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2019 (3) TMI 895 - AT - Income TaxValidity of assessment u/s 153B(1)(b) - search to appellant - absence of panchnama - production of search Record before ITAT - HELD THAT - material on record clearly establish that assessee was subjected to search action u/s 132 in pursuance of valid warrant of authorisation u/s 132 and during the course of search panchanama was also drawn in respect of the premises searched of the assessee firm. The assessing officer, therefore, rightly proceeded to pass the assessment order under section 153B(1) of the Income Tax Act, having jurisdiction over the case of the assessee. Therefore, this ground of appeal of assessee has no merit. Service of Notice u/s 143(2) - within the period of limitation - HELD THAT - After considering the rival submissions, we are of the view that the issue is covered against the assessee by Judgment of Honorable Delhi High Court in the case of Ashok Chadda vs. ITO 2011 (7) TMI 252 - DELHI HIGH COURT in which it was held that in proceedings under section 153A of the Income Tax Act, there is requirement to issue notice under section 143(2) of the Income Tax Act . Learned Counsel for the Assessee did not dispute this legal proposition. It may also be added here that the assessee in response to notice under section 153A dated 28th December 2012, filed the return of income on 21st March 2013 and A.O. issued notice under section 143(2) and 142(1) on dated 22nd May, 2013. In response thereto, the assessee and their Counsel appeared before assessing officer. Therefore, notice under section 143(2) have been issued and served upon assessee within the period of limitation, though, it was not required as per the above Judgment. - Ground of assessee dismissed Validity of assessment in absence of proper sanction as required u/s 153D - Assessee voluminous reply filed on 29th January 2014 - AO written a letter to the Addl. CIT, Chandigarh on 30th January 2014 with draft assessment order for his consideration and approval - The AO is stationed at Faridabad and the Addl. CIT is stationed at Chandigarh - The Addl. CIT, Chandigarh granted approval u 153D on 31st January 2014 Addl. CIT, Chandigarh did not mention in the approval, if he has gone through the assessment record - HELD THAT - It is clear that assessee filed last reply before assessing officer at Faridabad on 29th January 2014 and according to Learned Counsel for the Assessee, it contained more than 500 pages. Therefore, it is difficult for the AO at Faridabad to go through these voluminous papers and prepare a draft order on 30th January 2014, so that the draft order could be transmitted to the Addl. CIT at Chandigarh on same day. In reply to RTI application, the assessing officer has reported that no record of mode of dispatch of assessment record to the Addl. CIT is available with the AO. Similarly, no record is available as to how the draft order and assessment record have been received by Addl. CIT at Chandigarh. The Addl. CIT, Chandigarh did not mention in his approval dated 31st January 2014 (supra), if he has gone through the assessment record or that assessment record was produced before him. Since no details are available on record about the mode, through which, assessment record was transmitted by the AO at Faridabad to Addl. CIT in Chandigarh and vice-versa by Addl. CIT, Chandigarh to Assessing Officer at Faridabad on the very next day would lead to suspicion, in explanation of A.O. if any, valid draft order was transmitted to the Addl. CIT within the time or if the Addl. CIT has communicated the approval under section 153D to the Assessing Officer at Faridabad on 31st January 2014. These facts would clearly show that the action of the Addl. CIT, Chandigarh granting approval in this case was, thus, a mere mechanical exercise, accepting the draft order as it is, without any independent application of mind on his part. Nothing has been clarified during the course of hearing to the effect that if Addl. CIT has gone through the assessment record, before accepting the draft assessment order. Thus, there was no application of mind on the part of the Addl. CIT before granting approval. we are of the view that no valid approval/sanction have been granted by the Addl. CIT, Chandigarh before passing the assessment order in the matter. The requirement of Section 153D of I.T. Act, 1961, are not satisfied in this case. We accordingly hold that entire assessment order is vitiated and is null and void. - Decided in favour of assessee. Capital gain computation on sale of shares - Reduction of consideration in agreement in the nature of Addendum to the Main Agreement - full value of consideration cannot be construed as the market value, but, as the price bargained for by the parties to the Sale. - HELD THAT - It is not in dispute that the assessee was owner of the impugned shares of M/s. R.S. Infrastructure Pvt. Ltd. The assessee agreed to sell the shares to M/s. Lowe Realty Pvt. Ltd., for a consideration of ₹ 526 crores through the initial Agreement, but, later on its conditions were amended through Addendum to the Agreement and total consideration was reduced to ₹ 520 crores. The observations of the authorities below had been that such consideration could not be changed. Section 62 of the Indian Contract Act, 1872 provides effect of novation recession and alteration of contract If the parties to contract - - agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed. The above Section of Contract Act approves the action of the assessee and the purchaser in altering the terms of the contract. The assessee has executed fresh agreement in the nature of Addendum to the Main Agreement, through which, the consideration was reduced from ₹ 526 crores to ₹ 520 crores. The contention of assessee is supported by Bank statement of the assessee and the purchaser. No evidence has been brought on record of understated price of shares or more consideration received by the assessee. No evidence, in fact, comes on record, if assessee received ₹ 6 crores from the purchaser. Change in the Terms of the Agreement is permissible in Law. Therefore, in the absence of any evidence or material and record, it is difficult to believe that assessee received ₹ 6 crores from the purchaser of the shares. Thus, there was no justification for the authorities below to make the addition - Decided in favour of assessee. Short term capital loss - bonafide genuine transaction to purchase CCDs and only because of one of the condition was not satisfied for transfer of CCDs, therefore, assessee had to sell the shares at a lower price. - HELD THAT - facts clearly show that assessee entered into the bonafide genuine transaction to purchase CCDs and only because of one of the condition was not satisfied for transfer of CCDs, therefore, assessee had to sell the shares at a lower price. Therefore, assessee suffered short term capital loss of ₹ 155.75 crores in this regard. The documentary evidences on record have not been doubted by the authorities below. The parties are genuine and assessed to tax and all transactions are carried-out through the Banking channel. The assessee could not have produce the original CCDs before A.O. because the same were given to the purchaser M/s. Zealous at the time of sale of CCDs by the assessee. Merely because transaction was carried-out within the Group concerns, by itself, is no ground to reject the explanation of assessee. Considering the totality of the facts and circumstances, we are of the view that assessee has entered into genuine transaction which is supported by documentary evidences, which have not been doubted by the authorities below. Therefore, the rule of preponderance of probability would not apply to the facts and circumstances of the case. Therefore, there was no justification for the authorities below to reject the claim of assessee of short term capital loss. - Decided in favour of assessee.
Issues Involved:
1. Validity of the assessment order under section 153B(1)(b) of the Income Tax Act, 1961. 2. Requirement and service of notice under section 143(2) of the Income Tax Act, 1961. 3. Proper sanction under section 153D of the Income Tax Act, 1961. 4. Addition of ?6 crores while computing taxable capital gains on transfer of shares. 5. Disallowance of short-term capital loss of ?155.75 crores arising on the sale of debentures. 6. Levy of interest under section 234B of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Validity of the assessment order under section 153B(1)(b): The assessee contended that the assessment order was without jurisdiction as no search was conducted. However, the Department produced a warrant of authorization and panchanama proving that a search was conducted under section 132 of the Income Tax Act. The Tribunal found that the assessment order was validly passed under section 153B(1)(b) as the search action was substantiated with proper documentation. 2. Requirement and service of notice under section 143(2): The assessee argued that the assessment was illegal due to the absence of a valid notice under section 143(2). The Tribunal referenced the Delhi High Court judgment in Ashok Chadda vs. ITO, which mandates the issuance of notice under section 143(2) in proceedings under section 153A. It was found that the notice under section 143(2) was issued and served within the period of limitation, making the assessment order valid. 3. Proper sanction under section 153D: The assessee claimed that proper sanction under section 153D was not received before passing the assessment order. The Tribunal examined the timeline and found that the draft assessment order was sent to the Addl. CIT on 30th January 2014, and approval was granted on 31st January 2014. However, the Tribunal noted that the approval process was mechanical and lacked application of mind, as there was insufficient time for the Addl. CIT to review the voluminous records. The approval was communicated by fax on 5th February 2014, after the assessment order was passed. Consequently, the Tribunal held that the assessment order was vitiated and null and void due to the lack of valid approval under section 153D. 4. Addition of ?6 crores while computing taxable capital gains: The assessee contested the addition of ?6 crores, arguing that the sale consideration was reduced from ?526 crores to ?520 crores due to market conditions, as per an amended agreement. The Tribunal found that the amendment to the agreement was permissible under Section 62 of the Indian Contract Act, 1872, and there was no evidence of understated price or additional consideration received. The addition of ?6 crores was deleted. 5. Disallowance of short-term capital loss of ?155.75 crores: The assessee claimed a short-term capital loss on the sale of debentures, which was disallowed by the assessing officer as non-genuine. The Tribunal examined the documentary evidence, including the debenture subscription agreement, arbitration proceedings, and sale transactions, and found that the transactions were genuine and supported by evidence. The Tribunal concluded that the assessee genuinely suffered a short-term capital loss and allowed the claim. 6. Levy of interest under section 234B: The levy of interest under section 234B was not disputed by the assessee and was considered mandatory and consequential. Therefore, the Tribunal dismissed this ground of appeal. Conclusion: The Tribunal quashed the assessment order due to the lack of valid approval under section 153D, allowed the claim of short-term capital loss, and deleted the addition of ?6 crores. The appeal was partly allowed.
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