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2020 (12) TMI 659 - AT - Income TaxReopening of assessment u/s 147 - loss on the sale of shares with respect to certain private limited/ limited companies which was set off against the gain on the sale of land rights - as per AO transactions for booking loss on the sale of shares of private limited/ limited company was nothing but a colourable device adopted by the assessee in order to escape the income tax liability - HELD THAT - We hold that the view initially formed by the AO during the original assessment proceedings cannot be altered for initiating the proceedings under Section 147 of the Act. If the AO does so that will amount to review which is not desirable under the provisions of Section 147 of the Act. In view of the above and after considering the facts in totality, we do not find any reason to interfere in the order of the Learned CIT (A). Hence the ground of appeal of the Revenue is dismissed. Disallowance of loss on account of purchase and sale of shares - colourable device for setting off against the capital gain income - non-response of the notice issued by the AO under section 133(6) - HELD THAT - Admittedly, the primary onus to prove the correctness of the transaction is on the assessee as it has the special knowledge of the circumstances and privy to the facts of the case. Hence, the assessee has to satisfy the AO about the correctness of the impugned loss. After going through the details filed by the assessee as discussed above, we find that the assessee has discharged its onus to justify the loss claimed by it on the purchase and sale of the shares. Thus the onus shifts on the AO to disprove the contention of the assessee by collecting contrary evidence. But The AO has not brought any contrary evidence against the assessee to prove that the loss claimed by it was not a genuine loss. In other words no contrary evidence was collected or confronted by the AO against the contention of the assessee. Thus it can be inferred that the burden of proof has been discharged by the assessee. Question is that whether the assessee can be blamed for non-response of the notice issued by the AO under section 133(6) of the Act and answer stands against the Revenue and in favour of the assessee. It is because the assessee is not under any obligation to enforce the parties to response to the notice issued by the AO under section 133(6) of the Act. In fact the AO has been authorized to exercise its power granted under the statute i.e. under section 133 (6) of the Act and if the other party does not cooperate then the AO has power to levy the penalty on such party under section 272A of the Act. But the assessee under no circumstance can be penalized on account of non-response of the notice issued under section 133(6) of the Act to the parties. Non-availability of valuation report of the shares of the companies in which the assessee has incurred losses - HELD THAT - The tax liability, if any arises will be applicable in the hands of the recipient and no liability, can be imposed on the transferor. Therefore, we are of the view that the assessee being the transferor of shares cannot be subject to tax in the instant case. There was no provision under the Act for the year under consideration prescribing the guidelines for pricing of the shares unlike the provisions contained u/s 50C of the Act concerning immovable properties under the head capital gain. Thus in the absence of any specific provision to determine the sale price of the shares of the company, we are inclined to hold that the price declared by the assessee is correct and within the provisions of law. High profit/taxable income cannot be a criteria to decide the price of the share/script. Thus any unusual price rise/ fall in the shares of the company cannot be a basis to draw an inference that capital loss generated by the assessee is bogus in nature. Thus after considering the above facts, we are of the opinion that AO is not correct in challenging the loss declared by the assessee on the purchase and sale of shares. It is not the case of the Revenue that there was some inflow of money from the buyer of the shares to the assessee which is unaccounted. As there is no dispute about the nature of the transaction and the consideration received by the assessee against the sale of shares, therefore the transaction cannot be termed as a sham transaction. Onus is on Revenue to establish that assessee has received some benefit over and above the actual sales consideration. We are not inclined to interfere in the order passed by ld. CIT(A) deleting the addition - Decided against revenue.
Issues Involved:
1. Validity of the reassessment proceedings initiated under Section 147 read with Section 143(3) of the Income Tax Act, 1961. 2. Deletion of the disallowance of loss claimed by the assessee on the sale and purchase of shares. Detailed Analysis: 1. Validity of the Reassessment Proceedings Initiated Under Section 147 Read with Section 143(3) of the Income Tax Act, 1961: The Revenue contended that the CIT(A) erred in cancelling the assessment framed under Section 147 read with Section 143(3) of the Act. The AO initiated reassessment proceedings based on the belief that the assessee had artificially generated a loss on the sale of shares to set off against gains from the sale of land rights. The AO noticed that the shares were purchased at a high price and sold at a low price without any valuation report, suggesting a colorable device to escape tax liability. The assessee argued that the reassessment was based on the same set of facts and documents available during the original assessment, representing a change of opinion without any new tangible material. The CIT(A) upheld this contention, stating that the reassessment was not permissible as per the Supreme Court judgment in ACIT Vs. Kelvinator India Ltd., which prohibits reopening based on a mere change of opinion. The Tribunal affirmed the CIT(A)'s decision, emphasizing that the AO must possess fresh new material to form a "reason to believe" that income has escaped assessment. The Tribunal noted that all details regarding the loss on the sale of shares were already examined during the original assessment proceedings, and no new information was brought to light. Thus, the reassessment proceedings were invalid as they were based on a change of opinion rather than new tangible material. 2. Deletion of the Disallowance of Loss Claimed by the Assessee on the Sale and Purchase of Shares: The Revenue challenged the deletion of the disallowance of ?10,18,15,500 claimed by the assessee as a loss on the sale and purchase of shares. The AO disallowed the loss, citing the absence of valuation reports and questioning the genuineness of the transactions. The AO observed that the shares were purchased at high prices and sold at significantly lower prices within a short span, suggesting a colorable device to reduce tax liability. The assessee provided detailed documentation, including confirmations from parties, share certificates, bank statements, and other relevant documents, to support the genuineness of the transactions. The assessee argued that there was no legal requirement for a valuation report for the year under consideration, as the relevant provisions under Section 56(2)(viia) were effective from 01.06.2010. The CIT(A) accepted the assessee's submissions, noting that the transactions were supported by sufficient documentary evidence, and the payments were made through banking channels. The CIT(A) concluded that the primary onus of proving the genuineness of the transactions was discharged by the assessee, and the AO did not bring any contrary evidence to disprove the assessee's claims. The Tribunal upheld the CIT(A)'s decision, stating that the AO's disallowance was not justified, as the assessee had provided ample evidence to substantiate the loss. The Tribunal also highlighted that the absence of a valuation report did not invalidate the transactions, as there was no statutory requirement for such a report for the year under consideration. The Tribunal reiterated that the AO's observations were based on assumptions without any concrete evidence, and the loss claimed by the assessee was genuine and allowable. Conclusion: The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decisions on both the validity of the reassessment proceedings and the deletion of the disallowance of the loss claimed by the assessee. The Cross Objection filed by the assessee was dismissed as infructuous.
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