ASSISTANT COMMISSIONER OF INCOME TAX LTU CIRCLE 1 CHENNAI, CHENNAI V. PRUDENTIAL SUGAR CORPORATION LIMITED, CHITOOR

ITA 2298/CHNY/2024

AI Insights

The case involves the Assistant Commissioner of Income Tax, LTU, Circle -1, Chennai as the appellant and Prudential Sugar Corporation Limited as the respondent. The dispute centered on the deletion of a Long Term Capital Loss of Rs.24 crores by the CIT(A), which the revenue challenged. The loss was claimed by the assessee on the sale of shares of two companies, which were purchased at a high premium and later sold at a loss. The revenue argued that these transactions were sham transactions intended to evade tax, citing abnormal features such as the involvement of common directors and the purchase of shares at a high premium despite the companies being loss-making and having a negative net worth. The CIT(A) found the transactions to be genuine, a decision which the Tribunal upheld.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 708171 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Assessment Year: 2018-2019
• Other Referred Cases: Durga Prasad More vs. CIT, Sumati Dayal vs. CIT, Hillman Properties Pvt. Ltd. vs. ITO, CIT vs. Orissa Corporation Pvt. Ltd, CIT vs. Walchand & Co. etc., J K Woollen Manufacturers vs. CIT, CIT vs. Birla Cotton Spg And Wvg. Mills Ltd., Madhav Prasad Jatia vs. CIT UP, S.A. Builders Ltd. vs. CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: E.PAVUNA SUNDARI; C.I.T
• Assessee Lawyers: D.ANAND
• Keywords: Set aside; Reasonable cause; Onus to prove; Commercial expediency; Capital Gains; Valuation report; Accommodation entries; Wrong claim; Share purchase agreement; Bogus

Judgement Text

"आयकर अपीलीय अिधकरण, ‘ए’ Ɋायपीठ, चेɄई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI ŵी एस एस िवʷनेũ रिव, Ɋाियक सद˟ एवं ŵी एस. आर. रघुनाथा, लेखा सद˟ क े समƗ BEFORE SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.:2298/Chny/2024 िनधाŊरण वषŊ / Assessment Year: 2018-19 The Assistant Commissioner of Income Tax, LTU, Circle -1, Chennai. vs. Prudential Sugar Corporation Limited, Prudential Nagar, Koppedu Post, Nindra, Mandal – 517 587. (अपीलाथŎ/Appellant) [PAN:AAACP-4338-D] (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से/Appellant by : Ms. E. Pavuna Sundari, C.I.T. ŮȑथŎ की ओर से/Respondent by : Shri. D. Anand, Advocate सुनवाई की तारीख/Date of Hearing : 08.05.2025 घोषणा की तारीख/Date of Pronouncement : 17.07.2025 आदेश /O R D E R PER S. R. RAGHUNATHA, AM: This appeal by the revenue is filed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2018-19, vide order dated 22.04.2024. 2. The revenue has raised the following grounds of appeal: 1. The order of the learned Commissioner of Income Tax (Appeals) in ITA No. ITBA/NFAC/S/250/24-25/1064272174(1) dt. 22.04.2024 for the Assessment year 2018-19 is erroneous in law, facts and circumstances of the case. :-2-: ITA. No.:2298/Chny/2024 2. The learned CIT(A) erred in deleting the disallowance of Long Term Capital Loss of Rs.24 crores made by the AO wherein the ratio of the decision of the Hon'ble Supreme Court in the case Durga Prasad More (82 ITR 540) and Sumati Dayal (80 Taxman 39) of examining the transactions by applying the test of preponderance of human probability and after duly considering the surrounding circumstances related to the transactions claimed was not followed and it was apparent the said transactions were sham if one considers the following abnormal features related to the said transactions: a) The Directors, Shri Kishor Jhunjhunwala and Shri Vinod Baid of the assessee company were also Directors in the said two companies, M/S Discovery Infoways Ltd., and M/s Prudential Ammana Sugars Ltd., whose shares were purchased and sold. b) The shares were purchased by the assessee in the companies, M/s Discovery Infoways Ltd., and M/s Prudential Ammana Sugars Ltd., of face value Rs.10 per share by paying a premium of Rs.90 per share and Rs.40 per share respectively during Financial Year 2014-15. Though both the companies were registering losses, were having a negative net worth and from were not having any business activities, however during Financial Year 2014-15 they received aggregate premium of Rs.11.25 crores and Rs.10 crores respectively from various subscribers including the assessee. c) The valuation reports submitted by the assessee of M/s Sibasankar and Associates on the valuation of shares of these two companies at the time of purchase and sale of shares had no basis and did not explain as to how the market value of the shares at the time of purchase and sale were arrived at. 3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing officer be restored. 3. The brief facts of the case are that the assessee is a company filed its return of income for the AY 2018-19 declaring a total income of Rs.3,24,17,990/- on 05.10.2018. The case was selected for limited scrutiny under CASS and accordingly statutory notices were issued to the assessee. During the assessment proceedings, the AO found that the assessee has earned capital gains through slump sale u/s.50(B) of the Act by transferring an undertaking on a slump sale basis to M/s.Netam Sugar Private Limited in terms of the order dated 21.03.2017 of the Hon’ble Supreme Court. As per the report of an accountant in Form No.3CEA under sub section (3) of section 50B of the Act, the consideration received for slump sale was Rs.1,30,15,59,570/- and net worth of undertaking was determined at Rs.77,68,31,171/-. :-3-: ITA. No.:2298/Chny/2024 4. The assessee entered into business transfer agreement with the buyer on 04.04.2015. During the same time i.e. in 2014, the assessee had purchased shares of two closely held companies (Discovery Infoways Limited and Prudential Ammana Sugar Limited) for a consideration of Rs.12.50 Crores each as detailed below: Date of Purchase Name of Company Quantity (Nos.) Amount (Rs.) 10.09.2014 Discovery Infoways Limited 12,50,000 12,50,00,000/- 10.09.2014 Prudential Ammana Sugar Limited 25,00,000 12,50,00,000/- 5. During the financial year 2017-18 (AY 2018-19), the assessee sold all the above shares acquired for Rs.1.00 crore. Thereby, claiming a Long Term Capital Loss of Rs.24.00 Crores. Details of such sale transactions are given below: Date of Sale Name of Company Quantity (Nos.) Amount (Rs.) 31.03.2018 Discovery Infoways Limited 12,50,000 50,00,000 31.03.2018 Prudential Ammana Sugar Limited 25,00,000 50,00,000 6. The aforesaid Long Term Capital Loss, on sale of the shares was set off against Long Term Capital Gain arose on account of slump sale. 7. The assessee filed the details of sale transactions including the ledger accounts of Discovery Infoways Limited and Prudential Ammana Sugar Limited along with bank statement reflecting the transaction details of shares purchased. Further, the assessee stated that the shares were sold on the basis of value ascertained upon analysing financials of the respective companies as well as multiple market prevailing circumstances. Further, the assessee also filed a debit note which was issued on 31.03.2018 to prudential stock and securities limited based on the financial statements for the A.Y.2014-15 of the companies in which the assessee had :-4-: ITA. No.:2298/Chny/2024 purchased the shares. On perusal of the submission of the assessee the AO had observed the following about the companies in which the assessee had invested in shares: “4.2.1 Analysis of financial statements of Discovery Infoways Limited:- A. The company has incurred losses amounting to Rs.1,41,05,750.73 for F.Y. 2013-14 and Rs.25,23,745.09 for F.Y. 2014-15. B. The purchases during the F.Y. 2013-14 were Rs.72,456/- which significantly increased to Rs.1,01,68,898/- during F.Y. 2014-15. C. Operational expenses for F.Y. 2013-14 were Rs.21,022/- which increased to Rs.2,01,187/- during F.Y. 2014-15. Major operations expenses include Audit fees, Bank charges, share trading differences, ROC filing fees, DP charges, professional fees. D. Audit fees for F.Y. 2013-14 is Rs.1,100/- and for F.Y. 2014-15 is Rs. 5,100/-. Both these amounts were not paid till the end of F.Y. 2014-15. The audit fees payable to the auditor is a very miniscule amount. E. Share capital has increased from Rs.10,00,000/- as on 31.03.2014 to Rs. 2,55,00,000/- as on 31.03.2015. F. During the F.Y. 2014-15 company has received share premium of Rs.11,25,00,000/-. G. Major application of funds:- a. Investment in shares Rs.6,22,69,800/- as on 31.03.2015 b Advances given Rs.6,47,32,319.56/- as on 31.03.2015 H. The net worth of the company as on 31.03.2014 (just before purchase of shares by the assessee) stood at Rs.1,92,89,315/- in negative. From the above observations, it appears that the Financial statements does not show any genuine business activity conducted by this company. 4.2.2 Analysis of financial statements of Prudential Ammana Sugars Limited:- A. The company has incurred losses amounting to Rs.2,756/- for F.Y. 2013-14 and profit of Rs.9,895/- for F.Y. 2014-15. B. There is no purchase and sale transaction during the FY 2014-15. C. Other expenses for F.Y. 2013-14 was Rs.2,756/ which significantly increased to Rs.7,52,794/- during F.Y. 2014-15. Major other expenses include Audit fees, Bank charges. Travelling & conveyance, ROC filing fees, Business promotion expenses and subscriptions. :-5-: ITA. No.:2298/Chny/2024 D. Audit fees for F.Y. 2013-14 is Rs 1,100/- and for F.Y. 2014-15 is Rs. 1,000/-. Both these amounts were not paid till the end of F.Y. 2014-15. The audit fees payable to the auditor is a very miniscule amount. E. Share capital has increased from Rs. 1,20,00,000/ as on 31.03.2014 to Rs. 5,10,,00,000/ as on 31.03.2015. F. During the F.Y. 2014-15 company has received share premium of Rs.10,00,00,000/- G. Major application of funds :- a. Current Loans and advances given Rs.78,48,744/- and Rs.12,78,39,820/- as on 31.03.2015 b. Non current advances given Rs.25,64,112/- H. The only income is Interest on unsecured loan amounting to Rs.7,66,397/-. 1. The net worth of the company as on 31.03.2014 (just before purchase of shares by the assessee) stood at Rs.6,82,841/- in negative. From the above observations, it appears that Financial statements does not show any genuine business activity conducted by this company. 8. Further, the AO observed that the slump sale of the undertaking took place on 26.04.2017 (AY 2018-19) giving rise to capital gain from slump sale amounting to Rs.52,47,28,399/-. The assessee ought to have been paid the advance tax on the same. 9. Therefore, the AO came to a conclusion that the Long Term Capital Loss on sale of shares to the tune of Rs.24.00 crores have not been supported by any valid and reasonable explanations and documents and hence, brought to tax by holding as under: “4.4. The assessee has failed to submit any evidence before us to reasonably justify undertaking the purchase of such unlisted shares at such a huge premium. In the judgement by Hon'ble Delhi ITAT in the case of Hillman Properties Pvt. Ltd. Vs ITO (ITAT Delhi) held that mere showing that the transactions were through banking channels does not prove the genuineness of the transaction. The relevant portion of the judgement is being reproduced below: \"Merely showing that transactions were carried out through Banking channel in the facts and circumstances of the case is not sufficient to prove the genuineness of the transaction in the matter. Courts and Tribunals have to Judge the evidence :-6-: ITA. No.:2298/Chny/2024 before them by applying the test of human probability. If the said test is applied in this matter, it is clearly established that assessee failed to prove identity of the accommodation entry providers, their creditworthiness and genuine of the transaction in the matter. We, therefore, do not find any justification to interfere with the Orders of the authorities below in making the addition of Rs. 50 lakhs.\" 4.5. The preponderance of probabilities only denotes the simultaneous existence of several facts', each probable in itself, albeit low, so as to cast a serious doubt on the truth of the presented 'facts', which together make up for a bizarre circumstance, leading to the inference of collusiveness or a device set up to conceal the truth, i.e., in the absence of credible evidences. In view of the observations mentioned, it can be concluded from the above facts and circumstances that there was a planning and design of purchasing preference shares at higher value and then selling them at a very lower cost to book huge capital loss to avoid payment of taxes. Needless to say, that income tax proceedings are civil proceedings and the degree of proof required is by preponderance of probabilities. Therefore, applying the test of preponderance of probabilities, and considering the entire sequence of events, it can be concluded that the intention of the assessee all-way long was to book LTCL which in turn would be set off against the capital gain from slump sale. In coming to this view, reliance was placed on theory of human probability as enunciated by the honourable supreme court in case of CIT v/s Durga Prasad More (82 ITR 540) and CIT v/s Sumati Dayal (80 ΤΑΧΜΑΝ 89). 4.6. In such circumstance, the view that these transactions of purchase and sale of shares of these closely held companies was conducted solely with the intention of booking LTCL which can be set off against the LTCG earned on slump sale. These are mere book entries using banking channel between parties whose management are related. Taking this view, the setting off of Rs. 24 cores cannot be allowed. Therefore, the same is being disallowed and added back to the income of the 5. As the assessee has understated its income by claiming bogus LTCL which are not allowable as per law, penalty proceedings under section 270A of the act are being initiated on this issue. Since these are false entries recorded in books of account in my view, I am satisfied that this is underreporting in the nature of misreporting as per provisions of section 270A. 6. A show cause notice dated 25.03.2021 was issued to the assessee along with Draft Assessment Order. The assessee was asked to submit its reply by 30.03.2021. In its response dated 30.03.2021, the assessee has stated the following: That we invested in preference shares of both the companies on the basis of the comprehensive analysis and future prospects in the year 2014-15 and all transactions were carried out through banks in normal business operations, as such absolutely genuine and legitimate. However, subsequently we ascertained on the basis of the financials and other parameters as well as future prospects of the investments that we should not continue with the existing investments in preference shares of Mis Prudential Ammana Sugars Limited and M/s Discovery Infoways Limited in the financial year 2017-18, as both the companies could not expand and diversify as plan to venture earlier, as such we thought it was wise to liquidate the said investments on the best of price available and accordingly we sold out, we further reiterate that all the transactions were carried out with utmost :-7-: ITA. No.:2298/Chny/2024 genuineness backed with the proper analyses on the basis of the information available. That we further reiterate that entire investments decisions were made upon comprehensive analyzes of data available with complete decisive strategy in fair in transparent manner without any biased, moreover we undertook different scientific approaches to analyze financial implications keeping in mind prospect to risk and return out of the investment, as such upon getting full satisfied about the investments prospects we gone ahead and invested in anticipation of lucrative returns, but unfortunately things/decisions could not fall in our lines of expectations, as such later on we ascertained that we should not continue with the investments in both the companies and we decided to liquidate the same on the base price available. That we further state that we analyzed duly audited accounts of both the companies before investing as well as got apprised by the presentations given by them in connection with the existing operations and future plans, as such the entire transactions were carried out with reasonable care in routine business operations and best of the decisions were made appropriately on the basis information and data available. 6.1 The arguments given by the assessee in its reply to show cause notice have already been considered while making the Draft assessment order. The plea taken by the assessee that the transactions were done through banking channel, hence, they are absolutely genuine and legitimate. Such a plea is not acceptable. This argument ios already considered in para 4.4 of this order. The assessee has failed to prove reasonableness and genuineness of these transactions. Therefore, the addition on account of booking of bogus long term capital loss is not being disturbed with. 7. With these remarks, the total income of the assessee is computed as under: Income as per the return filed : 3,24,17,987/- Add: Disallowance of LTCL. : 24,00,00,000/- Assessed Total Income : 27,24,17,987/- Rounded off : 27,24,17,990/- 10. Aggrieved by the order of the AO the assessee challenged the order before the ld.CIT(A), NFAC, Delhi. Before the ld.CIT(A) the assessee reiterated the facts and further submitted the following: The appellant made detailed submissions which are reiterated above, however the gist of submissions is as follows: “…… The appellant is a public listed company having more than 5000 shareholders engaged in in agro commodities activities particularly sugar manufacturing since 1993-94. AO has alleged that even though same price was paid for purchase of shares the quantity of the shares bought were different. It is not understood as to what is the relevance of such a baseless allegation when the price range could be different which :-8-: ITA. No.:2298/Chny/2024 was exactly the case in hand. The appellant had purchased 12,50,000/- shares of Discovery Infoways Ltd having face value of Rs.10/- per share and at a premium of Rs.90 per share resulting in total consideration paid of Rs.12,50,00,000/-. Further the appellant had purchased 25,00,000 shares of Prudential Ammana Sugar Ltd with face value of Rs.10 per share and at a premium of Rs.40/- per share aggregating to total payments made of Rs.12,50,00,000/-. We have invested in preference shares of both the companies on the basis of the comprehensive analysis and future prospects in the year 2014-15. It has been stated by the AO that the appellant has paid premium for purchase of the shares which is not reasonable and the companies of whose shares the appellant had invested are not worthy companies. It is to be submitted that the investments which had been made by the appellant is after the evaluation of the future prospects of the company and on the basis of the chartered accountant's opinion and advice as per the certificate available in the paper book. The purchase of the shares has been made in AY 2015-16 wherein proper procedure has boon followed and duly recorded in the respective books of accounts. The Income Tax Department has also assessed the appellant company as well as the companies in which such investment was made and there are no pending proceedings in respect of the companies and therefore there can be no doubt raised as to the valuation/purchase of the shares. On the issue of excess premium paid the appellant is relying on the various case Iaws. Issue in respect of no genuine business activities carried out by the companies namely, Discovery Infoways and Prudential Ammana Sugar Ltd. Again such an allegation made by the AC is absolutely baseless on the basis of both the companies being companies which are regularly filing their Income tax returns as well as assessed to tax by the Income Tax Department. The Investments were made during Financial Year 2014-15 relevant to AY 2015-16 and assessments have been framed in respect of the parent company as well as the companies in whose shares the appellant had Invested for AY 2015-16 and there is no adverse remark whatsoever by the Department in respect of the purchase / Investment and the same has been accepted as genuine and therefore at this stage no adverse inference can be cast upon it. The appellant on the other hand has repeatedly submitted that the transactions are genuine, the purchase and sale of the shares are supported by bills and vouchers, the payments made for purchase have been made through account payee cheque, the shares purchased were of private limited companies who were regularly filling their returns having a PAN number and complying to the Registrar of Companies Act and the shares which were sold were again to a limited company who were regularly filling their return and complying with the rules and regulations before the ROC. It is the allegation of the AO that the appellant has made sale of the shares close to the slump sale. It is to be submitted that the slump sale took place on 26.4.2017 whereas sale of the shares was on 31.3.2018 before the end of the previous year and therefore there is no link whatsoever between the slump sale and the sale of shares. The allegation that no advance tax was paid by the assessee against slump sale is also baseless as because tax evasion and tax planning are two separate things and tax planning does not tantamount to tax evasion. The appellant was already looking into the prospect of selling the shares as the company was not making profits and incurring losses and it wanted to liquidate its investments since a long period. The appellant also on many occasions has passed the Board Resolution of its Intention to sell the shares and liquidate its investments and on the best opportunity it has done so during the year. :-9-: ITA. No.:2298/Chny/2024 The AO has made addition only on the basis of suspicion and on the basis that the appellant had earned Capital Gains on slump sale of Rs.52,47,28,399/-whereas no material filed by the appellant has been controverted by the AO and neither the AO has made any enquiry whatsoever and therefore, on the basis of numerous case laws cited above the addition is not sustainable. Determination of order With respect to charging of high premium, the matter is well covered by various judicial decisions that once the identities and creditworthiness of the share applicants and genuineness of the transaction are established, the transaction cannot merely be termed bogus merely on the basis of high premium paid for investment in shares. Relevant case laws on the matter relied by the appellant are; (a) PCIT vs. Chain House International (P.) Ltd. [2018] 98 com 47 (Madhya Pradesh) (b) Principal Commissioner of Income Tax v. Rohtak Chain Co. (P.) Ltd. [2019] 110 taxmann.com 59 (SC), (c) Principal Commissioner of Income-tax v. Bharat Securities (P.) Ltd. [2020] 113 taxmann.com 32 (SC). The Courts have held that in applying the test of commercial expediency for determining whether the expenditure was wholly and exclusively laid out for the purpose of business, reasonableness of the expenditure has to be judged from the point of view of the businessman and not of the Revenue. In this case the business expediency of the investment has been explained by the appellant. Relying on the same, it is inferred that fixing of share premium is a commercial decision and cannot be disputed. Reliance in this regard is also placed on the following decisions of the apex Court: Ø CIT vs. Malayalam Plantations Limited: 53 ITR 140 (SC) Ø CIT vs. Walchand & Co. etc. (1967) 65 ITR 381ØJ K Woollen Manufacturers vs. CIT: 72 ITR 612(SC) CIT vs. Birla Cotton Spg And Wvg. Mills Ltd., 82 ITR 166 (SC) Ø Madhav Prasad Jatia vs. CIT UP 118 ITR 200 (SC) (Ø S.A. Builders Ltd. vs. CIT: 288 ITR 1 (SC) It has been mentioned by the Ld. AO that the assessee had purchased 12,50,000 shares of Discovery Infoways Ltd on 10.9.2015 for total consideration of Rs. 12,50,00,000/- and purchased 25,00,000 shares of Prudential Ammana Sugar Ltd on 10.9.2014 for total consideration of Rs.12,50,00,000/-, The AO has alleged that even though same price was paid for purchase of shares the quantity of the shares bought were different. The appellant has contested that the price of share is determined after analyzing financials and prospects of the future business opportunities of both the companies. This justification of appellant is acceptable as it is up to the investor to make the decision with regard to every investment made. The investment decision can be different for different companies, Ld. AO has mentioned that that the appellant has made sale of the shares close to the slump sale. Ld. AO has mentioned that no advance tax was paid by the assessee against slump sale as the appellant had intention to set off against LTCG. The appellant has submitted that the slump sale took place on 26.4.2017 whereas sale of the shares was on 31.3.2018 before the end of the previous year and therefore there is no link whatsoever between the slump sale and the sale of shares. The issue here is genuineness of both the transactions. Regarding slump sale of the business, Ld AO has not disputed it in the order, only point of difference is capital loss claimed. Moreover, being a listed company, appellant informed the shareholders and SEBI with regard to slump sale of the business. On the three basic ingredients for establishing the genuineness of investment made viz., identity, creditworthiness of the subscribers and the genuineness of the transactions, appellant submitted that all of these are fulfilled. In this respect gist of :-10-: ITA. No.:2298/Chny/2024 submission as under: (1) On identity: the appellant is a public listed company. regularly convening shareholder meetings SEBI and MCA compliant and have filed their income tax returns regularly. The appellant emphasized that identity of investor is well established and this has also not been doubted by the Ld. AO. ii) On creditworthiness: To establish the creditworthiness of the investor with respect to investment made, the audited financial statements of FY 2014-2015 onwards has been submitted. The Ld. AO has also not refuted that appellant had sufficient fund for making investment in the share capital of the two companies companies namely. M/s Discovery Infoways Ltd and Prudential Ammana Sugar Ltd. AO has mentioned that no genuine business activities carried out by the companies namely, M/s Discovery Infoways and Mis Prudential Ammana Sugar Ltd. The appellant in the reply has stated that these are regularly filing their income tax returns as well as assessed to tax by the Income Tax Department. The Income Tax Department has framed assessments in respect of these companies. The appellant has contested that the price of share is determined after analyzing financials and prospects of the future business opportunities of both the companies. In my considered opinion, the decision of investment is the commercial decision of the appellant. It is noted that Ld. AO has relied upon the decision in the case of ITA.No.6530/Del./2014 M/s. Hillman Properties Pvt. Ltd., New Delhi. The facts of this case are totally different as in case of M/s. Hillman Properties Pvt. Ltd, the A.O. has received specific information from Investigation Wing that assessee has received accommodation entries from two parties, the details of the same are mentioned in the reasons which have not been disputed by the assessee as well. The report received from the DIT (Inv.) Wing further reveals that enquiries were initiated to probe into some Bank account which was used to issue cheques to entry seeker or beneficiary against cash paid by them to the entry operator. The A.O. has specifically recorded the fact in the assessment order that initially in different account of the Investors, the cash have been deposited from where the amount have been transferred to the another accounts of Investors and then transferred to assessee. These information are specific to show that against the cash, entry has been provided to the assessee by entry providers. The assessee failed to produce any evidence before the tax authorities. Hon'ble ITAT held that it is clearly established that assessee failed to prove identity of the accommodation entry providers, their creditworthiness and genuine of the transaction in the matter. The case of appellant is not the case of accommodation entry as that of the assesse in case of M/s. Hillman Properties Pvt. Ltd., New Delhi. The AO in its order has relied upon the decision in the case of CIT v Durga Prasad More 82 ITR 540 (SC) and Sumati Dayal v CIT 214 ITR 801 (SC) and has invoked the test of human probabilities. The appellant is relying upon the decision of the Supreme Court in the case of CIT vs. Orissa Corporation Pvt. Ltd 159 ITR 78 (SC). which has discussed scope of initial burden and as to what extent assessee has an obligation to discharge the burden. The appellant is relying upon the decision of Lalchand Bhagat Ambica Ram vs. CIT (1959) 37 ITR 288 (SC) and Sreelekha Banerjee vs. CIT (1963) 49 ITR 112 (SC). :-11-: ITA. No.:2298/Chny/2024 11. After considering the submissions the ld.CIT(A) has deleted the addition made of Rs.24.00 Crores by treating the long term capital loss as bogus by holding as under. “The brief facts pertaining to this issue are that the Ld. AO disallowed the long term capital loss claimed by the appellant to the extent of Rs.24,00,00,000/- to be taxed u/s 115BBE of the IT Act. The appellant had transferred as slump sale undertaking to M/s Netan Sugar Pvt. Ltd which gives rise to Capital Gains of Rs.52,47,28,399/-, The A.O. found that the appellant had set off loss to the extent of Rs.24,00,00,000/- on sale of shares with the Capital Gains of Rs.52,47,28,399/- derived by the appellant on account of slump sale. The Ld. AO further found that the shares worth Rs.25,00,00,000/- were sold by the appellant on 31.3.2018 for aggregate value of Rs.1,00,00,000/- resulting in Long Term Capital Loss of Rs.24,00,00,000/-. The quantity of the shares bought by the appellant on 10.9.2014 was different whereas the purchase price paid was the same. Valuation, Report was not furnished by the appellant in respect of the valuation on sale of shares. The Ld. AO observed that no reasonable cause could be shown for payment of such huge premium by the appellant at the time of purchase as the face value of the shares was Rs.10/- and the premium paid was @ Rs.40/- and @ Rs.90/- per share. The Ld. AO relied upon the decision of the Delhi Tribunal in the case of M/s Hillman Properties Pvt. Ltd vs. ITO on the issue of high premium. The Ld. AO mentioned that the accounts/financial statements submitted by the appellant showed that no genuine business activities had been carried out by the two companies, namely M/s Discovery Infoways Ltd and Prudential Ammana Sugar Ltd. The Ld. AO observed that the appellant has sold these shares near to the date of slump sale of the undertaking. The appellant did not pay any advance tax on transfer of the undertaking as slump sale on which Capital Gains of Rs. 52,47,28,399/- was earned which shows the intention of the assessee to not pay tax. The appellant has made disclosure of the full particulars of investments in the year of investment in the audit reports. No adverse consequence on the aforesaid transaction observed by the assessing officer with respect to the investment made by the appellant company during the course of assessment proceedings u/s 143(3). Since all the facts are before the AO, there is little room for conjecture. Considering the facts and circumstances narrated and analyzed above, all the details and documents placed on record corroborating the claim of the appellant the judicial precedents referred, addition made by the Ld. AO towards treating long term capital loss as bogus claimed by the appellant to the extent of Rs.24,00,00,000/-is directed to be deleted. Thus, grounds taken by the appellant in this regard are allowed.” 12. Aggrieved by the order of the ld.CIT(A) the Revenue challenged the order before us. The ld.DR assailing the action of the ld.CIT(A) submitted that the ld.CIT(A) has erred in deleting the addition of long term capital loss of Rs.24.00 Crores. :-12-: ITA. No.:2298/Chny/2024 13. Further, the ld.DR supported the orders of the AO and prayed for confirming the same by setting aside the order of the ld.CIT(A). 14. Per contra the ld.AR Mr.Anand, Advocate asserted the action of the ld.CIT(A) and submitted that there the ld.CIT(A) has rightly reversed the action of the AO by deleting the treatment of long-term capital loss as bogus. Before us the ld.AR submitted a paper book of 280 pages consisting of the Audit report for the F.Y.2014- 15, 2015-16 and 2017-18, Auditor confirmation on the advice to buy the shares of the companies, Share certificate of prudential Ammana Sugars ltd and Discovery Infoways limited. Further ld.AR reiterated the facts, which have already been submitted by the assessee both before the AO as well as the ld.CIT(A). 15. The ld.AR submitted that the assessee is a listed company in BSE and NSE and the audited financials have been filed with the stock exchanges as per the SEBI guidelines from time to time. The ld.AR drew our attention to the Annual report and the audited financials as on 31.03.2015 (page No.15 of the paper book) of the assessee, wherein the investment made in these two companies’ shares to the tune of Rs.12.50 Crores each have been disclosed in the Directors Report dated 28.09.2015 as per Section 186 of the Companies Act, 2013. Further, the investment in shares has been shown under ‘Non-Current Investments’ in Schedule 8 of the Balance sheet as on 31.03.2015 under the sub head of ‘Equity Shares(unquoted)’ (Page No.69 of the paper book) during the financial year 2014-15 as detailed below: a) ……. b) 25,00,000 Preference shares @Rs.50/- each paid up in Prudential Ammana Sugars Ltd. Rs.12,50,00,000/- c) 12,50,000 Preference shares @Rs.100/- each paid up in Discovery Infoway Ltd. Rs.12,50,00,000/- :-13-: ITA. No.:2298/Chny/2024 16. Similarly, in the Audited financials as on 31.03.2016 the investments in these two companies continued to be shown under ‘Non-Current Investments’ (page No.156 of the paper book), which has been submitted to the Bombay stock exchange as required under the provisions of the SEBI. 17. Further, the ld.AR took us through the audited financials as on 31.03.2018, wherein the investments of these two company shares have been sold during the F.Y. 2017-18(A.Y. 2018-19) (page No.264 of the paper book). The ld.AR drew our attention to the CA certificate issued for recommended price of the shares of these two companies at the time of investment as well as at the time of disposal of the shares (page No.277 of the paper book). The ld.AR also took us through the share certificate of Prudential Ammana Sugars Limited (page No.278 & 279 of the paper book) and Discovery Infoway Limited (page No.280 of the paper book). 18. In light of the above arguments and submissions the ld.AR submitted that the AO has grossly erred in understanding the transactions and hence treated as bogus transactions. Hence, the ld.AR prayed for confirming the order of the ld.CIT(A), as there is no reason to interfere with the well-reasoned order of the ld.CIT(A). 19. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The only issue before us to decide is whether the Long-Term Capital Loss of Rs.24.00 Crores claimed by the assessee on sale of unlisted shares is from genuine transactions, allowable to be set off against Long-Term Capital Gain arising from a slump sale u/s.50B of the Act, or whether it is a colourable device to evade tax. 20. It is undisputed fact that the assessee made investments in preference shares of two unlisted companies during FY 2014-15. These investments are reflected in the :-14-: ITA. No.:2298/Chny/2024 audited financial statements of the assessee for AY 2015-16 under “Non-Current Investments” and has been reported in the Directors report of the Company in compliance with Section 186 of the Companies Act, 2013. We note that the assessee is a listed company in BSE and has reported to SEBI the audited financials for the F.Y. 2014-15. It is evident from the audited financials as on 31.03.2015 the investments in shares of these two companies have been shown in Schedule No.8 – ‘Non- Current Investments’(Page No.69 of the paper book) to the tune of Rs.25.00 Crores. Further, we find that these transactions are executed through proper banking channels and substantiated by share certificates, CA valuation reports, and accounting entries. 21. Therefore, we do not find any infirmity in the order of the ld.CIT(A) in deciding the issue in favour of the assessee. Our view is also supprted by the Hon’ble Supreme Court in CIT vs. Walfort Share & Stock Brokers (P.) Ltd. [(2010) 326 ITR 1 (SC)] held that if a transaction is otherwise valid and permissible under the law, and supported by documentation, the mere tax advantage does not render it a sham. 22. Further, we find that the assessee explained with documentary evidence that the Investment was made based on financial data and business plans of the investee companies. The decision to liquidate the shares at a lower price was taken based on updated financials and diminished prospects of the companies. The loss on investment arose from genuine business decision, not from any sham arrangement. 23. The above argument of the assessee was well supported by the legal principle laid down in S.A. Builders Ltd. v. CIT [(2007) 288 ITR 1 (SC)], it was held that commercial expediency must be judged from the perspective of the businessman, not the tax department. :-15-: ITA. No.:2298/Chny/2024 24. We note that the AO relied on the theory of “human probability” and the decisions in Durga Prasad More and Sumati Dayal to allege that the transactions were pre-planned to avoid tax. However, in the present case there is no evidence of collusion or artificial inflation of sale/purchase value. The AO has not brought any evidence to prove otherwise that the transactions were fictitious or that the consideration was not actually paid. In our considered opinion the AO failed to bring on record any material to prove that the seller or buyer of shares were related parties or accommodation entry providers. The theory of human probability cannot override documentary evidence and audited accounts unless there is a specific finding of collusion or falsity. 25. On perusal of the impugned order the CIT(A) examined the investment history, disclosure in statutory records, documentary trail of sale and purchase, Valuation evidence from chartered accountants. Further, we find that the ld.CIT(A) has observed that the assessee has submitted before the AO that these companies have been regularly filing their income tax returns as well as assessed to tax by the income tax department and framed assessments in respect of these companies. Therefore, the CIT(A) has rightly held that the capital loss arose from a real, demonstrable business decision. The AO's inferences were speculative and lacked evidentiary support. Hence, the assessee was entitled to claim set-off as per the provisions of the Act. 26. Further, we note that no evidence was brought on record by the AO to suggest that the loss was pre-determined, the buyer of shares colluded with the assessee and the share purchase/sale consideration was not real. The burden to prove that a transaction is a \"colourable device\" is on the person who alleges. In the :-16-: ITA. No.:2298/Chny/2024 present case the revenue cannot shirk their responsibility to prove the transaction as sham. 27. Based on the above factual matrix, legal principles, and evidentiary material available on record, the addition of Rs.24.00 Crores by disallowing the Long-Term Capital Loss is unjustified and liable to be deleted. Accordingly, the appeal of the Revenue is dismissed and the order of the CIT(A) is upheld, confirming that:  The Long-Term Capital Loss of Rs.24.00 Crores on sale of shares is genuine.  The assessee is entitled to set-off this loss against the LTCG arising on slump sale under Section 50B of the Act. 28. In the result the appeal filed by the revenue is dismissed. Order pronounced in the court on 17th July, 2025 at Chennai. Sd/- Sd/- (एस एस िवʷनेũ रिव) (S.S. VISWANETHRA RAVI) Ɋाियक सद˟/Judicial Member (एस. आर. रघुनाथा) (S.R.RAGHUNATHA) लेखा सद˟/Accountant Member चेɄई/Chennai, िदनांक/Dated, the 17th July, 2025 SP आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3.आयकर आयुƅ/CIT– Chennai/Coimbatore/Madurai/Salem 4. िवभागीय Ůितिनिध/DR 5. गाडŊ फाईल/GF "