Appeal Details
Counselvise Citation
[2017] 128 COUNSELVISE.COM (IT) 7177 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 year(s) 1 month(s) 11 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
02-02-2017
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Assessment Year
2007-2008
Appeal Filed On
22-12-2014
Judgement Text
, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . . , , ' # BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.2252/PUN/2014 '% % / ASSESSMENT YEAR : 2007-08 SHRI ADAR POONAWALLA, SAROSH BHAVAN, 16-B/1, DR. AMBEDKAR ROAD, PUNE 411001 PAN : AFEPP9955N . /APPELLANT V/S DCIT, CENTRAL CIRCLE-1(1), PUNE . /RESPONDENT . / ITA NO.2273/PUN/2014 '% % / ASSESSMENT YEAR : 2007-08 DCIT, CENTRAL CIRCLE-1(1), PUNE . /APPELLANT V/S SHRI ADAR CYRUS POONAWALLA, 16-B/1, SAROSH BHAVAN, DR. AMBEDKAR ROAD, PUNE 411001 PAN : AFEPP9955N . /RESPONDENT ASSESSEE BY : SHRI SUNIL PATHAK AND SHRI RAJSHEKHAR ABHYANKAR REVENUE BY : SHRI RAJEEV KUMAR, CIT / ORDER PER R.K.PANDA, AM : THESE ARE CROSS APPEALS. THE FIRST ONE IS FILED BY THE A SSESSEE AND THE SECOND ONE FILED BY THE REVENUE AND ARE DIRECTE D AGAINST THE ORDER DATED 30-09-2014 OF THE CIT(A)-I, PUNE RELATING TO ASSESSMENT / DATE OF HEARING : 06.12.2016 / DATE OF PRONOUNCEMENT:02.02.2017 2 ITA NOS.2252 & 2273/PUN/2014 YEAR 2007-08. FOR THE SAKE OF CONVENIENCE THESE WERE HEARD TO GETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND IS THE EXECUTIVE DIRECTOR OF SERUM INSTITUTE OF INDIA LIMITED AND SERUM INTERNATIONAL LTD. IN THIS CASE A SEARCH ACTION U/S.132 OF THE I.T. ACT WAS CONDUCTED AT THE VARIOUS BUSINESS PREMISES OF THE POONAWALLA GROUP OF CASES ON 21-06-2011 AND THE SEARCH WAS CONCLUDED ON 13-09-2011. DURING THE COURSE OF SEARCH A CTION THE TOTAL UNDISCLOSED INCOME ADMITTED BY THE POONAWALLA GROUP WAS RS.141.795 CRORES, THE DETAILS OF WHICH ARE GIVEN BY THE AS SESSING OFFICER AT PAGES 2 TO 9 OF THE ASSESSMENT ORDER. AS PER THE SAID CHART THE ASSESSEE HAS DISCLOSED AN AMOUNT OF RS. 15.95 CRORES WHICH COMPRISES OF JEWELLERY AND CONTINGENCY OF RS.1 CRORE AND DISALLOWANCE OF BUSINESS LOSS OF RS.14.95 CRORES. 3. THE ASSESSING OFFICER NOTED THAT DURING THE ASSESSMEN T PROCEEDINGS COMPLETED U/S.143(3) OF THE ACT CLAIM OF SHORT T ERM CAPITAL LOSS OF RS.14,95,84,395/- ON SALE OF SHARES OF HCL WAS DISALLOWED BY THE ASSESSING OFFICER. SUBSEQUENTLY, THE ASSE SSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A) AND THE CIT(A) ALSO UPHELD THE VIEW TAKEN BY THE ASSESSING OFFICER. THE ASSESSEE PR EFERRED AN APPEAL BEFORE THE TRIBUNAL AND THE DECISION OF THE TRIBUNAL WAS YE T TO COME. MEANWHILE, A SEARCH ACTION U/S.132 OF THE ACT WAS C ONDUCTED IN THE CASE OF THE ASSESSEE AND THEIR BUSINESS CONCERN S. VIDE STATEMENT RECORDED U/S.132(4) OF THE ACT MR.CYRUS POONA WALLA AGREED ON BEHALF OF THE ASSESSEE TO WITHDRAW THE CLAIM O F SHORT TERM CAPITAL LOSS OF HCL TECHNOLOGIES LTD. IN A.Y. 2007-08. THE ASS ESSING OFFICER REPRODUCED THE STATEMENT OF MR.CYRUS POONAWALLA R ECORDED U/S.132(4) OF THE ACT WHICH READS AS UNDER : 3 ITA NOS.2252 & 2273/PUN/2014 IT IS SUBMITTED THAT THE SHARES OF CITY PARK PVT. LTD. WERE GIFTED BY ME TO MR. ADAR POONAWALLA AND THE ABOVE SHARES WERE HELD AS INVESTMENTS BY ME AS WELL AS ADAR POONAWALLA AND HENCE, THE CAPITAL GAIN THEREON WAS CORRECTLY OFFERED AS LONG TERM CAPITAL GAIN. ADAR PO ONAWALLA HAD PURCHASED SHARES OF HCL TECHNOLOGIES LTD. AND AFTER REC EIVING BONUS IN THE RATIO OF 1:1 HE HAD SOLD THE ORIGINAL SHARES WHICH HAD RESULTED INTO SHORT TERM CAPITAL LOSS OF RS.14.95 CRORES. ALTHOUGH STR ICTLY SPEAKING, THE PROVISIONS OF BONUS STRIPPING CONTAINED IN SEC.94(8) ARE NOT APPLICABLE TO SHARES IN COMPANIES. HOWEVER, WITH A VIEW TO BUY PEACE, I ON BEHALF OF MR. ADAR POONAWALLA AGREE TO CONSIDER THE COST OF SHARES SOLD OF HCL TECHNOLOGIES LTD. ON AVERAGE BASIS AS DONE BY THE ASSESSING OFFICER. THIS WILL RESULT IN ADDITIONAL INCOME OF RS.14.56 CROR ES IN THE HANDS OF MR. ADAR POONAWALLA FOR A.Y. 2007-08. HOWEVER, MR. ADAR POONAWALLA WILL BE FREE AND WILL CONTINUE TO CONTEST THE OTHER ISSUE AS TO WHETHER THE ABOVE TRANSACTION IN SHARES IN CITY PARK AND HCL TECHN OLOGIES LTD. WERE ADVENTURE IN THE NATURE OF TRADE AS HELD BY THE AO O R CAPITAL GAIN ON INVESTMENT AS CLAIMED BY MR. ADAR POONAWALLA. 4. THE ASSESSING OFFICER OBSERVED THAT WHILE FILING THE RETUR N IN RESPONSE TO NOTICE U/S.153A THE CLAIM OF SHORT TERM CAP ITAL LOSS WAS NOT WITHDRAWN BY THE ASSESSEE. SUBSEQUENTLY, THE ASSE SSEE FURNISHED A LETTER DATED 13-02-2012 STATING THAT HE HA S NO OBJECTION TO WORK OUT LOSS ON SALE OF SHARES OF HCL TECHNOLOGIES L TD. ON AVERAGING THE COST OF ORIGINAL SHARES AND BONUS SHARES TO HONOUR THE DECLARATION MADE DURING THE SEARCH ACTION. 5. DURING ASSESSMENT PROCEEDINGS ON BEING QUESTIONED BY THE ASSESSING OFFICER THE ASSESSEE RE-AFFIRMED THE SAME AS STA TED VIDE LETTER DATED 13-02-2012. THE ASSESSING OFFICER ACCORDINGL Y WORKED OUT THE LOSS ON SALE OF SHARES AT RS.39.41 LAKHS AGAINST T HE CLAIM OF LOSS BY THE ASSESSEE AT RS.14.95 CRORES AS IT WAS MADE BY THE ASSESSING OFFICER IN THE ORDER PASSED U/S.143(3) OF THE ACT AND CONFIRMED BY THE CIT(A). 6. THE ASSESSING OFFICER FURTHER NOTED THAT DURING THE ASS ESSMENT U/S.143(3) THE ASSESSING OFFICER HAD TREATED THE SALE OF SHA RES OF CITY PARK PVT. LTD. AS BUSINESS INCOME. SUBSEQUENTLY, THE AS SESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A) AND THE LD.CIT(A) HAS NOT ACCEPTED THE VIEW TAKEN BY THE ASSESSING OFFICER AND TRE ATED IT AS 4 ITA NOS.2252 & 2273/PUN/2014 CAPITAL GAIN. THE DEPARTMENT HAS PREFERRED AN APPEAL B EFORE THE TRIBUNAL AND THE DECISION OF THE TRIBUNAL IS YET TO COME. T HEREFORE, TO KEEP CONSISTENCY IN DEPARTMENTS VIEW, THE ASSESSING OFFICER TREATED THE SALE OF SHARES OF CITY PARK PVT. LTD. AS BUS INESS INCOME. THE ASSESSING OFFICER ACCORDINGLY DETERMINED THE TOTAL INCO ME OF THE ASSESSEE AT RS.20,21,64,507/-. 7. BEFORE CIT(A) THE ASSESSEE STRONGLY CHALLENGED THE A CTION OF THE ASSESSING OFFICER. IT WAS SUBMITTED THAT THE ASSESSEE HE LD THE GIFTED SHARES OF CLOSELY HELD COMPANY NAMELY CITY PARK PVT. LTD . AS INVESTMENT AND NOT AS STOCK IN TRADE NOR DID HE CONV ERT THE SAME AS STOCK IN TRADE A FTER RECEIVING THE SAME BY WAY OF GIFT. IT WAS VEHEMENTLY ARGUED THAT PROFIT FROM SALE OF THESE SHARES I S REQU I RED TO BE ASSESSED UNDER THE HEAD 'LONG-TERM CAP I TAL GAIN' AS PER PROV I SIO N S OF SEE . 2(42A) READ WITH EXPLANATION 1(B) AND SEE . 49(1) OF THE I.T. ACT. IT WAS SUBMITTED THAT THE ASSESSING OFFICER ERRED IN ASSESSING 'CAPITAL GAIN' AS 'BUSINESS PROFIT' WHEN SHARES RECEIVED AS 'GIFT' WERE TRANSFERRED WITHOUT CONVERTING THE SAME AS 'STOCK-IN- TRADE'. 8. COUNTERING THE OBSERVATION OF THE ASSESSING OFFICER THA T THE ASSESSEE AS WELL AS THE FATHER OF THE ASSESSEE WERE ACT IVELY ENGAGED IN PURSUING THE BUSINESS ACTIVITIES OF CITY PARKS PVT . LTD . , THE ASSESSEE STATED THAT THE ' BOARD OF DIRECTORS' OF 'SIIL ' AND 'SIL' PASSED RESOLUT I ON APPOINTING T H E ASSESSEE AS EXECUTIV E DIR E CTOR. 'SIIL' PASSED A RESOLUTION APPOINTING ASSESSEE'S FATHER AS ITS ' CHAIRMAN & MANAGING DIRECTOR'. BESIDES, THE ASSESSEE & HIS FATHER ARE ALSO D I RECTORS O F VARIOU S POONAWALLA GROUP OF COMPANIES AND WERE OCCUP I ED I N THE DAY - TODAY ACTIVITI ES OF SUCH COMPANIES. TH E ABOVE POSITION SUBSTANTIATES THAT N EI TH E R THE ASSESSEE NOR HIS F ATH ER HAD 5 ITA NOS.2252 & 2273/PUN/2014 TIME TO M A N A GE THE AFF AIR S O F T H E FIRM/CON V E R T ED COMP A NY I .E . 'CI T Y PARK PVT . LTD. ' IT WAS ARGUED THAT NEITHER THE ASSESSEE NOR HIS FATH ER HAD EXPERTISE OR TIME TO INV O LV E IN P EC ULI A R TYPE OF BUSINESS ACTIVITIES OF THE 'FIRM'/'CONVERTED COMPANY'. IT WAS ACCORDINGLY A RGUED THAT THE OBSERVATION OF THE ASSESSING OFFICER THAT THE ASSESSEE WA S ACTIVELY ENGAGED IN THE BUSINESS ACTIVITY OF CITY PARK PV T . L TD. IS MISL E ADING AND HAS NO SUPPO RT O F F ACT S . 9. AS REGARDS THE OBSERVATION OF THE ASSESSING OFFICER OF ACT IVE INVESTOR AND PASSIVE INVESTOR IT WAS ARGUED THAT SAID CLA SSIFICATION HAS NO SANCTITY IN TAX LAW. IT WAS ARGUED THAT IF PROMOT ERS OF COMPANIES WHO CONTROL THE DAY TO DAY BUSINESS OPERATIO NS OF THEIR COMPANIES SELL THEIR HOLDING, THEN SUCH SHARES CONTROLLING TH EIR BUSINESS INTEREST DID BECAME THEIR STOCK IN TRADE BUT IT STILL MAINTAINS A CHARACTER OF CAPITAL ASSET. 10. SO FAR AS THE TRANSACTION IN SHARES RELATING TO HCL TECHNOLOGIES LTD. IS CONCERNED IT WAS ARGUED THAT THE S HARES OF THE SAID COMPANY WERE PURCHASED IN DEMAT FORM THROUGH AUTH ORISED SHARE BROKER AT ARMS LENGTH PRICE, I.E. AT THE PRICE TR ADED ON STOCK EXCHANGE ON CUM-BONUS BASIS. THE SHARES WERE ALSO SOL D ON EX- BONUS BASIS AT PREVAILING MARKET RATE ON RECOGNISED STOC K EXCHANGE THROUGH AUTHORISED BROKER. THE SHARES WERE SUBJECT TO DELIVERY ON SALE FROM THE DEMAT ACCOUNT AND SALE CONSIDERATION WAS R ECEIVED FROM THE SHARE BROKER. IT WAS ARGUED THAT THE ASSESS EE HAD FOLLOWED FIFO METHOD FOR DETERMINING THE VALUE OF SHARES SOLD. THE CBDT CIRCULARS 704 AND 717 WERE ALSO BROUGHT TO THE NOTICE O F THE CIT(A). IT WAS ARGUED THAT IN VIEW OF FIFO METHOD SHARES SOLD, WHICH WERE ACQUIRED WITH COST ON CUM-BONUS BASIS AND SOLD ON EX-BO NUS BASIS WERE SUBJECT TO COMPUTATION OF CAPITAL GAIN/LOSS BY CONSID ERING THE 6 ITA NOS.2252 & 2273/PUN/2014 COST OF ACQUISITION AS PER FIFO METHOD AND CONSEQUENTIALL Y THE COST OF ACQUISITION IN RESPECT OF BONUS SHARES WOULD BE VALUED A T NIL AND THERE IS NO QUESTION OF CLAIMING DOUBLE DEDUCTION OF COST WHEN BONUS SHARES ARE SOLD. THE ASSESSEE ALSO BROUGHT TO THE NOTICE OF THE CIT (A) THE RETURN OF INCOME FILED FOR SUBSEQUENT YEAR WHEREIN SAM E IS REPORTED WITHOUT CONSIDERING COST FOR THE SAME AND GROS S SALE CONSIDERATION IS REPORTED WHILE COMPUTING THE CAPITAL GAIN . IT WAS FURTHER ARGUED THAT THE ASSESSEE ACQUIRED SHARES OF HC L TECHNOLOGIES LTD. WITH AN INTENTION TO HOLD THE BONUS SHA RES FOR A LONG TIME AS AN INVESTOR AND THIS ASPECT IS SUBSTANTIATED IN THE CONTEXT OF LONG HOLDING OF THE BONUS SHARES. 11. AS REGARDS THE COMPUTATION OF THE COST OF BONUS SHA RES ON THE PRINCIPLE OF AVERAGING ADOPTED BY THE ASSESSING OFFICER IS CO NCERNED IT WAS ARGUED THAT SUCH A METHOD IS NOT SIMPLE AND THE ACTION OF THE ASSESSING OFFICER IN IMPOSING AVERAGE METHOD ON VALUATION OF SHARES OF LISTED COMPANIES DOES NOT MEET WITH PROVISIONS OF SECTION 45(2A) OR SECTION 55(2)(AA)(IIIA) OF THE I.T. ACT AND IT ALSO OVERRULES T HE INSTRUCTION OF CBDT CIRCULAR WHICH THE ASSESSING OFFICER IS NO T SUPPOSED TO OVERRULE. THE CBDT CIRCULAR NO.717 DATED 1 4-08-1995 WAS ALSO RELIED UPON. IT WAS FURTHER ARGUED THAT THE AS SESSEE ACQUIRED SHARES OF HCL TECHNOLOGIES LTD. WHICH WERE SUBJ ECT TO DELIVERY IN DEMAT FORM. THE PAYMENT WAS MADE TO THE BR OKERS, DELIVERY OF SHARES IN DEMAT ACCOUNT WAS RECEIVED AND TH E SALE CONSIDERATION WAS RECEIVED FROM BROKERS. THE DELIVERY ON SALE WAS GIVEN FROM DEMAT ACCOUNT. ALL THESE FACTS WERE SUBSTANTIA TED THROUGH RELEVANT DOCUMENTS AND EXAMINED BY THE ASSES SING OFFICER. THEREFORE, UNDER SUCH CIRCUMSTANCES THE ASSESSING OFFICER COULD NOT HAVE CALLED SUCH FACTS AS A COLOURABLE DEVICE. IT WAS ARG UED THAT THE PURCHASE PRICE OF SHARES CANNOT BE AVERAGED WHILE ASCER TAINING COST 7 ITA NOS.2252 & 2273/PUN/2014 OF BONUS SHARES UNLESS ASSESSEE OPTS FOR IT. IT WAS ARG UED THAT THE COST OF ACQUISITION OF ORIGINAL SHARES STILL REMAINS UNCHANGED EVEN AFTER ALLOTMENT OF BONUS SHARES. RELYING ON VARIOUS DECISIO NS IT WAS ARGUED THAT THE ACTION OF THE ASSESSING OFFICER IN SPREADIN G THE PURCHASE PRICE OF SHARES OF HCL TECHNOLOGIES LTD. ON ALLOTM ENT OF BONUS SHARES IS BEYOND THE PROVISION OF LAW. 12. AS REGARDS THE OBSERVATION OF THE ASSESSING OFFICER TH AT THE ASSESSEE HAS NOT ACTED LIKE AN INVESTOR BUT LIKE A TRADE R, IT WAS ARGUED THAT THE SAME IS BASED ON PRESUMPTION BY IGNORIN G THE RATIONALE BEHIND INVESTMENT DECISION AND ALSO THE LONG HOLDIN G PERIOD OF BONUS SHARES. 13. SO FAR AS THE OBSERVATION OF THE ASSESSING OFFICER ON BONUS STRIPPING TRANSACTIONS WHILE DENYING THE CAPITAL LOSS CLAIMED BY THE ASSESSEE IS CONCERNED IT WAS ARGUED THAT THE ASSESSING OFFICER WHILE DERIVING SUCH INFERENCE IGNORED THE FACT THAT THE SAID PRO VISION IS APPLICABLE FOR TRANSACTIONS PERTAINING TO UNITS AND THERE IS A DIFFERENCE BETWEEN A UNIT AND A SHARE OF A LISTED COMP ANY. IT WAS ARGUED THAT PROVISIONS OF SECTION 94(8) IS APPLICABLE FOR BON US STRIPPING TRANSACTIONS IN CASE OF UNITS AND NOT FOR SHARE S. IT WAS ACCORDINGLY ARGUED THAT THE ASSESSING OFFICER WAS NOT JU STIFIED IN DISALLOWING THE LOSS OF RS.15,01,80,424/- ON ACCOUNT OF SALE OF ORIGINAL SHARES OF HCL TECHNOLOGIES LTD AND TREATING THE P ROFIT ON SALE OF SHARES OF CITY PARKS PVT. LTD. AS BUSINESS INCOME. 14. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) HELD THE PROFIT ON SALE OF SHARES OF CITY PARKS PVT . LTD. AS CAPITAL GAIN. HE, HOWEVER, UPHELD THE ACTION OF THE ASSESSIN G OFFICER IN DISALLOWING THE LOSS OF RS.15,01,80,424/- ON ACCOUNT OF SA LE OF ORIGINAL SHARES OF HCL TECHNOLOGIES LTD. WHILE DOING SO, HE OBSERVED 8 ITA NOS.2252 & 2273/PUN/2014 THAT THE GROUNDS RAISED BY THE ASSESSEE BEFORE HIM WER E SUBJECT MATTER OF APPEAL FILED AGAINST THE ORIGINAL ASSESSMENT ORDER U/S.143(3) FOR THE SAME YEAR WHICH WAS DECIDED BY HIM IN HIS CAPACITY AS CIT(A)-III. IN THE SAID ORDER, HE HAD GRAN TED PARTIAL RELIEF IN RESPECT OF PROFIT ON SALE OF SHARES IN CITY PARKS PVT. L TD. HOLDING THERE IN THAT THE SAID PROFIT IS CHARGEABLE TO TAX AS INC OME FROM CAPITAL GAINS AS CLAIMED BY THE ASSESSEE. 15. SO FAR AS THE LOSS CLAIMED ON SALE OF HCL SHARES LTD. IS CONCERNED, HE OBSERVED THAT THE FINDINGS OF THE ASSESSING OFFICER ON CHARGEABILITY OF THE PROFIT/LOSS ON SALE OF THESE SHARES TO TAX UNDER THE HEAD BUSINESS AND THE VALUATION OF SHARES WERE UP HELD BY HIM. SINCE NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE FACTUAL SITUATION OR THE LEGAL POSITION CONCERNING THE SAID ISSUES H AS CHANGED DURING THE INTERVENING PERIOD, HE HELD THAT THE FINDINGS/CONCLUSIONS ARRIVED IN HIS ORDER DATED 28-02-2011 HOLDS GOOD AS ON DATE. 16. AGAIN ELABORATING THE ISSUE THE LD.CIT(A) FURTHER HELD TH AT THE SHARES OF CITY PARKS PVT. LTD. WERE NOT PURCHASED OR AC QUIRED BY THE ASSESSEE ON HIS OWN VOLITION. THOSE SHARES WERE RECEIVED AS GIFT FROM HIS FATHER. THESE SHARES WERE HELD BY THE ASSESSEES FAT HER AS INVESTMENTS. FURTHER, SHARES ARE OF A PRIVATE LIMITED COM PANY AND THE SAME ARE NOT FREELY MARKETABLE OR TRANSFERABLE. THE S HARES OF A PRIVATE LIMITED COMPANY DO NOT HAVE THE BASIC CHARACTER ISTICS OF MARKETABILITY REQUIRED FOR AN ASSET TO BE CAPABLE OF BEING TRADED IN THE MARKET. HE FURTHER OBSERVED THAT THE SALE OF SHARE S IS TO ONE BUYER IN SOLITARY TRANSACTION AND THERE ARE NO OTHER INS TANCES OF PURCHASE AND SALE OF SHARES IN THE SHARES OF CITY PARKS PVT. LTD. DURING THE YEAR. HE ALSO NOTED THAT THE COMPANY CITY P ARKS PVT. LTD. 9 ITA NOS.2252 & 2273/PUN/2014 WAS IN THE BUSINESS OF DEALING IN PROPERTIES, DEVELOPMENT OF LAND, CONSTRUCTION OF BUILDINGS, CONSTRUCTION AND DEVELOPMENT OF INDUSTRIAL PARKS, INFORMATION TECHNOLOGY PARKS ETC. EACH S UCH PROJECT INVOLVES DIFFERENT STAGES OF EXECUTION RIGHT FROM IDE NTIFICATION OF SUITABLE LAND FOR INDUSTRY, ACQUISITION OF LAND, DESIGNING, OBT AINING VARIOUS PERMISSIONS FROM GOVERNMENT AUTHORITIES, CONSTRUCT ION OF THE PROJECT, COMPLETION ETC. HE ALSO OBSERVED FROM THE DETAILS FURNISHED BY THE ASSESSEE AT THE TIME OF ASSESSMENT PROC EEDINGS THAT DURING THE PERIOD OF HOLDING OF SHARES BY THE ASSESSEE A S A GIFT THE FOLLOWING DEVELOPMENTS HAVE TAKEN PLACE : 1. THE COMPANY CITY PARK PROGRESSED TOWARDS OBTAINING POSSESSION OF LAND. 2. IN SEPT, 2006 THE COMPANY ACQUIRED MORE THAN 100 ACRES OF LAND AND AS A RESULT, BENEFITS OF SPECIAL TOWNSHIP WERE AVAIL ABLE AS PER GOVERNMENT POLICY LIKE AUTOMATIC NON AGRICULTURAL ( NA) PERMISSION, STAMP DUTY, CONCESSION, EXEMPTION FROM URBAN LAND CEIL ING ACT, ETC. 3. THE COMPANY OBTAINED VARIOUS LICENCES FROM GOVT. OF INDIA SUCH AS FORMAL APPROVAL FROM OFFICE OF THE DEVELOPMENT CO MMISSIONER, SEZ FOR SET UP OF SPECIAL ECONOMIC ZONE, PERMISSION FROM M INISTRY OF COMMUNICATION & INFORMATION TECHNOLOGY TO IMPORT TH E ITEMS FOR SETTING UP OF STP UNITS UNDER SOFTWARE TECHNOLOGY PARK SCHEM E, APPROVAL FROM MINISTRY OF COMMERCE & INDUSTRIES FOR SETTING UP OF THE INDUSTRIAL PARK, LETTER FROM GOVT. OF MAHARASHTRA AGREEING IN PRINCIP LE APPROVAL FOR SETTING UP OF PRODUCT SPECIFIC SEZ ETC. 4. THERE WAS GENERAL INCREASE IN THE LAND VALUE IN TH E AREA, I.E. HINJEWADI WHERE CITY PARK PROJECT WAS LOCATED. IN VIEW OF THE ABOVE DEVELOPMENTS THAT HAD TAKEN PLA CE DURING THE PERIOD OF HOLDING OF LAND BY THE APPELLANT, IT IS BU T NATURAL THAT THERE WAS ENHANCEMENT IN THE VALUE OF THE LAND ACQUIRED BY TH E COMPANY AND THE RESULTANT APPRECIATION IN THE VALUE OF THE SHARES OF T HE COMPANY. AS THE APPELLANT WAS ABLE TO GET BETTER PRICE, HE DECIDED T O SEE OFF THE SHARES HELD BY HIM TO PENINSULA LAND LTD. WHEN THE SAID COM PANY APPROACHED THE APPELLANT. FROM THESE FACTS PLACED ON RECORD, IT IS DIFFICULT TO DRAW THE INFERENCE THAT THE SHARES OF CITY PARK WERE HELD BY THE APPELLANT AS STOCK IN TRADE OR SALE OF THE SAID SHARES BY THE APPELLA NT CONSTITUTES AN ADVENTURE IN THE NATURE OF TRADE. 17. HE OBSERVED THAT THE SHARES OF A COMPANY ARE AN A SSET DISTINCT FROM THE ASSETS OWNED BY THE COMPANY. RELYING ON VARIOU S DECISIONS AND THE CBDT CIRCULAR DATED 15-06-2007 WHERE CERTAIN C RITERIA ARE 10 ITA NOS.2252 & 2273/PUN/2014 PRESCRIBED BY THE DEPARTMENT TO TREAT THE PROFIT ON SA LE OF SHARES AS CAPITAL GAIN OR BUSINESS INCOME HE HELD THAT THE SHARES O F CITY PARKS PVT. LTD. RECEIVED BY THE ASSESSEE FROM HIS FATHER AS GIFT CANNOT BE REGARDED AS STOCK IN TRADE OF THE ASSESSEE. FURTHER T HE TRANSACTIONS CANNOT BE TREATED AS AN ADVENTURE IN NATURE OF TRADE . HE ACCORDINGLY HELD THAT THE GAINS ARISING OUT OF THESE SHAR ES IS ONLY AN APPRECIATION IN THE VALUE OF INVESTMENTS HELD BY THE ASSESSEE AND THE PROFIT ARISING FROM THE SALE OF SHARES OF CITY PARKS PVT. LT D. IS ASSESSABLE AS CAPITAL GAIN AND NOT AS PROFITS AND GAINS FROM BUSINESS. 18. SO FAR AS THE LOSS ARISING OUT OF PURCHASE AND SALE OF 471500 SHARES OF HCL TECHNOLOGIES LTD. IS CONCERNED HE OBSERVED THAT THERE IS FREQUENCY AND MAGNITUDE OF THE PURCHASE AND SALES IN H CL SHARES IN A SHORT SPAN OF TIME DURING THE YEAR. THERE WAS A SY STEMATIC, CONTINUOUS AND ORGANISED CARRYING ON BUSINESS ACTIVITY OF PURCHASE AND SALE OF SHARES AND SUCH ACTIVITY CONSTITUTES AN ADVE NTURE IN THE NATURE OF TRADE. IN SUCH A SITUATION WHERE THE ASSESSE E WAS CARRYING ON BUSINESS OF PURCHASE AND SALE OF SHARES WITH A MOTIV E TO EARN PROFIT/BOOK IMMEDIATE LOSS, EVEN IF SUCH TRANSACTIONS ARE RE CORDED IN THE STATEMENT OF ACCOUNTS OF THE ASSESSEE AS INVESTMEN T, THE ASSESSING OFFICER IS JUSTIFIED IN LAW IN COMPUTING THE INCOME OF SUCH SHARES UNDER THE HEAD BUSINESS. 19. SO FAR AS THE ISSUE RELATING TO VALUATION OF BONUS SHAR ES RECEIVED OF HCL TECHNOLOGIES LTD. IS CONCERNED HE HELD TH AT THE METHOD ADOPTED BY THE ASSESSING OFFICER IN VALUING OF HCL B ONUS SHARES ON THE PRINCIPLE OF AVERAGING ORIGINAL COST CANNOT BE FAULTED WITH AND THE ASSESSING OFFICER HAS CORRECTLY WORKED OUT THE LOSS FROM SALE OF HCL SHARES AS BUSINESS LOSS AT RS.39,41,287/- AS A GAINST 11 ITA NOS.2252 & 2273/PUN/2014 CAPITAL LOSS AT RS.15,01,80,423/-. 20. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) IN GIVING PART R ELIEF THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : GROUNDS BY ASSESSEE : BEING AGGRIEVED BY AN ORDER PASSED U/S. 250 BY THE LE ARNED CIT(A)-I, PUNE (REFERRED FOR SHORT AS 'CIT(A) ' HEREINAFTER) YOUR APPELLANT RAISES FOLLOWING 'GROUNDS OF APPEAL' AMONG OTHERS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND I N LAW. 1. THE LEARNED CIT (A) ERRED IN DISALLOWING THE LOSS OF RS.15,01,80,424/- ON ACCOUNT OF SALE OF ORIGINAL SHARE S OF HCL TECHNOLOGIES LTD. 2. THE LEARNED CIT (A) ERRED IN CONFIRMING THAT THE TRANSACTION OF PURCHASE AND SALE OF ORIGINAL EQUITY SHARES OF HCL TECH NOLOGIES LTD. WAS AN ADVENTURE IN NATURE OF TRADE AND THUS CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS FROM BUSINESS' AS AGAINST THE APPELLANT 'S CONTENTION THAT THE SAME WAS IN THE NATURE OF INVESTMENT AND THUS CHARGEABLE UNDER THE HEAD 'INCOME FROM CAPITAL GAINS'. 3. THE LEARNED CIT (A) OUGHT TO HAVE HELD THAT THE TRANSACTION OF SALE OF EQUITY SHARES OF HCL TECHNOLOGIES LTD. IS A BON AFIDE TRANSACTION AND IS NOT COVERED EITHER BY SECTION 94 AND IN FACT FAVORABLY COVERED BY THE DECISION OF SUPREME COURT IN THE CASE OF WALFORT SHARES AND STOCK BROKERS PVT. LTD. (326 ITR 1). 4. WITHOUT PREJUDICE TO GROUND NO. 2, THE LEARNED C IT (A) ERRED IN CONFIRMING THAT BONUS SHARES RECEIVED OF HCL TECHNOLOG IES LTD. FORMED PART OF STOCK-IN-TRADE AND HE ERRED IN VALUING THE SA ID BONUS SHARES AT AVERAGE COST WHEN THEY OUGHT TO HAVE BEEN EXCLUDED A LTOGETHER IN LIGHT OF SUPREME COURT DECISION IN THE CASE OF CIT V. MADAN GOPAL RADHEY LAL (1969) 73 ITR 652 WHEREIN THE SUPREME COURT HELD TH AT EVEN IN THE HANDS OF A DEALER BONUS SHARES RECEIVED ARE CAPITAL ASSET UNLESS SPECIFICALLY CONVERTED INTO STOCK-IN-TRADE. 5. WITHOUT PREJUDICE TO GROUND NO. 2 AND WITHOUT AD MITTING THAT THE PURCHASE AND SALE OF EQUITY SHARES OF HCL TECHNOLOGIES L TD. IS AN ADVENTURE IN THE NATURE OF TRADE, THE LEARNED CIT ( A) ERRED IN NOT ACCEPTING THAT IN VIEW OF PRINCIPLE INCORPORATED IN THE PROVISIONS OF SECTION 55(2), THE COST OF BONUS SHARES SHALL BE TAKEN TO BE NIL AND ENTIRE COST OUGHT TO BE ALLOCATED TO ORIGINAL SHARES. 6. WITHOUT PREJUDICE TO GROUND NO. 2 AND WITHOUT AD MITTING THAT THE PURCHASE AND SALE OF SHARES OF HCL TECHNOLOGIES LTD. IS AN ADVENTURE IN THE NATURE OF TRADE, THE LEARNED CIT (A) ERRED IN N OT ALLOWING THE APPELLANT THE OPTION TO VALUE THE SHARES SOLD AND HELD IN STOCK AS PER THE GENERALLY ACCEPTED PRINCIPLE OF FIFO. 12 ITA NOS.2252 & 2273/PUN/2014 THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, MOD IFY AND / OR DELETE ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL, WITHDRAW ANY OF THE 'GROUNDS OF APPEAL' AT THE TIME OF APPEAL PROCEEDINGS. GROUNDS BY REVENUE 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE PROFIT ON SALE O F SHARES OF M/S. CITY PARKS PVT. LTD. AS CAPITAL GAIN WHEN THERE WAS A CLEA R CUT ADVENTURE IN THE NATURE OF TRADE ON THE PART OF THE ASSESSEE. 2. WITHOUT PREJUDICE TO THE ABOVE GROUND, ON THE FA CTS AND IN THE CIRCUMSTANCES OF THE CASE, LD.CIT(A) WAS NOT JUSTIFIED I N HOLDING THAT THE CAPITAL GAIN ON ACCOUNT OF SALE OF SHARES OF M/S. CITY PARKS PVT. LTD. IS LONG TERM CAPITAL GAIN WHEN THE UNDERLYING ASSET WHIC H GOT TRANSFERRED DUE TO SALE OF SHARES WAS LAND AND HOLDING PERIOD OF WH ICH WAS LESS THAN 36 MONTHS. 3. THE ORDER OF LD.CIT(A) MAY BE VACATED AND THAT O F THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND A ND MODIFY ANY OF THE ABOVE GROUNDS OF APPEAL. 21. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUB MITTED THAT THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ORDER DATED 31 -01-2005 IN ITA NOS.764 AND 824/PN/2012 FILED BY THE ASSESSEE AND T HE REVENUE RESPECTIVELY FOR A.Y. 2007-08 HAS ALREADY DECIDED BOTH THE ISSUES IN FAVOUR OF THE ASSESSEE ON MERIT. THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT BONUS STRIPPING IS ALLOWABLE IN LAW. H E SUBMITTED THAT CIT(A) WHILE HOLDING THAT PROFIT ON SALE OF SHA RES OF CITY PARKS PVT. LTD. AS CAPITAL GAIN UPHELD THE DISALLOWANCE OF LOSS OF RS.15,01,80,424/- ON ACCOUNT OF SALE OF HCL TECHNOLOGIES LTD . ON THE GROUND THAT THE ASSESSEE ITSELF HAS ADMITTED IN HIS STATEMENT RECORDED U/S.132(4). HE SUBMITTED THAT THE ADMISSION BY MR. CYRUS POONAWALLA DURING THE COURSE OF SEARCH ACTION THAT HE WILL NOT CLAIM THE LOSS IS NOT BINDING ON THE ASSESSEE SINCE THE SAME IS A LEGAL ISSUE. 13 ITA NOS.2252 & 2273/PUN/2014 22. REFERRING TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. EVEREST KENTO CYLINDERS LTD. REPORTED IN 378 ITR 57 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DEC ISION HAS HELD THAT THE ASSESSEE COULD NOT BE BOUND BY HIGHER DIS ALLOWANCE AGREED TO BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. REFERRING TO THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF BAMBINO INVESTMENT A ND TRADING CO. LTD. VS. DCIT REPORTED IN 2 SOT 585 HE SUBMIT TED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT APPEAL AG AINST ASSESSMENT ON CONCESSION IS MAINTAINABLE IF IT TRANSPIRES LAT ER ON THAT CONCESSION WAS GIVEN ON A MISTAKEN IMPRESSION OF TRU E LEGAL POSITION. 23. REFERRING TO PAGE 223 OF THE PAPER BOOK THE LD. COUN SEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE A NSWER TO QUESTION NO.14 GIVEN BY DR. CYRUS S. POONAWALLA IN HIS STATE MENT RECORDED U/S.132(4) WHEREIN HE HAS STATED THAT MR. ADAR POONAWALLA WILL BE FREE AND WILL CONTINUE TO CONTEST THE OTHER ISSUE AS TO WHETHER THE TRANSACTION IN SHARES OF CITY PARKS PVT. LTD. AND HCL TECHNOLOGIES LTD. WERE ADVENTURE IN THE NATURE OF TRADE AS HELD BY THE ASSESSING OFFICER OR CAPITAL GAIN ON INVESTMENTS AS CLAI MED BY ADAR POONAWALLA. HE SUBMITTED THAT ADMISSION ON POINTS OF LAW IS NOT BINDING ON THE ASSESSEE. REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF BANARSI DAS VS. KANSHI RA M REPORTED IN AIR 1963 SC 1165, 1169 HE SUBMITTED THAT AN ADMISSION WOULD BIND THE PERSON MAKING IT ONLY IN SO FAR AS FACTS ARE CO NCERNED BUT NOT IN SO FAR AS IT RELATES TO A QUESTION OF LAW. REFERRING TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MAHENDRA MANILAL NANAVATI VS. SUSHILA MAHENDRA NANAVATI REPORTED IN AIR 1 965 SC 14 ITA NOS.2252 & 2273/PUN/2014 364 HE SUBMITTED THAT ADMISSION TO BE BINDING MUST BE T AKEN AS A WHOLE. HE SUBMITTED THAT ADMISSIONS MUST BE CLEAR IF THEY A RE TO BE USED AGAINST A PERSON MAKING IT. THERE SHOULD BE NO DOU BT OR AMBIGUITY ABOUT THE ALLEGED ADMISSION. REFERRING TO THE DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF SHRI KRISHAN VS. K URUKSHETRA UNIVERSITY REPORTED IN AIR 1976 SC 376 HE SUBMITTED THA T ANY ADMISSION MADE IN IGNORANCE OF LEGAL RIGHTS OR UNDER DURES S CANNOT BIND THE MAKER OF THE ADMISSION. 24. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED TH AT THE DATE OF SEARCH WAS 21-06-2011 AND ASSESSMENT YEAR INV OLVED WAS A.Y. 2007-08. THE ASSESSMENT WAS EARLIER COMPLETED U/S.14 3(3) AND THE ASSESSEE WAS IN APPEAL. HE SUBMITTED THAT IN THE INS TANT CASE THE ADDITION WAS MADE ONLY ON THE BASIS OF A STATEMENT AND NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COUR SE OF SEARCH. REFERRING TO THE DECISION OF HONBLE BOMBAY HIGH C OURT IN THE CASE OF CIT VS. CONTINENTAL WAREHOUSING CORPORATION R EPORTED IN 374 ITR 645 HE SUBMITTED THAT ADDITION CANNOT BE MADE IN THE 153A ASSESSMENT IN ABSENCE OF ANY INCRIMINATING EVIDENCE FOUND D URING THE COURSE OF SEARCH. REFERRING TO THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. T. SIVAPRABHASKAR REPOR TED IN 238 CTR 457 HE SUBMITTED THAT THE STATEMENT IS NOT AN EVID ENCE AND IN ABSENCE OF DISCOVERY OF ANY EVIDENCE IN THE COURSE OF SEA RCH AT THE PREMISES OF THE ASSESSEE OR ANY INFORMATION RELATABLE TO A NY SUCH MATERIAL, ADDITION CANNOT BE MADE ON THE BASIS OF THE STA TEMENT OF A THIRD PARTY. 25. REFERRING TO THE DECISION OF THE CHANDIGARH BENCH OF TH E TRIBUNAL IN THE CASE OF DCIT VS. PRATAP SINGH RAJENDRA CH AMOLA & CO. REPORTED IN 19 DTR 182 HE SUBMITTED THAT THE TRIBUN AL IN THE 15 ITA NOS.2252 & 2273/PUN/2014 SAID DECISION HAS HELD THAT NO ADDITION IN BLOCK ASSESSMEN T CAN BE MADE SOLELY ON THE BASIS OF STATEMENTS RECORDED DURING THE SEARCH. IT HAS BEEN HELD IN THE SAID DECISION THAT SUCH STATEMEN TS CANNOT BE TREATED AS INCRIMINATING MATERIAL FOUND IN THE COURSE OF SE ARCH. HE ACCORDINGLY SUBMITTED THAT STATEMENT OF MR. CYRUS POONA WALLA CANNOT BE TREATED AS INCRIMINATING EVIDENCE. SINCE THE TRIB UNAL HAS ALREADY DECIDED BOTH THE ISSUES IN FAVOUR OF THE ASSESSE E HE SUBMITTED THAT THE APPEAL FILED BY THE ASSESSEE SHOULD BE ALLOWED AND THE APPEAL FILED BY THE REVENUE SHOULD BE DISMISSED. 26. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDER OF THE CIT(A) TO THE EXTENT HE HAS UPHELD THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE LOSS OF RS.15,01,80,424/-. HE SUBMITTED THAT THE STATEMENT RECOR DED U/S.132(4) IS AN ENFORCEABLE EVIDENCE UNLESS IT IS PROVED TH AT IT WAS MADE DUE TO ANY COERCION OR THREAT. THEREFORE, THE ST ATEMENT RECORDED U/S.132(4) HAS TO BE GIVEN SANCTITY. HE SUBMITTE D THAT THE ASSESSEE HAS FURNISHED A LETTER TO THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS ACCEPTING THE DISALLOWAN CE OF LOSS WHICH WAS GIVEN AFTER DUE APPLICATION OF MIND. HE SUBMITTED THAT THE LD.CIT(A) HAS GIVEN COGENT REASONS WHILE UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE LOSS OF RS.15,01,80,424/- ON ACCOUNT OF SALE OF SHARES OF HCL TECHNOLOGIES LTD. 27. SO FAR AS THE ORDER OF CIT(A) IN HOLDING THE PROFIT ON SA LE OF SHARES OF CITY PARKS PVT. LTD. AS CAPITAL GAIN IS CONCERNED THE LD. DEPARTMENTAL REPRESENTATIVE HEAVILY RELIED ON THE ORDER OF THE ASSESSING OFFICER. HE SUBMITTED THAT THE ASSESSING OFFICER H AS GIVEN COGENT REASONS AS TO WHY THE PROFIT ON SALE OF SHARES O F CITY PARKS PVT. LTD. SHOULD BE TREATED AS ADVENTURE IN NATURE OF T RADE. HE 16 ITA NOS.2252 & 2273/PUN/2014 ACCORDINGLY SUBMITTED THAT THE ORDER OF THE ASSESSING O FFICER BE UPHELD ON THIS ISSUE. 28. THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOINDER SUB MITTED THAT THE STATEMENT RECORDED U/S.132(4) MAY HAVE BETTER FORCE BUT IT IS NOT BINDING ON THE ASSESSEE SO FAR AS LEGAL ISSUE IS CONCERNED. 29. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE IN THE IN STANT CASE IS THE MANAGING DIRECTOR OF SERUM INSTITUTE OF INDIA LTD. AND SERUM INTERNATIONAL LTD. AND SON OF MR. CYRUS POONAWALLA WHO IS THE CHAIRMAN OF THE ABOVE TWO COMPANIES. THE ASSESSEE FILED H IS RETURN OF INCOME U/S.139(1) ON 31-07-2007 DECLARING TOTAL INCOME OF RS.5,51,54,126/- WHICH INCLUDED LONG TERM CAPITAL GAIN OF RS.2,24,68,231/- AND THE BALANCE OF RS.3,26,85,795/- WAS NON CAPITAL GAIN INCOME. WE FIND THE ASSESSING OFFICER COMPLETED T HE ASSESSMENT U/S.143(3) ON 22-12-2009 DETERMINING THE TOTA L INCOME AT RS.20,21,64,510/-. IN THE SAID ORDER THE ASSESSING OFFICE R DETERMINED THE LOSS ON SALE OF SHARES OF HCL TECHNOLOGIES PVT. LTD. AT RS.39,41,287/- AS AGAINST LOSS OF RS.15,01,52,644/-. SIMILARL Y HE DETERMINED THE PROFIT ON SALE OF CITY PARKS PVT. LTD. AT RS.17,34,20,000/- AS AGAINST CAPITAL GAIN DETERMINED BY T HE ASSESSEE. WE FIND THE LD.CIT(A) VIDE ORDER DATED 28-02-20 11 HELD THAT ASSESSING OFFICER HAD CORRECTLY DETERMINED THE LOSS FROM SALE OF HCL SHARES AS BUSINESS LOSS OF RS.39,41,287/- AS AGAINS T CAPITAL LOSS OF RS.15,01,80,423/- CLAIMED BY THE ASSESSEE. HE, HOW EVER, HELD THAT THE GAINS ARISING OUT OF TRANSFER OF SHARES OF CIT Y PARKS PVT. LTD. IS ASSESSABLE AS CAPITAL GAIN AND NOT AS PROFIT AND GAINS FROM 17 ITA NOS.2252 & 2273/PUN/2014 BUSINESS AS HELD BY THE ASSESSING OFFICER. BOTH THE ASS ESSEE AND THE DEPARTMENT WERE IN APPEAL BEFORE THE TRIBUNAL. IN TH E MEANTIME, A SEARCH ACTION U/S.132 OF THE I.T. ACT WAS CON DUCTED ON VARIOUS PREMISES OF THE POONAWALLA GROUP ON 21-06-2011. THE STATEMENT OF DR. CYRUS S. POONAWALLA WAS RECORDED U/S.132 (4) WHO IN HIS REPLY TO QUESTION NO.14 HAD STATED THAT WITH A VIE W TO BUY PEACE HE, ON BEHALF OF MR. ADAR POONAWALLA, AGREES TO CONS IDER THE COST OF SHARES SOLD OF HCL TECHNOLOGIES LTD. ON AVERAGE BASIS AS DONE BY THE ASSESSING OFFICER WHICH WILL RESULT IN AN ADDITIONA L INCOME OF RS.14.50 CRORES IN THE HANDS OF MR. ADAR POONAW ALLA FOR A.Y. 2007-08. THE DETAILED REPLY OF MR. CYRUS POONAWALLA H AS ALREADY BEEN REPRODUCED IN THE PRECEDING PARAGRAPHS. BASED ON TH IS AND FOLLOWING THE ORDER OF HIS PREDECESSOR THE ASSESSING O FFICER WORKED OUT THE LOSS ON ACCOUNT OF SALE OF HCL TECHNOLOG IES PVT. LTD. AT RS.39.41 LAKHS AS AGAINST THE CLAIM OF LOSS BY THE ASSES SEE AT RS.14.95 CRORES. 30. SO FAR AS THE SALE OF SHARES OF CITY PARKS PVT. LTD. IS CONCERNED, THE AO FOLLOWING THE ORDER OF HIS PREDECESSOR IN THE ORIGINAL ASSESSMENT PROCEEDINGS, TREATED THE PROFIT ON SALE OF CITY PARKS PVT. LTD. AS BUSINESS INCOME. WHILE DOING SO, HE FURT HER OBSERVED THAT ALTHOUGH THE CIT(A) HAS NOT ACCEPTED THE VIEW TAKEN BY THE ASSESSING OFFICER, HOWEVER, THE APPEAL PREFERRED BY THE REVENUE IS PENDING BEFORE THE TRIBUNAL AND THEREFORE TO K EEP THE CONSISTENCY IN DEPARTMENTS VIEW THE PROFIT ON SALE OF SUC H SHARES HAS TO BE TREATED AS BUSINESS INCOME. WE FIND IN APPEAL T HE LD.CIT(A) FOLLOWING HIS ORDER IN THE EARLIER PROCEEDINGS CONSIDE RED THE PROFIT ON SALE OF SHARES OF CITY PARKS PVT. LTD. AS CA PITAL GAIN. HE, HOWEVER, UPHELD THE DISALLOWANCE OF THE LOSS OF 18 ITA NOS.2252 & 2273/PUN/2014 RS.15,01,80,424/- ON ACCOUNT OF SALE OF SHARES OF HCL TECHN OLOGIES PVT. LTD. AND UPHELD THE ACTION OF THE ASSESSING OFFICER IN WORKING OUT SUCH LOSS AT RS.39.41 LAKHS. WHILE DOING SO, HE FURTHER OBSERVED THAT THE ASSESSEE ITSELF HAS ADMITTED IN THE STATEMENT RECORDED U/S.132(4) FOR SUCH TREATMENT. 31. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESS EE THAT BOTH THE ISSUES HAVE BEEN DECIDED BY THE TRIBUNAL ON ME RIT IN ASSESSEES OWN CASE. HE SUBMITTED THAT MERELY BECAUS E MR. CYRUS POONAWALLA HAD ADMITTED DURING THE COURSE OF SEARCH THAT THE ASSESSEE WILL NOT CLAIM THE SAME IS NOT BINDING ON THE ASS ESSEE SINCE IT IS A LEGAL ISSUE. IT IS ALSO THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH ADDITION CANNOT BE MADE ON THE BA SIS OF A MERE STATEMENT OF THE ASSESSEE. ACCORDING TO HIM STATEMENT IS NOT AN EVIDENCE AND THEREFORE THE STATEMENT OF MR. CYRUS POONA WALLA CANNOT BE TREATED AS INCRIMINATING EVIDENCE. 32. WE FIND MERIT IN THE ABOVE ADMISSION OF THE LD. COUNSEL F OR THE ASSESSEE. ADMITTEDLY, THE ISSUE RELATING TO LOSS OF RS.15,01,80,424/- ON ACCOUNT OF SALE OF SHARES OF HCL TECHN OLOGIES PVT. LTD. AND THE ISSUE RELATING TO PROFIT ON SALE OF SHARES OF CITY PARKS PVT. LTD. AS CAPITAL GAIN OR BUSINESS INCOME HAS BEE N DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES O WN CASE IN ITA NOS. 764 AND 824/PUN/2012 FILED BY THE ASSESSEE AND REVENUE RESPECTIVELY VIDE ORDER DATED 30-01-2015 FOR A.Y. 2007-0 8. THE RELEVANT OBSERVATION OF THE TRIBUNAL FROM PARA 16 ONWARDS READ AS UNDER : 19 ITA NOS.2252 & 2273/PUN/2014 16. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. FACTUALLY SPEAKING, SHARES OF CITY PARK PVT. LTD. SOLD BY THE ASSESSE E WERE NEITHER PURCHASED AND NOR ACQUIRED BY THE ASSESSEE ON HIS OWN VOL ITION, BUT THE SAME HAVE BEEN RECEIVED AS GIFT FROM HIS FATHER. NOTA BLY, OUT OF THE TOTAL OF 6,67,000 SHARES, THE INVESTEE COMPANY ALLOTTED 6,66 ,333 SHARES TO CYRUS S. POONAWALLA (ASSESSEES FATHER) ON 27.01.2006 ON PAR (@ RS.10/- EACH) AND THE BALANCE 667 SHARES WERE ALLOTTED TO HIM ON 09.06.2006 ON PAR. THESE SHARES WERE RECEIVED BY THE ASSESSEE AS A GIFT FROM HIM FATHER (I.E. CYRUS S. POONAWALLA) IN THE PRECEDING YEAR, I.E. ON 01.09.2006. THE FACT-POSITION EMERGING FROM THE ORDERS OF THE AUT HORITIES BELOW REVEALS THAT SUCH SHARES WERE INDEED HELD BY ASSESSEES FATH ER AS AN INVESTMENT. IN SUCH A SCENARIO, ESPECIALLY IN THE AB SENCE OF ANY NOTABLE INSTANCES OF OTHER PURCHASE AND SALE OF SHARES OF CITY P ARK PVT. LTD. BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION, IN OUR VIEW, THE ONUS WAS ON THE REVENUE TO DEMONSTRATE THAT THE SALE OF SHA RES OF CITY PARK PVT. LTD. BY THE ASSESSEE WAS A TRANSACTION AKIN TO AN A DVENTURE IN THE NATURE OF TRADE. 17. THE CIT(A) HAS OBSERVED THAT THE INVESTEE COMPANY I.E. CITY PARK PVT. LTD. IS AN UNLISTED PVT. LTD. COMPANY AND THEREF ORE ITS SHARES ARE NOT FREELY MARKETABLE OR TRADABLE. ACCORDING TO THE CI T(A), SHARES OF AN UNLISTED PRIVATE LIMITED COMPANY DO NOT HAVE THE BASI C CHARACTERISTICS OF A MARKETABLE PRODUCT, THAT ARE ASSOCIATED WITH THE SHA RES OF A STOCK EXCHANGE LISTED COMPANY. ON THIS ASPECT, WE FIND NO REASON TO DIFFER WITH THE OBSERVATIONS OF THE CIT(A). THE INVESTEE COM PANY, CITY PARK PVT. LTD. WAS IN THE BUSINESS OF DEALING IN PROPERTY, D EVELOPMENT OF LAND, CONSTRUCTION OF BUILDING, DEVELOPMENT OF INDUSTRIAL P ARK, INFORMATION TECHNOLOGY PARK, ETC.. IT IS EMERGING FROM THE ORDE RS OF THE AUTHORITIES BELOW THAT DURING THE PERIOD WHEN ASSESSEE HELD THE SHAR ES OF THE SAID COMPANY AND EVEN DURING THE PERIOD HELD BY THE ASSESSEE S FATHER, THE SAID COMPANY ACQUIRED LAND/OTHER ASSETS AND UNDERTOOK A CTIVITIES WHICH ENHANCED THE VALUE OF LANDS/OTHER ASSETS OF THE INVESTEE COMPANY, WHICH DID RESULT IN APPRECIATION IN THE VALUE OF SHARES OF T HE SAID INVESTEE COMPANY. IT IS, FOR THIS REASON ASSESSEE CANVASSED BEFORE T HE LOWER AUTHORITIES THAT HE WAS OFFERED A BETTER PRICE OF THE SHARES AND THEREFORE HE DECIDED TO SELL THE SHARES HELD BY HIM TO PENINSULA LAND LTD., WHEN THE SAID CONCERN APPROACHED HIM. TO THE CONTRARY, T HE PLEA OF THE REVENUE IS THAT THE SALE OF SHARES OF CITY PARK PVT. LT D. BY THE ASSESSEE WAS INTENDED TO TRANSFER THE LANDS ACQUIRED BY THE INV ESTEE COMPANY. THEREFORE, ACCORDING TO THE REVENUE, THE SHARES OF CI TY PARK PVT. LTD. WERE HELD BY ASSESSEE AS STOCK-IN-TRADE AND ANY SALE THERE OF CONSTITUTES AN ADVENTURE IN NATURE OF TRADE. WE ARE UNABLE TO ACCEPT THE AFORESAID PLEA OF THE REVENUE BECAUSE THE BUSINESS AND ASSETS OF A C ORPORATE ENTITY ARE NOT BUSINESS AND ASSETS OF ITS SHAREHOLDERS, AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF MRS. BACHA F. GUZDAR VS. CIT, (1955) 27 ITR 01 (SC). THE CIT(A), IN OUR VIEW, MADE NO MISTAKE I N DISREGARDING THE AFORESAID PLEA OF THE ASSESSEE BY RELYING ON THE JUDGEM ENT OF THE HONBLE SUPREME COURT IN THE CASE OF MRS. BACHA F. GUZDAR (SUP RA). THE FOLLOWING OBSERVATIONS OF THE HONBLE SUPREME COURT I N THE CASE OF MRS. BACHA F. GUZDAR (SUPRA) IS WORTHY OF NOTICE, AND WHIC H CLEARLY SUPPORT THE CONCLUSION OF CIT(A) :- THAT A SHAREHOLDER ACQUIRES A RIGHT TO PARTICIPATE IN THE PROFITS OF THE COMPANY MAY BE READILY CONCEDED BUT IT IS NO T POSSIBLE TO ACCEPT THE CONTENTION THAT THE SHAREHOLDER ACQUIRES ANY INTEREST IN THE ASSETS OF THE COMPANY. A SHAREHOLDER HAS GOT NO INTEREST IN 20 ITA NOS.2252 & 2273/PUN/2014 THE PROPERTY OF THE COMPANY THOUGH HE HAS UNDOUBTED LY A RIGHT TO PARTICIPATE IN THE PROFITS IF AND WHEN THE COMPA NY DECIDES TO DIVIDE THEM. THE INTEREST OF A SHAREHOLDER VIS-A-VI S THE COMPANY WAS EXPLAINED IN THE SHOLAPUR MILLS CASE [1950] SCR 869 AT 904. THAT JUDGMENT NEGATIVES THE POSITION TAKEN UP ON BE HALF OF THE APPELLANT THAT A SHAREHOLDER HAS GOT A RIGHT IN THE PROPERTY OF THE COMPANY. IT IS TRUE THAT THE SHAREHOLDERS OF TH E COMPANY HAVE THE SOLE DETERMINING VOICE IN ADMINISTERING TH E AFFAIRS OF THE COMPANY AND ARE ENTITLED, AS PROVIDED BY THE AR TICLES OF ASSOCIATION, TO DECLARE THAT DIVIDENDS SHOULD BE DI STRIBUTED OUT OF THE PROFITS OF THE COMPANY TO THE SHAREHOLDERS BUT THE INTEREST OF THE SHAREHOLDER EITHER INDIVIDUALLY OR COLLECTIVELY DOES NOT AMOUNT TO MORE THAN A RIGHT TO PARTICIPATE IN THE P ROFITS OF THE COMPANY. THE COMPANY IS A JURISTIC PERSON AND IS DI STINCT FROM THE SHAREHOLDERS. IT IS THE COMPANY WHICH OWNS THE PROPERTY AND NOT THE SHAREHOLDERS. 18. ON THIS ASPECT, WE MAY ALSO REFER TO THE DISCUSSION B Y THE CIT(A) IN PARA 5.1.3 OF HIS ORDER WHEREIN HE HAS REFERRED TO THE CBDT CIRCULAR DATED 15.06.2007. AS PER THE CIT(A), FOLLOWING THE CRITERIA LAID DOWN IN THE CBDT CIRCULAR, THE SHARES IN QUESTION ARE TO BE UN DERSTOOD AS INVESTMENT THEREBY GIVING RISE TO CAPITAL GAIN ON I TS SALE. THE AFORESAID FINDING OF THE CIT(A) HAS NOT BEEN NEGATED BY THE RE VENUE BEFORE US AND IS ACCORDINGLY AFFIRMED. 19. ANOTHER ASPECT RAISED BY THE ASSESSING OFFICER WAS THA T ASSESSEE OR HIS FATHER WERE NOT MERELY PASSIVE INVESTORS IN CITY PARK PVT. LTD. BUT WERE ACTIVELY INVOLVED IN THE BUSINESS OPERATIONS OF TH E COMPANY AND THEREFORE THE SHARES HELD BY THEM IN CITY PARK PVT. L TD. ATTAIN THE CHARACTER OF STOCK-IN-TRADE. IN OUR CONSIDERED OPINI ON, WHETHER A SHAREHOLDER IS AN ACTIVE OR A PASSIVE INVESTOR IN AN INV ESTEE COMPANY IS OF NO CONSEQUENCE TO EXAMINE THE NATURE OF THE SHARES HELD BY HIM. IN OUR VIEW, THE CIT(A) WAS JUSTIFIED IN NEGATING THE AF ORESAID PLEA OF THE ASSESSING OFFICER IN THE PROCESS OF DETERMINING THE NATUR E OF THE SHARE HOLDING OF ASSESSEE IN CITY PARK PVT. LTD.. 20. BEFORE PARTING, WE MAY ALSO REFER TO A PLEA OF T HE ASSESSING OFFICER THAT ASSESSEE HAD ADOPTED A COLOURABLE DEVICE T O AVOID TAX AND IN THIS CONTEXT RELIANCE WAS PLACED ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF MCDOWELL AND CO. LTD. V S. CTO, 154 ITR 148 (SC). THIS OBJECTION OF THE ASSESSING OFFICER HAS BEEN D EALT WITH BY THE CIT(A) IN PARA 5.1.5 OF HIS ORDER, WHICH READS AS UNDE R :- 5.1.5 THE ASSESSING OFFICER HAS PLACED RELIANCE ON THE JUDGMENT OF HON'BLE SUPREME COURT IN CASE OF MC. DOWELL & CO . LTD. AND OTHER AUTHORITIES AND OBSERVED THAT A COLORABLE DEV ICE WAS ADOPTED BY THE APPELLANT TO AVOID TAX. HOWEVER, IN THIS CASE, THE ISSUE INVOLVED IS TAXABILITY OF GAINS ARISING ON SA LE OF IMPUGNED SHARES UNDER THE HEAD 'CAPITAL GAINS' OR AS 'PROFIT S OF BUSINESS'. THE CONVERSION OF ERSTWHILE PARTNERSHIP FIRM INTO P RIVATE LIMITED COMPANY, HOLDING OF SHARES BY APPELLANT'S FATHER IN CITY PARK, RECEIPT OF SHARES BY THE APPELLANT WAY OF GIFT, SUB SEQUENT SALE OF SHARES, GENUINENESS OF THE TRANSACTIONS ARE NOT DOU BTED BY THE ASSESSING OFFICER. IT CANNOT ALSO BE GLOSSED OVER T HAT 50% OF THE SHARES IN THE COMPANY WERE HELD BY OTHER PROMPTERS, NAMELY MR. 21 ITA NOS.2252 & 2273/PUN/2014 ANIRUDHA DESHPANDE, MR. VITHAL MANIYAR, NAMRATA FIL M ENTERPRISES LTD. IN SUCH CIRCUMSTANCES, IN SO FAR A S ACQUISITION AND SALE OF SHARES OF CITY PAK ARE CONCERNED, IT IS DIFFICULT TO SAY THAT THE APPELLANT ADOPTED COLORABLE DEVICE TO AVOI D TAX. THE MANNER IN WHICH THE TRANSACTION IN SHARES OF CITY P ARK HAS BEEN ENTERED INTO BY THE APPELLANT'S FATHER AND APPELLAN T CAN AT BEST BE TERMED AS TAX PLANNING, BUT IT CANNOT BE REGARDE D AS TAX EVASION. TAX PLANNING IS PERMISSIBLE AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. AZA DI BACHAO ANDOLAN 263 ITR 706. 21. IN OUR VIEW, THE AFORESAID DISCUSSION BY THE CIT(A) IS FAIR AND APT, HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CA SE AND WE FIND NO REASON TO INTERFERE WITH THE SAME. IN ANY CASE, THER E IS NO MATERIAL TO SUGGEST THAT ANY COLOURABLE DEVICE HAS BEEN ADOPTED BY THE ASSESSEE TO AVOID TAX WHILE CARRYING ON THE TRANSACTION OF SALE O F SHARES OF CITY PARK PVT. LTD. TO PENINSULA LAND LTD.. 22. IN VIEW OF THE AFORESAID DISCUSSION, WE HEREBY AFFI RM THE ORDER OF THE CIT(A) HOLDING THAT THE SURPLUS ARISING ON THE SALE OF SHARES IN CITY PARK PVT. LTD. IS ASSESSABLE AS CAPITAL GAIN AND NOT AS P ROFITS AND GAINS OF BUSINESS. THUS, ON THIS ASPECT, REVENUE FAILS. 23. NOW, WE MAY TAKE-UP THE APPEAL OF THE ASSESSEE WH ICH RELATES TO THE NATURE AND QUANTIFICATION OF LOSS INCURRED BY THE ASSESSEE ON SALE OF SHARES OF HCL TECHNOLOGIES LTD.. 24. TO RECAPITULATE, THE BACKGROUND OF THE DISPUTE I N ASSESSEES APPEAL CAN BE SUMMARIZED AS FOLLOWS. THE ASSESSEE BEFORE US IS AN INDIVIDUAL, WHO IS EXECUTIVE DIRECTOR OF SERUM INSTIT UTE OF INDIA LTD.. IN THE PERIOD FROM 28.02.2007 TO 13.03.2007, ASSESSEE PURC HASED 4,71,517 EQUITY SHARES OF HCL TECHNOLOGIES LTD. FOR A TOTAL CON SIDERATION OF RS.29,36,28,768/- (INCLUSIVE OF BROKERAGE, ETC.). TH E AVERAGE PURCHASE PRICE OF ABOVE PURCHASE WAS RS.622 PER SHARE. ON 12.02 .2007, HCL TECHNOLOGIES LTD. ANNOUNCED BONUS ISSUE OF SHARES IN THE RATIO OF ONE SHARE FOR EVERY ONE SHARE HELD AND THE RECORD DATE WA S FIXED AS 16.03.2007. CONSEQUENTLY, ON ACCOUNT OF HIS PURCHASE OF 4,71,517 EQUITY SHARES, ASSESSEE RECEIVED 4,71,517 BONUS SHARES ALSO. SUBSEQU ENTLY, BETWEEN 15.03.2007 TO 28.03.2007 ASSESSEE SOLD 4,71,500 SHARES OF HCL TECHNOLOGIES LTD. OUT OF THE ORIGINAL 4,71,517 SHARES ACQUIRED BY HIM. SUCH SHARES WERE SOLD FOR A CONSIDERATION OF RS.14,28,67 ,804/- WHICH REFLECTED AN AVERAGE SALE PRICE OF RS.303 PER SHARE. ASSESSEE DECLARED A SHORT TERM CAPITAL LOSS ON SALE OF SUCH SHARES OF RS.15,01, 80,424/-. 25. THE ASSESSING OFFICER HAS DIFFERED WITH THE ASSESSEE ON THE TREATMENT OF THE AFORESAID TRANSACTION. AS PER THE ASSE SSING OFFICER, THE AFORESAID TRANSACTION REFLECTED ACTIVE INVOLVEMENT OF THE ASSESSEE AS A TRADER, RATHER THAN AS AN INVESTOR. AS PER THE ASSESSIN G OFFICER, ASSESSEE REGULARLY DEALT IN THE SHARES OF HCL TECHNOLOGIE S LTD. WHICH REFLECTED A TRADING INTENTION. SECONDLY, THE STAND OF THE ASSESSING OFFICER WAS THAT THE MOTIVE FOR CARRYING OUT THE AFORESAID SET OF TRANSACTIONS IN THE SHARES OF HCL TECHNOLOGIES LTD. WAS TO INCUR LOSS ON ACCOUNT OF BONUS STRIPING AND THEN SET-OFF SUCH LOSS AGAINST THE LONG TERM CAPITAL 22 ITA NOS.2252 & 2273/PUN/2014 GAIN ACCRUING TO THE ASSESSEE ON SALE OF SHARES OF CITY PARK PVT. LTD.. AS PER THE ASSESSING OFFICER, THE MOTIVE OF THE ASSESSEE IN DE ALING IN THE SHARES OF HCL TECHNOLOGIES LTD. WAS TAX AVOIDANCE AND A DUBIOUS TAX PLANNING. ULTIMATELY, THE ASSESSING OFFICER DISAGREED WITH THE ASSESSEE WITH NATURE AND THE QUANTIFICATION OF LOSS ON THE SALE OF 4,71,500 EQUITY SHARES OF HCL TECHNOLOGIES LTD.. THE ASSESSING OFFICER C OMPUTED THE LOSS AT RS.39,41,287/- AS PER THE TABULATION WHICH WE H AVE REPRODUCED EARLIER IN THIS ORDER. THE POINT OF DIFFERENCE ON THIS ASPECT BETWEEN THE ASSESSEE AND THE ASSESSING OFFICER WAS WITH REGARD TO THE CO ST OF THE SHARES SOLD. THE ASSESSING OFFICER FOLLOWED THE METHODOLO GY OF SPREADING THE COST OF ORIGINAL SHARES TO TOTAL SHARES I.E . THE ORIGINAL SHARES PLUS BONUS SHARES. IN OTHER WORDS, THE TOTAL SHARES HELD BY THE ASSESSEE (I.E. ORIGINAL SHARES 4,71,517 + BONUS SHARES 4,71, 517) WERE CONSIDERED TO HAVE BEEN ACQUIRED FOR AN AMOUNT OF RS. 29,36,28,768/-, I.E. THE PRICE ORIGINALLY INCURRED BY THE ASSESSEE. TH E ASSESSING OFFICER TREATED THE SHARES OF HCL TECHNOLOGIES LTD. AS STOCK-IN- TRADE AND THEREFORE THE LOSS OF RS.39,41,287/- TREATED AS A BUSINE SS LOSS. THE CIT(A) HAS AFFIRMED BOTH THE STANDS OF THE ASSESSING OFFIC ER, NAMELY, THAT THE TRANSACTION IN THE SHARES OF HCL TECHNOLOGIES LTD. WAS A BUSINESS TRANSACTION, AND, SECONDLY THAT THE METHODOLOGY OF LO SS COMPUTED BY THE ASSESSING OFFICER WAS CORRECT. 26. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESSEE V EHEMENTLY ARGUED THAT THE LOWER AUTHORITIES HAVE ERRED IN TREA TING THE ACTIVITY OF DEALING IN THE SHARES OF HCL TECHNOLOGIES LTD. AS A BUSI NESS ACTIVITY. ACCORDING TO THE LD. REPRESENTATIVE, ASSESSEE WAS WHOLE- TIME INVOLVED AS EXECUTIVE DIRECTOR OF SERUM INSTITUTE OF INDIA LTD .; AND, THAT THERE WAS NEITHER AN ORGANIZED ACTIVITY OF TRADING IN SHARES AN D NOR WAS THERE ANY ORGANIZATIONAL SUPPORT IN THIS REGARD. WITH REGARD T O THE PROFIT MOTIVE, IT HAS BEEN CONTENDED BY THE LD. REPRESENTATIVE THAT BE IT BE A BUSINESS TRANSACTION OR AN INVESTMENT TRANSACTION, PROFIT MAXIM IZATION IS AN ELEMENT WHICH IS ALWAYS PRESENT. IT HAS ALSO BEEN CONT ENDED THAT THE LOWER AUTHORITIES HAVE ERRED IN CONFIRMING THAT BONU S SHARES RECEIVED FORMED PART OF THE STOCK-IN-TRADE AND TAKING THE COST OF SHARES SOLD ON AVERAGE BASIS WAS ALSO WRONG. IN THIS CONTEXT, RELIANCE HAS BEEN PLACED ON THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CA SE OF CIT VS. MADAN GOPAL RADHYEY LAL, 73 ITR 652 WHEREIN THE SUPREME C OURT HELD THAT IN THE HANDS OF THE DEALER OF SHARES, ANY BONUS SHARES RECEI VED CONSTITUTE A CAPITAL ASSET UNLESS SPECIFICALLY CONVERTED INTO STOCK- IN-TRADE. BASED ON THE AFORESAID JUDGEMENT, IT IS CONTENDED THAT THE ASSESS EE RECEIVED THE BONUS SHARES AS A CAPITAL ASSET AND NEVER CONVERTED THE BONUS SHARES INTO STOCK-IN-TRADE. IT IS SUBMITTED THAT IN THE SUBSEQ UENT ASSESSMENT YEARS, THE SALE PROCEEDS IN RESPECT OF BONUS SHARES SOLD WE RE OFFERED TO TAX UNDER THE HEAD CAPITAL GAIN AFTER CONSIDERING THEIR COST OF ACQUISITION AS NIL AND SUCH A TREATMENT HAS BEEN ACCEP TED BY THE ASSESSING OFFICER IN SCRUTINY ASSESSMENTS. IT WAS THEREFORE C ONTENDED THAT THE QUANTITY OF BONUS SHARES COULD NOT BE CONSIDE RED WHILE DETERMINING THE COST OF THE ORIGINAL SHARES SOLD DURING THE YEAR UNDER CONSIDERATION. ACCORDING TO THE LD. REPRESENTATIVE, THIS IS ALSO ON PAR WITH SECTION 55(2)(AA)(IIIA) OF THE ACT WHEREIN THE COST OF BONUS SHARES IS TO BE TAKEN AS NIL AND THE ENTIRE COST IS LIABLE TO BE ADJUSTED ON THE ORIGINAL SHARES. 27. AT THE TIME OF HEARING, IT HAS ALSO BEEN POINTED OUT THAT DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAD SOLD OTHER SHARES AN D UNITS OF MUTUAL FUNDS, AND PROFIT ARISING FROM SUCH TRANSACTIONS HAVE BEEN 23 ITA NOS.2252 & 2273/PUN/2014 ACCEPTED BY THE ASSESSING OFFICER TO BE ASSESSABLE AS CAPI TAL GAINS. FURTHERMORE, IT WAS POINTED OUT THAT IN THE PRECEDIN G ASSESSMENT YEARS AS WELL AS IN THE SUBSEQUENT ASSESSMENT YEARS, THE ASSESSING OFF ICER HAS ASSESSED THE GAIN ON SALE OF SHARES AS AN INCOME ASSESSABLE U NDER THE HEAD CAPITAL GAINS, EVEN IN THE COURSE OF SCRUTINY ASSES SMENT. FOR ALL THE AFORESAID REASONS, IT HAS BEEN CANVASSED THAT THERE WAS NO SCOPE FOR TREATING THE IMPUGNED TRANSACTION AS BUSINESS TRANSACTIO NS. IT WAS ALSO VEHEMENTLY ARGUED THAT THERE WAS NO MATERIAL TO IMPE ACH THE GENUINENESS OF THE TRANSACTIONS AND THAT AT BEST THE TRA NSACTION CAN BE TERMED AS A USE OF THE PROVISIONS OF LAW AND IT CANNO T BE SAID TO BE A ABUSE OF LAW, AS WAS OBSERVED BY THE HONBLE SUPREME C OURT IN THE CASE OF CIT VS. WALFORT SHARE & STOCK BROKERS (P.) LTD., 3 26 ITR 1 (SC) IN A SOMEWHAT SIMILAR SITUATION. 28. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE APPEARING FOR THE REVENUE HAS REITERATED THAT THE MA GNITUDE AND FREQUENCY OF THE TRANSACTIONS IN THE HCL TECHNOLOGIE S LTD. SHARES WAS QUITE SUBSTANTIAL WHICH REFLECTS THAT THE INTENTION OF THE ASSESSEE WAS TO TRADE IN SUCH SHARES. WITH REGARD TO ASSESSEES INTENTION, IT WAS POINTED OUT THAT AT THE TIME OF UNDERTAKING TRANSACTIONS IN H CL TECHNOLOGIES LTD. SHARES, ASSESSEE WAS AWARE THAT HE WAS CONSIDERING THE SALE O F SHARES OF CITY PARK PVT. LTD., WHICH WAS TO YIELD HIM SUBSTANTI AL AMOUNT OF CAPITAL GAIN AND THEREFORE HE UNDERTOOK THE IMPUGNED TRANSAC TION IN SHARES OF HCL TECHNOLOGIES LTD. IN ORDER TO INCUR A LOSS. ACCOR DING TO THE LD. DEPARTMENTAL REPRESENTATIVE, IT IS A COMMON KNOWLEDG E THAT SHARE PRICES COME DOWN AFTER THE ISSUE OF THE BONUS SHARES, SINC E THE BONUS SHARES ARE ALLOTTED AFTER CAPITALIZING THE FREE RESERV ES OF A COMPANY. THEREFORE, ASSESSEE BOUGHT THE SHARES OF HCL TECHNOLOGIES LTD. ON CUM BONUS BASIS AND AFTER HAVING RECEIVED THE BONUS SHARES, T HE ORIGINAL SHARES WERE SOLD IN THE MARKET AT THE REDUCED PRICES. ACCORDING TO THE LD. DEPARTMENTAL REPRESENTATIVE, SEQUENCE OF EVENTS CL EARLY INDICATE THAT THE PURCHASE AND SALE OF SHARES WAS UNDERTAKEN WITH THE SOLE INTENTION OF BOOKING A LOSS SO AS TO SET-OFF THE SAME A GAINST THE GAIN FROM SALE OF SHARES OF CITY PARK PVT. LTD. AND TAKE THE BEN EFIT OF PROVISIONS OF SECTION 10(38) OF THE ACT, THEREBY CLAIMING THE CAPI TAL GAIN ON SALE OF BONUS SHARES AS EXEMPT ON A LATER DATE. 29. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN THE PRESENT CASE, THE FUNDAMENTAL ASPECT WHICH IS PERMEAT ING THROUGH THE ENTIRE EXERCISE CARRIED OUT BY THE ASSESSING OFFICER IS T HAT THE SHORT TERM CAPITAL LOSS INCURRED BY THE ASSESSEE ON SALE OF 4,71,500 SHARES OF HCL TECHNOLOGIES LTD. HAS BEEN SET-OFF AGAINST THE LONG TER M CAPITAL GAIN EARNED BY THE ASSESSEE ON THE SALE OF SHARES OF CITY PARK PVT. LTD.. THE APPELLANT PURCHASED 4,71,517 EQUITY SHARES OF HCL TECH NOLOGIES LTD. AT AN AVERAGE PRICE OF RS.622 PER SHARE BETWEEN 28.02.20 7 TO 13.02.2007. AFTER RECEIPT OF 4,71,517 BONUS SHARES, ASSESSEE SOLD 4,71, 500 SHARES OUT OF ORIGINAL SHARES BETWEEN 16.03.2007 TO 28.02.2007 A T AN AVERAGE SELLING PRICE OF RS.303 PER SHARE. OSTENSIBLY, AFTER T HE ISSUE OF BONUS SHARES, THE PRICE OF HCL TECHNOLOGIES LTD. DECLINED IN THE MARKET AND THEREFORE THE SALE PRICE REALIZED BY THE ASSESSEE WAS ONL Y RS.303 PER SHARE AS AGAINST AS THE PURCHASE PRICE OF CUM-BONUS SHARES OF RS.622 PER SHARE. THE RESULTANT LOSS WAS CANVASSED TO BE A SHORT CAPI TAL LOSS. IN THE SUBSEQUENT YEARS, ASSESSEE SOLD THE BALANCE SHARES REMAINING WITH HIM I.E. BONUS SHARES OF 471517 AND THE 17 OUT OF THE ORIG INAL 471517 SHARES. AS THE PERIOD OF HOLDING THAT WAS IN EXCESS OF 12 MONTH S, IN SUBSEQUENT YEARS THE GAIN ON SALE OF SUCH SHARES HAS BEEN ACCEPTED BY THE ASSESSING 24 ITA NOS.2252 & 2273/PUN/2014 OFFICER AS LONG TERM CAPITAL GAIN, WHICH WAS EXEMPT U /S 10(38) OF THE ACT. NOTABLY, WHILE COMPUTING SUCH CAPITAL GAIN, TH E COST OF ACQUISITION OF THE BONUS SHARES WAS TAKEN AS NIL BY APPLICATION OF T HE PROVISIONS OF SECTION 55(2)(AA)(IIA) OF THE ACT. THE AFORESAID POSI TION HAS BEEN ACCEPTED BY THE ASSESSING OFFICER IN SCRUTINY ASSESSMENT, AS ASSERTED BY THE ASSESSEE IN THE COURSE OF THE HEARING BEFORE US, AND THIS MATERIAL HAS NOT BEEN REPUDIATED FROM THE SIDE OF THE REVENUE. 30. IN THE CURRENT YEAR, ASSESSEE COMPUTED THE LOSS ON SA LE OF 4,71,500 ORIGINAL SHARES BY CONSIDERING THE AVERAGE AC QUISITION COST OF RS.622 PER SHARE. OSTENSIBLY, IT RESULTED IN A LOSS BECA USE THE SALE PRICE REALIZED WAS ONLY RS.303 PER SHARE. FIRST OF ALL, THE ASSESSING OFFICER VIEWED THE WHOLE TRANSACTION AS A DUBIOUS TAX PLANNIN G. IN THIS CONTEXT, A REFERENCE HAS BEEN MADE TO THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF WALFORT SHARE & STOCK B ROKERS (P.) LTD. (SUPRA). IN THE CASE BEFORE THE HONBLE SUPREME COUR T, ASSESSEE PURCHASED MUTUAL FUND UNITS ON 24.03.2000 AND BECAME ENTITLED TO DIVIDEND ON THE UNITS @ RS.4 PER UNIT AND EARNED A DI VIDEND OF RS.1,82,12,862/-. AS A RESULT OF THE DIVIDEND PAYOUT THE VALUE OF THE UNITS REDUCED FROM RS.17.23 TO RS.13.23 PER UNIT ON MA RCH 27, 2000, WHEN ASSESSEE SOLD ALL THE UNITS AND COLLECTED AN AMOUNT OF RS.5,90,55,207/- AS WELL AS OTHER INCENTIVES OF RS.23,76 ,778/-. IN ALL, ASSESSEE RECEIVED BACK RS.7,96,44,847/- AS AGAINST INITIA L PAYOUT OF RS.8,00,00,000/-. IN THE RETURN OF INCOME, ASSESSEE CL AIMED DIVIDEND OF RS.1,82,12,862/- AS EXEMPT U/S 10(33) OF THE ACT AND A LSO CLAIMED A SET- OFF RS.2,09,44,793/- AS LOSS INCURRED ON SALE OF UNITS. THE REVENUE DISALLOWED THE SET-OFF OF LOSS CLAIMED WHICH WAS NEGATED BY THE TRIBUNAL AND THEREAFTER THE HONBLE SUPREME COURT. AS PER TH E HONBLE SUPREME COURT, IT STOOD ESTABLISHED THAT THERE WAS A SALE AND TH AT ASSESSEE RECEIVED A DIVIDEND, WHICH WAS TAX-FREE. IN THIS CON TEXT, THE HONBLE SUPREME COURT NOTED THAT THE ENTIRE TRANSACTION COUL D NOT BE SEEN AS ABUSE OF LAW BUT THE ASSESSEE HAD MADE USE OF THE PROVISIONS OF SECTION 10(33) . THE HONBLE SUPREME COURT OBSERVED THAT EVEN IF I T WAS TO BE ASSUMED THAT THERE WAS A PRE-PLANNED ACTION YET THERE WAS NOTHING TO IMPEACH THE GENUINENESS OF THE TRANSACTION. ADVERTING TO THE PROVISIONS OF SECTION 94(7) OF THE ACT, THE HONBLE SUPREME COU RT NOTED THAT IN THE CASE OF ASSESSMENT, BEFORE 01.04.2002 I.E. BEFORE INSERTI ON OF SECTION 94(7) OF THE ACT, LOSSES PERTAINING TO THE EXEMPTED IN COME COULD NOT BE DISALLOWED. THE ASSESSMENT YEAR BEFORE THE HONBLE SUPR EME COURT WAS BEFORE THE INSERTION OF SECTION 94(7) OF THE ACT. IT HAS ALSO BEEN OBSERVED BY THE HONBLE SUPREME COURT THAT EVEN AFTE R APPLYING SECTION 94(7) TO CASES FOR ASSESSMENT YEARS AFTER 01.04.2002, THE LOSS TO BE IGNORED WOULD BE ONLY TO THE EXTENT OF THE DIVIDEND RECEIVED AND NOT THE ENTIRE LOSS. IN OTHER WORDS, THE LOSSES OVER AND ABOVE T HE DIVIDEND RECEIVED WOULD STILL BE ALLOWED TO BE SET-OFF. CONSID ERING THE AFORESAID SCHEME OF THE ACT, THE HONBLE SUPREME COURT HELD TH AT THE PARLIAMENT HAS NOT TREATED THE DIVIDEND STRIPPING TRANSACTION AS SH AM OR BOGUS. 31. IN OUR CONSIDERED OPINION, THE PARITY OF REASONIN G LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF WALFORT SH ARE & STOCK BROKERS (P.) LTD. (SUPRA) IS DEFINITELY ATTRACTED IN THE PRESE NT CASE TOO. IN THE PRESENT CASE, EVEN IF IT IS TAKEN THAT THE TRANSACTION IN THE SHARES OF HCL TECHNOLOGIES LTD. WAS PRE-PLANNED, BUT THE INFERENCE DRAWN BY THE ASSESSING OFFICER THAT IT WAS A DUBIOUS TAX PLANNING CANN OT BE UPHELD BECAUSE THERE IS NOTHING TO IMPEACH THE GENUINENESS OF THE TRANSACTION CARRIED OUT BY THE ASSESSEE. IN THE CASE BEFORE THE HO NBLE SUPREME 25 ITA NOS.2252 & 2273/PUN/2014 COURT ALSO, SIMILAR SITUATION PREVAILED AND THE REVENU E HAD CAST DOUBT ON THE TRANSACTION BECAUSE OF PRE-PLANNED NATURE OF T HE TRANSACTION. THE HONBLE SUPREME COURT NEGATED THE STAND OF THE REVEN UE, AS NOTED BY US EARLIER. APPLYING THE SIMILAR PARITY OF REASONING I N THE PRESENT CASE, THE STAND OF THE ASSESSING OFFICER THAT THE TRANSACTION WAS P RE-MEDITATED WITH THE INTENTION OF INCURRING LOSS AND SETTING-OFF AGAINST CAPITAL GAINS INCOME IS AN ABUSE OF LAW CANNOT BE AFFIRMED. 32. WE MAY ALSO REFER TO SECTION 94(8) OF THE ACT, WH ICH HAS BEEN INSERTED BY THE FINANCE (NO.2) W.E.F. 01.04.2005, AN D IT PROVIDES THAT LOSS ARISING ON BONUS STRIPPING OF UNITS IS TO BE IGNORED AFT ER 01.04.2005. THE PHRASEOLOGY OF SECTION 94(8) OF THE ACT ITSELF REVEALS THAT THE PARLIAMENT IN ITS WISDOM RESTRICTED THE SCOPE OF BONUS STRIPPING U/S 94(8) OF THE ACT ONLY TO THE UNITS AND DID NOT EXTEND IT TO THE SHARES WHILE THE SCOPE OF THE DIVIDEND STRIPPING CONTAINED IN SECTION 94(7) OF THE ACT APPLIED BOTH TO SHARES/SECURITIES AS WELL AS UNITS. THEREFORE, ON THE STRENGTH OF SECTION 94(8) OF THE ACT ALSO AND HAVING REGARD TO TH E PARITY OF REASONING LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE W ALFORT SHARE & STOCK BROKERS (P.) LTD. (SUPRA), THE TRANSACTIONS OF PU RCHASE AND SALE OF SHARES OF HCL TECHNOLOGIES LTD. ARE TO BE UNDERSTOOD AS A GENUINE TRANSACTION AND ARE NOT COVERED BY THE PROVISIONS OF SE CTION 94(8) OF THE ACT. 33. NOW, WITH REGARD TO THE STAND OF THE ASSESSEE THAT HE HAS ACTED AS AN INVESTOR AND NOT AS A TRADER WHILE CARRYING OUT TH E AFORESAID TRANSACTION IN THE SHARES OF HCL TECHNOLOGIES LTD.. IN THIS CONTEXT, THE SUM AND SUBSTANCE OF THE CASE MADE OUT BY THE REVENUE I S THAT WITHIN A SHORT PERIOD OF TIME ASSESSEE HAS CARRIED OUT SUBSTANTIAL PURCHASE/SALE TRANSACTIONS IN THE SHARES OF HCL TECHNOLOGIES LTD.. AS PER THE ASSESSING OFFICER, THE TRANSACTION HAS BEEN CARRIED OUT IN A SYST EMATIC AND ORGANIZED MANNER AND THE INTENT WAS TO INCUR A LOSS, W HICH COULD BE SET- OFF AGAINST THE CAPITAL GAINS INCOME. THEREFORE, ACC ORDING TO THE REVENUE, THE TRANSACTIONS HAVE TO UNDERSTOOD AS A BUSIN ESS ACTIVITY. 34. IT IS TRITE LAW THAT WHETHER A PARTICULAR TRANSAC TION IS AN ADVENTURE IN THE NATURE OF TRADE OR IS AN INVESTMENT SIMPLICITOR IS A MIXED QUESTION OF LAW AND FACTS. IT IS ALSO EVIDENT TH AT THERE IS A PLETHORA OF JUDICIAL RULINGS ON THIS ASPECT. NEVERTHELESS, A CO MMON THREAD WHICH EMERGES FROM VARIOUS JUDICIAL RULINGS IS THAT NO SINGLE TEST IS CONCLUSIVE BUT THE ENTIRE CONSPECTUS OF FACTS AND CIRCUMSTANCES OF A GIVEN CASE HAVE TO BE CUMULATIVELY APPRECIATED IN ORDER TO DETERMIN E AS TO WHETHER THE TRANSACTION IN QUESTION IS AN ADVENTURE IN THE NATURE OF TRADE OR IS AN INVESTMENT SIMPLICITOR. IN THIS BACKGROUND, WE MAY EX AMINE THE FACTUAL MATRIX OF THE PRESENT CASE. AT THE OUTSET, THE LD. RE PRESENTATIVE POINTED OUT THAT THE GAIN DERIVED ON SALE OF OTHER SHARES AND MUTUAL FUNDS IN THIS YEAR HAS BEEN ACCEPTED BY THE ASSESSING OFFICER TO BE ASSE SSABLE UNDER THE HEAD CAPITAL GAINS. IT HAS ALSO BEEN POINTED OU T THAT IN THE SCRUTINY ASSESSMENT FOR THE PRECEDING ASSESSMENT YEARS AS WELL AS FOR T HE SUBSEQUENT ASSESSMENT YEARS THE PROFIT ON SALE OF SHARES EARN ED BY THE ASSESSEE HAS BEEN ACCEPTED AS ASSESSABLE UNDER THE HEAD CAPI TAL GAINS. NOTABLY, EVEN WITH REGARD TO THE GAIN ON SALE OF BON US SHARES OF HCL TECHNOLOGIES LTD., IT WAS STATED AT BAR THAT IN SUBSEQUE NT ASSESSMENT YEARS IT HAS BEEN ACCEPTED BY THE ASSESSING OFFICER AS AN INCOME ASSESSABLE UNDER THE HEAD CAPITAL GAINS. ON ALL THESE ASPECTS, THE REVENUE HAS NOT CONTROVERTED THE FACTUAL MATRIX BROU GHT OUT BY THE 26 ITA NOS.2252 & 2273/PUN/2014 ASSESSEE. IN THIS BACKGROUND, IN OUR CONSIDERED OPINION, THE ONUS WAS ON THE REVENUE TO ESTABLISH THAT THE TRANSACTION IN THE SH ARES OF HCL TECHNOLOGIES LTD. WAS NOT ASSESSABLE UNDER THE HEAD CAP ITAL GAINS, AS DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME. THE MOOT POINT IS AS TO WHETHER OR NOT, HAVING REGARD TO THE DISCUSSION IN THE ORDERS OF THE AUTHORITIES BELOW, SUCH AN ONUS HAS BEEN DISCHARGED BY T HE REVENUE. 35. THE ONLY POINT MADE BY THE REVENUE IS THAT MAGN ITUDE AND FREQUENCY OF THE TRANSACTION IN HCL TECHNOLOGIES LTD. IS SUBSTANTIAL. IN OUR CONSIDERED OPINION, IN THE PRESENT CASE, THE NATUR E OF THE ASSESSEES DEALING IN SHARES AS AN INVESTOR STANDS ESTABLISHED IN PAST AS WELL AS ALSO IN FUTURE YEARS. THE ASSESSEE IS FULL TIME INVOLVED IN O THER ACTIVITY OF BEING EXECUTIVE DIRECTOR OF SERUM INSTITUTE OF INDIA LTD.. THERE IS NO MATERIAL TO SUGGEST THAT ANY ORGANIZATIONAL STRUCTURE OR INFRASTRUCTURE IS POSSESSED BY THE ASSESSEE TO UNDERTAKE TRADING IN SHARES AS A BUSINESS ACTIVITY. THERE IS NO MATERIAL TO SAY THAT ASSESSEE AC TED AS A FREQUENT DEALER IN SHARES OVER AN EXTENDED PERIOD OF TIME. NO DOUBT, FOR A SHORT SPELL OF TIME IN THE MONTHS OF FEBRUARY AND MARCH, ASSE SSEE HAS UNDERTAKEN TRANSACTIONS IN THE SHARES OF HCL TECHNOLOGI ES LTD.. BUT THE SAME BY ITSELF CANNOT BE CATEGORIZED AS A BUSINESS ACTIVI TY, AS IT IS NOT A CONTINUOUS ACTIVITY. MOREOVER, WE ALSO FIND WEIGHT I N THE PLEA SETUP BY THE LD. REPRESENTATIVE BEFORE US THAT IF THE INTENTIO N WAS TO INCUR LOSS, AS CANVASSED BY THE ASSESSING OFFICER, THEN OBVIOUSLY SUCH AN ACTIVITY CANNOT BE CATEGORIZED AS BUSINESS. IT IS WELL UNDERSTO OD THAT NO BUSINESS IS CARRIED OUT WITH AN INTENTION OF MAKING A L OSS, RATHER THE INTENTION IS ALWAYS TO MAKE PROFITS. THEREFORE, BY TA KING AN OVERALL VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE A RE UNABLE TO UPHOLD THE STAND OF THE LOWER AUTHORITIES THAT THE TR ANSACTION IN THE SHARES OF HCL TECHNOLOGIES LTD. IS A BUSINESS TRANSACTION . WE HEREBY SET-ASIDE THE ORDER OF THE CIT(A) ON THIS ASPECT AND DI RECT THE ASSESSING OFFICER TO RE-COMPUTE THE CAPITAL GAIN/LOSS ON THE SAL E OF SHARES OF HCL TECHNOLOGIES LTD. CONSIDERING IT TO BE ASSESSABLE UNDER T HE HEAD CAPITAL GAINS AS PER LAW. THUS, ON THIS ASPECT ASSESSEE SUCCEEDS. 33. SINCE THE ISSUE RELATING TO PROFIT ON SALE OF SHARES OF C ITY PARKS PVT. LTD. AS CAPITAL GAIN HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE, THEREFORE, IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT T O OUR NOTICE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) TREA TING SUCH PROFIT ON SALE OF SHARES OF CITY PARKS PVT. LTD. AS CAPITAL GAIN. GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY DISMISSED. 34. SO FAR AS THE GROUNDS BY THE ASSESSEE ARE CONCERN ED THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECIS ION OF THE TRIBUNAL AS REPRODUCED IN THE PRECEDING PARAGRAPHS. IT IS THE CASE OF THE REVENUE THAT THE ASSESSEE ITSELF HAS ADMITTED DU RING THE 27 ITA NOS.2252 & 2273/PUN/2014 COURSE OF SEARCH TO DISALLOW SUCH LOSS. THE ASSESSEE DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS HAD ALSO REITERATED TH E SAME STAND. THEREFORE, THE QUESTION THAT ARISES IS AS TO WHET HER SUCH ADMISSION BY THE ASSESSEE DURING THE COURSE OF SEARCH W ILL BE BINDING ON HIM OR NOT. 35. THE COURTS IN VARIOUS DECISIONS HAVE HELD THAT AN ADM ISSION WOULD BIND THE PERSON MAKING IT ONLY IN SO FAR AS FACTS AR E CONCERNED BUT NOT IN SO FAR AS IT RELATES TO A QUESTION OF LAW VIDE BANARSI DAS VS. KANSHI RAM REPORTED IN AIR 1963 SC 116 5, 1169. THE HONBLE SUPREME COURT IN THE CASE OF BHARAT SINGH V S. MST. BHAGIRATHI REPORTED IN AIR 1966 SC 405, 410 HAS HELD THA T ADMISSION MUST BE CLEAR IF THEY ARE TO BE USED AGAINST A PERSON MAKING THEM. IT HAS ALSO BEEN HELD BY THE HONBLE SUPRE ME COURT IN THE CASE OF SHRI KRISHAN VS. KURUKSHETRA UNIVERSITY (SU PRA) THAT ANY ADMISSION MADE IN IGNORANCE OF LEGAL RIGHTS OR UNDER DU RESS CANNOT BIND THE MAKER OF THE ADMISSION. IN THE INSTANT C ASE, THE ADMISSION WAS A POINT OF LAW AND THEREFORE THE SAME IS N OT BINDING ON THE ASSESSEE. 36. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF EVEREST KENTO CYLINDERS LTD. HAS HELD THAT ASSESSEE COULD NOT BE BOUND BY AGREED DISALLOWANCE OFFERED BEFORE THE ASSESSING OFFICER DURING THE C OURSE OF ASSESSMENT PROCEEDINGS. THE RELEVANT OBSERVATION OF T HE HONBLE HIGH COURT READS AS UNDER : 10. HAVING CONSIDERED SUBMISSIONS OF MR.MALHOTRA FOR THE REVENUE AND MR.PARDIWALLA FOR THE ASSESSEE, WE ARE OF THE VIEW THAT THE ORDER OF THE TRIBUNAL AS REGARDS DISALLOWANCE UNDER SECTION 14A AND RESTRICTING THE SAME TO RS.1 LAC WAS JUSTIFIED IN VIEW OF THE MATER IAL ITA1165.13 BEFORE THE TRIBUNAL. FURTHERMORE, HAVING CONSIDERED THE FACT THAT A SUM OF RS.4,47,649/- WAS NOT CONCEDED IN THE RETURN BUT WAS ADHOC ACCEPTANCE DURING THE COURSE OF ASSESSMENT, THE ASSESSEE COU LD NOT BE BOUND BY IT. THE TRIBUNAL AS THE SECOND FACT FINDING AUTHORITY HAD GONE 28 ITA NOS.2252 & 2273/PUN/2014 INTO FACTUAL ASPECTS IN GREAT DETAIL AND THEREFORE H AVING INTERPRETED THE LAW AS IT STOOD ON THE RELEVANT DATE THE ORDER PASSED C ANNOT BE FAULTED. IN THE MATTER OF GUARANTEE COMMISSION, THE ADJUSTMENT MADE BY THE TPO WERE BASED ON INSTANCES RESTRICTED TO THE COMMERCIA L BANKS PROVIDING GUARANTEES AND DID NOT CONTEMPLATE THE ISSUE OF A CORPORATE GUARANTEE. NO DOUBT THESE ARE CONTRACTS OF GUARANTEE, HOWEVER, WHEN THEY ARE COMMERCIAL BANKS THAT ISSUE BANK GUARANTEES WH ICH ARE TREATED AS THE BLOOD OF COMMERCE BEING EASILY ENCASHAB LE IN THE EVENT OF DEFAULT, AND IF THE BANK GUARANTEE HAD TO BE OBTAIN ED FROM COMMERCIAL BANKS, THE HIGHER COMMISSION COULD HAVE BEEN JUSTIFIED. IN THE PRESENT CASE, IT IS ASSESSEE COMPANY THAT IS ISSUING CORPORATE GUAR ANTEE TO THE EFFECT THAT IF THE SUBSIDIARY AE DOES NOT REPAY LOAN A VAILED OF IT FROM ICICI, THEN IN SUCH EVENT, THE ASSESSEE WOULD MAKE GOOD THE AMOUNT AND REPAY THE LOAN. THE CONSIDERATIONS WHICH APPLIED FOR ISSUANCE OF A CORPORATE GUARANTEE ARE DISTINCT AND SEPARATE FROM TH AT OF BANK GUARANTEE AND ACCORDINGLY WE ARE OF THE VIEW THAT C OMMISSION CHARGED CANNOT BE CALLED IN QUESTION, IN THE MANNER TPO HAS D ONE. IN OUR VIEW THE COMPARISON IS NOT AS ITA1165.13 BETWEEN LIKE TRAN SACTIONS BUT THE COMPARISONS ARE BETWEEN GUARANTEES ISSUED BY THE COMMERC IAL BANKS AS AGAINST A CORPORATE GUARANTEE ISSUED BY HOLDING COMP ANY FOR THE BENEFIT OF ITS AE, A SUBSIDIARY COMPANY. IN VIEW OF THE ABOVE DISCUSSION WE ARE OF THE VIEW THAT THE APPEAL DOES NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW AND IT IS DISMISSED. THERE WILL BE NO OR DER AS TO COSTS. 37. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF BAMBI NO INVESTMENT TRADING COMPANY LTD. (SUPRA) HAS HELD THAT AP PEAL AGAINST ASSESSMENT ON CONCESSION IS MAINTAINABLE IF IT LATER TRANSPIRES THAT CONCESSION WAS GIVEN ON A MISTAKEN IMPRE SSION OF TRUE LEGAL POSITION. THE RELEVANT OBSERVATION OF THE TRIBUN AL FROM PARA 6 ONWARDS READ AS UNDER : 6. WE HAVE CAREFULLY CONSIDERED THE FACTS AND THE RIVAL CONTENTIONS. THE QUESTION WHETHER THE INTEREST ON DEBENTURES CAN BE CONSIDERED TO BE INTEREST FROM LOANS AND ADVANCES WITHIN THE MEANING OF S. 2(7) OF THE INTEREST-TAX ACT IS A QUESTION OF LAW AND NOT A MERE Q UESTION OF FACT. THE JUDGMENTS OF THE HIGH COURTS AND THE ORDERS OF THE TR IBUNAL CITED ON BEHALF OF THE ASSESSEE (SUPRA) BEAR OUT THIS POSITION. THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF RAMESH CHANDRA & CO. (SUPRA) CITED ON BEHALF OF THE DEPARTMENT IS A CASE OF A STATEMENT MADE OF A FACT. CERTAIN DISCREPANCIES IN THE SARKI ACCOUNT WERE FOUND BY THE ITO AND THE ASSESSEE WAS ASKED TO RECONCILE-THE SAME. THE ASSESSEE EXPRESS ED HIS INABILITY TO DO SO AND AGREED THAT THE AMOUNT MAY BE ADDED TO THE INCOME. THE ITO RECORDED THE SAME IN THE ORDER SHEET WHICH WAS ALSO SIGNED BY THE PARTNER OF THE ASSESSEE-FIRM. IT WAS ON THE SE FACTS THAT THE HIGH COURT HELD THAT THE APPEAL TO THE AAC WAS NOT M AINTAINABLE SINCE THE ASSESSEE HAD CONCEDED BEFORE THE AO THAT THE DISCREP ANCIES COULD NOT BE RECONCILED AND, THAT THE AMOUNT MAY BE ADDED TO THE INCOME. THIS FACTUAL POSITION WAS NOT RESILED FROM BY THE ASSESSEE AT A NY TIME THEREAFTER BEFORE THE ITO. THE HIGH COURT, THEREFOR E, HELD THAT SO LONG AS THE ASSESSEE'S STATEMENT STOOD, IT COULD NOT HAVE A GRIEVA NCE IN THAT BEHALF AND WAS NOT ENTITLED TO APPEAL AGAINST THE SAME . IN OUR HUMBLE 29 ITA NOS.2252 & 2273/PUN/2014 OPINION, THE JUDGMENT IS NOT APPLICABLE WHERE AN ADM ISSION OR CONCESSION IS MADE BY THE ASSESSEE ON A PURE QUESTION OF L AW. NO TAX CAN BE IMPOSED OR COLLECTED WITHOUT THE AUTHORITY OF LAW AND MERELY BECAUSE THE ASSESSEE ADMITS OR CONCEDES BEFORE THE AO THAT A PART ICULAR AMOUNT IS TAXABLE IN LAW, THERE BEING NO DISPUTE REGARDING T HE FACTS, IT CANNOT BE BROUGHT TO TAX. IF STILL AO HAS BROUGHT THE SAME TO TAX BASED MERELY ON CO NCESSION MAD E BY TH E ASSE SSEE, IT CANNOT BE EQUATED TO A CONCESSION AS REGARDS FACTS, AND IT CANNOT BE SAID THAT THE ASSESSEE CA N HAVE NO RIGHT OF APPEAL WHEN HE IS LATER ADVIS E D O R INFORMED OF TH E C ORR E CT POSITION IN LA W. THE AO D E RIV E S THE POW E R TO A SS E SS A REC E IPT AS INC O M E ONLY FROM TH E P RO VISIONS OF THE TA X ING E NACTMENT AND NOT FROM THE CONCESSION MADE BY THE ASSESSE E THAT THE SAME IS TA X ABL E UNDE R TH E ENACTMENT. SUCH A CONCESSION, ON A PURE QU E STION OF LAW SUCH AS TH E ASSESSABILITY OF A RECEIPT AS 'INT E RES T ON LOANS AND ADVANC E S' UND E R THE PROVISIONS OF S. 2(7) OF THE INTEREST-TAX ACT, DOES NOT RELIEVE THE AO OF HIS DUTY TO EX AMINE WHETHER THE RECEIPT IS P R OP E RTY SO ASSESSABLE. IN THE JUDGMENT CITED BY T H E LEARNED DEPARTMENTAL REPRESENTATIVE (SUPRA), THE ASSE SSEE ADMITTED BEFORE THE AO THAT HE HAD NO EVIDENCE TO SU PPORT HIS CLAIM. THERE WAS NO DISPUTE THAT IF T HERE IS NO EVIDENCE TO RECONCILE THE DISC R EPANCIES DETECTED BY THE AO, THE AMOUNT I NVOLVED COULD BE BROUGHT TO TAX. WE ARE NOT CONCERNED WITH A CASE WHERE THE A SSESSEE AGREED TO AN ADD I TION ON GROUNDS OF LACK OF EVIDENCE. WE ARE CONCERNE D WITH A CASE WHERE THE ASSESSE E CONCEDED THAT IN LAW INTEREST FROM DEBENTURES COU L D BE ASSESSED AS INTEREST ON ' LOANS AND ADVANCES'. THIS CONCESSION IS OF A LEGAL POSITION WHICH DOES NOT BIND THE ASSESSEE. IF IT LA TER TRANSPIRES THAT THE CONCESSION WAS GIVEN UNDER A MISTAKEN I MPRESSION OF THE TRUE LEGAL POSITION, THE ASSESSEE COULD FILE AN APPEAL AND CHALLENG E THE ASSESSMENT. 7. WE, THEREFORE, HOLD THAT THE APPEAL B E FORE THE CIT(A) WAS MAINTAINABLE. 8. AS REGARDS MERITS, IN THE JUDGMENTS OF THE HIGH COURTS A ND THE ORDERS OF THE TR I BUNAL CITED ON BEHALF OF THE ASS E SSEE, IT HAS BEEN HELD THAT INTEREST ON DEBENTURES CANNOT BE CONSIDERED AS INT EREST ON LOANS AND ADVANCES AND, THEREFORE, NO INTEREST-TAX IS CHARG EABLE. RESPECTFULLY FOLLOWING THE JUDGMENTS AND THE ORDERS, WE DELETE THE DEBENTURE INTEREST OF RS . 2 4 ,26,974 FROM THE ASSESSMENT AND ALLOW THE APPEAL . (EMPHASIS SUPPLIED BY US) 38. WE FURTHER FIND MR. CYRUS POONAWALLA IN HIS STATEMENT RECORDED U/S.132(4) HAD CATEGORICALLY STATED THAT MR. ADA R POONAWALLA WILL BE FREE AND WILL CONTINUE TO CONTEST THE OTH ER ISSUE AS TO WHETHER THE ABOVE TRANSACTION IN SHARES OF CITY P ARKS PVT. LTD. AND HCL TECHNOLOGIES LTD. WERE ADVENTURE IN NATURE OF T RADE AS HELD BY THE ASSESSING OFFICER OR CAPITAL GAIN ON INVESTMENT AS CLAIMED BY MR. ADAR POONAWALLA. ANOTHER FACT THAT MERITS CONSIDERATIO N IS THAT NO INCRIMINATING EVIDENCE WAS FOUND DURING THE COURSE OF SE ARCH. IT 30 ITA NOS.2252 & 2273/PUN/2014 WAS ONLY ON THE BASIS OF STATEMENT OF MR. CYRUS POONAW ALLA THAT THE ADDITION HAS BEEN MADE. 39. THE HONBLE MADRAS HIGH COURT IN THE CASE OF T. SIVAPRABHASKAR (SUPRA) HAS HELD THAT THE STATEMENT IS NO T AN EVIDENCE AND IN ABSENCE OF DISCOVERY OF ANY EVIDENCE IN T HE COURSE OF SEARCH AT THE PREMISES OF THE ASSESSEE OR ANY INFORMAT ION RELATABLE TO ANY SUCH MATERIAL ADDITION CANNOT BE MADE ON THE BA SIS OF THE STATEMENT OF A THIRD PARTY. THE RELEVANT OBSERVATION OF THE HONBLE HIGH COURT FROM PARA 7 ONWARDS READ AS UNDER : 7. W E HEARD MR. K . SUBRAMANIAM, LEARNED SENIOR S T ANDING CO U NS E L FO R TH E APPELLANT AND MR . V . D. GOPAL, LEARNED COUNSEL FOR THE RESPONDENT/ASS E SSEE. 8. A P E RU S AL OF THE ORDER OF THE ASSE S SING AUTHOR I TY AS WE L L AS THAT OF TH E TRIBUNAL DIS C LOSES THA T EVEN WHILE CONSIDERING THE CASH FLOW STATEMENT F I LED BY THE RESPOND E NT/A SS E S SEE, WHAT WAS MAINLY RELIED UPON BY THE ASSESSING AUTHORITY WAS NOT BASED ON A N Y SEARCH MAT E RIAL S, BUT WERE B A SED ON THE STATEMENT OF ONE T. SIVAPRABHAS K AR. THE TRIBUNAL ALSO NOTED T HAT IN THE ACKNOWLEDGEMENT ENCLOSED W I TH THE LETTER OF ITO, WARD-III(1) , TRICHY DT. 1 4 TH NOV . , 2006, THER E WAS NO MENTION ABOUT ANY SEIZED MATER I A L EXCEPT THE SWORN STATEMENT OF THE SAID T. SIVAPRABHASK AR DT. 3RD APRIL, 1996 AND THAT OF THE ASSESSEE DT. 21ST MA RCH, 1996. 9. IT I S WELL-SETTLED THAT IN ORDE R TO CAST A LIAB I L I TY BY WAY OF AN ORDER OF BLOCK ASSESSMENT UNDER CHAPTER XIV-B, THE PERIOD COM PRISING PREVIOUS YEARS RELEVANT TO TEN ASSESSMENT YEARS PRECEDING A PREVIOUS YEAR IN WHICH THE SEARCH WAS CONDUCTED UNDER S. 132 OF THE ACT, SUCH ASSESSMENT CAN BE MADE ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF THE SEARCH AND SUCH OTHER MATERIAL OR INFORMAT I ON THAT WERE AVAILABLE WITH T HE AO, WHICH WERE ALSO RELATABLE TO SUCH EVIDENCE. 10. A PERUSAL OF THE ORDER OF THE ASSESSING AUTHORITY D ISCLOSES THAT THERE WAS NO SUCH EVIDENCE , WHICH WAS AVA I LABLE AND UNEARTHED IN THE COURSE OF THE SEARCH HELD ON 21ST MARCH, 1996 OR SUCH I NFORMATION, WHICH WAS RELATABLE TO SUCH EVIDENCE FOUND IN SUCH MAT ER I AL. 11. IN SUCH CIRCUMSTANCES, THE CONC L USION OF T HE TRIBUNAL THAT T H E REL I ANCE PLACED UPON ANY OTHER MATERIAL , WHICH DID NOT FORM PART OF SUCH SEARCH MATERIAL BASED ON THE SEARCH CONDUCTED U N DER S. 1 32 OF THE ACT, OF THE ASSESSEE'S PREMIS E S ON 21ST MARCH , 1996 , CAN FO R M THE BASIS F OR MAKING THE BLOCK ASSESSMENT (SIC). THEREFORE, WE DO NOT FIND ANY ILLEGALITY IN THE CONCLUSION OF T HE TR I B U NAL IN HAVING SET ASIDE THE BLOCK ASSESSMENT AND G I V I NG LIBERTY TO THE ASSESSING AU T HO RI TY TO MAKE R EGULAR ASSESSMENT OR REASSESSMENT BASED ON THE I NFORMATION AVAILABLE AS PER T H E P R OVIS I ONS OF THE IT ACT. 31 ITA NOS.2252 & 2273/PUN/2014 12. THE QUEST I ONS OF LAW RAISED ARE THEREFORE ANSWERED AGAINST THE APPELLANT AND IN FAVOUR O F THE A S SESSEE . T H E APPEAL FAILS AND THE SAME IS DISMISSED. NO COSTS . 40. WE FIND THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CAS E OF PRATAPSINGH RAJENDRA CHAMOLA (SUPRA) HAS HELD THAT NO AD DITION IN BLOCK ASSESSMENT CAN BE MADE SOLELY ON THE BASIS OF STA TEMENTS RECORDED DURING THE COURSE OF SEARCH. SUCH STATEMENT S CANNOT BE TREATED AS INCRIMINATING MATERIAL FOUND IN THE COURSE OF SE ARCH. THE RELEVANT OBSERVATION OF THE TRIBUNAL FROM PARA 7 ONWARDS READ AS UNDER : 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE ORD ERS OF THE LOWER AUTHORIT I ES AND THE MATERIAL ON RECORD. IN THE INSTANT CASE, I T IS NOT IN DISPUTE THAT THE ADDITION OF RS. 20,35,000 HAS BEEN MADE SOLELY ON THE BASIS OF STATEMENTS RECORDED OF THE EMPLOYEES OF THE ASSESSEE FIRM UNDER S. 133A OF THE ACT AND STATEMENT RECORDED OF ONE OF THE PARTNERS OF THE ASSESSEE UNDER S. 132 OF THE ACT. THE BASI C CONTENTION OF THE ASSESSEE BEFORE US IS THAT SUCH STATEMENTS SO RECORDED DO NOT CONSTITUTE EVIDENCE DETECTED AS A RESULT OF SEARCH AND THEREFORE, IT CANNOT BE HELD THAT THERE WAS ANY UNDISCLOSED INCOME O F THE ASSESSEE ASSESSABLE IN TERMS OF CHAPTER XIV-B OF THE ACT. IN THIS REGARD, JODHPUR BENCH OF THE TRIBUNAL IN THE CASE OF CHITRA DEVI VS. ASSTT. CIT (SUPRA), AS REGARD THE PROVISIONS CONTAINED IN S. 158BB OF THE ACT , HELD THAT THE STATEMENTS RECORDED DURING THE SEARCH CANNOT BE SAID TO BE AN EVIDENCE FOUND AS A RESULT OF SEARCH THOUGH THE SAME MAY BE AN E VIDENCE OBTAINED DURING THE SEARCH. IT WAS THUS HELD THAT, ANY ADDITION MADE ON THE BASIS OF STATEMENTS RECORDED OR THROUGH ENQUIRY ALO NE CANNOT CONSTITUTE EVIDENCE FOUND AS A RESULT OF SEARCH AND ACC ORDINGLY, NO ADDITION CAN BE MADE BY WAY OF UNDISCLOSED INCOME IN THE BLOCK ASSESSMENT . IT HAS BEEN SO HELD IN PARA 39 OF THE DECISION: '39. BESIDES, THE SAID ADDITION IN THE HANDS OF PRESENT ASSESSEE CD IS NOT TENABLE ON THE LEGAL SCORE AS WELL. WE MAY NOTE THAT THE PROVISION OF S. 158BB(1) STANDS AMENDED VIDE FINANCE ACT, 2002 W.R.E. F. 1ST JULY, 1995, AND THE. RELEVANT AMENDED PROVISION STANDS AS UNDER: '158BB. (1) THE UNDISCLOSED INCOME OF THE BLOCK PERI OD SHALL BE THE AGGREGATE OF THE TOTAL INCOME OF THE PREVIOUS YEARS F ALLING WITHIN THE BLOCK PERIOD COMPUTED IN ACCORDANCE WITH THE PROVISI ONS OF THIS ACT, ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH OR REQ UISITION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS AND SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE AO AND RELATABLE TO SUCH EVID ENCE . . . . . . . EARLIER, THE WORDS 'RELATABLE TO SUCH EVIDENCE' DID N OT EXIST IN THE AFORESAID STATUTORY PROVISION, AND SO ANY INFORMATION C OULD ALSO FORM THE BASIS FOR ADDITION AS UNDISC L OSED INCOME. BUT NOW, AS S. 158BB(1) STANDS AMENDED VIDE FINANCE ACT, 2002, W.R.E.F. 1ST JULY, 1 995, AN INFORMATION AVAILABLE WITH THE AO, TO FORM BASIS FOR ADDITION IN A BLOCK ASSESSMENT, HAS ESSENTIALLY TO BE ONE RELATED TO OR CONNECTED WITH THE 32 ITA NOS.2252 & 2273/PUN/2014 EVIDENCE/MATERIAL FOUND AS A RESULT OF SEARCH/REQUISITI ON, AND IT CANNOT BE ANY INFORMATION THAT MAY BE AVAILABLE WITH THE A O, BEING UNRELATED TO OR UNCONNECTED WITH THE EVIDENCE FOUND AS A RESULT O F SEARCH. HOWEVER, IN THE INSTANT CASE, THIS ADDITION HAS BEEN MADE ON THE BASIS OF THE STATEMENTS OF PRESENT ASSESSEE AND HER TWO SONS RECORDED DUR ING SEARCH BUT THESE SAID STATEMENTS THOUGH, MAY CONSTITUTE INFORMA TION AVAILABLE WITH THE AO, BUT THE SAME CAN, BY NO STRETCH OF IMAG INATION, BE TREATED TO BE ' RELATABLE TO 'SUCH EV I DENC E' , THA T I S , TO TH E EVID E NC E 'FOUND' AS A R ESULT OF SEARCH I N AS MU C H AS T HE STATEMENT R ECO RD E D DURING SEARCH CANNOT BE SAID TO BE AN EVIDENCE 'FOUND ' AS A RESULT OF SEARCH THOUGH THE SAME MAY BE AN EVIDENCE 'OBTAINED' DURING SEARCH. ACCORDINGLY , IN VIEW OF THE PROVISION OF S . 15 8 BB(1) AS IT STANDS AMENDED VIDE F I NANCE ACT, 2002, W.R.E . F. 1ST JULY , 1995 , AN ADDITION ON ACCOUNT OF HOUSEHOLD EXPENSES DEEMED TO HAVE BEEN MET OUT OF JOB WORK INCOME, EST I MATED ON THE BASIS OF STATEMENT RECORDED DURING SEARCH, CANNOT JUSTIFIABL Y BE MADE IN THE BLOCK AS S E SS MENT AS THE SAID STATEMENT DOES NOT FALL WITHIN THE EMBRACEMENT OF EVIDENCE FOUND AS A R E SULT OF SE ARCH , NOR WITHIN THAT OF INFORMATION RELATABLE THERETO. THE ADD I TION, AS SUCH IS LIABLE TO BE DE L ETED.' 8. THE AFORESAID DECISION OF THE TRIBUNAL STANDS AFFIRMED BY THE HON'BLE RAJASTHAN HIGH COURT IN AN APPEAL BY THE R E VENU E AS REPORTED IN CIT VS. SMT. CHITRA DEVI SONI (2008) 214 CTR (RAJ) 118, THO UGH ON A DIFFERENT GROUND, AS THE REVENUE HAS NOT CHALLENGED THE ORDER O F THE TRIBUNAL ON THE AFORESAID PROPOSITION. IN FACT, SIMILAR VIEW HAS BE EN EXPRESSED BY THE JODHPUR BENCH IN ANOTHER CASE OF SHREE CHAND SONI VS. DY. CIT (2006) 101 ITJ (JD) 1028, WHEREIN PARA 47 CONTAINS THE FOLL OWING : ' 47 . THIS ADDITION IS BASED ON THE STATEMENT ALONE AND NO SUC H INCOME WAS D I SCLOSED IN THE RE TURN S FILED FOR THE BLOCK PERIOD. ADMITTEDLY NO INCRIMINATING DOCUMENT WAS FOUND TO SUPPORT THE IMPUG NED ADDITION. THIS BENCH HAS BEEN CONTINUOUSLY TAKING THE VIEW THAT A STATEMENT RE CORDED UNDER S . 132(4) OF THE ACT DOES NOT TANTAMOUNT TO UNEARTHING ANY INCRIMINATING E VIDENCE DURING THE COURSE OF SEARCH, THEREFORE, NO ADDITION CAN BE MADE ON THAT SCO R E ALONE . T H EREFORE , I N OUR OPINION , THE IMPUGNED ADDITION CANNOT SURVIVE, AND THE SAME HAS TO BE DE L ET E D . THE FOL L OW I NG CASES CAN BE REFERRED TO FOR THE ABOVE PROPOS I TION OF L AW : (I ) DY. CI T VS. SANMUKHDAS WADHWAN I (2003) 80 ITJ (NAG) 648 : (2003) 85 ITD 73 4 (NAG); ( I I) CONCORD OF IND I A INSURANCE CO. LTD. VS. SMT. NIRMALA DEVI & ORS. (1979) 118 ITR 507 (SC); (III) SATISHBHAI JAYANTILAL SHAH VS. ASSTT. CIT (1997) 57 ITJ (AHD) 424 : (1997) . 61 ITD 307 (AHD). ' 9 . THE COCHIN BENCH OF TRIBUNAL IN THE CASE OF MRS. CATH ERINE THOMAS VS . DY. CIT (2008) 116 ITJ (COCH) 797 : (2008) 111 ITD 132 (COCH) HAS ALSO HELD AS UNDER : ' 13. WE HAVE HEARD THE PARTIES. IN THIS CASE, THE SAID A DDITIONS ARE MADE WHICH ARE BASED ON SOME OF THE ADMISSIONS OR STATEMENTS OF THE DECEASED ASSESSEE DURING THE COURSE OF SEARCH ACTION UNDER S. 132. THE CIT(A) HIMSELF HAS COME TO THE CONCLUSION THAT THE SAID ADDITI ONS ARE NOT BASED ON ANY MATERIAL AND ARE ONLY ON PURE ASSUMPTION. THE CIT(A) HAS ALSO 33 ITA NOS.2252 & 2273/PUN/2014 GIVEN THE FINDING THAT THAT THE AO HAS NOT MADE ANY ATTEMPT TO QUANTIFY THE HOUSEHOLD EXPENSES FOR THE YEAR WHEN THE STATEMENT WAS MADE. THE CIT(A) HAS FURTHER GIVEN THE FINDING THAT THERE IS ME RIT I N THE ASSESSEE'S CONTENTION THAT THE ESTIMATE IS ILLOGICAL AND BASELESS. THE REVENUE HAS NOT CHALLENGED THIS FINDING OF THE CIT(A) BEFORE US.' 10. IT IS THUS EV I DENT FROM THE ABOVE THAT A CONSISTENT VIEW THAT HAS B EEN EXPRESSED I N SERIES OF DECISIONS IS THAT THE STATEMENTS RECORDED BY I TSELF CANNOT CONSTITUTE EV I DENCE FOUND AS A RESULT O F SEARCH FOR PURPOSE OF DETERMINING UNDISCLOSED INCOME UNDER CHAPTER XIV-B OF THE ACT . RESPECTFULLY FOLLOWING THE AFORESAID PRINCIPLES, WE HO LD THAT SINCE IN THE INSTANT CASE TOO, THE ADDI T ION HAS BEEN MADE SOLELY ON THE BASIS OF STATEMENTS RECORDED, THERE IS NO SCOPE FOR ADDING T HE S UM OF RS. 20,35,000 AS UND I SCLOSED INCOME OF THE ASSESSEE WITHIN THE MEANING OF CHAPTER XIV - B OF THE ACT. THE ADD I TION IS HEREBY DELETED. 11 . BEFORE PARTING WE MAY ALSO REFER TO AN ARGUMENT TAKE N BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE BASIS OF THE DECISION OF THE HON 'BLE RAJASTHAN HIGH COURT IN THE CASE OF RAMJAS NAWAL VS. CI T (2003) 183 CTR (RAJ) 144. BY RELYING ON THE SAID DECISION, IT WAS CON TENDED THAT THE STATEMENT RECORDED AT THE TIME OF THE SEARCH CAN BE A BASIS TO DETERMINE UNDISCLOSED INCOME OF THE ASSESSEE UNDER CHAPTER XIV-B OF THE ACT. WE HAVE PERUSED THE SAID DECISION. IN THIS CASE, STATEMENT W AS RECORDED DURING THE SEARCH WHEREBY THE ASSESSEE COULD NOT EXPLAIN THE PROFITS OF A PARTNERSHIP FIRM M/S S.P. AND THE GIFTS SHOWN IN THE PA PERS SEIZED. THE ASSESSEE, THEREFORE SURRENDERED THE SAME FOR TAXATION WHE REAS IN THE IT RETURNS, THE SAME WAS NOT OFFERED FOR TAXATION. THE AD DITIONS WERE MADE BY THE AO ON THIS COUNT, WHICH WERE SUSTAINED BY THE H ON'BLE HIGH COURT WHEREBY IT WAS NOTICED THAT AT THE TIME OF SEARCH, TH E INCOME IN QUESTION WAS ADMITTED BY THE ASSESSEE. HOWEVER, THE SAID DECISION IS NOT A CASE TO SUPPORT THE PROPOSITION THAT AN ADDITION UNDER CHAPTE R XIV-B CAN BE MADE SOLELY ON THE BASIS OF THE STATEMENTS RECORDED IN T HE SEARCH. IN THE CASE OF RAMJAS NAWAL (SUPRA) NOT ONLY THERE WAS AN ADMI SSION DURING THE STATEMENT RECORDED AT THE TIME OF SEARCH BUT INCRIMIN ATING MATERIAL IN THE FORM OF VALUABLES, ASSETS, DOCUMENTS, JEWELLERY AND PAP ERS RELATING TO INVESTMENTS ETC. WERE ALSO FOUND AND SEIZED. IN PARA 19 OF THE SAID JUDGEMENT, IT IS CLEARLY OBSERVED BY THE HON'BLE HIGH COURT THAT AS PER THE MATERIAL ON RECORD, THE FIRM M/S S.P. WAS FOUND NOT T O BE GENUINE. THIS PROMPTED THE ASSESSEE TO SURRENDER THE INCOME SHOWN IN TH E NAME OF M/S S.P. AS INCOME OF THE ASSESSEE AND HIS TWO SONS. FROM THE READING OF THE SAID JUDGEMENT, IT TRANSPIRES THAT IT IS NOT THE STA TEMENT OF THE ASSESSEE DURING THE SEARCH ALONE WHICH FORMED THE BASIS WITH THE AO TO MAKE THE ADDITION. IN THE PRESENT CASE, AS WE HAVE FOU ND EARLIER, THE SOLE BASIS TO MAKE THE ADDITION ARE THE STATEMENTS RECORDED AT THE TIME OF SEARCH. THEREFORE, THE DECISION OF THE HON'BLE HIGH C OURT OF RAJASTHAN IN THE CASE OF RAMJAS NAWAL (SUPRA) STANDS ON A DIFFERENT FOOTING AND DOES NOT MILITATE AGAINST THE LEGAL PROPOSITION RELIED UPO N BY US IN ORDER TO DELETE THE ADDITION IN THE INSTANT APPEALS. 41. SINCE THE TRIBUNAL HAS ALREADY DECIDED THE ISSUE IN FAVO UR OF THE ASSESSEE IN THE APPEAL FILED AGAINST THE ORIGINAL ASSESSMENT ORDE R AND ORIGINAL CIT(A)S ORDER AND SINCE NO INCRIMINATING MATERIA L WAS 34 ITA NOS.2252 & 2273/PUN/2014 FOUND DURING THE COURSE OF SEARCH AND THE ADDITION WAS M ADE SOLELY ON THE BASIS OF THE STATEMENT OF THE ASSESSEE, THEREFOR E, WE HOLD THAT THE CIT(A) WAS NOT JUSTIFIED IN DISALLOWING THE LOSS OF RS.15,01,80,424/- ON ACCOUNT OF SALE OF SHARES OF HCL TECHN OLOGIES LTD. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 42. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWE D AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 02-02-2017. SD/- SD/- (VIKAS AWASTHY) (R.K. PANDA) JUDICIAL MEMBER ACC OUNTANT MEMBER PUNE; DATED : 02 ND FEBRUARY, 2017. ( )'+ , / COPY OF THE ORDER FORWARDED TO : / BY ORDER , //TRUE COPY// .//ASSISTANT REGISTRAR 9 , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A) - I , PUN E 4. CIT (CENTRAL), PUNE 5. > AA9 , 9 , A BENCH / DR, ITAT, A BENCH PUNE; 6. C / GUARD FILE.
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Team Counselvise - February 06, 2026
Residency Rules: Income Tax Act, 1961 vs Income Tax Bill, 2025 — A Subtle Yet Significant Shift!
Team Counselvise - February 18, 2026