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Smt. Harjit Kaur vs Assistant Commissioner Of Income Tax on 11 November, 2013 cites

Commissioner Of Income-Tax, West ... vs Durga Prasad More on 26 August, 1971

Needless to say that one has to look at the whole transactions and a series of steps taken to accomplish such share transactions, in an integrated manner, with a view to ascertaining the true nature and character of such purchase and sale of shares. The shares were purchased and sold in these cases, cannot be treated as regular business transactions as the assessee appellants purchased shares, on 8.11.2007, @ ` 100/- per share and sold the same on 31.3.2008 @ ` 10/- per share, in the face of book value of such shares sold at ` 56/- as on 31.3.2008. Such approach of the appellants, runs contrary to the very nature of human conduct. The Hon'ble Supreme Court, in the case of CIT v. Durga Prasad More (1971) 82 ITR 540 (SC) has categorically held that the revenue is entitled to look into the surrounding circumstances, to find out the reality of the recitals made in the documents. The relevant observations and findings of Hon'ble Supreme Court, in the matter of discharge of 'onus of proof' and the relevance of surrounding circumstances of the case are "that though an appellant's statement must be Singh Gurbax 2013.12.20 10:10 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.280 of 2013 (O&M) 7 considered real until it was shown that there were reasons to believe that the appellant was not the real, in a case where the party relied on self serving recitals in the documents, it was for the party to establish the transfer of those recitals, the taxing authorities were entitled to look into the surrounding circumstances to find out the reality of such recitals. Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and the Tribunals have to judge the evidence before them by applying the test of human probability. Human minds may differ as to the reliability of place of evidence, but, in the sphere, the decision of the final fact finding authority is made conclusive by law.
Supreme Court of India Cites 1 - Cited by 1107 - Full Document

C.I.T., Madras vs T.N.K. Govinda Raju Chetty on 12 February, 1987

15. It is essential on the part of the revenue authority, to look into the real nature of transaction and what happens in the real word and contextualize the same to such transactions in the real market situation. It is pertinent to state here, the judicial wisdom of Hon'ble Supreme Court in CIT v. Arvinda Raju (TN) 120 ITR 46 (SC) wherein it was held that 'one day, in our welfare state geared to social justice, this clever concept of 'avoidance' as against 'evasion' may have to be exposed.' In the present case, there is an obvious and plain transaction of tax evasion which has been clothed with the smoke-screen of subterfuges, by the assessee appellants. The facts of the present case clearly reveal that such trading transactions of purchase and sale of shares,had not been effected, for commercial purpose but to create artificial loss, with a view to reducing tax liability. The appellant resorted to readymade scheme for purchase and sale of shares which ultimately found their last destination, to the original seller i.e. the said unlisted company. Such transactions are not genuine and natural transactions but preconceived transactions, demonstrating creation of such short term capital loss. Such transactions are mutually self-serving. It is mentioned that earning profit is a natural instinct ingrained in human beings, particularly in the businessman, unless, of course, earning of loss is also a profitable preposition, as is discernible from the fact situation of the present appeals. The appellants restored to a preconceived scheme, to procure short term capital loss, for the purpose of neutralizing the short term capital gains by way of price differential, in the said share transactions not supported by market factors. Cumulative events in such transactions of shares reveals that the same are devoid of any commercial nature and fall in the realm of not being bonafide, in contents. In view of the above legal and factual discussion and judicial precedents discussed above, we are of the opinion that the findings of the CIT(Appeals) are not based Singh Gurbax 2013.12.20 10:10 I attest to the accuracy and integrity of this document High Court Chandigarh ITA No.280 of 2013 (O&M) 9 on relevant, cogent and credible material or evidence. Such share transactions were not quoted and consequently, were not traded through stock exchange. When all the facts and circumstances of the case are viewed, in totality, it is evident that the assessee appellants failed to discharge the onus, to prove the genuineness of the transactions of purchase and sales of such shares. The impugned transactions of shares are preordained one, not for legitimate commercial purpose in view but for the purpose of creating non genuine and artificial short term capital loss, with a view to reducing valid tax liability. These transactions of shares were not governed by market factors prevalent at that relevant time, in such trade, but the same are product of the design and mutual understanding on the part of the appellants and the said Hissar based unlisted company. Learned CIT(Appeals) has failed to bring any cogent and credible evidence, to dislodge such finding. Having regard to the peculiar fact situation of the present case, it is evident that such share transactions were closed circuit transactions and clearly structured one. Therefore, in the light of judicial precedents of jurisdictional High court and Hon'ble Supreme Court, as discussed above, we do not find any merit in the findings of the CIT(Appeals).
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