TaxTMI 
TaxTMI 
2018 (12) TMI 1822
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....to appreciate that there was no specific relevant, reliable and tangible material on record to form a "reason to believe" that income of the appellant had escaped assessment and in view thereof the proceedings initiated are illegal, untenable and therefore unsustainable. 1.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that reasons recorded mechanically without application of mind do not constitute valid reasons to believe for assumption of jurisdiction u/s 147 of the Act. 1.3 That in absence of any valid approval obtained under section 151 of the Act, initiation of proceedings u/s 147 of the Act and assessment framed u/s 147/143(3) of the Act are invalid and deserve to be quashed as such." 1.4 That the learned Commissioner of Income Tax (Appeals) had failed to appreciate that the statement recorded in the course of survey has no evidentiary value and therefore, such statement so recorded could not be relied upon and in absence of any other tangible material to form an opinion that income of the assessee has escaped assessment and therefore, edifice of the present proceedings was factually and legally misconceived and hence unsustainable. 1....
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....llowance so upheld is absolutely unwarranted. 3. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding a disallowance of Rs. 24,25,83,400/- on account of loss on sale of commercial space to M/s Laurel Infrastructure Pvt. Ltd. 3.1 That here too, the finding of the learned Commissioner of Income Tax (Appeals) that the transactions of sale of commercial space are nothing but structured transactions in order to incur capital loss and with the sole purpose of incurring the loss, are based on factually and legally misconceptions and in any case are irrelevant consideration so as to determine the liability of loss claimed by the appellant company. 3.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that all what is relevant to determine the eligibility of loss claimed by the appellant is incurring of loss in as much as that assessee should have owner of a capital asset and assessee must transfer a capital asset and since both the facts are not in dispute, the alleged purpose behind the capital asset in the year under consideration are irrelevant and extraneous considerations and as such, denial of loss cl....
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....cer consequently reopened the assessment by issuing a notice U/s 148 of the Act on 31/3/2016. The Assessing Officer completed the assessment U/s 143(3) read with Section 147 of the Act on 22/12/2016 and disallowed the claim of set off of short term capital loss and also made disallowance of transfer expenses. Thus, the total income of the assessee was assessed at Rs. 66,29,69,740/-. 4. The assessee challenged the action of the Assessing Officer before the ld. CIT(A) and also raised the issue of validity of reopening. The ld. CIT(A) granted part relief to the assessee, therefore, both the assessee and the department have challenged the impugned order by filing cross appeals before the ITAT. 5. Before us, the assessee has challenged the validity of reopening of the assessment on various legal objections: (i) The assessment was reopened merely on the basis of information of the Investigation Wing without application of independent mind by the Assessing Officer to form the belief that the income assessable to tax has escaped assessment thereby the reopening is based on borrowed satisfaction. (ii) The approval granted U/s 151 of the Act is not valid as the same is mechanical witho....
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....how that the claim of short term capital loss is bogus or the transactions are not genuine. The ld. counsel for the assessee has relied upon the following decisions: (i) Pr.CIT Vs. G&G Pharma India Ltd. 384 ITR 147 (Del). (ii) Pr.CIT Vs. RMG Polyvinyl (I) Ltd. 396 ITR 5 (Del) (iii) Pr.CIT Vs. Meenakshi Overseas (P) Ltd. 395 ITR 677 (Del) (iv) Rajiv Agarwal Vs ACIT 395 ITR 255. (v) Sree Meenakshi Mills Ltd. Vs Commissioner of Income-tax. 7. On the other hand, the ld CIT-DR has submitted that the enquiry conducted by the DDIT(Inv), Faridabad reveals the fact that the alleged transaction of application money and transfer of the property between the related parties are only accommodation entries to create artificial loss to be set off against the taxable income of the assessee. The Director of the assessee company as well as the group copies accepted the bogus claim in their statements recorded by the Investigation Wing and therefore, the report of DDIT(Inv), Faridabad constitute a tangible material to form the belief that the income assessable to tax has escaped assessment. The ld. CIT-DR further contended that when there is no original assessment in the case of the a....
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....t regarding the investment in subscription of 4,40,000 shares of M/s HH Interior and Auto Component Pvt. Ltd. in respect of which the assessee paid Rs. 29.70 crores as call money towards the allotment of shares and payment of final call money of Rs. 9.90 crores was due when the assessee transferred those 4,40,000 shares of M/s HH Interior and Auto Component Pvt. Ltd. to the group company M/s Sharash Finance & Investment Co. P. Ltd.. The third transaction was sale of commercial space in Prestige Mall at Shivaji Place, District Centre, Main Ring Road, Raja Garden, New Delhi to M/s Loral Infrastructure Pvt. Ltd. was also part of return of income and duly recorded in the books of account of the assessee. These transactions were very much in the knowledge of the Assessing Officer at the time of processing of return of income U/s 143(1) of the Act when an adjustment on account of short term capital loss of Rs. 66,66,30,267/- was made and subsequently passing the order U/s 154 of the Act on 10/01/2013. The Assessing Officer did not doubt the genuineness of the transactions, however, the allowability of the claim as per the provisions of the Act was objected by the Assessing Officer while ....
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....any by the name of M/s Advance Automation & Process Control Pvt. Ltd.. Angel Infrastructure Pvt. Ltd. sold 1377 equity shares of Advance Automation & Process Control Pvt. Ltd. and earned profit of Rs. 65 Cr. As per computation sheet downloaded from ROC, Angel Infrastructure Pvt. Ltd. incurred losses of Rs. 29.7 Cr. on account of forfeiture of the share application money paid to HH Interior and Auto Component Pvt. Ltd. Angel Infrastructure Pvt. Ltd. has also claimed loss of Rs. 24.25 Cr. on account of sale of a commercial property admeasuring 109342 sq. feet. It has also claimed loss of Rs. 12.94 Cr. on account of sale of 77800 shares of Larson & Tubro. The details are as per the table given below: Long Term profit on Sale of Shares Amount (Rs.) 31/03/2009 Sale Value of 1377 Eq. Shares of Advance Automation & process Control Pvt. Ltd. 713594978.5 Less cost of Acquisition 55493800 Less Transfer Exp. 5577243 652623935.50 Misc. Income 10.00 Total A 674181887.40 Less Short Term Loss on sale of shares and property A. Shares Sale of 77800 Eq. Shares of Larson & Tubro 70513408.8....
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....Advanced Automation & Process Control Pvt. Ltd. against this receipt, the company has claimed a capital gain of Rs. 67,41,81,887/-. In order to avoid paying taxes on the capital gains of Rs. 67,41,81,887/-. The company M/s Angel Infrastructure Pvt. Ltd. has entred into bogus/sham transactions with entities owned and controlled by one Sh. Ashok Kapur of the Krishna Group. IN ORDER TO DETERMINE THE TRUE NATURE OF THE TRANSACTIONS BETWEEN THE COMPAHY ANGEL INFRASTRUCTURE PRIVATE LIMITED AND VARIOUS GROUP COMPANIES OF THE KRISHNA GROUP A SURVEY UNDER THE PROVISIONS OF THE INCOME TAX ACT 1961 WAS CONDUCTED AT THE VARIOUS PREMISES OF THE KRISHNA GROUP ON 03RD MARCH, 2016 BY DDIT(INVESTIGATION)-I, FARIDABAD. The transactions are discussed in detail with reference to the survey findings:- Loss on account of Share Application Money to M/s HH Interior and Auto Component Pvt. Ltd. (Formerly known as M/s SKH Auto Components Limited): In the computation of the income the company Angel Infrastructure Private Limited has shown the following loss on account of sale of shares of SKH Auto Components Ltd. Sale of 440000 Eq. Sh of SKH Auto Components Ltd. 0 Less: Cost of Acquisition....
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....erior & Auto Components Pvt. Ltd. AAACK4360J Parvesh Soni A.K. Bedi S.L. Sethi Paresh Soni Shruti Kapur Shreya Jain A.K. Bedi S.L. Sethi Parvesh Soni A.K. verma A.K. Bedi D.K. Nanda (as on 31/03/2013) (Details of directorship download from ROC and ITD System is enclosed as Annexure-G) The relationship of the various directors with the Krishna group is discussed as under: Name of the Director Relationship with the Krishna Group Sh. A.K. Verma He is Manager at Manesar Plant of Krishna Maruti Ltd. The fact is evident on an analysis of his Income Tax Return as he is drawing a salary from the Krishna Group. The fact has been admitted by Sh. Ashok Kapur in his statement recorded during the course of survey. Sh. D.K. Nanda He used to be an employee of the Krishna Group. The fact has been admitted by Sh.Ashok Kapur in his statement recorded during the sources of survey. Sh. Paresh Soni He is a Director and CEO of the Metals Divisions of the Krishna Group. He was present at one of the premises during the course of survey and his statement was recorded. He has admitted that he was working for Sh. Ashok Kapur and his family mem....
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....nd the consequent losses. He has submitted as under: The company M/s Angel Infrastructure Pvt. Ltd. had entered into an agreement sell with M/s Laurel Infrastructure Pvt. Ltd. on 12/03/2009 for the sale of commercial space admeasuring 1,09,342.53 sq.ft of the PARADISE MALL a total consideration of Rs. 30,18,41,600/-. The company M/s Angel Infrastructure Pvt. Ltd. had in turn bought the above mentioned commercial space from various entities as per the details given below: Sr. No. Name of the seller Total area Dated of agreement to sell Total sale consideration 1. ABR Auto Pvt. Ltd. 11,676.17 15.09.2008 Rs. 5,85,39,000/- 2. Sharsh Finance & Investment Co. P. Ltd. 34,686.29 15.09.2008 Rs. 17,28,39,000/- 3. Mr. Ashok Kapur 23,723.34 15.09.2008 Rs. 11,89,68,800/- 4. Mrs. Arti Kapur 4,817.32 15.09.2008 Rs. 2,32,40,200/- 5. Roz ka Meo Component Pvt. Ltd. 34,439.42 15.09.2008 17,08,13,000/- Total 1,09,342.53 Rs. 54,44,00,000/- (Copy of all agreement to sell is enclosed as Annexure-I) Since the above was sold for Rs. 30,18,41,600/- to M/s Laurel Infrastructure Pvt. Ltd. vide agreement dated 12/03/2009 the company M/s Angel....
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.... under: Name of the Director Relationship with the Krishna Group Mrs. Arti Kapur She is the wife of Sh. Ashok Kapur Sh. Parvesh Soni He is a Director and CEO of the Metals Divisions of the Krishna Group. He was present at one of the premises during the course of survey and his statement was recorded. He has admitted that he was working for Sh. Ashok Kapur and his family members. Sh. A.K. Bedi He used to be an employee of the Krishna Group. The fact has been admitted by Sh. Ashok Kapur in his statement recorded during the course of survey. Shruti Kapur She is a daughter of Sh. Ashok Kapur, the Chairman of the Krishna Group. Shreya Jain She is a daughter of Sh. Ashok Kapur, the Chairman of the Krishna Group. From the above discussion, the following conclusions are in order:- 1. The transaction for purchase and sale of property entered into by M/s Angel Infrastructure Pvt. Ltd. is with related parties. Hence, these are not arms length transactions. The full value of consideration adopted in these transactions is not the actual value of the property being bought and sold. The value has been artificially adjusted to generate artificial capital loss in th....
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.... the group companies were with a view to further the business interest of the entities involved. However since these entities belong to the Krishna group and are owned and operated by Sh. Ashok Kapur serious allegations have been leveled regarding the genuineness of the transaction we also understand that doubts has been raised regarding the transaction not being at arm length prices. In view of the above we hereby undertake that we will forgo the claim of the losses on the following transaction: S. No. Description of the transaction Amount Involved F.Y. Involved 1. Loss on account of forfeiture of share application money by M/s HH Interior and Auto Component Pvt. Ltd. 30 Cr 2008-09 2. Loss on account of sale of property at Prestige Mall to M/s Laurel Infrastructure Pvt. Ltd. 24 Cr 2008-09 Total 54 Cr. Thus as directed we will file a revised return in the case of M/s Angel Infrastructure Pvt. Ltd. (PAN AAFCA2023B) for the A.Y. 2009-10 (Pertaining to F.Y. 2008-09) after disallowing the loss claimed of Rs. 54 Cr. as discussed above. Accordingly an amount of Rs. 54 Cr will be offered to tax as per the provision of Income Tax Act, 1....
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....also very much part of the relevant record considered by the Assessing Officer at the time of passing the order U/s 154 of the Act. Therefore, except the change of opinion on the same set of facts, nothing new has been brought on record as a result of the survey conducted by the DDIT (Inv.) Faridabad which is the basis of forming the belief by the Assessing Officer at the time of recording the reasons. The reasons recorded by the Assessing Officer running in 11 pages, but except the particulars of the assessee with PAN and assessment year at page 1 of the reasons recorded and last page of reasons recorded all other contents are nothing but reproduction of the information received by the Assessing Officer from the DDIT(Inv.), Faridabad. Even in the said report, no new material or fact much less the incriminating material was either discovered or impounded by the investigation party. The only new material in the entire process was the statements of Sh. Ashok Kapur, Director of Krishna Maruti group recorded during the survey. The relevant part of the statement of Sh. Ashok Kapur is reproduced in the letter dated 13/3/2016 vide which the DDIT (Inv.) Faridabad sent the information to th....
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....9 Total 54 Cr. Thus as directed we will file a revised return in the case of M/s Angel Infrastructure Pvt. Ltd. (PAN AAFCA2023B) for the A.Y. 2009-10 (Pertaining to F.Y. 2008-09) after disallowing the loss claimed of Rs. 54 Cr. as discussed above. Accordingly an amount of Rs. 54 Cr will be offered to tax as per the provision of Income Tax Act, 1961. The due taxes on this amount Rs. 54 Cr. will be paid as soon as possible. I am authorized to give the above commitment as M/s Angel Infrastructure Pvt. Ltd. is one of my group company owned and operated by me through my employees. Q. 21 Do you want to say anything else? Ans. It is hereby clarified that the above said understanding has been provided in order to avoid litigation and to buy peace in mind with a request neither penalty nor any punitive action may kindly be initiated against group. There is nothing in the said statement to reveal that any particular of income was not disclosed by the assessee in the original return of income or during the proceedings U/s 154 of the Act. The entire report contains the details and facts which were recorded in the books of account as well as duly disclosed by the assessee....
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....ssue of validity of reopening based on the report of Investigation Wing has held in para 12 as under: "12. In the present case, after setting out four entries, stated to have been received by the Assessee on a single date i.e. 10th February 2003, from four entities which were termed as accommodation entries, which information was given to him by the Directorate of Investigation, the AO stated: "I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries." The above conclusion is unhelpful in understanding whether the AO applied his mind to the materials that he talks about particularly since he did not describe what those materials were. Once the date on which the so called accommodation entries were provided is known, it would not have been difficult for the AO, if he had in fact undertaken the exercise, to make a reference to the manner in which those very entries were provided in the accounts of the Assessee, which must have been tendered along with the return, which was filed on 14th November 2004 and was pro....
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....elief by the AO that income has escaped assessment. The reasons so recorded have to be based on some tangible material and that should be evident from reading the reasons. It cannot be supplied subsequently either during the proceedings when objections to the reopening are considered or even during the assessment proceedings that follow. This is the bare minimum mandatory requirement of the first part of Section 147 (1) of the Act. 25. At this stage it requires to be noted that since the original assessment was processed under Section 143 (1) of the Act, and not Section 143 (3) of the Act, the proviso to Section 147 will not apply. In other words, even though the reopening in the present case was after the expiry of four years from the end of the relevant AY, it was not necessary for the AO to show that there was any failure to disclose fully or truly all material facts necessary for the assessment. 26. The first part of Section 147 (1) of the Act requires the AO to have "reasons to believe" that any income chargeable to tax has escaped assessment. It is thus formation of reason to believe that is subject matter of examination. The AO being a quasi judicial authority is expecte....
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.... material indicates that income of an assessee has escaped assessment, form a believe that income of the assessee has escaped assessment. Plainly, in this case, the assessee had not acquired any material to form such belief. On the contrary, when it is pointed out to the Assessing Officer that SHPL had not assigned any policy to Rajiv Agarwal, the said fact was completely overlooked. Similarly, in the case of Vijay Laxmi Agarwal, the Assessing Officer failed to take into account the fact that the assessee had paid a sum of Rs. 2,08,000, which was more than surrender value of the policy, for assignment of the policy in her favour. This too was completely ignored by the Assessing Officer." Therefore, the Assessing Officer is required to form a belief on the basis of independent application of mind on the information or material received from the Investigation Wing. It is clear that the Investigation Wing took a view that the transactions were bogus. The Assessing Officer without discussing anything as to how the transaction is bogus has reopened the assessment on the borrowed satisfaction of the Investigation Wing. In the report of the Investigation Wing, there is no allegation that....
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....00 crores, the assessee has entered into the bogus transactions. Even the transaction of sale of commercial space in Prestige Mall was not found to be bogus either by the Investigation Wing or alleged by the Assessing Officer in the reasons recorded but the only allegation was that it was not at Arm's Length Price being a transaction between the related parties. However, the Assessing Officer in the concluding para of reasons recorded, assumed that all the transactions are bogus to form the belief that the income assessable in tax has escaped assessment. Therefore, there is a wide disconnect between the reasons recorded and formation of belief which shows that the Assessing Officer has not applied his independent mind while recording the reasons for reopening of the assessment. It is discernable from the record and reasons recorded by the Assessing Officer that the reopening is based on borrowed satisfaction. Hence, we hold that the reopening of assessment is not valid and the same is liable to be quashed. We order accordingly. 9. The next objection raised by the assessee is against the mechanical approval of reopening without application of mind:- The ld. counsel for the assessee....
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....under: Proposal for obtaining sanction of The Pr. Commissioner of Income Tax-1, Jaipur for issue of notice u/s 148 of the Income-tax Act, 1961, 1 Name and address of the assessee M/s Angel Infrastructure Pvt. Ltd., B-5 Vrindavan Apartment, Kings Road, Jaipur, Rajasthan. 2. PAN AAFCA2023B 3. Status Company 4. Ward Ward 3(1), Jaipur 5. Assessment year in respect of which it is proposed to issue notice issued U/s 148 A.Y. 2009-10 6. The quantum of income which has escaped assessment Rs. 65,00,00,000/- 7. Whether the provisions of Section 147(a), 147(b) or 147(c) are applicable. Provisions of Section 147 explanation 2(b) is applicable 8. Whether the assessment is proposed for the first time, if the reply is in affirmative please state YES (a) Whether any voluntary return had already been filed, and YES 9. If the answer to item 8 is in the negative, please state -- (a) The income originally assessed Rs. 65,60,08,500/- (b) Whether it is a case of under assessment, assessment at too low rate assessment which has been made the subject of excessive relief or allowing or excessive loss or depreciation: 10. ....
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....val by a higher ranking officer. For these reasons, the court is satisfied that the findings by the Income-tax Appellate Tribunal cannot be disturbed." Thus, the requirement to record the satisfaction is to reflect the satisfaction in briefest possible manner from the record. The approval granted in the ritualistic and formal manner rather than meaningful is not satisfying the requirement U/s 151 of the Act. In the case of CIT Vs. S. Goyenka Lime & Chemical Ltd. (supra), the Hon'ble M.P. High Court has held in para 7 to 10 as under: "7. We have considered the rival contentions and we find that while according sanction, the Joint Commissioner, Income Tax has only recorded so "Yes, I am satisfied". In the case of Arjun Singh (supra), the same question has been considered by a Coordinate Bench of this Court and the following principles are laid down:- 'The Commissioner acted, of course, mechanically in order to discharge his statutory obligation properly in the matter of recording sanction as he merely wrote on the format "Yes, I am satisfied" which indicates as if he was to sign only on the dotted line. Even otherwise also, the exercise is shown to have been performed ....
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.... by the ITO was to be agreed upon, the least, which is expected, is that an appropriate endorsement is made in this behalf setting out brief reasons. Reasons are the link between the material placed on record and the conclusion reached by an authority in respect of an issue, since they help in discerning the manner in which conclusion is reached by the concerned authority. Our opinion is fortified by the decision of the Apex Court in Union of India v. M.L Capoor AIR 1974 SC 87 wherein it was observed as under :- "27. ... We find considerable force in the submission made on behalf of the respondents that the "rubber-stamp" reason given mechanically for the supersession of each officer does not amount to "reasons for the proposed supersession". The most that could be said for the stock reason is that it is a general description of the process adopted in arriving at a conclusion. ... 28. ... If that had been done, facts on service records of officers considered by the Selection Committee would have been correlated to the conclusions reached. Reasons are the links between the materials on which certain conclusions are based and the actual conclusions. They disclose how ....
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....1/3/2016 whereas the jurisdiction of the assessee was transferred to ITO Ward 3(1), Jaipur from ITO Ward 7(2), Jaipur only on 30/3/2016. He has referred to page No. 50 of the department's paper book wherein the PAN details and jurisdiction as per ITBA data base are given and thus contended that the jurisdiction from ITO Ward 7(2), Jaipur was transferred to ITO Ward 3(1), jaipur on 30/3/2016 and hence the ITO Ward 3(1), Jaipur was not vested with jurisdiction of the assessee as on 21/3/2016 when the reasons were recorded. The ld. counsel has submitted that prior to the order dated 30/3/2016, the jurisdiction was vested with the ITO Ward 7(2), Jaipur as evident from the intimation dated 17/2/2011issued U/s 143(1) of the Act and subsequent orders passed U/s 154 of the Act. Thus, it is explicit that no reasons were recorded by the ITO Ward 3(1), Jaipur after assuming jurisdiction on 30/3/23016 and consequently proceedings U/s 148 of the Act are ex facie bad in law and illegal. The reasons dated 21/3/2016 are not valid reasons when the ITO Ward 3(1), Jaipur was not the Assessing Officer of the assessee on the said date, consequently the proceedings initiated U/s 147/148 of the Act are i....
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....repancy in the record about the order passed U/s 127 of the Act dated 04/10/2016 which is shown in the ITBA database as the date of transfer on 17/10/2016. Therefore, the information available on ITBA database is not matching with the physical orders on record. However, once the physical orders are available on the record then the non-availability of same on the ITBA database would not change the fact of order passed U/s 127 of the Act. Accordingly, we do not find any substance or merit on this objection of the assessee and the same is dismissed. 15. Ground No. 2 of the assessee's appeal is regarding the disallowance of short term capital loss on transfer of share of M/s HH Interior and Auto Component Pvt. Ltd.. As per the resolution passed in the Board's meeting dated 27/2/2009 it was decided that the assessee was subscribed to 4,40,000 equity shares of M/s HH Interior and Auto Component Pvt. Ltd. at Rs. 900 per share aggregating total investment of Rs. 39.60 crores. These shares were offered alongwith right to subscribe 14% secured debenture of Rs. 100 each at a discounted price of Rs. 10 each and such right was exercisable after expiry of two years from the date of full payment....
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....in the hands of assessee company to be set off against the profit from sale of shares and other incomes. Hence, as per the Assessing Officer, it was an attempt to avoid tax liability. 16. The assessee challenged the action of the Assessing Officer before the ld. CIT(A) but could not succeed. 17. Before us, the ld counsel for the assessee has submitted that the finding of the Assessing Officer and the ld. CIT(A) is based on conjectures and surmises and not on fact basis. The investment in the shares of M/s HH Interior and Auto Component Pvt. Ltd. was duly recorded in the books of account and was also accepted by the Assessing Officer. The terms of allotment of shares clearly spelled out that the assessee had subscribed 4,40,000 shares @ Rs. 900 per share total amounting to Rs. 39.60 crores out of which Rs. 29.70 crores stood remitted by the assessee. Ld. counsel has explained that the assessee paid call money of Rs. 19.80 crores on application money being 50% of the subscription price and a sum of Rs. 9.90 crores as first call money. The payment of total amount to Rs. 29.70 crores is evident from the record as well as other documentary evidence submitted by the assessee before the....
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....sessment order dated 28/3/2014 passed U/s 153A read with Section 143(3) of the Act in the case of M/s Sharash Finance & Investment Company Pvt. Ltd.. The shares of M/s HH Interior and Auto Component Pvt. Ltd. were subscribed by the seven group companies including the assessee at the same rate of premium. The investment made by all other group companies has been duly recorded and accepted in their books of account and also assessed to tax by the department when there is no dispute regarding the subscription of the shares by the other group companies then the said investment made by the assessee on the similar terms cannot be doubted. Thus, once the fact of allotment of shares is not in dispute then the fact of transfer of shares cannot be disputed when all relevant evidence as well as final call money of Rs. 9.90 crores paid by M/s Sharash Finance & Investment Company Pvt. Ltd. were produced before the Assessing Officer. The ld. counsel has further submitted that share certificates were also issued in favour of M/s Sharash Finance & Investment Company Pvt. Ltd. hence the transfer of shares by the assessee and subsequently the final allotment in favour of M/s Sharash Finance & Invest....
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....ing the survey U/s 133A of the Act. All the facts as narrated in the report of the DDIT (Inv.), Faridabad are already on the record and in the books of account of the assessee. The statement recorded during the survey has not evidentiary value without corroborating evidence. In support of his contention, he has relied upon the following decisions: (i) Paul Mathews & Sons vs. Commissioner of Income-tax 263 ITR 101 (Ker) (ii) Commissioner of Income-tax vs. S. Khader Khan Son 300 ITR 157 (Mad). (iii) Commissioner of Income-tax, Salem vs. S. Khader Khan Son 352 ITR 480 (SC). The ld. counsel has referred to the series of decisions on this point that the statement recorded during the survey has not evidentiary value in absence of any corroborating/documentary evidence. He has also referred to the Instruction File No. 286/2003 dated 10/03/2003 as well as the Instruction No. File No. 286/98/2013 dated 18/03/2014 issued by the CBDT and submitted that the CBDT has repeatedly suspected the taxing authority that instead of obtaining the statement under hands of coercion during the search or survey more emphasis be given in collecting the documentary evidence. No justification for the As....
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....Interior and Auto Component Pvt. Ltd. and the assessee is not a transaction between the two independent parties. There is no dispute that Sh. Ashok Kapur and his family members owned and having controlled over the group companies including M/s HH Interior and Auto Component Pvt. Ltd.. Hence, it is clear that the share application money of Rs. 20.70 crores given by the assessee to M/s HH Interior and Auto Component Pvt. Ltd. and consequent forfeiture of same is not a transaction between the two independent parties. Two related parties have entered into this transaction in order to create a fictitious loss in the hand of the assessee. The said loss artificially generated with a view to be set off against the gain according to the assessee on account of sale of shares of M/s Advance Automation & Process Control Pvt. Ltd.. The Assessing Officer has clearly brought out the fact that there was no financial problems at the time when the shares were claimed to have been transferred without any consideration as the assessee received huge fund of Rs. 71.36 crores on sale of shares of M/s Advance Automation & Process Control Pvt. Ltd.. Thus the entire transaction of purchase and sale and crea....
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....uced is not prohibited and a tax payer may resort to such planning to minimize the tax liability. The assessee is entitled to arrange his affairs as to avoid taxation but the arrangement must be real and genuine and not sham or make believe. There is a distinction between the legitimate avoidance and tax evasion as held by the Hon'ble Gujarat High Court in the case of Shakarlal Balabhai Vs. ITO 100 ITR 97 (Guj), therefore, the genuine arrangement would be permissible and may result in an assessee escaping tax. These are well settled legal propositions as considered from time to time by the Hon'ble High Courts as well as the Hon'ble Supreme Court in the various decisions including the decision in the case of Mc. Dowell & Co. Ltd. Vs. Commercial Tax Officer 154 ITR 148 (SC) as well as in the case of Union of India Vs. Aazadi Bachao Andolan (Supra). Thus, the legitimate tax planning within the framework of law is permissible. If we analyse the present matter in the light of the settled legal propositions, we find that the transfer of shares by the assessee was actual and real transaction as evident from the relevant record and sequence of events taken place completing the chai....
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....sessee in favour of the said company. The indemnity bond was also executed by M/s Sharash Finance & Investment Company Pvt. Ltd. to pay the final call money due against the shares so that the right to subscribe the debentures by the assessee would not be affected due to default in payment of call money. It is not in dispute that the final call money of Rs. 9.9 crores was paid by M/s Sharash Finance & Investment Company Pvt. Ltd. and the shares were finally transferred in favour of the said company. The Assessing Officer has not brought anything on record or has given a finding that the payment of final call money was not actually made by M/s Sharash Finance & Investment Company Pvt. Ltd. but it was made by the assessee. Therefore, to arrive at a conclusion that the transaction is not genuine but only shown on the paper, the Assessing Officer ought to have established the fact that it was not a real transfer but only a colour is given as a transfer of shares. The other fact of the transfer of shares being agreement between the parties, the issue of share certificate in the name of M/s Sharash Finance & Investment Company Pvt. Ltd. are duly established from the record. The Assessing ....
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....er of shares." 9. The above passage has been quoted in the Commentary of the Companies Act mentioned herein above from a decision in Florence Land and Public Works Co., In re [1885] 29 Ch D 421 at 426. 10. On account of the aforesaid fact that the binding contract existed between the assessee and the investee company, the irresistible conclusion that can be drawn on the aforesaid facts and circumstances is that as soon as the allotment is made, the assessee would be deemed to have acquired a right in such shares even if the call monies or the full face value of the shares has not been paid. Thus, in a case where only share application money is paid and the balance is yet to be paid on actual allotment of shares, the holder of such allotment would be recognised as a member of the investee company. Thus, it cannot be said that the assessee had not acquired right in such shares on account of its failure to deposit the balance amount for allotment of shares. The aforesaid view would attract the provisions of section 2(47) of the Act. The extinguishment of any rights therein as appeared in section 2(47) of the Act, covers every possible transaction resulting in the destruction, anni....
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....nsfer of shares for consideration of balance call money to be paid by the transferee is a case on better footings to be held as transfer of capital asset and a capital loss from the said transfer. The Hon'ble Delhi High Court in the case of CIT Vs. Shri Chand Ratan Bagri in ITA No. 31/2010 (supra) has also upheld the view that the forfeiture of convertible warrants has resulted into extinguishment of rights of the assessee to obtain the shares and therefore, has resulted capital loss in the hands of the assessee. Therefore, as far as the transaction of transfer of shares in question is concerned, the same is nothing but transfer of capital asset as held in the various decisions relied upon by the assessee. 19.1 Once the assessee has produced all relevant evidence to establish the genuineness and the transaction actually taken place then treating the same as bogus on the ground that the motive of the transaction is to avoid the tax liability is not sustainable in law. The Assessing Officer has misunderstood the entire facts and the nature of transaction as recorded at page No. 16 of the assessment order as under: "Hence, it is amply clear that the company M/s HH Interior and Auto....
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....icer is that the Board Meeting was held on 23/3/2016 after the survey dated 03/3/2016 is in fact absolute incorrect and contrary to the fact that the said Board meeting was held on 23/3/2009 and not on 23/3/2016, therefore, the question of afterthought plan does not arise as held by the Assessing Officer. The ld CIT-DR has fairly accepted this fact that the Board meeting was held on 23/3/2009 and not on 23/03/2016 as it was rightly recorded by the ld. CIT(A) at page No. 167 of the impugned order. As regards the statement recorded by the Investigation Wing, Faridabad, we find that there is nothing in the statement to show that the transaction is bogus. The relevant para of the statement is recorded by the ld. CIT(A) at page No. 44 to 46 as under: Q.19. Please refer to the sale of shares of M/s Angel Infrastructure Pvt. Ltd. and M/s Advanced Automation & process control Pvt. Ltd. provide the complete details of the total sale consideration capital gain arising and the consequent set off of losses through various transactions entered into by M/s Angel Infrastructure Pvt. Ltd.. The transaction was done on 12/09/2008. Ans. The details are as under: 1. Total sale consideration for ....
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....l Infrastructure Pvt. Ltd. is one of my group company owned and operated by me through my employees. Q. 21 Do you want to say anything else? Ans. It is hereby clarified that the above said understanding has been provided in order to avoid litigation and to buy peace in mind with a request neither penalty nor any punitive action may kindly be initiated against group. Thus, the so called surrender was obtained by the search team and the same is without any incriminating material. Therefore, the statement recorded during the survey proceedings without documentary evidence cannot be a basis to make the addition in absence of any corroborating evidence. The CBDT in the Instruction No. 286/2/2003 dated 10/03/2003 has directed the taxing authorities to refrain from such confessions if not based on reliable evidence as the same does not serve any useful purpose. It was therefore, advised that there should be focus and concentration on collection of evidence of income, which leads to the information on what has not been disclosed or is not likely to be disclosed. It is a clear direction by the CBDT that while recording statement during the course of search and seizure and survey operat....
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....und that the same was imprudent. Once the transaction is treated as transfer of capital asset then the provisions of Section 40A(2) of the Act cannot be attracted due to the reason that the transaction is between the related parties. since the claim is short term capital loss and not the business loss suffered by the assessee, therefore, it would not attract the provisions of Section 40A(2) of the Act. Moreover, it is otherwise not a payment to the related party so as to fall in the category of transaction between the specified persons as per Section 40A(2) of the Act. 19.2 Accordingly, in view of the above discussion as well as the following the various decisions on the point we hold that the transaction of transfer of shares in question cannot be treated as non-genuine merely because the assessee incurred loss and set off of the same against the capital gain. Hence, the orders of the authorities below qua this issue are set aside and the addition made by the Assessing Officer is deleted. 20. Ground No. 3 of the assessee's appeal is regarding disallowance of loss on sale of commercial space. On 31/07/2004 M/s Gold Cause Construction Pvt. Ltd. purchased commercial plot No. 23 mea....
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....lleged sale of commercial space is also bogus. The Assessing Officer has also disallowed the transfer expenses of Rs. 25,000/- claimed by the assessee. The ld. CIT(A) confirmed the disallowance made by the Assessing Officer. 21. Before us, the ld counsel for the assessee has submitted that the Assessing Officer has given the reasons for treating the transaction as bogus that the sale and purchase agreements were on non-judicial stamp paper of Rs. 50/- and are not registered with Stamp Authorities. However, the sale and purchase are two elements which move in tandem to complete a sale transaction. The department has accepted one element of the transaction in the hand of the purchaser then how the transaction of the sale in the hand of the assessee can be treated as bogus, therefore, no presumption can be raised against the genuineness of the second element. The ld counsel has pointed out that in the instant case, the sale by the seller (first allottee) was accepted and therefore, there cannot be case for denial of purchase of the commercial space by the assessee. Further the transaction of purchase was executed on non-judicial stamp paper of Rs. 50/- which was accepted by the Asses....
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....ived and untenable. The Assessing Officer has raised objection that the transactions were between the related parties and there was no financial crisis to sale the property in distress. However, when the Assessing Officer has not disputed the fair market price of the property as on the date of sale and also accepted the purchase of the said commercial space in the hand of M/s Laurel Infrastructure Pvt. Ltd. then the said transaction cannot be denied in the hand of the assessee. At the time of purchase by the assessee, the sale was duly accepted in the case of selling parties and when the property was sold by the assessee, the transfer was accepted by the Assessing Officer in the hand of the purchaser M/s Laurel Infrastructure Pvt. Ltd., therefore, the transaction of purchase and sale in the hand of the assessee cannot be denied. The ld. counsel has further contended that when the provisions of domestic transfer prices as specified in Section 92BA are not applicable for the assessment year under consideration as the said amendment was made by the Finance Act, 2012 w.e.f. 01/04/2013 then it cannot be a ground for treating the transaction as not at Arm's length or bogus. The ld. couns....
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....appearing in the books of account of M/s Sharash Finance & Investment Co. P. Ltd., a sum of Rs. 14,56,50,000/- was appearing as debit balance on 01/04/2008 and the same amount was credited on 01/04/2008 through a general entry with a narration by advance against the property. A similar position is in respect of remaining agreements except in case of Sh. Ashok Kapur wherein debit balance was appearing as on 01/04/2008 and a sum of Rs. 9.96 crores were credited on 01/04/2008 through a general entry. Hence, the entire transaction of purchase of commercial space by the five companies from whom the assessee purchased the said commercial space was not free from doubt. Since all the companies to the transaction of purchase and sale are a group companies and controlled by one Sh. Ashok Kapur, therefore, these are nothing but structured transaction in order to incur capital loss which may be set off against the capital gain on sale of shares by the assessee. The assessee has not explained the circumstances which has compelled the assessee for selling the commercial space at such a huge loss within a short period of six months of its purchase. Therefore, when the entire transactions of purch....
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.... against the profits on sale of shares. It is pertinent to note that the acquisition of the right of commercial space in the mall was also through unregistered agreements and similarly the assessee transferred the said right of commercial space through unregistered agreements. The Assessing Officer has not disputed the transaction of purchase of the said commercial space by five companies/persons in their assessments and further the Assessing Officer has also accepted the transaction of purchase of the said commercial space by M/s Laurel Infrastructure Pvt. Ltd. from the assessee. The ld. counsel for the assessee has referred to the assessment orders in respect of these parties and pointed out that the Assessing Officer has not disputed the fact of initial allotment of the commercial space to these five persons and also accepted the transaction of purchase of commercial space by M/s Laurel Infrastructure Pvt. Ltd. from the assessee. The ld. CIT-DR has not disputed the fact that the department has not disputed the transactions in the hands of the other parties either five persons from whom the assessee purchased or the purchaser to whom the assessee sold the commercial space. Since ....
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....tablished from the record as it has change hands through banking channels then the transaction cannot be held as an artificial transaction. Since it is not an immovable property but it was only a right in the immovable property, therefore, when all the parties to the transaction in question have accepted the transaction through agreements and the Assessing Officer has accepted the same in the hand of all other parties then the transaction in hand of the assessee cannot be questioned. 23.1 There may be a possibility of understatement of the sale consideration which has resulted loss of Rs. 24.25 crores to the assessee, however, the Assessing Officer has not even made any attempt to determine the fair market price of the commercial space as on the date of sale and further it is not the case of the Assessing Officer that the assessee has received the consideration more than which is declared by the assessee. Therefore, though the transaction is between the related parties but once the Assessing Officer has not given a finding that the sale consideration is suppressed or understated then the transaction between the related parties cannot be held as bogus. Even otherwise when it is a t....
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....s of the case and in law, the Ld. CIT(A) was justified in holding the Capital Gains on sale of 1377 equity shares of M/s Advance Automation & Process Control Pvt. Ltd. as Long Term Capital Gain without appreciating the fact that in the guise of sale of share the assessee has sold immovable property situated at Plot no. 187, HSIDC Gurgaon and that the said transaction is in the nature of short term capital gain? (ii) Whether in the facts and in the circumstance of the case and in law, the Ld. CIT was justified in not appreciating the facts brought on record by the AO after piecing the corporate veil and bring to the fore the basic facts of the case relating to the sale of shares of M/s Advance Automation and Process Control Pvt. Ltd.? (iii) Whether in the facts and in the circumstance of the case and in law, the Ld. CIT was justified in allowing the appeal of the assessee and thus directing the AO to allow set off of short term capital loss on sale of shares of M/s L&T without appreciating the facts as brought on record by the AO? The appellant craves the right to amend alter or add to any of the grounds of appeal given above." 25. Grounds No. 1 and 2 of the revenue's a....
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....hree years from the date of acquiring the shares by the assessee, therefore, the profit arising from the said transaction was treated as short term capital gain by the Assessing Officer. He has relied upon the order of the Assessing Officer. 27. On the other hand, the ld counsel for the assessee has submitted that the finding of the Assessing Officer are based on fundamental misconception of both the facts and law. It was contended that the Assessing Officer has not disputed that there was transfer of shares alone by the assessee as share holder of M/s Advance Automation & Process Control Pvt. Ltd.. The assessee received the sale consideration on account of sale of shares of M/s Advance Automation & Process Control Pvt. Ltd. and not on account of sale of land and building even there was no document for transfer of the immovable property being land and building owned by the said company. Thus, under no stretch of imagination, it can be held that the assessee transferred any immovable property and not shares. The land and building was owned by M/s Advance Automation & Process Control Pvt. Ltd. and not by the shareholders and therefore, the sale of land and building can be done only ....
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.... & Process Control Pvt. Ltd. is only the share holder holding 50% of the equity shares of the said company. The ownership of the said company got changed when the assessee alongwith other share holders Shri Ashok Kumar Munjal and H&H Real Estate Pvt. Ltd. sold the entire shareholding of M/s Advance Automation & Process Control Pvt. Ltd. to M/s Rolta Pvt. Ltd.. The said transaction of sale of share was undisputedly after more than two years from the date of acquisition. The assessee claimed the profit arising from the sale of shares as long term capital gain and the said claim cannot be disputed in normal circumstances of sale of shares after two years, however, the Assessing Officer held that the company M/s Advance Automation & Process Control Pvt. Ltd. was having only the asset as plot of land and building thereon and therefore, what was sold by the assessee and other shareholders of the said company was the asset being the land and building. Accordingly, the Assessing Officer treated the sale of shares of M/s Advance Automation & Process Control Pvt. Ltd. as the transactions of sale of land and consequently the gain was treated as short term capital gain being the sale was less ....
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....ch incorporation must owe its existence to a statutory authority. The Corporation/Company, in law, is a juristic person and has a separate legal entity of its own. Once incorporated, the entity of Company is entirely separate from that of its shareholders. It bears its own name; has a seal of its own; its assets are separate and distinct from those of its members; it can sue and be sued exclusively for its own purpose; liability of members or shareholders is limited to the capital invested by them; creditors of Company cannot obtain satisfaction from the assets of shareholders/members of company and similarly creditors of members/shareholders have no right to the assets of Company. This position was recognised in Salomon v. Salomon & Co. 1897 AC 22. When the shares of a company are bought, it cannot be said that the shareholder acquired any interest in the assets of the company, therefore by the same analogy when the shares are transferred, it cannot be said that the shareholders has transferred the assets of the company. It may be mentioned that in case of Mrs. Bacha F. Guzdar Vs CIT 27 ITR 01, it was observed by the Hon'ble Apex Court that: "That a shareholder acquires a ....
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....the holding of shares. A controlling interest is, therefore, not an identifiable or distinct capital asset independent of the holding of shares. The control of a company resides in the voting power of its shareholders and shares represent an interest of a shareholder which is made up of various rights contained in the contract embedded in the articles of association. The right of a shareholder may assume the character of a controlling interest where the extent of the shareholding enables the shareholder to control the management. Shares, and the rights which emanate from them, flow together and cannot be dissected. The tax consequences of a share sale would be different from the tax consequences of an asset sale. A slump sale would involve tax consequences which could be different from the fax consequences of a sale of assets on itemized basis" (emphasis supplied) 4.3 It is to be noted that the dispute under consideration is squarely covered by the decision of the Hon'ble Karnataka High Court in the case of Bhoruka Engineering Industries. Ltd. 356 ITR 25 (Kar.), wherein, it was held that: "19. In view of the judgment of the Apex Court in Vodafone, it is held that "tax p....
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....with the sole intention of evading payment of tax, then such a transaction would not have any legitimacy. Therefore, a colourable device cannot be a part of tax planning. Therefore, in each case, the transaction in question and the material on record has to be carefully examined to find out whether the transaction is "sham" or "unreal" or "colourable device" to evade payment of tax. 20. In the instant case, as set out above, according to the revenue, on the day the assessee transferred their share from BFSL, the only property which was available in BFSL was this land. Before transfer of the shares, the BFSL has systematically reduced this investment except that of the land instead of trading its shares through BSE. The shares were" traded through Magadh Stock Exchange. In the agreement entered into for transfer of shares, reference is only made to the sale of the land. Therefore, what was attempted to for transfer of shares is nothing but the transfer of immovable property. On the date of transfer, BFSL has become a Shell company. Therefore, it was a deliberate structural device to avoid tax implications. The grievance is, the property which was purchased for 3.75 crore was sold ....
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....the date of transfer. But that does not make the transaction "colourable" or "unreal" or "sham." 21...... 24. In the instant case, the assessee is holding the shares in BFSL from 01.10.1984. Therefore, it is a long term Capital asset. The transaction has taken place subsequent to 28.09.2004 as such the second condition is fulfilled. They have paid the security transaction tax to Magadha Stock Exchange. Where all these three conditions stipulated under Section 10(38) of the Act are fulfilled, the assessee is entitled to the benefit flowing therefrom i.e., the income from such transfer shall, not be included in the total income of the assessee for the previous year. Merely because if a registered sale deed has been executed by BFSL selling the land in favour of DFL-CDL in which event capital gain should have been paid on the sale consideration, is no reason to hold that when a shareholder of BFSL transfer his share for a consideration, after complying with the legal requirements, is not entitled to the benefit of tax exemption. All the authorities are carried away by this aspect: of the matter and because the assessee was able to avoid payment of income tax, consequently th....
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.... though the issue was relating to application of provisions of section 50C of the Act but it was held by the Hon'ble Tribunal that by transferring the shares, the assets of the company were not transferred by the shareholders. It would be appropriate to reproduce the relevant extracts as under: "5. We have heard both the parties and perused the material on record. In this case, the main contention of the Id. A.R is that the provisions of the section 50C does not attract to the transactions, which ore not registered with the Stomp Duty Valuation Authority and there was no direct transfer of land and building or both. In the present case, the assessee company, sold the shores of M/s. General Wood Industries (P) Ltd., at its prevailing book value to the following persons:- Mr. T.T. Varadarajan 50% -12,000 shores at Rs. 100 - Rs. 12 lakhs Mrs. Mayo Varadarajan 50% -12,000 shores of Rs. 100 - Rs. 12 lakhs Thus, the ownership of the company viz. M/s. General Wood Industries (PJ Ltd., now owned by the above two persons jointly. According to Id. Assessing Officer, the assessee sold the actual land and building in the guise of sole of shores to the above pers....
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....ons of section 50C are deemed provisions and, therefore, the same have to be interpreted strictly in accordance with the spirit of the provisions. In the light of the above legal interpretation of section 50C of the Act, we need to examine the facts of the present case. In the instant case, what transferred by the assessee are the shares in the company and not the land or building or both. Assessee does not have full ownership on the flats which are owned by the company. The transfer of shares was never a part of the assessment of the Stamp duty Authorities of the State Government. The company was deriving income, taxable under the head 'income from property' for more than a decade. The expression "assessable" is inserted in section 50C(1) of the Act is not relevant for the impugned assessment years. In such circumstances, the AO's decision to invoke the provisions of section 50C to the tax planning adopted by the assessee is not proper and it does not have the sanction of the provisions of IT Act." (emphasis supplied) 4.6 In a recent decision dated 13.12.2017, in the case of Shri Navrattan Kothari vs. ACIT in ITA No. 425/JP/2017, it was observed by the Hon'ble ITAT, ....
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....y then the ownership of the asset held by the company does not effect by change of ownership of the company itself. The change in the shareholdings of the company shall not amount to change of the holding of asset by the company. It is settled proposition of law that the company is separate legal entity then its share holders. The asset owned by the company would remain the asset of the company irrespective of change of shareholding of such company. The changing hands of shares of company would amount the change of ownership of the company and not the change of ownership of the asset held by the company. The Hon'ble Supreme Court in the case of Vodafone International Holdings B.V. Vs Union of India (supra) while considering the identical issue in para 168, 169 and 179 has held as under: "168. Substantial territorial nexus between the income and the territory which seeks to tax that income, is of prime importance to levy tax. Expression used in Section 9(1)(i) is "source of income in India" which implies that income arises from that source and there is no question of income arising indirectly from a source in India. Expression used is "source of income in India" and not "from ....
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....ot find any error or illegality in the impugned order of the ld. CIT(A) qua this issue. 29. Ground No.3 of the revenue's appeal is regarding disallowance of short term capital loss on sale of shares of L&T Ltd. by the Assessing Officer by invoking the provisions of Section 94(8) of the Act, which was deleted by the ld. CIT(A). The assessee purchased 77800 equity shares of L&T Ltd. for a consideration of Rs. 19,99,40,244/- in the month of September, 2008. Subsequently M/s L&T Ltd. has decided to issue and allot bonus shares in the ratio of 1:1 and the assessee was allotted equal number of bonus shares on 08/10/2008. Thereafter the assessee sold 77800 equity shares in three trenches for a total consideration of Rs. 7,05,13,409/-. The details of sales of shares are as under: Date No of shares Amount (Rs.) 03/11/2009 58400 9,11,72,453/- 19/03/2010 15440 2,49,56,444/- 23/03/2010 3500 56,55,715/- 29/03/2010 460 7,35,012/- Thus, the assessee incurred short term capital loss of Rs. 12,94,26,835/- on sale of 77800 equity shares of L&T Ltd. During the assessment proceedings, the Assessing Officer proposed to invoke Section 94(8) of the Act contemplates bonus striping and the....
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....disputed. The assessee also produced all the relevant documents being brokers note, ledge account, transaction statement, copy of DEMAT account and copy of the bank statement reflecting the payment of purchase consideration and receipt of sale consideration. The bonus shares were also reflected in the ledger account as well as in the other record. It is also a transaction which can be verified independently from independent sources. Hence, the ld counsel has submitted that the Assessing Officer without conducting any enquiry in respect of the genuineness of the transaction has given a very casual and vague finding. He has pointed out that since there are two lot of shares acquired by the assessee, one the original lot of 77800 equity shares and subsequently equal number of bonus shares issued by the company. Therefore, what was sold by the assessee was the original shares based on the FIFO method. He has supported the order of the ld. CIT(A) on this issue. 33. We have considered the rival submissions as well as relevant material on record. The shares of L&T Ltd. are listed in the stock exchange and further the Assessing Officer itself has given details of purchase, bonus shares an....
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....ion 94(8) Act and as such these are not applicable in the instant case under consideration. It is also noted that as per provisions of section 55(2) (iiia) of the Act, the cost of acquisition of bonus shares is to be taken as Nil and therefore, the cost of shares acquired cum bonus would not be diluted on account of issue of bonus shares to the appellant. 3.2 It is noted that the sale and purchase of these shares were executed on stock exchange through stock brokers and the appellant has paid STT on purchase as well sale of these shares. It is further noted that the AO has issued show cause notice u/s 94(8) of the Act but has made disallowance by holding that the genuineness of the purchase and sale of shares of L & T could not be proved by the appellant as the complete details were not provided. I fail to understand on what basis, the AO has arrived to the conclusion that the purchase and sale of shares of M/s L&T were not genuine without discussing the matter in the assessment order. 3.3 In view of the above discussion and looking to the totality of facts and circumstances of the case, it is held that the AO was not justified in disallowing short term capital loss of Rs. 12,9....
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....stripping as has been carried out by the assessee in the case on hand. This section has been introduced under Chapter X of the Act - "Special Provisions relating to Avoidance of Tax". Section 94 of the Act in Chapter X of the Act bears the heading "Avoidance of tax by certain transactions in securities." The provisions of section 94(8) of the Act read as under : '94 (8) Where - (a) any person buys or acquires any units within a period of three months prior to the record date; (b) such person is allotted additional units without any payment on the basis of holding of such units on such date; (c) such person sells or transfers all or any of the units referred to in clause (a) within a period of nine months after such date, while continuing to hold all or any of the additional units referred to in clause (b), then, the loss, if any, arising to him on account of such purchase and sale of all or any of such units shall be ignored for the purposes of computing his income chargeable to tax and notwithstanding anything contained in any other provision of this Act, the amount of loss so ignored shall be deemed to be the cost of purchase or acquisition of such additional unit....