Smt.Sabrina Gev Khergamwala , Bangalore V. The Income Tax Officer Ward-6(3)(2), Bangalore

ITA 1254/BANG/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2123 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-03-2020
• Assessment Year: 2012-2013
• Appeal Filed On: 02-06-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R PREMI
• Assessee Lawyers: V SRINIVASAN
• Keywords: Valuation report
• Section: 13; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER ITA NO. 12 54 / BANG/201 7 ASSESSMENT YEAR : 2012 13 SMT. SABRINA GEV KHERGAMWALA. PROP. COLOUR INTERNATIONAL, X FLOOR, MANTRI ALTIUS, #17, RAJ BHAVAN ROAD, BENGALURU 560 001. PAN : AGIPK6627R VS. ITO WARD 6 (3) (2), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI. V . SRINIVASAN , ADVOCATE REVENUE BY : S MT. R. PREMI, JCIT DR DATE OF HEARING : 11.03.2020 DATE OF PRONOUNCEMENT : 29 . 0 4 .20 20 O R D E R PER A. K. GARODIA, A. M. : THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) 1, BENGALURU DATED 22.03. 2017 FOR THE ASSESSMENT YEAR 2012 13. 2. IN THIS APPEAL, THERE IS THE ONLY EFFECTIVE ISSU E IN DISPUTE. THIS IS REGARDING THIS ACTION OF THE AO AS PER WHICH HE DIS REGARDED THE SHARE PREMIUM PAID BY THE ASSESSEE OF RS. 370,55,881/- WH ILE COMPUTING LONG TERM CAPITAL LOSS ON SALE OF SHARES ALTHOUGH H E ALLOWED THE FACE VALUE OF SUCH SHARES SOLD BY THE ASSESSEE AS COST F OR COMPUTING LONG TERM CAPITAL LOSS ON SALE OF SHARES. ITA NO. 1254/BANG/2017 PAGE 2 OF 5 3. BRIEF RELEVANT FACTS ARE THAT IT IS NOTED BY THE AO IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS DECLARED LTCG OF RS. 62 8,48,549/- ON SALE OF IMMOVABLE PROPERTY AND AGAINST IT, HE CLAIMED SE T OFF OF LONG TERM CAPITAL LOSS OF RS. 740,24,974/- ON SALE OF SHARES OF M/S LVK BABYWEAR PVT. LTD. THE AO ALSO NOTED IN THE ASSESSMENT ORDER THAT OUT OF TOTAL SHARES, 990,000 SHARES WERE PURCHASED BY THE ASSESS EE FROM MR. K. R. KRISHNA. MANAGING DIRECTOR OF THAT COMPANY ON 12.04 .2010 FOR RS. 99 LACS AT THE FACE VALUE OF THESE SHARES BEING RS. 10 /- PER SHARE AND ANOTHER 20 LACS SHARES WERE PURCHASED ON 28.03.2011 FROM TH E COMPANY FOR RS. 2 CRORES AT THE FACE VALUE OF THESE SHARES BEING RS . 10/- PER SHARE. THE AO ALSO NOTED THAT A STATEMENT U/S 131 WAS RECORDED BY HIM IN COURSE OF ASSESSMENT PROCEEDINGS OF MR. K. R. KRISHNA. MAN AGING DIRECTOR OF THAT COMPANY. THE AO STATED ON PAGE 2 OF THE ASSESS MENT ORDER THAT THE MD OF THE COMPANY STATED IN THIS STATEMENT THAT THE SHARES WERE VALUED AT RS. 10/- PER SHARE AND ISSUED TO THE PRESENT ASS ESSEE AND NO PREMIUM WAS COLLECTED. THEREAFTER IT IS NOTED BY THE AO ON PAGE 4 OF THE ASSESSMENT ORDER THAT ON 25.03.2015, AN AFFIDAVIT W AS FILED BY MR. K. R. KRISHNA. MANAGING DIRECTOR OF THAT COMPANY IN WHICH IT WAS STATED BY HIM THAT THE SHARES WERE ALLOTTED BY THE COMPANY TO THE PRESENT ASSESSEE AT A PREMIUM TO GIVE HIM MAJORITY SHARES BUT THE A O OBSERVED THAT IT LACKS SUBSTANCE IN THE ABSENCE OF ANY VALUATION REP ORT AND IN THE LIGHT OF THIS FACT THAT IN A SPAN OF 12 MONTHS, ENTIRE SHARE S WERE SOLD ONLY FOR RS. 10,000/- WITHOUT MAJOR CHANGE IN COMPANYS FINANCIA LS. A SHOW CAUSE NOTICE WAS ISSUED BY THE AO TO THE ASSESSEE IN VIEW OF THE STATEMENT OF THE MD OF THAT COMPANY IN WHICH HE STATED THAT THE SHARES WERE ISSUED AT PAR AS AGAINST THE CLAIM OF THE ASSESSEE THAT TH E SHARES WERE ACQUIRED ITA NO. 1254/BANG/2017 PAGE 3 OF 5 BY HIM AT A PREMIUM. REPLY WAS SUBMITTED BY THE ASS ESSEE TO THE AO BUT THE AO REJECTED THE CLAIM OF THE ASSESSEE THAT PREMIUM WAS PAID BY THE ASSESSEE. VARIOUS REASONS ARE STATED BY THE AO IN THE ASSESSMENT ORDER AS TO WHY HE REJECTED THIS CLAIM. THE AO COMP UTED THE LTCL ON SALE OF SHARES AT RS. 299.90 LACS BY DEDUCTING THE SALE PROCEEDS OF RS. 10,000/- FROM FACE VALUE OF THESE SHARES RS. 3 CROR ES. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE CIT (A) BUT WIT HOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. BOTH SIDES WERE HEARD. LEARNED AR OF THE ASSESSE E DRAWN OUR ATTENTION TO PAGES 42 TO 54 OF THE PAPER BOOK CONTA INING REPLY DARTED 25.03.2015 ALONG WITH AFFIDAVIT OF THE MD OF THE CO MPANY AND COPY OF ANNUAL RETURN OF THE COMPANY FILED BEFORE ROC. AUDI TED STATEMENT OF ACCOUNTS OF THE COMPANY FOR THE YEAR ENDED ON 31.03 .2012 WITH PREVIOUS YEAR FIGURES WAS ALSO FILED AND IT WAS SUB MITTED THAT THE RECEIPT OF SHARE PREMIUM BY THE COMPANY IS DULY ACCOUNTED F OR BY THE COMPANY IN THE BALANCE SHEET AND ANNUAL RETURN FILED WITH R OC AND THEREFORE, THE AO WAS NOT JUSTIFIED IN EXCLUDING THE PAYMENT O F SHARE PREMIUM BY THE ASSESSEE FOR ACQUIRING THE SHARES, LEARNED DR O F THE REVENUE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIN D THAT BOTH THE AO AND CIT (A) HAVE GIVEN SEVERAL REASONS FOR REJEC TING THE CLAIM OF THE ASSESSEE ABOUT PAYMENT OF SHARE PREMIUM. IT IS STATED BY THE LEARNED CIT (A) IN THE IMPUGNED ORDER THAT THE MD OF THE CO NCERNED COMPANY IN THE STATEMENT RECORDED ON OATH ON 05.03.2015 HAD STATED THAT THE SHARES WERE ALLOTTED @ RS. 10/- PER SHARE AND THE N ET WORTH OF THE COMPANY WAS IN NEGATIVE WHEN THE ASSESSEE PURCHASED THE SHARES AND ITA NO. 1254/BANG/2017 PAGE 4 OF 5 THEREFORE, THE CLAIM OF PAYMENT OF SHARE PREMIUM IS NOT ACCEPTABLE PARTICULARLY IN THE ABSENCE OF ANY VALUATION REPORT SUPPORTING PAYMENT OF PREMIUM AND THIS FACT THAT WITHIN A SPAN OF 12 M ONTHS, THE SHARES WORTH RS. 3 CRORES FACE VALUE WERE SOLD FOR ONLY RS . 10,000/-. IN OUR CONSIDERED OPINION, IN THE LIGHT OF VARIOUS FACTS A ND REASONS NOTED BY BOTH THE LOWER AUTHORITIES WHICH COULD NOT BE CONTR OVERTED BY THE LEARNED AR OF THE ASSESSEE, NO INTERFERENCE IS CALL ED FOR. IN FACT, WE FEEL THAT EVEN THE LOSS OF RS. 299.90 LACS ALLOWED BY TH E AO IS ALSO NOT PROPER BECAUSE IT IS QUITE ABNORMAL THAT ANY PERSON WILL SALE SHARES WORTH CRORES FOR A PALTRY SUM OF RS. 10,000- EXCEPT FOR S TOPPING FURTHER LOSS. IN THE PRESENT CASE, FURTHER LOSS CAN BE MAXIMUM RS . 10,000/- BEING THE SALE PROCEEDS SAID TO HAVE BEEN REALIZED AND TO STO P THIS SMALL AND NEGLIGIBLE LOSS, NO NORMAL PERSON WILL SALE SHARES HAVING FACE VALUE OF RS. 3 CRORES AND STATED COST OF RS. 740,24,974/- FO R RS. 10,000/- WHICH IS MERELY ABOUT 0.3% OF THE FACE VALUE OF THE SHARE S SOLD. HENCE THE SALE ITSELF IS NOT BEYOND DOUBT. BUT THE APPELLANT CANNO T BE WORSE OF AT THE TRIBUNAL AND HENCE, WE CANNOT REDUCE THE AMOUNT OF LOSS ALLOWED BY THE AO BUT IN VIEW OF ABOVE DISCUSSION, WE DECLINE TO I NTERFERE IN THE ORDER OF CIT (A). 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (N. V. VASUDEVAN) (A.K. GARODIA) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED: 27 TH APRIL, 2020. /NS/* ITA NO. 1254/BANG/2017 PAGE 5 OF 5 COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.