Ita/12/2010 Of Commissioner Of Income Tax v. Smti. Sanghamitra Bharali

ITA 12/2010BEFORETHE HON’BLE MR.JUSTICE I.A. ANSARITHE HON’BLE DR. (MRS) JUSTICE INDIRA SHAH This is an appeal preferred by the Revenue, under Section 260A of Income Tax Act, 1961 (hereinafter referred to as �the Act �) against the order, dated 18.03.2010, passed by the learned Income Tax Appellate Tribunal, Guwahati Bench, Guwahati, in ITA No. 166(Gau) of 2007. 2.The appeal has been heard on the following substantial questions of law: �(i)Whether on the facts and in the circumstances of the case, the Tribunal was justified and correct in law in directing the Assessing Officer to treat thetransaction relating to long term ’capital gain’ as genuine and is not the saidfinding perverse? (ii)Whether on the facts and in the circumstances of the case, the Tribunal was justified and correct in law in allowing the claim of the Respondent for exemption under Section 54 F of the Income Tax, 1961? (iii)Whether on the facts and in the circumstances of the case, the Tribunal was justified and correct in law in directing the Assessing Officer to delete the addition of Rs.15 lakhs as income from undisclosed source from the income of the Respondent and is not the said decision perverse? (iv)Whether on the facts and in circumstances of the case, the Tribunal was justified and correct in law in directing the Assessing Officer to delete the addition of Rs.80,000/- as income from undisclosed source from the income of the Respondent and is not the said decision perverse? �QUESTION NO.1 and 23.Since both these questions are closely interwoven, both these questions are being discussed and decided together.4.The material facts and various stages, which have given rise to the present appeal, may, in brief, be set out as under:(i)The assessee filed return of her income, for the assessment year2001-02, showing a total income of Rs.1,49,348/- and the assessment was completed, under Section 143(3) of the Act, on 25.3.2004, determining the total income to be Rs.2,10,630/-. The said order of assessment was set aside by the Commissioner of Income Tax in exercise of the revisional power under Section 263 of the Act and the assessing officer was directed to make a fresh assessment keeping in view the observations made in the revisional order passed under Section 263 of the Act. (ii)Following the revisional order passed under Section 263 of the Act, fresh assessment proceedings were initiated by the assessing officer. The assessee had shown a long term ’capital gain’ of Rs.18,33,160/- claiming that the ’capitalgain’ had been made on account of investment in purchase of flat at Mumbai. The’capital gain’ was also claimed on account of sale of shares of one BirdhichandPannalal Agency Limited. (iii)Summon, under Section 131 of the Act, was issued to Sri Birdhi Chand Baid, director of the Company, but there was no compliance. The address of Birdhichand Pannalal Agency Limited, furnished by Guwahati Stock Exchange Ltd., was different from the one furnished by the Registrar of Companies (NER), Shillong. (iv)In order to verify genuineness of existence and activities of Birdhichand Pannalal Agency Limited, an Inspector of the Income Tax Department was deputedto verify the existence and activities of Birdhichand Pannalal Agency at the addresses furnished by the Guwahati Stock Exchange as well as the one furnished bythe Registrar of Companies (NER), Shillong. However it was found that the same were occupied by some other persons and no Company, by name and style of Birdhichand Pannalal Agency Limited, was in existence there. The assessee was, then, asked to furnish address of the Company, but the assessee failed to do so. (v)The annual returns of Birdhichand Pannalal Agency Limited, including the profit and loss account and balance sheet, for the assessment years 1998-99 to 2004-05, were obtained from the Registrar of Companies(NER), Shillong, and, on verification of the same, it was found that the profit before tax of the Company,as on 31.03.1999, was Rs.22,000/-, as on 31.3.2000 was Rs. 8091/- and as on 31.03.2001 was Rs.14,390/- only. No dividend was declared by the Company as there was no adequate profit. The assessee purchased 28,000 numbers of shares of the Company, on 12.11.1999, @ Rs.2.50 per share and the same were sold, on 04.12.2000,@ Rs. 67.97 per share. Thus, the share of the Company was shown to have risen from Rs.2.50 per share to Rs.67.97 within a span of one year. The share broker was also examined, under Section 131 of the Act, and, in course of examination, hestated that all records relating to purchase and sale of shares, in question, were lost and, therefore, the actual purchase and sale could not be verified fromthe broker. The assessee submitted her return of income for the assessment year2000-01 relevant to the year of purchase on 22.12.2000 i.e. after the shares were shown to have been sold on 4.12.2000. (vi)The assessing officer, in the order of assessment, noted that though theshares were sold through bank account of the assessee, purchase of shares were not made through the bank account of the assessee. The assessing officer observed that since the return, for the assessment year 2000-01 relevant to the year ofpurchase, was filed after the date of sale and that purchase of shares was not done through the bank account of the assessee, the actual event of purchase of the shares of assessee could not be verified and, therefore, it was apparently anafter- thought and a modus operandi adopted to convert the undisclosed income into ’capital gain’. The director of the company was also summoned, but no such person was found available at the address of the Company obtained from Guwahati Stock Exchange. The assessing officer, therefore, treated the ’capital gain’ as bogus and disallowed the long term ’capital gain’, sought to be exempted under Section 54 of the Act, to the tune of Rs. 15,33,160/- and added back the same as ’income from undisclosed sources’.5.While disallowing the said claim of the assessee, the assessing officerobserved as under- � It is therefore, evident from the above facts and circumstances that the Company M/s Birdhichand Pannalal Agencies Ltd. is playing an accommodative role in deployment of undisclosed surplus funds of the assessee. As discussed above, it isapparent that entire event of purchase was created back dated on 04.12.2000 when the shares were shown as sold, which is why there is no record of actual purchase by the assessee even with the broker. As there are no record of purchase, therefore, these were shown as purchased outside the bank accounts of the assessee. Non existence of the Company & its Director at the address given and its dismal profit year after year also proves the accommodative role played in convertingundisclosed income of the assessee. Therefore, the ’capital gain’ is treated asbogus. The alleged long term ’capital gain’ sought to be exempt under Section 54 of the Income Tax Act, 1961 to the tune of Rs.18,33,160/- is disallowed and isadded back as income from undisclosed source. �6.On an appeal being filed, Commissioner of Income Tax(Appeals) upheld theAssessing Officer’s order disallowing the claim of the assessee. While upholding the order of assessment, Commissioner of Income Tax (Appeals) observed that the appellant had failed to controvert the stand taken by the assessing officer inasmuch as the assessing officer brought sufficient numbers of materials on record to show that the assessee’s claim was untenable.7.The assessee preferred a second appeal before the Income Tax Appellate Tribunal, Guwahati Bench, Guwahati, assailing the judgement of Commissioner of Income Tax (Appeals) on the following ground: �For that the learned CIT(A) had erred in law and in facts in confirming the rejection of income earned by way of Long Term ’capital gain’s of 18,33,160/- on sale of shares considering the same as bogus as well as in confirming the rejection of exemption under Section 54F of the same amount. � 8.The learned Income Tax Appellate Tribunal set aside the orders of the revenue authorities and directed the assessing officer to treat the said transaction as genuine and deleted the addition made on this account. The learned Tribuna l, in its order, observed that neither the assessing officer nor the Commissioner of Income Tax (Appeals) had pointed out that the documents, filed by the assessee, were either false or not supported by evidence. The learned Tribunal observed that the Revenue authorities had not considered the papers and documents filed by the assessee for both, purchase as well as sale of shares. The learned Tribunal, on the basis of copies of documents filed by the assessee i.e. copies of bills, credit notes, contract notes, party ledgers, quotations of shares as on 4/12/2000 and undertaking from the assessee to the effect that original share certificates were not in the possession of the assessee, came to the conclusion that the transaction was not bogus. The learned Tribunal, therefore, held as under: �Since, in the present case, the assessee has established that both the purchaseas well as sale of the shares alongwith supporting evidences, such as, contractnotes ledger, account of the brokers and the transactions are properly entered in the books of accounts which were already available on record with the revenueauthorities, we find no reason to disbelieve the same. Hence, we set aside the orders of the revenue authorities on this issue and direct the A.O. to treat thesaid transactions as genuine and delete the addition made on account of this. �9.We have heard Dr. Ashok Saraf, learned Sr. Standing Counsel for the Revenue and Mr. A. Mazumdar, learned counsel appearing for the assessee.10.While assailing the order, passed by the learned Tribunal, Dr. Saraf, learned Sr. Standing counsel, appearing for the Revenue, has submitted that the issue has to be examined considering the facts and surrounding circumstances and applying the test of human probabilities. He submitted that having regard to the facts and circumstances of the case, an inference could reasonably be drawn thatthe said transaction of purchase of shares was bogus, an after-thought and a modus operandi to convert the undisclosed income in the guise of ’capital gain’. Dr. Saraf submitted that it cannot be believed that shares of a Company, which isnot in existence and whose profits, after tax, were so nominal that it (company) could not even declare dividends to share holders, had risen from Rs.2.50 to Rs.67.97 within a span of one year. The learned Sr. Standing counsel has further submitted that no documents and/or papers, in support of the said purchase and sale of shares, could be produced by the broker as the same were lost and that even before the first appellate authority, no such papers and documents were produced, but the learned Tribunal, in its order, has set aside the orders of the revenue authorities on the ground that the revenue has not considered the papers filed by the assessee in support of purchase as well as sale of the said shares. Dr. Saraf’s submission is that no ground was taken before the learned Tribunal to the effect that papers and documents were submitted, but not considered by therevenue authorities. This apart, submits Dr. Saraf, the assessing officer has clearly recorded, in the order of assessment, that the transaction of purchase and sale of shares could not be verified as the broker stated that all the recordswere lost. It is the further submission of Dr. Saraf that power of a Tribunal remains confined to the subject matter of appeal and a Tribunal can decide the issue on the basis of the facts, which were placed before the appellate authority.It is Dr. Saraf’s contention that no new case could have been made out suo motoby an Income Tax Appellate Tribunal as has been done in the present case.11.While supporting the order of the learned Tribunal, Mr. Mazumdar, learned counsel for the assessee, has submitted that since the learned Tribunal, on the basis of the documents and papers, came to the conclusion that the transactionwas not bogus, no interference is called for by this Court. Mr. Mazumdar has also submitted that simply because the transaction was off market transaction, the same cannot be treated to be a sham transaction . Mr . Saraf that power of a Tribunal remains confined to the subject matter of appeal and a Tribunal can decide the issue on the basis of the facts, which were placed before the appellate authority.It is Dr. Saraf’s contention that no new case could have been made out suo motoby an Income Tax Appellate Tribunal as has been done in the present case.11.While supporting the order of the learned Tribunal, Mr. Mazumdar, learned counsel for the assessee, has submitted that since the learned Tribunal, on the basis of the documents and papers, came to the conclusion that the transactionwas not bogus, no interference is called for by this Court. Mr. Mazumdar has also submitted that simply because the transaction was off market transaction, the same cannot be treated to be a sham transaction . Mr. Mazumdar, learned counsel, has further submitted that since the transaction of purchase and sale of the shares was through broker, but merely because the Company was not found located at the given address of the Company, the transaction cannot be treated to be bogus.12.The learned counsel for the assessee has contended that the official quotation, as on 04.12.2000, i.e., the date of sale of shares, at Gauhati Stock Exchange, was Rs. 68/- and the rate, at which the assessee sold the shares, through the registered broker, was commensurate to the official quotation. Mr. Mazumda r contends that the purchase of shares on 12.11.1999 and sale of shares on 04.12.2000 being evidenced by documents, like ledger of registered dealer, etc, the said transaction cannot be said to be a sham transaction. Mr. Mazumdar has also contended that Skylimit International, which has purchased the shares from the assessee, has also confirmed the transaction in its deposition before the assessing officer. 13.In support of his contention, learned counsel for the assessee, relies on the decision, in CIT-III, Ludhiana V. Vivek Mehta , 204 Taxman 177, wherein it has been held that when the purchaser confirms the purchase of shares from theassessee by cheque, the initial burden on the assessee stands discharged and itis for the Revenue to establish that the transaction, in question, was bogus. Mr. Mazumdar has also relied on a decision, in CIT V. Smt. Jamnadevi Agarwal, (2010)328 ITR 656 (Bom), wherein the Court has held that the fact that some of thetransactions were off market transactions cannot be a ground to treat the transactions as sham transactions. 14.Reacting to the submissions made by Mr. Mazumdar, Dr. Saraf submits thatthe assessee has, nowhere, submitted materials to show that the shares, purchased by her, were quoted, in the Stock Exchange, @ 2.50 paisa per share on the day of purchase. Further, the transaction of purchase was in cash. Dr. Saraf pointsout that no evidence has been brought on record to show that shares purchased were quoted @ 2.50 paisa on the date of purchase in the Stock Exchange and, hence, simply because the shares were sold, at a price, quoted in the Stock Exchange on the date of sale, it cannot be said that the transaction was a genuine transaction. 15.Before entering into the merit of the appeal, it will be necessary to examine the scope of an appeal before an Appellate Tribunal and scope of relief that could be granted by a Tribunal.16.The powers of a Tribunal, in dealing with appeals, are expressed under Section 254 of the Act, in widest possible terms inasmuch as Section 254 of the Act reads as under: of purchase. Further, the transaction of purchase was in cash. Dr. Saraf pointsout that no evidence has been brought on record to show that shares purchased were quoted @ 2.50 paisa on the date of purchase in the Stock Exchange and, hence, simply because the shares were sold, at a price, quoted in the Stock Exchange on the date of sale, it cannot be said that the transaction was a genuine transaction. 15.Before entering into the merit of the appeal, it will be necessary to examine the scope of an appeal before an Appellate Tribunal and scope of relief that could be granted by a Tribunal.16.The powers of a Tribunal, in dealing with appeals, are expressed under Section 254 of the Act, in widest possible terms inasmuch as Section 254 of the Act reads as under: � 254. Orders of Appellate Tribunal.- (1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. (2) The Appellate Tribunal may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-Section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer : Provided that an amendment whichhas the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this sub-Section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard : Provided further that any application filed by the assessee in this sub-Section on or after the 1st day of October, 1998, shall be accompanied by a fee of fiftyrupees. (2A) In every appeal, the Appellate Tribunal, where it is possible, may hear and decide such appeal within a period of four years from the end of the financial year in which such appeal is filed under sub-Section (1) or sub-Section (2) of Section 253 : Provided that the Appellate Tribunal may, after considering the merits of the application made by the assessee, pass an order of stay in any proceedings relating to an appeal filed under sub-Section (1) of Section 253, for a period not exceeding one hundred and eighty days from the date of suchorder and the Appellate Tribunal shall dispose of the appeal within the said period of stay specified in that order: Provided further that where such appeal isnot so disposed of within the said period of stay as specified in the order of stay, the Appellate Tribunal may, on an application made in this behalf by the assessee and on being satisfied that the delay in disposing of the appeal is not attributable to the assessee, extend the period of stay, or pass an order of stay for a further period or periods as it thinks fit; so, however, that the aggregate of the period originally allowed and the period or periods so extended or allowed shall not, in any case, exceed three hundred and sixty-five days and the Appellate Tribunal shall dispose of the appeal within the period or periods of st ay so extended or allowed: Provided also that if such appeal is not so disposed of within the period allowed under the first proviso or the period or periods extended or allowed under the second proviso, which shall not, in any case, exceedthree hundred and sixty-five days, the order of stay shall stand vacated after the expiry of such period or periods, even if the delay in disposing of the appeal is not attributable to the assessee. (2B) The cost of any appeal to the Appellate Tribunal shall be at the discretion of that Tribunal. (3) The Appellate Tribunal shall send a copy of any orders passed under this Section to the assessee and to the Commissioner. (4) Save as provided in Section 256 or Section 260A, orders passed by the Appellate Tribunal on appeal shall be final. � ay so extended or allowed: Provided also that if such appeal is not so disposed of within the period allowed under the first proviso or the period or periods extended or allowed under the second proviso, which shall not, in any case, exceedthree hundred and sixty-five days, the order of stay shall stand vacated after the expiry of such period or periods, even if the delay in disposing of the appeal is not attributable to the assessee. (2B) The cost of any appeal to the Appellate Tribunal shall be at the discretion of that Tribunal. (3) The Appellate Tribunal shall send a copy of any orders passed under this Section to the assessee and to the Commissioner. (4) Save as provided in Section 256 or Section 260A, orders passed by the Appellate Tribunal on appeal shall be final. � 17.Section 254 of the Act provides that the Appellate Tribunal, upon givingboth the parties an opportunity of being heard, pass such order as it thinks fit. 18.Coupled with the above, Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963, provides that the appellant shall not, except with the leave of Tribunal, urge or be heard in support of his ground not set forth in the memorandum of appeal or taken by leave of Tribunal provided parties, who may be affected, has had sufficient opportunity of being heard on that ground.19.The Supreme Court, in Hukumchand Mills Ltd. V. Commissioner of Income Tax, Central, Bombay (1967) 63 ITR 232, while examining the power of Appellate Tribunal, under Section 33(4) of the Income Tax Act, 1922, held that while the word �thereon � restricts the jurisdiction of the Tribunal to the subject matter of appeal, the words �pass such order as Tribunal thinks fit � includes all power except possibly the power of enhancement, which are conferred upon the Commissionerby Section 31 of said the Act. The Tribunal has, therefore, jurisdiction to go into every aspect of the assessment proceeding and also determine if the question as to whether such assessment was made in accordance the law or not provided aground is taken before the Tribunal or additional ground, by amendment, is allowed to be taken by the Tribunal. The Tribunal has also jurisdiction to decide the question of law, which arises from the facts as found by the taxing authority,which has a bearing on the taxable liability of the assessee. 20.Moreover, the Supreme Court, in National Thermal Power Co. Ltd. v. CIT, (1998) 229 ITR 389, held as under: �The power of the Tribunal in dealing with the appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item istaxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the Commissioner ofIncome Tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier. � 21.The scope of the relief, sought for by an assessee, in appeal, determines the subject matter of appeal. The relief, sought for, may have, at times, to be inferred since the assessee may not indicate, in specific terms, what is the scope of relief that he seeks in appeal. This has, quite often, to be understood from a range of attack on the assessment order as reflected in the grounds of appeal. In fact, the grounds of challenge substantially determine the scope of thesubject matter of appeal. With regard to such subject matters, if the assessee has chosen to make a challenge on a ground other than those raised by him earlier, it would be open to him to seek to urge such a ground. If the subject matter remains the same, the new case, projected by the assessee to obtain relief sough t for in respect of such subject matter, should be permitted.22.The Supreme Court, in CIT Vs. Mahalakshmi Textile Mills, reported in (1967 )66 ITR 710, described the Tribunal’s appellate jurisdiction in the widest terms possible, when it said that all questions, whether of law or of fact, which relate to the assessment of the assessee, may be raised before the Tribunal and there is nothing in the Act, which restricts the Tribunal to determine those questions only, which were raised before the departmental authorities. 23.On the basis of the principles laid down by the Supreme Court, it must be held in this case that the assessee was not precluded from raising a new contention and the learned Tribunal was not precluded from examining and determining that contention merely on the ground that the same had not been put forward at the earlier stages of the proceedings in assessment and in the first appeal.24.Thus, the subject matter of appeal may be capable of challenge on various grounds, some of which might have been raised and some might not have been raised earlier. Some grounds raised might have been dealt with or some of them might not have been dealt with; but a decision on the subject matter is an implied decision on all matters, which are raised and which could have been raised, whether dealt with or not. Merely because a ground has not been raised, though couldhave been raised in support of the reliefs sought for in the appeal, it cannot be said that it cannot be raised before the Tribunal.25.The matter can be viewed from a different angle also. It might happen that before the assessee came to the Tribunal, the assessee had not viewed the question urged by him for the purpose of seeking relief in the appeal from the proper perspective, a perspective from which he could have successfully mounted an assault on the order of assessment. In all these situations, in an appeal before the Tribunal, he is free to make a fresh approach, present his case from a different perspective and raise new grounds in support of the relief sought for by him. The fact that he had failed to make that approach before the first appellate authority should not stand in the way of his making the new approach. But all these must be related to the same subject matter as was in appeal before the firstappellate authority. If the subject-matter remains the same, the new case presented by him to obtain reliefs, sought for, in respect of such subject-matter, should be permitted.26.In Commissioner of Income-tax V. Krishna Mining Co., reported in (1977)107 ITR 702(AP), Andhra Pradesh High Court has held as under: �Although the powers of the Tribunal are thus expressed in very wide language, the word \thereon\ restricts the use of such wide powers of the Tribunal to the subject-matter of the appeal. What plainly follows is that the Tribunal’s powers are limited to passing such orders as it thinks fit �on the appeal \. In other words, the powers of the Tribunal are limited to the subject-matter of the appeal. � �It would not be permissible for the Tribunal to adjudicate or give a finding ona question which was not agitated or in regard to which no relief was claimed in the lower tribunals or which was not in dispute and which does not form the subject-matter of the appeal. � �The Tribunal’s decisions must be confined, as in the case of other judicial or quasi-judicial tribunals, to the questions brought before it on the appeal, and it must not travel outside it. �27.In Cellulose Products’ case (1985) 151 ITR 499(Guj) , P.S. Poti C.J., speaking for the Full Bench, observed: �In all these situations, in an appeal before the Tribunal, he is free to make afresh approach, present his case from a different perspective and raise new grounds in support of the relief sought by him. The fact that he has failed to makethat approach before the first appellate authority should not stand in the way of his making the new approach. But all this must be related to the same subject-matter as was in appeal before the first appellate authority. � 28.It was further held: � It is evident, therefore, that the attempt of the Tribunal in every case, where it is called upon to consider the question whether the new approach should be permitted should be to determine whether the subject-matter would remain the sam e, even if the new ground is permitted to be raised. � �Speaking of subject matter, it may happen that substantially a claim is urged by an assessee assuming that he is entitled to that claim under a certain provision of law indicated by him. It may be that he is entitled to relief in respect of such claim or part of it not because of that provision, but of some other provision of law. For the mere reason that he does not refer to or advert to the provision appropriately applicable will be no reason to deny him the right to urge his case, since, in such a case also, the subject matter will not change by reason of allowing the question to be raised. � 29.In the present case, the subject matter of appeal was rejection of long term ’capital gain’ of Rs.18,33,160/- on sale of shares treating the same as bogus. Whether the said rejection was legally justified or not can be examined fromdifferent angles. There was no restriction, on the powers of the learned Tribunal, to examine the correctness of such a rejection from an angle different from the one adopted by the assessing officer or first appellate authority. We are, therefore, unable to agree with submission of Dr. Saraf that since no specific ground was taken before the learned Tribunal, the learned Tribunal was not justified in looking into the matter from a different angle. 30.After having come to the conclusion that the learned Tribunal has the power to examine the issues from an angle different from the one, which the first appellate authority did, we shall, now, examine the correctness of the findings of the learned Tribunal in the present case. 31.With regard to the above, it may be noted that it is the specific finding of the assessing officer that no documents and papers could be produced in support of purchase and sale of shares as it was stated by the broker that the samewere lost.32.The said findings were not challenged by the assessee before the appellate authority. Before the learned Tribunal, the assessee contended that the assesse submitted copies of bills, credit notes, contract notes, party ledgers, quotations of shares as on 04.12.2000, etc. in support of the purchase and sale of shares. The learned Tribunal, in this connection, held as under : �The Assessing Officer could not verify the documents etc. of the shares broker as according to him, the shares purchase register and sale register were lost bythe share broker. The assessee purchased the shares on 12.11.1999 and sold out such shares on 4.12.2000. The Assessing Officer examined the share broker Sri Ashok Kumar Agarwala on 08.07.2005 under Section 131 of the Act after a lapse of almost five years. An FIR was also lodged before the Police on the subsequent date on which the books were lost. the share broker replied to almost all the queries asked by the assessing officer. thus, the learned counsel submitted that it is evident that shares were transacted through registered share broker and transaction were made through bank. �33.The genuineness of a transaction, such as the case at hand, has to be examined from the surrounding circumstances. It is, no doubt, true that in all cases in which receipt is sought to be taxed as income, the burden lies on the Revenue to prove that it is within the taxing provision; but once that burden is discharged, the burden of proving that it is not taxable, because it falls within exemption provisions under the Act, lies on the asseesse. 34.If the explanation, offered by the assesse about the nature and source thereof, is, in the opinion of assessing officer, not satisfactory and there are evidence and circumstances pointing out to the effect that what had been shown was not real and if the asseesse fails to controvert such facts and circumstances, then, such facts and circumstances can certainly be used against the assessee by holding that the said receipt was in the nature of income. 35.In the present case, the asseessee has not been able to prove that the shares were purchased, on 12.11.1999, inasmuch as there is no documentary evidence proving the said fact inasmuch as the said purchase was made in cash. Further,the assessee has also not been able to show that the said shares were listed, in the stock market, @ Rs. 2.50, on the day of purchase, inasmuch as the assesse has produced the quotation of the shares as on the date of sale, issued by the Guwahati Stock Exchange, but no such quotation, on the date of purchase, was prod uced by the assesse. 36.There is no dispute that the sale amount was received by the assesse through bank; but what is disputed is as to whether the long term ’capital gain’, claimed by the assessee, was really a long term ’capital gain’ or not. 37.Reliance placed by Mr. Mazumdar, on the decision of Bombay High Court, in Commissioner of Income Tax Vs. Smt. Jamnadevi Agarwal, reported in 228 ITR 656, is misplaced. In Smt. Jamnadevi Agarwal (supra), the assesse had produced documentary evidence to show that the shares purchased and sold were in conformity with the market price prevailing on the respective dates; but this has not been done in the present case. The Bombay High Court, in its decision, observed as under : �From the documents produced before us, which were also in the possession of theAssessing Officer, it is seen that the shares in question were in fact purchased by the assessees on the respective dates and the company has confirmed to havehanded over the shares purchased by the assessees. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However the purchase and the sale price of the shares declared by the assesses werein conformity with the market rates prevailing in the respective dates as is seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off-market transactions cannot be a ground to treat the �From the documents produced before us, which were also in the possession of theAssessing Officer, it is seen that the shares in question were in fact purchased by the assessees on the respective dates and the company has confirmed to havehanded over the shares purchased by the assessees. Similarly, the sale of the shares to the respective buyers is also established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However the purchase and the sale price of the shares declared by the assesses werein conformity with the market rates prevailing in the respective dates as is seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off-market transactions cannot be a ground to treat the transactions as sham transactions. �38.Thus, the decision of Bombay High Court, in Smt. Jamnadevi Agarwal (supra), does not support the case of the assesse.39.The Punjab and Haryana High Court’s decision, in CIT-III, Ludhiana (supra), also does not support the case of the assessee inasmuch as the transaction of sale and purchase of shares, in the said case, were as per the value prevalentin stock exchange and the said finding of fact was recorded on the basis of evidence produced on record. There is no dispute that simply because the transactions are off market transaction, the same cannot be a ground to treat the transaction as a sham transaction.40.However, in the case in hand, the assesse, although has produced documentary evidence to show that shares were sold at a price prevailing in the stock market on the date of sale, but no documentary evidence were produced to show that on the date of purchase, the market price of the shares was same at which the shares were claimed to have been purchased. 41.No doubt, apparent must be considered real until it is shown that there are reasons to believe that the apparent is not real and for that purpose, taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be examined and considered by applying the test of human probabilities. 42.In the present case, the facts that two different addresses were given of the Companies, one in Gauhati Stock Exchange and the other in the office of Registrar of Company, no such Company was found to be in existence at both the places, the assessee had failed to furnish the address of the Company and when the notice, sent to the director of the Company, was returned on the ground that no such person was found available at the address of the Company, the claim that shares of the Company rose from Rs.2.50 to Rs.67.97 within a span of one year, when the profit, upon payment of tax of the Company for 3 years, was negligible andno dividend could be declared, because of the inadequacy of profits, coupled with the facts that the purchase of shares was made in cash, the share broker failed to produce the records relevant to the purchase and sale of shares on the ground that the same were lost, the share quotation price of the purchase was not produced before any authority, the returns of income, relevant to the purchase and sale of shares was filed after the transaction of sale, as claimed, was over,are clearly relevant circumstances pointing out towards the fact that the transaction was not genuine and the same was an after-thought and a sort of modus operandi to convert the undisclosed income into a ’capital gain’. 43.From the facts and circumstances, narrated above, it cannot be said thatthe explanation, offered by the assesee, as regards long term ’capital gain’ wa s rejected unreasonably and that the finding that the said amount was not on account of long term ’capital gain’ is based on no evidence. 44.Having considered the facts and the circumstances and the materials available on record, an inference can be reasonably drawn that in reality, the transaction was bogus and it was simply a sort of modus operandi to convert the undisclosed income into a long term ’capital gain’ claiming the same to be exempted.45.The nature of the Tribunal’s jurisdiction envisages that the Tribunal will indicate the disputed queries, the evidence, the pros and cons and, then, record reasons in support of the decision. The practice of recording decisions without reasons has been deprecated by the Supreme Court, in Esthuri Aswathiah V. CIT, (1967)66 ITR 478(SC) as well as in CIT V. Walchand & Co.(P) Ltd. V. CIT, (1967)65 ITR 381. 46.In Nawabganj Sugar Mills Co. Ltd. V. CIT, (1972) 86 ITR 44(SC), the Supreme Court has held that the Tribunal has to act judicially in the sense that it has to consider, with due care, all material facts in favour of, and against theassessee, and, then, record its findings on the contentions raised by the assessee and the Commissioner in light of evidence and the relevant law. The Supreme Court, in Nawabganj Sugar (supra), also held that an order, recorded on a reviewof only one part of the evidence ignoring the remaining evidence, cannot be regarded as having conclusively determined the questions of fact raised before the Tribunal. 47.Hence, when the Revenue adduced evidence to show that a particular transaction was not genuine, order passed by the Tribunal without enquiring into all relevant facts and evidence would not be valid. The High Court has, indeed, the jurisdiction to interfere with the findings of the appellate Tribunal if it appears that the either the Tribunal has misunderstood the statutory language, because the proper construction of the statutory language is a matter of law, or it has arrived at a finding based on no evidence or where the finding is inconsistent with the evidence or contradictory thereto or it has acted on material, partlyrelevant and partly irrelevant, or where the Tribunal draws upon its own imagination and imports facts and circumstances not apparent form the record, or basesits conclusions on mere conjectures and surmises, or where no person, judicially acting and properly instructed as to the relevant law, could have come to the determination reached. In all such cases, the findings arrived at are vitiated.48.The learned Tribunal, in the present case, without examining the surrounding circumstances and without applying the principle of human probability, cameto conclusion that the assessee had established both purchase and sale of shares by producing copies of bills, credit notes, contract notes, party ledgers, quotations of shares as on 04.12.2000 and that the transaction was properly enteredinto the books of accounts, set aside the addition made by the assessing officer without considering the fact that simply entry of transaction in the books of account cannot lead to an irresistible conclusion that what was shown in the books of account was real and the transaction was genuine. The learned Tribunal hassimply brushed aside the surrounding circumstances, which created a serious doubt on the genuineness of transaction. It is highly improbable that a Company, whose shares rose by more than 25 times, within a span of one year, is not in existence nor the directors of the Company are traceable at the address given.49.Under such circumstances, we don’t think that the assessing officer committed any error in rejecting the claim of assessee and, in fact, applying the test of human probabilities, the assessing officer rightly concluded that the assessee’s claim about the amount, being the long term ’capital gain’, is not genuine and that said finding arrived at by the assessing officer cannot be said to bea finding, which is not based on no evidence . The learned Tribunal hassimply brushed aside the surrounding circumstances, which created a serious doubt on the genuineness of transaction. It is highly improbable that a Company, whose shares rose by more than 25 times, within a span of one year, is not in existence nor the directors of the Company are traceable at the address given.49.Under such circumstances, we don’t think that the assessing officer committed any error in rejecting the claim of assessee and, in fact, applying the test of human probabilities, the assessing officer rightly concluded that the assessee’s claim about the amount, being the long term ’capital gain’, is not genuine and that said finding arrived at by the assessing officer cannot be said to bea finding, which is not based on no evidence. Under such circumstances we have no other option, but to interfere with the order passed by the learned Tribunal,Guwahati Bench, Guwahati, on this score and restore and confirm the orders, passed by assessing officer and the Commissioner of Income Tax (Appeals), in this regard.Question No.350.The assessee had shown Rs.15 lakhs as advance from M/S Venus Hospitals Pvt. Ltd. against sale of a flat at Housefed, Guwahati, for Rs.16 lakhs. The enti re payment was made, in cash, on 1.4.2000, 25.5.2000 and 26.6.2000 @ 5 lakhs each. The assessee submitted that the possession of the flat was not handed over tothe Company, because the Company had failed to pay the remaining amount of Rs.1lakh. In order to verify the genuineness of the Company, Principal Officer of the Company, M/S Venus Hospitals Pvt. Ltd., was summoned, under Section 131 of the Act, but the notice was returned unserved on the ground that no such Company was found in existence at the said address. The assessee was asked to produce thePrincipal Officer of the Company and, accordingly, the assessee presented, Sri Sanjay Kumar Kabra, director of the Company, whose statement was recorded under Section 131(1) of the Act. The director of the Company stated that the agreementof purchase of the flat was cancelled in the year 2003 and that the Company hadalso received back Rs.6 lakhs. The assessing officer asked the Director as to why the payment, for purchase of flat, was made in cash and repayment of Rs.3.5 lakh was received in cash and balance of Rs.2.5 lakh was received in self-cheque of the assessee and not received, in account payee cross cheque, in the name of M/S Venus Hospitals Pvt. Ltd., despite having bank accounts of the Company and the assessee, the director could not give any satisfactory reason for the same. The cancellation agreement of the said flat was also on a plain sheet of paper without having any proper documentary value. The assessing officer enquired from the Director of the company the reason for the proposed purchase of flat and the director replied that it was proposed to set up a Laboratory/Diagnostic Centre. The said Director could not give any satisfactory reply to the question as to why a residential flat was proposed for setting up of a Laboratory/Diagnostic Centre, for, a residential place is not allowed to be used for such a purpose. This apart, the Director also admitted that the company had no activity since its inception. 51.In view of the facts and circumstances, pointed out above, the assessingofficer held that the Company appeared to be an entity existing on paper to accommodate undisclosed income of the asessee and payment of the entire advance of Rs. 15 lakh was added back to the assessee’s income as income from undisclosed sources. 52.On an appeal being filed before the Commissioner of Income Tax (Appeals), the said addition was upheld. On further appeal before the learned Tribunal, the learned Tribunal held that the transactions, which were made in cash, were recorded in the books of account of the Company. The learned Tribunal also recorded that there is no finding of the assessing officer that the cancellation agreement, prepared on a plain p