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TMI Blog2017 (5) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... by these companies was less than even Rs. 50,000/- in A.Y. 2006-07. Even the confirmations have been prepared on plain paper and names of the authorized signatories are also not written on either of the confirmation." 2. The assessee filed return of income on 29/11/2006 declaring NIL income after adjustments of brought forward losses and unabsorbed depreciation. The case was completed U/s 143(3) of the Income Tax Act, 1961 (in short the Act) on 18/12/2008. The case was reopened by issuing notice U/s 148 of the Act on 30/3/2011 and the assessment was finalized U/s 143(3)/148 of the Act on 28/11/2011. 3. Against the order of the Assessing Officer, the assessee filed appeal before the ld. CIT(A), who has sustained reopening of the assessment against which the assessee has not filed any appeal. The revenue is in appeal only with regard to disallowance of long term capital loss of Rs. 80,88,79,697/-, which has been allowed while deciding the ground No. 2 and 3 of the assessee's appeal by holding as under:- "4.3 I have perused the facts of case, the assessment order and the submissions of the appellant. The contention of the Assessing Officer is that the shares of M/s. Modern Syntex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration, the assessee had sold 1,84,05,000/- shares of M/s Modern Syndex (I) Limited for total consideration of Rs. 3,68,10,000/- to Invitation Investment P. Ltd. (1,00,00,000 shares) shown as sold @ Rs. 2/- per share totaling to Rs. 2,00,00,000/- and Trishul Traders Pvt. Ltd. (84,05,000 shares) shown as sold @ Rs. 2 per share at Rs. 1,68,10,000/-. The assessee calculated indexed cost of acquisition of the shares at Rs. 84,56,89,697/- and after reducing the receipt of 3,68,10,000/- long term capital gain loss of Rs. 80,88,79,697/- was claimed in the return of income. M/s Modern Syntex (I) Limited (MSIL) was earlier listed in Jaipur stock exchange, however, on 07/1/2002 the trading in the shares of MSIL were suspended. The assessee was holding 16% of the total shares capital of MSIL. Thus, the shares were subscribed in the earlier years and the issue is not in dispute. The MSIL was a sister concern of the assessee company. The net worth of the company on the date of sale of shares was negative, which was clear from the balance sheet for the financial year 2004-05 of MSIL. This transaction was not through stock exchange. The shares were not in D-Mat account. These shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received by him and there is understatement or concealment of consideration in respect of the transfer. Sub-section (2) has no application in case of an honest and bona fide transaction where the consideration received by the assessee has been correctly declared or disclosed by him, and there is no concealment or suppression of the consideration. We find that, in the present case, it was not the contention of the revenue that the property was sold by the assessee to his daughter-in-law and five of his children for a consideration which was more than the sum of Rs. 16,500 shown to be the consideration for the property in the instrument of transfer and there was understatement or concealment of the consideration in respect of the transfer. It was common ground between the parties and that was a finding of fact reached by the income-tax authorities that the transfer of the property by the assessee was a perfectly honest and bona fide transaction where the full value of the consideration received by the assessee was cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is below Rs. 50,000/- for the AY 2006-07. b) Your honour it is surprised to note here that whether the returned income in isolation is the indicator of the creditworthiness of the buyers ? c) Assessee has furnished the copy of Income Tax return & confirmation, Name & addresses of these parties. If the Ld. AO had any doubt in his mind he could have made independent inquiry from such buyers. Thus, Ld. AO's again made the allegations in guesses. d) There is no requirement in the law that the seller should ascertain the net worth of the company before selling the shares to the buyer. Thus, the allegations made by the Ld. AO is purely a guess work and order passed by the Ld. CIT(A) is liable to be sustained. 16. Ongoing through the assessment order, your honour will notice that the AO has not deleted the sale of shares per se. The AO's allegation is that the sale consideration shown by the assessee cannot be relied upon and he has assumed the sale consideration equivalent to the indexed cost of acquisition. The assessee, in the present case, has declared the actual sale consideration received by it. The onus was upon the AO to bring material to demonstrate that assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal (2001) 250 ITR 531 (Del) 21. CIT Vs Discovery Estates Pvt. Ltd. (2013) 356 ITR 159 (Del). 6. We have heard the rival contentions of both the parties, perused the material available on the record and also gone through the various case laws relied upon. The undisputed fact gathered from the record that the assessee company invested in the shares of MSIL, which was a sister concern of the assessee. These shares totaling to 1,84,05,000 were acquired by the assessee on the following dates, 1,18,25,000 on 01/4/1993, 32,90,000 on 05/10/1994 and 32,90,000 on 05/10/1995. During the year, the assessee claimed the sale consideration of Rs. 3,68,10,000 of the sale of 1,84,05,000 shares @ 2/- per share. It is also pertinent to note that the trading in the shares of MSIL was suspended in the stock exchange w.e.f. 07/1/2002. Further these shares were also not sold by way of delivery but on the basis of deed of assignment dated 30/3/2006. It was claimed that these shares were sold through private negotiations. It is also a fact that at the relevant time MSIL was having negative worth by 147.27 crores. Thus, the market worth of these shares on the date of sale was Nil/Zero. The Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed income for assessment year 2006-07 and 2007-08 was for Rs. 26,775 and Rs. 9465/- respectively. Advance and self assessment tax was not paid, only TDS was claimed. The total share capital of the company was of Rs. 9,70,000/- only and the reserve and surplus declared were Rs. 79,16,450/-. The ld AR has not produced further details of the sales and closing stock as declared in the P&L account even when these were asked by the Bench. All these facts in respect of these two purchase companies suggest that these companies' were not having sufficient worth to purchase the shares of crores of rupees when the market value of the shares was zero due to the negative net worth of the company MSIL and when the sales of the shares were suspended at stock exchange. The transaction was claimed to be through negotiations but how these two companies of small worth agreed to purchase shares of negative worth by paying crores rupees. By this transaction, the assessee had claimed loss of Rs. 80,88,29,697/- on the inquiry from the Bench. Ld. AR stated that the assessee had not utilized the benefit of this loss till date. Therefore, all these factual aspects need to be looked into prior to finalizatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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