AI Drafter 
TaxTMI 
TaxTMI 
2023 (11) TMI 118
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....m sale of shares of SMS IT Solutions Pvt. Ltd. (SMS ITS PL). Appellant held 200 shares of this company at face value of Rs. 100 per share. These shares were purchased by appellant on 30.03.2010 and sold on 30.04.2014 at value of Rs. 1,39,200/- per share. As a result appellant offered to tax LTCG of Rs. 2,77,87,600/- after claiming indexation of Rs. 32,400/- on total sale consideration of shares of Rs. 2,78,20,000/- Against these gains the appellant has claimed exemption u/s 54 of Rs. 2,42,85,300/-on account of Investment in NHAI bonds dated 15.09.2014, Investment in House Property and Deposits under Capital Gain Account with IDBI Bank Ltd. 6.3 The AO analyzed the said transaction and held that the real nature of these transactions was not what was disclosed by the appellant. This has been discussed in detail by the AO in para 3 of assessment order which is briefly as under Financial Credentials of SMS IT Solutions Pvt. Ltd. This company was set up on 21.06.2005 with stated objects as per MOA being to carry on business of manufacturing and trading of CD and DVD products and IT related products. The P&L account, Balance Sheet filed with ROC and IT Departmen....
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....s an arranged transaction and appellant obtained benefit of lower rate of taxation as LTCG from this transaction. g) Bank statement of SVPL was accessed by notice u/s 133(6) issued to HDFC Bank Kolkata. It was found that immediately before any payment was made to appellant as consideration on transfer of shares, large amounts were received from certain other parties to provide buyer with sufficient funds to purchase shares from appellant. h) ITR's filed by SVPC show that company has been running huge losses for several years till 2014. Thus, it will be extraordinary for such a company to buy shares of SMS IT with no operations at huge premium. i) SVPL claims to be company trading in Shares/Securities and Shares purchased become stock in trade. In ITR for A.Y. 2015-16, SVPL declared total purchases of Rs. 45.37 Cr out of which Rs. 41.76 Cr is towards shares of SMS IT. This amount has been paid in advance substantially. The AO held that any reasonable person would draw inference that accommodation entries were provided to counter party under the garb of sale/purchase of shares. 6.4 Valuation a) Appellant claimed that Shares of SMS IT w....
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....llant and copies of bank statement was filed. It was contended that u/s 68 appellant is only bound to prove source of credits and not the source of source of credits. c) The AO held that as per Section 68 the appellant must prove the identity and creditworthiness of other party and genuineness of transaction. d) Identity * The AO held that appellant and other entities sold all 3000 shares accounting for entire share capital of SMS IT to another corporate entity. The value of this transaction was Rs. 41.76 Cr. The AO held it not conceivable that appellant had no details about the person behind SVPL with whom such negotiations were made. * Sh. Sanjeev Singhal the oldest Director and Signatory in SMS IT was issued summons u/s 131. He appeared but could not provide any information about any such Individual/entity behind SVPL to whom shares of SMS IT were sold. Statement of Sanjeev Singhal is reproduced on Page 33-38 of assessment order. * In view of these facts the AO held that the Identity of purchasing party is not satisfactorily explained. Reliance was placed on judgment of Hon'ble Delhi High Court in CIT Vs NR Portfolio and Hon'b....
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....ore any payment was made to appellant as sale consideration for shares these were large amount received by SVPL from other parties. Why would SVPL buy shares of SMS ITS PL with no operations at such a high premium. 6. The ld. CIT(A) deleted the addition. 7. Aggrieved, the revenue filed appeal before us. 8. Before us, the ld. DR argued that Sh. Narendra Kumar Jain admitted that he is managing a network of Shell Company and Sh. Rajesh Kumar is a dummy Director. The ld. AR supported the of the ld. CIT(A). 9. Heard the arguments of both the parties and perused the material available on record. 10. Before the revenue authorities the assessee had furnished the following documents before the AO regarding the transaction of sale of shares of SMS ITSPL. * Evidence of acquisition of these shares by the appellant in earlier AY'S. * Copy of Share Certificate and Share Transfer Deed. * Sale bill of shares. Confirmation of Buyer i.e. SVPL. 11. The ld. CIT(A) held that the AO has not pointed out any discrepancy in these documents. Thus the holding of shares of SMS ITS PL and the sale of shares by the assessee is not disputed by the AO. The assessee....
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....es of SMS ITS PL should have been computed on book value is not factually correct. On the contrary the AO should have an objection if according to him the sale consideration of shares was shown lower than the Market Value/FMV of the property owned by SMS ITS PL. 17. The ld. CIT(A) held that in the assessment order the AO has relied upon the statement recorded by DDIT (Investigation), Kolkata on 11.04.2017 of Narendra Kumar Jain stated to be an entry operator who managed a net work of shell companies which provided accommodation entries. However, in the said statement there is no reference to the assessee or the company SMS ITS PL whose shares have been sold. 18. In the said statement there is reference to SVPL i.e. the company who purchased the shares. However, there is no reference to the transaction of sale of shares of SMS ITS PL by the assessee to SVPL in the said statement. On examination of statement it was found to be in context with accommodation entries given by Narendra Kumar Jain to SESA group. There is no linkage between SESA group and assessee or and SMS ITS PL or SESA group and SVPL in the statement. 19. Thus, in the statement recorded of Narendra Kr. Jain th....