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TMI Blog2011 (8) TMI 1360X X X X Extracts X X X X X X X X Extracts X X X X ..... when the Assessing Officer was having sufficient time to inquire about the shares. It was also pleaded that the assessee is also having interest income, therefore, it is not coming in exception clause especially when the necessary details were filed before the ld. Assessing Officer as well as before the ld. CIT(A). Our attention was also invited to Explanation to sec. 73 of the Act. It was further explained that the ld. Assessing Officer has not doubted the purchase of the shares for which our attention was invited to page 10 11 of the paper book. It was clarified by the Ld. Counsel for assessee that there was certain problem in IPOs and the decision was taken at the advice of merchant banker resulting into to take a decision either to go out or to sell the shares. The assessee decided to sell the same which caused losses. On a query from the Bench, as to why the shares were sold at losses, it was clarified by the Ld. Counsel for assessee that to save the assessee from huge losses, it was deemed right to face lesser losses. The purchase and sale of the shares was claimed to be confirmed and all the transactions are through cheques. It was also clarified that none of the director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without contention of the assessee that the shares were sold due to immediate requirement of funds is not acceptable. On perusal of the submissions filed by the assessee, it is seen that at the same time (Nearby to the above date i.e. 29.3.2008), assessee has purchased shares of other companies. Assessee could not justify the sale of shares on such huge loss, which indicates that these are bogus losses shown incurred by the assessee company. Sold shares are of an closely held and unquoted company and it is a probability that these transactions should have been made for tax evasion. Since assessee has been failed to prove the genuineness of the said losses and at this stage further enquiry is not possible, the losses shown by the assessee are hereby disallowed and added back to the total income of the assessee. If the aforesaid observation of the ld. Assessing Officer is analysed, firstly, the sale was made by the resolution made by the board of directors, firstly as there was immediate requirement of funds in the assessee company and secondly, the assessee purchases shares of other companies. It is also clear that the ld. Assessing Officer did not make any inquiry about the all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h details for the F.Y. 04-05 05-06 are enclosed herewith as Annexure 7. 11. The proof in support of S.T.T. paid for the year is furnished herewith as Annexure 8. 12. The copies of accounts maintained with the banks for F.Y. 05-06 are furnished herewith as Annexure 9. 13. Details of all the accounts of debtors having credit balance and creditors having debit balance enclosed herewith as Annexure 10. 14. Copy of ledger of Municipal Tax Legal Professional Charges enclosed herewith as Annexure 11. 15. List of present directors and person authorised to operate bank account is enclosed herewith as Annexure 12. 16. Copies of ledger of investment made along with copies of share application money enclosed herewith as Annexure 13. 17. Copy of Agreement with M/s. Giriraj Construction enclosed herewith as Annexure 14. 18. All books of account are being submitted herewith as Annexure 15. Hope this will fulfill all your requirements related to scrutiny. Thanking you, For K.K. Patel Finance Ltd. Sd/- Director Encl. a/a To, Date: 29.12.2008 The ACIT, Range-5(1), Indore Sub: Regarding assessment proceedings of our company for A.Y. 2006-07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r letter dated 17th November, 2008 for your kind reference. The company charged the rate of interest to the parties as per their creditworthiness, identity, previous experience with the party and the market condition, The said section 73 is not applicable to our company as the company is a registered company under the Companies Act, 1956 and principal business of the company is to lend the money to the parties as its normal business. The explanation to the said section clears that Where any part of the business of a company (other than a company whose gross total income consists mainly of income which is chargeable under the heads Interest on securities , income from house property , capital gains and Income of other sources ) or a company the principal business of which is the business of banking or the granting of loans and advances) consists in the purchase and sale of shares of other companies such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares.) As explained above it is very much clear that the company is a registered NBFC an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making/upholding the addition. Even the observation of the Assessing Officer is not certain and it is based upon probabilities. Rather the object of the transaction by the assessee should be clearly spelt out that it was with the purpose of tax evasion. The Assessing Officer has used the work probability and no independent finding has been given that the claim of the assessee is bogus. In the absence of clear facts, no decision can be taken on the basis of probabilities. Possibilities and probabilities are normally used when the primary evidence is not in existence. Impossibility of any further inquiry, at the relevant stage, by the Assessing Officer cannot be the ground for making the addition. It is not the case that the assessee was noncooperative rather the assessee attended the assessment from time to time and even filed written submissions. Books of account were also submitted during the assessment proceedings which were examined by him as is evident from the opening para of the assessment order. The books were neither rejected nor any discrepancy was found. Even during assessment proceedings, the claim of the assessee was that the shares were sold due to immediate requireme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cided on the basis of possibilities and probabilities cannot withstand at the touchstone of judicial scrutiny. The only reason for disallowance of loss is that the assessee could not justify the sale of shares at huge losses, automatically does not indicate that the transaction was bogus. The Assessing Officer was having sufficient time from August Sep. 2008 to 31.12.2008 and again when the ld. CIT(A) asked the comments from him in the form of remand report. However, no further inquiry was made, if so desired, therefore, the contention of the ld. CIT(A) that the assessee deliberately suppressed the evidence, if any, is also not based on facts when sufficient evidence was produced by the assessee. There is no reason to suspect the same, however, if the department still feels, nothing prevented the same to examine it further or to bring contrary material on record but that was not done. In view of these facts, no adverse inference could be drawn against the assessee. The assessee is only expected to furnish evidence which was available with him to justify its claim, therefore, without rebutting or proving the same otherwise, the transaction cannot be treated as bogus disbelieving t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pam Kapoor (299 ITR 179) (Pat) and ITO vs. S. Pannm Balam and Others (240 ITR 171) (Mad). It is also pertinent to note that purchase of shares were made from SCCL and payments were made by cheques. The sale of shares were made after analysing position of the company and the payments were received by cheques. Thus, transaction so effected are proper and independent to each other. Thus, there was sufficient material with the Assessing Officer to consider that these were actual transactions. The decision in CIT vs. Kundan Investment Ltd. (263 ITR 626) (cal) wherein it was held that mere fact that shares sold at loss immediately after purchase and the assessee could not be able to produce share broker would not disentitle the assessee from claiming loss from the shares. Identical view was taken in CIT vs. Emerald commercial Co. (250 ITR 539). The ratio laid down in CIT vs. Karamchand Thapar Bros. P. Ltd. (176 ITR 535) (SC) further supports the case of the assessee. The ld. CIT/DR has mentioned the decision from the Hon ble Apex Court in the case of Mcdowell which was duly summed up by Hon ble Gujrat High Court in Banyan Berry vs. CIT (131 CTR 127) (Guj), 222 ITR 831 (SC), wherein, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are retained either to have control of management or to support management holding control. This is not the case here. The sale was made at a price which could be obtained in the prevailing circumstances. Since the purchaser has confirmed the transactions u/s 133(6), therefore, there was no scope for the ld. Assessing Officer to doubt the sale transactions. The deal was purely commercial deal with commercial prudence and nothing is on record indicating that the loss was claimed to be bogus. Even otherwise, the businessman is the best judge in his interest under the peculiar facts and circumstances, therefore, there is nothing on record except probabilities, surmises and conjectures, that too, without any cogent material on record especially when the accounts are audited, transactions are properly recorded, sales are verified, purchases are not doubted, therefore, in view of the decision in ITO vs. Madanlal Singhal Sons (100 ITJ 647) (Jod), the transaction of purchase and sales, under the facts and circumstances cannot be treated as bogus, therefore, this appeal of the assessee is allowed. Since we have allowed the appeal of the assessee, therefore, we do not feel it appropriate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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