DCIT, Ludhiana V. M/s Oriental Dyeing & Finishing Mills, Ludhiana

ITA 230/CHANDI/2008

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1617 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-10-2015
• Assessment Year: 1999-2000
• Appeal Filed On: 20-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSHIL VERMAN
• Keywords: Capital asset

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 230/CHD/2008 ASSESSMENT YEAR: 1999-2000 THE DCIT, VS M/S ORIENTAL DYEING & CIRCLE-VI, FINISHING MILLS, LUDHIANA. 278-I.A.A., LUDHIANA. PAN: AAAF02323E & ITA NO. 286/CHD/2008 ASSESSMENT YEAR: 1999-2000 THE ITO-VI(2), VS SHRI RAJAT SOOD, LUDHIANA. 278-I.A.A., LUDHIANA. PAN: ACFPS3599B & ITA NO. 287/CHD/2008 ASSESSMENT YEAR: 2000-2001 THE ITO-VI(2), VS SHRI RAJAT SOOD, LUDHIANA. 278-I.A.A., LUDHIANA. PAN: ACFPS3599B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUSHIL VERMAN, CIT-DR RESPONDENT BY : SHRI ASHWANI KUMAR DATE OF HEARING : 20.10.2015 DATE OF PRONOUNCEMENT : 04.11.2015 O R D E R PER BHAVNESH SAINI,JM THIS ORDER SHALL DISPOSE OF ALL THE DEPARTMENTAL APPEALS. WE HAVE HEARD REPRESENTATIVES OF BOTH THE 2 PARTIES, PERUSED THE FINDINGS OF AUTHORITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. THE A PPEALS ARE DECIDED AS UNDER. ITA 230/2008 2. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE O RDER OF LD. CIT(APPEALS)-II LUDHIANA DATED 09.01.2008 FO R ASSESSMENT YEAR 1999-2000, CHALLENGING THE ORDER OF LD. CIT(APPEALS) IN DELETING THE ADDITION OF RS. 1,58,6 3,380/- MADE BY ASSESSING OFFICER UNDER SECTION 45(4) OF TH E INCOME TAX ACT AS CAPITAL GAINS. THE ASSESSEE CHAL LENGED THE ACTION OF THE ASSESSING OFFICER BEFORE LD. CIT( APPEALS) IN WORKING OUT AND ASSESSING LONG TERM CAPITAL GAIN IN THE CASE AT RS. 1,58,63,380/- ON THE ALLEGED TRANSFER O F FACTORY LAND AND BUILDING ETC. AND HIS ACTION IN HO LDING THAT THE CONDITIONS STIPULATED IN SUB-SECTION (XIII )(C) AND (D) OF SECTION 47 WERE NOT FULFILLED. 3. THE BRIEFS OF THE CASE ARE THAT ORIGINAL RETURN DECLARING NET INCOME OF RS. 11,47,211/- WAS FILED O N 20.12.1999. IN THE MONTH OF MARCH, 2006, A REPORT O N TAX EVASION PETITION IS STATED TO HAVE BEEN RECEIVED FR OM THE OFFICE OF THE DDIT(INV.)-II, LUDHIANA REPORTING THA T IN A PROCESS OF-TAKE-OVER OF BUSINESS OF THE ASSESSEE FI RM UNDER ASSESSMENT BY M/S ORIENTAL KNIT FAB. (P) LTD. , LUDHIANA A PRIVATE LIMITED COMPANY, SUBSTANTIAL AMO UNT OF RS.1.02 CRORE WAS AGREED TO BE PAID BY S/SHRI RA JAT SOOD AND NARINDER SOOD, PARTNERS (TRANSFEREES) TO S HRI 3 VIJAY SOOD, PARTNER(TRANSFEROR) VIDE AGREEMENT DATE D 7.12.1998, THIS FIRM WAS ORIGINALLY EVIDENCED BY PARTNERSHIP DEED DATED 1.4.1992 AND IT WAS IN THE BUSINESS OF PROCESSING AND DYEING OF YARN/CLOTHS AN D RESALE OF DYES AND CHEMICALS. THE PARTNERS AND THEI R SHARES IN THE FIRM WERE AS UNDER: - 1. VIJAY SPOD S/O SH. RAM MURTI SOOD 25% 2. SH. NARINDER SOOD S/O -DO- 25% 3. SH. RAJAT SOOD S/O SH. NARINDER SOOD 25% 4. SH. VIJAY SOOD (HUF) KARTA VIJAY SOOD 25% 4. AS PER THE ASSESSMENT ORDER, AS HUGE LIABILITY O F CAPITAL GAIN IS ATTRACTED IN THE PROCESS OF TRANSFE R OF CAPITAL ASSET BY WAY OF DISTRIBUTION OF CAPITAL ASS ET ON THE DISSOLUTION OF THE FIRM, A NOTICE U/S ,148 WAS ISSU ED ON 24.3.2006 AND SERVED UPON THE ASSESSEE ON 27.3.2006 . IN RESPONSE TO THE QUERIES OF THE A.O. WITH REGARD TO CAPITAL GAINS ARISING ON THE TAKING OVER OF THE ASSETS OF T HE FIRM BY THE PVT. LTD. COMPANY AS ABOVE, IT WAS CONTENDED THAT NO CAPITAL GAIN IS CHARGEABLE U/S 45(4) AS IT IS EX EMPT BY VIRTUE OF CLAUSE XIII OF SECTION 47 OF THE ACT. AS ALL THE RELEVANT CONDITIONS LAID THEREIN HAVE BEEN FULFILLE D AND WHEN THERE WAS NOTING TO JUSTIFY THAT ANY CONDITION WAS NOT FULFILLED. 5. SUBSEQUENTLY ON THE REQUEST OF THE ASSESSEE INSPECTION OF RECORD WAS GIVEN BY THE A.O. TO THE A SSESSEE. DURING THE ASSESSMENT PROCEEDINGS THE A.O. SOUGHT T O CONSIDER THAT THE DOCUMENT DATED 7.12.1998 REGARDIN G PAYMENT TO SHRI VIJAY SOOD WAS A GENUINE DOCUMENT. AS 4 PER THIS DOCUMENT RS. 1,02,00,000/- WAS TO BE PAID TO SHRI VIJAY SOOD PARTNER BY SHRI NARINDER SOOD AND S HRI RAJAT SOOD. THIS AMOUNT WAS TO BE PAID IN THREE OR MORE INSTALLMENTS AS PER THE FOLLOWING SCHEDULE AS ALSO THE DELIVERY OF TWO MOTOR CARS (OF THE FIRM) DESCRIBED AS UNDER:- RS.26,00,000/- FROM TODATE TO 1.1.1999 RS.36,00,000/- FROM 1.1.1999 TO 30.6.1999 RS.40,00,000/- FROM 1.7.1999 TO 30.12.1999 MOTOR CARS PB-10-A-3433 (CONTESSA) PB-10-S-3637 (MARUTI ESTEEM) 6. AS PER THIS ALLEGED DOCUMENT LAND (MEASURING 24 20 SQ. YDS) AND BUILDING SITUATED AT 278-IAA, LUDHIANA , PLANT AND MACHINERY INCLUDING THE ELECTRICAL FITTINGS, GE NERATOR ETC., MOTOR CARS, POWER ELECTRICITY AND TELEPHONE CONNECTION TOGETHER WITH ANY SECURITY THERE AGAINST WHETHER REFUNDABLE OR NOT, ANY GOODWILL ENJOYED BY THE FIRM ETC. WOULD HAVE BECOME THE SOLE AND ABSOLUTE PROPERTY/RIGHT OF SHRI NARINDER SOOD AND SHRI RAJAT SOOD AND THAT SHRI VIJAY SOOD BEING THE TRANSFEROR IRREV OCABLY RELINQUISHED ALL THE RIGHTS THEREIN IN FAVOUR OF TH E TRANSFEREE I.E. SHRI NARINDER SOOD AND SHRI RAJAI S OOD. IN VIEW OF CONSIDERING THIS AGREEMENT TO BE A GENUINE AGREEMENT, THE A.O. WAS OF THE VIEW THAT OF SECTION 45(4) ARE APPLICABLE IN ASSESSEE'S CASE. HE ACCORDINGLY A SKED ASSESSEE TO EXPLAIN AS TO WHY THE CAPITAL GAINS SHO ULD NOT BE BROUGHT TO TAX. 5 7. DURING .THE ASSESSMENT PROCEEDINGS IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE AGREEM ENT DATED 7.12.1998 WAS NEVER ENTERED OR EXECUTED BETWE EN THE PARTIES AND THE ALLEGATIONS MADE BY SHRI VIJAY SOOD WERE FALSE. AS PER THE ASSESSEE THE BUSINESS & MANAGEMENT ALONG WITH ASSETS AND LIABILITIES OF THE ASSESSEE WERE TAKEN OVER BY THE COMPANY M/S ORIENTA L KNIT FAB. (P) LTD. VIDE AGREEMENT DATED 1.4.1999. I T WAS EXPLAINED THAT SH RAJINDER PAL SOOD, ONE OF THE WIT NESSES HAS REFERRED TO THE AGREEMENTS DATED 1.4.1999 AND T O AGREEMENT DATED 30.12.99 AND THAT IF AGREEMENT DATE D 7.12.98 WAS ENTERED, THEN THERE WAS NO NEED FOR ANY AGREEMENT DATED 1.4.99 AND DATED 30.12.1999. IT WAS SUBMITTED THAT NO CASH PAYMENT OF RS.36 LAC AND RS. 21 LAC AS CLAIMED TO BE MADE BY SHRI VIJAY SOOD TO HIM BY SHRI RAJAT SOOD AS PER THE AGREEMENT DATED 7.12.199 8 WAS EVER MADE. CERTAIN CONTRADICTIONS IN THE STAT EMENT OF SHRI VIJAY SOOD WERE ALSO POINTED OUT DURING THE ASSESSMENT PROCEEDINGS BY THE ASSESSEE TO CONTEND T HAT THE, ALLEGED AGREEMENT DATED 7.12.1998 WAS NOT A GENUINE DOCUMENT. THE A.O., HOWEVER, DID NOT ACCEP T THE CONTENTION OF THE ASSESSEE. HE OBSERVED THAT SHRI VIJAY SOOD WAS HAVING SUBSTANTIAL SHARE IN THE FIRM OF 50 % IN HIS INDIVIDUAL AND HUF CAPACITY AND THAT THE BUSINE SS PREMISES OF THE ASSESSEE FIRM WERE LOCATED IN THE P RIME BUSINESS PLACE I.E. INDUSTRIAL AREA 'A', LUDHIANA. THE A.O. FURTHER OBSERVED THAT A VERY HIGH VALUE OF GOO DWILL IS ATTACHED TO THE INDUSTRIAL HOUSES LOCATED IN THI S AREA. 6 AS PER HIM, NO PARTNER WILL RELEASE/RELINQUISH HIS INTEREST IN THE SPECIFIED ASSETS WHICH IN ADDITION TO LAND & FACTORY, BUILDING ALSO INCLUDES HIS INTEREST IN ELECTRICAL, GOODWILL, LICENSES, QUOTAS AND CONTRACT S ETC. AT THE BOOK VALUE. THE AO ALSO OBSERVED THAT THE MARKE T VALUE OF SPECIFIED ASSETS OF THE ASSESSEE WAS MANY MORE TIMES THAN THE BOOK VALUE AS ALSO INDICATED BY THE CONSIDERATION AGREED TO PASS AS PER THE AGREEMENT D ATED 7.12.1998. HE, THEREFORE, CONCLUDED THAT THE TAKE-O VER AGREEMENT DATED 1.4.1999, IF ANY, IS A SHAM AND COL LUSIVE DOCUMENT AND THAT THIS SEEMS TO BE A BRAIN WORK OF AN INCOME TAX CONSULTANT OF THE ASSESSEE FIRM OR OF ITS EX- PARTNERS. AS PER THE A.O. THE DOCUMENT IS SUBSEQUE NTLY MADE TO EVADE HUGE LIABILITY TO CAPITAL GAINS TAX O F THE ASSESSEE FIRM U/S 45(4) TAKING SHELTER OF EXEMPTION U/S 47(XIII) OF THE ACT. WHILE CONCLUDING AS ABOVE, THE A.O, ALSO OBSERVED THAT THE 'ORIGINAL DOCUMENT DATED 7.1 2.1998 WAS DULY PRODUCED BY SHRI VIJAY SOOD BEFORE THE ITO -V1(2) IN THE PROCEEDINGS BEFORE HIM IN !HE CASE OF SHRI R AJAT SOOD (ASSESSMENT YEAR 2000-01). HE ALSO NOTED THAT SH VIJAY JAIN AND SH RAJINDER PAL SOOD, THE WITNESSES TO THE AGREEMENT DATED 7.12.1998 IN THEIR STATEMENTS RECOR DED BY THAT A.O. DID CONFIRM SIGNING THE ALLEGED DOCUME NT AS PER THE AO THE CONTENTION OF THE ASSESSEE THAT THE WITNESSES HAVE NO KNOWLEDGE OF THE CONTENTS OF THE DOCUMENT ETC. HAVE NO LOCUS STANDI EVEN IN THE EVENT OF PRODUCTION OF ORIGINAL DOCUMENT BEFORE ITO-VI(2), LUDHIANA. THE AO ALSO NOTED THAT SHRI VIJAY SOOD DU LY 7 CONFESSED BEFORE THE ITO-VI(2) THAT HE RECEIVED 'CA SH AS MENTIONED IN THE AGREEMENT AND THAT THE SAID CASH W AS SPENT IN PURCHASE OF LAND, MARRIAGE OF HIS DAUGHTER AND IN STARTING NEW BUSINESS IN THE NAME & STYLE OF KIR ON COLLECTION. THOUGH THE A.O. OBSERVED THAT SHRI VIJA Y SOOD CORROBORATED THE UTILIZATION OF CASH WITH SOME DOCUMENTARY EVIDENCE, THE SAID DOCUMENTARY EVIDENCE HAS NOT BEEN DISCUSSED IN THE ASSESSMENT ORDER. 8. COMING TO THE APPLICABILITY OF THE PROVISIONS OF SECTION 47(XIII) THE A.O. OBSERVED THAT IN THE CASE OF THE ASSESSEE THE CONDITIONS STIPULATED IN SUB-CLAUSE XI II (C) & XIII (D) ARE NOT FULFILLED IN ASSESSEE'S CASE. THIS IS SO, BECAUSE THE SHARES OF THE COMPANY FLOATED ON ACCOUN T OF TAKE-OVER OF THE ASSESSEE FIRM, WERE NOT RETAINED F OR A MINIMUM PERIOD OF FIVE YEARS AS PER THE LAW. HE, THEREFORE, HELD THAT CAPITAL GAINS WAS CHARGEABLE I N THIS CASE U/S 45(4) OF THE ACT. 9. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER WORKED OUT THE CAPITAL GAINS UNDER THE PROVISIONS OF SECTION 4 5(4) IN THIS CASE AS UNDER: - THE CONSIDERATION PASSING ON THE TRANSFER OF CAPITAL ASSETS AS PER THE AGREEMENT DATED 7.12.1998 AS DISCUSSED ABOVE. 2,04,00,000 LESS: INDEX COST OF LAND (1349123 X 351/223) RS.2123508/- WDV OF OTHER ASSETS RS.2413112/- RS. 45,36,620/- LONG TERM CAPITAL GAIN RS. 1,58,63, 380/- 8 HE ADDED THIS AMOUNT TO THE TOTAL INCOME OF THE ASS ESSEE IN THE ASSESSMENT YEAR UNDER CONSIDERATION. 10. THE ADDITION WAS CHALLENGED BEFORE LD. CIT(APPE ALS) AND IN APPEAL, THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE ASSESSING OFFICER AS NOT AT ALL JUSTIFIED IN HOLDING THAT THE PROVISIONS OF SECTION 45(4) WERE APPLICABLE IN THE FACTS & CIRCUMSTANCES OF ASS ESSEE'S CASE AND IN MAKING ADDITION OF RS.L,58,63,380/- TO THE TOTAL INCOME ON ACCOUNT OF CAPITAL GAINS. THE LD. C OUNSEL FOR THE ASSESSEE SUBMITTED THAT IN COMING TO HIS CONCLUSIONS AS ABOVE, THE LD. A.O. HAS HEAVILY AND RATHER UNILATERALLY RELIED ON AN ALLEGED AGREEMENT DATED 7.12.1998 WITHOUT APPRECIATING THE SUBMISSIONS WHATSOEVER MADE BY THE ASSESSEE DURING THE ASSESSME NT PROCEEDINGS. 10.1 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED TH AT THE MANAGEMENT OF THE BUSINESS ALONG WITH ALL THE ASSET S AND LIABILITIES OF THE ASSESSEE FIRM WERE TRANSFERR ED TO M/S ORIENTAL KNIT FAB. PVT. LTD. VIDE AGREEMENT FOR TAKEOVER DATED 1.4.1999. IT IS FURTHER SUBMITTED TH AT THIS AGREEMENT IS DULY SIGNED BY ALL THE THEN PARTNERS S HRI N.M. SOOD, SHRI V.M. SOOD AND SHRI RAJAT SOOD AND S HRI VIJAY SOOD, KARTA OF HIS HUF ALONG WITH SHRI RAJAT SOOD IN THE CAPACITY OF THE DIRECTOR OF THE COMPANY. TWO WITNESSES SHRI VIJAY KUMAR JAIN AND SHRI RAJINDER P AL SOOD HAVE ALSO SIGNED THIS AGREEMENT. THIS AGREEMEN T IS 9 STATED TO BE DULY REGISTERED BEFORE THE SUB-REGISTR AR. THE LD. COUNSEL ALSO EXPLAINED THAT VIDE AN ANOTHER AGREEMENT DATED 30.12.1999 SHRI VIJAY SOOD AND SHRI RAJAT SOOD IN THEIR INDIVIDUAL CAPACITIES AND IN TH E CAPACITY OF THE PARTNERS OF THE APPELLANT FIRM (BOT H AS INDIVIDUAL AND HUF FOR SHRI VIJAY SOOD) AND DIRECTO R OF THE ABOVE MENTIONED COMPANY HAVE AGREED THAT ERSTWH ILE FIRM OR ANY OF ITS PARTNERS WERE LEFT WITH NO RIGHT , TITLE OR INTEREST IN THE PROPERTY BEING THE LAND AND BUILDIN G BELONGING TO THE ASSESSEE FIRM AND THAT THIS WOULD BECOME THE PROPERTY OF THE COMPANY, THIS AGREEMENT HAS ALSO BEEN SIGNED BY ALL THE PARTIES AND THIS IS STA TED TO BE READ IN SUPPLEMENT TO THE AGREEMENT DATED 1.4.19 99. HE SUBMITTED THAT IT IS ON THE BASIS OF THESE AGREE MENTS THAT THE LAND AND BUILDING PERTAINING TO THE ASSESS EE FIRM WAS TRANSFERRED TO THE SAID COMPANY AND THAT T HE AGREEMENT CLAIMED TO HAVE BEEN ENTERED ON 07.12.199 8, IS NOT GENUINE AT ALL. AS PER THE LD. COUNSEL THE V ARIOUS CONCLUSIONS DRAWN BY THE A.O. ARE CONTRARY TO THE F ACTS AND CONTRADICTORY AND THAT THIS IGNORE THE FOLLOWIN G FACTUAL AND LEGAL POSITION: - THE SAID AGREEMENT DATED 7.12.1998 WAS THE PRODUCT OF THE FIGMENT OF IMAGINATION OF SH VIJAY SOOD WITH A VIEW TO SERVE HIS PURPOSE AND TO CREATE PROBLEMS FOR THE APPELLANT FIRM AND ITS PARTNERS. THE STATEMENTS AND CROSS-EXAMINATION OF SH VIJAY SOOD AND THE STATEMENTS OF THE WITNESSES 10 RECORDED BY DY DIRECTOR INCOME TAX-LNV II, AND OTHER ALLIED EVIDENCE AND PAPERS GO ON TO PROVE THAT NO AGREEMENT DATED 07-12-1998 WAS EVER EXECUTED AND NO PAYMENT IN CASH AS ALLEGED BY SH VIJAY SOOD HAS EVER BEEN MADE PURSUANT TO THE SO CALLED AGREEMENT. ALL THE ALLEGATIONS ARE FALSE, WITHOUT ANY SUB- STRATUM OF FACTUAL CONTENT. THE AGREEMENT IS ONLY AN AFTER-THOUGHT OF SH VIJAY , SOOD, WHO CREATED THIS FALSE AGREEMENT TO HARASS ,SH RAJAT SOOD AND HIS FAMILY MEMBERS AS WOULD BE APPARENT FROM A CONSIDERATION OF THE FOLLOWING FACTS:- MR VIJAY SOOD TRIED TO HARASS THE PARTNERS OF THE APPELLANT FIRM AT VARIOUS LEVELS E.G. BY FILLING A CIVIL SUIT AGAINST FOR DECLARATION OF THE AGREEMENT DATED 7-12-1998 AS NULL & VOID WHEREAS THE SAID AGREEMENT NEVER EXISTED AND UPON THE REPLICATION OF THE DEFENDANTS TO THE COURT, AROUND 3 YEARS BACK HE HAS NOT FOLLOWED THE SUIT. MOREOVER, IF SUCH AN AGREEMENT WOULD HAVE BEEN THERE, HE MIGHT HAVE PROCEEDED FOR RECOVERY AND PURSUED THE LEGAL ACTION TO ITS LOGICAL CONCLUSION. MR VIJAY SOOD ALSO FILED A COMPLAINT DATED 27- 02-2004 WITH REGISTRAR OF COMPANIES, JALANDHAR, REGARDING WRONG TRANSFER OF SHARES, WHICH WAS PROPERLY REPLIED BY THE PARTNERS OF APPELLANT. FIRM AND THE TRANSFER DEEDS AND OTHER PAPERS WERE DULY VERIFIED BY THE SAID AUTHORITY AND AFTER VERIFICATION, THE COMPLAINT WAS FOUND TO BE FALSE AND HENCE FILED WHICH AGAIN UNDERLINES AND PROVES BEYOND DOUBT HIS NEFARIOUS INTENTIONS. REGARDING THE SO CALLED AGREEMENT DATED 7-12- 1998, WHILE THE ENTIRE DOCUMENT IS TYPE WRITTEN ONLY THE AMOUNTS ARE FILLED THEREIN BY HAND. IF 11 THE AGREEMENT WAS BEING TYPED AND SIGNED IN 'ITS SPIRIT, THEN OBVIOUSLY AND EVIDENTLY THERE WAS NEED FOR WRITING THE AMOUNT BY HAND INSTEAD OF BEING TYPE WRITTEN. IN HIS CROSS EXAMINATION IN PARA NO. 3 MR. VIJAY SOOD HAS STATED THAT THE AMOUNTS WERE WRITTEN BY SH VIJAY JAIN, A WITNESS TO THE SO TAILED AGREEMENT DATED 7-12-1998 AFTER THESE FIGURES WERE ARRIVED AT BY THE TWO WITNESSES. WHEREAS BOTH THE WITNESSES, IN THEIR STATEMENTS BEFORE D.D.I.T-LNV II, LDH HAVE SHOWN THEIR IGNORANCE ABOUT THE CONTENTS OF THE SO CALLED AGREEMENT. SH RAJINDER PAL SOOD, ANOTHER WITNESS TO THE AGREEMENT HAS ALSO NOT ADMITTED ABOUT THE KNOWLEDGE OF EXISTENCE OF ANY SUCH AGREEMENT, BUT SIMPLY SAID THAT THE PARTIES ASKED HIM TO PUT SIGN ON SOME DOCUMENTS AND THE CONTENTS WERE NOT DISCLOSED TO HIM AND HAS STATED MAT THE PARTIES CAME TO HIM ALONGWITH SH VIJAY JAIN THE OTHER WITNESS TO THE DOCUMENTS. SH VIJAY JAIN IN HIS WITNESS HAS SAID THAT THE DOCUMENTS WERE SIGNED IN THE DYEING MILL WHERE HE AND SH RAJINDER PAL SOOD MET SH NARINDER SOOD, VIJAY SOOD AND RAJAT SOOD. SH VIJAY JAIN IS ALSO MENTIONING THAT HE SIGNED THE PAPERS FOR TAKE OVER BY THE COMPANY OF FIRM AND ALSO SIGNED THE DOCUMENTS WHICH WERE GOT REGISTERED THROUGH HIS WITNESS IN THE COURT, WHICH CLEARLY REFER TO THE AGREEMENT DATED 01.04.1999 AND AGREEMENT DATED 30.12.1999 WHICH WAS GOT REGISTERED. EVIDENTLY IF THE SAID FIGURES HAVE BEEN ARRIVED AT AND FILLED IN BY ONE OF THE WITNESSES, THEY SHOULD EVIDENTLY HAVE KNOWN THE CONTENTS OF THIS AGREEMENT, WHICH FURTHER PROVES THAT THIS AGREEMENT NEVER EXISTED AND ITS CREATION IS AN AFTER THOUGHT ON THE POINT OF MR VIJAY SOOD. 12 AS REGARDS THE IGNORANCE OF SH VIJAY SOOD TO THE AGREEMENT DATED 01.04.09 FOR TAKEOVER OF FIRM BY THE COMPANY AS STATED IN PARA 4 OF HIS CROSS EXAMINATION, IT IS HUMBLY SUBMITTED THAT COPY OF THE SAID AGREEMENT DULY SIGNED BY ALL THE PARTIES ON REQUISITE STAMP PAPER IS ALREADY ON THE DEPARTMENT'S RECORD. MOREOVER, SH VIJAY SOOD EXECUTED AN AGREEMENT/DEED OF TRANSFER ALONGWITH SH RAJAT SOOD AND SMT MEENA SOOD BEFORE THE SUB REGISTRAR LUDHIANA (A REVENUE AUTHORITY) DATED 30-12-1999 TO GIVE AN EFFECT TO THE TERMS AND CONDITIONS OF THE AGREEMENT DATED 01.04.99 FOR TAKEOVER OF FIRM BY THE COMPANY. HIS ACT OF DEHYING THE FACT OF HAVING SIGNED SUCH AN AGREEMENT VIDE PARA NO. 6 OF HIS CROSS EXAMINATION, EVEN AFTER THE FACT THAT SUCH AN AGREEMENT WAS SIGNED BEFORE SUB-REGISTRAR, LUDHIANA, FURTHER PROVES HIS MALAFIDE AND THAT WHATEVER HE IS STATING IS FALSE AND THE FABRICATION OF THE ALLEGED AGREEMENT DATED 7.12.1998 IS JUST A MEANS TO HARASS THE OTHER PARTY AND IT WAS NEVER EXECUTED AND THE AGREEMENT DATED 1,4,1999 IS THE ONLY VALID DOCUMENT, SH VIJAY SOOD HAS PROPERLY SIGNED AND EXECUTED TRANSFER DEEDS FOR TRANSFER OF HIS SHARES ORIENTAL KNIT FABS PVT. LTD., WHICH CAME INTO BEING AFTER CONVERSION OF THE FIRM INTO COMPANY' AS WOULD BE EVIDENT FROM THE ORIGINAL TRANSFER DEEDS AVAILABLE WITH THE COMPANY, THIS FACT HAS ALSO BEEN PROVIDED BEFORE REGISTRAR OF COMPANIES AS EXPLAINED HEREINBEFORE. WHILE ON THE ONE HAND MR. VIJAY SOOD HAS STATED THAT AFTER DEATH OF HIS BROTHER SH. NARINDER SOOD ON 03.05.1999, SH RAJAT SOOD STARTED REFUSING TO PAY HIM THE BALANCE 13 AMOUNT. ON THE CONTRARY HE IS SAYING THAT RS.36.00 LACS WAS PAID ON 30.6.1999 IN CASH IN HIS STATEMENT RECORDED BEFORE THE DD1T-II AND RS. 7.00 LACS BY CHEQUES THEREAFTER. FURTHER MORE IN THE COURT CASE HE HAS ADMITTED OF HAVING ALLEGEDLY RECEIVED RS. 23.5 LACS IN CASH INSTEAD OF RS.36.00 LACS WHICH REVEAL THE SELF CONTRADICTORY NATURE OF HIS STATEMENTS ARISING OUT OF THE MALAFIDE INTENTIONS EXHIBITED UN FABRICATING DOCUMENTS. HE HAS STATED TWO DIFFERENT AMOUNTS AT TWO DIFFERENT PLACES. THERE IS NO PROOF OR DOCUMENT OR RECEIPT FOR THE HUGE CASH PAYMENT AS ALLEGED. EVIDENTLY ANY TRANSACTION INVOLVING PAYMENT OF SUCH A HUGE PAYMENT IN CASH HAS TO BE ACCOMPANIED BY A DOCUMENTARY PROOF EVIDENCING SUCH A HUGE AMOUNT OF MONEY CHANGING HANDS. IF ANY AGREEMENT DATED 7.12.1998 MIGHT HAS ACTUALLY BEEN ENTERED THERE WOULD NOT HAVE BEEN ANY AGREEMENT DATED 01.04.1999 AND AGREEMENT DATED 30.12.1999 THEREOF PROVES THAT THE ALLEGED AGREEMENT DATED 7.12.1998 WAS BY FABRICATING/CONCEIVING FAKE PAPERS. 10.2 THE LD. COUNSEL FOR THE ASSESSEE SPECIFICAL LY MENTIONED THAT THE AGREEMENT DATED 7.12.1998 WHICH IS ON A PLAIN PAPER AND DENIED BY THE ASSESSEE HAVING BEEN SIGNED AT ALL HAS BEEN ACCEPTED BY THE A.O. TO BE G ENUINE AND WHEREAS THE AGREEMENT DATED 1.4.1999 WHICH WAS ON REVENUE STAMP PAPER AND DULY REGISTERED BEFORE THE SUB- REGISTRAR, LUDHIANA ON 3.12.1999 WHEREIN IT WAS EXE CUTED BY SHRI VIJAY SOOD IN PERSON, HAS BEEN REJECTED WIT HOUT GIVING REASONS. HE SUBMITTED THAT THE A.O. WAS NOT 14 JUSTIFIED AT ALL IN OBSERVING THAT THE AGREEMENT DA TED 1.4.1999 IS A SHAM OR COLLUSIVE DOCUMENT AND IT WAS THE BRAIN WORK OF AN INCOME TAX CONSULTANT WHEN IT IS D ULY SIGNED BY THE PARTIES AND THE WITNESSES AND DULY REGISTERED BEFORE THE SUB-REGISTRAR. THE LD. COUNSE L ALSO SUBMITTED THAT THE ASSESSEE FULFILLS ALL THE CONDIT IONS LAID DOWN IN CLAUSE XIII OF SECTION 47. AS PER HIM, THER EFORE, NO CAPITAL GAINS WHAT-SO-EVER WERE CHARGEABLE UNDER THE PROVISIONS OF SECTION 45(4) OF THE ACT. IN VIEW OF THE ABOVE, THE LD. COUNSEL SUBMITTED THAT THE APPEAL OF THE ASSESSEE MIGHT BE DECIDED IN THE LIGHT OF THE ABOVE 'SUBMISSIONS AND THE GROUNDS OF APPEAL SHOULD BE ALLOWED. 10.3 THE DETAILED WRITTEN SUBMISSION OF THE ASSES SEE WERE SENT TO THE ASSESSING OFFICER FOR HIS COMMENTS ON EACH & EVERY POINT THAT THE ASSESSEE HAD RAISED. TH E REPORT OF THE ASSESSING OFFICER I.E. THE DCIT CIRCL E-VI, LUDHIANA HAS BEEN RECEIVED VIDE LETTER NO.317 DATED 11.7.2007. IN THIS REPORT THE A.O. STATED THAT THE AGREEMENT DATED 7.12.1998 IS A GENUINE DOCUMENT AND THAT, THEREFORE, THE ACTION OF THE A.O. IN MAKING T HE ASSESSMENT ON THE BASIS OF THIS DOCUMENT IS FULLY JUSTIFIED. IN THIS REPORT THE ASSESSING OFFICER HAS REITERATED THAT THE CONDITIONS LAID DOWN IN PROVISO (C) AND (D) OF CLAUSE (XIII) OF SECTION 47 ARE NOT SATISFIE D IN THE CASE OF THE ASSESSEE AND, THEREFORE, DENIAL OF BENE FIT U/S 47(XIII) WAS FULLY JUSTIFIED IN THIS CASE AND THAT THE 15 ASSESSING OFFICER CORRECTLY APPLIED THE PROVISIONS OF SECTION 45(4) IN THIS CASE. THE ASSESSING OFFICER A LSO ATTENDED THE HEARING ON 1.1.2008 WHEREIN HE REITERA TED THE CONTENTIONS AS ABOVE. 11. THE LD. CIT(APPEALS) CONSIDERING THE SUBMISSION S OF THE ASSESSEE AND MATERIAL ON RECORD, DELETED THE AD DITION AND HELD THAT NO CAPITAL GAIN IS CHARGEABLE UNDER T HE ABOVE PROVISIONS AND ACCORDINGLY ALLOWED APPEAL OF THE ASSESSEE. THE FINDINGS OF LD. CIT(APPEALS) IN PARA 11 TO 17 OF THE APPELLATE ORDER ARE REPRODUCED AS UNDER : 11. I HAVE CAREFULLY CONSIDERED THE CONTENTION OF THE LD. COUNSEL FOR THE APPELLANT AND PERUSED THE RELEVANT RECORD. AS POINTED OUT BY THE LD. COUNSEL ALSO, FOR COMING TO HIS CONCLUSIONS THE A.O. HAS MAINLY RELIED UPON THE AGR EEMENT DATED 7.12.1998. BEFORE THE A.O. AND DURING APPEAL PROCEE DINGS LD. COUNSEL HAD BEEN VEHEMENTLY ARGUING THAT SHRI RAJAT SOOD HAD NEVER SIGNED ANY SUCH DOCUMENT AND THAT HIS SIGNATU RES WHAT-SO- EVER ON THIS DOCUMENT WERE FORGED SIGNATURES. IN V IEW OF SUCH A SERIOUS ALLEGATION AND CONTENTION OF THE APPELLANT THE A.O. COULD NOT VALIDLY PROCEED FURTHER WITHOUT MEETING THE OBJ ECTIONS OF THE APPELLANT. FROM THE ASSESSMENT ORDER IT APPEARS THA T THESE DOCUMENTS WERE NOT AT ALL SHOWN TO THE APPELLANT IN ORIGINAL. RATHER THE A.O. WHILE FRAMING THE ASSESSMENT ALSO D OES NOT APPEAR TO HAVE SEEN THE ORIGINAL HIMSELF AND HE HAS JUST MENTIONED IN THE ASSESSMENT ORDER THAT THE ORIGINAL DOCUMENT WAS PRODUCED BEFORE THE ITO-VI(2), LUDHIANA, DURING THE ASSESSMENT PROCEEDINGS OF SHRI RAJAT SOOD. IN THE F ACE OF THE SERIOUS ALLEGATION THAT THE SIGNATURES OF SHRI RAJA T SOOD WERE FORGED ON THIS DOCUMENT, NO ADVERSE INFERENCE COULD HAVE BEEN VALIDLY DRAWN ON THIS DOCUMENT BEFORE SHOWING THE O RIGINAL DOCUMENT AND WITHOUT MEETING THE OBJECTION AS ABOVE . 16 12. THE OTHER IMPORTANT ASPECT OF THE CASE IS THAT IN A CIVIL SUIT FILED BY SHRI VIJAY SOOD HE HAS REQUESTED TO T REAT THE AGREEMENT DATED 7.12.1998 TO BE NULL & VOID. THIS I S APPARENTLY DONE AGAINST DONE AGAINST SHRI RAJAT SOOD. HOWEVER, ON THE OTHER HAND, SHRI RAJAT SOOD HIMSELF IS CONTENDING THAT TH ERE WAS NO SUCH AGREEMENT AT ALL. THEREFORE, IN THE FACE OF T HE FACTUAL POSITION, IT CANNOT BE CONCLUSIVELY SAID THAT THE A GREEMENT DATED 7.12.1998 WAS ACTUALLY EXECUTED AMONGST THE PARTIES INVOLVED. 13. FURTHER AS POINTED BY THE LD. COUNSEL, SHRI VIJ AY JAIN AND SHRI RAJINDER PAL SOOD ARE STATED TO BE THE WITNESS ES AND ARBITRATORS IN THE DOCUMENT DATED 7.12.1998. IN NON E OF THEIR STATEMENTS RECORDED BY THE DDIT(INV.) OR THE A.O. T HEY HAVE CONFIRMED THAT SHRI RAJAT SOOD PAID THE AMOUNT SPEC IFIED IN THE SAID DOCUMENT. BOTH OF THEM WERE RATHER IGNORANT A BOUT THE CONTENTS OF THE DOCUMENT. AS POINTED OUT BY THE LD . COUNSEL IN HIS CROSS EXAMINATION BEFORE THE A.O. SHRI VIJAY SO OD STATED THAT THE AMOUNTS IN THE DOCUMENT WERE WRITTEN BY SHRI VI JAY JAIN, A WITNESS TO THE SAID AGREEMENT DATED 7.12.1998, AFTE R THESE FIGURES WERE ARRIVED AT BY THE TWO WITNESSES, WHEREAS BOTH THE WITNESSES IN THEIR STATEMENTS BEFORE THE DDIT (INV.)-II, LUDH IANA HAVE SHOWN THEIR IGNORANCE ABOUT THE CONTENTS OF THE AGR EEMENT. IT IS ALSO TO BE NOTED THAT SHRI VIJAY JAIN IN HIS WITNES S HAS SAID THAT THE DOCUMENTS WERE SIGNED IN THE DYEING MILL WHERE HE AND SHRI RAJINDER PAL SOOD MET SHRI NARINDER SOOD. SHRI VIJA Y SOOD AND SNRI RAJAT SOOD, THEREFORE, THEY SHOULD HAVE KNOWN THE CONTENTS OF THE DOCUMENTS. AS MENTIONED ABOVE THE ARGUMENTS OF THE LD. COUNSEL SHRI ASHWANI KUMAR ALSO RIGHTLY POINTED OUT THAT IN HIS STATEMENT SHRI VIJAY JAIN IS MENTIONING ABOUT THE R EGISTRATION OF THE DOCUMENTS WHICH HAVE TO BE THE DOCUMENTS DATED 1.4.1999 AND 30.12.1999 AS ONLY THESE WERE GOT REGISTERED AN D WHEREAS THE DOCUMENT DATED 7.12.1998 WAS NOT REGISTERED AT ALL. AN OTHER IMPORTANT FACT WHICH IS BROUGHT OUT FROM THE SUBMIS SIONS THE LD. COUNSELS THAT SHRI VIJAY SOOD WAS ISSUED CORRESPOND ING SHARES OF ORIENTAL KNIT FAB. PVT. LTD. AFTER 7.12.1998 AND TH AT ORIGINAL TRANSFER DEEDS FOR TRANSFER OF THE SHARES WERE AVAI LABLE WITH THE COMPANY AND THAT THIS FACT HAS ALSO BEEN PROVED BEF ORE THE REGISTRAR OF COMPANIES AND NO ADVERSE INFERENCE HAS BEEN DRAWN 17 AGAINST THE COMPANY IN THIS REGARD. IF THE IMMOVABL E PROPERTIES OF THE FIRM WERE TRANSFERRED VIDE AGREEMENT DATED 7 .12.1998 AS ALLEGED AND AS CONSIDERED BY THE A.O. THEN THERE WA S NO REASON TO ISSUE SHARES TO SHRI VIJAY SOOD IN PROPORTION TO HIS CAPITAL IN THE APPELLANT FIRM IN RESPECT OF THE COMPANY IN WHO SE BALANCE SHEET THE SAME IMMOVABLE PROPERTIES WERE INCLUDED. IF SHRI VIJAY SOOD WAS PAID FOR THE ASSETS, HE COULD NOT HAVE BEE N ENTITLED TO THE SHARES OF THE COMPANY IN THE BOOKS OF WHICH THE SAME ASSETS WERE INCLUDED. THE FACT WITH REGARD TO ISSUANCE OF SHARES TO SHRI VIJAY SOOD AND THEIR SUBSEQUENT TRANSFER ARE SOMEHO W UNDISPUTED FACTS OF THE CASE. FROM THIS ANGLE ALSO AGREEMENT D ATED 7.12.1998 DOES NOT APPEAR TO BE A VALID OR A GENUINE AGREEMEN T. THERE IS ALSO CONSIDERABLE FORCE IN THE ARGUMENT OF THE LD. COUNSEL THAT THE CONTENTIONS OF SHRI VIJAY SOOD COULD NOT BE TAK EN TO BE CORRECT ON THE GROUND THAT WHEREAS HE IS STATING .T HAT AFTER THE DEATH OF HIS BROTHER SHRI NARINDER SOOD ONJ 3.5.199 9, SHRI RAJAT SOOD STARTED REFUSING TO PAY HIM THE BALANCE AMOUNT AS PER THE AGREEMENT DATED 7.12.1998, HE HIMSELF IS SAYING THA T RS. 36.00 LAC WAS PAID TO HIM BY SHRI RAJAT SOOD ON 30.6.1999 AND AN OTHER RS.7 LAC BY CHEQUES THEREAFTER. IN VIEW OF THE ABOV E CONTRADICTION, ALSO THE STATEMENTS AND CONTENTION O F SHRI VIJAY SOOD WITH RESPECT TO THE AGREEMENT DATED 7.12.1998 CANNOT BE ACCEPTED AS IT IS. I AM ALSO IN AGREEMENT WITH THE CONTENTION OF THE LD. COUNSEL THAT IF ANY AGREEMENT DATED 7.12.19 98 HAD BEEN ACTUALLY ENTERED, THERE WOULD NOT HAVE BEEN ANY AGR EEMENT DATED 1.4.1999 AND AGREEMENT DATED 30.12.1999. HOWEVER, A S ALREADY MENTIONED, THE AGREEMENTS DATED 1.4.1999 AND 30.12. 1999 ARE THERE AND COPIES OF THE SAME ARE ON RECORD. THESE A GREEMENTS ARE SIGNED BY SHRI RAJAT SOOD AND SHRI VIJAY SOOD ALONG WITH TWO WITNESSES S/SHRI VIJAY JAIN AND RAJINDER PAL SOOD. RATHER, AGREEMENT DATED 1.4.1999 IS ALSO REGISTERED BEFORE THE SUB- REGISTRAR. IN THE FACE OF THESE TWO AGREEMENTS AGAI N THE AGREEMENT DATED 7.12.1998 DOES NOT APPEAR TO BE A V ALID AND GENUINE AGREEMENT. 14. COMING TO 'THE APPLICABILITY OF SECTION 45(4), AS PER CLAUSE XIII OF SECTION 47 OF THE ACT NO CAPITAL GAIN IS CH ARGEABLE TO TAX U/S 45(4), IF THE FOLLOWING FOUR CONDITIONS ARE SAT ISFIED: - 18 (11) AS PER CLAUSE (XIII)_OF SEC. 47 OF THE INCOM E TAX ACT 1961, 'ANY TRANSFER OF A CAPITAL ASSET OR INTAN GIBLE ASSET BY A FIRM TO A COMPANY AS A RESULT OF SUCCESS ION OF THE FIRM BY A COMPANY IN THE BUSINESS CARRIED ON BY THE FIRM IS NOT REGARDED AS A TRANSFER IF THE FOLLOWING CONDITIONS ARE SATISFIED :- (A) ALL THE ASSETS AND LIABILITIES OF THE FIRM OR OF THE ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS RELAT ING TO THE BUSINESS IMMEDIATELY BEFORE THE SUCCESSION BECO ME THE ASSETS AND LIABILITIES OF THE COMPANY; (B) ALL THE PARTNERS OF THE FIRM IMMEDIATELY BEFO RE THE SUCCESSION BECOME THE SHAREHOLDERS OF THE COMPANY I N THE SAME PROPORTION IN WHICH THEIR CAPITAL ACCOUNTS STO OD IN THE BOOKS OF THE FIRM ON THE DATE OF THE SUCCESSION ; (C) THE PARTNERS OF THE FIRM DO NOT RECEIVE ANY CONSIDERATION OR BENEFIT, DIRECTLY OR INDIRECTLY, I N ANY FORM OR MANNER, OTHER THAN BY WAY OF ALLOTMENT OF SHARES IN THE COMPANY; AND (D) THE AGGREGATE OF THE SHAREHOLDING IN THE COMPAN Y OF THE PARTNERS OF THE FIRM IS NOT LESS THAN FIFTY PER CENT OF THE TOTAL POWER IN THE COMPANY AND THEIR SHAREHOLDI NG CONTINUES TO BE AS SUCH FOR A PERIOD OF FIVE YEARS FROM THE DATE OF THE SUCCESSION; 15. IN VIEW OF THE DISCUSSION AS ABOVE IT CANNOT BE SAID THAT THE PARTNERS OF THE FIRM DID RECEIVE ANY CONSIDERATION OR BENEFIT DIRECTLY OR INDIRECTLY OTHER THAN BY WAY OF ALLOTME NT OF SHARES IN THE COMPANY. FURTHER, THE AGGREGATE OF THE SHARE H OLDINGS OF THE COMPANIES OF THE PARTNERS IS NOT LESS THAN 50% OF T HE TOTAL VOTING POWER BECAUSE THOUGH THE SHARES OF SHRI VIJAY SOOD WERE TRANSFERRED, SHRI RAJAT SOOD AND THE ERSTWHILE PART NERS' SHARE IN THE COMPANY WERE MORE THAN 50% AND THESE WERE RETAI NED AS SUCH FOR A PERIOD OF MORE THAN FIVE YEARS FROM THE DATE OF SUCCESSION. TRANSFER OF SHARES OF SHRI VIJAY SOOD WITHIN THE PE RIOD OF FIVE YEARS, THEREFORE, DOES NOT DISQUALIFY THE APPELLANT FOR EXEMPTION U/S 47(XIII) BECAUSE STILL THE AGGREGATE OF THE SHA RE HOLDINGS IN THE COMPANY OF THE OTHER PARTNERS OF THE FIRM, DOES NOT COME BELOW 50% OF THE TOTAL VOTING POWER IN THE COMPANY. 16. IN VIEW OF THE ABOVE DISCUSSION IT HAS TO BE HE LD THAT NO CONSIDERATION WHAT-SO-EVER HAS GONE TO SHRI VIJAY S OOD, THE PARTNERS OF THE APPELLANT FIRM ON THE BASIS OF THE ALLEGED AGREEMENT DATED 7.12.1998. IT IS FURTHER TO BE HELD THAT THE CONDITIONS LAID DOWN U/S 47(XIII) HAVING BEEN FULFI LLED IN THIS CASE, NO CAPITAL GAIN IS CHARGEABLE UNDER THE PROVI SIONS OF SECTION 45(4) OF THE ACT. IT IS HELD ACCORDINGLY. 19 17. IN THE RESULT, THE APPEAL OF THE APPELLANT IS A LLOWED. 12. THE LD. DR RELIED UPON ORDER OF THE ASSESSING O FFICER AND REFERRED TO THE AGREEMENT IN QUESTION DATED 07.12.1998 AND SUBMITTED THAT ALL THE PARTNERS OF T HE ASSESSEE FIRM SIGNED THIS AGREEMENT. SHRI VIJAY SO OD RELINQUISHED HIS SHARES IN THE FIRM. THE REPORT OF THE DDIT, LUDHIANA WAS RECEIVED AGAINST THE ASSESSEE FI RM AND NONE OF THE PARTIES HAVE DENIED THEIR SIGNATURE S. THE LD. DR SUBMITTED THAT THE CONDITIONS OF SECTION 47(XIII)(C)(D) HAVE NOT BEEN SATISFIED BY THE ASSES SEE IN THIS CASE BECAUSE SHARES OF SHRI VIJAY SOOD WERE NO T KEPT FOR FIVE YEARS, THEREFORE, CAPITAL GAIN IS CHARGEAB LE IN THE MATTER. 12(I) ON THE OTHER HAND, LD. COUNSEL FOR THE ASSE SSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND SUBMITTED THAT AGREEMENT IN QUESTION DATED 07.12.1998 IS A FORGED DOCUMENT AND ASSESSEE AND IT S PARTNERS HAVE DENIED SIGNATURE THEREON. THE AGREEM ENT FOR TAKEN-OVER ON 01.04.1999 AND DATED 30.12.1999 A RE GENUINE DOCUMENTS. THE WITNESSES TO THE AGREEMENT DATED 07.12.1998 HAVE DENIED THE CONTENTS OF THE SAME. TH E OTHER AGREEMENT DATED01.04.1999 AND 30.12.1999 ARE REGISTERED DOCUMENTS WHICH BEARS SIGNATURES OF ALL THE PARTNERS OF THE ASSESSEE FIRM. WHEN DOCUMENTS WERE REGISTERED WHICH BEAR SIGNATURE OF ALL THE PARTNERS , THERE WAS NO NEED TO EXECUTE UNREGISTERED DOCUMENT. SHRI VIJAY 20 SOOD SIGNED ALL THE DOCUMENTS OF TRANSFER OF SHARES OF M/S ORIENT KNIT FAB PVT. LTD. CO. THE LAST PAYMENT IS ALLEGED TO BE MADE AFTER DEATH OF SHRI NARINDER SOOD ON 03.05.1999 WHICH SHOWS THAT AGREEMENT DATED 07.12.1 998 WAS FORGED DOCUMENT. NO EVIDENCE HAS BEEN BROUGHT ON RECORD OF RECEIPT OR PAYMENT OF ANY MONEY IN QUESTI ON TO SHRI VIJAY SOOD. IT IS ALSO ADMITTED FACT THAT SHR I VIJAY SOOD HAS NOT DECLARED THE AMOUNT IN QUESTION FOR TA XATION PURPOSES, THEREFORE, IT WAS WHOLLY A FABRICATED STO RY OF SHRI VIJAY SOOD TO HARASS THE OTHER PARTNERS. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT WAS SPECIFICAL LY CONTENDED BEFORE THE AUTHORITIES BELOW THAT SHRI RA JAT SOOD AND SHRI NARINDER SOOD HAD NEVER SIGNED ANY DOCUMENT WHICH IS RELIED UPON BY SHRI VIJAY SOOD ON 07.12.1998. IT WAS ALSO SPECIFICALLY CONTENDED THA T ON THIS DOCUMENT, SIGNATURES HAVE BEEN FORGED. IN VIE W OF THESE SERIOUS ALLEGATIONS, THE ASSESSING OFFICER SH OULD HAVE MADE PROPER ENQUIRY INTO THE MATTER AND SHOULD HAVE REFERRED THE MATTER TO THE HANDWRITING EXPERT FOR OBTAINING THE OPINION OF THE HANDWRITING EXPERT AS TO THE GENUINENESS OF THE SIGNATURES ON THE AGREEMENT DATE D 07.12.1998, BUT ASSESSING OFFICER DID NOT DO ANYTHI NG IN THE MATTER. FURTHER, SHRI VIJAY SOOD HAS ALSO NOT PRODUCED ANY REPORT OF HANDWRITING EXPERT ON RECORD TO PROVE THAT THE SAME BEARS THE GENUINE SIGNATURES OF SHRI NARINDER SOOD AND SHRI RAJAT SOOD. THEREFORE, ASSE SSING 21 OFFICER HAS FAILED TO PROVE THAT THE AGREEMENT DATE D 07.12.1998 IS A GENUINE DOCUMENT AND BEARS GENUINE SIGNATURES OF THE PARTNERS OF THE ASSESSEE FIRM. F URTHER, FROM THE ASSESSMENT ORDER, IT IS CLEAR THAT THE AGR EEMENT DATED 07.12.1998 WAS NOT AT ALL SHOWN TO THE ASSESS EE IN ORIGINAL. THE ASSESSING OFFICER, WHILE FRAMING THE ASSESSMENT ALSO DID NOT APPEAR TO HAVE SEEN THE ORI GINAL AGREEMENT HIMSELF BECAUSE HE HAS MENTIONED IN THE ASSESSMENT ORDER THAT ORIGINAL AGREEMENT DATED 7.12 .1998 HAVE BEEN PRODUCED BY SHRI VIJAY SOOD DURING THE ASSESSMENT PROCEEDINGS IN THE CASE OF SHRI RAJAT SO OD FOR ASSESSMENT YEAR 2000-01. IT WAS ALSO NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT SAME COULD NOT BE CONFRONTED TO THE ASSESSEE AS SHRI VIJAY SOO D HAD BEEN RELUCTANT TO SHOW IT PUBLICLY. IN VIEW OF THE SE SERIOUS ALLEGATIONS, IT WAS NECESSARY FOR THE ASSES SING OFFICER TO BRING THE ORIGINAL AGREEMENT DATED 07.12 .1998 ON RECORD AND SHOULD HAVE VERIFY THE GENUINENESS OF THE SIGNATURE AND GENUINENESS OF THE AGREEMENT IN QUEST ION. HOWEVER, NOTHING HAS BEEN DONE BY THE ASSESSING OFF ICER AS NOTED ABOVE, THEREFORE, WHEN SUCH A DOCUMENT IS NOT CONFRONTED TO THE ASSESSEE FIRM, NO ADVERSE INFEREN CE COULD BE DRAWN AGAINST THE ASSESSEE FIRM OR ITS PAR TNERS SHRI RAJAT SOOD AND SHRI NARINDER SOOD. THE SAME W OULD ALSO NOT BE ADMISSIBLE IN EVIDENCE AGAINST THE INTE REST OF THE ASSESSEE FIRM AS WELL AS ITS PARTNERS. IT IS A LSO INTERESTING TO NOTE THAT SHRI VIJAY SOOD FILED A CI VIL SUIT MAKING A PRAYER THAT AGREEMENT DATED 07.12.1998 IS NULL 22 AND VOID. THIS SUIT FOR DECLARATION WAS FILED AGAI NST ASSESSEE SHRI RAJAT SOOD ONLY. IT WOULD MEAN THAT SHRI VIJAY SOOD HIMSELF DID NOT PLACE RELIANCE UPON THE AGREEMENT DATED 07.12.1998. SHRI RAJAT SOOD HAS BE EN CLAIMING SINCE BEGINNING THAT THERE WERE NO SUCH AGREEMENTS EXECUTED BETWEEN THE PARTIES, THEREFORE, LD. CIT(APPEALS) WAS JUSTIFIED IN HOLDING THAT NO SUCH AGREEMENT VALIDLY EXIST. THE ASSESSEE HAS ALSO POI NTED OUT BEFORE THE AUTHORITIES BELOW THAT SHRI VIJAY JA IN AND SHRI RAJINDER PAL SOOD ARE STATED TO BE WITNESSES A ND ARBITRATORS IN THE DOCUMENTS DATED 07.12.1998. HOW EVER, IN THEIR STATEMENTS BEFORE INCOME TAX AUTHORITIES, NONE OF THEM HAVE CONFIRMED THAT SHRI RAJAT SOOD PAID ANY AMOUNT TO SHRI VIJAY SOOD. RATHER BOTH OF THEM SHO WN THEIR IGNORANCE ABOUT THE CONTENTS OF THE AGREEMENT . COPY OF STATEMENT OF SHRI VIJAY JAIN IS FILED ON RE CORD IN WHICH HE HAS DENIED CONTENTS OF THE AGREEMENT IN QUESTION AND STATED THAT HE HAS SIGNED THIS AGREEME NT IN GOOD FAITH WITHOUT READING THE SAME. THE LD. CIT(A PPEALS) DISCUSSED IN DETAIL THE ROLE OF THESE TWO WITNESSES IN SIGNING THE AGREEMENT IN QUESTION AS A WITNESS BUT APPARENTLY NONE OF THEM SUPPORTED THEORY PROPOUNDED BY SHRI VIJAY SOOD AND THE ASSESSING OFFICER. 14. THE ASSESSEE HAS, HOWEVER, CONTENDED THAT THE GENUINE AGREEMENT DATED 01.04.1999 WAS EXECUTED BETWEEN THE ASSESSEE FIRM THROUGH ITS PARTNERS SHRI NARINDER SOOD, SHRI VIJAY SOOD, SHRI RAJAT SOOD WIT H M/S 23 ORIENTAL KNIT FAB PVT. LTD. CO. WHICH IS REGISTERED DOCUMENT THROUGH WHICH THE ASSESSEE COMPANY/TRANSFE ROR DUE TO INCREASE IN THE VOLUME AND COMPLICITY OF THE BUSINESS, HAS TRANSFERRED THE ENTIRE BUSINESS TO TH IS COMPANY/TRANSFEREE AND THE TRANSFEREE HAS TAKEN OVE R THE ENTIRE MANAGEMENT AND BUSINESS OF THE ASSESSEE FIRM WITH ALL ASSETS AND LIABILITIES WITH IMMEDIATE EFFECT I. E. 01.04.1999. ALL ASSETS, RIGHTS, TITLE, INTEREST ET C. OF THE TRANSFEROR FIRM, AT THE CLOSE OF THE BUSINESS ON 31 .03.1999 WERE TRANSFERRED AND VESTED IN THE TRANSFEREE COMPA NY THROUGH THE AGREEMENT. IN CONSIDERATION OF THE SAI D TRANSFER, TRANSFEREE COMPANY SHALL ALLOT FULLY PAID UP EQUITY SHARES AT PAR TO EACH OF THE PARTNERS OF THE ASSESSEE FIRM IMMEDIATELY BEFORE THE TRANSFER/SUCCE SSION AS MENTIONED ABOVE. AS NOTED ABOVE, THIS AGREEMENT DATED 01.04.1999 FOR HANDING OVER ENTIRE MANAGEMENT AND BUSINESS TO A PRIVATE LTD. COMPANY IS SIGNED BY ALL THE PARTNERS OF THE ASSESSEE FIRM AND IS A REGISTERED D OCUMENT BEFORE REGISTRAR. THUS, THE GENUINENESS OF THE SIG NATURES ON THE SAID AGREEMENT AND GENUINENESS OF THE TRANSA CTION COULD NOT BE DISPUTED. FURTHER, AGREEMENT DATED 30.12.1999WAS ALSO EXECUTED BETWEEN TRANSFEROR FIRM THROUGH ALL ITS PARTNERS ( AND LEGAL HEIR OF SHRI N ARINDER SOOD SMT. MEENA SOOD ) AND THE TRANSFEREE COMPANY WHICH IS ALSO REGISTERED DOCUMENT IN WHICH ALSO, IT WAS CONFIRMED THAT ENTIRE BUSINESS AND MANAGEMENT HAVE BEEN TAKEN OVER BY THE PRIVATE LIMITED COMPANY OF ASSESS EE FIRM W.E.F. 01.04.1999. ALL ASSETS AND LIABILITIE S OF THE 24 FIRM HAVE BEEN TAKEN OVER BY THE PRIVATE LIMITED CO MPANY AND ALL IMMOVABLE ASSETS WOULD VEST IN THE TRANSFER EE COMPANY. THIS REGISTERED AGREEMENT IS ALSO SIGNED BY SHRI VIJAY SOOD, SHRI RAJAT SOOD AND SMT.MEENA SOOD , W/O LATE SHRI NARINDER SOOD. SHRI VIJAY SOOD HAS N EVER DISPUTED THE CONTENTS OF THIS REGISTERED DOCUMENT T HROUGH ANY EVIDENCE OR MATERIAL ON RECORD. THEREFORE, ON THE FACE OF THESE REGISTERED DOCUMENTS ON RECORD, NO RELIANC E COULD BE PLACED ON UNREGISTERED DISPUTED AGREEMENT DATED 07.12.1998. 14(I) IT IS ALSO IMPORTANT TO NOTE HERE THAT WHE N ENTIRE MANAGEMENT AND BUSINESS OF THE ASSESSEE FIRM WAS TA KEN OVER BY THE COMPANY AND AS PER AGREEMENT DATED 01.04.1999, THE TRANSFEREE COMPANY ALLOTTED FULLY P AID UP EQUITY SHARES TO ALL THE PARTNERS OF THE ASSESSEE F IRM, SHRI VIJAY SOOD WAS ALSO ALLOTTED CORRESPONDING SHARES O F THE COMPANY. SHRI VIJAY SOOD FILED A COMPLAINT WITH REG ISTRAR OF COMPANIES REGARDING WRONG TRANSFER OF SHARES WHI CH MATTER WAS CONSIDERED BY THE REGISTRAR OF COMPANIES AND THE TRANSFER DEEDS AND OTHER PAPERS WERE DULY VERIF IED BY THE SAID AUTHORITY AND AFTER VERIFICATION, THE COMP LAINT OF SHRI VIJAY SOOD WAS FOUND TO BE FALSE AND WAS THERE FORE, FILED. THEREFORE, NO ADVERSE INFERENCE COULD BE DR AWN IN THE MATTER AGAINST THE ASSESSEE FIRM. FURTHER, WHE N THE IMMOVABLE PROPERTIES OF THE ASSESSEE FIRM WERE ALLE GEDLY TRANSFERRED VIDE AGREEMENT DATED 07.12.1998, AS IS CONSIDERED BY THE ASSESSING OFFICER AND COMPLAINT I S MADE 25 BY SHRI VIJAY SOOD, THERE WAS NO REASON TO ISSUE SH ARE TO SHRI VIJAY SOOD IN PROPORTION TO HIS CAPITAL IN THE ASSESSEE FIRM BY THE COMPANY. NO CLINCHING EVIDENC E IS BROUGHT ON RECORD TO PROVE THAT ASSESSEE FIRM OR IT S PARTNERS PAID ANY AMOUNT IN CASH TO SHRI VIJAY SOOD . THERE WAS ALSO NO NEED FOR SHRI VIJAY SOOD TO SIGN THE REGISTERED AGREEMENT LATER ON DATED 01.04.1999 AND 30.12.1999 FOR TAKING OVER ENTIRE BUSINESS OF THE A SSESSEE FIRM BY THE PRIVATE LIMITED COMPANY. OTHERWISE, HE COULD HAVE OBJECTED TO THESE DOCUMENTS BEFORE THE REGISTR AR WHERE THESE AGREEMENTS HAVE BEEN REGISTERED. IF SHR I VIJAY SOOD HAS RECEIVED ANY ALLEGED AMOUNT THROUGH THE AGREEMENT DATED 07.12.1998, SHRI VIJAY SOOD WOULD N OT BE ENTITLED FOR THE SHARES OF THE COMPANY IN THEIR BOO KS OF ACCOUNT. THE LD. CIT(APPEALS), THEREFORE, CORRECTL Y NOTED THAT ISSUANCE OF SHARES TO SHRI VIJAY SOOD AND THEI R SUBSEQUENT TRANSFERS ARE UNDISPUTED, FACT OF THE CA SE. THIS WOULD ALSO CAST A SERIOUS DOUBT ON THE GENUINE NESS OF THE AGREEMENT DATED 07.12.1998. 14(II) THE LD. CIT(APPEALS), THEREFORE, ON PROPER APPRECIATION OF THE FACTS AND MATERIAL ON RECORD, C ORRECTLY HELD THAT THE AGREEMENT DATED 07.12.1998 IS NOT VAL ID AND GENUINE AGREEMENT. NO PREFERENCE CAN BE GIVEN OF T HIS DISPUTED AGREEMENT AGAINST THE REGISTERED AGREEMENT S DATED 01.04.1999 AND 30.12.1999 WHICH HAVE ALSO BEE N ADMITTEDLY SIGNED BY SHRI VIJAY SOOD. IN BOTH THE REGISTERED AGREEMENTS, THE SIGNATURE OF THE PARTIES HAVE 26 BEEN ADMITTED BUT ON THE AGREEMENT DATED 07.12.1998 , THE SIGNATURES OF TWO OF THE PARTNERS ALONGWITH THE WIT NESSES HAVE BEEN DENIED. THUS, NO EVIDENCE HAVE BEEN BROU GHT ON RECORD FOR DISSOLUTION OF THE ASSESSEE FIRM PRIO R TO 01.04.1999 WHEN THE ENTIRE BUSINESS OF THE ASSESSEE FIRM WAS TAKEN OVER BY THE PRIVATE LIMITED COMPANY. THER EFORE, THERE IS NO TRANSFER OF THE CAPITAL ASSET SO AS TO INVOKE THE PROVISIONS OF SECTION 45(4) OF THE INCOME TAX ACT. THE EVIDENCE AND MATERIAL ON RECORD FULLY SUPPORT THE F INDINGS OF LD. CIT(APPEALS) THAT IT IS A CASE OF SUCCESSION OF THE ASSESSEE FIRM BY A PRIVATE LIMITED COMPANY THROUGH GENUINE TRANSFER AGREEMENT DATED 01.04.1999 AND SUBSEQUENT REGISTERED AGREEMENT DATED 30.12.1999. 15. THE LD. DR FURTHER CONTENDED THAT CONDITIONS OF SECTION 47(XIII)(C)(D) HAVE NOT BEEN SATISFIED BY T HE ASSESSEE. HOWEVER, ON GOING THROUGH THE SAME PROVI SIONS AS REPRODUCED IN THE FINDINGS OF THE LD. CIT(APPEAL S), WE ARE OF THE VIEW THAT CONDITIONS OF SECTION 47(XIII) HAVE BEEN FULFILLED BY THE ASSESSEE IN THIS CASE. THE F ACTS OF THE CASE CLEARLY SUPPORT THE FINDINGS OF LD. CIT(AP PEALS) THAT THERE WAS A TRANSFER OF CAPITAL ASSET OR INTA NGIBLE ASSET BY ASSESSEE FIRM TO COMPANY AS A RESULT OF SUCCESSION OF THE FIRM BY THE COMPANY IN THE BUSINE SS CARRIED ON BY THE ASSESSEE FIRM. ALL THE ASSETS AN D LIABILITIES OF THE FIRM RELATING TO THE BUSINESS IM MEDIATELY BEFORE SUCCESSION BECOME THE ASSETS AND LIABILITIES OF THE COMPANY. ALL THE PARTNERS OF THE ASSESSEE FIRM 27 IMMEDIATELY BEFORE SUCCESSION, BECOME SHAREHOLDERS OF THE COMPANY IN THE SAME PROPORTION IN WHICH THEIR C APITAL ACCOUNTS STOOD IN THE BOOKS OF THE FIRM ON THE DATE OF THE SUCCESSION. THE PARTNERS OF THE FIRM DO NOT RECEIV E ANY CONSIDERATION OR BENEFIT DIRECTLY OR INDIRECTLY IN ANY FORM OR MANNER OTHER THAN BY WAY OF ALLOTMENT OF SHARES IN THE COMPANY. EVEN THESE PROVISIONS REFERRED TO THE WOR D PARTNERS AND THE SAME DID NOT SAY OF A PARTNER. SINCE, IN THIS CASE SHRI NARINDER SOOD AND SHRI RAJAT SOOD PARTNER IN THE ASSESSEE FIRM ALWAYS DISPUTED THE CL AIM OF SHRI VIJAY SOOD, THEREFORE, THESE PROVISIONS WOULD NOT APPLY AGAINST THE ASSESSEE FIRM. THE AGGREGATE OF THE SHARE HOLDING IN THE COMPANY OF THE PARTNERS OF THE FIRM WAS NOT FOUND LESS THAN 50% OF THE TOTAL VOTING POW ER IN THE COMPANY AND THEIR SHARE HOLDING CONTINUES TO BE AS SUCH FOR A PERIOD OF FIVE YEARS FROM THE DATE OF TH E SUCCESSION. THE LD. CIT(APPEALS), ON EXAMINATION O F THE RECORD SPECIFICALLY FOUND THAT AGGREGATE OF THE SHAREHOLDING OF THE COMPANIES BY THE PARTNERS IS NO T LESS THAN 50% OF THE TOTAL VOTING POWERS BECAUSE THOUGH THE SHARES OF SHRI VIJAY SOOD WERE TRANSFERRED, SHRI RA JAT SOOD AND ERSTWHILE PARTNERS SHARE IN THE COMPANY W ERE MORE THAN 50% AND THESE WERE RETAINED AS SUCH FOR A PERIOD OF MORE THAN 5 YEARS. THEREFORE, THE SAME W OULD NOT DISQUALIFY THE ASSESSEE FROM EXEMPTION UNDER SE CTION 47(XIII) OF THE ACT. 16. THIS FINDING OF FACT RECORDED BY LD. CIT(APPEAL S) HAVE NOT BEEN REBUTTED THROUGH ANY EVIDENCE OR MATERIAL ON R ECORD. 28 FURTHER, THE FINDINGS OF FACT RECORDED BY LD. CIT(A PPEALS) UNDER SECTION 47(III) HAVE NOT BEEN CHALLENGED BY T HE REVENUE DEPARTMENT IN THE PRESENT APPEAL. IT MAY BE NOTED HERE AGAIN THAT SINCE ON THE REGISTERED AGREEMENTS DATED 01.04 .1999 AND 30.12.1999, THE BUSINESS OF THE ASSESSEE FIRM WAS T AKEN OVER BY THE LIMITED COMPANY WHICH HAVE BEEN SIGNED BY SH RI VIJAY SOOD AS WELL ON BEHALF OF THE FIRM, THEREFORE, STOR Y MADE UP BY SHRI VIJAY SOOD LATER ON AND ACCEPTED BY THE ASSESS ING OFFICER, WILL DEMOLISH THE ENTIRE CASE OF THE REVENUE. 17. IN VIEW OF THE ABOVE DISCUSSION, THE LD. CIT (APPEALS) HAS CORRECTLY HELD THAT NO CONSIDERATION, WHAT-SO-E VER HAS GONE TO SHRI VIJAY SOOD, PARTNER OF THE ASSESSEE FI RM ON THE BASIS OF THE ALLEGED AGREEMENT DATED 07.12.1998. TH E LD. CIT(APPEALS) ALSO CORRECTLY HELD THAT THE CONDITION S LAID DOWN UNDER SECTION 47(XIII) OF THE ACT HAVE BEEN FULFILL ED IN THIS CASE. THEREFORE, NO CAPITAL GAIN IS CHARGEABLE UNDE R THE PROVISIONS OF SECTION 45(4) OF THE ACT. THUS, THERE IS NO MERIT IN THE DEPARTMENTAL APPEAL, THE SAME IS ACCORDINGLY DISMISSED. 18. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMI SSED. ITA 286/2008 & 287/2008 19. BOTH THE DEPARTMENTAL APPEALS ARE DIRECTED AGAINST THE DIFFERENT ORDERS OF LD. CIT(APPEALS)-II LUDHIAN A DATED 17.01.2008 FOR ASSESSMENT YEAR 1999-2000 AND 2000-0 1 IN WHICH THE REVENUE CHALLENGED THE DELETION OF ADDITI ONS OF RS. 29 21 LACS AND RS. 23,50,000/- ON ACCOUNT OF INCOME FR OM UNDISCLOSED SOURCES. 20. THE ASSESSING OFFICER, ON THE BASIS OF THE A LLEGED AGREEMENT DATED 07.12.1998 NOTED THAT ASSESSEE HAS PAID THE AMOUNTS IN QUESTION TO SHRI VIJAY SOOD. ACCORDINGL Y, BOTH THE ABOVE ADDITIONS WERE MADE. THE LD. CIT(APPEALS), FO LLOWING HIS ORDER DATED 09.01.2008 IN THE CASE OF THE FIRM M/S ORIENTAL DYEING & FINISHING MILLS (SUPRA) DELETED THE ENTIRE ADDITIONS IN BOTH THE APPEALS. 21. BOTH THE PARTIES STATED THAT ISSUE IS SAME A S HAVE BEEN CONSIDERED IN THE CASE OF THE FIRM IN ITA 230/2008, THEREFORE, FOLLOWING THE REASONS FOR DECISION IN THE CASE OF T HE ASSESSEE FIRM, WE DISMISS BOTH THESE APPEALS OF THE REVENUE AS WELL. 22. IN THE RESULT, BOTH THE APPEALS OF THE REVE NUE ARE DISMISSED. 23. IN THE RESULT, ALL THE APPEALS OF THE REVEN UE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPURNA MEHROTRA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 4 TH NOV., 2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT/CHD