Ramesh Suri, New Delhi V. DCIT, New Delhi

ITA 4188/DEL/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52493 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-07-2011
• Assessment Year: 1988-1989
• Appeal Filed On: 26-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK
• Keywords: Gift; Business income; Additional evidence; Corroborative evidences
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B DELHI) BEFORE SHRI A.D. JAIN AND SHRI SHAMIM YAHYA ITA NO. 4188(DEL)2009 ASSESSMENT YEAR: 1988-89 SHRI RAMESH SURI, DY.COMMISSIONER OF INCOME TAX, N-119, PANCHSHEEL PARK, N.DELHI. V. CIRCLE 9(1) , NEW DELHI. (APPELLANT) (RESPO NDENT) APPELLANT BY: SHRI SALIL AGGARWAL, ADV. RESPONDENT BY: SMT. PRA TIMA KAUSHIK, SR. DR ORDER PER A.D. JAIN, J.M . THIS IS ASSESSEES APPEAL FOR ASSESSMENT YEAR 1988- 89 AGAINST THE ORDER DATED 25.6.2009 PASSED BY THE LEARNED COMMISS IONER OF INCOME TAX(APPEALS)XII, NEW DELHI, CONTENDING THAT THE LD. CIT(A) ERRED IN DISALLOWING THE LOSS OF ` 1,58,28,700/- DECLARED BY THE ASSESSEE. 2. THE FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL WHO IN HIS RETURN OF INCOME CLAIMED A SHORT TERM CAPITAL LOSS OF ` 1,58,28,500/- ON SALE OF EQUITY SHARES OF BHARAT HOTELS LTD., DETAILED AS UNDER:- ITA 4188(DEL)09 2 ` COST OF 10,00,000 EQUITY SHARES OF ` 10/- PURCHASED @ ` 25.70 PER SHARE ON 13.11.87: 2,57,00,000 ADD: COST OF STAMPS ETC. 1,28,500 ------------------- 2,58,28,500 LESS: SOLD @ ` 10/- PER SHARE ON 30.3.88 1,00,00,000 --------------------- SHORT TERM CAPITAL LOSS: 1,58,28,500 -------------------- 3. THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION WAS INITIALLY COMPLETED BY THE AO VIDE HIS ORDER DATED 26.3.91, I N THE COURSE OF WHICH, HE EXAMINED THE CLAIM OF THE ASSESSEE REGARDING THE LO SS ON THE SALE OF SHARES OF M/S. BHARAT HOTELS LTD. THE ASSESSEE HAD SUBMITT ED THE DETAILS OF 1,79,07,000 SHARES PURCHASED ON 13.11.87 @ ` 25.70 EACH. THE ASSESSEE ALSO FURNISHED THE DETAILS OF 10,00,000 SHARES SOLD @ ` 10/- PER SHARE DURING THE YEAR, ON 30.3.88. THE SHARES WERE CLAIMED TO H AVE BEEN PURCHASED ON A MUTUALLY AGREED PRICE. THE AO NOTED THAT THE QUOTE D RATE OF THE SHARES OF BHARAT HOTELS LTD. AT THE DELHI STOCK EXCHANGE WAS ` 8.50 EACH AS ON 30.1.1987. THE AO FURTHER NOTED THAT ALL THE FAC TS WERE NOT DISCLOSED BY THE ASSESSEE AND APPLYING THE CASE OF MCDOWELL & C O., 154 ITR 148(SC) ITA 4188(DEL)09 3 HE HELD THAT IT WAS A CASE OF A COLOURABLE DEVICE H AVING BEEN USED AND HENCE DISALLOWED THE LOSS ON THE SALE OF SHARES CLAIMED B Y THE ASSESSEE . THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE C IT(A), AFTER LOOKING INTO THE FACTS OF THE CASE SENT THE ISSUE BACK TO THE F ILE OF AO, VIDE HER ORDER DATED 20.8.92. THE AO THEREAFTER COMPLETED THE AS SESSMENT AND AFTER LOOKING INTO THE FACTS OF THE CASE, DISALLOWED THE CLAIM OF THE ASSESSEE PERTAINING TO SHORT TERM CAPITAL LOSS OF ` 1,58,28,500/-. THE AO, IN THE SECOND ASSESSMENT ORDER DATED 25.3.95, RETAINED THE DISALLOWANCE OF LOSS ON THE GROUND THAT THE SAME WAS NOT A GENUINE LOSS, BU T A CONTRIVED LOSS ACHIEVED THROUGH COLOURABLE TRANSACTIONS. THE REA SONING TAKEN BY THE AO WAS THAT THE SHARES WERE PURCHASED BY THE ASSESSEE FROM PERSONS CONNECTED WITH SHRI G. SAGAR SURI & SONS, @ ` 25.70 PER SHARE; THAT THE PURCHASE OF THESE SHARES WAS COMPLETELY FUNDED BY M/S. DEEKSHA HOLDING LTD., WHICH ADVANCED A LOAN OF ` 8 CRORES TO SHRI RAMESH SURI ON 9.11.87 AND ANOTHER ` 27 LAKHS ON 10.11.87; THAT 10 LAKHS OF THESE SHARES WERE SOLD TO M/S. DEEKSHA HOLDING LTD. ON 30.3.88, WHICH RESULTED IN LOSS; THAT THE RATE PER SHARE, PAID AT ` 25.70, HAD NO RELATIONSHIP TO THE MARKET VALUE OF T HE SHARES; THAT THE RATE OF ` 10/-, RECEIVED AS SALE PRICE, CORRESPONDED TO THE Q UOTED PRICES; THAT ALL THE PERSONS WHO WERE PARTIES TO TH E TRANSACTIONS OF PURCHASE ITA 4188(DEL)09 4 AND SALE, WERE CONNECTED PERSONS; THAT MR. G. SAGA R SURI WAS THE ELDER BROTHER OF SHRI RAMESH SURI, THE ASSESSEE; THAT THE SHARES WERE PURCHASED FROM THE FAMILY MEMBERS OF AND CONCERNS CONTROLLED BY SHRI G. SAGAR SURI; THAT SHRI LALIT SURI WAS YOUNGER BROTHER OF SHRI RA MESH SURI; THAT M/S. DEEKSHA HOLDING LTD., WHICH RECEIVED THE REMAINING NUMBER OF SHARES, WAS AN ENTITY CONTROLLED BY SHRI LALIT SURI, WHOSE WIFE , MRS. JYOTSANA SURI, WAS THE DIRECTOR OF M/S. BHARAT HOTELS LTD., WHOSE SHAR ES WERE THE SUBJECT MATTER OF THE TRANSACTIONS, WHICH, AGAIN, WAS A COM PANY WHERE SHRI LALIT SURI, ALONG WITH COMPANIES CONNECTED WITH HIM, HAD ACQUIRED THE CONTROLLING INTEREST; AND THAT SHRI RAMESH SURI WAS ALSO A DIRE CTOR OF M/S. BHARAT HOTELS LTD. 4. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE T HE CIT(A) AND MADE VARIOUS SUBMISSIONS. IT WAS, INTER ALIA, CONTENDED THAT THE TRANSACTION OF PURCHASE AND SALE OF SHARES STOOD VERIFIED BY THE A O AND BOTH, THE PAYMENTS, AS WELL AS THE RECEIPTS, WERE BY WAY OF CHEQUES AND AS SUCH, THERE WAS NO JUSTIFICATION TO DISBELIEVE THE TRANSACTIONS; THAT THE SELLERS OF THE SHARES HAD DULY ACCOUNTED FOR THE SALE CONSIDERATION IN THEIR INCOME TAX CASES; THAT THE FINDING OF THE AO THAT THE ASSESSEE HAD ADOPTED A C OLOURABLE DEVICE WAS NOT CORRECT, BECAUSE THERE WAS NO DIFFERENCE IN THE PRI CE PAID AND THE PRICE ACCOUNTED FOR BY THE ASSESSEE; THAT THE PURCHASE PR ICE PAID OF ` 25.70 PER ITA 4188(DEL)09 5 SHARE COULD NOT BE REJECTED OR DISBELIEVED MERELY B ECAUSE THE SAME WAS HIGHER THAN THE MARKET RATE, BY IGNORING THE FACT T HAT THE PRICE HAD TO BE PAID ON THE BASIS OF NEGOTIATIONS DUE TO THE FAMILY DISP UTES; THAT THE G. SAGAR SURI GROUP WAS NOT WILLING TO PART WITH THE SHARES OF M/ S. BHARAT HOTELS LTD. AT A LOWER PRICE; THAT HOWEVER, THE ASSESSEE DID NOT TAK E A SIMILARLY HIGH PRICE FROM THE LALIT SURI GROUP WHEN HE SOLD THE SHARES T O THEM, DUE TO THE CONSIDERATION OF HIS BROTHER; AND THAT THE TRANSAC TION WAS GENUINE AND AS SUCH, THE LOSS COULD NOT BE DISALLOWED. THE ASSE SSEE SUBMITTED A COPY OF THE PLAINT IN SUIT NO. 516 IN THE CASE OF SHRI RAME SH SURI V/S. SHRI G. SAGAR SURI & OTHERS ALONG WITH THE COPY OF THE ORDER PASS ED BY THE HONBLE HIGH COURT OF DELHI IN SUPPORT OF THE ARGUMENT THAT THE TRANSACTIONS WERE CARRIED OUT WITH AN OBJECT TO SETTLE THE FAMILY DISPUTE. 5. THE CIT(A), VIDE ORDER DATED 4.3.96, SUSTAINED T HE DISALLOWANCE OF THE LOSS ON THE GROUND THAT THE SAME WAS CONTRIVED AND WAS A PART OF A COLOURABLE DEVICE, CARRIED OUT WITH A VIEW TO OBTAI N UNDUE TAX BENEFITS. THE REASONING ADVANCED BY HIM WAS AS FOLLOWS: 1. THAT THE PURCHASE PRICE OF ` 25.70 WAS AS PER NEGOTIATIONS CLAIMED BY THE ASSESSEE WAS NOT SUPPORTED BY ANY EV IDENCE INASMUCH AS IN THE APPLICATION MADE TO DELHI HIGH C OURT WHICH RESULTED IN A DECREE IN TERMS OF COMPROMISE, THERE IS NO MENTION OF THE PURCHASE OF SHARES OF M/S. BHARAT HOTELS LTD. B Y THE ASSESSEE AND NEITHER THE HONBLE HIGH COURT HAD MADE ANY MEN TION OF ANY SUCH PURCHASE WHILE APPROVING THE COMPROMISE. ITA 4188(DEL)09 6 2. THAT THERE WAS NO JUSTIFICATION IN THE PURCHASE OF SHARES BY THE ASSESSEE AT A HIGH PRICE MERELY TO DISPOSE THEM OFF SHORTLY AFTERWARDS AT A MUCH LOWER PRICE. 3. THAT THE SHARES WERE PURCHASED AND SOLD BY THE PART IES DIRECTLY AND NOT ON THE FLOOR OF THE STOCK EXCHANGE SHOWS TH AT THE BROKER WAS INTRODUCED BY THE ASSESSEE ONLY TO GIVE A COLOU R OF GENUINENESS TO THE TRANSACTION OF SUCH PURCHASES AN D SALES, THE PRICE BEING PAID FOR THE PURCHASE OF SHARES BEING V ERY MUCH HIGHER THAN THE MARKET RATE. 4. THAT THE ASSESSEE HAD DECLARED CONSULTANCY COMMISSI ON INCOME OF ` 50 LAKHS AND PROFIT ON SALE OF SHARES/DEBENTURES, W ITHOUT CONSIDERING THE IMPUGNED LOSS OF ` 3,42,37,980/-. THE LOSS WAS A DEVICE TO REDUCE THE TAX LIABILITY IN ANTICIPATION OF AFORESAID HUGE INCOMES. 5. THAT THE ASSESSEE ACTED ONLY AS A CONDUIT FOR THE T RANSFER OF SHARES FROM SAGAR SURI GROUP TO LALIT SURI GROUP AND IN TH E PROCESS GAINED UNDUE ADVANTAGE OF DERIVING HUGE TAX BENEFIT S BY CLAIMING THE IMPUGNED LOSS. 6. THAT BY APPLYING THE TEST OF HUMAN PROBABILITIES, T HE TRANSACTIONS COULD NOT BE CONSIDERED GENUINE BUT WAS A COLOURABL E DEVICE TO REDUCE THE TAX LIABILITIES. 6. IN APPEAL BEFORE THE TRIBUNAL, BY WAY OF ITA NO. 2746(DEL)96, THE ASSESSEE FILED AN APPLICATION FOR ADDITIONAL EVIDEN CE, SEEKING TO ADDUCE (A) COPY OF PLAINT IN SUIT NO. 516 OF 1988 FILED BY THE ASSESSEE IN THE HIGH COURT OF DELHI; AND (B) COPY OF THE DEFENDANTS I.E ., G. SAGAR SURI & OTHERS, REPLY TO THE ABOVE PLAINT IN SUIT NO. 516 OF 1988 F ILED IN THE HIGH COURT OF DELHI. IT WAS CONTENDED THAT THE AFORESAID EVIDENC E WAS BEING PLACED IN ITA 4188(DEL)09 7 SUPPORT OF THE HISTORY OF THE FAMILY DISPUTE AND TO JUSTIFY THE NEGOTIATED PRICE OF A SHARE OF BHARAT HOTEL LIMITED, OF ` 25.70; THAT WITH RESPECT TO THE ACQUISITION OF SHARES, THE SAME HAD BEEN MADE AT TH E NEGOTIATED PRICE AND WAS SUPPORTED BY THE ADDITIONAL EVIDENCE SOUGHT TO BE PLACED BEFORE THE TRIBUNAL; THAT THE PURCHASE PRICE OF ` 25.70, AS ON 13.11.87, WAS SOUGHT TO BE JUSTIFIED, ALTERNATIVELY, ON THE BASIS OF THE ST OCK EXCHANGE QUOTATIONS OF THE SHARES ON 10.11.87 AND 16.11.87, AT ` 18/- AND ` 22/- PER SHARE, RESPECTIVELY, WITH REFERENCE TO THE COPIES OF STOCK EXCHANGE QUOTATIONS, WHICH WERE PLACED IN THE PAPER BOOK; THAT THERE WAS NO DOUBT ABOUT THE GENUINENESS OF THE PAYMENT, AS PAYMENTS HAD BEEN MA DE THROUGH ACCOUNT PAYEE CHEQUES, COPIES OF WHICH HAD BEEN GIVEN TO TH E AO, WHO HAD VERIFIED THE SAME AND WAS FULLY SATISFIED ABOUT THE PAYMENT; THAT IN THE CASE OF THE SELLER OF THE SHARES, THE PRICE HAD BEEN ACCEPTED B Y THE DEPARTMENT, AS NOTED BY THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS, B UT IGNORED BY THE AO IN THE SECOND ASSESSMENT; THAT THE OBSERVATION OF THE LOWER AUTHORITIES THAT THE PURPOSE OF THE PURCHASE AND SALE OF SHARES RESULTIN G IN THE LOSS WAS NOT CLEAR, WAS UNJUSTIFIED; THAT THE ASSESSEE WAS THE YOUNGER BROTHER OF SHRI G.SAGAR SURI; THAT THE ASSESSEE, ALONG WITH HIS THREE OTHE R BROTHERS, INCLUDING SHRI LALIT SURI, WAS PART OF A GROUP WHICH ALSO CARRIED ON BUSINESS INCLUDING THE BUSINESSES RELATING TO M/S. DELHI AUTOMOBILES PVT. LTD., M/S. DELHI AUTO & ITA 4188(DEL)09 8 GENERAL FINANCE PVT. LTD., M/S SEQUOIA CONSTRUCTION PVT. LTD. AND M/S. GANGA AUTOMOBILES PVT. LTD.; THAT DISPUTES HAD ARIS EN AMONGST THE VARIOUS FAMILY MEMBERS; THAT AN INFORMAL ARRANGEMENT TOOK P LACE AMONGST THE BROTHERS IN TERMS OF WHICH, THE CONTROLLING INTERE ST IN BHARAT HOTELS LTD. WAS TO VEST IN SHRI LALIT SURI; THAT IN TERMS OF THE SA ME, THE SHARES HELD BY SHRI G. SAGAR SURI AND HIS CONTROLLED COMPANIES, M/S. DELHI AUTO & GENERAL FINANCE PVT. LTD., WERE TRANSFERRED TO THE ASSESSEE , WHO SUBSEQUENTLY TRANSFERRED THEM TO THE COMPANIES CONTROLLED BY SHR I LALIT SURI; THAT IN THE PROCESS OF SUCH SETTLEMENT, THE AFORESAID SHARES CA ME TO BE ACQUIRED BY THE ASSESSEE AT THE NEGOTIATED PRICE; THAT THE PURPOSE OF THE PURCHASE AND SALE OF SHARES WAS TO ARRIVE AT A FAMILY ARRANGEMENT, SO AS TO SETTLE THE DISPUTE AND THE SAME WAS DISCERNIBLE FROM THE MATERIAL ON RECOR D; THAT THE LOWER AUTHORITIES HAD DISREGARDED THE SAME AND HAD DOUBTE D THE TRANSACTIONS ON MERE CONJECTURES; THAT THE PLAINT FILED BY THE ASSE SSEE BEFORE THE HIGH COURT OF DELHI AND THE REPLY OF THE DEFENDANTS WERE VITAL PIECES OF EVIDENCE WHICH SUPPORTED THE ASSERTIONS MADE BY THE ASSESSEE ALL A LONG BEFORE THE LOWER AUTHORITIES; THAT THE ORDER OF THE HONBLE HIGH COU RT AND THE COPY OF THE DECREE PASSED BY THE HIGH COURT IN TERMS OF THE COM PROMISE WERE VERY MUCH BEFORE THE CIT(APPEALS); THAT THE EVIDENCE DID NOT BRING OUT ANY NEW FACT SITUATION, AS THE FACTS REGARDING THE EXISTENC E OF THE FAMILY DISPUTE AND ITA 4188(DEL)09 9 THE LITIGATION BEFORE THE HIGH COURT WERE VERY MUCH IN THE KNOWLEDGE OF THE LOWER AUTHORITIES; THAT THE EVIDENCE MERELY SOUGHT TO CLARIFY THE BASIS OF THE PURCHASE PRICE OF ` 25.70, AS CANVASSED BY THE ASSESSEE; AND THAT THE FACT THAT THE NEGOTIATIONS IN THE PROCESS OF THE FAMILY SETTL EMENT CULMINATED IN THE FIXATION OF THE PRICE OF THE SHARES TO BE SOLD TO T HE ASSESSEE BY THE SELLERS AT ` 25.70 STOOD ESTABLISHED. 7. THE TRIBUNAL, VIDE ORDER DATED 28.4.96 (COPY AT PAGES 176 TO 193 OF THE ASSESSEES PAPER BOOK, APB, FOR SHORT) OBSERV ED, INTER ALIA, AS FOLLOWS: 9. IN THE INSTANT CASE, WE ARE DEALING WITH THE ON E SUCH SITUATION WHERE THE ASSESSEE HAS ADMITTED TO A GAP IN ITS STAND WHICH HAS BEEN DEMONSTRATED BY THE CIT(APPEAL S). THE CIT(APPEALS) WHILE CONSIDERING THE EFFICACY OF PURCHASE PRICE OF ` 25.70 DID NOT FIND ANY FACTUAL SUPPORT IN THE STAND OF THE ASSESSEE THAT THE SAME WAS ARRIVED AT AS PART OF SETTLEMENT OF DISPUTE WITH THE FAMILY MEMBERS. THE MATERIAL BEFORE THE CIT(APPEALS) WAS THE APPLICATIO N MADE BY THE ASSESSEE TO THE DELHI HIGH COURT FOR A DECRE E IN TERMS OF THE COMPROMISE AND ALSO THE ORDER OF THE HONBLE HIGH COURT THEREOF. PRESENTLY THE ASSESSEE SEEKS TO BRI NG ON RECORD FRESH EVIDENCE IN THE SHAPE OF (A) COPY OF P LAINT IN SUIT NO. 516 OF 1998 FILED BY THE ASSESSEE IN HIGH COURT OF DELHI, AND (B) COPY OF THE DEFENDANTS, I.E., G. SA GAR SURI & OTHERS, REPLY TO THE ABOVE PLAINT. 10 WE HAVE PERUSED THE AFORESAID EVIDENCES. THE R EPLY OF THE DEFENDANTS G. SAGAR SURI & OTHERS TO THE ASS ESSEES PLAINT IS WORTHY OF NOTICE. THE COMPROMISE BETWEE N THE FAMILY WAS ADOPTED AND IMPLEMENTED, INTER ALIA, IN THE ITA 4188(DEL)09 10 FOLLOWING MANNER, AS PER THE EXTRACT FROM THE FRESH DOCUMENTS:- I. ON OR ABOUT NOVEMBER 10, 1987, THE BOARD OF DIRECTORS OF THE AUTOMOBILE COMPANY PASSED A RESOLUTION FOR SELLING THE ENTIRE EQUITY OF BHARAT HOTELS LTD. AND AUTHORIZED DEFENDANT NO. 1 TO EFFEC T THE TRANSFER UNDER HIS SIGNATURE ON BEHALF OF THE AUTOMOBILE COMPANY. II. THE DIRECTORS ALSO APPROVED AND DECIDED UPON THE TERMINATION OF THE INITIAL AGREEMENT BETWEEN THE AUTOMOBILE COMPANY AND M/S. BHARAT HOTELS LTD., DATED JUNE 18, 1981. III. THE MARKET VALUE OF EACH SHARE OF THE FACE VALUE OF ` 10/- IN THAT PUBLIC LIMITED COMPANY WAS FIXED AT ` 25.70. THE FACE VALUE OF THE SHARES, I.E., AT ` 10/- PER SHARE CAME TO ` 5 CRORES. THE TOTAL AMOUNT PAYABLE BY THE PURCHASERS OF THE SHARES TO DEFENDANTS NO. 1 TO 5 AND 8AND 9 AND OTHERS, WHOSE EQUITY WAS BEING ACQUIRED BY THE PLAINTIFF AND HIS NOMINEE AND BY TH E NOMINEE OF DEFENDANT NO.7 AT THE AGREED RATE OF ` 25.70 CAME TO ` 12,86,04,877/-. IV. THE SALE OF ABOVE-MENTIONED SHARE HOLDING OF THE AUTOMOBILE COMPANY AT THE ABOVE-MENTIONED RATE OF ` 25.70 PER SHARE WAS DULY APPROVED IN A MEETING OF T HE BOARD OF DIRECTORS OF THE SAID COMPANY HELD ON OR ABOUT DECEMBER 4, 1987. 11. THE ORDER OF THE CIT(A) BY WAY OF PARA 5.1 WHI CH HAS BEEN REFERRED TO BY THE LD. DR BEFORE US, READS AS FOLLOWS: IT HAS BEEN CLAIMED THAT THERE WAS A FAMILY DISPU TE AS THE RESULT OF WHICH THERE WAS PROTRACTED NEGOTIATIONS B ETWEEN THE TWO WARRING GROUPS. A SETTLEMENT WAS FINALLY A RRIVED AT, WHICH WAS APPROVED BY DELHI HIGH COURT. THE ASSES SEE HAD TO AGREE TO PAY HIGHER RATE THAN THE MARKET RAT E OF ` ITA 4188(DEL)09 11 25.70 PER SHARE ON ACCOUNT OF SUCH NEGOTIATED PRICE . I FIND THAT IN THE APPLICATION MADE TO DELHI HIGH COURT FO R A DECREE IN TERMS OF COMPROMISE, THERE IS NO MENTION OF THE PURCHASE OF SHARES OF M/S. BHARAT HOTELS LTD. BY TH E ASSESSEE AND NEITHER THE HONBLE HIGH COURT MAKE AN Y MENTION OF ANY SUCH PURCHASE WHILE APPROVING THE COMPROMISE. WHEN THIS FACT WAS PUT TO ASSESSEE DU RING THE COURSE OF THE HEARING, IT WAS STATED THAT THE PURCH ASE OF SHARES OF BHARAT HOTELS IS NOT MENTIONED IN THE APP LICATION BECAUSE THIS TRANSACTION HAD ALREADY BEEN COMPLETE D BEFORE THE APPLICATION WAS FILED. IT WAS STATED THAT THE FAMILY SETTLEMENT WAS TAKING PLACE IN STAGES. AFTER THE ASSESSEE PERFORMED HIS PART IN PURCHASING THE SHARES, THE G. SAGAR SURI GROUP REFUSED TO CARRY OUT THEIR PART OF THE S ETTLEMENT AS A RESULT OF WHICH ASSESSEE HAD TO FILE A SUIT IN DELHI HIGH COURT WHICH ULTIMATELY RESULTED IN A COMPROMISE DEC REE. THIS CLAIM OF THE ASSESSEE LACKS FORCE INASMUCH AS WHENEVER THERE ARE FAMILY DISPUTES RESULTING IN COURT PROCEE DINGS, THE COMPROMISE APPLICATION CONTAINS THE ENTIRE SETTLEME NT FOR THE APPROVAL OF THE COURT. THIS IS SO BECAUSE THE COMPROMISE ARRIVED AT IS COMPREHENSIVE IN THE SPIRI T OF GIVE AND TAKE AND CARRYING OUT AN ORAL COMPROMISE IN STA GES IS UNLIKELY TO SOLVE THE PROBLEM. APART FROM THIS, T HERE IS NO EVIDENCE IN SUPPORT OF THE CLAIM THAT THE SHARES WE RE PURCHASED AT A HIGHER PRICE ON THE BASIS OF NEGOTIA TED PRICE. THIS IS MERELY A CLAIM PUT FORWARD BY THE ASSESSEE WITHOUT ANY SUPPORTING EVIDENCE. 12. A COMBINED READING OF THE ORDER OF THE CIT(A) AND THE AFORESAID EVIDENCE NOW BEING SOUGHT TO BE INTRO DUCED BEFORE US LEADS TO A CLEAR INFERENCE THAT IF THE CO NTENTS OF THE ADDITIONAL EVIDENCE IS CONSIDERED THE GAP OR THE LA CUNAE REMAINING IN THE STAND OF THE ASSESSEE WITH RESPECT TO THE JUSTIFICATION OF PURCHASE PRICE, WHICH HAS BEEN NOT ED BY THE CIT(APPEALS) GETS REMOVED. THE PLEA OF THE ASSESS EE BEFORE THE LOWER AUTHORITIES ALL ALONG HAS BEEN THA T THE PURCHASE PRICE HAS BEEN ARRIVED AT IN THE PROCESS O F SETTLEMENT OF FAMILY DISPUTE AND IS NEGOTIATED PRIC E. THE REPLY OF THE DEFENDANT, I.E., G. SAGAR SURI WHOSE G ROUP HAD ITA 4188(DEL)09 12 SOLD THE SHARES TO THE ASSESSEE AT ` 25.70 CLEARLY SHOWS THAT THE PLEA OF THE ASSESSEE IS BORNE OUT. 13 IN THE INSTANT CASE, HAVING REGARD TO THE NATURE OF EVIDENCE THAT IS SOUGHT TO BE PRAYED FOR, WE DEEM I T FIT AND PROPER TO ADMIT THE SAME. 14. THE FRESH MATERIAL CLEARLY SUGGESTS THE REASONI NG AND THE JUSTIFICATION OF THE PURCHASE PRICE OF ` 25.70. THUS, THIS EVIDENCE IS RELEVANT TO DECIDE THAT THE PURCHASE PR ICE PAID WAS HIGHER BECAUSE OF IT BEING A NEGOTIATED PRICE. HOWEVER, THE FRESH EVIDENCE HAS NOT BEEN EXAMINED BY EITHER OF THE LOWER AUTHORITIES. WE, THEREFORE, DEEM IT FIT AND PROPER TO SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND R EMAND THE SAME TO THE FILE OF THE AO TO BE EXAMINED AFRESH IN THE LIGHT OF THE AFORESAID EVIDENCE. THEREFORE, THE ORDER O F THE CIT(A) IS SET ASIDE AND THE ISSUE IS RESTORED TO TH E FILE OF THE AO TO BE CONSIDERED AFRESH. 15. FOR STATISTICAL REASONS, THE ASSESSEE SUCCEEDS ON THIS GROUND. 8. VIDE ORDER DATED 12.12.07, THE AO AGAIN REJECTED THE ASSESSEES CLAIM OF LOSS ON THE SALE OF SHARES OF M/S. BHARAT HOTELS LTD. AND ASSESSED THE INCOME AT ` 8,58,200/-, AS DONE IN THE FIRST ROUND. IT WAS OB SERVED, INTER ALIA, AS FOLLOWS:- THE FACTS OF THE CASE HAVE BEEN CONSIDERED IN THEI R ENTIRETY. FROM THE FRESH EVIDENCE FILED, IT APPEARS THAT THE ASSES SEE WAS IN A PREDICAMENT DUE TO FAMILY DISPUTES. BUT THE INCOM E TAX ACT CANNOT BE A PARTY TO HIS PREDICAMENT NOR CAN IT BE A PART Y TO HIS CONSIDERATION FOR HIS BROTHER. AFTER CONSIDERING THE FRESH EVIDENCE AND LOOKING INTO THE SURROUNDING CIRCUMSTANCES SUCH AS THE ASSESSEE WAS ANTICIPATING A SUBSTANTIAL INCOME DURING THE YE AR, IT IS HELD THAT ITA 4188(DEL)09 13 THE ASSESSEE ADOPTED A COLOURFUL DEVICE TO CREATE A LOSS WHICH IS NOT ACCEPTED IN VIEW OF THE DECISION OF THE SUPREME COU RT IN THE CASE OF MCDOWELL & CO. LTD. V. ITO[1985] 154 ITR 148. AS SESSED AT INCOME OF ` 8,58,200/- AS PER ORDER U/S 143(3) DATED 23.03.1995 . 9. THE CIT(A), BY VIRTUE OF THE IMPUGNED ORDER DATE D 25.6.2009, CONFIRMED THE ADDITION, OBSERVING, INTER ALIA, AS U NDER:- IT IS PERTINENT TO NOTE THE FOLLOWING:- I) THE SAID DOCUMENT SUBMITTED BEFORE THE HONBLE ITAT CLAIMING TO BE NEW EVIDENCE ARE IN FACT DOCUMENTS WHICH WE RE FILED IN 1988 IN SUIT NO. 516 BEFORE THE HONBLE DELHI HIGH COURT, AS SUCH NO EXPLANATION HAS BEEN BROUGHT ON RECORD AS T O WHY THE SAID DOCUMENTS ARE BEING CLAIMED TO BE AS NEW EVID ENCE. SINCE THE ITAT ORDER IS DATED 28 TH APRIL, 06, I.E., AFTER 18 YEARS OF THE APPLICATION BEING SUBMITTED BEFORE THE HIGH COURT. HENCE THE ASSESSEES VERY PLEA REGARDING ADMITTANCE OF NEW EVIDENCE IS QUESTIONABLE AND IS CLEARLY A HALF BAKE D AFTER THOUGHT. II) IT IS PERTINENT THAT ARS WHOLE ARGUMENT IN THE PRE SENT PROCEEDINGS HAS BEEN THAT THE SAID DOCUMENTS PERTAI NING TO SUIT NO. 516 SHOULD BE TAKEN AS FINAL WORD THAT THE SALE AND PURCHASE OF THE SHARE AT ` 25.70 PER SHARE ACTUALLY TOOK PLACE. HOWEVER, THE WHOLE ARGUMENT APPEARS TO BE AN AFTER- THOUGHT. THE ISSUE AT HAND IS NOT WHETHER SALE OR PURCHASE O F THIS AMOUNT OF ` 25.70 PER SHARE TOOK PLACE BUT HOW AND WHY ASSESSEE IS CLAIMING THIS AMOUNT TO BE THE NEGOTIAT ED PRICE AND THIS QUESTION HAS NOT BEEN ANSWERED EITHER IN THE P RESENT PROCEEDINGS OR IN THE ASSESSMENT PROCEEDINGS UNDER REFERENCE. THE AO HAS BEEN GOING INTO THE REASON AS TO WHY AND HOW THE SAID AMOUNT WAS CLAIMED TO BE SALE/PURCHASE PRICE. THE SAID VALUE OF ` 25.70 PER SHARE IS AGAINST ALL ECONOMICS/COMMERCIAL SENSE/MARKET FORCES, AS HAS ALSO BEEN BROUGHT OUT I N THE ORIGINAL ASSESSMENT ORDER AND SUBSEQUENT ORDER OF C IT(A). ITA 4188(DEL)09 14 THE ISSUE OF THIS PRICE BEING CLAIMED TO SET OFF AG AINST HUGE INCOME OF THE ASSESSEE DURING THE PERIOD UNDER REFE RENCE HOLDS KEY TO THE WHOLE ISSUE. AS SUCH THE ASSESSEE HAS FAILED TO EXPLAIN WHY AND HOW THE NEGOTIATED PRICE OF ` 25.70 WAS ARRIVED AT AND THE NEW EVIDENCE DOES NOT GIVE ANY ANSWER/EXPLANATION TO THIS QUESTION. III) THE AR HAS HIMSELF ADMITTED VIDE HIS SUBMISSION DAT ED 25.11.07 THAT, THE MATTER REGARDING THE TRANSFER O F SHARE OF BHARAT HOTEL LTD. WAS SETTLED BY NEGOTIATION EARLIE R THAN THE COMPROMISE REACHED. THIS IS A DICHOTOMY BECAUSE NEGOTIATIONS ARE HELD SO AS TO CULMINATE IN A COMPR OMISE AND THE AR HAS FAILED TO EXPLAIN HOW NEGOTIATIONS WERE AN ENTIRELY DIFFERENT MATTER TO THE FINAL COMPROMISE. IV) NO EXPLANATION HAS BEEN GIVEN AS TO WHY THE BOARD O F DIRECTORS OF THE AUTOMOBILE COMPANYS RESOLUTION FOR SELLING THE ENTIRE EQUITY OF BHARAT HOTEL LTD. WAS NOT BROUGHT BEFORE THE AO ALONG WITH BASIS OF THE FIXING OF RATE OF THE SHARE . MERE SUBSEQUENT CLAIM OF APPROVAL, BY THE DIRECTORS OF T HE AUTOMOBILE COMPANY, OF THE PRICE AT ` 25.70 PER SHARE IS NOT ACCEPTABLE UNLESS THE LOGIC AND THE MARKET FORCES B EHIND IT ARE EXAMINED BY THE INCOME TAX AUTHORITIES. V) VIDE GROUND NO.8 OF APPEAL, THE AR HAS SUBMITTED TH AT: THE AO HAS NOT APPLIED HIS MIND TO THE EVIDENCE FI LED BEFORE THE HONBLE BENCH OF ITAT AS ADDITIONAL EVIDENCE WH ICH CLEARLY PROVES THE CASE OF THE ASSESSEE THAT THE PU RCHASE PRICE OF EACH SHARE OF BHARAT HOTELS LTD. IS ` 25.70 BASED ON THE NEGOTIATION BETWEEN THE ASSESSEE AND THE SELLER OF THE SHARES. THE LOGIC BEHIND THE PRICE HAS NOT BEEN GIVEN. TH E HONBLE ITAT HAS DIRECTED THE AO TO EXAMINE CERTAIN DOCUMEN TS SUBMITTED BEFORE IT FOR THE FIRST TIME. THE HONB LE ITAT HAD NOT GIVEN A CATEGORICAL FINDING THAT THE ASSESSEES CLAIM IS CORRECT, TRUE AND ACCEPTABLE. IF THIS WERE SO, THE HONBLE ITAT COULD HAVE PASSED AN ORDER IN THE ASSESSEES FAVOUR , YET IN THEIR WISDOM HONBLE LORDSHIPS CHOSE TO RESTORE THE MATTE R TO THE ITA 4188(DEL)09 15 AO FOR EXAMINATION. THE HONBLE COURT DID NOT DIR ECT THE AO TO PASS THE ORDER IN A PARTICULAR MANNER, THE AO HA S BEEN GIVEN THE FREEDOM TO COME TO THE CONCLUSION AFTER EXAMINI NG THE EVIDENCE WHICH WERE PRODUCED BEFORE THE ITAT FOR TH E FIRST TIME. IT IS PERTINENT TO NOTE THAT ONLY THIS ISSUE WAS RESTORED TO THE FILE OF THE AO FOR FURTHER EXAMINATION. THE A O HAS CARRIED OUT THE ORDER OF THE HONBLE ITAT AND EXAMINED THE CLAIM/EVIDENCE, ON MERIT. VI) IT IS ALSO PERTINENT TO BRING ON RECORD THAT IN THE APPLICATION MADE TO DELHI HIGH COURT FOR A DECREE IN TERMS OF C OMPROMISE, THERE IS NO MENTION OF THE PURCHASE OF SHARE OF M/S . BHARAT HOTELS LTD. OR THEIR NEGOTIATED PRICE. THE CLAIM OF THE ASSESSEE THAT PIECE MEAL FAMILY SETTLEMENT HAS TAKEN PLACE I S NOT ACCEPTABLE BECAUSE COMPROMISE AND SETTLEMENTS INVOL VED BOTH GIVE AND TAKE, TO SOLVE A PROBLEM. AS SUCH AT NO STAGE HAS ANY BASIS BEEN GIVEN FOR WORKING OUT THE VALUE OF ` 25.70 PAISE PER SHARE WHICH IS MORE THAN 157% OF THE FACE VALUE OF THE SHARE AND 304 % OF THE PREVAILING MARKET PRICE ( ` 6.36 AS ON 31.12.87). IN VIEW OF THE ABOVE FACTS BROUGHT ON RECORD VIDE A SSESSMENT ORDER UNDER REFERENCE AND INABILITY OF THE ASSESSEE TO EXPLAIN HOW AND WHY THE VALUE OF SHARE HAS BEEN WORKED AT ` 25.70 PAISE PER SHARE AND IN VIEW OF THE ALLEGED NEW EVI DENCE, THE ADDITION MADE IS CONFIRMED. 10. BEFORE US, CHALLENGING THE IMPUGNED ORDER, THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE LD. CIT(A) HAS ERRE D IN DISALLOWING THE LOSS OF ` 1,58,28,700/- DECLARED BY THE ASSESSEE; THAT THE LD . CIT(A) HAS ERRED IN INTERPRETING THE TRIBUNAL ORDER DATED 28.4.06; THAT THE AO WAS TO SEE THE PLAINT AND THE REPLY OF THE DEFENDANTS IN THE SUIT FILED BEFORE THE HONBLE HIGH COURT; THAT THEREIN, THE FACTUM OF THE AGREED PRICE WAS MENTIONED; THAT ITA 4188(DEL)09 16 THE FAMILY DISPUTE OF THE ASSESSEE HAS NOWHERE BEEN DISPUTED; THAT THE AO DID NOT EXAMINE THE MATTER AT LENGTH; THAT IN FACT, NO COMMENT AT ALL WAS MADE BY THE AO; THAT THE TRIBUNAL HAD MADE CATEGORI CAL OBSERVATIONS WHILE REMANDING THE MATTER TO THE AOS FILE; THAT THE OBS ERVATIONS OF THE TRIBUNAL HAVE ATTAINED FINALITY AND COULD NOT BE OVER-RIDDEN BY THE AO, AS HELD IN BHOPAL SUGAR INDUSTRIES V. ITO, BHOPAL, 40 ITR 61 8 (SC); THAT FURTHER, THE EVIDENCE PLACED BEFORE THE TRIBUNAL, IN THE SHAPE O F THE AFORESAID PLAINT AND WRITTEN STATEMENT OF THE DEFENDANTS IN THE SUIT FIL ED BEFORE THE HONBLE HIGH COURT AMPLY JUSTIFIES THE PURCHASE PRICE OF THE SHA RES OF M/S. BHARAT HOTELS LTD. AT ` 25.70 PER SHARE; THAT THIS PRICE WAS ARRIVED AT IN THE FAMILY SETTLEMENT OF THE ASSESSEE AND WAS, THEREFORE, THE AGREED/NEGOTIATED PRICE; THAT THE LD. CIT(A) HAS MERELY DITTOED THE ASSESSM ENT ORDER; THAT THEN, THE AO, IN GIFT-TAX PROCEEDINGS (APB- 2, 26 TO 32), ACC EPTED THE SHARE PRICE AT ` 25.70 PER SHARE; THAT THIS WAS UPHELD BY THE COMMIS SIONER (APPEALS) (COPY AT APB-2, 14 TO 25); THAT THIS WAS ALSO CONFIRMED B Y THE TRIBUNAL (APB-2, 1 TO 13); THAT THEREFORE, THE PURCHASE PRICE OF THE S HARES HAS BEEN FOUND ACCEPTABLE BY THE DEPARTMENT ITSELF; THAT THE AO N EVER EXAMINED THE SELLERS OF THE SHARES; AND THAT HENCE, THE ORDER PASSED BY THE LD. CIT(A) IS UNSUSTAINABLE IN THE EYE OF LAW AND IS LIABLE TO BE CANCELLED BY ALLOWING THE APPEAL FILED BY THE ASSESSEE. ITA 4188(DEL)09 17 11. THE LD. DR, ON THE OTHER HAND, HAS STRONGLY SUP PORTED THE IMPUGNED ORDER. IT HAS BEEN SUBMITTED THAT THE ASSESSEE PUR CHASED SHARES OF BHARAT HOTELS LTD. AT ` 25.70 PER SHARE ON 13.11.87 FROM PERSONS AND COMPA NIES CONNECTED WITH G. SAGAR SURI GROUP FOR ` 4,60,20,990/-, BY TAKING A LOAN OF ` 9.27 CRORES FROM M/S. DEEKSHA HOLDINGS PVT. LTD. THIS LOAN WAS INTEREST FREE. IT WAS PAID BACK PARTLY IN SUBSEQUENT YEARS. THERE WAS A REMAINING BALANCE OF ` 37,53,400/-. ` 6.36 PER SHARE WAS THE PRICE OF THE SHARES QUOTED ON 31.12.87. ON 30.3.88 THE ASSESSEE SOLD 10,00,0 00 SHARES AT ` 10/- PER SHARE TO M/S. DEEKSHA HOLDINGS PVT. LTD., WHOSE MAN AGING DIRECTOR HAPPENS TO BE MRS. RITU SURI, WIFE OF THE ASSESSEE, THOUGH THE ASSESSEE MAINTAINED THAT RITU SURI IS THE WIFE OF SHRI LALIT SURI, BROTHER OF THE ASSESSEE AND THAT RITU SURI WAS NOT THE MANAGING DI RECTOR OF M/S. BHARAT HOTELS LTD. ON 30.3.88, THE DATE ON WHICH THE ASS ESSEE SOLD THE SHARES, THE QUOTED PRICE OF THE SHARES WAS AROUND ` 10/- PER SHARE. ON 12.5.88, THE ASSESSEE SOLD THE REMAINING SHARES TO M/S. JYOTSANA HOLDING PVT. LTD. @ ` 10/- PER SHARE. ON 8.3.90, M/S. JYOTSANA HOLDING P VT. LTD. TRANSFERRED THE SHARES TO ANOTHER GROUP CONCERN, NAMELY, M/S. RELIA BLE BUILDERS, @ ` 10/- PER SHARE. M/S. DEEKSHA HOLDINGS PVT. LTD. FURTHE R PURCHASED SHARES OF BHARAT HOTELS FROM M/S. CONTINENTAL CONSTRUCTION PV T. LTD., M/S. R.R. ITA 4188(DEL)09 18 HOLDING PVT. LTD. AND MR. HANUWANT SINGH TIKKA ALL @ ` 10/- PER SHARE. PART OF THE SHARE-HOLDING WAS SOLD TO SHRI LALIT SU RI AND MRS. JYOTSANA SURI @ ` 10/- PER SHARE. THE PURCHASE OF 17,90,700 SHARES OF M/S. BHARAT HOTELS BY THE ASSESSEE @ ` 25.70 PER SHARE AND SALE OF 10,00,000 SHARES @ ` 10/- PER SHARE, OF M/S. DEEKSHA HOLDINGS PVT. LTD. IN TH E PREVIOUS YEAR RESULTED IN THE CLAIM OF LOSS OF ` 1,58,28,500/- IN ASSESSMENT YEAR 1988-89. THE REMAINING SHARES WERE ALSO SOLD TO M/S. JYOTSANA HO LDING PVT. LTD. IN ASSESSMENT YEAR 1989-90, @ ` 10/- PER SHARE. THIS RESULTED IN A LOSS OF ` 1,25,15,640/-. THE ASSESSEE HAD ORIGINALLY CLAIME D HIS LOSS TO BE A BUSINESS LOSS. HOWEVER, SUBSEQUENTLY, HE REVISED THE CLAIM TO BE A SHORT TERM CAPITAL LOSS. 12. THE LD. DR HAS CONTENDED THAT THE PURCHASE OF S HARES WAS MADE @ ` 25.70 PER SHARE; THAT THIS WAS HIGHER THAN THE MARK ET RATE; THAT THE QUOTED PRICE OF THE SHARES AT THE RELEVANT TIME WAS LOWER; THAT THE BREAK UP VALUE AS ON 31.12.87 AT ` 6.36 AND WAS CONSIDERABLY LOWER; THAT THE PURCHASE PRICE WAS FINANCED ENTIRELY BY M/S. DEEKSHA HOLDINGS PVT. LTD.; THAT M/S. DEEKSHA HOLDINGS PVT. LTD. HAD GIVEN AN INTEREST FR EE LOAN OF ` 9.27 CRORES; THAT A MAJORITY OF 10,00,000 SHARES WAS SOLD TO THI S VERY CONCERN WITHIN A SPAN OF FOUR YEARS @ ` 10/- PER SHARE; THAT THE REMAINING SHARES WERE ALSO ITA 4188(DEL)09 19 SOLD TO M/S. JYOTSANA HOLDING PVT. LTD. WITHIN SIX MONTHS, @ ` 10/- PER SHARE; THAT BOTH THE SALE TRANSACTIONS RESULTED IN HEAVY LOSS ON ACCOUNT OF TRANSACTIONS IN THESE SHARES OF ` 2.81 CRORES; THAT SHRI SIKANDER LAL KOHLI, SHARE BROKER, HAD PLAYED THE MINIMUM ROLE IN THE TR ANSACTIONS, THE TRANSACTIONS BEING BETWEEN THE PURCHASER AND THE SE LLER DIRECTLY; THAT ALL THE TRANSACTING PARTIES WERE CLOSELY RELATED; THAT THE SHARES WERE PURCHASED FROM G. SAGAR SURI GROUP AND WERE SOLD TO THE CONCERNS B ELONGING TO LALIT SAGAR GROUP; THAT UNDISPUTEDLY, SHRI G. SAGAR SURI AND SH RI LALIT SURI ARE BROTHERS; THAT THE ASSESSEE HAD PURCHASED THE SHARES WITH THE INTENTION OF ACQUIRING CONTROLLING INTEREST IN M/S. BHARAT HOTELS LTD. AND FOR THIS, HE HAD PAID AN UNREALISTIC PRICE WHICH WAS RELATED NEITHER TO THE MARKET RATE, NOR TO THE INTRINSIC VALUE OF THE SHARES; THAT THE SHARES HAVI NG BEEN SOLD AT THE PREVAILING MARKET PRICE AND NO NEGOTIATED PRICE, AS ALLEGED, HAVING BEEN SETTLED, THERE WAS NO QUESTION OF PURCHASING THE SH ARES @ ` 25.70 PER SHARE; THAT THE ASSESSEE ONLY WANTED TO SHOW LOSS FROM THE SE TRANSACTIONS IN ORDER THAT THE HUGE PROFITS EARNED IN ASSESSMENT YEARS 19 88-89 AND 1989-90 COULD BE REDUCED; AND THAT IT WAS IN THESE FACTS THAT THE LOSS CLAIMED WAS NOT ACCEPTED, IT BEING COLOURABLE DEVICE. 13. THE LD. DR HAS FURTHER CONTENDED THAT BY VIRTUE OF THE ORDER DATED 4.3.96, THE LD. CIT(A) SUSTAINED THE DISALLOWANCE M ADE, OBSERVING THAT THE ITA 4188(DEL)09 20 ASSESSEE HAD A HUGE INCOME AND HAD DECLARED CONSULT ANCY COMMISSION OF ` 50 LAKHS, BESIDES NET PROFIT OF ` 2,17,22,320/- AND ` 79.07 LAKHS, ON SALE OF SHARES/DEBENTURES, THAT WITHOUT CONSIDERING THE LOS S ON SALE OF SHARES OF BHARAT HOTELS LTD. DURING THE YEAR, THE PROFIT ON S ALE OF SHARES/DEBENTURES CAME TO ` 3,42,37,960/-, THAT THE SALE OF SHARES WAS ENTIRELY THE ASSESSEES OWN CASE, THAT THE CLAIM OF LOSS IN ASSESSMENT YEAR S 1987-88 AND 1988-89 WAS IN ANTICIPATION OF HUGE PROFITS, THAT THE CONSU LTANCY COMMISSION HAD BEEN RECEIVED FROM WALCHAND NAGAR INDUSTRIES LTD., AS PER THE AGREEMENT DATED 18.9.87 WHICH WAS MUCH BEFORE THE DATE OF PUR CHASE AND SALE OF SHARES ON 13.11.87, 30.3.88 AND 12.5.88, THAT THE MAJOR IN COME IN ASSESSMENT YEAR 1989-90 WAS PROFIT ON SALE OF SHARES WHICH COULD NO T BE SAID TO HAVE NOT BEEN ANTICIPATED OR NOT IN THE KNOWLEDGE OF THE ASS ESSEE, THAT IT HAD NOT BEEN EXPLAINED AS TO HOW THE AMOUNT OF ` 1,29,26,500/-, REPRESENTING COMPENSATION FOR THE PAST SERVICES BY THE ASSESSEE TO M/S. DELHI AUTOMOBILE PVT. LTD., DEFENDANT NO. 8 IN THE SUIT F ILED BEFORE THE HONBLE DELHI HIGH COURT, HAD BEEN WORKED OUT, THAT AT THE SAME TIME, THE ASSESSEE HAD AGREED TO PURCHASE 17,90,700 SHARES @ ` 25.70 PER SHARE, A PRICE MUCH HIGHER THAN THE MARKET PRICE, THAT THE SHARES WERE PURCHASED BY THE ASSESSEE FOR THE ASSESSEE WHOPPING SUM OF ` 4,60,20,990/-, WHICH IN FACT THE INCOME ITA 4188(DEL)09 21 OF ` 3.92 CRORES, THAT THE LOSS IN PURCHASE AND SALE OF SHARES OF BHARAT HOTELS LTD. WAS IN FACT ADJUSTED AGAINST THE WHOPPING INCO ME OF ` 3.92 CRORES EARNED BY THE ASSESSEE IN ASSESSMENT YEAR 1989-90, THAT IN ALL LIKELIHOOD THE AMOUNT OF COMPENSATION HAD BEEN INCREASED BY THE EX CESS AMOUNT CHARGED FROM THE ASSESSEE FOR THE SHARES OF BHARAT HOTELS L TD., THAT THEREFORE, IT APPEARED TO BE A CASE WHERE THE ASSESSEES MONEY HA D BEEN PLOUGHED BACK, THE LOSS SUFFERED BEING ONLY NOTIONAL AND HAVING BE EN SET OFF BY THE HIGHER AMOUNT RECEIVED AND ADJUSTED AGAINST THE ASSESSEES PROFITS, THEREBY CONSIDERABLY REDUCING HIS TAX LIABILITY, AND THAT N OTICEABLY THE SHARES PURCHASED BY THE ASSESSEE AT A MUCH HIGHER RATE ULT IMATELY WENT TO THE LOSS, INDICATING THAT THE ASSESSEE WAS MERELY A CONDUIT FOR THE TRANSFER OF SHARES FROM SAGAR SURI GROUP TO LALIT SURI GROUP, THEREBY DERIVING HUGE BENEFITS BY CLAIMING LOSS. 14. THE LD. DR HAS FURTHER CONTENDED THAT THE BASIS OF CLAIMING PRICE OF SHARES @ ` 25.70 PER SHARE HAS NEVER BEEN EXPLAINED TO THE DEP ARTMENT THOUGH IT IS AGAINST THE PREVAILING MARKET CONDITIO NS; THAT EVEN IF IT IS ON THE NEGOTIATIONS OF A FAMILY DISPUTE, THE PRICE HAS TO BE BASED ON THE MARKET CONDITIONS OR ON SOME EXPLAINABLE LOGIC; THAT DESPI TE THE FACT THAT THE ASSESSEE WAS PROVIDED NUMEROUS OPPORTUNITIES TO DO SO, HE DID NOT MAKE IT CLEAR AS TO HOW THE AMOUNT WAS ARRIVED AT; THAT IT WAS ALSO WRONG ON THE PART ITA 4188(DEL)09 22 OF THE ASSESSEE TO STATE THAT THE GROUP OF G. SAGAR SURI, BROTHER OF THE ASSESSEE, DID NOT WANT TO PART WITH THE SHARES OF M /S. BHARAT HOTELS LTD., EVEN THOUGH THE MARKET VALUE OF THE SHARES WAS MUCH LESS THAN THAT OF ` 25.70 PER SHARE; THAT WHEN THE SHARES WERE SOLD TO LALIT SURI GROUP, THE CONSIDERATION RECEIVED WAS NOT AS HIGH, EVEN THOUGH AS PER THE ASSESSEES OWN CASE, THERE WAS A FAMILY DISPUTE BETWEEN THEM; THAT FURTHER, THOUGH THE EVIDENCE SUBMITTED BY THE ASSESSEE BEFORE THE TRIBU NAL, IN THE FORM OF COPY OF PLAINT IN SUIT NO. 516 OF 1988 FILED BY THE ASSE SSEE IN HIGH COURT OF DELHI AND A COPY OF DEFENDANTS REPLY FILED, BY SHRI G. S AGAR SURI & OTHERS, PERTAINED TO THE YEAR 1988, THEY WERE FURNISHED BEF ORE THE TRIBUNAL AS NEW EVIDENCE, WITHOUT EXPLAINING AS TO HOW THESE DOCUM ENTS CONSTITUTED NEW EVIDENCE, EVEN AFTER EIGHTEEN LONG YEARS; THAT EVEN THIS NEW EVIDENCE DOES NOT THROW ANY LIGHT ON THE ISSUE OF AS TO HOW THE N EGOTIATED PRICE OF ` 25.70 PER SHARE WAS ARRIVED AT; THAT NOT ONLY THIS, THE A SSESSEE HAS HIMSELF ADMITTED THAT THE MATTER REGARDING TRANSFER OF SHARES OF BHA RAT HOTELS LTD. WAS SETTLED BY NEGOTIATIONS EARLIER THAN THE PRICE ARRIVED AT, WHICH IS A CONTRADICTIO N IN TERMS TO THE STAND MAINTAINED BY THE ASSESSEE; THAT ALSO, NO EXPLANATION IS FORTHCOMING AS TO WHY THE RESOLUTION OF THE BOARD OF DIRECTORS OF THE AUTOMOBILE COMPANY FOR SELLING THE SHARES OF BHARAT HOTELS LTD. IN THEIR ENTIRETY WERE NOT FILED BEFORE THE AO; THAT AS CORR ECTLY OBSERVED BY THE ITA 4188(DEL)09 23 CIT(A), THE AO DID CARRY OUT THE ORDER OF THE TRIBUNAL AND IT WAS ON LY THEREAFTER THAT THE ADDITION WAS MADE AGAIN; THAT T OO, PERTINENTLY, AS NOTED BY THE LD. CIT(A), IN THE DECREE PLACED BY THE HONBLE DELHI HIGH COURT, THE FACTUM OF PURCHASE OF SHARES OF BHARAT HOTELS LTD. DOES NOT FIND ANY MENTION, NOR HAS THEIR NEGOTIATED PRICE BEEN MENTIO NED THEREIN; THAT THE ASSESSEES PLEA OF PEACE-MEAL FAMILY SETTLEMENT HAS RIGHTLY BEEN REJECTED BY THE LD. CIT(A); THAT REMARKABLY, AS OBSERVED BY THE LD. CIT(A), THE VALUE OF ` 25.70 PER SHARE IS MORE THAN 157% OF THE FACE VALUE OF THE SHARES AND 304% OF THE PREVAILING MARKET PRICE OF ` 6.36 AS ON 31.12.87. 15. ON THE BASIS OF THE ABOVE SUBMISSIONS, THE LD. DR HAS CONTENDED THAT THERE BEING NOTHING WRONG WITH THE ORDER PASSED BY THE LD. CIT(A), THE SAME BE CONFIRMED WHILE DISMISSING THE APPEAL FILED BY T HE ASSESSEE, WHICH CARRIES NO MERIT WHATSOEVER. 16. THE TRIBUNAL, BY VIRTUE OF ITS ORDER DATED 24.8 .06 (SUPRA), OBSERVED, INTER ALIA, THAT :- 12. A COMBINED READING OF THE ORDER OF THE CIT(A) AND THE AFORESAID EVIDENCE NOW BEING SOUGHT TO BE INTRODUCED BEFORE U S LEADS TO A CLEAR INFERENCE THAT IF THE CONTENTS OF THE ADDITIONAL EV IDENCE IS CONSIDERED THE GAP OR THE LACUNAE REMAINING IN THE STAND OF TH E ASSESSEE WITH RESPECT TO THE JUSTIFICATION OF PURCHASE PRICE, WHI CH HAS BEEN NOTED BY THE CIT(A) GETS REMOVED. THE PLEA OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES ALL ALONG HAS BEEN THAT THE PURCHASE PR ICE HAS BEEN ITA 4188(DEL)09 24 ARRIVED AT IN THE PROCESS OF SETTLEMENT OF FAMILY D ISPUTE AND IS NEGOTIATED PRICE. THE REPLY OF THE DEFENDANT , I.E ., G. SAGAR SURI WHOSE GROUP HAD SOLD THE SHARES TO THE ASSESSEE AT ` 25.70 CLEARLY SHOWS THAT THE PLEA OF THE ASSESSEE IS BORNE OUT. 13. IN THIS CONTEXT THE RELIANCE PLACED BY THE LD. COUNSEL FOR THE ASSESSEE ON THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF PARI MANGALDAS GIRDHARIDAS V. CIT, 1977 CTR GUJARAT 647 IS WORTHY OF NOTICE. ACCORDING TO THE HONBLE HIGH COURT IN TH E CONTEXT OF RULE 29 OF THE APPELLATE TRIBUNAL RULES, THE TRIBUNAL HA S POWER TO ALLOW ADDITIONAL EVIDENCE TO BE BROUGHT ON RECORD IF IT E NABLES IN THE INTEREST OF JUSTICE, TO CLEAR AN OBSCURITY WHICH WO ULD LHAVE KOTHERWISE RESULTED IN THE ORDER OF THE TRIBUNAL. THE HONBL E HIGH COURT WAS DEALING WITH A SITUATION WHERE THE TRIBUNAL WAS CON SIDERING THE PLEA OF THE ASSESSEE AS TO WHETHER THE PROFIT RESULTING ON THE SALE OF SHARES WAS TO BE CONSIDERED AS A BUSINESS INCOME OR A CAPI TAL GAIN. THE AO AND THE CIT(A) HAD HELD THE PROFIT AS BUSINESS INCO ME. BEFORE THE TRIBUNAL THE ASSESSEE CANVASSED THAT THE SAME BE TR EATED AS CAPITAL GAINS AND IN THAT REGARD RELIANCE WAS PLACED ON AN AGREEMENT WITH THE BUYER OF THE SHARES BY WAY OF WHICH IT WAS SOUG HT TO BE DEMONSTRATED THAT THE TRANSFER OF SHARES WAS NOT EF FECTED IN THE ORDINARY COURSE OF BUSINESS BUT IT WAS UNDERTAKEN A S A PART AND PARCEL OF THE TRANSFER OF THE MANAGEMENT OF THE INV ESTEE COMPANY. THE TRIBUNAL FOUND THAT IN THE EARLIER YEARS THE DE ALING OF SHARES MADE BY THE ASSESSEE WAS CONSIDERED AS BUSINESS INC OME AND DID NOT DEEM IT FIT TO ADMIT THE AGREEMENT SOUGHT TO BE REL IED UPON BY THE ASSESSEE AS THE SAME WAS NOT BEFORE THE LOWER AUTHO RITIES AND ALSO IN THE LIGHT OF THE PRECEDENT. IN THIS BACKGROUND, TH E HONBLE HIGH COURT OPINED THAT THE AGREEMENT DESERVES TO BE ADMI TTED CONSIDERING THE PURPOSE OF RULE 29 OF THE APPELLATE TRIBUNAL RU LES. ACCORDING TO THE HONBLE HIGH COURT IT WAS A LACUNAE IN THE RECO RD OF THE LOWER AUTHORITIES, WHICH THE ASSESSEE SOUGHT TO REMOVE BY PRAYING FOR ADMISSION OF ADDITIONAL EVIDENCE AND THUS DESERVED TO BE ADMITTED. IT FOLLOWS FROM THE DECISION OF THE HONBLE HIGH COUR T OF GUJARAT THAT THE DISCRETION VESTED WITH THE TRIBUNAL IN TERMS OF RULE 29 IS NOT TO BE RESTRICTED BUT IS OF WIDE AMPLITUDE AND IS ALSO AVA ILABLE TO BE EXERCISED IN THE CASE WHERE THE ASSESSEE IS ABLE TO JUSTIFY ITS STAND BEFORE THE LOWER AUTHORITIES AND ALSO FREE IT FROM DEFECTS OR LACUNAE WHICH THE ADDITIONAL EVIDENCE WOULD REDRESS. IN TH E INSTANT CASE, ITA 4188(DEL)09 25 HAVING REGARD TO THE NATURE OF EVIDENCE THAT IS SOU GHT TO BE PRAYED FOR, WE DEEM IT FIT AND PROPER TO ADMIT THE SAME. 14. THE FRESH MATERIAL CLEARLY SUGGESTS THE REASO NING AND THE JUSTIFICATION OF THE PURCHASE PRICE OF ` 25.70. THUS, THIS EVIDENCE IS RELEVANT TO DECIDE THAT THE PURCHASE PRICE PAID WAS HIGHER BECAUSE OF ITS BEING A NEGOTIATED PRICE. HOWEVER, THE FRESH EV IDENCE HAS NOT BEEN EXAMINED BY EITHER OF THE LOWER AUTHORITIES. WE, T HEREFORE, DEEM IT FIT AND PROPER TO SET ASIDE THE ORDERS OF THE LOWER AUT HORITIES AND REMAND THE SAME TO THE FILE OF THE AO TO BE EXAMINED AFRES H IN THE LIGHT OF THE AFORESAID EVIDENCE. THEREFORE, THE ORDER OF THE C IT(A) IS SET ASIDE AND THE ISSUE IS RESTORED TO THE FILE OF THE AO TO BE CONSIDERED AFRESH. 15. FOR STATISTICAL REASONS, THE ASSESSEE SUCCEED S ON THIS GROUND. 17. SO, THE MATTER WAS REMANDED BY THE TRIBUNAL TO THE FILE OF THE AO, TO BE DECIDED DE NOVO, ON CONSIDERING THE ADDITIONAL E VIDENCE FILED BY THE ASSESSEE BEFORE THE TRIBUNAL, WHICH ADDITIONAL EVID ENCE HAD BEEN ADMITTED BY THE TRIBUNAL. THAT BEING SO, THE DISPUTE BEFOR E US EVIDENTLY IS AS TO WHETHER THE DIRECTIONS OF THE TRIBUNAL HAVE BEEN CO RRECTLY CARRIED OUT BY THE AO AND AS TO WHETHER THE LD. CIT(A) HAS CORRECTLY U PHELD THE ADDITION MADE BY THE AO. 18. THE ASSESSEE CLAIMS TO HAVE PURCHASED 17,90,700 SHARES OF BHARAT HOTELS LTD. ON 13.11.87, @ ` 25.70 PER SHARE AND 10,00,000 SHARES @ ` 10/- PER SHARE, ON 30.3.88, AT A MUTUALLY AGREED PRICE. THE DEPARTMENT HAS DISPUTED THE RATE OF ` 25.70 PER SHARE, ON THE BASIS THAT THE QUOTED RATE OF ITA 4188(DEL)09 26 SHARES OF BHARAT HOTELS LTD., AT THE DELHI STOCK EX CHANGE, AS ON 30.1.87, WAS ` 8,50 PER SHARE. 19. IT IS TO BE SEEN AS TO WHETHER THE STAND TAKEN BY THE ASSESSEE THAT THE PURCHASE PRICE WAS ARRIVED AT IN A FAMILY SETTLEMEN T AND IT WAS HENCE THE NEGOTIATED PRICE, IS INDEED THE POSITION COMING OUT . NOW, AN INTERIM APPLICATION UNDER ORDER 23, RULE 3 OF THE CODE OF C IVIL PROCEDURE WAS FILED BEFORE THE HONBLE DELHI HIGH COURT IN THE AFORESAI D SUIT ( A COPY THEREOF IS AT APB 272 TO 283), ON BEHALF OF BOTH THE PARTIES T O THE SAID SUIT, PRAYING TO THE COURT TO PLACE ON RECORD THE COMPROMISE ARRIVED AT BETWEEN THE PARTIES AND TO PASS A DECREE IN TERMS OF THE SAID COMPROMIS E. IT WAS ON THE BASIS OF THIS APPLICATION THAT THE HONBLE DELHI HIGH COURT PASSED ITS ORDER DATED 24.3.88, IN ACCORDANCE WITH THE TERMS AND CONDITION S AS INCORPORATED IN THE COMPROMISE APPLICATION, ON THE AGREEMENT OF BOTH TH E PARTIES. A COPY OF THE SAID ORDER IS AT APB 285 TO 287. IT WOULD BE A PPROPRIATE TO RECORD HERE THAT THE ASSESSEE, RAMESH SURI WAS PLAINTIFF IN T HE SUIT AND G. SAGAR SURI, SMT. SHYAMA SURI, UJVAL SAGAR SURI, ASHWINI SURI, N ARINDER SUJRI, SHRI ROSHAN SURI AND LALIT SURI WERE DEFENDANT NOS. 1 TO 7, WHEREAS DELHI AUTOMOBILE PVT. LTD., DELHI AUTO & GENERAL FINANCE PVT. LTD., SEQUOIA CONSTRUCTION PVT. LTD. AND GANGA AUTOMOBILE PVT. LT D. WERE DEFENDANT NOS. 8 TO 11. ITA 4188(DEL)09 27 20. AS PER THE SUBMISSIONS MADE BEFORE THE TRIBUNAL IN THE EARLIER ROUND, THE ASSESSEE IS THE YOUNGER BROTHER OF SHRI G. SAGA R SURI. HE, ALONG WITH HIS OTHER THREE BROTHERS, INCLUDING SHRI LALIT SURI, WA S PART OF THE GROUP. THIS GROUP CARRIED ON BUSINESS INCLUDING THE BUSINESS RE LATABLE TO M/S. DELHI AUTOMOBILE PVT. LTD., DELHI AUTO & GENERAL FINANCE PVT. LTD., SEQUOIA CONSTRUCTION PVT. LTD. AND GANGA AUTOMOBILE PVT. LT D. DISPUTES HAD ARISEN AMONGST THE FAMILY MEMBERS AND IT WAS THIS THAT LED TO A FAMILY ARRANGEMENT AMONGST THE BROTHERS. AS PER THIS FAMILY ARRANGEM ENT, INTEREST IN BHARAT HOTELS LTD. WAS TO VEST IN LALIT SURI. ACCORDING LY, THE SHARES HELD BY SHRI G. SAGAR SURI AND HIS CONTROLLED COMPANIES , NAMELY , M/S. DELHI AUTOMOBILES AND GENERAL FINANCE PVT. LTD., WERE TRA NSFERRED TO THE ASSESSEE, WHO LATER ON TRANSFERRED THESE SHARES TO THE COMPAN IES CONTROLLED BY SHRI LALIT SURI. IT WAS IN TERMS OF THE FAMILY SETTLEME NT THAT THE ASSESSEE ACQUIRED THE SHARES AT THE NEGOTIATED PRICE OF ` 25.70 PER SHARE. IT WAS BY VIRTUE OF THE FAMILY SETTLEMENT ONLY THAT THE FAMILY DISPUTE OF THE ASSESSEE CAME TO BE SETTLED AMICABLY. 21. IN THE DEFENDANTS WRITTEN STATEMENT BEFORE THE HONBLE DELHI HIGH COURT IN THE SUIT FILED BY THE ASSESSEE, AS NOTED B Y THE TRIBUNAL, IT WAS SUBMITTED BY THE DEFENDANTS THAT ON OR ABOUT 10.11. 87, THE BOARD OF DIRECTORS OF THE AUTOMOBILE COMPANY PASSED A RESOL UTION FOR SELLING THE ITA 4188(DEL)09 28 ENTIRE EQUITY OF BHARAT HOTELS LTD. AND AUTHORIZED SHRI G. SAGAR SURI (DEFENDANT NO. 1 IN THE SUIT) TO EFFECT THE TRANSFE R UNDER HIS SIGNATURE IN THE AUTOMOBILE COMPANY; THAT THE DIRECTORS ALSO APPROVE D AND DECIDED UPON THE TERMINATION OF THE INITIAL AGREEMENT BETWEEN THE AU TOMOBILE COMPANY AND BHARAT HOTELS LTD., WHICH WAS DATED 18.6.81; THAT T HE MARKET VALUE OF EACH SHARE OF THE FACE VALUE OF ` 10 IN THAT PUBLIC LIMITED COMPANY WAS FIXED AT ` 25.70 PER SHARE; THAT THE FACE VALUE OF THE SHARES, I.E., @ ` 10/- PER SHARE CAME TO ` 5 CRORES; THAT THE TOTAL AMOUNT PAYABLE BY THE PURC HASERS OF THE SHARES TO DEFENDANT NOS. 1 TO 5, 8&9 AND OTHERS, WH OSE EQUITY WAS BEING ACQUIRED BY THE PLAINTIFF AND HIS NOMINEE AND BY TH E NOMINEE OF DEFENDANT NO.7, I.E., SHRI LALIT SURI, AT THE AGREED RATE OF ` 25.70 PER SHARE CAME TO ` 12,86,04,877/-; AND THAT THE SALE OF THE SAID SHARE HOLDING OF THE AUTOMOBILE COMPANY, AT THE SAID RATE OF ` 25.70 PER SHARE WAS DULY APPROVED IN A MEETING OF THE BOARD OF DIRECTORS OF THE AUTOMOBILE COMPANY, HELD ON OR ABOUT 4.12.87. 22. IN HIS ORDER DATED 4.3.96, THE LD. CIT(A) CONSI DERED THE AFORESAID DOCUMENTS FILED BEFORE THE HONBLE DELHI HIGH COURT IN THE SUIT OF THE ASSESSEE. THE LD. CIT(A) OBSERVED THAT BEFORE THE HONBLE HIGH COURT, THERE WAS NO MENTION OF THE PURCHASE OF SHARES OF M /S. BHARAT HOTELS LTD. BY ITA 4188(DEL)09 29 THE ASSESSEE. ON QUERY, THE ASSESSEE HAD SUBMITTED BEFORE THE LD. CIT(A) THAT THIS WAS SO, SINCE THE TRANSACTION HAD ALREADY BEEN COMPLETED BEFORE THE APPLICATION WAS FILED BEFORE THE HONBLE HIGH COURT ; THAT THE FAMILY SETTLEMENT WAS TAKING PLACE IN STAGES; THAT AFTER T HE ASSESSEE HAD PURCHASED THE SHARES AND THEREBY PERFORMED HIS PART, THE G. S AGAR SURI GROUP REFUSED TO PERFORM THEIR PART OF THE STATEMENT AND IT WAS AS A RESULT OF THIS, THAT THE SUIT HAD TO BE FILED, RESULTING IN THE COMPROMISE DECREE . THE CIT(A) OBSERVED THAT THIS CONTENTION OF THE ASSESSEE WAS UNTENABLE, SINCE IN FAMILY DISPUTES BEFORE COURTS, THE COMPROMISE APPLICATION CONTAINS THE ENTIRE SETTLEMENT; AND THAT THERE WAS NO EVIDENCE IN SUPPORT OF THE CL AIM THAT THE SHARES HAD BEEN PURCHASED AT A HIGHER PRICE ON THE BASIS OF TH E NEGOTIATIONS. 23. IN SUM AND SUBSTANCE, IT IS THIS VERY REASONIN G OF THE LD. CIT(A) IN THE EARLIER ROUND, WHICH HAS BEEN REPEATED IN THE ORDER UNDER CONSIDERATION HERE. 24. HAVING CONSIDERED THE MATERIAL ON RECORD, WE FI ND THAT THE STAND TAKEN BY THE DEPARTMENT IS INCORRECT. UNDISPUTEDLY, IT H AS EVER BEEN THE STAND OF THE ASSESSEE THAT THE PURCHASE PRICE OF ` 25.70 PER SHARE WAS ARRIVED AT IN THE PROCESS OF SETTLEMENT OF THE ASSESSEES FAMILY DISP UTE. THIS FACT IS AMPLY BORNE OUT FROM THE WRITTEN STATEMENT OF THE DEFENDA NTS IN THE SUIT FILED BEFORE THE HONBLE HIGH COURT, AS DISCUSSED ABOVE. THIS BEING SO, THE FACTUM OF ITA 4188(DEL)09 30 THE STATED PRICE OF ` 25.70 PER SHARE BEING THE NEGOTIATED PRICE COMES BEYOND THE PALE OF ANY DOUBT WHATSOEVER. OBVIOUSLY , AT THE TIME OF FILING OF THE WRITTEN STATEMENT, THE PRESENT DISPUTE REGARDIN G ASSESSMENT COULD NOT HAVE BEEN IN THE MINDS OF THE DEFENDANTS. NO FALSI TY TO THE WRITTEN STATEMENT CAN, THEREFORE, BE POSSIBLY ATTRIBUTED. MOREOVER, IT WAS ON THE BASIS OF THE PLEADINGS OF BOTH THE PARTIES, I.E., THE PLAINTIFF AND THE DEFENDANTS BEFORE THE HONBLE HIGH COURT, THAT THE COMPROMISE DECREE WAS DRAWN. 25. THAT APART, TRUE, THE TRIBUNAL, IN THE EARLIER ROUND, DID NOT GIVE ANY FINDING ON THIS ISSUE. IN FACT, THE MATTER WAS REMANDED O NLY FOR THE PURPOSE OF CONSIDERING THE ADDITIONAL EVIDENCE FILED. THE DEPARTMENT, HOWEVER, HAS, RATHER THAN CONSIDERING THIS ADDITIONAL EVIDEN CE, TRIED TO PICK HOLES THEREIN, EVEN THOUGH THE SAME WAS THE BASIS OF THE COMPROMISE DECREE DRAWN BY THE HONBLE HIGH COURT. 26. THE RELEVANT PORTION OF THE CIT(A)S ORDER WOUL D BE APPROPRIATE TO BE REPRODUCED HERE:- I) THE SAID DOCUMENT SUBMITTED BEFORE THE HONBLE ITAT CLAIMING TO BE NEW EVIDENCE ARE IN FACT DOCUMENTS WHICH WERE FILED IN 1988 IN SUIT NO. 516 BEFORE THE HONBLE DELHI HIGH COURT, A S SUCH NO EXPLANATION HAS BEEN BROUGHT ON RECORD AS TO WHY TH E SAID DOCUMENTS ARE BEING CLAIMED TO BE AS NEW EVIDENCE. SINCE THE ITAT ORDER IS DATED 28 TH APRIL, 06, I.E. AFTER 18 YEARS OF THE APPLICATION BEING SUBMITTED BEFORE THE HIGH COURT. HENCE, THE ASSES SEES VERY PLEA REGARDING ADMITTANCE OF NEW EVIDENCE IS QUESTIONABL E AND IS CLEARLY A HALF BAKED AFTER THOUGHT. ITA 4188(DEL)09 31 II) IT IS PERTINENT THAT ARS WHOLE ARGUMENT IN TH E PRESENT PROCEEDINGS HAS BEEN THAT THE SAID DOCUMENTS PERTAI NING TO SUIT NO. 516 SHOULD BE TAKEN AS FINAL WORD THAT THE SALE AND PURCHASE OF THE SHARE AT ` 25.70 PER SHARE ACTUALLY TOOK PLACE. HOWEVER, THE WHOLE ARGUMENT APPEARS TO BE AN AFTER-THOUGHT. THE ISSU E AT HAND IS NOT WHETHER SALE OR PURCHASE OF THIS AMOUNT OF ` 25.70 PER SHARE TOOK PLACE BUT HOW AND WHY ASSESSEE IS CLAIMING THIS AMO UNT TO BE THE NEGOTIATED PRICE AND THIS QUESTION HAS NOT BEEN ANS WERED EITHER IN THE PRESENT PROCEEDINGS OR IN THE ASSESSMENT PROCEEDING S UNDER REFERENCE . THE AO HAS BEEN GOING INTO THE REASON AS TO WHY AND HOW THE SAID AMOUNT WAS CLAIMED TO BE SALE/PURCHASE PRI CE. THE SAID VALUE OF ` 25.70 PER SHARE IS AGAINST ALL ECONOMICS/COMMERCIAL SENSE/MARKET FORCES, AS HAS ALSO BEEN BROUGHT OUT I N THE ORIGINAL ASSESSMENT ORDER AND SUBSEQUENT ORDER OF CIT(A). THE ISSUE OF THIS PRICE BEING CLAIMED TO SET OFF AGAINST HUGE INCOME OF THE ASSESSEE DURING THE PERIOD UNDER REFERENCE HOLDS KEY TO THE WHOLE ISSUE. AS SUCH THE ASSESSEE HAS FAILED TO EXPLAIN WHY AND HOW THE NEGOTIATED PRICE OF ` 25.70 WAS ARRIVED AT, AND THE NEW EVIDENCE DOES N OT GIVE ANY ANSWER/EXPLANATION TO THIS QUESTION . III) THE AR HAS HIMSELF ADMITTED VIDE HIS SUBMISSIO N DATED 25.11.07 THAT, THE MATTER REGARDING THE TRANSFER OF SHARE O F BHARAT HOTELS LTD. WAS SETTLED BY NEGOTIATION EARLIER THAN THE COMPROM ISE REACHED. THIS IS A DICHOTOMY BECAUSE NEGOTIATIONS ARE HELD S O AS TO CULMINATE IN A COMPROMISE AND THE AR HAS FAILED TO EXPLAIN HO W NEGOTIATIONS WERE AN ENTIRELY DIFFERENT MATTER TO THE FINAL COMP ROMISE. IV) NO EXPLANATION HAS BEEN GIVEN AS TO WHY THE BOA RD OF DIRECTORS OF THE AUTOMOBILE COMPANYS RESOLUTION FOR SELLING THE ENTIRE EQUITY OF BHARAT HOTELS LTD. WAS NOT BROUGHT BEFORE THE AO A LONG WITH BASIS OF THE FIXING OF RATE OF THE SHARE. MERE SUBSEQUENT C LAIM OF APPROVAL, BY THE DIRECTORS OF THE AUTOMOBILE COMPANY, OF THE PRI CE AT ` 25.70 PER SHARE IS NOT ACCEPTABLE UNLESS THE LOGIC AND THE MA RKET FORCES BEHIND IT ARE EXAMINED BY THE INCOME TAX AUTHORITIES. V) VIDE GROUND NO.8 OF APPEAL, THE AR HAS SUBMITTE D THAT: ITA 4188(DEL)09 32 THE AO HAS NOT APPLIED HIS MIND TO THE EVIDENCE FI LED BEFORE THE HONBLE BENCH OF ITAT AS ADDITIONAL EVIDENCE WHICH CLEARLY PROVES THE CASE OF THE ASSESSEE THAT THE PURCHASE PRICE OF EACH SHARE OF BHARAT HOTELS LTD. IS ` 25.70 BASED ON THE NEGOTIATIONS BETWEEN THE ASSESSEE AND THE SELLER OF THE SHARES. THE LOGIC BEHIND THE PRICE HAS NOT BEEN GIVEN. TH E HONBLE ITAT HAS DIRECTED THE AO TO EXAMINE CERTAIN DOCUMENTS SUBMIT TED BEFORE IT FOR THE FIRST TIME. THE HONBLE ITAT HAD NOT GIVEN A CATEGORICAL FINDING THAT THE ASSESSEES CLAIM IS CORRECT, TRUE AND ACCE PTABLE. IF THIS WERE SO, THE HONBLE ITAT COULD HAVE PASSED AN ORDER IN THE ASSESSEES FAVOUR, YET IN THEIR WISDOM HONBLE LORDSHIPS CHOSE TO RESTORE THE MATTER TO THE AO FOR EXAMINATION. THE HONBLE COU RT DID NOT DIRECT THE AO TO PASS THE ORDER IN A PARTICULAR MANNER, TH E AO HAS BEEN GIVEN THE FREEDOM TO COME TO THE CONCLUSION AFTER E XAMINING THE EVIDENCE WHICH WERE PRODUCED BEFORE THE ITAT FOR TH E FIRST TIME. IT IS PERTINENT TO NOTE THAT ONLY THIS ISSUE WAS RESTORED TO THE FILE OF THE AO FOR FURTHER EXAMINATION. THE AO HAS CARRIED OUT T HE ORDER OF THE HONBLE ITAT AND EXAMINED THE CLAIM/EVIDENCE, ON ME RIT. VI) IT IS ALSO PERTINENT TO BRING ON RECORD THAT I N THE APPLICATION MADE TO DELHI HIGH COURT FOR A DECREE IN TERMS OF COMPRO MISE, THERE IS NO MENTION OF THE PURCHASE OF SHARE OF M/S. BHARAT HOT ELS LTD. OR THEIR NEGOTIATED PRICE. THE CLAIM OF THE ASSESSEE THAT PEACE-MEAL FAMILY SETTLEMENT HAS TAKEN PLACE IS NOT ACCEPTABLE BECAUS E COMPROMISES AND SETTLEMENTS INVOLVED BOTH GIVE AND TAKE TO SOLV E A PROBLEM. AS SUCH AT NO STAGE HAS ANY BASIS BEEN GIVEN FOR WORKI NG OUT THE VALUE OF ` 25.70 PER SHARE WHICH IS MORE THAN 157% OF THE FACE VALUE OF LTHE SHARE AND 304% OF THE PREVAILING MARKET PRICE ( ` 6.36 AS ON 31.12.87) . IN VIEW OF THE ABOVE FACTS BROUGHT ON RECORD VIDE A SSESSMENT ORDER UNDER REFERENCE AND INABILITY OF THE ASSESSEE TO EX PLAIN HOW AND WHY THE VALUE OF SHARE HAS BEEN WORKED AT ` 25.70 PER SHARE AND IN VIEW OF LTHE ALLEGED NEW EVIDENCE, THE ADDITION MADE IS C ONFIRMED. ITA 4188(DEL)09 33 27. FIRST OF ALL, ONCE THE TRIBUNAL HAD ALREADY ADM ITTED THE ADDITIONAL EVIDENCE, THE LD. CIT(A) HAS ILL - OBSERVED THAT THE EVIDENCE SO PRODUCED WAS NOT NEW EVIDENCE, BECAUSE EIGHTEEN YEARS HAD ELAPSED SINCE THE FILING OF THE SUIT BEFORE THE HONBLE HIGH COURT, I.E., IN 1988. THE POSITION HERE, ON THE OTHER HAND, IS THAT FOR THE TRIBUNAL, IT WAS DEFINITELY NEW EVIDENCE, SINCE THOUGH, THE SUIT WAS FILED IN 1988, THE PROCE EDINGS THEREIN WERE NOT IN THE KNOWLEDGE OF THE TRIBUNAL AND IT WAS ONLY WHEN THE NEED AROSE THAT THE DOCUMENTS PERTAINING TO THE SUIT WERE FILED BEFORE THE TRIBUNAL. 28. FURTHER, THE LD. CIT(A) HAS OBSERVED THAT THE I SSUE WAS AS TO WHY AND HOW THE AMOUNT OF ` 25.70 PER SHARE WAS ARRIVED AT AS THE NEGOTIATED PR ICE AND THAT THIS ISSUE WAS NEVER BEEN ANSWERED BY THE ASSESSEE. THIS OBSERVATION, EVIDENTLY, IS A RESULT OF COMPLETE MIS -READING AND NON-READING OF THE WRITTEN STATEMENT FILED BY THE DEFENDANTS IN THE SUIT FILED BY THE ASSESSEE BEFORE THE HONBLE HIGH COURT. TO STRESS THE POINT, IT WOULD BE APT TO REPRODUCE HERE, THE RELEVANT PORTION THEREOF:- I. ON OR ABOUT NOVEMBER 10,1987, THE BOARD OF DIRE CTORS OF THE AUTOMOBILE COMPANY PASSED A RESOLUTION FOR SELLING THE ENTIRE EQUITY OF BHARAT HOTELS LTD. AND AUTHORIZED DEFENDANT NO. 1 TO EFFECT THE TRANSFER UNDER HIS SIGNATURE ON BEHALF OF THE AUTOM OBILE COMPANY. II. THE DIRECTORS ALSO APPROVED AND DECIDED UPON T HE TERMINATION OF THE INITIAL AGREEMENT BETWEEN THE AUTOMOBILE COMPAN Y AND M/S. BHARAT HOTELS LTD. DATED JUNE 18, 1981. ITA 4188(DEL)09 34 III. THE MARKET VALUE OF EACH SHARE OF THE FACE VAL UE OF ` 10/- IN THAT PUBLIC LIMITED COMPANY WAS FIXED AT ` 25.70/-. THE FACE VALUE OF THE SHARES, I.E., AT ` 10/- PER SHARE CAME TO ` 5 CRORES. THE TOTAL AMOUNT PAYABLE BY THE PURCHASERS OF THE SHARES TO DEFENDAN TS NOS. 1 TO 5 AND 8&9 AND OTHERS, WHOSE EQUITY WAS BEING ACQUIRED BY THE PLAINTIFF AND HIS NOMINEE AND BY THE NOMINEE OF DEFENDANT NO.7 AT THE AGREED RATE OF ` 25.70/- CAME TO ` 12,86,04,877/-. IV. THE SALE OF ABOVE-MENTIONED SHARE HOLDING OF T HE AUTOMOBILE COMPANY AT THE ABOVE-MENTIONED RATE OF ` 25.70/-PER SHARE WAS DULY APPROVED IN A MEETING OF THE BOARD OF DIRECTORS OF THE SAID COMPANY HELD ON OR ABOUT DECEMBER 4, 1987. THIS PORTION OF THE REPLY HAS ALSO BEEN REPRODUCED AT PAGE 13 OF THE TRIBUNAL ORDER DATED 28.4.06 (APB 188). THE OBSERVATION O F THE LD. CIT(A), THEREFORE, APPARENTLY, IS A RESULT OF NOT ONLY MIS- READING AND NON-READING OF MATERIAL EVIDENCE BROUGHT ON RECORD BEFORE THE TRIB UNAL, BUT ALSO OF THE TRIBUNAL ORDER. IT CANNOT BE GAINSAID THAT FROM TH E SAID WRITTEN STATEMENT, IT CLEARLY COMES OUT THAT THE AMOUNT OF ` 25.70 PER SHARE WAS THE NEGOTIATED PRICE. 29. THEN, THE LD. CIT(A) HAS ALSO ERRED IN OBSERVIN G THAT THE NEGOTIATION WAS A MATTER ENTIRELY DIFFERENT FROM THE FINAL COMP ROMISE. HE HAS FAILED TO CONSIDER THAT IT REMAINED UNREBUTTED IN THE SUIT TH AT THE MATTER REGARDING THE SHARES OF BHARAT HOTELS LTD. WAS SETTLED EARLIER T HAN THE COMPROMISE ARRIVED AT, AND THE PRICE OF THE SHARES WAS MENTIONED IN TH E WRITTEN STATEMENT BY THE ITA 4188(DEL)09 35 DEFENDANT IN THE SUIT. IT IS ALSO BUT A CONJECTURE ON THE PART OF THE LD. CIT(A) TO STATE THAT NEGOTIATIONS ARE HELD SO AS TO CULMIN ATE IN A COMPROMISE AND THAT IT WAS NOT SO IN THE PRESENT CASE. THE FAMIL Y FEUD OF THE ASSESSEE, AS BORNE OUT FROM THE PLEADINGS IN THE SUIT BEFORE THE HIGH COURT, WAS A LONG DRAWN PROCESS AND IT WAS ULTIMATELY THAT IT CULMINA TED IN THE COMPROMISE DECREE. 30. THE OBSERVATION OF THE LD. CIT(A) THAT THE RESO LUTION OF THE BOARD OF DIRECTORS OF AUTOMOBILE COMPANY WAS NEVER BROUGHT B EFORE THE AO AND THAT NO EXPLANATION FOR THIS WAS OFFERED , IS OF NO BENEFIT TO THE DEPARTMENT. THE FACTUM OF THE RESOLUTION HAVING BEEN PASSED HAS NOWHERE BEEN REFUTED IN THE SUIT AND IT WAS A STEP IN THE PROCEEDINGS LE ADING TO THE ULTIMATE COMPROMISE DECREE. WHAT HAS BEEN TERMED BY THE CI T(A) TO BE A MERE SUBSEQUENT CLAIM OF APPROVAL OF THE PRICE OF ` 25.70 PER SHARE BY THE DIRECTORS OF THE AUTOMOBILE COMPANY, IS NOT AT ALL SO, IN VIEW OF THE PLEADINGS IN THE SUIT AND THE COMPROMISE DECREE, IN THE LIGHT OF THE PRECEDING DISCUSSION. THE DEPARTMENT HAS GONE UTTERLY WRONG IN REJECTING THIS CLAIM. 31. LASTLY, THE LD. CIT(A) HAS ALSO ERRED IN OBSERV ING THAT THE CLAIM OF PIECE-MEAL FAMILY SETTLEMENT WAS NOT ACCEPTABLE S INCE COMPROMISE AND SETTLEMENT INVOLVE BOTH GIVE AND TAKE, TO SOLVE A P ROBLEM, IS ALSO NOT DETRIMENTAL TO THE ASSESSEES CLAIM . NOTHING HAS BEEN BROUGHT ON RECORD TO ITA 4188(DEL)09 36 SHOW THAT THE SETTLEMENT OF THE FAMILY DISPUTE OF T HE ASSESSEE WAS ONLY A CULMINATION OF A LONG DRAWN DISPUTE, WHICH CONTINUE D OVER LONG YEARS. THE COMPROMISE DECREE WAS ONLY THE CULMINATION OF THIS DISPUTE, PASSED WITH THE AGREEMENT OF THE PARTIES TO THE SUIT. 32. IN VIEW OF THE ABOVE, THE GRIEVANCE OF THE ASSE SSEE IS FOUND TO BE JUSTIFIED AND IS ACCEPTED AS SUCH. THE ORDER UND ER APPEAL IS THUS CANCELLED. THE LOSS OF ` 1,58,28,700/- DECLARED BY THE ASSESSEE IS DIRECTED TO BE ALLOWED. 33. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.08.2011. SD/- SD/- (SHAMIM YAHYA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12 .08.2011 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER ITA 4188(DEL)09 37 DEPUTY REGISTRAR