9911796707
TMI Blog2012 (4) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... A - held that:- The shareholders having the shares as on 17-07-2006 have offered the gain arising from sale of shares by treating the sale consideration at Rs. 318/- per share. Hence, it is not the case that there is a tax evasion. The entities which purchased the shares before 17-07-2006 and has offered the profit. It is not the case of the revenue that such entities have given back profit to the persons from whom such shares were purchased before 17-07-2006. Hence, it is not the case of tax evasion. X X X X Extracts X X X X X X X X Extracts X X X X ..... to avoid inconvenience. The A.O treated sale of 10000 equity share to YCPL @ 100/- per share as genuine but remaining 25000 equity share were treated as the same were transferred to avoid short term capital gain in the hands of the assessee i.e. BAPL on account of the following reasons:- "(a) There were an MOU between Techpro, BAPL and Shri Prem Kumar Garg on 17-07-2006 vide which it was agreed to sell the shares of BAPL to Techpro @ Rs. 318/- per share. (b) The shares were transferred to YCPL after the date of MOU as well as sale proceeds realized in the bank a/c on 19.7.2006 after the date of MOU. (c) The learned A.O took into consideration two evidences which suggest that the share transfer is make believe arrangement. Photo copy of MOU without it annexure seized during the course of search. Secondly Register of share transfer of BAPL stated as seized from the residence of Shri S.K. Singhal containing details of date of share transfer and Board Meeting etc. That the share transfer of BAL was to avoid capital gain in the hands of assessee company. (d) The learned A.O. was of view that entire share holding was in the control of Sh. S.K. Singhal and his associate and Sh. Prem G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of share was resorted in order to save on Stamp Duty involved in transferring of land. Sole intention behind transfer of share by the share holders of M/s Blossom Automotive Pvt. Ltd. was to sell plot of land ;held by the company at Bhiwadi to M/s Techpro System Ltd. for which the value of the plot was agreed between the share holders of M/s Blossom Automotive Pvt. Ltd.& M/s Techpro System Ltd. at Rs. 12.72 crores as is evident from para b of the MOU which has been given the name CONSIDERATION which is reproduced below:- The Techpro will make a payment to the Seller and to the other share holders of Blossom in proportionate of their share holding in Blossom, to the tune of Rs. 12.72 Crores ( Rupees Twelve Crores Seventy Two Lac only) i.e. Rs. 318/- per share towards sale of Equity shares of Rs. 10/-each. From the language of the para of the MOU as given above, it is evident that payment of Rs.12.72 crores for the plot of land was to be paid the share holders of M/s Blossom Automotive Pvt. Ltd. in proportion of their share holding in; the company. As such it is not the transfer of shares but transfer of plot of land through the mode of share transferring." (e) Transferring of sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than 15 players who are either family members or concerns of the family, namely Sh. Rekesh Kumar, Sh. Sanjeev Kumar are brothers, M\s R.K. Agarawal & Sons(HUF) is the of Sh. Rakesh Kumar, like wise M\s Geripwell Steel Pvt Ltd., M\s Lambardar Concrete Pvt Ltd., are the closely held companies of Sh. Rakesh Kumar & Sh. Sanjeev Kumar's family. Similarly, M\s Singhal Securities Pvt Ltd. M\s Singhal Credit Management Pvt. Ltd. M\s SNR Rubbers Pvt Ltd., are the closely held companies of Sh. Surendra Kumar Singhal and His family from whose residence documents regarding the transfer of share of M\s Blossom Aotomotive Ltd., and other related documents have been seized. Documents relied upon, reasons put forward apparently appears to be genuine but the documents seized and the circumstances relating to transfer of share by the assessee to Kolkata based companies give rise to contradictions which proves that the transactions of share which the assessee has entered with Kolkata based company was just a façade/colorable device to reduce its capital gain liability. Without further going into any detail the contradictions as mentioned below arising from the documents seized from the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , & M/s Yuthika Commercial Pvt Ltd,. Were transferred on 31.07.2006. The assessee held all the 25000 shares on 17.07.2006, the date on which MOU with M/s Techpro Systems Ltd. for transfer of shares was entered into by the shareholders of the group and its claim that on 17.07.2006 i.e. the date of MOU, it had no shares of m/s Blossom Automotive Pvt Ltd. proves to be contradictory in view of the detail given in Register of share Transfer and Minutes of Board meeting of the company. (iii) Although the Assessee has received payment of Rs. 25 lacs from M/s Yuthika commercial Pvt Ltd. On 18.07.2006 but it cannot be said to be received on account of transfer of shares because as per the Register of share Transfer (Annexure-A) and Minutes of Board Meeting dated 31.07.2006 (Annexure-B) share were still with the assessee. (iv) Transfer of share to Kolkata based companies by the shareholders as has been discussed in the pares above is nothing but resorting to colorable device to avoid payment of tax which can not b allowed even if it apparently appears to be within the four corners of law as has been held by hon'ble Supreme Court of India while dealing the SLP in the case of McDowell And Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd transfer of shares, it is apparent that in reality it was sale of plot to M/s Techpro Systems Ltd and not of shares. Whole gamut of transferring the shares of M/s Blossom Automative (P) Ltd. by the assessee alongwith other shareholders to Kolkata based companies and transfer of shares within a period of three months by the Kolkata based companies to M/s Techpro Systems Ltd although apparently appears to be genuine a transaction but in this case apparent is not real because transfer of share to Kolkata based can not be considered to be a transfer since the shares ultimately landed up with M/s Techpro System Ltd. where they were indented to be as per the MOU between the Share Holder & M/s Techpro Systems. (vi) Transfer of Shares by the Share holders of M/s Blossom automotive Pvt Ltd was used as a tool by the Share Holder for transferring the plot of land to M/s Techpro System Ltd. However, mode of transfer of an assets is not determinative of the nature of the assets is well supported by the judgement in the case of Vodafone International Holding B.V. v. Union of India And Another, 311 ITR 46 (Bombay High Court) wherein it has been held that "Shares in themselves may be an assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and use the faculties of his brain to decide a case judiciously and on merits. In this case under signed can not shut his eyes to the open secret that there is a blatant attempt on the part of the assessee to evade tax by stage managing the documents. In view of foregoing, it is held that the assessee has earned a Short Term Capital Gain from transfer of plot of land through the mode of share transfer which computed as under proportionately on the basis of his shareholding and the total Short Term Capital Gain earned by the shareholder Short Term Capital Gain = A×B C 8,71,00,000 × 25,000 4,00,000 Rs. 54,43,750/- A: Total Short Capital Gain earned by the Shareholders B: No. of Shares held And Transferred by the assessee C: Total shares of M/s Blossom Automative which have been transferred to M/s Techpro Systems Ltd. 2.7 The ld. AR has made the following Submission before the learned CIT(A):- "(a) There was search warrant against the company but no search has been carried out against the Assessee Company. The search warrants were served on the individuals but the search warrant was not served on the company through its directors. (b) No requisition of books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment years immediately preceding the assessment year relevant to the previous year, in which search was conducted. In case no search is conducted against the person, the period of operation to which the provision of section 153A of the act is baseless. Though the provision of section of 158BC of the act are not applicable to searches conducted after 31-05-2003, but the provision of section 132 of the Income Tax act are continuining on the statute implying thereby that the provision of section 153A of the act are only applicable in case valid search is conducted against the assessee under section 132 of the act. Accordingly, we declare the assessment made against the assessee under the provision of section 143(3) read with section 153A of the Income Tax Act are null and void and direct the assessing officer to cancel the same. Thus, the issue related to the validity of search raised by the assessee is allowed." 2.8 The A/R has also made the following submissions before the ld. CIT(A) (i) There was no seizure of any kind of share transfer register seized from the possession of the assessee company or its director. (ii) The company Blossom Automotive Pvt. Ltd. was not operating o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice. In this regards the assessee place reliance on 169 taxman 0130. (viii) Section 132(4A) of the Act uses expression "it may be presumed" it is not obligatory on the assessing authority to make a presumption. Even if a presumption is required to be made, them, as held in CIT v. S.M.S. Investment Corporation Pvt. Ltd. [1994] 207 ITR 364 (Raj.), the presumption is a rebuttable one and relates to a question of fact. While coming to this conclusion, the Rajasthan High court relied upon and earlier decision rendered by it in CIT v. S.M.S. Investment Corporation [1988] 73 CTR (Raj.) 184 : (1988) 173 ITR 393 (Raj.) (ix) Even in ITO v. T. Abdul Majeed [1988] 169 ITR 440 (Ker.) it has been held as follows: "It is true the section 132(4A) of the Act. Enables the court to presume the truth of the contents of such books. However it is a presumption which can be rebutted Moreover, the presumption envisaged therein is only a factual presumption. It is in the discretion of court, depending upon other factors, to decide, whether the presumption must be drawn. The expression used in the subsection is 'may be presumed' as is used in section 114 of the evidence Act. 1872. It is not mandate that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company. The company Techpro System Ltd. was having some strategic planning as stated by the learned AO and the assessment order in para 3.5 which is reproduced below:- "After acquiring the total share holding of M/s Blossom Automotive Pvt. Ltd, M/s Techpro System Ltd. initiated the procedure of merger and M/s Blossom Automotive Pvt. Ltd. merged with its holding company M/s Techpro System Ltd. w.e.f. 01.04.2008 pursuant to the order dated 10.07.2009 of Hon'able High Court of Rajasthan, Jaipur Bench, Jaipur and the order dated 22.05.2009 of Hon'ble High Court of Delhi, New Delhi". During assessment proceeding the assessee company has submitted all the details of the transferee company in respect of its identity particulars of balance sheet and annual return filed with department of company affairs, details of income tax- PAN etc. The learned AO has brought on record the above facts nor he has brought on record the facts of inquiry conducted by him. The facts of inquiry conducted by learned AO be ascertained from his file. If no inquiry has been conducted by learned AO, it is prayed that the inquiry may kindly be conducted by your kind office, exercising co terminus power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Prem Kumar Garg. Share holders of M/s Blossom Automotive Pvt. Ltd. entered into a MOU dated 17.7.2006 with M/s Techpro System Ltd through authorized representative. Sh. Prem Kumar Garg, who also a major share holder of M/s Blossom Automotive Pvt. Ltd to sell their shareholding in the company to M/s Techpro System Ltd. this MOU was not cancelled and rather acted upon as was confirmed by M/s Techpro System Ltd. vide their letter dated 3.7.10 in response to notice u/s 133(6) dated 29.6.10 issued by A.O. As per this MOU, 100% shareholding of M/s Blossom Automotive Pvt. Ltd. was to be transferred from the exiting share @ 318/- per share at total consideration of Rs. 12.72 crore to M/s Techpro System Ltd. However, on papers 3,18,00 shares of M/s Blossom Automotive Pvt. Ltd. were shown to be transferred to 9 Kolkata based companies @ Rs. 100/-per shares. Later on paper all these 9 Kolkata based companies have shown to have transferred all these 3,18,000 shares to M/s Techpro System Ltd. at the same rate i.e. @ Rs. 318/-per shares, as was decided in MOU dated 17.07.2006 between the erstwhile shareholders of M/s Blossom Automotive Pvt. Ltd. & M/s Techpro System Ltd. Surprisingly and rathe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the post dated cheque was issued on 28.4.2006 itself and not somewhere near 18th July, 2006. On the contrary, from perusal of the cheque no. of this contended post dated cheque (Cheque no. 0729479) claimed to be issued on 28.4.2006 itself vis-à-vis the cheque no. issued on 28.4.2006 (Cheque no. 191826), it is seen that the claimed post dated cheque is altogether from the different series of the cheque book. If both the cheques were issued on same date, then they would normally have nearby number or at least will be from the same series of the cheque book. This being not so, the claim of the appellant that the cheque of Rs. 25 lakh was post dated and was issued at the relevant Point of time, is not at all accepted. 4. As per the guidelines and rules of SEBI as well as Registrar of companies, any sell of share is to be evidenced by execution of contract note. In the instant case, the A.R. of the appellant failed to file the copy of contract note during assessment proceeding or even in the appellant proceeding to support his claim that shares was sold in April 2006. The plea taken for non-execution of contract was the transaction of sell of shares was not routed through reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d I the earlier Para and hence not repeated. 6. If the argument sake, the contention of A. R. that the appellant and other erstwhile share holder of M/s Blossom Automotive Pvt. Ltd. have sold shares to the 9 Kolkata based companies well before 17.07.06 i.e. the date of MOU is treated as correct (Though not correct), then what was the need of those erstwhile share holders to enter into a MOU with M/s Techpro Systems Ltd., because as per the A.R. version, they had already sold their shares to 9 Kolkata based companies and they did not own any share of the company as on 17.07.2006. Management of M/s Techpro Systems Ltd would also enter into MOU with only such persons who are shareholders of the company, after duly ascertaining this fact. It only infers that as on 17.07.2006 the erstwhile shareholders of M/s Blossom Automotive Pvt. Ltd. Including M/s Singhal Securities Pvt Ltd., M/s Singhal Credit Management Ltd. & M/s S.N.R. Rubbers Pvt. Ltd. were continuing. Thus argument of the A.R. that share were already sold by erstwhile shareholders including the appellant to Kolkata based company well before 17.07.2006, is baseless. It further strengthen the inference drawn by the AO that int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e share transfer form. The date 12.07.06. referred by the A.R. is not the date of transfer/date of sell of share by the appellant company but it is actually the date of issue of blank share transfer form by the registrar of company, which quit evident from date available on the round seal of the Registrar of company affixed on the top of share transfer form. From the aforesaid details and evidence, it is proved that these share were sold by the appellant company on somewhere near 31.07.2006 and thereby the share along with the duly signed share transfer form was delivered to purchaser on 31.07.2006.This argument of the appellant that these shares were transferred by the appellant company well before the date of MOU was thus found to be totally baseless and rejected in the appeal order dated 17.08.2011 of M/s Singhal Securities Pvt. Ltd in appeal no. 893/10-11. 8. Similarly in respect of share of M/s S.N.R. Rubbers Pvt. Ltd, the claim of shares of M/s Blossom Automotive Pvt. Ltd. being prior to the MOU is also unsupported and unsubstantiated by the independent evidence. Rather the copy of share transfer form clearly reflects that these shares have been shown to be sold on 31.07.06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... denced by contract note between the parties and moreover, the share transfer forms have been seized by the appellant company on 10.05.2006 and 31.07.2006 for 10000 and 25000 shares respectively. For handing over the share certificates and the transfer form to the purchaser company. It only infers that though 10000 shares were sold somewhere nearer to 10.05.006 But 25000 shares were sold somewhere nearer to 31.07.06 and at least not before the date of MOU. Accordingly, the other argument of the appellant that on the date of MOU, The appellant company was not holding the shares are also found to be devoid any merit. The Argument that directors of appellant company had no knowledge about M/s Techpro System Ltd. and its plan is also incorrect. Infact on the perusal of MOU dated 17.07.2006, it is seen that firstly the MOU is not only between Sh. Prem Kumar Garg Who is authorized/ constituted Attorney and M/s Techpro Systems Pvt Ltd. but M/s Blossom Automotive Pvt Ltd. is also is one of the party. Interestingly, one of the director namely Smt. Shika Singhal, of Appellant company M/s Singhal Credit management has signed the MOU in the capacity of authorized representative of M/s Blossom A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out on record regarding 10000 shares earlier transferred by the appellant; A.O was fair enough not to treat that transaction as non-genuine. Hence the addition of Rs. 54,43,750/- so made by the A.O. is hereby confirmed in the instant case of the appellant.'' 2.10 The submission of the assessee before us are as under:- "It is submitted that no physical search operation was carried out at the business of the assessee company, no incriminating documents were seized from the directors of the assessee company or from the assessee. More over nothing seized for the assessment year under consideration. Therefore initiation of proceeding u/s 153A is bad in law. In case initiated proceeding u/s 153A in the recent judgment it has been held, when nothing incriminating was found in the course of search relating to any of the assessment years, the assessments for such years could not be disturbed. Assistant Commissioner of Income tax v. Srj Peety Steels (P) Ltd. (ITAT Pune) - Decision annexed as annexure-X 1. The assessee company sold out 35000 equity shares of Blossom Automotive Pvt. Ltd for consideration of Rs. 100/- per share to M/s Yuthika Commercial Pvt. Ltd. on 28.4.2006 vide common b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the course of assessment proceeding on 22.11.2010, the AO was requested to provide us Annexure-A of the MOU to ascertain whether assessee was one of the party. The AO on the request letter remarked that the Annexure-A of the MOU dated 17.7.2006 taken place in between existing share holders and M/s Techpro Systems Ltd. Subsequently the learned A.O. sought the same along with details payment to the seller shares from M/s Techpro System Ltd. Bhiwadi. The learned A.O. before passing the assessment order supplied the information collected u/s 133(6) of the I.T. Act, 1961. On perusal of Annexure-A to the MOU dated 17.7.2006 the name of the assessee company was not available but YuthiKa Commercial Pvt. Ltd. was find place as share holder. In view of the fact the assessee company was not all party at the time of MOU. It is further submitted that the A.O. not brought on record any contrary evidence in making addition of 54,43,720/-. The onus cast upon the revenue in making any addition, which factor totally absent. 4. The allegation of the A.O. that the major share holding of M/s Blossom Automotive Pvt. Ltd. in the control of Sh. S.K. Singhal and his associate and Sh. Prem Garg and his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the sale value of share @ 318/- per equity share of Blossom Automotive Pvt Ltd. as per MOU which has been reproduced by the AO at para 3.3 of the assessment order. 8. Transferring of shares by shareholders of BAPL to Kolkata based companies @ Rs.100/- per share and re-transferring of same shares to M/s Techpro System Ltd. @ 318/- per share within a period of 3 months was a sham paper transaction resorted to by the shareholders of M/s BAPL to reduce their capital gain liability. The allegation leveled by the A.O. without any evidence contrary to the facts, the contention of the A.O leads that the sale proceeds of equity share by Yuthika Commercial Pvt. Ltd. reached to the assessee after sale of share of Blossom Automotive Pvt. Ltd. to Techpro System Ltd without evidences in his possession merely surmises may kindly be ignored and delete the addition made by the A.O. The learned CIT(A) also followed the AO's views without evidences and sustained the addition. Finally it is submitted that the search operations were carried out at the residence of Sh. S.K. Singhal and Office premises. During the course of search operation intensive investigation were made even after search. In ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of shares were sold to nine Kolkata based companies at a rate of Rs. 100/- per share. The A.O was of the view that the sale of shares by this group to the Kolkata based companies was a 'make believe arrangement' or a 'colourable device' to avoid payment of taxes. The A.O found that the 100% share holding of M/s Blossom Automotives Pvt. Ltd. was transferred from Sh. S.K. Singhal and his associates to M/s Techpro Systems Ltd. within a span of less than one year. The transaction would have resulted into a short term capital gain of Rs. 8.72 crores in the hands of Sh. S.K. Singhal and his associates and the same would have been taxable @ 30% because the transaction was not through stock exchange and no STT was paid on it. However, to save the short term capital gain arising from the transaction, the group entered into a 'make believe' arrangement involving 9 Kolkata based companies. On paper, it was claimed that the shares by Sh. S.K. Singhal and his associates were initially sold to 9 Kolkata based companies @ Rs. 100- per share and subsequently Kolkata based companies sold the share to M/s Techpro Systems Ltd. @ Rs. 318/- per share. There are several evidences which conclusively p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax by share holders of BAPL on the transactions of transfer of their shares directly to M/s Techpro Systems Ltd. The A.O has gone one step further and has observed that the company Blossom Automotive Pvt. Ltd.(BAPL) was not carrying out any activities and owned only one asset- a piece of land at Industrial Area, Bhiwadi. The A.O has alleged that actually the shareholders of BAPL wanted to transfer this land to M/s Techpro Systems Ltd. Instead of directly transferring the land the shareholders transferred 100% share holding of BAPL to TSL. Even the share holding was transferred through the circuitous route of Kolkata based companies as discussed above. According to the A.O, the total consideration for sale of this land was Rs. 12,72,00,000/- and the cost of acquisition of the land was Rs. 4,01,00,000/-. Therefore, the share holders of BAPL earned capital gain of Rs. 8,71,00,000/- (12,72,00,000/- - 4,01,00,000/-) on this transaction of sale of land. The short term capital gain on this transaction was allocated by the A.O in the hands of the share holders in proportion to their share holding in the BAPL. The addition made in the hands of these three assesses are as follows: (1) S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) In the written submissions, the assessee has relied on the decisions of S.M Trading Corporation v. ACIT 20 SOT 489- ITAT Mumbai 'J' Bench and Dr. Mansukh Kanjibhai Shah v. ACIT [2011] 129 ITD 376. These decisions are not applicable in the case of the assessee as the facts in these are totally different. In the case of S.M. Trading Corporation, the search was conducted at a premises which was owned by the assessee but rented to another concern. In the case of Dr. Mansukh K. Shah though warrant of authorization was issued in the name of the assessee, being managing trustee of the trust, but no search operation was conducted in the premises of the assessee. Even in the warrant of authorization, the address of the place to be searched was not the address of the assessee individual. But, here the warrant is issued in the name of the assessee and the address of the premises searched is also the official address of the assessee viz. E-127, Industrial Area, Bhiwadi. The panchnama is prepared for the search operation conducted at this premises and the name of the assessee very much appears in the panchnama (copy of the search warrant and the panchnama are placed at APB pages 1 to 8). I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apparently the assessee is trying to misconstrue the facts and misinform the appellate authorities to derive undue benefits for itself. This document is actually one single page and it is page no. 22 of Exhibit 5 of Annexure "AA' seized from the residence of Sh. Surendra Kumar Singhal at E-127, RIICO Industrial Area, Bhiwadi, Alwar. A copy of this page has been enclosed by the AO as Annexure 'A' to the assessment order. Thus claim of the assessee about the non- availability of this register is wrong. (ii) The assessee has claimed that the MoU dated 17.07.2006 relied on by the AO contained one 'Annexure A' and in this, the assessee company was not shown as the owner of the shares of BAPL. The assessee has filed a copy of this Annexure A on page-19 of APB(For M/s Singhal Securities Ltd. In this respect, it is submitted that during the assessment proceedings, the assessee asked for a copy of such Annexure 'A' to this MoU but the AO had clearly written on the same letter(APB pg. 22) that in the MoU found by the Department there was no such Annexure 'A'. Now, this Annexure 'A' submitted is made up by the assessee and has no evidentiary value. It may also be noted that the main MoU is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by M/s Techpro Systems Ltd and subsequently M/s BAPL was merged in M/s TSL. From these facts, it is clear that the ultimate aim for undertaking all these transactions was to transfer the land from M/s BAPL to M/s TSL. For doing so the share holders of M/s BAPL who jointly owned this land resorted to the circuitous method of transfer of 100% shareholding to TSL. In this respect, in point no. (vii) on page 12, the A.O has cited the decision of Hon'ble Bombay High Court in the case of Vodafone International Holding B.V v. Union of India and another 311 ITR 46, in which Hon'ble Court held that "shares in themselves may be an asset in some cases like the present one, shares may be merely a mode or a vehicle to transfer some other asset(s). In the instant case, the subject matter of transfer as contracted between the parties is not actually the shares of a Cayman Island Company, but the assets (as stated supra) situated in India. The choice of the petitioner in selecting a particular mode of transfer of these rights enumerated above will not alter or determine the nature or character of asset". On the basis of this decision, the A.O has held that the mode of transfer of an asset is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of MoU i.e. 17.07.2006. Further, the 'share transfer register of BAPL' seized from the residence of Sh. S.K. Singhal, the shares are shown to be transferred to the Kolkata companies on 31.07.2006 only. (viii) The assessee has also claimed that the Kolkata based companies have accounted the transaction of purchase of shares and payment thereof to the assessees in their books of account and therefore, it cannot be called a make believe arrangement. In this respect, it is submitted that all these transaction of purchase and sale of shares of BAPL to the Kolkata companies and M/s Techpro Systems Ltd. may have been recorded in the books of account of various parties and documents must have been prepared in support of such transactions but the case of the Department is that all these transactions and documentation are a colourable device to disguise the real transaction of transfer of land of BAPL to M/s Techpro Systems Ltd. (ix) The assessee has claimed that it is not the case of the Department that the assessees have received any income/amount/benefit from M/s TSL or from the Kolkata companies and the addition is based on the conjecture that the transaction was between the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e worth of their company. There are no reasons why they will sell their shares to outsiders at consideration equivalent to the cost of their shares. It may be noted that by selling their shares to Kolkata companies @ Rs. 100 per share, these assessees had foregone their profit to the extent of Rs. 218 per share. (iii) Sh. Prem Kumar Garg was a major shareholder of M/s BAPL. He has himself shown to have sold a substantial portion of his shares( 77,000 shares) to a Kolkata based company viz. M/s Shreevar Overseas Ltd. @ Rs. 100 per share. Subsequently, he only is authorized by this Kolkata based company to further sell their shares of BAPL to Techpro Systems Pvt. Ltd. @ Rs. 318 per share. A copy of resolution passed by this company is enclosed at page 73 of Department's paper book. Is it not fishy or surprising that I sell my share to somebody @ Rs. 100 per share and then the same somebody authorizes me to further negotiate the sale of these shares and sign the transfer deed and other documents and for that somebody I sell the shares @ Rs. 318 per share ? (iv) Sh. Prem Kumar Garg is the power of attorney holder for many of the individuals of this group (pg. 54 to 69 DPB) who sold t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and the revenue so far as sale of 10,000 shares are concerned. The revenue is of the view that assessee has earned Short term capital gain of Rs. 54,53,750/- on 25,000 shares. According to the AO, the entire shares of M/s. Blossom Automotives Pvt. Ltd. have been purchased by M/s. Techpro System Ltd. at Rs. 318/- per share. The total consideration for 4.00 lacs shares will be Rs. 12.72 crores. M/s. Blossom Automotives Pvt. Ltd. purchased a plot for a sum of Rs. 4.01 crores. Thus the consideration of Rs. 12.72 crores was considered as value of the plot and by reducing the cost of plot, the profit was determined at Rs. 8.71 crores. Thus the profit is on 4.00 lacs shares. The AO accordingly computed the Short term capital gain of Rs. 54,43,750/- as per calculation given in the assessment order. Capital gain : A×B C =8,71,00,000×25,000 4,00,000 = Rs. 54,43,750/- A = Total Short term capital gain earned by the shareholders. B = No. of share held and transfer by the assessee C = total shares of M/s. Blossom Automotives Pvt. Ltd. which has been transferred to M/s. Techpro System Ltd. In the written submission, the ld. DR has heavily relied upon the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment of tax, such shares have been shown to have been sold on 28-04-2006. 2.13 Before us, the ld. AR of the assessee company drew our attention to the confirmations of the transfer forms issued by M/s. Yuthika Commercial Pvt Ltd.. In this, it is mentioned that 25,000 shares were purchased by M/s. Yuthika Commercial Pvt Ltd. vide invoice dated 28-04-2006 by giving post dated cheque. The transfer deed dated 14-07-2006 was received on 15-07-2006. In the case of transfer of shares, the transfer took place as and when the shares were delivered. It is not necessary that there should be a contract note. When a person wants to gift the shares then he can hand over the transfer deed alongwith share certificates to the donee. This system was prevalent when shares were in the paper form. It was a normal practice that blank deed which is to be given to the buyer. In case the buyer wants to sell it before getting it transferred in his name then he can sell those shares without getting his name registered as shareholder in the company register. The Hon'ble Apex Court in the case of Howrah Trading Co. Ltd. v. CIT [1959] 36 ITR 215 recognised the validity of 'Blank Transfers'. The name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw is that four learned judges speaking through Misra, J. Agreed with the observations of Chinnappa Reddy, J. as to how in certain circumstances tax avoidance should be brought within the tax net. iii) That, subsequent to McDowell, another matter came before the Constitution Bench of five Judges in Mathuram Agrawal v. State of Madhya Pradesh [1999] 8 SCC 667, in which Westminster principle was quoted which has not been noticed by Azadi Bachao. Our Analysis 58. Before coming to Indo-Mauritius DTAA, we need to clear the doubts raised on behalf of the Revenue regarding the correctness of Azadi Bachao (supra) of the simple reason that certain tests laid down in the judgments of the English Courts subsequent to The Commissioners of Inland Revenue v. His Grace the Duke of Westminster [1935] All E.R. 259 and W.T. Ramsay Ltd. v. Inland Revenue Commissioners (1981) 1 All E.R. 865 help us to understand the scope of Indo Mauritius DTAA. It needs to be clarified, that, Mc Dowell dealt with two aspects. First, regarding validity of the Circular(s) issued by CBDT concerning Indo-Mauritius DTAA. Second, on concept of tax avoidance/evasion. Before us, arguments were advanced on behalf of the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the sole intention of tax avoidance. In Craven (Inspector of Taxes) v. White (Stephen) [1983] 3 All. E.R. 495 it was held that the Revenue cannot start with the question as to whether the transaction was a tax deferment/saving device but that the Revenue should apply the look at test to ascertain its true legal nature. It observed that genuine strategic planning had not been abandoned. 64. The majority judgment in Mc Dowell held that "tax planning may be legitimate provided it is within the framework of law" (para 45). In the latter part of para 45, it held that "colourable device cannot be apart of tax planning and it is wrong to encourage the belief that it is honourable to avoid payment of tax by resorting to dubious methods". It is the obligation of every citizen to pay the taxes without resorting to subterfuges. The above observations should be read with para 46 where the majority holds "on this aspect one of us, Chinnappa Reddy, J. Has proposed a separate opinion with which we agree". The words "this aspect" express the majority's agreement with the judgment of Reddy, J. only in relation to tax evasion through the use of colourable devices and by resorting to dubious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he paid up value of equity shares Even after 1-10-2009, the fair market value of the unquoted equity shares is to be determined on the basis of book value of the assets for computing income u/s 56 of the Act. It has not been provided that fair market value of the assets as contained in balance sheet of the company should be considered for ascertaining the value of the shares. The share is bundle of right and is distinct from the assets of the company. Share also refers to the voting power and in case the assessee is having more than the particular number of shares then it can have a controlling interest. In Vodafone International Holdings B.V. case (supra), the Hon'ble Apex Court observed it was ''a share sale'' and not an asset sale. A 'sale' may take various forms. Accordingly tax consequences will vary. The tax consequences of a share sale would be different from the tax consequences of an asset sale. A slump sale would involved tax consequences which could be different from the tax consequences of sale of assets on itemized basis. The Hon'ble Apex Court in the case of Vodafone International Holdings B.V. (supra) has observed that :- "(16) A transaction has to be viewed from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of increasing the capital gain when there is no iota of evidence to suggest that the assessee has received consideration over and above the consideration received. The AO has neither examined Shri P.K. Garg nor Directors of the M/s. Techpro System Ltd.. Without examining, the AO could not have doubted the genuineness of the transactions. The MOU was acted upon and there is nothing on record with the company which purchased the shares from the assessee company and has passed on money from M/s. Techpro System Ltd. to the assessee 2.17 We do agree that the revenue has a right to pierce the veil. However, for that purpose, the revenue is required to collect the evidence to show that what is apparent is not real. The AO obtained the Annexure for the MOU from M/s. Techpro System Ltd. u/s 133(6) of I.T. Act. In that Annexure, the name of the assessee is not appearing. The AO has neither examined any director of M/s. Techpro System Ltd. or director the assessee company. The date of 31-07-2006 as appearing in the transfer form does not conclusively suggest that the shares were transferred on that date. This is also evident from the fact that the assessee company received consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... System Ltd. The assessee company has sold shares to M/s. Yuthika Commercial Pvt Ltd. There is a case of sale of shares and not sale of assets. Thus the third ground of appeal of the assessee is decided in favour of the assessee. 2.22 The 4th ground of appeal of assessee is relating to charging of interest u/s 234B(3) of the Act. The charging of interest is mandatory and the assessee will get the consequential relief. ITA No. 854/ JP/2011 - Singhal Securities (P) Ltd. 3.1 The ground of appeal raised by the assessee are as under:- ''1 That the ld. CIT(A) has erred in law as well as facts by holding that the order passed u/s 153A r.w.s. 143(3) is not suffering from any infirmity and not bad in law 2. That the ld. CIT(A) has erred in law as well as facts by not recognizing the sale of 50000 equity shares of M/s. Blossom Automotives Pvt. Ltd. @ Rs. 100/- per share duly recorded in the books of accounts and consequently, confirming the addition of Rs.1,08,87,500/- made by the AO, worked out, without discharging onus, on surmises and conjectures perverse to facts and provisions of law. 3. The ld AO as well as the ld. CIT(A) has erred in law and facts of the case in holding the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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