“Section 38(1)(c)”
The decision most relied on for Section 38(1)(c) is CIT v. Shri Arbuda Mills Ltd. (231 ITR 50), cited in 61 judgments on BharatTax.
Leading authorities on Section 38(1)(c)
The Commissioner's revisional powers under Section 263, as clarified by Explanation (c) of Section 263(1) (retrospectively inserted by the Finance Act, 1989), extend to and are deemed always to have extended to matters that were not considered and decided in an appeal. This means the CIT can revise an order even if it was appealed, provided the specific issue under revision was not part of the appeal proceedings.
This case establishes principles for evaluating the genuineness of long-term capital gains claimed under Section 10(38), particularly when allegations of bogus transactions, price rigging, or penny stock schemes arise. It clarifies the department's burden of proof in demonstrating, based on a preponderance of probability, that an assessee used a colourable device to claim exempt income.
A return of income filed in response to a notice under Section 153A of the Income-tax Act is to be considered as a return filed under Section 139 of the Act for all other provisions, including the purpose of penalty under Section 271(1)(c).
The onus is on the assessee to prove the genuineness of long-term capital gains (LTCG) through sufficient documentary evidence of purchase, sale, and holding period, especially when allegations of providing bogus LTCG arise.
A penalty under section 271(1)(c) cannot be levied if the assessee has provided all relevant material and not concealed any inaccurate particulars of income, even if a claim is not sustainable in law. The Assessing Officer must properly verify the genuineness of claims.
The Assessing Officer cannot make additions to income based solely on suspicions or unusual features noticed in the assessee's business without corroborating material evidence. Such features are only a starting point for inquiry, not proof of suppression or understatement of sale price.
Gains arising on the sale of shares cannot be treated as sham solely because purchases were made in cash, if the surrounding facts and circumstances support the transaction.
Explanation 5A to Section 132 of the Income Tax Act applies only when undisclosed money, bullion, jewellery, or other valuable articles are found during a search and additions are made on that basis; no such material was brought on record by the revenue in this case.
