Anu Khurana, New Delhi V. ACIT, New Delhi

ITA 1747/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74320 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 13-03-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 13-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK WADEKAR
• Assessee Lawyers: A K KHURANA
• Keywords: Related party transaction; Reasonable cause
• Section: 143(3)

Judgement Text

ITA NO. 1747/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH .A, NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 1747/DEL/2012 A.Y. : 2004 - 05 MS. ANU KHURANA, 40, COMMUNITY CENTRE, ZAMRUDPUR, NEW DELHI (PAN: AAJPK0156C) VS. ACIT, CC-12, JHANDEWALAN EXTN., NEW DELHI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. A.K. KHURANA, CA DEPARTMENT BY : SH. VIVEK WADEKAR, CIT(DR) ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS-XXXI), NEW DELHI DATED 10.2.2012 PERTAINING TO ASSESSMENT YEAR 2004-05. 2. ONE ISSUE RAISED IS THAT LD. CIT(A) ERRED IN SUS TAINING THE DISALLOWANCE OF CAPITAL LOSS OF RS. 9,97,500/- STAT ING THAT THIS TRANSACTION IS A SHAM PERHAPS TO BOOK AN ARTIFICIAL LOSS. 3. IN THIS CASE ASSESSMENT WAS FRAMED U/S. 153C REA D WITH SECTION 143(3) OF THE I.T. ACT. IN THIS CASE DURIN G THE ASSESSMENT PROCEEDINGS ASSESSEE WAS ASKED TO FILE THE DETAILS OF LOSS INCURRED IN ANY UNLISTED SHARES DURING THE YEAR UNDER CONSIDERA TION. ASSESSEE FILED REPLY STATING THAT SHE HAD INCURRED LOSS ON S ALE OF SHARE OF M/S KHURANA ECO FRIENDLY VENTURES. SHE FURTHER STATED T HAT COMPANY HAD SUFFERED LOSSES DUE TO INVESTMENT WITH COMPUNNEL SO FTWARE INDIA PVT. LTD. AND LOANS AND ADVANCES WITH HYDROMECH TEC HNOLOGY AND ITA NO. 1747/DEL/2012 2 MONICA PROCESSING PLANTS WHICH WERE IRRECOVERABLE. THUS THE BOOK VALUE OF SHARES HAD DECREASED AND THE SHARES WERE SOLD TO SMT. ANKI KHURANA. ASSESSEE FILED COPY OF THE BALANCE SH EET OF M/S KHURANA ECO FRIENDLY VENTURES. AO HELD THAT THE REP LY WAS CONSIDERED BUT NOT FOUND TO BE SATISFACTORY AS IN M /S KHURANA ECO FRIENDLY VENTURES THE FATHER OF THE ASSESSEE IS DIR ECTOR AND THE SHARES HAVE BEEN SOLD TO HER SISTER IN LAW. THUS I T IS A RELATED PARTY TRANSACTION IN WHICH THE SHARES HAVE BEEN MERELY T RANSFERRED BETWEEN THE FAMILY MEMBERS AND THE ASSESSEE HAS BOO KED AN ARTIFICIAL LOSS. THUS THE TOTAL LOSS OF RS. 9,97,5 00/- WAS BEING DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASS ESSEE. 4. UPON ASSESSEES APPEAL IN THIS REGARD, LD. CIT( A) HELD THAT IT IS APPARENT THAT THIS TRANSACTION IS A SHAM TO BOOK AN ARTIFICIAL LOSS. ACCORDINGLY, LD. CIT(A) AFFIRMED THE AOS ACTION. 5. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT THE AO HAS REJECTED THE ASSESSEES CLAIM OF LOSS IN SHARE TRANSACTIONS BY MERELY HOLDING THAT ASSESSEES REP LY IN THIS REGARD WAS NOT SATISFACTORY. HE HAS NOT SPELT OUT WHAT W AS NOT SATISFACTORY IN THE ASSESSEES REPLY. ASSESSEE HA S SOLD SHARES. AO HAS NOT BROUGHT OUT THAT THE SALE PRICE RECOVERED I N THIS REGARD WAS NOT PROPER. NO REASONABLE CAUSE HAS BEEN ATTRIBUTE D WHATSOEVER FOR HOLDING THAT THE TRANSACTION WAS NOT SATISFACTO RY. LD. CIT(A) HAS ALSO AFFIRMED THE AOS ACTION WITHOUT ANY BASIS. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THE SHARE TRANSACTION WAS THE SHAM. WE FIND THAT JUST BECAUSE THE TRANSACTION IS BETWEEN T HE RELATIVES, IT CANNOT BE SAID TO BE A SHAM. IN THIS REGARD, WE ALS O NOTE THE CONTENTION BY THE LD. COUNSEL OF THE ASSESSEE THA T IN SIMILAR CASE IN THE CASE OF ASHWANI KHURANA VS. ACIT IN ITA NO. ITA NO. 1747/DEL/2012 3 1942/DEL/2012 VIDE ORDER DATED 27.9.2013, ITAT HAS DELETED THE SIMILAR DISALLOWANCE HOLDING AS UNDER:- 6. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SIDES AND THE FACTS OF THE CASE, WE ARE UNABLE TO AGREE WITH THE FINDING OF THE ASSESSING OFFICER AS WELL AS CIT(A). THE AO HAS OBSERVED THAT DURING THE YEAR, M/S KARMA LAKELANDS PVT. LTD. HAS GROWN MANIFOLDS AND THUS, THE SALE OF SHARES ON BOOK VALUE BETWEEN THE RELATED PARTIES IS WRONG. HOWEVER IN SUPPORT OF THE ABOVE CONTENTION, THE ASSESSING OFFICER HAS NOT GIVEN ANY FACTS OR FIGURES. ON THE OTHER HAND, THE ASSESSEE HAS GIVEN THE BREAK UP OF ASSETS AND LIABILITIES OF THE SAID COMPANY AS ON 31 ST MARCH, 2003 AS WELL AS 31 ST MARCH, 2004 WHICH CLEARLY SHOWS THAT THE NET BOOK VALUE OF THE COMPANY HAS REDUCED BETWEEN 31 ST MARCH, 2003 TO 31 ST MARCH, 2004 AND THE BREAK UP VALUE OF THE SHARE IS EVEN LESS THAN THE BOOK VALUE OF THE SHARES AT WHICH THE ASSESSEE HAS SOLD THE SHARES. THE LD. CIT(A) HAS UPHELD THE ACTION OF THE AO ON THE GROUND THAT THE TRANSACTION OF SALE OF SHARES IS A SHAM TRANSACTION. HOWEVER, WE DO NOT FIND ANY EVIDENCE OR BASIS FOR HOLDING THE SALE OF SHARES TO ASSESSEES WIFE AS SHAM TRANSACTION. MERELY BECAUSE THE TRANSACTION IS BETWEEN THE RELATIVES, IT, PER SE, CANNOT BE SAID TO BE SHAM OR BOGUS TRANSACTION. AT THE TIME OF HEARING BEFORE US, IT IS STATED BY THE LD. CIT(A) THAT THE COMPANY M/S KARMA LAKELANDS PVT. LTD. HAS SUBSTANTIAL AGRICULTURAL LAND, ITS VALUE HAS INCREASED MANIFOLDS AND, THEREFORE, THE SALE OF SHARES AT BOOK VALUE IS NOT CORRECT. HOWEVER, WE FIND THAT NO SUCH REASON IS GIVEN EITHER BY THE AO OR BY THE CIT(A) AND EXCEPT THE BALD STATEMENT, NO EVIDENCE IS PRODUCED TO POINT OUT THAT THE MARKET VALUE OF THE ASSETS WAS MUCH MORE THAN WHAT IS SHOWN IN THE BALANCE SHEET. IN VIEW OF THE TOTALITY OF THE ABOVE FACTS, WE ARE OF THE OPINION THAT THERE WAS NO JUSTIFICATION FOR THE DISALLOWANCE OF CAPITAL LOSS OF RS. ITA NO. 1747/DEL/2012 4 7,84,979/-. THE AO IS DIRECTED TO ALLOW THE SAME. 7. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENT, WE SET ASIDE THE ORDER OF THE AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOR OF THE ASSESSEE. 8. THE OTHER ISSUE RAISED PERTAINING TO THE VALIDI TY OF JURISDICTION IS NOT BEING ADJUDICATED, AS NOW THE SAME IS ONLY O F ACADEMIC IMPORTANCE, AS THE APPEAL ON MERITS HAS ALREADY BE EN ALLOWED AS ABOVE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/3/2014. SD/- SD/- [ [[ [R.P. TOLANI R.P. TOLANI R.P. TOLANI R.P. TOLANI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 14/3/2014 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 1747/DEL/2012 5