TaxTMI 
TaxTMI 
2025 (7) TMI 1436
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....of the Act. The Ld. CIT(A) did not appreciate that the fact that the appellant filed Income Tax Return u/s 139(1) and the return was processed u/s 143(1) of the Act. The selection of the case under scrutiny is the prerogative of the Income Tax Department. The reason for not putting the case under scrutiny cannot be the ground for alleging that the appellant did not make full and true disclosure of facts which entitled the Revenue Officer for initiating the proceeding u/s 147 of the Act. 2. The Ld. CIT(A) erred on facts and law in upholding the Order dated 28.03.2013 passed by the Assessing Officer wherein the objections filed by the appellant, challenging the initiation of proceedings u/s147 of the Act were rejected arbitrarily. Without prejudice to ground no 1 and 2 3. On the facts of the case and as per law, the Lid CITIA) erred in upholding the arbitrary order of the Ld. Assessing Officer in disallowing Short Term Capital Loss of Rs 27,92,30,441/-, incurred in sale of commercial FSI in Sirsa Project & sale of 4659 shares of Mansarover Heritage Inn Private Limited, merely on his whims and fancy. The Ld. CIT (A) erred in upholding the Order of the Assess....
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....hereof. As per the assessee, it purchased 4659 shares of M/s Mansarover Heritage Inn Put. Ltd. from M/s Complete Engineers Put. Ltd. for Rs. 28,88,58,000/- on 13.05.2009 @ Rs. 62,000/- per share at prevailing market rate at that time. Later on, due to sluggishness in real estate market, the assessee sold those shares for Rs. 13,51,11,000/- to Mr. Rajesh Chaudhary as the assessee was not finding any buyer, for those shares, in the market. As a result, the assessee suffered the STCL of Rs. 15,37,47,000/-. The assessee had not received any sale consideration from Mr. Rajesh Chaudhary till the finalization of the assessment. Mr. Rajesh Chaudhary sold those shares to M/s Era Landmarks Ltd. for Rs. 13,51,11,000/-. 3.2 Further, the assessee also purchased commercial FSI in Sirsa Project for Rs. 18,57,50,000/- on 18.04.2009 from M/s Goglet Infotech Pvt. Ltd. @ of Rs. 66,000/- sq. ft. at prevailing market rate at that time. Later on, due to sluggishness in real estate market, the assessee sold commercial FSI in Sirsa Project for Rs. 6,00,00,000/- to Mr. Subhash Chaudhary as the assessee was not finding any buyer, for the commercial FSI in Sirsa Project, in the market. As a result, the as....
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....lling the FSI which was bought for Rs. 18,57,50,000/- to Shri Subhash Chaudhary for Rs. 6,00,00,000/ within a span of 4 months. There was no basis of valuation that how the price of both the transactions determined and what was the hurry to enter into such a transaction that would result into a loss of Rs. 27,94,97,000/- and for which no payment has been received till 31.03.2011. The whole chain of transactions was entered into just to set off of the capital gains arising on the shares of M/s Era Infra Engg. Ltd. This is evident from the perusal of the chain of transactions. The first transaction regarding the FSI was entered into buy the assessee with M/s Goglet Infotech Pvt. Ltd. which is a group concern of M/s Era Group. Then subsequently the FSI was sold to Sh. Subhash Chaudhary. The assessee has submitted that it could not find a prospective buyer who could purchase this development right. Since, the funds of the company were blocked and there was no hope for immediate recovery of real estate market, the company decided to sell these development rights to Sh. Subhash Chaudhary who had shown his willingness to purchase these rights for total consideration of R....
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....as been manufactured by the assessee to provide a cloak of genuineness to this sham transaction. Therefore, in light of the above circumstances, it is clear that this transaction is a sham transaction and was just entered to set off the short term capital gains to reduce the tax liability. Similarly, the transaction regarding the shares was entered into by the assessee with M/s Complete Engineers Pvt. Ltd. Then subsequently the shares were sold to Sh. Rajesh Chaudhary. The assessee has submitted that it could not find a prospective buyer who could purchase the shares and the market condition was not good. Since, the funds of the company were blocked and there was no hope for immediate recovery of real estate market, the company decided to sell these shares to Sh. Rajesh Chaudhary who had shown his willingness to purchase these rights for total consideration of Rs. 13,51,1 1,000/-. The contention of the assessee is wrong. No funds of the assessee were blocked. Infact no payment was made by the assessee to M/s Complete Engineers Pvt. Ltd. at the time of transaction. The payment of this transaction was made by the assessee on 06.10.2009 after the payment was received from M/s....
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....be given credit for the short term capital loss of Rs. 27,94,97,000/-. During the year, the assessee has earned capital gains of Rs. 27,92,30,441/-, which have been set off against the capital losses and the resultant capital losses of Rs. 2,66,559/- have been carried forward. As discussed above, the assessee is not being given the credit of the losses. Hence Rs. 27,92,30,441/- is added to the income of the assessee and loss of Rs. 2,66,559/- is not allowed to be carried forward." [Emphasis supplied.] 3.4 Aggrieved with the assessment order, the assessee filed appeal before the Ld. CIT(A), who dismissed the appeal as under: "11 I have considered the facts of the case, written submissions of the appellant, including the various case laws relied upon by the appellant and the findings given by the Assess1ng Officer on this issue. On considering the facts of the case, I find that the transactions in respect of the sale of commercial FSI in Sirsa Project and sale of shares of M/s Mansarover Heritage Inn Pvt. Ltd, were arrangements made by the appellant between these parties to reduce its tax burden. It is pertinent to note that the appellant M/s Victory Realtech Pvt....
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.... Subhash Chaudhary, to determine the genuineness of the transaction and on perusal of their ITRs he found that they were persons of no financial capability to enter into such deal. The fact that M/s Big Ben Developers Pvt and Ltd to whom said Sh. Subhash Chaudhary had transferred his rights in the FSI project M/s Era Landmarks Ltd. to whom Sh. Rajesh Chaudhary had transferred his rights in shares had not made any payment to the appellant till the time of completion of the assessment. Even the appellant had not made any payment to the companies from whom he had purchased the Development Right in Sirsa project and shares. This itself shows that there was also no scarcity of funds which compelled the appellant to sell its project and shares at a throw away price and suffered a huge loss to the tune of Rs. 27,94,97,000/-. 11.11 In view of the above discussion I am of the view that the Assessing Officer has rightly held that the transactions entered into by the appellant under Development Right Sale Agreement and Share Purchase Agreement were sham transactions used as a device to give colour of genuineness to a fictitious transaction. Therefore, considering these facts of the c....
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....nst the STCG. 6. On the other hand, the Ld. CIT-DR, placing reliance on the finding of the Authorities below, requested for dismissal of the appeal. He contended that the net worth of the companies from whom the commercial FSI of Sirsa Projects and shares of M/s Mansarover Heritage Inn Pvt. Ltd. purchased were negative at the time of purchases and sales thereof. He questioned the pricing of the commercial FSI rights of Sirsa Project and shares of M/s Mansarover Heritage Inn Pvt. Ltd. by submitting that these transactions were arranged. How purchases and sale of these assets would take place through journal entries rather than actual exchange of money. The self-serving documents evidencing such transactions could not determine the pricing at the time of purchases and sale of these assets particularly when the net worth of these companies at the time of purchases and sale of these assets were in negative. 7. We have heard both parties and have perused the material available on record. We find that the License No. 190 of 2007 granted by Haryana Govt. & Country Planning to VPN Buildtech Pvt. Ltd. and VPN Buildcon Pvt. Ltd. was valid upto 27.06.2009. The said license was not cance....
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....tage Inn Pvt. Ltd. was not demonstrated before us. Hence, we do not able to convince ourselves with the arguments of the Ld. Counsel that the prices of the commercial FSI rights of Sirsa Project and shares of M/s Mansarover Heritage Inn Pvt. Ltd. were based on the prevailing market rates at the time of purchase and sale transactions. It was very surprising to note that neither the purchase price for acquiring the said commercial FSI rights of Sirsa Project and shares of M/s Mansarover Heritage Inn Pvt. Ltd. was paid on the dates of said purchases nor the sale considerations of these assets were received at the time of the sale as no prudent business man would enter in such transactions particularly when the buyers of the said commercial FSI rights of Sirsa Project and shares of M/s Mansarover Heritage Inn Pvt. Ltd. were hand to mouth and had not any money to make such purchases. The genuineness of transactions under reference was not established beyond doubt either before us or the Authorities below. 10. As far as the shares of M/s Mansarover Heritage Inn Pvt. Ltd. are concerned, the issue of pending PIL before the Hon'ble Rajasthan High Court was there even at the time of purch....