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TMI Blog2020 (12) TMI 659X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d:- 11-12-2020 - Shri Rajpal Yadav, Vice President And Shri Waseem Ahmed, Accountant Member For the Assessee : Ms. Nipur Shah, AR For the Revenue : Shri Karunkant Ojha, CIT-DR ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The appeal has been filed by the Revenue and the Cross Objection has been filed by the assessee for A.Y. 2009-10 which are arising from the order of the CIT(A)-2, Ahmedabad dated 18.12.2015, in the proceedings under Section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short the Act ). 2. The Revenue has raised the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in not sustaining the notice issued u/s. 148 of the Act and treating the order passed u/s. 143(3) r.w.s. 147 of the Act as invalid. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the disallowance of loss claimed of ₹ 10,18,15,500/- on sale and purchase of shares although no valuation report of share was submitted by the assessee justifying the huge loss incurred. 3. On the facts and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings under Section 143(3) of the Act has verified all details related to sale and purchase of impugned share on which loss was incurred by the assessee which can be verified from the notice issued under Section 142(1) of the Act dated 31st May 2011. In the said notice, the details for the loss on the sale of shares vide paragraph No. 13 was requisitioned. 4.4. The assessee with respect to the loss on the sale of shares of the private limited companies has furnished the confirmation from the parties, PAN of the parties, Form No. 2 filed with the ROC, copies of the bank statement to the AO during the original assessment proceedings under Section 143(3) of the Act. As such the AO after verification of the necessary details as discussed here in above has allowed the impugned loss in the assessment framed under Section 143(3) of the Act vide order dated 27th December 2011. 4.5. The assessee regarding the valuation of shares submitted that there was no requirement for valuing the shares on the purchase and sale for the year under consideration under the provisions of the Act. As such there was an amendment brought under section 56(2)(viia) of the Act requiring the valuation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssor AO who issued the notice u/s. 148 which is not permissible as per the judgment of Hon ble Supreme Court in the case of ACIT Vs. Kelvinator India Ltd. (Supra) and other judgments of jurisdictional and other High Courts / ITAT referred above. Thus, in view of the detailed discussion in preceding paras initiation of reassessment proceedings in the case of appellant was not in accordance with the provisions of law as per the binding judgments / decisions of honourable jurisdictional High Court, ITAT and other courts, and therefore, the issue of notice u/s. 148 consequently reassessment completed is not sustained. 6. Being aggrieved by the order of the Learned CIT (A), the Revenue is in appeal before us. 7. The Learned DR before us submitted that the details filed by the assessee qua the loss occurred with respect to the purchase and sale of shares were not verified by the AO during the original assessment proceedings. This fact can also be verified from the assessment order. Therefore, the question of forming the opinion on the details filed by the assessee does not arise. 8. On the other hand, the Learned AR before us filed a Paper Book running from pages 1 to 582 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fashion Age Corporation (P.) Ltd. v. Dy. CIT [IT Appeal No.3542 (Delhi) of 2012, dated 23-11-2017] Considering the above discussion, it is clear that assessee disclosed primary facts and information regarding accommodation entry was already with the Department. Therefore, no new material was with the A.O. to form second time the reasons that income chargeable to tax has escaped assessment 9.6. As could be gathered from above, to re-open a case u/s. 147/148 of the Act, there has to be fresh information, which was initially not available. As fresh application of mind to same set of facts is not allowable in the grab of Sec. 147/148 of the Act. 9.7. Now coming to the Change of opinion, it refers to the fact that the AO forms an opinion on a given facts and circumstances of a case but in the same facts a different view is sought to be adopted. In other words the AO alters the view initially taken during the previous assessment despite there was absolutely no change in the facts as well as Law. 9.8. The term 'Change of Opinion' was particularly the point for consideration before the Hon ble Supreme Court in the case of ITO vs. Tech Span India Ltd. reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as considered by the Courts after making reference to the judgment of Tech Span India Ltd. (Supra) and held as under: 4. On going through the changes, quoted above, made to Section 147of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987 , reopening could be done under above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in Section 147 of the Act [with effect from 1-4-1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re-open the assessment. Therefore, post 1-4-1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of mere change of opinion , which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material facts before the AO during the original assessments. There was no basis for the successor AO to conclude that no opinion with regard to taxation of the payments received for the services rendered had been formed by the AO. It is plain that the precondition for invoking Section 147 did not exist. The assumption of jurisdiction under Section 148 of the Act was not valid. 9.14. In the light of the above discussion, we proceed to adjudicate the issue on hand. For this purpose we refer to the reasons recorded by the AO for initiating the proceedings under Section 147/148 of the Act which are placed on pages 81 to 85 of the Paper Book. On perusal of the reasons recorded by the AO, we find that the AO at the threshold has perused the profit and loss account, which was available during the original assessment proceedings, to point out that the loss incurred by the assessee on the purchase and sale of shares was manipulated to wipe out the profit on the sale of rights in the land. Furthermore, the purchase price and the sale price of the shares, resulting losses of ₹ 10,81,15,500/- only, was not based on valuation of the shares of the companies. Undisputedly, all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PAN : AAACG7004R To Office of the The Principal Officer, Income-tax Officer, Ward.4 (1), Ganesh Plantations Ltd., Ahmedabad. ft 'Ganesh Corporate House', 1st floor, Navjeevan Trust Bldg, 100 Feet Road, Hebatpur, Ashram Road, Ahmedabad. Thaltej, Date : 31-05-2011 Ahmedabad Sir, In continuation of Notices u/s. 143(2) dt. 27/8/2010 142(1) dt. 12/5/2011 issued to you for the assessment year 2009-10, end in furtherance to the details already filed by you on 25/5/2011, you are hereby required to furnish, in writing and verified in the prescribed manner, the following information before the undersigned on 20th June, 2011 at 12.30 p.m.:- XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 13. Details of loss on sale of shares shown at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SURAJ LTD. 24-09-2007 100000 10000000 24-03-2009 100000 500000 -9500000 TPL FINANCE LTD. 01-04-2008 138000 13800000 19-03-2009 138000 1380000 -12420000 WI NTER FRESH FOODS PVT LTD. 01-04-2008 116250 23250000 19-03-2009 116250 1162500 -22087500 TO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (v) Khandelwal infrastructure Pvt.Ltd. ₹ 9200000 Total Loss ₹ 108115500 10.2. The assessee in support of the impugned loss has furnished the details of the companies, confirmation of the parties, details of the purchases of the shares, sale of the shares, share transfer form, share certificates, copies of PAN, applications form for the allotment of shares and the bank statement/ bank book wherein the transactions for the purchase and sale of shares were recorded. 10.3. The assessee during the assessment proceeding also contended that there was no valuation of shares carried out in connection with the purchase and sale of the shares for determining the price for the purchase and sale of the shares. It was contended that there was no provision under the Act in force for the year under consideration requiring the assessee for determining the valuation of the shares with respect to the purchase and sale transactions. As such the provisions brought under the statute by the Finance Act under the provisions of section 56(2)(viia) of the Act wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per share without any valuation report of the shares. Furthermore, the company has shown losses of ₹ 66,99,106.00 in the financial year 2006-07 but the assessee has acquired the shares at premium as discussed above but without any basis. ii. The query raised to the company i.e. Suraj Limited whether it had sold its shares to any other company except the assessee at a price of ₹ 100, was not responded in reply to the notice furnished under section 133 (6) the Act. iii. Similarly, the assessee has not furnished any reason for buying shares of the loss incurring company at a premium as discussed above. As such no detail was submitted what the assessee expected for the growth of the company. iv. The shares were sold to the group company of Suraj Limited i.e. Suraj Impex Pvt. Ltd. at ₹5 per share which resulted loss to the assessee of ₹95 lakhs. As such, the assessee failed to justify for making the sale of the shares at loss within a period of few months from the purchase of shares. v. Similarly, the assessee could not justify that it had the information that the shares of M/s Suraj Limited was not going to be listed. III. Loss with respect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to valuation of shares or any document which could justify the basis of valuation of shares or charging of high premium. Further, the assessee failed to explain as to what were the circumstances that compelled the assessee company to sell the shares at a low price as the assessee could not offer any valid documented / evidential explanation. The reply of the assessee on this issue has been found very general in nature. The assessee has also not been able to furnish any documentary evidence that prompted the assessee to buy the shares at a high premium. The assessee also had failed to furnish any documentary evidence with regard to the market price of the shares at the time of purchase as well as sale other than the general reply given on 02/01/2015. In view of the above, transactions of shares cannot be considered as genuine transaction. The nature of transactions in absence of evidences clearly proves that it a colourable device with intent to reduce the tax liability. Therefore, the claim of set off of loss of ₹ 108115500/- incurred on sales and purchase of shares against the profit of the business is not found justified and is disallowed. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, deleted the addition made by the AO by observing as under: 3.9. With regard to the transactions in respect of transactions of shares of Security Analysis India Pvt. Ltd. and TPL Finance Limited, the appellant submitted the following documents in respect of the transactions, to the AO in the assessment proceedings vide its letter dated 22/07/2014. (i) Application form for allotment of equity shares by the appellant in the shares of Security Analysis (I) Pvt. Ltd. (ii) Copy of share certificates dated 09/06/2008 allotting the 2590 shares. (iii) Copy of Form No. 2, i.e. return filed by Security Analysis (India) Pvt. Ltd. in the ROC. (iv) Copy of PAN Card of Security Analysis (India) Pvt. Ltd. bearing PAN Number AAFCS 7479 B. (v) Copy of share transfer form in respect of the transfer of shares by the appellant in favour of Shree Ganesh Fin Trade Limited to whom the shares were sold. 3.10. Further, the appellant vide its letter dated 29/09/2014 to the AO, also submitted the copies of following documents which were also provided to the AO during the original assessment proceedings vide letter dated 12/12/2011:- (B) Following documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh account payee cheques and no cash having been taken by the appellant from the purchasers or taking back from the sellers, over and above to the consideration has been proved, thus, in absence of any other material on record, the purchase rate and sale rate of the shares could not be doubted and same are held to be on the prevalent market rates. Therefore, the primary onus cast upon the appellant has been duly discharged. 3.13. (ii) Loss on sale of shares in Surai Limited: On inquiry by the AO u/s. 133(6) of the I. T. Act, M/s. Sura] Limited has stated that, it had allotted 1100000 shares of ₹ 10 each at a premium of ₹ 90/- to the appellant. The AO held that in absence of any valuation report or any basis of valuation, the purchase transaction of shares was not found justified. The AO also observed that M/s. Suraj Limited had not sold any shares to other companies except to the appellant company @ ₹ 100/- per share. Since as per the balance sheet of Suraj Limited, there were losses in F. Y. 2006-07 and it was an off market transaction and M/s. Suraj Limited was not a listed company, so there was no justification on the part of the appellant company t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant. No inquiry with the purchasers of the shares namely; Suraj Impex Pvt. Ltd. to whom appellant has sold some of the shares has been made giving rise to doubt the authenticity of the rates of transaction. The purchaser company was having PAN, hence its identity was established. Further, the payments have also been received by the appellant from it and the appellant had transferred the shares in its name. The complete addresses, PAN Nos., details of payments and confirmations from the sellers as well as the purchasers were available on record with the AO which prima facie proved the genuineness of the transactions of the shares. Thus, in absence of no adverse observations about the authenticity of these supporting documents, the payments having been routed through account payee cheques and no cash having been taken by the appellant from the purchasers or taking back to the sellers, over and above to the consideration has been proved, thus, the purchase rate and sale rate of the shares could not be doubted and same are held to be on the prevalent market rates. Therefore, the primary onus cast upon the appellant has been duly discharged. 3.16. (iii) Loss on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33(6) of the I. T. Act to M/s. Khanelwal Infrastructure Pvt. Ltd. and in response to the same, the said company has confirmed that the appellant company had purchased 80000 shares as per the consideration agreed between the appellant and the company. This confirmation has not been controverted by way of bringing anything adverse on record. Further, in spite of available of all the documents on record, nothing was brought on record to doubt the transactions with the sellers from whom the appellant has purchased the shares and with the purchasers to whom said shares were sold by the appellant. No inquiries with the purchasers of the shares namely; Shri Shyamlal H. Gupta, Shri Dilip S. Khandelwal and Shri Ashok S. Khandelwal have been made to whom the appellant has sold the shares to verify the genuineness of the rate of the transaction. All the three purchasers were having PAN, hence their identity was established. Further, the payments have also been received by the appellant from them and the appellant had transferred the shares in their names. The complete addresses, PAN Nos., details of payments and confirmations from the sellers as well as the purchasers were available on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kukreja HorishM. AFOPK6389P 7750 200 1550000 19/3/2009 01/04/2008 Chenani Rajkumar M. AEBPC0615A 16500 200 3300000 19/3/2009 116250 200 23250000 116250 Rate 10 Amt 1162500 3.20. In response to the notice u/s. 133(6) of the I. T. Act, M/s. WFFPL has stated that the appellant company has purchased the shares from different parties as per the consideration agreed between the transferor and appellant. The AO observed that in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erent parties as per the consideration agreed between the transferor and transferee. This confirmation has not been controverted by the AO by way of bringing anything adverse on record. Further, in spite of available of all the documents on record, nothing has been brought on record to doubt the genuineness of the transactions with the sellers from whom the appellant has purchased the shares and with the purchasers to whom said shares were sold. Merely the parties have not made any response to the notices u/s. 133(6) would not be enough to disbelieve the transactions since the appellant did not have any control over the said parties. As per the judicial pronouncements, due to absence of the reply from the aforesaid parties, no adverse view can be taken against the appellant. The complete addresses, PAN Nos., details of payments and confirmations from the sellers as well as the purchasers were available on record with the AO which prima facie proved the genuineness of the transactions of the shares. Thus, no adverse observations about the authenticity of these supporting documents have been found. Since the payments have been routed through account payee cheque and no cash havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to get good returns. It is universal practice that no prudent businessman would make any investment in a company where the future of the said company is not good. 3.24.2. The reasons extended for sale on loss was due to decrease the burden of interest upon the investment by liquidating the shares at the earliest when there were no hopes for higher rates to be realised in future. In fact, in response to the notice u/s. 133(6), the replies have also been received by the appellant from Khandelwal Infrastructure Ltd., Suraj Ltd. Winter Fresh Foods Pvt. Ltd. which were confirming to the transactions taken place by the appellant. In fact in the case of TPL Finance Ltd., no notice by the said company has been received on its changed address. Since in respect of all the share transactions the appellant has provided the supporting evidences in the form of application for shares to the company, copies of share certificates, Form No.2 filed by the company to the ROC wherein the name of the appellant company was appearing as a shareholder, PAN Card copies of the companies, sale note for sale of shares, confirmation letters and payments / receipts through banking channels which hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) We are attaching herewith the following documents for the sale of shares of Securities Analysis (India) Pvt. Ltd. : (a) Application for equity shares by the assessee company to Securities Analysis (India) Pvt. Ltd. along with Board Resolution as per Exhibit-IV. (b) Xerox copy of Share Certificate as per Exhibit-V. (c) Form no.2 filed by Securities Analysis (India) Pvt. Ltd. for the allotment of shares to the assessee company as per Exhibit-VI. (d) PAN Card of Securities Analysis (India) Pvt. Ltd. as per Exhibit-VII. (e) Share transfer form along with sale note for sale of shares to Shree Ganesh Fintrade Ltd. as per Exhibit-VIII. (C) We are attaching herewith the following documents for TPL Finance Ltd. (a) Confirmation regarding sale of shares of TPL Finance Ltd. along with share transfer form as per Exhibit-IX. (D) We are attaching herewith the following documents for Suraj Ltd. (a). Application form for allotment of equity shares as per Exhibit-X. (b). PAN Card of Suraj Ltd. as per Exhibit-XI. (c). Form No.2 for allotment of shares to the company along with Xerox copy of share certificate as per Exhibit-XII. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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. In holding so we draw the support and guidance from the judgment of Hon ble Gujarat High Court in the case of Rohini Builders reported in 127 Taxman 523, where the head note reads as under: - Whether merely because summons issued to some of creditors could not be served or they failed to appear before Assessing Officer, could not be ground to treat those credits as non-genuine - Held, yes 17.4. The next question arises about the non-availability of valuation report of the shares of the companies in which the assessee has incurred losses. In this regard we note that there was no provision under the Act requiring the assessee, being transferor of the shares, to furnish the valuation report of the shares of the companies in respect of which it has incurred the loss. The lawmakers to determine the transfer value of unquoted share brought special provision by introducing Section 50CA of the Act which reads as under: [Special provision for full valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax in the instant case. 17.8. Thus. we hold that there was no provision under the Act for the year under consideration prescribing the guidelines for pricing of the shares unlike the provisions contained under section 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. 17.9. Without prejudice to the above, we note that the AO on one hand has recorded his finding with respect to the shares of certain companies that its face value stands at ₹10 but the assessee has purchased the same at a higher value. The basis of arriving at the conclusion that the assessee has purchased the shares at a higher value was non-availability of shares valuation. In other words the AO himself has admitted the value of the shares of certain companies at ₹10 but he has not given any benefit of such value while working out the loss with respect to purchase and sale of shares. As such the AO has treated the entire loss on the purchase and sale of shares ..... X X X X Extracts X X X X X X X X Extracts X X X X
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