TaxTMI 
TaxTMI 
2023 (1) TMI 179
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....ellate Tribunal 175/2012 2003-04 31.01.2006 C.No.9544(29)/2006-07/SLM dt.18.12.2006 382/Mds/2007 dt.17.12.2008 441/2010 2003-04 31.01.2006 C.No.9544(22)/2006-07/SLM dt.02.03.2007 1362/Mds/2007 dt.22.10.2009 3. The operative portion of the impugned order dated 17.12.2008 of the Appellate Tribunal in ITA.No.382/Mds/2007 impugned in TCA.No.175/2012 reads as under:- "13. We considered the arguments advanced by both sides in detail. We do not have any quarrel with the arguments of the Id.Chartered Accountant on the propositions explained by him in the light of the judicial pronouncements referred before us. We agree with the Id.C.A that unless and otherwise proved by materials, the stated consideration has to be treated as real consideration for the purpose of computing the capital gains. We do not have any iota of disagreement to the legal propositions advanced by the Id.C.A. 14. But, we have to state that the principle of law and such propositions must be applied depending upon the facts of each case . The break-up value of the shares may not be a valid statutory tool in working out the capital gains as argued by the Id.C.A. It is a statutory rule for the purpos....
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....y way of setting off of the loss against the positive business income. Therefore, the transaction has resulted in prejudice to the interests of the Revenue. Therefore, as rightly argued by the Id.Senior D.R., the assessment order passed in this case is erroneous as well as prejudicial to the interests of the Revenue. Therefore, we find that the Commissioner has rightly exercised his power under Section 263 of the Income Tax Act, 1961 and revised the impugned assessment order. 17. For the reason explained by the Commissioner in his order, we agree with him that the entire transaction was a make belief arrangement. It is a sham transaction. There is no statutory Rule to decide whether a transaction is sham or not. It is to be decided in the light of the facts available on record. Here, the case is that the company was incurring loss in the earlier assessment years and has stopped its business. Therefore, there was no attraction for anybody to purchase the shares of the company. But, the assessee's father came forward to purchase the shares. Even if such a move was justified, the consideration for the same must be comparable to actual worth of the share. The shares of Sri.Solaia....
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.....08.2006 in the case of the appellant in T.C.A.No.441 of 2010 stating that the orders are erroneous and prejudicial to the interest of the revenue. The reasoning given in the notices reads as below:- "It is found that while working out long term capital loss on sale of shares, the assessee has shown huge loss on the sale of shares of Sri Solaiandavar Textile Mills Limited. In order to verify the rate of sale, the Assessing Officer had called for the Annual Report of the Company for the year ending 31.03.2009 which is placed in records. However, it appears the break up value of the shares of the same as on 31.03.2003 has not been worked out in order to compare the same with the rate of sale of shares, as the sale has been effected to his father only to claim huge loss". 7. These notices ultimately culminated in the order of the Commissioner under Section 263 of the Income Tax Act, 1961 on 02.03.2007 and 18.12.2006 in the case of the appellant in T.C.A.No.441 of 2010 and T.C.A.No.175 of 2012 respectively. The operative portion of the order of the Commissioner in T.C.A.No.441 of 2010 is extracted below:- " The reply has been carefully considered. The learned Authorised Representa....
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.....No.175 of 2012 is extracted below:- The break up value of the equity share of Solaiandavar Textile Mills Ltd on 31.03.2003 has been worked at Rs.19.33 as under:- Value of Assets :- Fixed Assets - Net Block : Rs. 14,767.116 Net Current Assets, loans and advances : Rs.61,56,991 Less :- Income Tax advance : Rs. 5,58,318 : Rs. 55,98,673 Total Value of Assets : Rs.2,03,65,789 Less:- Total funds : Rs. 39,31,423 Net amount : Rs.1,64,34,366 Issued, subscribed and paid up capital : 8,50,000 shares of Rs.10 each Value of equity shares Rs.19.33" It is not understood as to why the shares were purchased by the father when the business stopped w.e.f.03.04.2002 or in other words why the father wanted controlling interest in the Mills after the closure of business. In the circumstances, the sale of share @ Rs.4 against break-up value of Rs.19.33 as on 31.03.2003 is not genuine and the Long Term Capital Loss claimed on the sale of shares of M/s.Solaiandavar Textile Mills Ltd. Should not be allowed. The Assessing Officer should enhance the assessment by disallowing capital loss of Rs.7,76,611/- claimed on the sale of the ....