TaxTMI 
TaxTMI 
2012 (4) TMI 324
X X X X Extracts X X X X
X X X X Extracts X X X X
....duly recorded in the books of accounts and consequently, confirming the addition of Rs. 54,43,750/- made by the AO, worked out, without discharging onus, on surmises and conjectures perverse to facts and provisions of law. 3. The ld AO as well as the ld. CIT(A) has erred in law and facts of the case in holding the transfer of shares to M/s. Techpro System Ltd. instead to M/s. Yuthika Commercial Pvt Ltd. as well as working out Short term capital gain on sale of land 4. The ld. AO has erred in law in charging interest u/s 234B (3) of I.T. Act as well as ld. CIT(A) erred in ignoring legal position of Section 234B of Income Tax Act, 1961" 2.2 The assessee company filed the returned income declaring total income of Rs. 23,92,172/-. The search and seizure operation was carried out at the residence of Sh. S.K. Singhal and others on 17.9.2008. The proceedings u/s 153A were initated against the assessee company. The assessee company engaged in the sale and purchase of equity shares of the companies and declaring income from this business. During the year under consideration the assessee company sold out 35000 equity shares of M/s Blossom Automotive Pvt. Ltd.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... dated 17.7.2006 to mitigate short term capital gain in their hands. (e) The learned A.O concluded that the only asset with BAPL was plot of land No.SPP-496-497 IA. Bhiwadi which was purchased on 5.4.2006 for consideration of Rs. 4,01,00,000/-. To avoid stamp duty on sale of land to the Techpro System Ltd. the assessee company sold the entire share holding to the Techpro System Ltd when the book value of plot of land remained the same as before transfer of shares. (f) The learned A.O. considered the manner in which shares of BAPL were transferred to the Kolkotta based companies @ Rs.100/- per share and after lapse of some time the Kolkotta based companies transferred the share holding of BAPL to Techpro System Ltd. @ 318/- per share as a device to avoid tax. (g) The learned A.O. linked the sale value of share @ 318/- per equity share of BAPL with the MOU and the contents of the MOU are as under:- "In the MOU with M/s Techpro Systems Ltd. following terms were agreed upon between the parties: (i) The Techpro will make a payment to the seller and to the other share holders of blossom in proportionate of their share share holding in blossom,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....share and re-transferring of same shares to M/s Techpro System Ltd. @ 318/- per share within a period of 3 months was a sham paper transaction resorted to by the shareholders of M/s BAPL to reduce their capital gain liability. The learned AO vide notice u/s 142(1) issued the questionnaire vide para-5 of the order may kindly be perused. The learned A.O. worked out short term capital gain Rs. 76,21,250/- on sale of 35000 equity shares, even though the learned A.O. in this questionnaire computed net asset value of Rs. 104.84 per equity share after taking into consideration of value of asset i.e. plot of land of Rs. 4,19,38,816/-. On finality quantified short term capital gain of Rs. 54,43,750/- on sale of 25000 equity shares of BAPL." 2.5 Before the AO, the assessee company replied as under:- "(i) No MOU with M/s Techpro Systems Ltd. was signed nor Sh. Prem Kumar Garg was authorized to sell assessee's shares. (ii) As per Annexure "A" of the MOU dated 17.7.2006 with M/s Techpro Systems Ltd.., the assessee i.e. M/s Singhal Credit Management Ltd. has not ;transferred any shares to M/s Techpro Systems Ltd. as the name of the assessee does not appear in Annexure-A. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....om Automotive Pvt Ltd. will answer all the queries. (i) The assessee has basically relied upon annexure "A" of the MOU dated 17.07.2006 by contesting that as per the annexure he has not transferred any share to M\s Techpro System Ltd and has transferred 35000 shares held by it to M\s Yuthika commercial Pvt. Ltd. After the date of MOU i.e. 17.07.2006 the assessee company has received payment for the same on 19.07.2006. There is no denying that the assessee received Rs 25 Lacs vide cheque no. 72949 on 18.07.2006 from M\s Yuthika Commercial Pvt Ltd. however, it is also worth noticing that the Register of share Transfer of M\s Blossom Automotive Pvt Ltd. Seized from the residence of Sh. Surender Kumar Singhal which gives the detail of share transfers along with date of Registration/transfer, date of meeting, particulars of share transferred, transferor and transferee. (Annexure- A) tells a different story. As per the Register of shares M/s Singhal Credit Management Ltd. Transferred 10000 Share on 10.05.2006 & 25000 Shares on 31.07.2006, which he claims where transferred to M/s Yuthika Commercial Pvt Ltd before 17.07.2006 i.e. the date of which MOU with M/s Techpro System....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Commercial Tax Office (154 ITR 148) 1985 that, "Tax planning may be legitimate provided it is within the framework of law, Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dublious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuge." (v) It is more important to see the intention behind the act of a person and is not to be guided as to what appears on the surface. In the case of the assessee as has been found from the facts of the case discussed in the preceding paras that the intention was to transfer plot of land and to save stamp duty and therefore the assessee resorted to transfer of shares instead of selling the plot directly to M/s techpro systems Ltd. At the same time in order to avoid tax liability on account of capital gains the asseesee sold the share @ of Rs. 100/- per share to Kokata based companies instead of @ Rs. 318/- per share to M/s Techpro Systems Ltd. Though the shareholders already had MOU with the said company. From the facts as narrated and discussed in detail in preceding paras ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in some cases like the present one, shares may be merely a mode or a vehicle to transfer some other assets. In the instant case, the subject matters of transfer as contracted between the parties is not actually the shares of a Cayman Island company, but the asset (as Stated Supra) situated in India, The choice of petitioner in selecting a particulars mode of transfer of these right enumerated above will not alter or determine the nature or character of asset." (vii) Fact of case relied upon as above are also similar to case of the assessee. In the case of assessee, subject matter of transfer was an assets in the form 0f plot of land which was transferred through the medium of transfer of shares. From the discussion above, it established that the assets transferred was a plot of land, its sale value was Rs. 127200000/- which was transfer through the mode of shares transfer which too were priced at Rs. 127200000/- (viii) In view of the discussion as above, it is held that the transfer of shares by the assessee along with other shareholder of M/s Blossom Automotive (P) Ltd to Kolkata based companies was sham. In reality it was transfer of shares to M/s Techpro Systems. and the t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d on the individuals but the search warrant was not served on the company through its directors. (b) No requisition of books of accounts was made under section 132A or there no seizure of any assets/ documents/ record of the company. (c) The Panchnama prepared is common and no specific finding or seizure is there against the assessee Company. (d) The search warrant and in Panch Nama the name of Blossom Automotive Pvt. Ltd. has also been mentioned at the address E-127 Industrial Area, Bhiwadi. This company on the date of search was neither having their office at E-127 Industrial Area Bhiwadi nor there was any requisition under section 132A or impounding / search against this company in the premises E-127 Industrial Area, Bhiwadi. Therefore the whole approach of the assessing officer was biased and contrary to the provision of section 132/153A. hence the order passed under section 153 A is bad under law. In support of above we would like to submit the following observation from the judicial ruling: M Trading Corporation v. Asst CIT-020 SOT 0489-ITAT Mumbai J Bench-it has been observed by the honourable Bench as follows: Section 132 of the Income Tax A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d of share transfer register seized from the possession of the assessee company or its director. (ii) The company Blossom Automotive Pvt. Ltd. was not operating or having any office at E-127 Industrial Area Bhiwadi on the date of search. The alleged share transfer register if any impounding from the premises of Blossom Automorive Pvt. Ltd. has not been provided to the assessee for confrontation. (iii) The alleged MOU between Prem Kumar Garg and Techpro System Ltd. was not impounding from the assessee company as the Assessee Company was not a party to it. (iv) In the assessment order the learned AO has not brought on record the contents of alleged MOU with its Annexure which contained the name of the persons who were holding the shares on the date of MOU (i.e. 17.07.2006). Rather when the copy of annexure to said MOU was asked from the assessing officer vide letter dated 25.11.2010, the AO made a remark on the request letter as follows: "May Please be noted that annexure A mentioned in the MOU under consideration in the case of M/s Blossom Automotive Pvt. Ltd. is not found & therefore its not available with the department. There is no other paper other than with regard t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o decide, whether the presumption must be drawn. The expression used in the subsection is 'may be presumed' as is used in section 114 of the evidence Act. 1872. It is not mandate that whenever the books of account are seized. The court shall necessarily draw the presumption, irrespective of any other factors which may dissuade the court from doing so" (x) The learned AO while framing the assessment has proceeded entirely no surmises and junctures. The transaction for sale of shares by the assessee company was a genuine transaction. The company has entered in to transaction for sale of 35000 shares on 28.04.2006, the transfer deed duly executed was delivered for 10000 & 25000 share before 17.07.2006. the transferee being holder in due course have sold their shares to which the assessee is not a party. (xi) The learned AO has not understood the provision of companies Act in respect of share transfer proceedings as provided in section 108 of the companies Act., 1956. the copy of provision of section 108 is enclosed for your ready reference. After execution of transfer instruments dated 05.05.2006 & 14.07.2006 respectively for 10000 & 25000 shares the transfer of shares in favour....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d by learned AO be ascertained from his file. If no inquiry has been conducted by learned AO, it is prayed that the inquiry may kindly be conducted by your kind office, exercising co terminus powers, with an opportunity of AO and to assessee to cross examine the party if being called in person. After the transaction done by the assessee company with the transfree company Yuthika Commercial Pvt. Ltd. Vide instrument dated 5.5.06 & 14.7.2006 respectively for 10000 & 25000 shares, Yuthika Commercial Pvt. Ltd, has done further transaction on 17.10.2006 by selling 55000 shares to Techpro System Ltd. This authentic information was available with assessing officer. The learned AO has not applied his mind, how Yuthika Commercial Pvt. Ltd., could escape from recording short term capital gain in its computation of income for the Assessment Year 2007-08 under the circumstances where subsequent sale was done by Yuthika Commercial Pvt. Ltd. to Techpro Systems Ltd. The assessee company has sold the shares at fair value of the shares as on the date sale. The working of this was submitted to AO. The learned AO has roped in the transaction done by Yuthika Commercial Pvt. Ltd. with Techpro Sys....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Ltd. at the same rate i.e. @ Rs. 318/-per shares, as was decided in MOU dated 17.07.2006 between the erstwhile shareholders of M/s Blossom Automotive Pvt. Ltd. & M/s Techpro System Ltd. Surprisingly and rather interestingly, all the 9 Kolkata based companies authorized same Sh. Prem Kumar Garg to sell their shareholding to M/s Techpro System Pvt. Ltd.. It is interesting to reiterate that Sh. Prem Kumar Garg was also earlier authorized by earlier share holders to sell their shareholding of M/s Blossom Automotive Pvt. Ltd. to M/s Techpro System Ltd. 2. It is quite surprising that when erstwhile shareholders of M/s Blossom Automotive Pvt. Ltd. including that appellant have entered into MOU with M/s Techpro System Ltd. for sell of shares @ Rs. 318/-per share on 17.7.2006, then why on some later date i.e. on 31.7.06, these shares holders will sell the impugned shares to 9 Kolkata based companies that too at a very low rate i.e. @ Rs.100/- per share. Obviously, these facts infer that it is the make believe affair and 9 Kolkata based parties have been brought into the seen only to manage the circuitous route of sale of shares of impugned company so that the profit can be d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f contract note during assessment proceeding or even in the appellant proceeding to support his claim that shares was sold in April 2006. The plea taken for non-execution of contract was the transaction of sell of shares was not routed through recognized stock exchange, as the shares were not listed. However, as per the rules and guidelines, the execution of contract note is required even in the case of off-market transaction of shares. In the absence of contract note, the date of sell of share so claimed is totally unsubstantiated and cannot be accepted. The next best evidence for sell of shares is the delivery of shares by the transferor along with the duly signed share transfer form. The A.R has furnished the copy of the share transfer form to support his claim. Major difference is noticed between the two transactions as seen from the perusal of share transfer form which further proves that 25,000 shares were not sold before the date of MOU. On perusal of copy shares transfer form, it is seen that the share transfer form for 10,000 shares is signed on 10.5.2006, whereas the transfer form for 25,000 shares is signed by the appellant company no 31.7.2006. If both lots of shares we....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... M/s S.N.R. Rubbers Pvt. Ltd. were continuing. Thus argument of the A.R. that share were already sold by erstwhile shareholders including the appellant to Kolkata based company well before 17.07.2006, is baseless. It further strengthen the inference drawn by the AO that introduction of 9 Kolkata based companied in between is just a make believe affair in order to reduce the tax liability. The other argument taken by the A.R. is that A.O. relied upon share transfer register of M/s Blossom Automotive Pvt Ltd. but the copy of same was not provided to him and rather same was not seized. It is to mention firstly that if such register giving details of transfer of share of M/s Blossom automotive Pvt Ltd. is not available with the A.O. then how the A.O. has given the precise and specific details of the transfer of share in the body of the assessment order by way of list -A & B. It is only that the share transfer register may not be exactly or physically in the form of register and/or may not have the heading "Share Transfer Register" superscribed on it, that is why the same seems to be not easily traceable by the present A.O. In any case, without further commenting in this issue, even oth....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f share of M/s S.N.R. Rubbers Pvt. Ltd, the claim of shares of M/s Blossom Automotive Pvt. Ltd. being prior to the MOU is also unsupported and unsubstantiated by the independent evidence. Rather the copy of share transfer form clearly reflects that these shares have been shown to be sold on 31.07.06 by the appellant M/s S.N.R. Rubbers Pvt. Ltd. to Kolkata based party M/s Nandan Mercantile Pvt. Ltd. further as in the earlier two cases there is no any independent evidence of actual payment to the appellant on contented sale of share before 17.07.06.i.e. the date of MOU. Infact, on being asked in the appeal of M/s S.N.R. Rubbers Pvt Ltd., A.R. filed copy of bank statement which reflected the cheques were credited in the bank account of M/s S.N.R. Rubbers Pvt Ltd. on 21.07.06 after the MOU. 9. It Is well known fact that negotiation for the transfer of share by the erstwhile share holders of M/s blossom Automotive Pvt Ltd., with the management of M/s Techpro Systems Ltd. would have been going on for 2-3 months earlier as number of share holders are involved including that of appellant and price of share also need to be negotiated with different share holders and than it h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....zed/ constituted Attorney and M/s Techpro Systems Pvt Ltd. but M/s Blossom Automotive Pvt Ltd. is also is one of the party. Interestingly, one of the director namely Smt. Shika Singhal, of Appellant company M/s Singhal Credit management has signed the MOU in the capacity of authorized representative of M/s Blossom Automotive Pvt. Ltd. More ever as per the MOU, Sh. Prem Kumar Garg & the other directors of Blossom automotive Pvt Ltd., are willing to resign from the directorship of the company as mentioned in the para 5 of the MOU. Thus it also proves that the other directors of M/s Blossom Automotive Pvt Ltd. out of which, some of them are also directors of the appellant company and other two companies of the same group under appeal, were in the knowledge of the MOU. The A.R. has furnished list of certain listed companies to support the argument that the share price movement is not based n valuation but is on market sentiments. The argument is devoid of any merit in view of fact firstly the appellant gas taken example of only few listed companies that too the companies not having similar activities as that of M/s Blossom Automotive Pvt. Ltd. Secondly out of the two companies dealing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... could not be disturbed. Assistant Commissioner of Income tax v. Srj Peety Steels (P) Ltd. (ITAT Pune) - Decision annexed as annexure-X 1. The assessee company sold out 35000 equity shares of Blossom Automotive Pvt. Ltd for consideration of Rs. 100/- per share to M/s Yuthika Commercial Pvt. Ltd. on 28.4.2006 vide common bill, which were purchased for consideration of Rs. 10 per share and paid premium of Rs. 90/- per share. The assessee company received consideration of Rs. 10,00,000/- against sale of 10000 equity share on 28.4.2006 and signed the transfer deed. The payment of remaining share of 25000 was received through cheque which was cleared on 19.7.2006 and signed the share transfer deed at the time of receipt of cheque in routine manner and business policies of the company. The assessee company was bound to sale equity share of Blossom Automotive Pvt. Ltd. in accordance to sale bill raise and consent given by the buyer before 17.7.2006. Although assessee was not aware about rise in share of Blossom automotive Pvt. Ltd. at the time of sale. 3. The learned A.O. disbelieved the sale of share before MOU as the 25000 equity share of Blossom Automotive Pvt. Ltd. were got t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... brought on record any contrary evidence in making addition of 54,43,720/-. The onus cast upon the revenue in making any addition, which factor totally absent. 4. The allegation of the A.O. that the major share holding of M/s Blossom Automotive Pvt. Ltd. in the control of Sh. S.K. Singhal and his associate and Sh. Prem Garg and his associates keeping in mind that 3,82,000/- equity shares were transferred to 9 Kolkotta based companies @ 100/- per share just before the MOU dated 17.7.2006 to mitigate short term capital gain in their hands. The A.O not disbelieve the identity of the buyer of equity share of Blossom Automotive Pvt. Ltd. genuineness of transaction of sale proceeds received by the seller of share. The sale proceeds of share by the assessee company realized before receipt of sale proceed of shares of Blossom Automotive Pvt. Ltd. by Yuthika Commercial Pvt. Ltd. to M/s Techpro system Pvt. Ltd. The learned A.O. recognized the sale proceeds of Rs. 25,00,000/-but remarked in the order "it can not be said that the sale proceed of Rs. 25,00,000/- actually against the sale of equity share Blossom Automotive Pvt. Ltd.." Then the A.O. was duty bound to ascertain nature of rec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the addition made by the A.O. The learned CIT(A) also followed the AO's views without evidences and sustained the addition. Finally it is submitted that the search operations were carried out at the residence of Sh. S.K. Singhal and Office premises. During the course of search operation intensive investigation were made even after search. In case any asset traced out, out of books then it can be said the assessee company acquired the said asset out of diverted funds of short term capital gain. The search party not brought on record any single asset out of books. Even cash balance also tallied with books as on date of search. It is not easy to make presumption of diversion of short term capital gain to avoid taxes without evidences. In view of the above submissions it is prayed before your honour kindly delete addition and allow the relief for which the assessee company is lawfully entitled.'' 2.11 The ld. DR has submitted as under:- ''The respondent herein submits the following written arguments in addition to the verbal arguments to be taken during the course of hearing in the above appeals: 2. The main issue in these 3 appeals is related to the sale of shares of a com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....believe' arrangement involving 9 Kolkata based companies. On paper, it was claimed that the shares by Sh. S.K. Singhal and his associates were initially sold to 9 Kolkata based companies @ Rs. 100- per share and subsequently Kolkata based companies sold the share to M/s Techpro Systems Ltd. @ Rs. 318/- per share. There are several evidences which conclusively prove that this was a make believe arrangement and the transactions were pre-determined. First and foremost evidence is' Register of Share Transfer' of M/s Blossom Automotives Pvt. Ltd. seized from the residence of Sh. Surendra Kumar Singhal which gives the details of share transfers alongwith date of registration/transfer, date of meeting, particulars of share transferred, transferor and transferee. (Annexure- A to the assessment order). According to this, only 74,000 shares were transferred by the associates of Sh. S.K. Singhal on 10.05.2006 and the majority shares numbering 3,08,000 were transferred on 31.07.2006. This shows that the majority of shares i.e. 3,08,000 were transferred to Kolkata based companies after the MoU dated 17.07.2006 had been entered into with M/s Techpro Systems Ltd. From this, it was clear that tran....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hare holders of BAPL earned capital gain of Rs. 8,71,00,000/- (12,72,00,000/- - 4,01,00,000/-) on this transaction of sale of land. The short term capital gain on this transaction was allocated by the A.O in the hands of the share holders in proportion to their share holding in the BAPL. The addition made in the hands of these three assesses are as follows: (1) Singhal Securities Pvt. Ltd. = 50,000 x 8,71,00,000/- = 1,08,87,500/- 4,00,000 (2) Singhal Credit Management Pvt. Ltd. = 25,000/- x 871,00,000/- = 54,43,750/- 4,00,000/- (3) SNR Rubber Pvt. Ltd = 51,000/- x 8,71,00,000/- = 1,11,05,250/- 4,00,000/- 4. Against the above additions the assessees filed appeal before CIT(A)-Central, Jaipur. Ld. CIT(A) considered the various arguments of the assessees thoroughly and confirmed the order of the A.O by rejecting the contentions of the assessee in detail. The detailed reasoning given by Ld. CIT(A) are given in para 9 of his order for all these three assessees. 5. Now, the assessees have filed these appeals against ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee. Even in the warrant of authorization, the address of the place to be searched was not the address of the assessee individual. But, here the warrant is issued in the name of the assessee and the address of the premises searched is also the official address of the assessee viz. E-127, Industrial Area, Bhiwadi. The panchnama is prepared for the search operation conducted at this premises and the name of the assessee very much appears in the panchnama (copy of the search warrant and the panchnama are placed at APB pages 1 to 8). In view of these facts, it is clear that a valid search and seizure operation has been conducted u/s 132 and the order u/s 153A passed by the A.O is as per law. 7. Ground no. 2 and 3: In these grounds, the assessee has objected to the action of Ld. CIT(A) in upholding the addition of capital gain made by the A.O. During the first appeal stage, the assessee put forth a number of arguments against the merit of the additions made. Ld. CIT(A) has carefully considered all these arguments and has rejected all of them by giving detailed reasoning. These reasonings have been given by Ld. CIT(A) in his order in paras 9 and 9.1 to 9.10/9.11/9.12 in cases of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee company was not shown as the owner of the shares of BAPL. The assessee has filed a copy of this Annexure A on page-19 of APB(For M/s Singhal Securities Ltd. In this respect, it is submitted that during the assessment proceedings, the assessee asked for a copy of such Annexure 'A' to this MoU but the AO had clearly written on the same letter(APB pg. 22) that in the MoU found by the Department there was no such Annexure 'A'. Now, this Annexure 'A' submitted is made up by the assessee and has no evidentiary value. It may also be noted that the main MoU is signed by three persons but on this Annexure 'A' the signature of the third person-Smt. Shikha Singhal is not there. (iii) It is claimed that the AO made inquiries from Techpro System Ltd. about the transactions between Kolkata companies and Techpro Systems Ltd. and this company confirmed these transaction but the AO did not provide the copies of such replies given by TSL. In this regard, it is submitted that on paper the shares of BAPL are shown as sold to the Kolkata companies who are in turn shown to have sold them to Techpro Systems Ltd. The main allegation of the AO is that all these transactions are sham transa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in themselves may be an asset in some cases like the present one, shares may be merely a mode or a vehicle to transfer some other asset(s). In the instant case, the subject matter of transfer as contracted between the parties is not actually the shares of a Cayman Island Company, but the assets (as stated supra) situated in India. The choice of the petitioner in selecting a particular mode of transfer of these rights enumerated above will not alter or determine the nature or character of asset". On the basis of this decision, the A.O has held that the mode of transfer of an asset is not determinative of the nature of the asset and therefore, he has concluded that the transfer of shares by the shareholders of BAPL was used as a tool by the shareholders for transferring the plot of land to M/s TSL. In the alternative, it is submitted that even if the addition is not treated as capital gain on the sale of plot of land of BAPL still the addition may be sustained as capital gain on the transfer of shares by the shareholders of M/s BAPL @ Rs. 318 per share to M/s TSL by considering the colourable device adopted by these shareholders as discussed above. (vii) The assessee has sta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o Systems Ltd. may have been recorded in the books of account of various parties and documents must have been prepared in support of such transactions but the case of the Department is that all these transactions and documentation are a colourable device to disguise the real transaction of transfer of land of BAPL to M/s Techpro Systems Ltd. (ix) The assessee has claimed that it is not the case of the Department that the assessees have received any income/amount/benefit from M/s TSL or from the Kolkata companies and the addition is based on the conjecture that the transaction was between the assessees and M/s TSL. In this respect, it is submitted that it is not required for the Department to prove that the assessees received some income/amount/benefit from the Kolkata companies. What is important is that the facts of this case suggest that the assessee group has used a colourable device to avoid payment of tax which cannot be allowed. In the case of CIT v. Durga Prasad More 82 ITR 540, Hon'ble Supreme Court held that "the apparent must be considered real only if it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... only is authorized by this Kolkata based company to further sell their shares of BAPL to Techpro Systems Pvt. Ltd. @ Rs. 318 per share. A copy of resolution passed by this company is enclosed at page 73 of Department's paper book. Is it not fishy or surprising that I sell my share to somebody @ Rs. 100 per share and then the same somebody authorizes me to further negotiate the sale of these shares and sign the transfer deed and other documents and for that somebody I sell the shares @ Rs. 318 per share ? (iv) Sh. Prem Kumar Garg is the power of attorney holder for many of the individuals of this group (pg. 54 to 69 DPB) who sold their shares to the Kolkata companies @ Rs. 100 per share and he is the power of attorney holder of all these 9 Kolkata companies also (pg. 70 to 73 DPB) for whom he is shown to have negotiated a rate of Rs. 318/- per share with Techpro Systems Ltd. Such involvement of one person clearly shows that all these transactions have been managed and manipulated to transfer capital gain from the shareholders of BAPL to the Kolkata companies who either did not have to pay any tax on these transactions or paid very less tax. The above unusual and improbable in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....value of the plot and by reducing the cost of plot, the profit was determined at Rs. 8.71 crores. Thus the profit is on 4.00 lacs shares. The AO accordingly computed the Short term capital gain of Rs. 54,43,750/- as per calculation given in the assessment order. Capital gain : AxB C =8,71,00,000x25,000 4,00,000 = Rs. 54,43,750/- A = Total Short term capital gain earned by the shareholders. B = No. of share held and transfer by the assessee C = total shares of M/s. Blossom Automotives Pvt. Ltd. which has been transferred to M/s. Techpro System Ltd. In the written submission, the ld. DR has heavily relied upon the fact that Short term capital gain has arisen in the hands of the Shri S.K. Singhal and his associates. When the private limited company is incorporated then person behind such private limited company will approach some other persons who may became a co-associate and then they persuade their known persons to acquire shares of private limited company. Looking to the business acumen of the promoter, other known persons b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed 14-07-2006 was received on 15-07-2006. In the case of transfer of shares, the transfer took place as and when the shares were delivered. It is not necessary that there should be a contract note. When a person wants to gift the shares then he can hand over the transfer deed alongwith share certificates to the donee. This system was prevalent when shares were in the paper form. It was a normal practice that blank deed which is to be given to the buyer. In case the buyer wants to sell it before getting it transferred in his name then he can sell those shares without getting his name registered as shareholder in the company register. The Hon'ble Apex Court in the case of Howrah Trading Co. Ltd. v. CIT [1959] 36 ITR 215 recognised the validity of 'Blank Transfers'. The name of the transferor is entered and the transferor signs the transfer with the share scrip annexed and hands it over to the transferee who if he chooses, may complete the transfer by entering his name and then apply to the company to register his name in the place of that of the transferor. 2.14 It is interesting to note that all the shares of M/s. Blossom Automotives Pvt. Ltd. have been purchased at Rs. 318/-per ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h has not been noticed by Azadi Bachao. Our Analysis 58. Before coming to Indo-Mauritius DTAA, we need to clear the doubts raised on behalf of the Revenue regarding the correctness of Azadi Bachao (supra) of the simple reason that certain tests laid down in the judgments of the English Courts subsequent to The Commissioners of Inland Revenue v. His Grace the Duke of Westminster [1935] All E.R. 259 and W.T. Ramsay Ltd. v. Inland Revenue Commissioners (1981) 1 All E.R. 865 help us to understand the scope of Indo Mauritius DTAA. It needs to be clarified, that, Mc Dowell dealt with two aspects. First, regarding validity of the Circular(s) issued by CBDT concerning Indo-Mauritius DTAA. Second, on concept of tax avoidance/evasion. Before us, arguments were advanced on behalf of the Revenue only regarding the second aspect. 59. The Westminster principle states that, "given that a document or transaction is genuine, the court cannot go behind it to some supposed underlying substance". The said principle has been reiterated in subsequent English Courts Judgments as "the cardinal principle". 60. Ramsay was a case of sale-lease back transaction in which gain was sought to be count....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 64. The majority judgment in Mc Dowell held that "tax planning may be legitimate provided it is within the framework of law" (para 45). In the latter part of para 45, it held that "colourable device cannot be apart of tax planning and it is wrong to encourage the belief that it is honourable to avoid payment of tax by resorting to dubious methods". It is the obligation of every citizen to pay the taxes without resorting to subterfuges. The above observations should be read with para 46 where the majority holds "on this aspect one of us, Chinnappa Reddy, J. Has proposed a separate opinion with which we agree". The words "this aspect" express the majority's agreement with the judgment of Reddy, J. only in relation to tax evasion through the use of colourable devices and by resorting to dubious methods and subterfuges. Thus, it cannot be said that all tax planning is illegal/illegitimate/impermissible. Moreover, Reddy, J. himself says that the agrees with the majority. In the judgment of Reddy, J. there are repeated references to schemes and devices in contradistinction to "legitimate avoidance of tax liability" (paras 7-10, 17 & 18). In our view, although Chinnappa Reddy, J. mak....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aining the value of the shares. The share is bundle of right and is distinct from the assets of the company. Share also refers to the voting power and in case the assessee is having more than the particular number of shares then it can have a controlling interest. In Vodafone International Holdings B.V. case (supra), the Hon'ble Apex Court observed it was ''a share sale'' and not an asset sale. A 'sale' may take various forms. Accordingly tax consequences will vary. The tax consequences of a share sale would be different from the tax consequences of an asset sale. A slump sale would involved tax consequences which could be different from the tax consequences of sale of assets on itemized basis. The Hon'ble Apex Court in the case of Vodafone International Holdings B.V. (supra) has observed that :- "(16) A transaction has to be viewed from a commercial and realistic perspective and it has to be determined whether it is a 'share sale' or an ''asset sale'' because the tax consequences of a share sale would be different from the tax consequences of an asset sale. A slump sale involves tax consequences which could be different from the tax consequences of a sale of assets on itemized ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctions. The MOU was acted upon and there is nothing on record with the company which purchased the shares from the assessee company and has passed on money from M/s. Techpro System Ltd. to the assessee 2.17 We do agree that the revenue has a right to pierce the veil. However, for that purpose, the revenue is required to collect the evidence to show that what is apparent is not real. The AO obtained the Annexure for the MOU from M/s. Techpro System Ltd. u/s 133(6) of I.T. Act. In that Annexure, the name of the assessee is not appearing. The AO has neither examined any director of M/s. Techpro System Ltd. or director the assessee company. The date of 31-07-2006 as appearing in the transfer form does not conclusively suggest that the shares were transferred on that date. This is also evident from the fact that the assessee company received consideration in his bank account on 19-07-2006. The AO has not examined Shri Pawan Kumar Garg who acted on behalf of other shareholders for the sale of the shares of the assessee company to M/s. Techpro System Ltd. There is also no evidence to suggest that Calcutta based companies were in any way connected with M/s. Singhal Credit Group or with ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Act. The charging of interest is mandatory and the assessee will get the consequential relief. ITA No. 854/ JP/2011 - Singhal Securities (P) Ltd. 3.1 The ground of appeal raised by the assessee are as under:- ''1 That the ld. CIT(A) has erred in law as well as facts by holding that the order passed u/s 153A r.w.s. 143(3) is not suffering from any infirmity and not bad in law 2. That the ld. CIT(A) has erred in law as well as facts by not recognizing the sale of 50000 equity shares of M/s. Blossom Automotives Pvt. Ltd. @ Rs. 100/- per share duly recorded in the books of accounts and consequently, confirming the addition of Rs.1,08,87,500/- made by the AO, worked out, without discharging onus, on surmises and conjectures perverse to facts and provisions of law. 3. The ld AO as well as the ld. CIT(A) has erred in law and facts of the case in holding the transfer of shares to M/s. Techpro System Ltd. instead to M/s. Nandan Mercantile Pvt Ltd. as well as working out Short term capital gain on sale of land 4. The ld. AO has erred in law in charging interest u/s 234B (3) of I.T. Act as well as ld. CIT(A) erred in ignoring legal ....