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TMI Blog2023 (11) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... PL is a company who purchased the shares of SMS ITS PL from the assessee. No adverse inference can be drawn against the assessee on basis of doubtful credentials of SVPL as the assessee has parted away with a valuable asset i.e. shares of a company having prime immovable property at Hailey Road Delhi and in lieu thereof, the assessee had received sale consideration at market price/fair market value. Decided in favour of assessee. - Sh. C. M. Garg, Judicial Member And Dr. B. R. R. Kumar, Accountant Member For the Assessee : Sh. Amit Goel, CA For the Revenue : Sh. Amit Katoch, Sr. DR ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: The present appeal has been filed by the Revenue against the order of ld. CIT(A)-37, New Delhi dated 22.09.2020. 2. The assessee filed return of income on 26.08.2015 showing total income of Rs. 39,50,140/-. The assessee had shown interest income from bank and Capital gain income. Income from LTCG was shown at Rs. 35,02,300/- and income from other sources was shown at Rs. 6,07,838/- resulting in total income of Rs. 39,50,140/-. 3. The assessment was completed u/s 143(3) of the Act at Total income of Rs. 2,82,67,840/-. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany who purchased these 200 shares of SMS ITS PL. The AO issued commission u/s 131(i)(d) of the Act on 15.05.2017 to ADIT (Investigation), Kolkata. The ADIT (Investigation) reported that summons u/s 131 dated 25.07.2017 were issued to SVPL but same could not be served at address given in ITR and he has explored all active address available of SVPL. Thus, the ADIT (Investigation) stated that it cannot be ruled out that SVPL being a paper company only. The AO held that such a paper/shell company is unlikely to possess resources to pay Rs. 41.76 Cr for acquisition of 100% sate in a company. Thus as per the AO the entire transaction appears as a dubious transaction. c) The AO found that Narender Kumar Jain has made statement on 11.04.2017 before DDIT (Investigation), Kolkata claiming that he was managing network of shell companies who are providing accommodation entries. One of the companies managed by him was Shreyans Vyapaar Pvt. Ltd. In his statement he has mentioned dummy directors appointed by him namely Rajesh Kumar Jain. d) Copy of statement of Narender Kr. Jain is reproduced by the AO on page 9 to Page 23 of the assessment order. e) Statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t time of sale of shares in 2014 an appreciated value of property claimed to have been purchased in 2005 was taken into consideration for valuation. However at time of issuance of shares to appellant in 2010 the said property was never considered at all. c) Valuation report dated 29.05.2014 could not have been basis for arriving at FMV of shares sold before that date. The Finance Act, 2014 relevant of AY. 2015-16 prescribes only one method of valuation of shares i.e. at Book Value. By this method the net worth of the entity would be same as its share capital is Rs. 3,00,000/- only and not Rs. 41.76 Cr as claimed by appellant. Even if other methods of valuation are used, then also, shares will be valued at face value alone. In view of these facts the AO held that appellants plea about fair valuation of shares before selling them appears to be without any basis and is an attempt to impact legitimacy to otherwise unexplained transaction. 6.5 Onus on appellant to prove Identity, Creditworthiness and genuineness a) The AO vide letter dated 23.11.2017 show caused the appellant as to why sum shown as LTCG be not taxed as Unexplained credits at MMR. b) The appellant s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SVPL. Thus, the income shown under LTCG was taxed u/s 68 as per provisions of Section 115BBE of the Act. The exemptions claimed u/s 54F /54EC were not allowed as they are available only against genuine LTCG. As a result the addition of Rs. 2,78,20,000/- was made by the AO u/s 68 of the Act. 5. The addition was made based on following findings of AO in Assessment Order: The company whose shares were sold i.e. SMS ITS PL is a shell company. The company who purchased the shares i.e. SVPL is a shell company Sale price of shares of SMS ITS PL has been calculated after considering the market price of property (4A, Hailey Road, Delhi) held by SMS ITS PL. The value of Shares has to be calculated on basis of book value. Shares were sold on 30.04.2014 but sale consideration was paid before 30.04.2014 to assessee. Entire transaction appears to be dubious transaction. M/s SVPL is one of the companies managed by Narender Kr. Jain who manages networks of shell companies and whose statement was recorded by DDIT (Investigation), Kolkata on 11.04.2017. This transaction is an arranged transaction and assessee obtained benefit of lower rate of taxation under LTCG. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked by any supporting evidence. 14. M/s SMS ITS PL owned a valuable immovable property located at 4A, Hailey Road, Delhi. The registration papers regarding acquisition of property were filed before the AO. Valuation report of the property was filed before the AO where FMV of property was determined by valuer. 15. The AO has made independent verification regarding the said property from NDMC which showed that said property is owned by SMS ITS PL. The FMV of shares has been calculated after considering the Market Value/FMV of the said property owned by M/s SMS ITS PL. The high price of the share of SMS ITS PL is due to the high value of the underlying asset i.e. immovable property at Hailey Road, KG Marg, New Delhi. 16. There is no dispute by the AO regarding the market price/FMV of property as shown by the assessee. It is a fact that FMV of shares in unlisted company will derive its value based on the market price of the assets owned by it less its liabilities. These facts show that the FMV of shares adopted by the assessee was correct after taking the market value of underlying asset and this FMV of shares shall be higher than the book value of unlisted shares. Thus, the o ..... 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