High Court
Case Details
ITA 12/2010 BEFORE THE HON’BLE MR.JUSTICE I.A. ANSARI THE 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 (cid:28)the Act (cid:29)) against the order, dated 18.03.201 0, passed by the learned Income Tax Appellate Tribunal, Guwahati Bench, Guwahati , in ITA No. 166(Gau) of 2007. 2. (cid:28)(i) was justified and correct in law in directing the Assessing Officer to treat the transaction relating to long term ’capital gain’ as genuine and is not the said finding perverse? Whether on the facts and in the circumstances of the case, the Tribunal The appeal has been heard on the following substantial questions of law: (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 exe mption under Section 54 F of the Income Tax, 1961? Whether on the facts and in the circumstances of the case, the Tribunal (iii) was justified and correct in law in directing the Assessing Officer to delete th e addition of Rs.15 lakhs as income from undisclosed source from the income of t he Respondent and is not the said decision perverse? Whether on the facts and in circumstances of the case, the Tribunal was (iv) justified and correct in law in directing the Assessing Officer to delete the ad dition of Rs.80,000/- as income from undisclosed source from the income of the R espondent and is not the said decision perverse? (cid:29) QUESTION NO.1 and 2 3. are being discussed and decided together. 4. ent appeal, may, in brief, be set out as under: Since both these questions are closely interwoven, both these questions The material facts and various stages, which have given rise to the pres (i) The assessee filed return of her income, for the assessment year 2001-02, showing a total income of Rs.1,49,348/- and the assessment was complet ed, 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 Commissio ner of Income Tax in exercise of the revisional power under Section 263 of the A ct 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 t he Act. Following the revisional order passed under Section 263 of the Act, fres (ii) h assessment proceedings were initiated by the assessing officer. The assessee h ad shown a long term ’capital gain’ of Rs.18,33,160/- claiming that the ’capital gain’ 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 Birdhichand Pannalal Agency Limited.
Legal Reasoning
(iii) Summon, under Section 131 of the Act, was issued to Sri Birdhi Chand Bai d, director of the Company, but there was no compliance. The address of Birdhich and Pannalal Agency Limited, furnished by Guwahati Stock Exchange Ltd., was diff erent from the one furnished by the Registrar of Companies (NER), Shillong. (iv) In order to verify genuineness of existence and activities of Birdhichan d Pannalal Agency Limited, an Inspector of the Income Tax Department was deputed to verify the existence and activities of Birdhichand Pannalal Agency at the ad dresses furnished by the Guwahati Stock Exchange as well as the one furnished by the 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 Birdhic hand Pannalal Agency Limited, was in existence there. The assessee was, then, as ked 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 v erification 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 w as no adequate profit. The assessee purchased 28,000 numbers of shares of the Co mpany, 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 f rom Rs.2.50 per share to Rs.67.97 within a span of one year. The share broker wa s also examined, under Section 131 of the Act, and, in course of examination, he stated that all records relating to purchase and sale of shares, in question, w ere lost and, therefore, the actual purchase and sale could not be verified from the broker. The assessee submitted her return of income for the assessment year 2000-01 relevant to the year of purchase on 22.12.2000 i.e. after the shares we re shown to have been sold on 4.12.2000. (vi) The assessing officer, in the order of assessment, noted that though the shares were sold through bank account of the assessee, purchase of shares were not made through the bank account of the assessee. The assessing officer observe d that since the return, for the assessment year 2000-01 relevant to the year of purchase, 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 t he shares of assessee could not be verified and, therefore, it was apparently an after- thought and a modus operandi adopted to convert the undisclosed income i nto ’capital gain’. The director of the company was also summoned, but no such p erson was found available at the address of the Company obtained from Guwahati S tock Exchange. The assessing officer, therefore, treated the ’capital gain’ as b ogus and disallowed the long term ’capital gain’, sought to be exempted under Se ction 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 officer observed as under- (cid:28) It is therefore, evident from the above facts and circumstances that the Compa ny M/s Birdhichand Pannalal Agencies Ltd. is playing an accommodative role in de ployment of undisclosed surplus funds of the assessee. As discussed above, it is apparent that entire event of purchase was created back dated on 04.12.2000 whe n the shares were shown as sold, which is why there is no record of actual purch ase by the assessee even with the broker. As there are no record of purchase, th erefore, 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 disma l profit year after year also proves the accommodative role played in converting undisclosed income of the assessee. Therefore, the ’capital gain’ is treated as bogus. The alleged long term ’capital gain’ sought to be exempt under Section 5 4 of the Income Tax Act, 1961 to the tune of Rs.18,33,160/- is disallowed and is added back as income from undisclosed source. (cid:29) 6. On an appeal being filed, Commissioner of Income Tax(Appeals) upheld the Assessing Officer’s order disallowing the claim of the assessee. While upholdin g the order of assessment, Commissioner of Income Tax (Appeals) observed that th e appellant had failed to controvert the stand taken by the assessing officer in asmuch as the assessing officer brought sufficient numbers of materials on recor d to show that the assessee’s claim was untenable. 7. The assessee preferred a second appeal before the Income Tax Appellate T ribunal, Guwahati Bench, Guwahati, assailing the judgement of Commissioner of In come Tax (Appeals) on the following ground: (cid:28)For that the learned CIT(A) had erred in law and in facts in confirming the rej ection of income earned by way of Long Term ’capital gain’s of 18,33,160/- on sa le of shares considering the same as bogus as well as in confirming the rejectio n of exemption under Section 54F of the same amount. (cid:29) The learned Income Tax Appellate Tribunal set aside the orders of the re 8. venue authorities and directed the assessing officer to treat the said transacti on as genuine and deleted the addition made on this account. The learned Tribuna
Decision
l, in its order, observed that neither the assessing officer nor the Commissione r of Income Tax (Appeals) had pointed out that the documents, filed by the asses see, were either false or not supported by evidence. The learned Tribunal observ ed that the Revenue authorities had not considered the papers and documents file d by the assessee for both, purchase as well as sale of shares. The learned Tri bunal, 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 cer tificates were not in the possession of the assessee, came to the conclusion tha t the transaction was not bogus. The learned Tribunal, therefore, held as under: (cid:28)Since, in the present case, the assessee has established that both the purchase as well as sale of the shares alongwith supporting evidences, such as, contract notes ledger, account of the brokers and the transactions are properly entered in the books of accounts which were already available on record with the revenue authorities, 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 the said transactions as genuine and delete the addition made on account of this. (cid:29) We have heard Dr. Ashok Saraf, learned Sr. Standing Counsel for the Reve 9. nue and Mr. A. Mazumdar, learned counsel appearing for the assessee. 10. While assailing the order, passed by the learned Tribunal, Dr. Saraf, le arned Sr. Standing counsel, appearing for the Revenue, has submitted that the is sue has to be examined considering the facts and surrounding circumstances and a pplying the test of human probabilities. He submitted that having regard to the facts and circumstances of the case, an inference could reasonably be drawn that the said transaction of purchase of shares was bogus, an after-thought and a mo dus operandi to convert the undisclosed income in the guise of ’capital gain’. D r. Saraf submitted that it cannot be believed that shares of a Company, which is not 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 R s.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 s ale of shares, could be produced by the broker as the same were lost and that ev en before the first appellate authority, no such papers and documents were produ ced, but the learned Tribunal, in its order, has set aside the orders of the rev enue authorities on the ground that the revenue has not considered the papers fi led 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 t o the effect that papers and documents were submitted, but not considered by the revenue authorities. This apart, submits Dr. Saraf, the assessing officer has c learly recorded, in the order of assessment, that the transaction of purchase an d sale of shares could not be verified as the broker stated that all the records were lost. It is the further submission of Dr. Saraf that power of a Tribunal r emains confined to the subject matter of appeal and a Tribunal can decide the is sue 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 moto by an Income Tax Appellate Tribunal as has been done in the present case. 11. While supporting the order of the learned Tribunal, Mr. Mazumdar, learne d counsel for the assessee, has submitted that since the learned Tribunal, on th e basis of the documents and papers, came to the conclusion that the transaction was not bogus, no interference is called for by this Court. Mr. Mazumdar has al so submitted that simply because the transaction was off market transaction, th e same cannot be treated to be a sham transaction . Mr. Mazumdar, learned counse l, 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 bog us. 12. The learned counsel for the assessee has contended that the official quo tation, as on 04.12.2000, i.e., the date of sale of shares, at Gauhati Stock Exc hange, was Rs. 68/- and the rate, at which the assessee sold the shares, throug h 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 s aid transaction cannot be said to be a sham transaction. Mr. Mazumdar has also c ontended that Skylimit International, which has purchased the shares from the as sessee, has also confirmed the transaction in its deposition before the assessin g officer. 13. In support of his contention, learned counsel for the assessee, relies o n the decision, in CIT-III, Ludhiana V. Vivek Mehta , 204 Taxman 177, wherein i t has been held that when the purchaser confirms the purchase of shares from the assessee by cheque, the initial burden on the assessee stands discharged and it is for the Revenue to establish that the transaction, in question, was bogus. M r. Mazumdar has also relied on a decision, in CIT V. Smt. Jamnadevi Agarwal, (20 10)328 ITR 656 (Bom), wherein the Court has held that the fact that some of the transactions were off market transactions cannot be a ground to treat the trans actions as sham transactions. 14. Reacting to the submissions made by Mr. Mazumdar, Dr. Saraf submits that the assessee has, nowhere, submitted materials to show that the shares, purchas ed 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 points out that no evidence has been brought on record to show that shares purchased w ere 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 transa ction. Before entering into the merit of the appeal, it will be necessary to ex 15. amine the scope of an appeal before an Appellate Tribunal and scope of relief th at could be granted by a Tribunal. 16. The powers of a Tribunal, in dealing with appeals, are expressed under S ection 254 of the Act, in widest possible terms inasmuch as Section 254 of the A ct reads as under: (cid:28) 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 ti me within four years from the date of the order, with a view to rectifying any m istake 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 th e assessee or the Assessing Officer : Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise inc reasing 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 fifty rupees. (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 th e financial year in which such appeal is filed under sub-Section (1) or sub-Sect ion (2) of Section 253 : Provided that the Appellate Tribunal may, after conside ring the merits of the application made by the assessee, pass an order of stay i n any proceedings relating to an appeal filed under sub-Section (1) of Section 2 53, for a period not exceeding one hundred and eighty days from the date of such order and the Appellate Tribunal shall dispose of the appeal within the said pe riod of stay specified in that order: Provided further that where such appeal is not 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 a ssessee 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 sta y for a further period or periods as it thinks fit; so, however, that the aggreg ate of the period originally allowed and the period or periods so extended or al lowed shall not, in any case, exceed three hundred and sixty-five days and the A ppellate 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 ex tended or allowed under the second proviso, which shall not, in any case, exceed three 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 appe al is not attributable to the assessee. (2B) The cost of any appeal to the Appel late Tribunal shall be at the discretion of that Tribunal. (3) The Appellate Tri bunal 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, or ders passed by the Appellate Tribunal on appeal shall be final. (cid:29) 17. Section 254 of the Act provides that the Appellate Tribunal, upon giving both the parties an opportunity of being heard, pass such order as it thinks fi t. 18. Coupled with the above, Rule 11 of the Income Tax (Appellate Tribunal) R ules, 1963, provides that the appellant shall not, except with the leave of Trib unal, 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, h as had sufficient opportunity of being heard on that ground. The Supreme Court, in Hukumchand Mills Ltd. V. Commissioner of Income Ta 19. x, Central, Bombay (1967) 63 ITR 232, while examining the power of Appellate Tri bunal, under Section 33(4) of the Income Tax Act, 1922, held that while the word (cid:28)thereon (cid:29) restricts the jurisdiction of the Tribunal to the subject matter of a ppeal, the words (cid:28)pass such order as Tribunal thinks fit (cid:29) includes all power exc ept possibly the power of enhancement, which are conferred upon the Commissioner by 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 questio n as to whether such assessment was made in accordance the law or not provided a ground is taken before the Tribunal or additional ground, by amendment, is allo wed to be taken by the Tribunal. The Tribunal has also jurisdiction to decide th e 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. Moreover, the Supreme Court, in National Thermal Power Co. Ltd. v. CIT, 20. (1998) 229 ITR 389, held as under: (cid:28)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 taxi ng authorities is to assess correctly the tax liability of an assessee in accord ance with law. If, for example, as a result of a judicial decision given while t he appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the as sessee should be prevented from raising that question before the Tribunal for th e first time, so long as the relevant facts are on record in respect of that ite m. 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 of Income 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 T ribunal should be prevented from considering questions of law arising in assessm ent proceedings although not raised earlier. (cid:29) 21. The scope of the relief, sought for by an assessee, in appeal, determine s the subject matter of appeal. The relief, sought for, may have, at times, to b e inferred since the assessee may not indicate, in specific terms, what is the s cope 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 ap peal. In fact, the grounds of challenge substantially determine the scope of the subject 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 earlie r, 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 (19 67 )66 ITR 710, described the Tribunal’s appellate jurisdiction in the widest te rms 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 qu estions only, which were raised before the departmental authorities. On the basis of the principles laid down by the Supreme Court, it must b 23. e held in this case that the assessee was not precluded from raising a new conte ntion 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 t he 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 vario us grounds, some of which might have been raised and some might not have been ra ised earlier. Some grounds raised might have been dealt with or some of them mig ht 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, whet her dealt with or not. Merely because a ground has not been raised, though could have been raised in support of the reliefs sought for in the appeal, it cannot be said that it cannot be raised before the Tribunal. The matter can be viewed from a different angle also. It might happen th 25. at before the assessee came to the Tribunal, the assessee had not viewed the que stion urged by him for the purpose of seeking relief in the appeal from the prop er perspective, a perspective from which he could have successfully mounted an a ssault 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 diffe rent perspective and raise new grounds in support of the relief sought for by hi m. 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 th ese must be related to the same subject matter as was in appeal before the first appellate authority. If the subject-matter remains the same, the new case prese nted by him to obtain reliefs, sought for, in respect of such subject-matter, sh ould 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: (cid:28)Although the powers of the Tribunal are thus expressed in very wide language, t he word \thereon\ restricts the use of such wide powers of the Tribunal to the s ubject-matter of the appeal. What plainly follows is that the Tribunal’s powers are limited to passing such orders as it thinks fit (cid:28)on the appeal \. In other w ords, the powers of the Tribunal are limited to the subject-matter of the appeal . (cid:29) (cid:28)It would not be permissible for the Tribunal to adjudicate or give a finding on a question which was not agitated or in regard to which no relief was claimed i n the lower tribunals or which was not in dispute and which does not form the su bject-matter of the appeal. (cid:29) (cid:28)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. (cid:29) 27. , speaking for the Full Bench, observed: (cid:28)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 gro unds in support of the relief sought by him. The fact that he has failed to make that 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. (cid:29) 28. (cid:28) It is evident, therefore, that the attempt of the Tribunal in every case, wher e 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 In Cellulose Products’ case (1985) 151 ITR 499(Guj) [FB], P.S. Poti C.J. It was further held: e, even if the new ground is permitted to be raised. (cid:29) (cid:28)Speaking of subject matter, it may happen that substantially a claim is urged b y an assessee assuming that he is entitled to that claim under a certain provisi on of law indicated by him. It may be that he is entitled to relief in respect o f such claim or part of it not because of that provision, but of some other prov ision of law. For the mere reason that he does not refer to or advert to the pro vision 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 reas on of allowing the question to be raised. (cid:29) 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 bog us. Whether the said rejection was legally justified or not can be examined from different angles. There was no restriction, on the powers of the learned Tribun al, 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, t herefore, unable to agree with submission of Dr. Saraf that since no specific gr ound was taken before the learned Tribunal, the learned Tribunal was not justifi ed in looking into the matter from a different angle. 30. After having come to the conclusion that the learned Tribunal has the po wer 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 findin g of the assessing officer that no documents and papers could be produced in sup port of purchase and sale of shares as it was stated by the broker that the same were lost. 32. The said findings were not challenged by the assessee before the appella te authority. Before the learned Tribunal, the assessee contended that the asses se submitted copies of bills, credit notes, contract notes, party ledgers, quota tions of shares as on 04.12.2000, etc. in support of the purchase and sale of sh ares. The learned Tribunal, in this connection, held as under : (cid:28)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 by the 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 As hok Kumar Agarwala on 08.07.2005 under Section 131 of the Act after a lapse of a lmost five years. An FIR was also lodged before the Police on the subsequent dat e on which the books were lost. the share broker replied to almost all the queri es asked by the assessing officer. thus, the learned counsel submitted that it i s evident that shares were transacted through registered share broker and transa ction were made through bank. (cid:29) The genuineness of a transaction, such as the case at hand, has to be ex 33. amined from the surrounding circumstances. It is, no doubt, true that in all cas es in which receipt is sought to be taxed as income, the burden lies on the Reve nue to prove that it is within the taxing provision; but once that burden is di scharged, 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 t hereof, 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 w as 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. In the present case, the asseessee has not been able to prove that the s 35. hares were purchased, on 12.11.1999, inasmuch as there is no documentary evidenc e 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, i n 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 G uwahati 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 thr ough bank; but what is disputed is as to whether the long term ’capital gain’, c laimed 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, i n Commissioner of Income Tax Vs. Smt. Jamnadevi Agarwal, reported in 228 ITR 656 , is misplaced. In Smt. Jamnadevi Agarwal (supra), the assesse had produced docu mentary evidence to show that the shares purchased and sold were in conformity w ith the market price prevailing on the respective dates; but this has not been d one in the present case. The Bombay High Court, in its decision, observed as und er : (cid:28)From the documents produced before us, which were also in the possession of the Assessing Officer, it is seen that the shares in question were in fact purchase d by the assessees on the respective dates and the company has confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the s hares to the respective buyers is also established by producing documentary evid ence. It is true that some of the transactions were off-market transactions. How ever the purchase and the sale price of the shares declared by the assesses were in conformity with the market rates prevailing in the respective dates as is se en 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. (cid:29) Thus, the decision of Bombay High Court, in Smt. Jamnadevi Agarwal (supr 38. a), does not support the case of the assesse. The Punjab and Haryana High Court’s decision, in CIT-III, Ludhiana (supr 39. a), also does not support the case of the assessee inasmuch as the transaction o f sale and purchase of shares, in the said case, were as per the value prevalent in stock exchange and the said finding of fact was recorded on the basis of evi dence produced on record. There is no dispute that simply because the transactio ns are off market transaction, the same cannot be a ground to treat the transact ion as a sham transaction. 40. However, in the case in hand, the assesse, although has produced documen tary evidence to show that shares were sold at a price prevailing in the stock m arket on the date of sale, but no documentary evidence were produced to show tha t on the date of purchase, the market price of the shares was same at which the shares were claimed to have been purchased. No doubt, apparent must be considered real until it is shown that there 41. are reasons to believe that the apparent is not real and for that purpose, taxin g authorities are entitled to look into the surrounding circumstances to find ou t the reality and the matter has to be examined and considered by applying the t est of human probabilities. In the present case, the facts that two different addresses were given o 42. f the Companies, one in Gauhati Stock Exchange and the other in the office of Re gistrar of Company, no such Company was found to be in existence at both the pla ces, 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 sh ares of the Company rose from Rs.2.50 to Rs.67.97 within a span of one year, whe n the profit, upon payment of tax of the Company for 3 years, was negligible and no dividend could be declared, because of the inadequacy of profits, coupled w ith the facts that the purchase of shares was made in cash, the share broker fai led to produce the records relevant to the purchase and sale of shares on the gr ound 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 a nd 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 trans action was not genuine and the same was an after-thought and a sort of modus ope randi to convert the undisclosed income into a ’capital gain’. 43. From the facts and circumstances, narrated above, it cannot be said that the 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 acc ount of long term ’capital gain’ is based on no evidence. 44. Having considered the facts and the circumstances and the materials avai lable on record, an inference can be reasonably drawn that in reality, the tran saction was bogus and it was simply a sort of modus operandi to convert the undi sclosed 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 wi ll indicate the disputed queries, the evidence, the pros and cons and, then, rec ord reasons in support of the decision. The practice of recording decisions with out reasons has been deprecated by the Supreme Court, in Esthuri Aswathiah V. CI T, (1967)66 ITR 478(SC) as well as in CIT V. Walchand & Co.(P) Ltd. V. CIT, (196 7)65 ITR 381. 46. In Nawabganj Sugar Mills Co. Ltd. V. CIT, (1972) 86 ITR 44(SC), the Supr eme 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 the assessee, and, then, record its findings on the contentions raised by the asses see 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 review of only one part of the evidence ignoring the remaining evidence, cannot be reg arded as having conclusively determined the questions of fact raised before the Tribunal. 47. Hence, when the Revenue adduced evidence to show that a particular trans action 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 appe ars that the either the Tribunal has misunderstood the statutory language, becau se the proper construction of the statutory language is a matter of law, or it h as arrived at a finding based on no evidence or where the finding is inconsisten t with the evidence or contradictory thereto or it has acted on material, partly relevant and partly irrelevant, or where the Tribunal draws upon its own imagin ation and imports facts and circumstances not apparent form the record, or bases its conclusions on mere conjectures and surmises, or where no person, judiciall y 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 surroun ding circumstances and without applying the principle of human probability, came to conclusion that the assessee had established both purchase and sale of share s by producing copies of bills, credit notes, contract notes, party ledgers, quo tations of shares as on 04.12.2000 and that the transaction was properly entered into the books of accounts, set aside the addition made by the assessing office r 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 boo ks of account was real and the transaction was genuine. The learned Tribunal has simply brushed aside the surrounding circumstances, which created a serious dou bt on the genuineness of transaction. It is highly improbable that a Company, wh ose shares rose by more than 25 times, within a span of one year, is not in exis tence nor the directors of the Company are traceable at the address given. 49. Under such circumstances, we don’t think that the assessing officer comm itted any error in rejecting the claim of assessee and, in fact, applying the te st of human probabilities, the assessing officer rightly concluded that the asse ssee’s claim about the amount, being the long term ’capital gain’, is not genuin e and that said finding arrived at by the assessing officer cannot be said to be a 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, pas sed by assessing officer and the Commissioner of Income Tax (Appeals), in this r egard. Question No.3 50. The assessee had shown Rs.15 lakhs as advance from M/S Venus Hospitals P vt. 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 eac h. The assessee submitted that the possession of the flat was not handed over to the Company, because the Company had failed to pay the remaining amount of Rs.1 lakh. In order to verify the genuineness of the Company, Principal Officer of t he Company, M/S Venus Hospitals Pvt. Ltd., was summoned, under Section 131 of th e Act, but the notice was returned unserved on the ground that no such Company w as found in existence at the said address. The assessee was asked to produce the Principal 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 agreement of purchase of the flat was cancelled in the year 2003 and that the Company had also received back Rs.6 lakhs. The assessing officer asked the Director as to w hy the payment, for purchase of flat, was made in cash and repayment of Rs.3.5 l akh 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 t he assessee, the director could not give any satisfactory reason for the same. T he cancellation agreement of the said flat was also on a plain sheet of paper wi thout having any proper documentary value. The assessing officer enquired from t he 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 wh y a residential flat was proposed for setting up of a Laboratory/Diagnostic Cent re, 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 inc eption. 51. In view of the facts and circumstances, pointed out above, the assessing officer held that the Company appeared to be an entity existing on paper to acc ommodate 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 s ources. 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, t he learned Tribunal held that the transactions, which were made in cash, were re corded in the books of account of the Company. The learned Tribunal also recorde d that there is no finding of the assessing officer that the cancellation agreem ent, prepared on a plain paper, was bad in law. The learned Tribunal further obs erved that since there was a credit of a cheque of Rs.2.5 lakh in bank account o f the Company, it cannot be said that the company was not in existence. Since th e purchaser, with whom the assessee had entered into the agreement, had filed al l the documents like income tax returns, balance sheet, etc., to prove the genui neness of the creditor, the learned Tribunal concluded that the revenue authorit ies were not justified in treating the transaction, in question, as bogus and al so in treating the same as income from undisclosed source. 53. Dr. Saraf, learned Senior Standing counsel, appearing for the Revenue, c ontends that the learned Tribunal reversed the decision of the assessing officer and the Commissioner of Income Tax (Appeals) without any just and reasonable gr ound and/or material. Dr. Saraf submits that the findings of the learned Tribuna l that the transaction was not bogus, without controverting the findings of the assessing officer, is not legally tenable. Dr. Saraf has further submitted that various circumstantial evidence supported the findings of the assessing officer in adding back the amount to the income of the assessee being undisclosed incom e and thereby the order of the learned Tribunal, on this score, too, is liable t o be set aside. 54. Mr. Mazumdar, learned counsel for the assessee, on the other hand, has s upported the decision of the learned Tribunal and submitted that since the trans actions were recorded in the books of account of the Company, the assessing offi cer was not justified in treating the transaction as bogus and in adding back th e amount, received as advance on account of sale of flat, as undisclosed income . 55. The learned counsel for the assesse submits that the advance, given to t he assesse, was duly reflected in the books of account of Venus Hospital Ltd and the said hospital cannot be said to be not in existence inasmuch as it had file d all relevant records like balance sheets, etc., proving genuineness of the tra nsaction. The learned counsel, for the assessee-respondent, has, in this regard, relied upon the decision, in Nemi Chand Kothari V. Commissioner of Income Tax, reported in (2004) 1 GLR 504, wherein it has been held that the creditor’s cre ditworthiness has to be judged vis-à-vis the transactions, which have taken plac e between the assessee and the creditor and it is not the business of the assess ee to find out the source of money of his creditor or of the genuineness of the transaction, which took place between the creditor and sub-creditor and/or credi tworthiness of the sub-creditors, for, these aspects may not be within the speci al knowledge of the assessee. 56. Mr. Mazumdar, learned counsel for the assessee-respondent, has submitted that the burden of the assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transa ctions, which have taken place between the assessee and the creditor. 57. When the facts of the present case are cautiously and carefully examined , it becomes clear that M/S. Venus Hospital Ltd, which had advanced cash loan to the assesse, is an income tax assesse and the transaction was duly reflected in its books of accounts. The said creditor also submitted its income tax return a nd balance sheet to prove the genuineness of the transaction. There can be, no doubt, that in order to establish the receipt of cash credit as required under S ection 68, the assessee must satisfy three important conditions, namely, (i) ide ntity of the creditor; (ii) genuineness of the transaction and (iii) financial c apability of the person giving the cash credit to the assessee, i.e., the credit -worthiness of the creditor. However, the onus of the assesse is limited to the extent of proving the source from which he received the cash credit. The creditworthiness of creditor has to be judged vis-à-vis the transact 58. ion, which had taken place between the assesse and the creditor, and it is not t he burden of assesse to find out the source of creditworthy capacity in order to prove the genuineness of transaction. In Nemichand Kothari (supra), this Court has held as under : (cid:28)If Sections 106 and 68 have to survive together, the logical interpretation wil l be that while the assessee has to prove only his special knowledge, i.e., the source from where he has received the credit and once he discloses the source fr om which he has received the money, he must also establish that so far as his tr ansaction with his creditor is concerned, the same is genuine and his creditor h ad the credit-worthiness to advance the loan, which the assessee had received. W hen the assessee discharges the burden so placed on him, the onus, then, shifts to the assessing officer if the assessing officer wishes to assess the said loan as the income of the assessee from undisclosed source, to prove either by direc t evidence or indirect/circumstantial evidence that the money, which the assesse e received from the creditor actually belonged to, and was owned by, the assesse e himself. If there is direct evidence to show that the loan received by the ass essee actually belonged to the assessee, there will be no difficulty in assessin g such amount as the income of the assessee from undisclosed source ; but if the re is no direct evidence in this regard, then the indirect or circumstantial evi dence has to be conclusive in nature and must, in such circumstances, unerringly point to the assessee as the person from whom the money had actually flown to t he hands of the sub-creditor and, then, routed through the hands of the sub-cred itor to the hands of the creditor. For this purpose, the circumstantial evidence has to be not only consistent with the hypothesis that the money belonged to th e assessee, but that this hypothesis must also be inconsistent with the hypothes is that none other than the assessee owned the said money. If the conclusion be that the money received, as loan, by the assessee may or may not belong to him o r if the possibility exists that the money received, as loan, by the assessee ma y not belong to him, then, in none of such two cases, the loan amount can be con clusively treated as income from undisclosed source of the assessee inasmuch as for assessing the money as income of the assessee from undisclosed source, there must be clinching evidence to show that the money actually belonged to none but the assessee himself. If no such clinching evidence is available, the money may be treated as the income from disclosed source of the creditor or of the sub-cr editor, as the case may be. If the inquiry under Section 68 reveals that though the creditor had the credit-worthiness, on the day on which he had advanced the loan to the assessee, yet the source of the creditor is not genuine, that is to say, though the transaction between the assessee and the creditor is genuine, th e transaction between the creditor and the sub-creditor is not genuine, then, in such a situation , it cannot be read as a corollary nor can it lead to the lone and only conclusion, in the absence of any other material, that the money that has changed hands from the sub-creditor to the creditor was received by the sub- creditor from none other than the assessee himself. (cid:29) 59. Keeping in view the position of law, when we examine the factual matrix of the present case, we find that so far as assesse is concerned, she has establ ished the identity of creditor, namely, Venus Hospital Ltd. The assesse has also discharged its burden, which rested on her, under Section 68 of the Act, by pro ving that the amount, received by her, in cash, by the said creditor, was duly r ecorded in books of account of Venus Hospital Ltd. and the same was examined and verified by the assessing officer. The identity of the said Venus Hospital has also been established inasmuch as it has filed all relevant documents like incom e tax return, balance sheet, etc. Hence, the identity of the creditor and the ge nuineness of transaction have been proved. 60. The burden, therefore, shifted to the assessing officer to prove the con trary. The assessing officer has failed to show, either directly or with the hel p of circumstantial evidence, that the said amount belonged to assessee. In the absence of any such evidence on record, more particularly, the identity of the c reditor and the genuineness of transaction, in question, having been proved, the assessing officer could not have treated the said amount as income derived from undisclosed sources. We, therefore, find no infirmity in the finding arrived at by the learned Income Tax Appellate Tribunal on this score and we, therefore, h eld that the learned Tribunal was justified in deleting the said addition of Rs. 15 lacs. Question No. 4 61. The assessee claimed to have taken advance of Rs. 80,000/- in cash, on 3 0.10.2000, against sale of car. On examination of returns filed upto 2004-05, th e assessing officer observed that the said advance still remained in the hands o f assessee without any car being delivered to the purchaser. The assessing offic er, in the order of assessment, noted that as per the returns of income, filed f or the assessment year 2001-02 to 2004-05, by the assessee, there was no car be longing to the assessee for sale. The assessee did not submit any returns after assessment year 2004-05 till the date of assessment and the said advance amount remained with the assessee. The purchaser of the car was summoned, under Section 131 of the Act, to verify the genuineness of transaction, but he failed to appe ar. 62. In view of the above, the assessing officer added back the aforesaid amo unt of Rs.80,000/- as undisclosed income. The Commissioner of Income Tax (Appeal s) upheld the addition made by the assessing officer. However, on further appeal being preferred, the learned Tribunal deleted the said addition holding that th e said transaction was genuine. The learned Tribunal held, in this regard, that the purchaser of the car was not asked by the assessing officer to be present fo r examination. 63. Upon perusal of the order of the learned Tribunal, it appears that the a ssessee produced the copy of balance sheet filed by the purchaser, wherein the t ransaction was duly recorded. It was further submitted by the assessee that the said car was subsequently sold to another person for a sum of Rs.2.25 lakhs, whi ch was evident from the statement submitted along with the return for the assess ment year 2002-03. From the perusal of assessment order, it appears that the adv ance from the sale of car taken by the assessee, on 30.10.2000, remained in the hands of the assessee. 64. From the evidence produced by the assessee before the authorities concer ned, it appears that advance of Rs.80,000/- was shown by the purchaser in his bo oks of account and the purchaser is also an income tax assessee. Once the identi ty of the purchaser and the genuineness of the transaction is established, the t ransaction cannot be treated as bogus and the amount cannot be treated as an und isclosed income and added back under Section 68 of the Act. 65. In the present case, we find that the identity of creditor, genuineness of the transaction as well as the creditworthiness of the creditor have been es tablished and, in our view, the learned Tribunal was justified in deleting the a ddition of Rs. 80,000/- made under Section 68 of the Act. The order of the learn ed Tribunal, therefore, on this score, is upheld. 66. Because of what have been discussed and pointed out above, this appeal i s partly allowed. We hereby partly set aside the order, dated 18.03.2010, passed by the learned Tribunal in ITA No.166 (Gau) of 2007 and restore the order, date d 09.03.2007, passed by the assessing officer in terms of the conclusions and fi ndings, which we have recorded under Question Nos.1 and 2. 67. osed of. 68. With the above observations and directions, this appeal shall stand disp No order as to costs.