TaxTMI 
TaxTMI 
2018 (10) TMI 241
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..... noted that during the year, the assessee had capital gain of Rs. 33,92,84,278/- from the sale of shares of Krizm Hotels Pvt. Ltd. The assessee has also claimed to have incurred an almost matching short-term capital loss of Rs. 30,14,64,010/-. The assessee was asked to give the chart of transaction of sales and purchase of shares during the year, which assessee has filed and the same has been reproduced by the A.O. at page-2 of the assessment order. The A.O, therefore, noted that assessee has incurred loss of Rs. 5.4 crores on the shares of Cryo Bank International Pvt. Ltd., loss of Rs. 4.2 crores on the shares of Universal Airways Pvt. Ltd., a loss of Rs. 15.55 crores on Devyani Foods Indl. Pvt. Ltd., a loss of Rs. 4.49 crores on the sale of shares of DG Agro Pvt. Ltd., All the above companies are related parties of the assessee-company and the assessee-company has invested in them in the month of August/September/November, 2008 accordingly. The sales of the same to the various sister concerns have happened in the month of March, 2009. The above transaction, therefore, appeared to be abnormal and with an intent of creating a loss. The assessee was asked to give the book values....
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....e respective companies along with required documents were filed. The A.O. has not pointed out any irregularity in any of the transactions conducted by the assessee-company. The A.O. in the assessment order has concluded that the assessee-company has subscribed to the shares at a very high value or has sold shares of the company at a consequently low value without appreciating the fact that the shares were purchased at the price which was approximately the break-up value per share as per their latest balance-sheet and also shares were generally allotted at par value or in a case premium was charged, then, such premium was charged from all the share applicants and also the shares were sold at rate which was approximately equal to the breakup value per share and the balance-sheet of the companies were also filed before A.O. along with calculation of break-up value per share and therefore, there was no discrepancy whatsoever in the rates of purchase or sales. All the parties filed reply before A.O. under section 133(6) along with bank statements of the concerns to whom share application money was paid by the assessee. The A.O. failed to appreciate that sale/purchase of shares was on in....
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....f M/s. Devyani Food Industries Private Limited as per its Audited Balance Sheet as on 31.03.2009 along with copy of Audited Balance Sheet for Financial Year 2008-09. 4. Copy of Statement showing the market value of equity shares of M/s. DJ Agri Industries Private Limited as per its Audited Balance Sheet as on along with copy of Audited Balance Sheet for Financial Year 2008-09. 5. Copy of Statement showing the market value of equity shares of M/s. Universal Dairy Products Private Limited as on 31.03.2009 along with copy of Audited Balance Sheet for Financial Year 2008-09." 4. The assessee submitted that there was sufficient cause for not filing the additional documents before A.O. and relied upon the decision of the Hon'ble Delhi High Court in the case of CIT vs. Virgin Securities and Credits Pvt. Ltd., (2011) 332 ITR 396 (Del.) and submitted that capital loss was incurred through genuine transaction and purchase/ allotment of shares were duly supported by purchase bills/ allotment advice. The A.O. made the addition merely on assumption. The A.O. cannot sit in the chair of businessman and dictate as to how the business is to be transacted. The assessee-company i....
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....m, financing and also engaged in investment activities. During the relevant year, the appellant company earned long term capital gain of Rs. 33.92 Crores on sale of assets, land and building and short term capital loss of Rs. 30.14 Crores on sales of shares. 6.2. The first issue in the aforesaid appeal is in respect of admission of additional evidences and this matter needs to be adjudicated first. The appellant company on 07.12.2012 filed certain documents as additional evidence along with application under Rule 46A of the Income Tax Rules. The documents filed as additional evidences consisted of the statement showing the market value of equity shares of various companies sold by the appellant company during the year along with the Audited Balance Sheet for Financial Year 2008-09 in support of the valuation of equity shares. The reason that the appellant company gave that such documents were not filed before the AO during assessment proceedings is that such documents were not called for during assessment proceedings. The learned AR of the appellant company submitted that the AO in the assessment order concluded that the appellant company has sold the shares at a significa....
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.... DCIT, Central Circle 12, New Delhi and duly verified the contents of the file at the time of appeal proceedings on 29.01.2014. On going through the file, I have verified that notice u/s 133(6) was sent by the AO to the various companies and replies have been received from the following companies which included their Balance Sheet for year ended 31.03.2009 and bank statement along with other documents :- a) Cryobank International India Pvt. Ltd., b) Universal Airways Pvt. Ltd., c) Devyani Food Industries Pvt. Ltd., d) D.J. Agri Industries Pvt. Ltd., e) Universal Dairy Products Pvt. Ltd., 6.6. I have gone through the matter and I am of the opinion that the additional evidence filed by the appellant company during the year under the appeal proceedings were already in possession of the A.O. while passing the assessment orders. It is only the statement prepared by the appellant company showing the market value of the shares based on the Balance Sheet of the company which was not available with the AO. However, the aforesaid statement has been prepared on the basis of the provisions of the wealth tax act and such exercise would have ....
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....peal and had a direct bearing on the quantum of claim made by the assessee, plea of the assessee which was taken before the Assessing Officer remains the same. The Assessing Officer had taken adverse not because of nonproduction of certain documents to support the plea and it was in these circumstances, the additional evidence was submitted before the CIT(A). It cannot be said not is it the case of the revenue that additional evidence, Rule 46A of the Act permits the CIT(A) to admit additional evidence if he finds that the same is crucial for disposal of the appeal. In the facts of this case, therefore, we are of the opinion that on this aspect, no substantial question of law arises." That where the additional evidence is crucial for disposal of the appeal then the same shall be admitted. Accordingly in the present appeal the additional evidence filed by the appellant company is being admitted under rule 46A due to the reason that the aforesaid documents were already in procession of the AO and also because such documents are crucial for the disposal of the appeal. After admitting the additional evidence, ground is decided hereunder. 6.8. On issu....
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....anies. Further the share certificates have been issued to the appellant company in support of the purchase of the shares and such information has been directly verified by the AO from the various parties under section 133(6) of Income Tax Act which are available in the assessment folder duly verified by me and photocopies of covering letter from 5 parties taken and kept in the appeal file. Also the payment for the aforesaid shares have been made by the appellant company by way of account payee cheques either in earlier years or during the year under appeal within reasonable time. 6.12. The transaction of investments in shares has already been verified by the AO u/s 133(6) of Income Tax Act from the various investee companies and the companies have filed the following documents :- a) Copy of share application form in support of subscription received from the appellant company and also the share certificates issued in favour of the appellant company. b) Extracts of shareholders register wherein the shareholding of the appellant company is duly reflected. c) Bank statement of the companies evidencing receipt of share application money from the appel....
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....009 Universal Dairy Products Private Limited 5.08 4.00 23/9/2008 6.16. On going through the aforesaid chart it will be seen that in most of the cases the price at which the shares have been sold by the appellant company is substantially higher to the market value of such shares. In few cases, the transaction for sale have been made at a price which is close to the market value and such transactions may have been made at that price due to business considerations after negotiations between the parties. 6.17. I have verified the assessment records for A.Y. 2009-10 and find that the Ld. AO to verify the market value of shares of 5 companies mentioned above issued notices u/s 133(6) dated 05.12.2011 to furnish the Balance Sheet for year ended 31.03.2009 along with other details and necessary replies dated 13/14/15 December, 2011 were duly received (a copy thereof obtained and placed in appeal file) and thus the market rate stands verified by independent enquiries. 6.18. On going through the evidences as discussed above and also the calculation of market value at which shares have been sold by the appellant company, I am of the considered opinion th....
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....that the AO cannot sit in the chair of businessman and dictate as to how the business is to be transacted. Relying on the order of the Hon'ble Supreme Court in the case of S.A. Builders Ltd. Vs. CIT reported in 288 ITR 1 and Hon'ble Delhi High Court in the case of CIT vs. Dalmia Cement (B) Ltd. 254 ITR 377, I hold that it is for the businessman to take such business decisions as are prudent for his business and the revenue cannot put itself in the armchair of the businessman or in the position of the Board of Directors. 6.24. Therefore I conclude that the share transactions carried out by the appellant company resulting in short term capital loss of Rs. 301464010/- represents genuine transaction and I delete the disallowance of loss of Rs. 301464010/-. 6.25. As regards the contention of the AO that the loss on purchase of sale of shares would amount to speculation loss within the meaning of Explanation to Section 73 of the Income Tax Act, the learned AR of the appellant company has mentioned that the appellant company was carrying out investment in shares and was not engaged in the business of trading in shares. As per the contention of the learned AR of the appel....
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.... has been correctly deleted by the Ld. CIT(A). 8. We have considered the rival submissions and perused the material available on record. The assessee company is admittedly engaged in trading in beverages, icecream, financing and investment etc. The assessee-company filed certain additional evidences before Ld. CIT(A) under Rule 46A which consisted of statement showing the market value of equity shares of various companies sold by the assessee company during the year along with relevant audited balance sheet in support of the valuation of equity shares. The assessee-company submitted that such documents were not called for by the A.O. Ld. CIT(A) called for the remand report from the A.O. However, it was not filed. Ld. CIT(A) noted that additional evidences were primarily audited balance sheet of various companies whose shares were sold by the assesseecompany at a loss during the year. On that basis, statement was prepared to compute market value of shares at the time of sale. These documents are also part of the record because these parties have directly submitted these documents before A.O. in pursuance of notice issued under section 133(6) by the A.O. Ld. CIT(A) found the conte....