sh. Hitesh Gandhi, had purchased one lakh shares of M/s GeeFCee Finance Limited for ₹11,00,000, allegedly paid in cash. These shares were later sold for ₹2,89,94,516, resulting in a claimed long-term capital gain of ₹2,78,26,685. The AO treated the transaction as non-genuine due to the assessee's inability to substantiate the source of investment and the genuineness of the transaction. The CIT(A) deleted the addition, finding that the department failed to prove the transaction was sham. The ITAT affirmed the CIT(A)'s decision.

What did the High Court hold?

The High Court held that the findings of the CIT(A) and the Tribunal were pure findings of fact. The CIT(A) had noted that the shares were physically transferred, dematerialized and credited to the assessee's account on 16.10.2006, dividend of ₹1,50,000 was received on 23.10.2007 and disclosed in the return, and the AO accepted this dividend as exempt. The CIT(A) found that the AO could not contradict the facts regarding purchase and sale of shares, and the search proceedings did not yield incriminating evidence. The Tribunal further noted that shares were sold through a SEBI-registered broker via banking channels, and STT was paid. The High Court found no illegality, error, or perversity in these findings and no substantial question of law arose. The appeal was dismissed.

What were the issues?

1. Whether on the facts and in the circumstances of the case, the Hon’ble Income Tax Appellate Tribunal has erred in law in upholding the order of the CIT(A), deleting the addition of ₹2,78,26,685/-, made by the AO on account of sham share transactions, ignoring that the purchase price was ₹11,00,000/- and sale consideration was ₹2,91,32,850/- within less than two years, shares were purchased in cash, not cheque, before dematerialization, and the company's worth was not proved? (Section 260-A of the Income Tax Act, 1961). The revenue argued that the circumstances, including the purchase price, sale consideration, payment method, and unproven company worth, indicated the non-genuineness of the transaction. 2. Whether the Hon’ble ITAT has erred in ignoring that in cases of sham transactions with abnormal value hikes, the AO is justified in drawing inferences from attendant circumstances? (Section 260-A of the Income Tax Act, 1961). The revenue contended that the AO could infer sham transactions from the circumstances themselves.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 153A,Section 143(3),Section 132

AI-generated summary — verify with the full judgment below

ITA No. 18 of 2017(O&M)

1

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

ITA No. 18 of 2017 (O&M)

Date of decision: 16.02.2017

The Pr. Commissioner of Income Tax (Central), Ludhiana

……Appellant

Vs.

Sh. Hitesh Gandhi, Bhatti Colony, Chandigarh Road, Nawanshahar.

…..Respondent

CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL

HON’BLE MR. JUSTICE RAMENDRA JAIN

Present: Mr. Rajesh Katoch, Advocate for the appellant.

Ajay Kumar Mittal,J.

1.

This appeal has been preferred by the appellant-revenue under Section 260-A of the Income Tax Act, 1961 (in short, “Act”) against the order dated 20.07.2016, Annexure A-III, passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (in short, “ the Tribunal”) in ITA No.129(Asr)/2014, for the Assessment Year 2008-09, claiming following substantial questions of law. (i)“Whether on the facts and in the circumstances of the case, the Hon’ble Income Tax Appellate Tribunal, has erred in law in upholding the order of the CIT(A), dele

The order continues below.

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