Challenge against Genuineness of Transaction not raised before ITAT does not survive before HC: Karnataka HC [Read Order]
The Karnataka High Court affirmed that the challenge against the genuineness of a transaction, if not raised before the ITAT, does not survive before the High Court
ITAT – ITAT Karnataka – Income tax – Genuine transaction – Karnataka High Court – Genuineness of Transaction – ITAT appeal – taxscan
ITAT – ITAT Karnataka – Income tax – Genuine transaction – Karnataka High Court – Genuineness of Transaction – ITAT appeal – taxscan
In a recent ruling, the Karnataka High Court dismissed a revenue appeal upholding the Income Tax Appellate Tribunal ( ITAT ) decision, which did not accept the revenue's argument about the genuineness of a particular transaction.
The assessee, M/s Jupiter Entertainment Ventures (P) Ltd., had acquired shares of M/s Asianet TV Holdings Pvt. Ltd. at a price of ₹500 per share and later sold these shares at ₹10 per share, claiming the resulting loss as a business loss. The Assessing Officer ( AO ) disallowed the loss, treating it as a capital loss and not a business loss, arguing that the transaction was structured to avoid taxes.
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This was partially upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], who concurred with the disallowance by the AO but allowed other claims. Both the assessee and the revenue approached the ITAT, which ruled in favour of the assessee, holding that the loss was indeed a business loss.
The revenue had challenged the tribunal order on the grounds that the assessee had allegedly employed a colorable device to claim business losses, suggesting that the transaction was not genuine.
However, the High Court bench of Justices S.G. Pandit and C.M. Poonacha, emphasised that the revenue had not raised the issue of the genuineness of the transaction before the ITAT.
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The bench also observed that the High Court could only entertain appeals under Section 260A of the Income Tax Act, 1961, if they involve a substantial question of law. The court noted that the revenue's argument regarding the genuineness of the transaction was not raised at the tribunal level, and no appeal on this specific issue had been filed before the ITAT. Consequently, the court concluded that this issue could not be entertained at the High Court level.
Since the revenue did not contest this aspect at the tribunal level, it could not subsequently challenge it before the High Court.
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The Division Bench of the Karnataka High Court observed that no substantial question of law arose from the tribunal’s order, as the issue was primarily factual and had already been settled by the ITAT.
The High Court upheld this view, noting that no appeal had been filed by the revenue at the tribunal level challenging the genuineness or nature of the transaction as a colorable device.
To Read the full text of the Order CLICK HERE
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