AO and CIT(A) are Quasi Judicial Authorities Employed for Execution of Income Tax Act: ITAT slams ‘Suspicious Transactions’ made by Assessee [Read Order]

The Assessing Officer as well as the CIT(A) who are quasi-judicial authorities employed for execution of the provisions of the Income Tax Act.”

The Pune Bench of the Income Tax Appellate Tribunal (ITAT), slammed ‘suspicious transactions’ made by assessee, Abhishek Ashok Lohade, and ruled that Assessing Officer (AO) and Commissioner of Income Tax (Appeals) (CIT(A)) are quasi-judicial authorities employed for execution of Income Tax Act, 1961.

The appellant is an individual deriving income from the execution of contracts etc. The AO denied the claim for exemption of capital gains under Section 10(38) of the Income Tax Act amounting to Rs.50 lakhs by holding that the transactions of purchase of shares of SRK Industries Ltd. and subsequent sale is nothing but a bogus transaction by relying upon the investigation report by the Investigation Wing of the Department and the Securities & Exchange Board of India (SEBI).

The appellant was also provided the copy of statements recorded by the Investigation Wing of the Department, alleged to be involved in providing accommodation entries bogus long term capital as set out in the assessment order.

During the course of assessment proceedings, the appellant had failed to substantiate that the transactions of purchase and sales of shares is genuine one. In the circumstances, the Assessing Officer brought to tax the sale proceeds of the shares as unexplained cash credit and completed the assessment.

Being aggrieved by the order of assessment, an appeal was filed before the CIT(A) contending that the assessee had proved the genuineness of the transactions of purchase and sales of shares. However, the CIT(A) had confirmed the action of the Assessing Officer invoking the doctrine of test of human probability.

Human Probability test is one of the important test laid down the highest court of India in order to check genuineness of the transactions entered into the books of account of the assesses.

During the course of assessment proceedings, the Assessing Officer noticed that the appellant had indulged in suspicious “suspicious transaction relating to long term capital gains on sale of shares” and relating to claim of appellant for exemption of Rs.51 lakhs under Section 10(38) of the Income Tax Act and sale of shares of M/s SRK Industries Limited.

A Bench comprising Inturi Rama Rao, Accountant Member and SS Viswanethra Ravi, Judicial Member lashed against the assessee and commented that “The principle of fraud can be squarely applied to the facts of the present case and principles of natural justice have no application. Applying the said doctrine, the transaction of purchase and sale of shares of SRK is void ab-initio, this is nothing but sham, make believe and colourful device adopted with excellent paper work with intention bringing the undisclosed income into books of account.”

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