2024 (9) TMI 89 - AT - Income Tax

Validity of reopening of assessment - reasons to believe - HELD THAT - CIT(A) considering the statement of facts given in Form 35 and written submissions, held no evidence whatsoever brought on record in support of the claim in contending the reassessment being invalid under law. Before us, no evidence whatsoever filed in support of ground Nos. 1 2 challenging the action of the ld. CIT(A) in confirming the reassessment proceedings initiated by issuing notice u/s 148 and completing the assessment u/s 143(3) r.w.s. 147 is invalid, thus, ground Nos. 1 2 as raised by the assessee are dismissed. STCG - Difference between the sale price and market value of the factory building - whether the value of factory land and building sold by the assessee is to be adopted as on the date of business transfer agreement executed during October, 2011 or as on the date of conveyance deed in the month of December, 2011 when the transfer deed was registered and stamp duty paid by the assessee? - HELD THAT - We note that the assessee adopted the market value of the factory land and building as on the date of business transfer agreement executed during October, 2011, but, however, the AO considered the market value of the factory land and building as on the date of conveyance deed executed in the month of December, 2011 when the transfer deed was registered and stamp duty paid by the assessee. CIT(A) observed that the transfer of any immovable property gets effected by virtue of the registration of the transfer agreement and not on any other date prior to such date. We note that the ld. CIT(A) confirmed the market value of the factory land and building being adopted by the AO as on the date of conveyance deed executed in the month of December, 2011. Hence, we find no infirmity in the order passed by the ld. CIT(A) and the same is justified. Thus, the ground No. 3 raised by the assessee is dismissed. Disallowing short term capital loss - no reason for fall of intrinsic value of shares within a short period of time - assessee claimed sale price of 20,00,000 shares at face value of ₹.10/- per share with premium of ₹.35/- from four entities and as the said transfer did not materialize and decided to resale the said shares to the same above said 4 entities at a face value of ₹.10/- per share only - HELD THAT - assessee failed to produce any valuation report or genuineness of the circumstances and other conditions, which compelled the assessee company to purchase the shares at ₹.45/-. We also noted that the assessee failed to produce share transaction statement, bank account statements for ₹.45/- being paid for each share and ₹.10/- received on resale, confirmations by way of financials from the four entities with whom the whole gamut of purchase and sales of shares took place. Thus, the Assessing Officer disallowed the entire loss of ₹.7,00,00,000/- claimed by the assessee. After considering the facts and circumstances of the case along with statement of facts and written submissions, the ld. CIT(A) found the submissions of the assessee are not acceptable in the absence of any documentary evidence and passed a detailed order. nothing was brought on record to show why the assessee within a short period of time sold the above said shares to the same 4 entities without charging premium and moreover, the assessee could not produce any details of share transaction statement, bank account statements for ₹.45/- being paid for each share and ₹.10/- received on resale, confirmations by way of financials from the four entities with whom the whole transaction was undertaken. Therefore, we find no infirmity in the order of the ld. CIT(A) and the same is justified.

Issues Involved:
1. Validity of reassessment proceedings.
2. Addition on account of difference between sale price and market value of factory building.
3. Disallowance of short-term capital loss of Rs. 7,00,00,000.

Detailed Analysis:

1. Validity of Reassessment Proceedings:
The assessee challenged the action of the Commissioner of Income Tax (Appeals) [CIT(A)] in treating the reassessment proceedings as valid in law. The CIT(A) issued a notice intimating the date of hearing to the assessee, who filed written submissions. The CIT(A), considering the statement of facts given in Form 35 and written submissions, held that no evidence was brought on record to support the claim that the reassessment was invalid. Before the Tribunal, no evidence was filed to challenge the CIT(A)'s confirmation of the reassessment proceedings initiated by issuing a notice under section 148 of the Income Tax Act, 1961, and completing the assessment under section 143(3) read with section 147 of the Act. Thus, the Tribunal dismissed ground Nos. 1 & 2 raised by the assessee.

2. Addition on Account of Difference Between Sale Price and Market Value of Factory Building:
The assessee contested the CIT(A)'s confirmation of the addition made due to the difference between the sale price and market value of the factory building. The Department argued that the assessee admitted a net short-term capital gain of Rs. 14,61,66,217, which included the sale consideration of the factory building at Rs. 7,45,44,453, whereas the market value as per the Department was Rs. 7,61,00,000. The CIT(A) discussed the entire facts and circumstances, noting that the Business Transfer Agreement was executed in October 2011, but the conveyance deed was registered in December 2011. The CIT(A) held that the transfer of immovable property is effected by the registration of the transfer agreement and not any prior date. Therefore, the market value as of the date of the conveyance deed in December 2011 was considered valid. The Tribunal found no infirmity in the CIT(A)'s order and dismissed ground No. 3 raised by the assessee.

3. Disallowance of Short-Term Capital Loss of Rs. 7,00,00,000:
The assessee challenged the CIT(A)'s confirmation of the Assessing Officer's (AO) disallowance of a short-term capital loss of Rs. 7,00,00,000. The assessee claimed the sale price of 20,00,000 shares at a face value of Rs. 10 per share with a premium of Rs. 35 from four entities. The shares were later resold to the same entities at Rs. 10 per share, leading to a claimed short-term capital loss. The AO doubted the transaction's genuineness due to the lack of evidence explaining the fall in intrinsic value and disallowed the loss. The CIT(A) upheld the AO's decision, noting that the assessee failed to produce any valuation report, share transaction statement, bank account statements, or confirmations from the entities involved. The Tribunal agreed with the CIT(A)'s detailed order, which cited various judicial precedents emphasizing the importance of genuineness in transactions. The Tribunal found no infirmity in the CIT(A)'s order and dismissed ground No. 4 raised by the assessee.

Consequential Grounds:
Ground Nos. 5 & 6 raised by the assessee were deemed consequential in nature and required no adjudication.

Conclusion:
The appeal filed by the assessee was dismissed in its entirety. The Tribunal upheld the CIT(A)'s decisions on all grounds, finding no infirmity in the reassessment proceedings, the addition due to the difference in sale price and market value of the factory building, and the disallowance of the short-term capital loss. The order was pronounced on 21st August 2024 at Chennai.

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