TaxTMI 
TaxTMI 
2025 (8) TMI 371
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....urt in the case Durga Prasad More (82 ITR 540) and Sumati Dayal (80 Taxman 39) of examining the transactions by applying the test of preponderance of human probability and after duly considering the surrounding circumstances related to the transactions claimed was not followed and it was apparent the said transactions were sham if one considers the following abnormal features related to the said transactions: a) The Directors, Shri Kishor Jhunjhunwala and Shri Vinod Baid of the assessee company were also Directors in the said two companies, M/S Discovery Infoways Ltd., and M/s Prudential Ammana Sugars Ltd., whose shares were purchased and sold. b) The shares were purchased by the assessee in the companies, M/s Discovery Infoways Ltd., and M/s Prudential Ammana Sugars Ltd., of face value Rs. 10 per share by paying a premium of Rs. 90 per share and Rs. 40 per share respectively during Financial Year 2014-15. Though both the companies were registering losses, were having a negative net worth and from were not having any business activities, however during Financial Year 2014-15 they received aggregate premium of Rs. 11.25 crores and Rs. 10 crores respectively from va....
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....al Loss, on sale of the shares was set off against Long Term Capital Gain arose on account of slump sale. 7. The assessee filed the details of sale transactions including the ledger accounts of Discovery Infoways Limited and Prudential Ammana Sugar Limited along with bank statement reflecting the transaction details of shares purchased. Further, the assessee stated that the shares were sold on the basis of value ascertained upon analysing financials of the respective companies as well as multiple market prevailing circumstances. Further, the assessee also filed a debit note which was issued on 31.03.2018 to prudential stock and securities limited based on the financial statements for the A.Y.2014-15 of the companies in which the assessee had purchased the shares. On perusal of the submission of the assessee the AO had observed the following about the companies in which the assessee had invested in shares: "4.2.1 Analysis of financial statements of Discovery Infoways Limited:- A. The company has incurred losses amounting to Rs. 1,41,05,750.73 for F.Y. 2013-14 and Rs. 25,23,745.09 for F.Y. 2014-15. B. The purchases during the F.Y. 2013-14 were Rs. 72,456....
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....vances given Rs. 25,64,112/- H. The only income is Interest on unsecured loan amounting to Rs. 7,66,397/-. 1. The net worth of the company as on 31.03.2014 (just before purchase of shares by the assessee) stood at Rs. 6,82,841/- in negative. From the above observations, it appears that Financial statements does not show any genuine business activity conducted by this company. 8. Further, the AO observed that the slump sale of the undertaking took place on 26.04.2017 (AY 2018-19) giving rise to capital gain from slump sale amounting to Rs. 52,47,28,399/-. The assessee ought to have been paid the advance tax on the same. 9. Therefore, the AO came to a conclusion that the Long Term Capital Loss on sale of shares to the tune of Rs. 24.00 crores have not been supported by any valid and reasonable explanations and documents and hence, brought to tax by holding as under: "4.4. The assessee has failed to submit any evidence before us to reasonably justify undertaking the purchase of such unlisted shares at such a huge premium. In the judgement by Hon'ble Delhi ITAT in the case of Hillman Properties Pvt. Ltd. Vs ITO (ITAT Delhi) held that mere s....
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....n slump sale. These are mere book entries using banking channel between parties whose management are related. Taking this view, the setting off of Rs. 24 cores cannot be allowed. Therefore, the same is being disallowed and added back to the income of the 5. As the assessee has understated its income by claiming bogus LTCL which are not allowable as per law, penalty proceedings under section 270A of the act are being initiated on this issue. Since these are false entries recorded in books of account in my view, I am satisfied that this is underreporting in the nature of misreporting as per provisions of section 270A. 6. A show cause notice dated 25.03.2021 was issued to the assessee along with Draft Assessment Order. The assessee was asked to submit its reply by 30.03.2021. In its response dated 30.03.2021, the assessee has stated the following: That we invested in preference shares of both the companies on the basis of the comprehensive analysis and future prospects in the year 2014-15 and all transactions were carried out through banks in normal business operations, as such absolutely genuine and legitimate. However, subsequently we ascertained on the ba....
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.... 7. With these remarks, the total income of the assessee is computed as under: Income as per the return filed : 3,24,17,987/- Add: Disallowance of LTCL. : 24,00,00,000/- Assessed Total Income : 27,24,17,987/- Rounded off : 27,24,17,990/- 10. Aggrieved by the order of the AO the assessee challenged the order before the ld.CIT(A), NFAC, Delhi. Before the ld.CIT(A) the assessee reiterated the facts and further submitted the following: The appellant made detailed submissions which are reiterated above, however the gist of submissions is as follows: "...... The appellant is a public listed company having more than 5000 shareholders engaged in in agro commodities activities particularly sugar manufacturing since 1993-94. AO has alleged that even though same price was paid for purchase of shares the quantity of the shares bought were different. It is not understood as to what is the relevance of such a baseless allegation when the price range could be different which was exactly the case in hand. The appellant had purchased 12,50,000/- shares of Discovery Infoways Ltd having face value of Rs. 10/- per share and at a premium ....
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....and vouchers, the payments made for purchase have been made through account payee cheque, the shares purchased were of private limited companies who were regularly filling their returns having a PAN number and complying to the Registrar of Companies Act and the shares which were sold were again to a limited company who were regularly filling their return and complying with the rules and regulations before the ROC. It is the allegation of the AO that the appellant has made sale of the shares close to the slump sale. It is to be submitted that the slump sale took place on 26.4.2017 whereas sale of the shares was on 31.3.2018 before the end of the previous year and therefore there is no link whatsoever between the slump sale and the sale of shares. The allegation that no advance tax was paid by the assessee against slump sale is also baseless as because tax evasion and tax planning are two separate things and tax planning does not tantamount to tax evasion. The appellant was already looking into the prospect of selling the shares as the company was not making profits and incurring losses and it wanted to liquidate its investments since a long period. The appellant also on man....
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....and purchased 25,00,000 shares of Prudential Ammana Sugar Ltd on 10.9.2014 for total consideration of Rs. 12,50,00,000/-, The AO has alleged that even though same price was paid for purchase of shares the quantity of the shares bought were different. The appellant has contested that the price of share is determined after analyzing financials and prospects of the future business opportunities of both the companies. This justification of appellant is acceptable as it is up to the investor to make the decision with regard to every investment made. The investment decision can be different for different companies, Ld. AO has mentioned that that the appellant has made sale of the shares close to the slump sale. Ld. AO has mentioned that no advance tax was paid by the assessee against slump sale as the appellant had intention to set off against LTCG. The appellant has submitted that the slump sale took place on 26.4.2017 whereas sale of the shares was on 31.3.2018 before the end of the previous year and therefore there is no link whatsoever between the slump sale and the sale of shares. The issue here is genuineness of both the transactions. Regarding slump sale of the b....
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....ies were initiated to probe into some Bank account which was used to issue cheques to entry seeker or beneficiary against cash paid by them to the entry operator. The A.O. has specifically recorded the fact in the assessment order that initially in different account of the Investors, the cash have been deposited from where the amount have been transferred to the another accounts of Investors and then transferred to assessee. These information are specific to show that against the cash, entry has been provided to the assessee by entry providers. The assessee failed to produce any evidence before the tax authorities. Hon'ble ITAT held that it is clearly established that assessee failed to prove identity of the accommodation entry providers, their creditworthiness and genuine of the transaction in the matter. The case of appellant is not the case of accommodation entry as that of the assessee in case of M/s. Hillman Properties Pvt. Ltd., New Delhi. The AO in its order has relied upon the decision in the case of CIT v Durga Prasad More 82 ITR 540 (SC) and Sumati Dayal v CIT 214 ITR 801 (SC) and has invoked the test of human probabilities. The appellant is relying ....
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....which Capital Gains of Rs. 52,47,28,399/- was earned which shows the intention of the assessee to not pay tax. The appellant has made disclosure of the full particulars of investments in the year of investment in the audit reports. No adverse consequence on the aforesaid transaction observed by the assessing officer with respect to the investment made by the appellant company during the course of assessment proceedings u/s 143(3). Since all the facts are before the AO, there is little room for conjecture. Considering the facts and circumstances narrated and analyzed above, all the details and documents placed on record corroborating the claim of the appellant the judicial precedents referred, addition made by the Ld. AO towards treating long term capital loss as bogus claimed by the appellant to the extent of Rs. 24,00,00,000/-is directed to be deleted. Thus, grounds taken by the appellant in this regard are allowed." 12. Aggrieved by the order of the ld.CIT(A) the Revenue challenged the order before us. The ld.DR assailing the action of the ld.CIT(A) submitted that the ld.CIT(A) has erred in deleting the addition of long term capital loss of Rs. 24.00 Crores. ....
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....mmended price of the shares of these two companies at the time of investment as well as at the time of disposal of the shares (page No.277 of the paper book). The ld.AR also took us through the share certificate of Prudential Ammana Sugars Limited (page No.278 & 279 of the paper book) and Discovery Infoway Limited (page No.280 of the paper book). 18. In light of the above arguments and submissions the ld.AR submitted that the AO has grossly erred in understanding the transactions and hence treated as bogus transactions. Hence, the ld.AR prayed for confirming the order of the ld.CIT(A), as there is no reason to interfere with the well-reasoned order of the ld.CIT(A). 19. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The only issue before us to decide is whether the Long-Term Capital Loss of Rs. 24.00 Crores claimed by the assessee on sale of unlisted shares is from genuine transactions, allowable to be set off against Long-Term Capital Gain arising from a slump sale u/s.50B of the Act, or whether it is a colourable device to evade tax. 20. It is undisputed fact that the assessee made investments in pr....