Appeal Details
Counselvise Citation
[2018] 119 COUNSELVISE.COM (IT) 0118 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
6 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
06-12-2018
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Assessment Year
2009-2010
Appeal Filed On
31-05-2018
Judgement Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S A, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 464/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2009-10 M/S ANGEL INFRASTRUCTURE (P) LTD., B-5, VRINDAVAN APARTMENT, KINGS ROAD, NIRMAN NAGAR, JAIPUR. CUKE VS. D.C.I.T., CIRCLE-2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAFCA 2023 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 761/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2009-10 A.C.I.T., CIRCLE-2, JAIPUR. CUKE VS. M/S ANGEL INFRASTRUCTURE (P) LTD., B-5, VRINDAVAN APARTMENT, KINGS ROAD, NIRMAN NAGAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAFCA 2023 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI GAUTAM JAIN & SHRI LALIT MOHAN (ADV) JKTLO DH VKSJ LS@ REVENUE BY : SHRI VARINDER MEHTA, SMT. ROLEE AGARWAL (CIT-DR) & SHRI HITESH AGARWAL (ACIT-A.O.) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 30/10/2018 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 06/12/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 16/03/2018 OF LD. CIT(A)-I, JAIPUR FOR THE A.Y. 200 9-10. ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 2 2. FIRST WE TAKE THE APPEAL FILED BY THE ASSESSEE WHE REIN THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)'HAS GROSSLY ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE INI TIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT AND, COMPL ETION OF ASSESSMENT UNDER SECTION 147/143(3) OF THE ACT WITH OUT APPRECIATING THAT THE SAME WERE WITHOUT JURISDICTIO N AND HENCE DESERVED TO BE QUASHED AS SUCH. 1.1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS FAILED TO APPRECIATE THAT THERE WAS NO SPECIFIC RELEVANT, RELIABLE AND TANGIBLE MATERIAL ON RECORD TO FORM A REASON TO BE LIEVE THAT INCOME OF THE APPELLANT HAD ESCAPED ASSESSMENT AND IN VIEW THEREOF THE PROCEEDINGS INITIATED ARE ILLEGAL, UNTE NABLE AND THEREFORE UNSUSTAINABLE. 1.2 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS FAILED TO APPRECIATE THAT REASONS RECORDED MECHANICALLY WI THOUT APPLICATION OF MIND DO NOT CONSTITUTE VALID REASONS TO BELIEVE FOR ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT. 1.3 THAT IN ABSENCE OF ANY VALID APPROVAL OBTAINED UNDER SECTION 151 OF THE ACT, INITIATION OF PROCEEDINGS U/S 147 OF THE A CT AND ASSESSMENT FRAMED U/S 147/143(3) OF THE ACT ARE INVALID AND DE SERVE TO BE QUASHED AS SUCH. 1.4 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAD FAILED TO APPRECIATE THAT THE STATEMENT RECORDED IN THE CO URSE OF SURVEY HAS NO EVIDENTIARY VALUE AND THEREFORE, SUCH STATEM ENT SO RECORDED COULD NOT BE RELIED UPON AND IN ABSENCE OF ANY OTHE R TANGIBLE MATERIAL TO FORM AN OPINION THAT INCOME OF THE ASSE SSEE HAS ESCAPED ASSESSMENT AND THEREFORE, EDIFICE OF THE PR ESENT PROCEEDINGS WAS FACTUALLY AND LEGALLY MISCONCEIVED AND HENCE UNSUSTAINABLE. 1.5 THAT VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPO N BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WITHOUT GRANTI NG ANY ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 3 OPPORTUNITY TO THE APPELLANT ARE WHOLLY INAPPLICABL E TO THE FACTS OF THE APPELLANT COMPANY. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS ALSO ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING A DISAL LOWANCE OF RS. 29,70,00,000/- ON ACCOUNT OF SHORT TERM CAPITAL LOS S ON SALE OF SHARES OF SKH AUTO COMPONENTS LTD. 2.1 THAT THE FINDING OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THAT SHORT TERM CAPITAL LOSS ON SALE OF S HARES OF M/S. SKH AUTO BY THE APPELLANT TO M/S SHARSH FINANCE AND INV ESTMENT CO. PVT. LTD. WAS NOT A GENUINE ONE AND THE ENTIRE SET OF TRANSACTION WAS NOTHING BUT A COLORABLE DEVICE TO REDUCE THE TA X LIABILITY OF THE APPELLANT COMPANY, IS FACTUALLY INCORRECT, LEGALLY MISCONCEIVED AND WHOLLY UNTENABLE. 2.2 THAT FURTHER THE FINDING THAT THE TRANSACTION U NDERTAKEN WAS BY THE RELATED PARTIES AND LOSS WAS NOT A GENUINE LOSS ALS O OVERLOOKS THE FACTUAL MATRIX AND EVIDENCE PLACED ON RECORD BY THE APPELLANT COMPANY. 2.3 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS RECORDED VARIOUS ADVERSE FINDINGS WITHOUT APPRECIAT ING THAT ONCE A TRANSACTION HAS BEEN EXECUTED AND MATERIALIZED AND THERE IS NO DISPUTE AS TO ITS EXECUTION AND MATERIALIZATION, TH EN THE CLAIM ACCEPTED IN THE CASE OF M/S SHARSH FINANCE AND INVE STMENT PVT. LTD. COULD NOT BE REGARDED AS SHAM IN THE CASE OF APPELL ANT COMPANY. 2.4 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS FAILED TO APPRECIATE THAT THERE IS NO MATERIAL ON RECORD T O PROVE THAT THE TRANSACTION WAS NOT ACTUALLY EXECUTED BY THE APPELL ANT AND THEREFORE, THE ASSUMPTION THAT IT WAS DONE WITH AN INTENT TO BOOK THE LOSSES IS IRRELEVANT CONSIDERATION AND THUS, TH E FINDINGS RECORDED ARE CONTRARY TO LAW, FACTS OF CASE AND HENCE UNTENA BLE. 2.5 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS ERRED BOTH IN LAW AND ON FACTS IN FAILING TO APPRECIATE T HE WRITTEN SUBMISSIONS FURNISHED AND EVIDENCE TENDERED BY THE APPELLANT COMPANY AND OVERLOOKING THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT. ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 4 2.6 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS ERRED BOTH IN LAW AND ON FACTS IN RECORDING VARIOUS ADVER SE INFERENCES WHICH ARE CONTRARY TO THE FACTS ON RECORD, MATERIAL PLACED ON RECORD AND, ARE OTHERWISE UNSUSTAINABLE IN LAW AND THEREFO RE, DISALLOWANCE SO UPHELD IS ABSOLUTELY UNWARRANTED. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING A DISALLOWANC E OF RS. 24,25,83,400/- ON ACCOUNT OF LOSS ON SALE OF COMMER CIAL SPACE TO M/S LAUREL INFRASTRUCTURE PVT. LTD. 3.1 THAT HERE TOO, THE FINDING OF THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS) THAT THE TRANSACTIONS OF SALE OF COMM ERCIAL SPACE ARE NOTHING BUT STRUCTURED TRANSACTIONS IN ORDER TO INC UR CAPITAL LOSS AND WITH THE SOLE PURPOSE OF INCURRING THE LOSS, ARE BA SED ON FACTUALLY AND LEGALLY MISCONCEPTIONS AND IN ANY CASE ARE IRRE LEVANT CONSIDERATION SO AS TO DETERMINE THE LIABILITY OF L OSS CLAIMED BY THE APPELLANT COMPANY. 3.2 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS FAILED TO APPRECIATE THAT ALL WHAT IS RELEVANT TO DETERMIN E THE ELIGIBILITY OF LOSS CLAIMED BY THE APPELLANT IS INCURRING OF LOSS IN AS MUCH AS THAT ASSESSEE SHOULD HAVE OWNER OF A CAPITAL ASSET AND A SSESSEE MUST TRANSFER A CAPITAL ASSET AND SINCE BOTH THE FACTS A RE NOT IN DISPUTE, THE ALLEGED PURPOSE BEHIND THE CAPITAL ASSET IN THE YEAR UNDER CONSIDERATION ARE IRRELEVANT AND EXTRANEOUS CONSIDE RATIONS AND AS SUCH, DENIAL OF LOSS CLAIMED BY THE APPELLANT IS NO T IN ACCORDANCE WITH LAW AND HENCE UNTENABLE. 3.3 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS ERRED BOTH IN LAW AND ON FACTS IN RECORDING VARIOUS ADVER SE INFERENCES WHICH ARE CONTRARY TO THE FACTS ON RECORD, MATERIAL PLACED ON RECORD AND, ARE OTHERWISE UNSUSTAINABLE IN LAW AND THEREFO RE, DISALLOWANCE SO UPHELD IS ABSOLUTELY UNWARRANTED. IT IS THEREFORE, PRAYED THAT IT BE HELD THAT ASSE SSMENT MADE BY THE LEARNED ASSESSING OFFICER AND SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DESERVES TO BE QUASHED AS SUCH. IT BE FURTHER HELD DISALLOWANCES MADE AND UPH ELD BY THE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 5 LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BE DEL ETED AND APPEAL OF THE APPELLANT COMPANY BE ALLOWED. 3. GROUND NO. 1 OF THE ASSESSEES APPEAL IS REGARDI NG VALIDITY OF REOPENING OF THE ASSESSMENT U/S 147/148 OF THE INCO ME TAX ACT, 1961 (IN SHORT THE ACT). THE ASSESSEE IS A PRIVATE LIMITE D COMPANY AND ENGAGED IN THE BUSINESS OF REAL ESTATE DEVELOPMENT. THE ASSE SSEE FILED ITS E-RETURN OF INCOME U/S 139(1) OF THE ACT ON 29/9/20 09 DECLARING TOTAL INCOME OF RS. 1,01,20,800/-. THE RETURN OF INCOME WA S PROCESSED U/S 143(1) OF THE ACT ON 17/03/2011 WHEREIN THE ASSESSIN G OFFICER MADE ADJUSTMENT ON ACCOUNT OF DISALLOWANCE OF SET OFF OF SHORT TERM CAPITAL LOSS OF RS. 66,66,30,267/- AGAINST THE LONG TERM CAPITAL GAIN OF RS. 64,58,87,697/-. AGGRIEVED BY THE ACTION OF DISALLOWA NCE OF SET OFF OF SHORT TERM CAPITAL LOSS, THE ASSESSEE FILED AN APPLICATIO N U/S 154 OF THE ACT ON 15/09/2012. THE ASSESSING OFFICER ACCEPTED THE CLAI M OF SETTING OF SHORT TERM CAPITAL LOSS AGAINST THE LONG TERM CAPITAL GAI N WHILE PASSING THE ORDER U/S 154 OF THE ACT ON 10/01/2013. THEREAFTER A SURVEY U/S 133A OF THE ACT WAS CONDUCTED AT THE PREMISES OF KRISHNA MAR UTI GROUPS ON 03/03/2016. DURING THE SURVEY, STATEMENT OF SHRI AS HOK KAPUR, DIRECTOR OF THE ASSESSEE COMPANY AND OTHER PERSONS WERE RECOR DED ON 04/3/2016 BY THE DDIT(INV.) FARIDABAD. THE ASSESSING OFFICER R ECEIVED INFORMATION FROM DDIT(INV), FARIDABAD ON 14/3/2016 THAT THE SHO RT TERM CAPITAL LOSS ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 6 ON FORFEITURE OF SHARE APPLICATION MONEY OF HH INTE RIOR AND AUTO COMPONENT PVT. LTD. OF RS. 29.70 CRORES AS WELL AS S HORT TERM CAPITAL LOSS OF RS. 24.00 CRORES ON ACCOUNT OF SALE OF COMMERCIA L SPACE AT PRESTIGE MALL ARE NOT GENUINE AND ARE LIABLE TO BE DISALLOWED UNDER THE PROVISIONS OF THE IT ACT. THE ASSESSING OFFICER CONSEQUENTLY R EOPENED THE ASSESSMENT BY ISSUING A NOTICE U/S 148 OF THE ACT O N 31/3/2016. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143( 3) READ WITH SECTION 147 OF THE ACT ON 22/12/2016 AND DISALLOWED THE CLAI M OF SET OFF OF SHORT TERM CAPITAL LOSS AND ALSO MADE DISALLOWANCE OF TRAN SFER EXPENSES. THUS, THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED AT RS. 66,29,69,740/-. 4. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSI NG OFFICER BEFORE THE LD. CIT(A) AND ALSO RAISED THE ISSUE OF VALIDIT Y OF REOPENING. THE LD. CIT(A) GRANTED PART RELIEF TO THE ASSESSEE, THEREFOR E, BOTH THE ASSESSEE AND THE DEPARTMENT HAVE CHALLENGED THE IMPUGNED ORD ER BY FILING CROSS APPEALS BEFORE THE ITAT. 5. BEFORE US, THE ASSESSEE HAS CHALLENGED THE VALID ITY OF REOPENING OF THE ASSESSMENT ON VARIOUS LEGAL OBJECTIONS: (I) THE ASSESSMENT WAS REOPENED MERELY ON THE BASIS OF INFORMATION OF THE INVESTIGATION WING WITHOUT APPLIC ATION OF INDEPENDENT MIND BY THE ASSESSING OFFICER TO FORM THE BELIEF TH AT THE INCOME ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 7 ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT THEREBY TH E REOPENING IS BASED ON BORROWED SATISFACTION. (II) THE APPROVAL GRANTED U/S 151 OF THE ACT IS NOT VALID AS THE SAME IS MECHANICAL WITHOUT APPLICATION OF MIND. (III) THE ITO, WARD 3(1), JAIPUR HAD NO JURISDICTIO N AS ON THE DATE OF RECORDING THE REASONS ON 21/3/2016 BUT THE JURI SDICTION OF THE ASSESSEE WAS TRANSFERRED FROM ITO WARD 7(2), JAIPUR ONLY ON 30/3/2016. HENCE, THE INITIATION OF THE PROCEEDINGS U/S 147/14 8 OF THE ACT IS BAD IN LAW FOR WANT OF JURISDICTION. 6. WE WILL DEAL WITH EACH OF THE ABOVE SAID OBJECTION S AGAINST THE REOPENING OF THE ASSESSMENT ONE BY ONE AS UNDER: (I) REOPENING IS BASED ON BORROWED SATISFACTION :- THE LD COUNSEL FOR THE ASSESSEE HAS REFERRED TO THE ACKNOWL EDGE OF RETURN OF INCOME PROCESSED U/S 143(1) OF THE ACT DATED 17/3/2 011 AT PAGE 74 OF THE PAPER BOOK AND SUBMITTED THAT THE ASSESSING OFF ICER MADE ADJUSTMENT OF DISALLOWANCE OF CLAIM OF SETTING OF SH ORT TERM CAPITAL LOSS OF RS. 66,66,30,267/- AGAINST THE LONG TERM CAPITAL GA IN OF RS. 64,58,87,694/-. THEREAFTER THE ASSESSEE FILED AN APP LICATION U/S 154 OF THE ACT ON 15/09/2012 AND THE ASSESSING OFFICER VID E ORDER DATED 10/1/2013 PASSED U/S 154 OF THE ACT ACCEPTED THE CL AIM OF SETTING OF SHORT TERM CAPITAL LOSS AGAINST THE LONG TERM CAPIT AL GAIN AND THEREBY ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 8 ACCEPTED THE RETURNED INCOME. THUS, THE ASSESSING OF FICER WHILE PASSING THE ORDER U/S 154 OF THE ACT WAS SATISFIED WITH THE G ENUINENESS AND CORRECTNESS OF THE CLAIM OF SHORT TERM CAPITAL LOSS AND ALLOWED THE SAME U/S 70 OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE THEN REFERRED TO THE REPORT OF THE INVESTIGATION WING, FARIDABAD AS WELL AS THE REASONS RECORDED BY THE ASSESSING OFFICER AND SUBMITTED THA T THE REASONS RECORDED FOR REOPENING OF THE ASSESSEE DO NOT CONST ITUTE REASONS TO BELIEVE TO VALIDLY ASSUMED JURISDICTION U/S 147 OF THE ACT. THE REASONS RECORDED BY THE ASSESSING OFFICER ARE VAGUE, HIGHLY NON-SPECIFIC AND REFLECT NON-APPLICATION OF MIND MUCH LESS INDEPENDE NT APPLICATION OF MIND. THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND ON THE RELEVANT PARTICULARS AND MATERIAL FILED BY THE ASSESSEE ALON GWITH THE RETURN OF INCOME AND DURING THE PROCEEDINGS U/S 154 OF THE AC T. THEREFORE, THE ASSESSING OFFICER HAS IGNORED THE RELEVANT MATERIAL AVAILABLE WITH HIM ON THE ASSESSMENT RECORD WHILE RECORDING THE REASONS FO R REOPENING. IT IS A CASE OF BORROWED SATISFACTION ON THE BASIS OF INFORM ATION RECEIVED FROM THE INVESTIGATION WING AND THEREFORE, THE REOPENING IS BAD IN LAW. HE HAS ASSERTED THAT THERE WAS NO TANGIBLE MATERIAL WITH THE ASSESSING OFFICER TO SHOW THAT THE CLAIM OF SHORT TERM CAPITAL LOSS IS BO GUS OR THE TRANSACTIONS ARE NOT GENUINE. THE LD. COUNSEL FOR THE ASSESSEE HA S RELIED UPON THE FOLLOWING DECISIONS: ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 9 (I) PR.CIT VS. G&G PHARMA INDIA LTD. 384 ITR 147 (D EL). (II) PR.CIT VS. RMG POLYVINYL (I) LTD. 396 ITR 5 (DE L) (III) PR.CIT VS. MEENAKSHI OVERSEAS (P) LTD. 395 ITR 677 (DEL) (IV) RAJIV AGARWAL VS ACIT 395 ITR 255. (V) SREE MEENAKSHI MILLS LTD. VS COMMISSIONER OF I NCOME-TAX. 7. ON THE OTHER HAND, THE LD CIT-DR HAS SUBMITTED T HAT THE ENQUIRY CONDUCTED BY THE DDIT(INV), FARIDABAD REVEALS THE F ACT THAT THE ALLEGED TRANSACTION OF APPLICATION MONEY AND TRANSFER OF TH E PROPERTY BETWEEN THE RELATED PARTIES ARE ONLY ACCOMMODATION ENTRIES TO C REATE ARTIFICIAL LOSS TO BE SET OFF AGAINST THE TAXABLE INCOME OF THE ASSESS EE. THE DIRECTOR OF THE ASSESSEE COMPANY AS WELL AS THE GROUP COPIES ACCEPTE D THE BOGUS CLAIM IN THEIR STATEMENTS RECORDED BY THE INVESTIGATION W ING AND THEREFORE, THE REPORT OF DDIT(INV), FARIDABAD CONSTITUTE A TANGIBLE MATERIAL TO FORM THE BELIEF THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPE D ASSESSMENT. THE LD. CIT-DR FURTHER CONTENDED THAT WHEN THERE IS NO ORIGI NAL ASSESSMENT IN THE CASE OF THE ASSESSEE THEN THE ISSUE OF GENUINEN ESS OF CLAIM WAS NEVER CONSIDERED BY THE ASSESSING OFFICER PRIOR TO THE RE CORDING OF REASONS FOR REOPENING OF THE ASSESSMENT. THE ASSESSING OFFICER HAS GIVEN THE RELEVANT DETAILS OF THE TRANSACTIONS AND CLAIM OF S HORT TERM CAPITAL LOSS. IN THE REASONS RECORDED, WHICH CONSTITUTES A TANGIBLE M ATERIAL TO FORM A REASONABLE BELIEF THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. THE LD. CIT-DR HAS REFERRED TO THE STATE MENT OF SHRI ASHOK KAPUR RECORDED BY THE INVESTIGATION WING AND SUBMIT TED THAT HE ADMITTED ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 10 THE TRANSACTION BETWEEN THE ASSESSEE AND OTHER GROU P COMPANIES WERE WITH A VIEW TO AVOID TAX AND THEREFORE IT CONSTITUTES A TANGIBLE MATERIAL FOR FORMING THE BELIEF BY THE ASSESSING OFFICER. THE LD. CIT-DR HAS FURTHER SUBMITTED THAT AT THE STAGE OF REOPENING OF THE ASS ESSMENT WHAT IS REQUIRED IS PRIMA FACIE REASONABLE BELIEF AND NOT T O ESTABLISH THE CORRECTNESS OF THE FACT RECORDED IN THE REASONS FOR REOPENING. THUS, WHAT IS NEEDED AT THE STAGE OF REOPENING IS THE NEXUS BE TWEEN THE MATERIAL AND BELIEVE THAT THERE WAS ESCAPEMENT OF INCOME. THE RELEVANCE OF REASONS IS JUSTIFIABLE AND NOT THE ADEQUACY OR SUFF ICIENCY. THE LD. CIT-DR HAS RELIED UPON THE FINDINGS OF THE LD. CIT(A) ON TH IS ISSUE AND SUBMITTED THAT THE LD. CIT(A) HAS PLACED RELIANCE ON VARIOUS D ECISIONS ON THE POINT WHICH ARE APPLICABLE ON THE FACTS OF THE PRESENT CAS E. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 29/9/2009 DECLARING TOTAL IN COME OF RS. 1,01,20,800/-. THE RETURN OF INCOME WAS PROCESSED U/ S 143(1) OF THE ACT ON 17/3/2011 AND INCOME OF THE ASSESSEE WAS ASSESSED AT RS. 65,60,00,500/- ON ACCOUNT OF DISALLOWANCE OF CLAIM O F SET OFF OF SHORT TERM CAPITAL LOSS OF RS. 66,66,30,267/- AGAINST THE LONG TERM CAPITAL GAIN. SUBSEQUENTLY ON THE APPLICATION OF THE ASSESSEE U/S 154 OF THE ACT, THE ASSESSING OFFICER PASSED AN ORDER DATED 10/01/2013 AS UNDER: ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 11 ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 12 THUS, IT IS CLEAR THAT THE TRANSACTION OF PURCHASE O F 77800 EQUITY SHARES OF LARSON & TUBRO LTD (L&T) AND BONUS ISSUED OF 1:1 ALLO TTED TO THE ASSESSEE AND SUBSEQUENT SALE OF 77800 SHARES BY THE ASSESSEE RESULTING SHORT TERM CAPITAL LOSS WAS DULY RECODED IN THE BOOK S OF ACCOUNT AND PART OF RETURN OF INCOME. SIMILARLY THE FACTS AND TRANSA CTIONS WERE PART OF RETURN OF INCOME AND BOOKS OF ACCOUNT REGARDING THE INVESTMENT IN SUBSCRIPTION OF 4,40,000 SHARES OF M/S HH INTERIOR AND AUTO COMPONENT PVT. LTD. IN RESPECT OF WHICH THE ASSESSEE PAID RS. 29.70 CRORES AS CALL MONEY TOWARDS THE ALLOTMENT OF SHARES AND PAYMENT OF FINAL CALL MONEY OF RS. 9.90 CRORES WAS DUE WHEN THE ASSESSEE TRANSFER RED THOSE 4,40,000 SHARES OF M/S HH INTERIOR AND AUTO COMPONENT PVT. L TD. TO THE GROUP COMPANY M/S SHARASH FINANCE & INVESTMENT CO. P. LTD .. THE THIRD TRANSACTION WAS SALE OF COMMERCIAL SPACE IN PRESTIGE MALL AT SHIVAJI PLACE, DISTRICT CENTRE, MAIN RING ROAD, RAJA GARDEN, NEW DE LHI TO M/S LORAL INFRASTRUCTURE PVT. LTD. WAS ALSO PART OF RETURN OF INCOME AND DULY RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. T HESE TRANSACTIONS WERE VERY MUCH IN THE KNOWLEDGE OF THE ASSESSING OFFI CER AT THE TIME OF PROCESSING OF RETURN OF INCOME U/S 143(1) OF THE AC T WHEN AN ADJUSTMENT ON ACCOUNT OF SHORT TERM CAPITAL LOSS OF RS. 66,66, 30,267/- WAS MADE AND SUBSEQUENTLY PASSING THE ORDER U/S 154 OF THE ACT O N 10/01/2013. THE ASSESSING OFFICER DID NOT DOUBT THE GENUINENESS OF THE TRANSACTIONS, ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 13 HOWEVER, THE ALLOWABILITY OF THE CLAIM AS PER THE PRO VISIONS OF THE ACT WAS OBJECTED BY THE ASSESSING OFFICER WHILE MAKING THE ADJUSTMENT AT THE TIME OF PROCESSING OF THE RETURN OF INCOME U/S 143( 1) OF THE ACT. THE ASSESSING OFFICER DESPITE THE ORDER U/S 154 OF THE ACT DID NOT CHOSE TO DISALLOW THE CLAIM BY INITIATING THE PROCEEDINGS U/S 147/148 OF THE ACT PRIOR TO THE INFORMATION RECEIVED FROM THE DDIT(INV .), FARIDABAD. THE ASSESSING OFFICER REOPENED THE ASSESSMENT BY RECORD ING THE REASONS AS UNDER: REASONS RECORDED FOR INITIATION OF ASSESSMENT PROCE EDINGS U/S 147 OF THE INCOME TAX ACT, 1961 IN THE CASE OF M/S ANGEL INFRASTRUCTURE PVT. LTD., B-5, VRINDAVAN APARTMENT, KINGS ROAD, JAIPUR FOR THE ASSESSMENT YEAR 2009-10. NAME & ADDRESS OF THE ASSESSEE M/S ANGEL INFRASTRUCTURE PVT. LTD., B - 5, VRINDAVAN APARTMENT, KINGS ROAD, JAIPUR, RAJASTHAN. PERMANENT ACCOUNT NO. AAFCA2023B STATUS COMPANY PREVIOUS YEAR 2008 - 09 ASSESSMENT YEAR 2009 - 10 DATE OF RECORDING THE REASON 21 - 03 - 2016 AS PER INFORMATION RECEIVED ON FROM OFFICE OF THE D EPUTY DIRECTOR OF INCOME TAX (INVESTIGATION)-1, FARIDABAD THROUGH HIS LETTER NO. 4365 DATED 14/3/2016. THE ISSUES IDENTIFIED IN THE CASE OF M/S ANGEL INFR ASTRUCTURE PVT. LTD.. PAN- (AAFCA2023B) HAVE TO SEEN IN THE CONTEXT THAT THE C OMPANY IS A PART OF THE KRISHNA GROUP OWNED AND CONTROLLED BY ONE. SH. ASHOK KAPUR. THE FLAGSHIP CONCERNS OF KRISHNA GROUP AND KRISHNA MARUTI LIMITED AND SKH METALS LIM ITED. THE MAIN PROMOTERS OF THE GROUP ARE MR. ASHOK KAPUR, MRS. AARTI KAPUR AND THE IR SON MR. SUNANDAN KAPUR. THEIR TRUSTED EMPLOYEES AND FAMILY MEMBERS HAVE BEEN MADE DIRECTORS IN THE SEVERAL CONCERNS OF THE KRISHNA GROUP. THE FOLLOWING PAST/P RESENT DIRECTORS OF THE COMPANY M/S ANGEL INFRASTRUCTURE PRIVATE LIMITED HAVE A CLO SE RELATIONSHIP WITH THE KRISHNA GROUP. NAME RELATIONSHIP WITH KRISHNA GROUP. AJIT KHULLAR HE I S A RELATIVE OF SH. ASHOK KAPUR AND IS A DIRECTOR I N SEVERAL ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 14 GROUP COMPANIES. HE IS ALSO A SUPPLIER OF RAW MATER IAL TO THE KRISHNA GROUP. (STATEMENT OF SH. AJIT KHULLAR IS EN CLOSED AS ANNEXURE-A) PARVESH SONI HE IS A DIRECTOR AND CEO OF THE METALS DIVISIO N OF THE KRISHNA GROUP AND IS AN OLD TRUSTED EMPLOYEE OF SH. ASHOK K APUR. (STATEMENT OF SH. PARVESH SONI IS ENCLOSED AS ANNEX URE-B) ISSUES:- DURING THE COURSE OF ENQUIRIES IN THIS OFFICE. IT H AS BEEN NOTICED THAT THE COMPANY M/S ANGEL INFRASTRUCTURE PRIVATE LIMITED (PAN-AAFCA2023 B) HAS SUPPRESSED THE CAPITAL GAINS RECEIVED ON SALE OF SHARES OF A COMPANY BY TH E NAME OF M/S ADVANCE AUTOMATION & PROCESS CONTROL PVT. LTD.. ANGEL INFRASTRUCTURE PVT. LTD. SOLD 1377 EQUITY SHA RES OF ADVANCE AUTOMATION & PROCESS CONTROL PVT. LTD. AND EARNED PROFIT OF RS. 65 CR. A S PER COMPUTATION SHEET DOWNLOADED FROM ROC, ANGEL INFRASTRUCTURE PVT. LTD. INCURRED L OSSES OF RS. 29.7 CR. ON ACCOUNT OF FORFEITURE OF THE SHARE APPLICATION MONEY PAID TO H H INTERIOR AND AUTO COMPONENT PVT. LTD. ANGEL INFRASTRUCTURE PVT. LTD. HAS ALSO CLAIMED LOS S OF RS. 24.25 CR. ON ACCOUNT OF SALE OF A COMMERCIAL PROPERTY ADMEASURING 109342 SQ. FEE T. IT HAS ALSO CLAIMED LOSS OF RS. 12.94 CR. ON ACCOUNT OF SALE OF 77800 SHARES OF LAR SON & TUBRO. THE DETAILS ARE AS PER THE TABLE GIVEN BELOW: LONG TERM PROFIT ON SALE OF SHARES AMOUNT (RS.) 31/03/2009 SALE VALUE OF 1377 EQ. SHARES OF ADVANCE AUTOMATION & PROCESS CONTROL PVT. LTD. 713594978.5 LESS COST OF ACQUISITION 55493800 LESS TRANSFER EXP. 5577243 652623935.50 MISC. INCOME 10.00 TOTAL A 674181887.40 LESS SHORT TERM LOSS ON SALE OF SHARES AND PROPERTY A. SHARES SALE OF 77800 EQ. SHARES OF LARSON & TUBRO 7051340 8.87 LESS, COST OF ACQUISITION OF 77800 EQ. SH. 19994024 4.29 129426835.42 (77800 BONUS SHARES RECEIVED ON ABOVE VALUED AT NIL COST ON FIFO BASIS) SALE OF 440000 EQ. SH OF SKH AUTO COMPONENTS LTD. 0 LESS: COST OF ACQUISITION OF 440000 OF RS. 7.50 PARTLY PAID EQ. SH. INCLUDING PREMIUM OF RS. 667.5 PER SHARE PAID 297000000.00 297000000.00 TOTAL A B. PROPERTY SALE VALUE OF 109342.53 SQ. FT OF COMMERCIAL SPACE 301841600.00 ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 15 LESS: TRANSFER EXPENSES 25000 301816600.00 LESS: COST OF ACQUISITION OF 109342.53 SQ.FT. 54440 0000.00 242583400.00 (COPY OF COMPUTATION SHEET DOWNLOADED FROM ROC IS E NCLOSED AS ANNEXURE-C) FINANCIAL STATEMENT OF ADVANCED AUTOMATION & PROCES S CONTROL PVT. LTD. WAS DOWNLOADED FROM ROC/ITD AND ANALYSED IT WAS NOTICED THAT ADVANCED AUTOMATION & PROCESS CONTROL PVT. LTD. OWNED AN INDUSTRIAL PLOT BEARING NO. 187, PHASE-I IN THE INDUSTRIAL ESTATE, UDYOG VIHAR, GURGAON, HARYANA ADMEASURING 7800.09 SQ. MET ERS ALLOTTED BY HARYANA STATE INDUSTRIAL AND INFRASTRUCTURE DEVELOPMENT CORPORATI ON LIMITED, TOGETHER WITH CONSTRUCTIONS STANDING THEREON. THE PLOT WAS REVALU ED IN ITS BOOKS OF ACCOUNT AT RS. 159 CR.. ADVANCED AUTOMATION & PROCESS CONTROL PVT. LTD. WAS MERGED INTO ROLTA LIMITED AFTER THE SCHEME OF AMALGAMATION WAS APPROV ED BY THE HON'BLE HIGH COURT, BOMBAY W.E.F. 01/04/2009. THUS AN INDUSTRIAL PLOT BEARING NO. 187, PHASE-I IN THE INDUSTRIAL ESTATE, UDYOG VIHAR, GURGAON WAS REVALUED AT RS. 159 CR. BEFORE MERGER O F ADVANCED AUTOMATION & PROCESS CONTROL PVT. LTD. WITH ROLTA LIMITED. SG. KAMAL SIN GH ACQUIRED ONE SHARE AS A NOMINEE OF ROLTA LIMITED OF ADVANCED AUTOMATION & PROCESS C ONTROL PVT. LTDS AS PART OF AMALGAMATION SCHEME. ON FIELD ENQUIRY, IT WAS FOUND THAT AN INDUSTRIAL PLOT BEARING NO. 187, PHASE-I IN THE INDUSTRIAL ESTATE, UDYOG VIHAR, GURGAON IS IN POSSESSION OF ROLTA LIMITED AND IS HAVING ITS CORPORATE OFFICE ON THIS PLOT. DIRECTORS OF ADVANCED AUTOMATION & PROCESS CONTROL PVT. LTD. WERE AS UNDER: NAME OF THE DIRECTOR ADDRESS MR. AJIT KHULLAR B - 5/13, AZAD APARTMENTS, SRI AURBINDO MARG, NEW DELHI. KAMAL MEHRA R - 680, NEW RAJENDER NAGAR, DELHI CONSEQUENTLY THE COMPANY M/S ANGEL INFRASTRUCTURE P VT. LTD. RECEIVED AN AMOUNT OF RS. 71,35,94,978 ON ACCOUNT OF SALE OF SHARES OF TH E COMPANY ADVANCED AUTOMATION & PROCESS CONTROL PVT. LTD. AGAINST THIS RECEIPT, THE COMPANY HAS CLAIMED A CAPITAL GAIN OF RS. 67,41,81,887/-. IN ORDER TO AVOID PAYING TAXES ON THE CAPITAL GAINS OF RS. 67,41,81,887/-. THE COMPANY M/S ANGEL INFRASTRUCTUR E PVT. LTD. HAS ENTRED INTO BOGUS/SHAM TRANSACTIONS WITH ENTITIES OWNED AND CON TROLLED BY ONE SH. ASHOK KAPUR OF THE KRISHNA GROUP. IN ORDER TO DETERMINE THE TRUE NATURE OF THE TRANSA CTIONS BETWEEN THE COMPAHY ANGEL INFRASTRUCTURE PRIVATE LIMITED AND VA RIOUS GROUP COMPANIES OF THE KRISHNA GROUP A SURVEY UNDER THE P ROVISIONS OF THE INCOME TAX ACT 1961 WAS CONDUCTED AT THE VARIOUS PR EMISES OF THE KRISHNA GROUP ON 03 RD MARCH, 2016 BY DDIT(INVESTIGATION)-I, FARIDABAD. ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 16 THE TRANSACTIONS ARE DISCUSSED IN DETAIL WITH REFER ENCE TO THE SURVEY FINDINGS:- LOSS ON ACCOUNT OF SHARE APPLICATION MONEY TO M/S H H INTERIOR AND AUTO COMPONENT PVT. LTD. (FORMERLY KNOWN AS M/S SKH AUTO COMPONENT S LIMITED): IN THE COMPUTATION OF THE INCOME THE COMPANY ANGEL INFRASTRUCTURE PRIVATE LIMITED HAS SHOWN THE FOLLOWING LOSS ON ACCOUNT OF SALE OF SHARES OF SKH AUTO COMPONENTS LTD. SALE OF 440000 EQ. SH OF SKH AUTO COMPONENTS LTD. 0 LESS: COST OF ACQUISITION OF 440000 OF RS. 7.50 PARTLY PAID EQ. SH. INCLUDING PREMIUM OF RS. 667.5 PER SHARE PAID 297000000.00 297000000.00 TOTAL A AS PER MINUTES OF MEETING SKH AUTO COMPONENTS LIMIT ED HELD ON 28/02/2009. ANGEL INFRASTRUCTURE PVT. LTD. WAS ALLOTTED 4,40,000 SHAR ES AT FACE VALUE OF RS. 10 AND PREMIUM OF RS. 890/-. AS PER MINUTES, RS. 19,80,00, 000/- WAS RECEIVED ON OR BEFORE 28/02/2009 AS SHARE APPLICATION CUM ALLOTMENT MONEY (@450 PER SHARE FOR 4,40,000 SHARES). IT WAS ALSO RESOLVED DURING THE MEETING TH AT BALANCE PAYMENTS SHALL BE PAID AS UNDER: A) FIRST CALL OF RS. 225/- PER SHARE PAYABLE ON O R BEFORE 15 TH MARCH, 2009. B) SECOND AND FINAL CALL OF RS. 225/- PER SHARE P AYABLE ON OR BEFORE 15 TH APRIL, 2009. (COPY OF DETAILS OF SHARE ALLOTMENT AND BOARDS RES OLUTION DOWNLOADED FROM ROC IS ENCLOSED AS ANNEXURE-E) SUBSEQUENTLY THE ENTIRE AMOUNT OF SHARE APPLICATION MONEY PAID BY M/S ANGEL INFRASTRUCTURE PVT. LTD. TO M/S HH INTERIOR AND AUT O COMPONENT PVT. LTD. HAS BEEN SHOWN AS FORFEITED BY M/S HH INTERIOR AND AUTO COMP ONENT PVT. LTD. AS A RESULT THE ENTIRE AMOUNT HAS BEEN CLAIMED AS A CAPITAL LOSS IN THE HANDS OF M/S ANGEL INFRASTRUCTURE PVT. LTD. IT IS RELEVANT TO NOTE HERE THAT SH. ASHOK KAPUR AN D HIS FAMILY MEMBERS OWN AND CONTROL THE COMPANY M/S HH INTERIOR AND AUTO COMPON ENT PVT. LTD., THE DETAILS OF SHAREHOLDERS ARE AS UNDER:- NAME OF COMPANY AS ON 31/03/2008 AS ON 31/03/2009 L ATEST HH INTERIOR & AUTO COMPONENTS PVT. LTD. AAACK4360J SHARSH FINANCE & INVESTMENT CO. PVT. LTD. (99.50%) SUNANDAN KAPUR- 10.44%, ASHOK KAPUR 64% SHARSH FINANCE & INVESTMENT PVT. LTD. (22%) NO SHAREHOLDING DETAIL AVAILABLE IN THE ITD SYSTEM. AS ON 31/03/2013. SHARSH FINANCE & INVESTMENT CO. PVT. LTD. AAHCS 1410L ASHOK KAPUR 99% ASHOK KAPUR 99% ASHOK KAPUR 92% AS ON 31/3/2014. ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 17 DETAILS OF SHAREHOLDING DOWNLOADED FROM ITD SYSTEM IS ENCLOSED AS ANNEXURE-F) FROM THE ABOVE TABLE IT IS AMPLY CLEAR THAT SH. ASH OK KAPUR AND HIS FAMILY MEMBERS HOLD 100% INTEREST IN THE COMPANY HH INTERIOR AND A UTO COMPONENT PVT. LTD. THROUGH SHARSH FINANCE & INVESTMENT CO. PVT. LTD. FURTHER IT IS TO BE NOTED THAT THE DIRECTORS OF THE COMPANY HH INTERIOR & AUTO COMPONENTS PVT. LTD. ARE THE FAMILY MEMBERS AND TRU STED EMPLOYEES OF SH. ASHOK KAPUR. NAME OF COMPANY AS ON 31/03/2008 AS ON 31/03/2009 L ATEST HH INTERIOR & AUTO COMPONENTS PVT. LTD. AAACK4360J PARVESH SONI A.K. BEDI S.L. SETHI PARESH SONI SHRUTI KAPUR SHREYA JAIN A.K. BEDI S.L. SETHI PARVESH SONI A.K. VERMA A.K. BEDI D.K. NANDA (AS ON 31/03/2013) (DETAILS OF DIRECTORSHIP DOWNLOAD FROM ROC AND ITD SYSTEM IS ENCLOSED AS ANNEXURE- G) THE RELATIONSHIP OF THE VARIOUS DIRECTORS WITH THE KRISHNA GROUP IS DISCUSSED AS UNDER: NAME OF THE DIRECTOR RELATIONSHIP WITH THE KRISHNA GROUP SH. A.K. VERMA HE IS MANAGER AT MANESAR PLANT OF KR ISHNA MARUTI LTD. THE FACT IS EVIDENT ON AN ANALYSIS OF HIS INCOME TAX RE TURN AS HE IS DRAWING A SALARY FROM THE KRISHNA GROUP. THE FAC T HAS BEEN ADMITTED BY SH. ASHOK KAPUR IN HIS STATEMENT RECORD ED DURING THE COURSE OF SURVEY. SH. D.K. NANDA HE USED TO BE AN EMPLOYEE OF THE KRI SHNA GROUP. THE FACT HAS BEEN ADMITTED BY SH.ASHOK KAPUR IN HIS STATEMENT RE CORDED DURING THE SOURCES OF SURVEY. SH. PARESH SONI HE IS A DIRECTOR AND CEO OF THE MET ALS DIVISIONS OF THE KRISHNA GROUP. HE WAS PRESENT AT ONE OF THE PREMISES DURING THE COURSE OF SURVEY AND HIS STATEMENT WAS RECORDED. HE HAS ADMITTED THAT HE WAS WORKING FOR SH. ASHOK KAPUR AN D HIS FAMILY MEMBERS. SH. A.K. BEDI HE USED TO BE AN EMPLOYEE OF THE KRIS HNA GROUP. THE FACT HAS BEEN ADMITTED BY SH. ASHOK KAPUR IN HIS STATEMENT R ECORDED DURING THE COURSE OF SURVEY. SH. AJIT KHULLAR SH. AJIT KHULLAR IS ONE OF THE SUP PLIERS OF THE KRISHNA GROUP. HE DEALS IN SEAT TRIMS AND HAS BEEN ASSOCIATED WITH THE GROUP FOR MORE THAN 10 YEARS. HE IS ALSO A RELATIVE OF SH . ASHOK KAPUR. IN HIS STATEMENT RECORDED DURING COURSE OF S URVEY HE HAS STATED THAT HE BECOME A DIRECTOR OF THE DIRECTI ON OF SH. ASHOK KAPUR AND HAS NO KNOWLEDGE OF THE AFFAIRS OF THE COMPANIES IN WHICH HE IS A DIRECTOR. SHRUTI KAPUR SHE IS A DAUGHTER OF SH. ASHOK KAPUR. THE CHAIRMAN OF THE KRISHNA GROUP. SHREYA JAIN SHE IS A DAUGHTER OF SH. ASHOK KAPUR. T HE CHAIRMAN OF THE KRISHNA GROUP. (COPY OF STATEMENT OF ABOVE MENTIONED PERSON IS ENC LOSED AS ANNEXURE-H) ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 18 FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT THE COM PANY M/S HH INTERIOR AND AUTO COMPONENT PVT. LTD. (FORMERLY KNOWN AS M/S SKH AUTO COMPONENTS LIMITED) IS AN ENTITY OWNED AND CONTROLLED BY SH. ASHOK KAPUR. THU S, THE SHARE APPLICATION MONEY OF RS. 29,70,00,000/- GIVEN BY M/S ANGEL INFRASTRUCTUR E PVT. LTD. TO M/S HH INTERIOR AND AUTO COMPONENT PVT. LTD. (FORMERLY KNOWN AS M/S SKH AUTO COMPONENTS PVT. LTD.) AND THE CONSEQUENT FORFEITURE OF THE SAME BY HH INT ERIOR AND AUTO COMPONENT PVT. LTD. (FORMERLY KNOWN AS M/S SKH AUTO COMPONENTS PVT . LTD.) IS NOT A TRANSACTION BETWEEN TWO INDEPENDENT PARTIES. THESE TWO RELATED PARTIES HAVE ENTERED INTO THIS TRANSACTION IN ORDER TO CREATE A FICTITIOUS LOSS IN THE HANDS OF M/S ANGEL INFRASTRUCTURE PRIVATE LIMITED. THE LOSS HAS BEEN ARTIFICIALLY GEN ERATED TO BE SET OFF AGAINST THE GAIN ACCRUING TO M/S ANGEL INFRASTRUCTURE PRIVATE LIMITE D ON ACCOUNT OF SHARES OF ADVANCED AUTOMATION & PROCESS CONTROL PVT. LTD. AS DISCUSSED ABOVE. LOSS ON ACCOUNT OF SALE OF PROPERTY:- IN THE RETURN OF INCOME FOR THE A.Y. 2009-10, THE A SSESSEE M/S ANGEL INFRASTRUCTURE PVT. LTD. HAS CLAIMED THE FOLLOWING LOSS ON SALE OF PROPERTY: SALE VALUE OF 109342.53 SQ. FT. COMMERCIAL SPACE 30 1841600.00 LESS: TRANSFER EXPENSES 25000 301816600.00 LESS: COST OF ACQUISITION OF 109342.53 SQ. FT. 54,4 4,00,000.00 242583400.00 DURING THE COURSE OF SURVEY PROCEEDING THE STATEMEN T OF SH. ASHOK KAPUR IS RECORDED. HE WAS ASKED TO PROVIDE THE DETAILS REGARDING THE A BOVE SALE OF PROPERTY AND THE CONSEQUENT LOSSES. HE HAS SUBMITTED AS UNDER: THE COMPANY M/S ANGEL INFRASTRUCTURE PVT. LTD. HAD ENTERED INTO AN AGREEMENT SELL WITH M/S LAUREL INFRASTRUCTURE PVT. LTD. ON 12/03/2 009 FOR THE SALE OF COMMERCIAL SPACE ADMEASURING 1,09,342.53 SQ.FT OF THE PARADISE MALL A TOTAL CONSIDERATION OF RS. 30,18,41,600/-. THE COMPANY M/S ANGEL INFRASTRUCTUR E PVT. LTD. HAD IN TURN BOUGHT THE ABOVE MENTIONED COMMERCIAL SPACE FROM VARIOUS ENTIT IES AS PER THE DETAILS GIVEN BELOW: SR. NO. NAME OF THE SELLER TOTAL AREA DATED OF AGREEMENT TO SELL TOTAL SALE CONSIDERATION 1. ABR AUTO PVT. LTD. 11,676.17 15.09.2008 RS. 5,85 ,39,000/- 2. SHARSH FINANCE & INVESTMENT CO. P. LTD. 34,686.29 15.09.2008 RS. 17,28,39,000/- 3. MR. ASHOK KAPUR 23,723.34 15.09.2008 RS. 11,89,6 8,800/- 4. MRS. ARTI KAPUR 4,817.32 15.09.2008 RS. 2,32,40, 200/- 5. ROZ KA MEO COMPONENT PVT. LTD. 34,439.42 15.09.2008 17,08,13,000/- TOTAL 1,09,342.53 RS. 54,44,00,000/- (COPY OF ALL AGREEMENT TO SELL IS ENCLOSED AS ANNEX URE-I) SINCE THE ABOVE WAS SOLD FOR RS. 30,18,41,600/- TO M/S LAUREL INFRASTRUCTURE PVT. LTD. VIDE AGREEMENT DATED 12/03/2009 THE COMPANY M/S ANGEL IN FRASTRUCTURE PVT. LTD. INCURRED A LOSS OF ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 19 RS. 24,25,58,400/-. THIS LOSS HAS BEEN SET OFF AGAI NST THE CAPITAL GAIN EARNED BY M/S ANGEL INFRASTRUCTURE PVT. LTD. FROM THE SALE OF THE SHARE S OF M/S ADVANCED AUTOMATION AND PROCESS CONTROL PVT. LTD.. HENCE NO CAPITAL GAIN TAX WAS PA ID. ON AN ANALYSIS OF THE ABOVE DETAILS IT WAS NOTICED THAT THE COMPANY M/S ANGEL INFRASTRUCTURE PVT. LTD. CLAIMS TO HAVE PURCHASED T HE COMMERCIAL SPACE FROM SH. ASHOK KAPUR, HIS WIFE MRS. ARTI KAPUR AND THE COMPANIES W HICH ARE OWNED AND CONTROLLED BY SH. ASHOK KAPUR. THE DETAILS OF THE SHAREHOLDING PA TTERN OF THE COMPANIES FROM WHOM COMMERCIAL SPACE HAS BEEN BOUGHT ARE AS BELOW: NAME OF THE COMPANY AS ON 31/03/2008 AS ON 31/03/20 09 LATEST ABR AUTO PVT. LTD. AADCA5137C SHRUTI KAPUR 99% ARTI KAPUR 21.83% ASHOK KAPUR 70.90% ASHOK KAPUR 92% (AS ON 31/03/2013) SHARSH FINANCE & INVESTMENT CO. PVT. LTD. AAHCS 1410 L ASHOK KAPUR 99% ASHOK KAPUR 99% ASHOK KAPUR 92% (AS ON 31/03/2014) ROZ KA MEO COMPONENTS PVT. LTD. ARTI KAPUR 99% ARTI KAPUR 99% SHREYA JAIN 99% (AS ON 31/03/2014 THUS THE COMPLETED SHAREHOLDING OF THESE COMPANIES IS WITH SH. ASHOK KAPUR AND HIS FAMILY MEMBERS (DETAILS OF SHAREHOLDING DOWNLOADED FROM ITD SYSTEM IS ENCLOSED AS ANNEXURE-J) THE DETAILS OF THE DIRECTORS OF THESE COMPANIES ARE TABULATED AS UNDER: NAME OF THE COMPANY AS ON 31/03/2008 AS ON 31/03/20 09 LATEST ABR AUTO PVT. LTD. AADCA5137C ARTI KAPUR SHRUTI KAPUR SHREYA JAIN A.K. BEDI PARVESH SONI ARTI KAPUR SHRUTI KAPUR SHREYA JAIN A.K. BEDI PARVESH SONI ARTI KAPUR SHRUTI KAPUR SHREYA JAIN A.K. BEDI PARVESH SONI (AS ON 31/03/2013 SHARSH FINANCE & INVESTMENT CO. PVT. LTD. AAHCS 1410 L ARTI KAPUR SHRUTI KAPUR SHREYA JAIN A.K. BEDI PARVESH SONI ARTI KAPUR SHRUTI KAPUR SHREYA JAIN A.K. BEDI PARVESH SONI ARTI KAPUR SHRUTI KAPUR SHREYA JAIN A.K. BEDI (AS ON 31/03/3014) ROZ KA MEO COMPONENTS PVT. LTD. ARTI KAPUR SHRUTI KAPUR SHREYA JAIN A.K. BEDI PARVESH SONI ARTI KAPUR SHRUTI KAPUR SHREYA JAIN A.K. BEDI PARVESH SONI ARTI KAPUR SHRUTI KAPUR SHREYA JAIN A.K. BEDI (AS ON 31/03/3014) (DETAILS OF DIRECTORS DOWNLOADED FROM ITD SYSTEM IS ENCLOSED AS ANNEXURE-K) THUS THE DIRECTOR OF THE COMPANIES IS EITHER THE FA MILY MEMBERS OF ASHOK KAPUR ON HIS TRUSTED EMPLOYEES. THE DETAILS ARE AS UNDER: NAME OF THE DIRECTOR RELATIONSHIP WITH THE KRISHNA GROUP ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 20 MRS. ARTI KAPUR SHE IS THE WIFE OF SH. ASHOK KAPUR SH. PARVESH SONI HE IS A DIRECTOR AND CEO OF THE ME TALS DIVISIONS OF THE KRISHNA GROUP. HE WAS PRESENT AT ONE OF THE PREMISES DURING THE COURSE OF SURVEY AND HIS STATEMENT WAS RECORDED. HE HAS ADMITTED THAT HE WAS WORKING FOR SH. ASHOK KAPUR AN D HIS FAMILY MEMBERS. SH. A.K. BEDI HE USED TO BE AN EMPLOYEE OF THE KRIS HNA GROUP. THE FACT HAS BEEN ADMITTED BY SH. ASHOK KAPUR IN HIS STATEMENT R ECORDED DURING THE COURSE OF SURVEY. SHRUTI KAPUR SHE IS A DAUGHTER OF SH. ASHOK KAPUR, THE CHAIRMAN OF THE KRISHNA GROUP. SHREYA JAIN SHE IS A DAUGHTER OF SH. ASHOK KAPUR, T HE CHAIRMAN OF THE KRISHNA GROUP. FROM THE ABOVE DISCUSSION, THE FOLLOWING CONCLUSION S ARE IN ORDER:- 1. THE TRANSACTION FOR PURCHASE AND SALE OF PROPERT Y ENTERED INTO BY M/S ANGEL INFRASTRUCTURE PVT. LTD. IS WITH RELATED PARTIES. H ENCE, THESE ARE NOT ARMS LENGTH TRANSACTIONS. THE FULL VALUE OF CONSIDERATION ADOPT ED IN THESE TRANSACTIONS IS NOT THE ACTUAL VALUE OF THE PROPERTY BEING BOUGHT AND SOLD. THE VALUE HAS BEEN ARTIFICIALLY ADJUSTED TO GENERATE ARTIFICIAL CAPITAL LOSS IN THE HANDS OF M/S ANGEL INFRASTRUCTURE PVT. LTD. 2. THE CAPITAL LOSS HAS BEEN CLAIMED MERELY ON THE BASIS OF AGREEMENT TO SELL. NO TRANSFER OF THE UNDERLYING ASSETS HAS ACTUALLY TAKE N PLACE. THUS THE AUTHENTICITY OF THE TRANSACTION IS IN SERIOUS DOUBT. 3. THESE ENTITIES ARE ULTIMATELY OWNED AND CONTROLL ED AND SH. ASHOK KAPUR, THE WHOLE SCHEME HAS BEEN PUT IN PLACE IN ORDER TO AVOI D THE PAYMENT OF TAXES ON THE CAPITAL GAINS GENERATED OUT OF THE SALE OF SHARES O F ADVANCED AUTOMATION & CONTROL PVT. LTD. THE ABOVE FACTS WERE CONFRO9NTED TO SH. ASHOK KAPUR DURING THE COURSE OF SURVEY PROCEEDINGS. HE HAS AGREED THAT THE COMPANY M/S ANG EL INFRASTRUCTURE PVT. LTD. WILL FOREGO THE SET OFF OF CAPITAL LOSSES CLAIMED. HE HA S SUBMITTED THAT THE COMPANY WILL REVISE ITS RETURN FOR THE A.Y. 2009-10 AND OFFER FO R THE ENTIRE AMOUNT OF GAINS ON THE SALES OF SHARES OF ADVANCED AUTOMATION & PROCESS CO NTROL REPRODUCED BELOW: Q.19. PLEASE REFER TO THE SALE OF SHARES OF M/S ANG EL INFRASTRUCTURE PVT. LTD. AND ADVANCED AUTOMATION & PROCESS CONTROL PVT. LTD. PRO VIDE THE COMPLETE DETAILS OF THE TOTAL SALE CONSIDERATION CAPITAL GAIN ARISING AND T HE CONSEQUENT SET OFF OF LOSSES THROUGH VARIOUS TRANSACTIONS ENTERED INTO BY M/S ANGEL INFR ASTRUCTURE PVT. LTD.. THE TRANSACTION WAS DONE ON 12/09/2008. ANS. THE DETAILS ARE AS UNDER: 1. TOTAL SALE CONSIDERATION FOR SHARES OF M/S ADVAN CE AUTOMATION AND PROCESS CONTROL PVT. LTD. 154 CR (APPROX) ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 21 2. SHARES OF M/S ANGEL INFRASTRUCTURE PVT. LTD. 77 CR. 3. CAPITAL GAINS ARISING IN THE HAND OF M/S ANGEL INFRASTRUCTURE PVT. LTD. (CLAIM TO BE VERIFIED) 65 CR. 4. LOSS SET OFF THROUGH FORFEITURE BY M/S HH INTERI OR AND AUTO COMPONENT PVT. LTD. 30 CR. 5. LOSS SET OFF THROUGH AGREEMENT TO SELL WITH M/S LAUREL INFRASTRUCTURE PVT. LTD. 24 CR 6. LOSS SET OFF THROUGH SALE OF SHARES OF L&T STOC K MARKET TRANSACTIONS 11 CR. (APPROX) I AM SUBMITTING A COPY OF THE TRIAL BALANCE OF M/S ANGEL INFRASTRUCTURE PVT. LTD. THAT REFLECTS THE ABOVE LOSSES. Q.20 PLEASE REFER TO THE DISCUSSION ABOVE, IT HAS B EEN CLEARLY BROUGHT OUT THAT THE TRANSACTION ENTERED BY THE M/S ANGEL INFRASTRUCTURE PVT. LTD. WITH THE GROUP COMPANY ARE SAME TRANSACTION IN ORDER TO AVOID PAYING THE D UE TAXES ON THE CAPITAL GAIN OF RS. 65 CR. AND DISCUSSED ABOVE. PLEASE EXPLAIN. ANS. IN THIS REGARD WE WOULD LIKE TO SUBMIT THAT TH E TRANSACTION ENTERED BY THE GROUP COMPANIES WERE WITH A VIEW TO FURTHER THE BUSINESS INTEREST OF THE ENTITIES INVOLVED. HOWEVER SINCE THESE ENTITIES BELONG TO THE KRISHNA GROUP AND ARE OWNED AND OPERATED BY SH. ASHOK KAPUR SERIOUS ALLEGATIONS HAVE BEEN LE VELED REGARDING THE GENUINENESS OF THE TRANSACTION WE ALSO UNDERSTAND THAT DOUBTS HAS BEEN RAISED REGARDING THE TRANSACTION NOT BEING AT ARM LENGTH PRICES. IN VIEW OF THE ABOVE WE HEREBY UNDERTAKE THAT WE WILL FORGO THE CLAIM OF THE LOSSES ON THE F OLLOWING TRANSACTION: S. NO. DESCRIPTION OF THE TRANSACTION AMOUNT INVOLV ED F.Y. INVOLVED 1. LOSS ON ACCOUNT OF FORFEITURE OF SHARE APPLICATION MONEY BY M/S HH INTERIOR AND AUTO COMPONENT PVT. LTD. 30 CR 2008-09 2. LOSS ON ACCOUNT OF SALE OF PROPERTY AT PRESTIGE MALL TO M/S LAUREL INFRASTRUCTURE PVT. LTD. 24 CR 2008-09 TOTAL 54 CR. THUS AS DIRECTED WE WILL FILE A REVISED RETURN IN T HE CASE OF M/S ANGEL INFRASTRUCTURE PVT. LTD. (PAN AAFCA2023B) FOR THE A.Y. 2009-10 (PE RTAINING TO F.Y. 2008-09) AFTER DISALLOWING THE LOSS CLAIMED OF RS. 54 CR. AS DISCU SSED ABOVE. ACCORDINGLY AN AMOUNT OF RS. 54 CR WILL BE OFFERED TO TAX AS PER THE PROVISI ON OF INCOME TAX ACT, 1961. THE DUE TAXES ON THIS AMOUNT RS. 54 CR. WILL BE PAID AS SOO N AS POSSIBLE. I AM AUTHORIZED TO GIVE THE ABOVE COMMITMENT AS M/S ANGEL INFRASTRUCTU RE PVT. LTD. IS ONE OF MY GROUP COMPANY OWNED AND OPERATED BY ME THROUGH MY EMPLOYE ES. Q. 21 DO YOU WANT TO SAY ANYTHING ELSE? ANS. IT IS HEREBY CLARIFIED THAT THE ABOVE SAID UND ERSTANDING HAS BEEN PROVIDED IN ORDER TO AVOID LITIGATION AND TO BUY PEACE IN MIND WITH A REQUEST NEITHER PENALTY NOR ANY PUNITIVE ACTION MAY KINDLY BE INITIATED AGAINST GROUP. ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 22 (COPY OF STATEMENT OF SH. ASHOK KAPUR IS ENCLOSED A S ANNEXURE-L) IN VIEW OF THE ABOVE FACTS MENTIONED ABOVE, IT IS E STABLISHED AND ALSO ADMITTED BY THE ASSESSEE THAT THE CAPITAL LOSSES CLAIMED BY M/S ANG EL INFRASTRUCTURE PVT. LTD. IS NOT GENUINE AND IS LIABLE TO BE DISALLOWED UNDER THE PR OVISION OF THE INCOME TAX ACT, 1961. DURING THE YEAR M/S ANGEL INFRASTRUCTURE PVT. LTD. EARNED CAPITAL GAIN OF RS. 65 CR IN ORDER TO AVOID TO PAYING TAXES ON CAPITAL GAIN OF R S. 65,00,00,000/-, THE COMPANY HAS ENTERED INTO BOGUS TRANSACTION WITH ENTITIES OWNED CONTROLLED BY SHRI ASHOK KAPUR. I HAVE CAREFULLY EXAMINED ALL THE DETAILS OF TRANSACT ION AS MENTIONED ABOVE, THEREFORE, I HAVE REASON TO BELIEVE THAT THE CASE IS FIT FOR REO PEN U/S 147 OF INCOME TAX ACT, 1961. I HAVE REASON TO BELIEVE THAT THE INCOME OF THE ASS ESSEE FOR RS. 65,00,00,000/- FOR THE A.Y. 2009-10 HAS ESCAPED ASSESSMENT DUE TO FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS FOR HIS ASSESSME NTS WHICH IS WELL COVERED WITHIN THE MEANING OF THE PROVISION OF SECTION 147 OF INCOME T AX ACT, 1961. THEREFORE, KIND APPROVAL IN TERMS OF PROVISIONS OF SECTION 151 OF T HE IT ACT, 1961 MAY PLEASE BE ACCORDED FOR INITIATING PROCEEDINGS U/S 147 AND TO ISSUE NOTICE U/S 148 OF THE IT ACT, 1961. THE TRANSACTION AS MENTIONED IN THE REASONS RECORDED BY THE ASSESSING OFFICER ARE DULY RECORDED IN THE BOOKS OF ACCOUNT O F THE ASSESSEE AS WELL AS THE OTHER GROUP COMPANIES. THE ASSESSING OFFICER WHILE PASSING THE ORDER U/S 154 OF THE ACT HAD ALREADY CONSIDERED THE RELEVANT RECORD PERTAINING TO THESE TRANSACTIONS OF SALE OF SHARES, SUBSCRIPTION IN THE EQUITY SHARES OF M/S HH INTERIOR AND AUTO COMPONENT PVT. LTD. (SKH AUTO COMPONENT PVT. LTD.) AND SUBSEQUENT TRANSFER OF THE SHARES TO ANOTHER GROUP COMPANY RESULTING LOSS. THE LOSS ON SALE OF C OMMERCIAL SPACE AND LOSS ON SALE OF SHARES OF L&T LTD. ARE ALSO VERY MU CH PART OF THE RELEVANT RECORD CONSIDERED BY THE ASSESSING OFFICER AT THE T IME OF PASSING THE ORDER U/S 154 OF THE ACT. THEREFORE, EXCEPT THE CHAN GE OF OPINION ON THE SAME SET OF FACTS, NOTHING NEW HAS BEEN BROUGHT ON R ECORD AS A RESULT OF ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 23 THE SURVEY CONDUCTED BY THE DDIT (INV.) FARIDABAD WHI CH IS THE BASIS OF FORMING THE BELIEF BY THE ASSESSING OFFICER AT THE TIME OF RECORDING THE REASONS. THE REASONS RECORDED BY THE ASSESSING OFFIC ER RUNNING IN 11 PAGES, BUT EXCEPT THE PARTICULARS OF THE ASSESSEE WI TH PAN AND ASSESSMENT YEAR AT PAGE 1 OF THE REASONS RECORDED A ND LAST PAGE OF REASONS RECORDED ALL OTHER CONTENTS ARE NOTHING BUT REPRODUCTION OF THE INFORMATION RECEIVED BY THE ASSESSING OFFICER FROM THE DDIT(INV.), FARIDABAD. EVEN IN THE SAID REPORT, NO NEW MATERIAL OR FACT MUCH LESS THE INCRIMINATING MATERIAL WAS EITHER DISCOVERED OR IMPO UNDED BY THE INVESTIGATION PARTY. THE ONLY NEW MATERIAL IN THE ENT IRE PROCESS WAS THE STATEMENTS OF SH. ASHOK KAPUR, DIRECTOR OF KRISHNA MARUTI GROUP RECORDED DURING THE SURVEY. THE RELEVANT PART OF THE STATEME NT OF SH. ASHOK KAPUR IS REPRODUCED IN THE LETTER DATED 13/3/2016 VIDE WHI CH THE DDIT (INV.) FARIDABAD SENT THE INFORMATION TO THE ASSESSING OFF ICER. AT THE COST OF REPLETION, WE REPRODUCE THE SAID PART OF THE STATEME NT AS UNDER: Q.19. PLEASE REFER TO THE SALE OF SHARES OF M/S ANG EL INFRASTRUCTURE PVT. LTD. AND ADVANCED AUTOMATION & PROCESS CONTROL PVT. LTD. PRO VIDE THE COMPLETE DETAILS OF THE TOTAL SALE CONSIDERATION CAPITAL GAIN ARISING AND T HE CONSEQUENT SET OFF OF LOSSES THROUGH VARIOUS TRANSACTIONS ENTERED INTO BY M/S ANGEL INFR ASTRUCTURE PVT. LTD.. THE TRANSACTION WAS DONE ON 12/09/2008. ANS. THE DETAILS ARE AS UNDER: 1. TOTAL SALE CONSIDERATION FOR SHARES OF M/S ADVAN CE AUTOMATION AND PROCESS CONTROL PVT. LTD. 154 CR (APPROX) 2. SHARES OF M/S ANGEL INFRASTRUCTURE PVT. LTD. 77 CR. 3. CAPITAL GAINS ARISING IN THE HAND OF M/S ANGEL INFRASTRUCTURE PVT. LTD. (CLAIM TO BE VERIFIED) 65 CR. ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 24 4. LOSS SET OFF THROUGH FORFEITURE BY M/S HH INTERI OR AND AUTO COMPONENT PVT. LTD. 30 CR. 5. LOSS SET OFF THROUGH AGREEMENT TO SELL WITH M/S LAUREL INFRASTRUCTURE PVT. LTD. 24 CR 6. LOSS SET OFF THROUGH SALE OF SHARES OF L&T STOC K MARKET TRANSACTIONS 11 CR. (APPROX) I AM SUBMITTING A COPY OF THE TRIAL BALANCE OF M/S ANGEL INFRASTRUCTURE PVT. LTD. THAT REFLECTS THE ABOVE LOSSES. Q.20 PLEASE REFER TO THE DISCUSSION ABOVE, IT HAS B EEN CLEARLY BROUGHT OUT THAT THE TRANSACTION ENTERED BY THE M/S ANGEL INFRASTRUCTURE PVT. LTD. WITH THE GROUP COMPANY ARE SAME TRANSACTION IN ORDER TO AVOID PAYING THE D UE TAXES ON THE CAPITAL GAIN OF RS. 65 CR. AND DISCUSSED ABOVE. PLEASE EXPLAIN. ANS. IN THIS REGARD WE WOULD LIKE TO SUBMIT THAT TH E TRANSACTION ENTERED BY THE GROUP COMPANIES WERE WITH A VIEW TO FURTHER THE BUSINESS INTEREST OF THE ENTITIES INVOLVED. HOWEVER SINCE THESE ENTITIES BELONG TO THE KRISHNA GROUP AND ARE OWNED AND OPERATED BY SH. ASHOK KAPUR SERIOUS ALLEGATIONS HAVE BEEN LE VELED REGARDING THE GENUINENESS OF THE TRANSACTION WE ALSO UNDERSTAND THAT DOUBTS HAS BEEN RAISED REGARDING THE TRANSACTION NOT BEING AT ARM LENGTH PRICES. IN VIEW OF THE ABOVE WE HEREBY UNDERTAKE THAT WE WILL FORGO THE CLAIM OF THE LOSSES ON THE F OLLOWING TRANSACTION: S. NO. DESCRIPTION OF THE TRANSACTION AMOUNT INVOLV ED F.Y. INVOLVED 1. LOSS ON ACCOUNT OF FORFEITURE OF SHARE APPLICATION MONEY BY M/S HH INTERIOR AND AUTO COMPONENT PVT. LTD. 30 CR 2008-09 2. LOSS ON ACCOUNT OF SALE OF PROPERTY AT PRESTIGE MALL TO M/S LAUREL INFRASTRUCTURE PVT. LTD. 24 CR 2008-09 TOTAL 54 CR. THUS AS DIRECTED WE WILL FILE A REVISED RETURN IN T HE CASE OF M/S ANGEL INFRASTRUCTURE PVT. LTD. (PAN AAFCA2023B) FOR THE A.Y. 2009-10 (PE RTAINING TO F.Y. 2008-09) AFTER DISALLOWING THE LOSS CLAIMED OF RS. 54 CR. AS DISCU SSED ABOVE. ACCORDINGLY AN AMOUNT OF RS. 54 CR WILL BE OFFERED TO TAX AS PER THE PROVISI ON OF INCOME TAX ACT, 1961. THE DUE TAXES ON THIS AMOUNT RS. 54 CR. WILL BE PAID AS SOO N AS POSSIBLE. I AM AUTHORIZED TO GIVE THE ABOVE COMMITMENT AS M/S ANGEL INFRASTRUCTU RE PVT. LTD. IS ONE OF MY GROUP COMPANY OWNED AND OPERATED BY ME THROUGH MY EMPLOYE ES. Q. 21 DO YOU WANT TO SAY ANYTHING ELSE? ANS. IT IS HEREBY CLARIFIED THAT THE ABOVE SAID UND ERSTANDING HAS BEEN PROVIDED IN ORDER TO AVOID LITIGATION AND TO BUY PEACE IN MIND WITH A REQUEST NEITHER PENALTY NOR ANY PUNITIVE ACTION MAY KINDLY BE INITIATED AGAINST GROUP. ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 25 THERE IS NOTHING IN THE SAID STATEMENT TO REVEAL THA T ANY PARTICULAR OF INCOME WAS NOT DISCLOSED BY THE ASSESSEE IN THE ORIG INAL RETURN OF INCOME OR DURING THE PROCEEDINGS U/S 154 OF THE ACT. THE E NTIRE REPORT CONTAINS THE DETAILS AND FACTS WHICH WERE RECORDED IN THE BOOK S OF ACCOUNT AS WELL AS DULY DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME. EVEN SH. ASHOK KAPUR IN HIS STATEMENT HAS NOT DISCLOSED ANY NEW FAC T WHICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNT OR NOT AVAILABLE I N THE PUBLIC DOMAIN. THE STATEMENT OF SH. ASHOK KAPUR CLEARLY REVEALS THA T AS DIRECTED BY THE INVESTIGATION TEAM HE AGREED TO FILE REVISED RETURN OF INCOME TO OFFER THE CAPITAL GAIN TO TAX. THE TEXT AND TENOR OF THE STATE MENT OF SH. ASHOK KAPUR SHOWS THAT IT WAS NOT A SURRENDER MUCH LESS A VOLUNTARY SURRENDER BUT THE SAME WAS OBTAINED AT THE TIME OF RECORDING T HE STATEMENT DURING THE SURVEY WHICH IS AGAINST THE INSTRUCTIONS ISSUED BY THE CBDT IN CIRCULAR NO. 286/2/2003 DATED 10/03/2003 AS WELL AS VIDE INS TRUCTION NO. FILE NO. 28/98/2013 DATED 18/3/2014. THE INVESTIGATION WING ARRIVED TO THE CONCLUSION THAT THE TRANSACTION OF BOOKING SHORT TE RM CAPITAL LOSS ARE BOGUS AND THE SAME ARE CLAIMED TO AVOID TAX ON LONG TERM CAPITAL GAIN. HOWEVER, THE BASIS OF THIS CONCLUSION IS THE ALLEGED ATTEMPT OF THE ASSESSEE TO AVOID TAX BUT NO MATERIAL OR THE TRANSA CTION ITSELF WAS FOUND TO BE OUT OF THE BOOK OF ACCOUNT OR DISCOVERED DURI NG THE SURVEY PROCEEDINGS. THEREFORE, IT IS NOTHING BUT A DIFFEREN CE OF OPINION OF THE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 26 INVESTIGATION WING ON THE SAME SET OF FACTS ALREADY CONSIDERED BY THE ASSESSING OFFICER WHILE PASSING THE ORDER U/S 154 OF THE ACT. THOUGH, THE ORDER U/S 154 OF THE ACT DOES NOT CONSTITUTE A DECI SION OF THE ASSESSING OFFICER ON THE MERITS OF AN ISSUE, HOWEVER, IF THE A SSESSING OFFICER WAS NOT SATISFIED WITH THE CLAIM AND EXPLANATION BASED O N SUPPORTING EVIDENCE THEN EVEN IF THE ISSUE COULD NOT BE DECIDED IN THE PROCEEDINGS U/S 154 OF THE ACT, IT WAS VERY MUCH OPEN TO THE ASSESSING OFFI CER TO INITIATE THE PROCEEDINGS U/S 147/148 OF THE ACT ON ITS OWN JUST A FTER THE ORDER PASSED U/S 154 OF THE ACT. THE NON-INITIATION OF THE PROCEE DINGS U/S 147/148 OF THE ACT BY THE ASSESSING OFFICER ON ITS OWN AND SUBS EQUENTLY REOPENING THE ASSESSMENT BASED ON THE REPORT OF THE INVESTIGA TION WING REVEALING NO NEW FACT RAISES SERIOUS QUESTION AS TO WHETHER THE ASSESSING OFFICER HAS APPLIED HIS INDEPENDENT MIND WHILE FORMING THE B ELIEF THAT INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. THE REPORT OF THE INVESTIGATION WING IS RATHER IN THE SHAPE OF INFORMATION THEN DIS COVERY OF ANY NEW FACT NOT DISCLOSED EARLIER. THE HONBLE DELHI HIGH COURT IN THE CASE OF PR.CIT VS. G&G PHARMA INDIA LTD. (SUPRA) WHILE CONSIDERING THE ISSUE OF VALIDITY OF REOPENING BASED ON THE REPORT OF INVESTIGATION W ING HAS HELD IN PARA 12 AS UNDER: 12. IN THE PRESENT CASE, AFTER SETTING OUT FOUR ENTRI ES, STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON A SINGLE DATE I.E. 10TH FEBRUARY 2003, FROM FOUR ENTITIES WHICH WERE TERMED AS ACCOMMODATION ENTRIES, WHICH I NFORMATION WAS GIVEN TO HIM BY THE DIRECTORATE OF INVESTIGATION, THE AO STA TED: 'I HAVE ALSO PERUSED ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 27 VARIOUS MATERIALS AND REPORT FROM INVESTIGATION WIN G AND ON THAT BASIS IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS INTRODUCED IT S OWN UNACCOUNTED MONEY IN ITS BANK ACCOUNT BY WAY OF ABOVE ACCOMMODATION E NTRIES.' THE ABOVE CONCLUSION IS UNHELPFUL IN UNDERSTANDING WHETHER TH E AO APPLIED HIS MIND TO THE MATERIALS THAT HE TALKS ABOUT PARTICULARLY SINCE HE DID NOT DESCRIBE WHAT THOSE MATERIALS WERE. ONCE THE DATE ON WHICH THE SO CALLE D ACCOMMODATION ENTRIES WERE PROVIDED IS KNOWN, IT WOULD NOT HAVE BEEN DIFF ICULT FOR THE AO, IF HE HAD IN FACT UNDERTAKEN THE EXERCISE, TO MAKE A REFERENCE T O THE MANNER IN WHICH THOSE VERY ENTRIES WERE PROVIDED IN THE ACCOUNTS OF THE A SSESSEE, WHICH MUST HAVE BEEN TENDERED ALONG WITH THE RETURN, WHICH WAS FILE D ON 14TH NOVEMBER 2004 AND WAS PROCESSED UNDER SECTION 143(3) OF THE ACT. WITHOUT FORMING A PRIMA FACIE OPINION, ON THE BASIS OF SUCH MATERIAL, IT WA S NOT POSSIBLE FOR THE AO TO HAVE SIMPLY CONCLUDED: 'IT IS EVIDENT THAT THE ASSE SSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK BY WAY OF ACC OMMODATION ENTRIES'. IN THE CONSIDERED VIEW OF THE COURT, IN LIGHT OF THE L AW EXPLAINED WITH SUFFICIENT CLARITY BY THE SUPREME COURT IN THE DECISIONS DISCU SSED HEREINBEFORE, THE BASIC REQUIREMENT THAT THE AO MUST APPLY HIS MIND TO THE MATERIALS IN ORDER TO HAVE REASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT IS MISSING IN THE PRESENT CASE. THE HON'BLE HIGH COURT AFTER CONSIDERING THE STATEME NT OF THE ASSESSING OFFICER IN THE REASONS RECORDED HELD THAT THE BASIC REQUIREMENT TO HAVE REASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT IS THAT THE ASSESSING OFFICER MUST APPLY HIS MIND TO THE MATERIAL. A SIMILAR VIEW HAS BEEN TAKEN BY THE HONB LE DELHI HIGH COURT IN THE CASE OF PCIT VS RMG POLYVINYL (SUPRA) IN PARA 12 AS UNDER: 12. RECENTLY, IN ITS DECISION DATED 26TH MAY, 2017 IN ITA NO. 692/2016 PR. CIT V. MEENAKSHI OVERSEAS [2017] 82 TAXMANN.COM 300 (DELHI) , THIS COURT DISCUSSED THE LEGAL POSITION REGARDING REOPENING OF ASSESSMENTS WHERE THE RETURN FILED AT THE INITIAL STAGE WAS PROCESSED UND ER SECTION 143(1) OF THE ACT AND NOT UNDER SECTION 143(3) OF THE ACT. THE REASON S FOR THE REOPENING OF THE ASSESSMENT IN THAT CASE WERE MORE OR LESS SIMILAR T O THE REASONS IN THE PRESENT CASE, VIZ., INFORMATION WAS RECEIVED FROM THE INVES TIGATION WING REGARDING ACCOMMODATION ENTRIES PROVIDED BY A 'KNOWN' ACCOMMO DATION ENTRY PROVIDER. THERE, ON FACTS, THE COURT CAME TO THE CONCLUSION T HAT THE REASONS WERE, IN FACT, ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 28 IN THE FORM OF CONCLUSIONS 'ONE AFTER THE OTHER' AN D THAT THE SATISFACTION ARRIVED AT BY THE AO WAS A 'BORROWED SATISFACTION' AND AT BEST 'A REPRODUCTION OF THE CONCLUSION IN THE INVESTIGATION REPORT.' THUS, IT WAS HELD THAT THE REOPENING ON BORROWED SATIS FACTION IS NOT VALID. THE ISSUE WAS DISCUSSED IN DETAIL BY THE HON'BLE HIGH COURT IN THE CASE OF PCIT VS. MEENAKSHI OVERSEAS (P) LTD. (SUPRA) IN PARA 24 TO 26 AND 37 AS UNDER: 24. THE REOPENING OF ASSESSMENT UNDER SECTION 147 IS A POTENT POWER NOT TO BE LIGHTLY EXERCISED. IT CERTAINLY CANNOT BE INVOKED C ASUALLY OR MECHANICALLY. THE HEART OF THE PROVISION IS THE FORMATION OF BELIEF B Y THE AO THAT INCOME HAS ESCAPED ASSESSMENT. THE REASONS SO RECORDED HAVE TO BE BASED ON SOME TANGIBLE MATERIAL AND THAT SHOULD BE EVIDENT FROM READING TH E REASONS. IT CANNOT BE SUPPLIED SUBSEQUENTLY EITHER DURING THE PROCEEDINGS WHEN OBJECTIONS TO THE REOPENING ARE CONSIDERED OR EVEN DURING THE ASSESSM ENT PROCEEDINGS THAT FOLLOW. THIS IS THE BARE MINIMUM MANDATORY REQUIREM ENT OF THE FIRST PART OF SECTION 147 (1) OF THE ACT. 25. AT THIS STAGE IT REQUIRES TO BE NOTED THAT SINCE THE ORIGINAL ASSESSMENT WAS PROCESSED UNDER SECTION 143 (1) OF THE ACT, AND NOT SECTION 143 (3) OF THE ACT, THE PROVISO TO SECTION 147 WILL NOT APPLY. IN OTHER WORDS, EVEN THOUGH THE REOPENING IN THE PRESENT CASE WAS AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT AY, IT WAS NOT NECESSARY FOR THE AO TO SHOW THAT THERE WAS ANY FAILURE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FAC TS NECESSARY FOR THE ASSESSMENT. 26. THE FIRST PART OF SECTION 147 (1) OF THE ACT REQU IRES THE AO TO HAVE 'REASONS TO BELIEVE' THAT ANY INCOME CHARGEABLE TO TAX HAS ESCA PED ASSESSMENT. IT IS THUS FORMATION OF REASON TO BELIEVE THAT IS SUBJECT MATT ER OF EXAMINATION. THE AO BEING A QUASI JUDICIAL AUTHORITY IS EXPECTED TO ARR IVE AT A SUBJECTIVE SATISFACTION INDEPENDENTLY ON AN OBJECTIVE CRITERIA. WHILE THE R EPORT OF THE INVESTIGATION WING MIGHT CONSTITUTE THE MATERIAL ON THE BASIS OF WHICH HE FORMS THE REASONS TO BELIEVE THE PROCESS OF ARRIVING AT SUCH SATISFACTIO N CANNOT BE A MERE REPETITION OF THE REPORT OF INVESTIGATION. THE RECORDING OF RE ASONS TO BELIEVE AND NOT REASONS TO SUSPECT IS THE PRE- CONDITION TO THE ASS UMPTION OF JURISDICTION UNDER SECTION 147 OF THE ACT. THE REASONS TO BELIEVE MUST DEMONSTRATE LINK BETWEEN THE TANGIBLE MATERIAL AND THE FORMATION OF THE BELI EF OR THE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. XXXXXXXX XXXXXXXXX 37. FOR THE AFOREMENTIONED REASONS, THE COURT IS SATI SFIED THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, NO ERROR HAS BEEN COMMIT TED BY THE ITAT IN THE IMPUGNED ORDER IN CONCLUDING THAT THE INITIATION OF THE PROCEEDINGS UNDER SECTION 147/148 OF THE ACT TO REOPEN THE ASSESSMENT S FOR THE AYS IN QUESTION DOES NOT SATISFY THE REQUIREMENT OF LAW. ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 29 THE HON'BLE HIGH COURT HAS LAID DOWN THE PRINCIPLE TH AT THE ASSESSING OFFICER BEING A QUASI JUDICIAL AUTHORITY IS EXPECTE D TO ARRIVE AT A SUBJECTIVE SATISFACTION INDEPENDENTLY ON AN OBJECTIVE CRITERIA . THE REASONS TO BELIEVE MUST DEMONSTRATE LINK BETWEEN THE TANGIBLE MATERIAL AND THE FORMATION OF BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT. THE R ECORDING OF REASONS TO BELIEF AND NO REASONS TO SUSPECT IS THE PRECONDI TION TO THE ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT. IN THE CASE OF RAJIV AGARWAL VS ACIT (SUPRA), THE HON'BLE HIGH COURT HAS HELD IN PARA 11 AS UNDER: 11. SECONDLY, THE ASSESSING OFFICER'S BELIEF THAT INC OME OF AN ASSESSEE HAS ESCAPED ASSESSMENT MUST BE BASED ON TANGIBLE MATERIAL. IT H AS BEEN EXPLAINED IN A NUMBER OF DECISIONS THAT THERE MUST BE A 'CLOSE NEX US' OR 'LIVE LINK' BETWEEN TANGIBLE MATERIAL AND THE REASON TO BELIEVE THAT IN COME HAS ESCAPED ASSESSMENT. IT FOLLOWS THAT THE MATERIAL ON THE BAS IS OF WHICH REASSESSMENT PROCEEDINGS CAN BE INITIATED MUST BE CREDIBLE MATER IAL WHICH COULD LEAD TO SUCH BELIEF. CLEARLY, AN UNSUBSTANTIATED COMPLAINT CANNO T BE THE SOLE BASIS FOR FORMING A BELIEF THAT INCOME OF AN ASSESSEE HAS ESC APED ASSESSMENT. EVEN IN CASES WHERE THE ASSESSING OFFICER COMES ACROSS CERT AIN UNVERIFIED INFORMATION, IT IS NECESSARY FOR HIM TO TAKE FURTHER STEPS, MAKE IN QUIRIES AND GARNER FURTHER MATERIAL AND IF SUCH MATERIAL INDICATES THAT INCOME OF AN ASSESSEE HAS ESCAPED ASSESSMENT, FORM A BELIEVE THAT INCOME OF THE ASSES SEE HAS ESCAPED ASSESSMENT. PLAINLY, IN THIS CASE, THE ASSESSEE HAD NOT ACQUIRE D ANY MATERIAL TO FORM SUCH BELIEF. ON THE CONTRARY, WHEN IT IS POINTED OUT TO THE ASSESSING OFFICER THAT SHPL HAD NOT ASSIGNED ANY POLICY TO RAJIV AGARWAL, THE S AID FACT WAS COMPLETELY OVERLOOKED. SIMILARLY, IN THE CASE OF VIJAY LAXMI A GARWAL, THE ASSESSING OFFICER FAILED TO TAKE INTO ACCOUNT THE FACT THAT THE ASSES SEE HAD PAID A SUM OF RS. 2,08,000, WHICH WAS MORE THAN SURRENDER VALUE OF TH E POLICY, FOR ASSIGNMENT OF THE POLICY IN HER FAVOUR. THIS TOO WAS COMPLETELY I GNORED BY THE ASSESSING OFFICER. THEREFORE, THE ASSESSING OFFICER IS REQUIRED TO FORM A BELIEF ON THE BASIS OF INDEPENDENT APPLICATION OF MIND ON THE INFORMATI ON OR MATERIAL RECEIVED FROM THE INVESTIGATION WING. IT IS CLEAR T HAT THE INVESTIGATION ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 30 WING TOOK A VIEW THAT THE TRANSACTIONS WERE BOGUS. TH E ASSESSING OFFICER WITHOUT DISCUSSING ANYTHING AS TO HOW THE TRANSACTIO N IS BOGUS HAS REOPENED THE ASSESSMENT ON THE BORROWED SATISFACTION OF THE INVESTIGATION WING. IN THE REPORT OF THE INVESTIGAT ION WING, THERE IS NO ALLEGATION THAT THE CLAIM OF THE ASSESSEE IS NOT BA SED ON ACTUAL TRANSACTION BUT THE SATISFACTION OF THE DEPARTMENT IS GUIDED BY THE FACT THAT DUE TO THE ALLEGED TRANSACTION, THE ASSESSEE A VOIDED THE TAX LIABILITY ON THE LONG TERM CAPITAL GAIN EARNED DURING THE YEA R. THE POSSIBILITY OF ARRANGING THE TRANSACTIONS IN A WAY TO SAVE THE TAX WOULD NOT BE A GROUND TO HOLD THAT THE TRANSACTION ITSELF IS BOGUS. IF A TRANSACTION IS VALID AND PERMISSIBLE UNDER THE LAW THE MOTIVE OF THE TRANSACT ION CANNOT RENDER IT BOGUS. IT MAY BE A CASE OF IMPERMISSIBLE CLAIM OF S HORT TERM CAPITAL LOSS AS PER THE PROVISIONS OF THE ACT BUT NEITHER THE IN VESTIGATION WING NOR THE ASSESSING OFFICER HAS PROCEEDED ON THOSE LINES THAT THE CLAIM IS NOT ALLOWABLE UNDER THE PROVISIONS OF THE ACT RATHER THE SOLE BASIS OF DISALLOWANCE OF CLAIM IS TREATING THE TRANSACTION AS NON-GENUINE. THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL TO S HOW THAT THE TRANSACTION AS CLAIMED IS NOT BASED ON THE ACTUAL P URCHASE AND SALE OR THE DOCUMENTS SUBSTANTIATING THE TRANSACTIONS ARE BOGUS . IT IS ALSO NOT A CASE OF DISCOVERY OF NEW FACT DURING THE INVESTIGATION BU T THE DEPARTMENT HAS TRIED TO GIVE THE COLOUR TO THE TRANSACTION AS BOGU S WITHOUT ANY MATERIAL ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 31 IN SUPPORT OF THAT SATISFACTION. THE SOLE BASIS IS T HE ALLEGED MOTIVE OF AVOIDING THE TAX ON CAPITAL GAIN BUT THERE IS NO PR OHIBITION AGAINST THE ILLEGITIMATE TAX PLANNING WHILE ENTERING INTO THE T RANSACTION OF PURCHASE AND SALE. THEREFORE, A TAX PLANNING IS NOT PROHIBITE D AS IN CASE OF TAX AVOIDANCE AS A DEVICE OR DESIGN WHICH IS NOT PERMISS IBLE UNDER THE LAW. THEREFORE, WHEN ACTUAL NATURE OF TRANSACTION AND THE CLAIM OF THE ASSESSEE ARE NOT FOUND TO BE AT VARIANCE THEN THE F ORMATION OF THE BELIEF THE ASSESSING OFFICER IS WITHOUT ANY BASIS BUT IS BA SED MERELY ON SURMISES AND CONJECTURES. 8.1 THERE IS NO ALLEGATION EITHER IN THE REPORT OF T HE INVESTIGATION WING OR IN THE REASONS RECORDED BY THE ASSESSING OFFICER ABOUT THE BOGUS CLAIM OF SHORT TERM CAPITAL LOSS OF RS. 12.94 CRORES ON S ALE OF EQUITY SHARES OF L&T LIMITED. EVEN OTHERWISE THE SHORT TERM CAPITAL LO SS DECLARED BY THE ASSESSEE IS NOT ARISING FROM FORFEITURE OF SHARE AP PLICATION MONEY BUT IT WAS DUE TO TRANSFER OF SHARES PRIOR TO THE PAYMENT O F THE FINAL CALL MONEY. HOWEVER, THE ASSESSING OFFICER IN THE CONCLUDING PAR T OF THE REASONS RECORDED HAS STATED THAT IN ORDER TO AVOID THE TAX ON CAPITAL GAIN OF RS. 65.00 CRORES, THE ASSESSEE HAS ENTERED INTO THE BOG US TRANSACTIONS. EVEN THE TRANSACTION OF SALE OF COMMERCIAL SPACE IN PRE STIGE MALL WAS NOT FOUND TO BE BOGUS EITHER BY THE INVESTIGATION WING OR ALLEGED BY THE ASSESSING OFFICER IN THE REASONS RECORDED BUT THE O NLY ALLEGATION WAS THAT ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 32 IT WAS NOT AT ARMS LENGTH PRICE BEING A TRANSACTION BETWEEN THE RELATED PARTIES. HOWEVER, THE ASSESSING OFFICER IN THE CONCL UDING PARA OF REASONS RECORDED, ASSUMED THAT ALL THE TRANSACTIONS ARE BOG US TO FORM THE BELIEF THAT THE INCOME ASSESSABLE IN TAX HAS ESCAPED ASSES SMENT. THEREFORE, THERE IS A WIDE DISCONNECT BETWEEN THE REASONS RECORD ED AND FORMATION OF BELIEF WHICH SHOWS THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS INDEPENDENT MIND WHILE RECORDING THE REASONS FOR RE OPENING OF THE ASSESSMENT. IT IS DISCERNABLE FROM THE RECORD AND R EASONS RECORDED BY THE ASSESSING OFFICER THAT THE REOPENING IS BASED ON BO RROWED SATISFACTION. HENCE, WE HOLD THAT THE REOPENING OF ASSESSMENT IS N OT VALID AND THE SAME IS LIABLE TO BE QUASHED. WE ORDER ACCORDINGLY. 9. THE NEXT OBJECTION RAISED BY THE ASSESSEE IS AGAI NST THE MECHANICAL APPROVAL OF REOPENING WITHOUT APPLICATION OF MIND:- THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE LD. PR.CIT HAS G RANTED APPROVAL IN MECHANICAL MANNER WITHOUT APPLICATION OF MIND. EVEN THE ASSESSMENT RECORD WAS NOT PRODUCED BEFORE THE APPROVING AUTHORI TY AS IT WAS ALSO NOT AVAILABLE WITH THE ASSESSING OFFICER AT THE TIME OF RECORDING THE REASONS DUE TO CHANGE OF JURISDICTION. THE SATISFACTION OF T HE APPROVING AUTHORITY HAS TO BE RECORDED WHICH CAN BE REFLECTED IN THE BR IEFEST POSSIBLE MANNER. IN THE CASE OF THE ASSESSEE, THE APPROVING AUTHORIT Y HAS EXERCISED THE POWER IN MECHANICAL MANNER RATHER THAN OBJECTIVELY A ND THEREBY NO ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 33 COMPLIANCE OF STATUTORY REQUIREMENT U/S 151 OF THE ACT. HE HAS RELIED UPON THE FOLLOWING DECISIONS: (I) PR. CIT VS M/S N.C. CABLES LTD. 391 ITR 11. (II) CIT VS. S. GOYANKA LIME & CHEMICAL LTD. 231 TAXM AN 73 (MP), WHICH HAS BEEN UPHELD BY THE HON'BLE SUPREME COURT REPORTED IN 237 TAXMAN 378. (III) CENTRAL INDIA ELECTRIC SUPPLY CO. LTD. VS ITO 333 ITR 237 (DEL) (IV) CHHUGAMAL RAJPAL VS. S.P. CHAILA & ORS. 79 ITR 603 (SC) THUS, THE LD COUNSEL HAS PLEADED THAT IN ABSENCE OF COMPLIANCE OF SECTION 151 OF THE ACT, THE NOTICE ISSUED U/S 148 IS INVALI D AND LIABLE TO BE QUASHED. 10. ON THE OTHER HAND, THE LD. CIT-DR HAS SUBMITTED THAT ALL RELEVANT MATERIAL WAS BEFORE THE LD. PR.CIT AT THE TIME OF GRA NTING OF APPROVAL U/S 151 OF THE ACT. THE LD. CIT-DR HAS REFERRED TO THE L ETTER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE REASONS RECORDED BY THE ASSESSING OFFICER WERE DULY ANNEXED TO THE ASSESSING OFFICERS LETTER SEEKING APPROVAL OF THE COMPETENT AUTHORITY. THE MATTER WAS FIRST PUT UP BEFORE THE LD. ADDL.CIT AND THEN BEFORE THE LD. PR.CIT WHO AFTER CONS IDERING THE REASONS RECORDED HAS GRANTED THE APPROVAL. THE LD. CIT-DR HA S FURTHER CONTENDED THAT THERE IS NO PRESCRIBED FORMAT OF GRANTING APPR OVAL OR RECORDING SATISFACTION U/S 151 OF THE ACT, THEREFORE, ONCE TH E APPROVAL IS GIVEN ON ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 34 SATISFACTION OF THE REASONS RECORDED BY THE ASSESSI NG OFFICER THEN DETAILED REASONING OF SATISFACTION IS NOT REQUIRED. THE LD. C IT-DR HAS SUPPORTED THE APPROVAL AS VALID AND BASED ON SATISFACTION OF THE LD. PR.CIT. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER SENT THE P ROPOSAL FOR OBTAINING THE SANCTION OF LD. PR.CIT VIDE LETTER DATED 30/3/20 16. THE COPY OF THE PROPOSAL AND SANCTION OF LD. PR.CIT IS PLACED AT PAG E NO. 1 AND 2 OF THE DEPARTMENTS PAPER BOOK AS UNDER: PROPOSAL FOR OBTAINING SANCTION OF THE PR. COMMISSI ONER OF INCOME TAX-1, JAIPUR FOR ISSUE OF NOTICE U/S 148 OF THE INCOME-TAX ACT, 1961 , 1 NAME AND ADDRESS OF THE ASSESSEE M/S ANGEL INFRASTRUCTURE PVT. LTD., B-5 VRINDAVAN APARTMENT, KINGS ROAD, JAIPUR, RAJASTHAN. 2. PAN AAFCA2023B 3. STATUS COMPANY 4. WAR D WARD 3(1), JAIPUR 5. ASSESSMENT YEAR IN RESPECT OF WHICH IT IS PROPOSED TO ISSUE NOTICE ISSUED U/S 148 A.Y. 2009 - 10 6. THE QUANTUM OF INCOME WHICH HAS ESCAPED ASSESSMENT RS. 65,00,00,000/ - 7. WHETHER THE PROVISIONS OF SECTION 147(A), 147(B) OR 147(C) ARE APPLICABLE. PROVISIONS OF SECTION 147 EXPLANATION 2(B) IS APPLICABLE 8. WHETHER THE ASSESSMENT IS PROPOSED FOR THE FIRST TIME, IF THE REPLY IS IN AFFIRMATIVE PLEASE STATE YES (A) WHETHER ANY VOLUNTARY RETURN HAD ALREADY BEEN FILED, AND YES 9. IF THE ANSWER TO ITEM 8 IS IN THE NEGATIVE, PLEASE STATE -- (A) THE INCOME ORIGINALLY ASSESSED RS. 65,60,08,500/ - (B) WHETHER IT IS A CASE OF UNDER ASSESSMENT, ASSESSMENT AT TOO LOW RATE ASSESSMENT WHICH HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF OR ALLOWING OR ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 35 EXCESSIVE LOSS OR DEPRECIATION: 10. WHETHER THE PROVISIONS OF SECTION 150(1) ARE APPLICABLE. IF THE REPLY IS IN AFFIRMATIVE, THE RELEVANT FACTS MAY BE STATED AGAINST ITEM NO. 11 AND IT MAY BE BROUGHT OUT THAT THE PROVISIONS OF SECTIONS 150(2) WOULD NOT STAND IN THE WAY OF INITIATING PROCEEDING U/S 147. THIS IS A CASE WHERE INCOME HAS ESCAPED ASSESSMENT. 11 REASONS FOR THE BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT REASONS AS PER ANNEXURE PAGE 1 TO 11. IN VIEW OF THE REASONS IT IS REQUESTED THAT NECESSA RY APPROVAL AS LAID DOWN UNDER SUB-SECTION (2) OF SECTION 151 OF THE IT ACT, 1961 MAY KINDLY BE ACCORDED. DATED 30-03-2016 (G P AWASTHI), INCOME TAX OFFICER WARD 3(1), JAIPUR 12 COMMENTS OF THE ADDITIONAL COMMISSIONER OF INCOME TAX ON THE REASONS RECORDED BY A.O. RECORDING (PURUSHOTTAM KASHYAP), ADDITIONAL COMMISSIONER OF INCOME TAX RANGE-3, JAIPUR 13 WHETHER THE PR. CIT IS SATISFIED ON THE REASON RECORDED BY THE A.O. THAT IT IS FIT CASE FOR ISSUE OF NOTICE U/S 148. YES (S.K. CHOWDHARI), PRINCIPAL COMMISSIONER OF INCOME TAX-1 JAIPUR IT IS EVIDENT FROM THE ABOVE PROPOSAL AND SANCTION THAT THE LD. PR.CIT HAS MARKED AS YES IN THE COLUMN AND SIGNED THE SAME. SINCE THE LIMITATION FOR ISSUING THE NOTICE U/S 148 OF THE ACT WAS EXPIRI NG ON 31/3/2016, THEREFORE, THE LD. PR.CIT WAS HAVING NO TIME TO EXAMI NE THE RELEVANT RECORD AND THEREFORE, THE SANCTION WAS GRANTED IN CO MPELLING CIRCUMSTANCES. FURTHER THE SANCTION BY THE WRITING YES DOES NOT EXHIBIT ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 36 ANY THOUGHT PROCESS IN EXERCISING THE POWER U/S 151 OF THE ACT. THE HONBLE DELHI HIGH COURT IN THE CASE OF PR.CIT VS. M /S N.C. CABLES LTD. (SUPRA) HAS HELD IN PARA 11 AS UNDER: 11 . SECTION 151 OF THE ACT CLEARLY STIPULATES THAT TH E COMMISSIONER OF INCOME-TAX (APPEALS), WHO IS THE COMPETENT AUTHORITY TO AUTHOR IZE THE REASSESSMENT NOTICE, HAS TO APPLY HIS MIND AND FORM AN OPINION. THE MERE APP ENDING OF THE EXPRESSION 'APPROVED' SAYS NOTHING. IT IS NOT AS IF THE COMMIS SIONER OF INCOME-TAX (APPEALS) HAS TO RECORD ELABORATE REASONS FOR AGREEING WITH THE N OTING PUT UP. AT THE SAME TIME, SATISFACTION HAS TO BE RECORDED OF THE GIVEN CASE W HICH CAN BE REFLECTED IN THE BRIEFEST POSSIBLE MANNER. IN THE PRESENT CASE, THE EXERCISE APPEARS TO HAVE BEEN RITUALISTIC AND FORMAL RATHER THAN MEANINGFUL, WHIC H IS THE RATIONALE FOR THE SAFEGUARD OF AN APPROVAL BY A HIGHER RANKING OFFICE R. FOR THESE REASONS, THE COURT IS SATISFIED THAT THE FINDINGS BY THE INCOME-TAX APPEL LATE TRIBUNAL CANNOT BE DISTURBED. THUS, THE REQUIREMENT TO RECORD THE SATISFACTION IS TO REFLECT THE SATISFACTION IN BRIEFEST POSSIBLE MANNER FROM THE R ECORD. THE APPROVAL GRANTED IN THE RITUALISTIC AND FORMAL MANNER RATHER THAN MEANINGFUL IS NOT SATISFYING THE REQUIREMENT U/S 151 OF THE ACT. IN T HE CASE OF CIT VS. S. GOYENKA LIME & CHEMICAL LTD. (SUPRA), THE HONBLE M .P. HIGH COURT HAS HELD IN PARA 7 TO 10 AS UNDER: 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND WE F IND THAT WHILE ACCORDING SANCTION, THE JOINT COMMISSIONER, INCOME TAX HAS ON LY RECORDED SO 'YES, I AM SATISFIED'. IN THE CASE OF ARJUN SINGH ( SUPRA ), THE SAME QUESTION HAS BEEN CONSIDERED BY A COORDINATE BENCH OF THIS COURT AND THE FOLLOWING PRINCIPLES ARE LAID DOWN: 'THE COMMISSIONER ACTED, OF COURSE, MECHANICALLY IN ORDER TO DISCHARGE HIS STATUTORY OBLIGATION PROPERLY IN THE MATTER OF RECO RDING SANCTION AS HE MERELY WROTE ON THE FORMAT 'YES, I AM SATISFIED' WH ICH INDICATES AS IF HE WAS TO SIGN ONLY ON THE DOTTED LINE. EVEN OTHERWISE ALSO, THE EXERCISE IS SHOWN TO HAVE BEEN PERFORMED IN LESS THAN 24 HOURS OF TIME WHICH ALSO GOES TO INDICATE THAT THE COMMISSIONER DID NOT APPLY HIS MIND AT ALL WHILE GRANTING SANCTION. THE SATISFACTION HAS TO BE WITH OBJECTIVITY ON OBJECTIVE MATERIAL.' ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 37 8. IF THE CASE IN HAND IS ANALYSED ON THE BASIS OF T HE AFORESAID PRINCIPLE, THE MECHANICAL WAY OF RECORDING SATISFACTION BY THE JOI NT COMMISSIONER, WHICH ACCORDS SANCTION FOR ISSUING NOTICE UNDER SECTION 1 48, IS CLEARLY UNSUSTAINABLE AND WE FIND THAT ON SUCH CONSIDERATIO N BOTH THE APPELLATE AUTHORITIES HAVE INTERFERED INTO THE MATTER. IN DOI NG SO, NO ERROR HAS BEEN COMMITTED WARRANTING RECONSIDERATION. 9. AS FAR AS EXPLANATION TO SECTION 151, BROUGHT INT O FORCE BY FINANCE ACT, 2008 IS CONCERNED, THE SAME ONLY PERTAINS TO ISSUAN CE OF NOTICE AND NOT WITH REGARD TO THE MANNER OF RECORDING SATISFACTION. THA T BEING SO, THE SAID AMENDED PROVISION DOES NOT HELP THE REVENUE. 10. IN VIEW OF THE CONCURRENT FINDINGS RECORDED BY THE LEARNED APPELLATE AUTHORITIES AND THE LAW LAID DOWN IN THE CASE OF ARJUN SINGH ( SUPRA ), WE SEE NO QUESTION OF LAW INVOLVED IN THE MATTER, WARRANTI NG RECONSIDERATION. THE HON'BLE HIGH COURT HAS HELD THAT MERELY WRITING O N THE FORMAT YES I AM SATISFIED INDICATES AS IF HE WAS TO SIGN ONLY ON THE DOTTED LINE AND THEREFORE, THE MECHANICAL WAY OF RECORDING SATISFACT ION IS CLEARLY UNSUSTAINABLE. SIMILARLY THE HONBLE DELHI HIGH COU RT IN THE CASE OF CENTRAL INDIA ELECTRIC SUPPLY CO. LTD. VS ITO (SUPRA ) HAS HELD AS PARA 19 AS UNDER: 19. IN RESPECT OF THE FIRST PLEA, IF THE JUDGMENTS IN CHUGAMAL RAJPAL'S CASE ( SUPRA ); CHANCHAL KUMAR CHATTERJEE'S CASE ( SUPRA ); AND GOVINDA CHOUDHURY & SONS' CASE ( SUPRA ) ARE EXAMINED, THE ABSENCE OF REASONS BY THE ASSESSING OFFICER DOES NOT EXIST. THIS IS SO AS ALONG WITH THE PROFORMA, REASONS SET OUT BY THE ASSESSING OFFICER WERE, IN F ACT, GIVEN. HOWEVER, IN THE INSTANT CASE, THE MANNER IN WHICH THE PROFORMA WAS STAMPED AMOUNTING TO APPROVAL BY THE BOARD LEAVES MUCH TO B E DESIRED. IT IS A CASE WHERE LITERALLY A MERE STAMP IS AFFIXED. IT IS SIGN ED BY A UNDER SECRETARY UNDERNEATH A STAMPED 'YES' AGAINST THE COLUMN WHICH QUERIED AS TO WHETHER THE APPROVAL OF THE BOARD HAD BEEN TAKEN. R UBBER STAMPING OF UNDERLYING MATERIAL IS HARDLY A PROCESS WHICH CAN G ET THE IMPREMATUR OF THIS COURT AS IT SUGGESTS THAT THE DECISION HAS BEE N TAKEN IN A MECHANICAL MANNER. EVEN IF THE REASONING SET OUT BY THE ITO WA S TO BE AGREED UPON, THE LEAST, WHICH IS EXPECTED, IS THAT AN APPROPRIAT E ENDORSEMENT IS MADE IN THIS BEHALF SETTING OUT BRIEF REASONS. REASONS ARE THE LINK BETWEEN THE MATERIAL PLACED ON RECORD AND THE CONCLUSION REACHE D BY AN AUTHORITY IN RESPECT OF AN ISSUE, SINCE THEY HELP IN DISCERNING THE MANNER IN WHICH CONCLUSION IS REACHED BY THE CONCERNED AUTHORITY. O UR OPINION IS FORTIFIED ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 38 BY THE DECISION OF THE APEX COURT IN UNION OF INDIA V. M.L CAPOOR AIR 1974 SC 87 WHEREIN IT WAS OBSERVED AS UNDER :- '27. ... WE FIND CONSIDERABLE FORCE IN THE SUBMISSI ON MADE ON BEHALF OF THE RESPONDENTS THAT THE 'RUBBER-STAMP' REASON GIVEN MECHANICALLY FOR TH E SUPERSESSION OF EACH OFFICER DOES NOT AMOUNT TO 'RE ASONS FOR THE PROPOSED SUPERSESSION' . THE MOST THAT COULD BE SAID FOR THE STOCK REASON IS THAT IT IS A GENERAL DESCRIPTION OF THE PROCESS ADOPTED IN ARR IVING AT A CONCLUSION. ... 28. ... IF THAT HAD BEEN DONE, FACTS ON SERVICE RE CORDS OF OFFICERS CONSIDERED BY THE SELECTION COMMITTEE WOULD HAVE BEEN CORRELAT ED TO THE CONCLUSIONS REACHED. REASONS ARE THE LINKS BETWEEN THE MATERIALS ON WHIC H CERTAIN CONCLUSIONS ARE BASED AND THE ACTUAL CONCLUSIONS. T HEY DISCLOSE HOW THE MIND IS APPLIED TO THE SUBJECT-MATTER FOR A DECISIO N WHETHER IT IS PURELY ADMINISTRATIVE OR QUASI-JUDICIAL. THEY SHOULD REVEA L A RATIONAL NEXUS BETWEEN THE FACTS CONSIDERED AND THE CONCLUSIONS RE ACHED. ONLY IN THIS WAY CAN OPINIONS OR DECISIONS RECORDED BE SHOWN TO BE MANIFESTLY JUST AND REASONABLE. ...' [EMPHASIS SUPPLIED] THIS IS COMPLETELY ABSENT IN THE PRESENT CASE. THU S, WE FIND FORCE IN THE CONTENTION OF LEARNED COUNSEL FOR THE APPELLANT THA T THERE HAS NOT BEEN PROPER APPLICATION OF MIND BY THE BOARD AND IF A PR OPER APPLICATION HAD TAKEN PLACE, THERE WOULD HAVE BEEN NO REASON TO RE- OPEN THE CLOSED CHAPTER IN VIEW OF WHAT WE ARE SETTING OUT HEREINAFTER. SECOND & THIRD PLEAS THE HON'BLE HIGH COURT HAS HELD THAT MERELY AFFIXING A STAMP AS YES AND SIGNING UNDERNEATH REVEALS THAT THE DECISION HA S BEEN TAKEN IN MECHANICAL MANNER. THUS, AS HELD BY THE HON'BLE HIGH COURT IN THE SERIES OF DECISIONS THAT THE PROCESS OF GRANTING SANCTION U/S 151 OF THE ACT FOR ISSUING THE NOTICE U/S 148 OF THE ACT IS A SAFEGUAR D PROVISION AGAINST ANY MISUSE OF POWER BY THE ASSESSING OFFICER, THEREFORE, THERE MUST BE SOMETHING ON RECORD TO DEMONSTRATE THE APPLICATION OF MIND. THE SATISFACTION OF THE SANCTIONING AUTHORITY MAY BE IN BRIEFEST MANNER BUT IT SHALL REFLECT THE APPLICATION OF MIND OF THE AUTHOR ITY. THE REQUIREMENT OF ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 39 RECORDING THE SATISFACTION IS TO REFLECT THE MIND O F THE AUTHORITY AND THE SAME CAN BE ASCERTAINED ONLY FROM THE READING OF RE CORD AND NOT FROM THE READING OF MIND OF THE AUTHORITY. THEREFORE, IN ABSENCE OF ANY SATISFACTION REFLECT FROM THE RECORD, THE STATUTORY REQUIREMENT U/S 151 OF THE ACT IS NOT SATISFIED AND CONSEQUENTLY THE NOTIC E ISSUED U/S 148 OF THE ACT IS NOT VALID FOR WANT OF JURISDICTION. HENCE, IN VIEW OF THE PECULIAR FACTS OF THE CASE AND BINDING PRECEDENT WE HOLD THAT THE A PPROVAL GRANTED U/S 151 OF THE ACT IS MECHANICAL AND WITHOUT APPLICATION OF MIND RENDERS THE NOTICE ISSUED U/S 148 OF THE ACT AS INVALID AND UNS USTAINABLE IN LAW. ACCORDINGLY, WE QUASH THE NOTICE ISSUED U/S 148 OF T HE ACT ON THIS GROUND ALSO. 12. THE NEXT OBJECTION OF THE ASSESSEE IS REGARDING LACK OF JURISDICTION OF THE ASSESSING OFFICER U/S 124 OF THE ACT AT THE TIME OF RECORDING THE REASONS. THE LD COUNSEL FOR THE ASSESSEE HAS SUBMIT TED THAT THE REASONS FOR REOPENING OF THE ASSESSMENT WERE RECORDED BY THE ITO, WARD 3(1), JAIPUR ON 21/3/2016 WHEREAS THE JURISDICTION OF THE ASSESSEE WAS TRANSFERRED TO ITO WARD 3(1), JAIPUR FROM ITO WARD 7 (2), JAIPUR ONLY ON 30/3/2016. HE HAS REFERRED TO PAGE NO. 50 OF THE DE PARTMENTS PAPER BOOK WHEREIN THE PAN DETAILS AND JURISDICTION AS PER ITBA DATA BASE ARE GIVEN AND THUS CONTENDED THAT THE JURISDICTION FROM ITO WARD 7(2), JAIPUR WAS TRANSFERRED TO ITO WARD 3(1), JAIPUR ON 30/3/2016 AND HENCE THE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 40 ITO WARD 3(1), JAIPUR WAS NOT VESTED WITH JURISDICTION OF THE ASSESSEE AS ON 21/3/2016 WHEN THE REASONS WERE RECORDED. THE LD. C OUNSEL HAS SUBMITTED THAT PRIOR TO THE ORDER DATED 30/3/2016, THE JURISDICTION WAS VESTED WITH THE ITO WARD 7(2), JAIPUR AS EVIDENT FRO M THE INTIMATION DATED 17/2/2011ISSUED U/S 143(1) OF THE ACT AND SUB SEQUENT ORDERS PASSED U/S 154 OF THE ACT. THUS, IT IS EXPLICIT THA T NO REASONS WERE RECORDED BY THE ITO WARD 3(1), JAIPUR AFTER ASSUMIN G JURISDICTION ON 30/3/23016 AND CONSEQUENTLY PROCEEDINGS U/S 148 OF THE ACT ARE EX FACIE BAD IN LAW AND ILLEGAL. THE REASONS DATED 21/3/2016 ARE NOT VALID REASONS WHEN THE ITO WARD 3(1), JAIPUR WAS NOT THE ASSESSING O FFICER OF THE ASSESSEE ON THE SAID DATE, CONSEQUENTLY THE PROCEED INGS INITIATED U/S 147/148 OF THE ACT ARE ILLEGAL AND NULLITY. 13. ON THE OTHER HAND, THE LD. CIT-DR HAS SUBMITTED THAT THE DETAILS AS REFERRED BY THE LD. COUNSEL FOR THE ASSESSEE IN THE DATABASE ARE NOT UPDATED DETAILS AS THERE ARE ORDERS PASSED U/S 127 OF THE ACT IN RESPECT OF THE TRANSFER OF JURISDICTION FROM ITO WARD 7(2), JAIPUR TO ITO WARD 3(1), JAIPUR. HE HAS FILED COPIES OF ORDER DATED 06 /1/2015 PASSED U/S 127 OF THE ACT WHEREBY THE JURISDICTION OF THE ASSESSEE COMPANY WAS TRANSFERRED FROM ACIT(OSD), CIRCLE-7, JAIPUR TO ITO WARD 3(1), JAIPUR. THUS, THE ITO WARD 3(1), JAIPUR WAS HAVING A VALID JU RISDICTION AT THE TIME OF RECORDING THE REASONS ON 21/3/2016. THE LD C IT-DR HAS ALSO FILED ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 41 COPIES OF THE NOTICES ISSUED U/S 143(2) AND 142(1) OF THE ACT. THE LD. CIT-DR HAS ALSO FILED A COPY OF THE ORDER DATED 04/ 10/2016 PASSED U/S 127 OF THE ACT WHEREBY THE JURISDICTION OF THE ASSE SSEE WAS AGAIN TRANSFERRED FROM ITO WARD 3 TO ACIT CIRCLE-2, JAIPUR WHO HAS FINALLY COMPLETED THE ASSESSMENT. THUS, THE LD CIT-DR HAS SU BMITTED THAT THERE IS NO AMBIGUITY AS FAR AS THE JURISDICTION OF ASSES SEE WAS VESTED WITH ITO WARD 3(1), JAIPUR AT THE TIME OF RECORDING THE REAS ONS ON 21/3/2016. 13.1 IN REBUTTAL, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ORDERS REFERRED AND FILED BY THE LD. CIT-DR REGARDI NG TRANSFER OF THE JURISDICTION WERE NEVER SERVED ON THE ASSESSEE AND I T WAS ALSO NOT PART OF THE INCOME TAX BUSINESS APPLICATION DATA BASE (ITBA) THUS, THESE ARE NONEST ORDER WHEN THE SAME WERE NOT COMMUNICATED TO THE ASSESSEE. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THOUGH AS PER ITBA DATABASE, THE JURISDICTION OF THE ASSESSEE WAS SHOWN AS TRANSFERRED FROM ITO WARD 7(2), JAIPUR TO ITO WARD 3(1), JAIPUR ON 30/3/2016 HOWEVER, THE LD CIT-D R HAS FILED COPIES OF ORDER DATED 06/01/2015 ALONGWITH LETTER OF THE AS SESSING OFFICER WHEREBY THE JURISDICTION OF THE ASSESSEE WAS TRANSFER RED FROM ITO WARD 7(2), JAIPUR TO ITO WARD 3(1), JAIPUR WITH IMMEDIATE EFFECT. THUS, IT IS CLEAR THAT AN ORDER PASSED U/S 127 OF THE ACT ON 06 /01/2015 WAS VERY MUCH INEXISTENCE TRANSFERRING THE JURISDICTION OF T HE ASSESSEE FROM ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 42 ACIT(OSD), CIRCLE-7, JAIPUR TO ITO WARD 3(1), JAIPUR, THOUGH, THE SAME WAS NOT UPDATED AND REFLECTED IN THE ITBA DATABASE M AINTAINED BY THE DEPARTMENT. IT IS NOTHING BUT NON-UPDATING THE INFO RMATION AND DATA IN THE ITBA WEBSITE OF THE DEPARTMENT. THERE IS ANOTHER DISCREPANCY IN THE RECORD ABOUT THE ORDER PASSED U/S 127 OF THE ACT DA TED 04/10/2016 WHICH IS SHOWN IN THE ITBA DATABASE AS THE DATE OF TRANSFE R ON 17/10/2016. THEREFORE, THE INFORMATION AVAILABLE ON ITBA DATABASE IS NOT MATCHING WITH THE PHYSICAL ORDERS ON RECORD. HOWEVER, ONCE THE PHYSICAL ORDERS ARE AVAILABLE ON THE RECORD THEN THE NON-AVAILABILITY O F SAME ON THE ITBA DATABASE WOULD NOT CHANGE THE FACT OF ORDER PASSED U /S 127 OF THE ACT. ACCORDINGLY, WE DO NOT FIND ANY SUBSTANCE OR MERIT O N THIS OBJECTION OF THE ASSESSEE AND THE SAME IS DISMISSED. 15. GROUND NO. 2 OF THE ASSESSEES APPEAL IS REGARD ING THE DISALLOWANCE OF SHORT TERM CAPITAL LOSS ON TRANSFER OF SHARE OF M/S HH INTERIOR AND AUTO COMPONENT PVT. LTD.. AS PER THE RESOLUTION PASSED I N THE BOARDS MEETING DATED 27/2/2009 IT WAS DECIDED THAT THE ASSESSEE WAS SUBSCRIBED TO 4,40,000 EQUITY SHARES OF M/S HH INTERIOR AND AUTO COMPONENT PVT. LTD. AT RS. 900 PER SHARE AGGREGATING TOTAL INVESTMENT O F RS. 39.60 CRORES. THESE SHARES WERE OFFERED ALONGWITH RIGHT TO SUBSCRIBE 14% SECURED DEBENTURE OF RS. 100 EACH AT A DISCOUNTED PRICE OF RS. 10 EACH AND SUCH RIGHT WAS EXERCISABLE AFTER EXPIRY OF TWO YEARS FROM THE DATE OF FULL ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 43 PAYMENT TOWARDS SUBSCRIPTION OF SHARES. THE ASSESSEE PAID 50% OF THE ISSUE PRICE OF THESE SHARES AT THE TIME OF ALLOTMEN T AND ALSO THE FIRST CALL MONEY TOTAL AMOUNTING TO RS. 29.70 CRORES. THE PAYME NT WAS MADE UP TO 15/3/2009 AS REFLECTED IN THE BANK STATEMENT AS WELL AS LEDGER ACCOUNT OF INVESTMENT IN SHARES. SUBSEQUENTLY ON 23/3/2009 IN THE BOARDS MEETING OF THE ASSESSEE IT WAS DECIDED THAT THE SHARES OF M /S HH INTERIOR AND AUTO COMPONENT PVT. LTD. TO BE TRANSFERRED TO THE G ROUP COMPANY M/S SHARASH FINANCE & INVESTMENT COMPANY PVT. LTD. DUE TO FINANCIAL DIFFICULTIES. ACCORDINGLY THE SHARES WERE STATED TO HAVE BEEN TRANSFERRED AS PER THE AGREEMENT BETWEEN THE ASSESSEE AND M/S SH ARASH FINANCE & INVESTMENT COMPANY PVT. LTD. IN THE PROCESS OF TRAN SFER, CERTAIN CORRESPONDENCES AND OTHER DOCUMENTS WERE ALSO EXECUT ED BETWEEN THE PARTIES SUCH AS REQUEST LETTER FOR TRANSFER OF SHAR ES IN FAVOUR OF M/S SHARASH FINANCE & INVESTMENT COMPANY PVT. LTD.. IND EMNITY BOND WAS ALSO EXECUTED FOR TRANSFER OF SHARES BY M/S SHARASH FINANCE & INVESTMENT COMPANY PVT. LTD. AND CONSEQUENTLY THE TIME PERIOD FOR SUBSCRIBING THE DEBENTURES WAS ALSO EXTENDED BY M/S HH INTERIOR AND AUTO COMPONENT PVT. LTD. UP TO 15/4/2017 AND THEREAFTER UP TO 15/4 /2020. FINALLY THE ASSESSEE SUBSCRIBED DEBENTURES ON 20/12/2017 AND PA ID A SUM OF RS. 4.40 CRORES. IN THE RETURN OF INCOME, THE ASSESSEE DECLARED SHORT TERM CAPITAL LOSS ON SALE OF SHARES OF M/S HH INTERIOR A ND AUTO COMPONENT PVT. ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 44 LTD. OF RS. 29.70 CRORES. DURING THE ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER PROPOSED TO DISALLOW THE SHORT TER M CAPITAL LOSS ON SALE OF SHARES WHICH WAS SET OFF AGAINST THE INCOME FROM O THER SOURCES. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE SUBM ITTED THAT THIS WAS NOT FORFEITURE OF SHARE APPLICABLE MONEY RATHER THE RE IS SHORT TERM CAPITAL LOSS DUE TO TRANSFER OF SHARES. THE ASSESSEE CONTEND ED THAT IT IS A CASE OF TRANSFER OF EQUITY SHARES HELD BY THE ASSESSEE OF M /S HH INTERIOR AND AUTO COMPONENT PVT. LTD. TO M/S SHARASH FINANCE & I NVESTMENT COMPANY PVT. LTD. WHICH HAS RESULTED SHORT TERM CAPITAL LOSS . THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE SHORT TERM CAPITAL LOSS BY HOLDING THAT THE ALLEGED TRANSACTION OF TRANSFER OF SHARE IS NOTHING BUT A SHAM TRANSACTION. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE TRANSAC TION IS BETWEEN RELATED PARTIES AND NOT AT ARMS LENGTH SO AS TO CR EATE FICTITIOUS LOSS IN THE HANDS OF ASSESSEE COMPANY TO BE SET OFF AGAINST THE PROFIT FROM SALE OF SHARES AND OTHER INCOMES. HENCE, AS PER THE ASSESSI NG OFFICER, IT WAS AN ATTEMPT TO AVOID TAX LIABILITY. 16. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESS ING OFFICER BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED. 17. BEFORE US, THE LD COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE FINDING OF THE ASSESSING OFFICER AND THE LD. CIT(A) IS BASED ON CONJECTURES ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 45 AND SURMISES AND NOT ON FACT BASIS. THE INVESTMENT IN THE SHARES OF M/S HH INTERIOR AND AUTO COMPONENT PVT. LTD. WAS DULY RE CORDED IN THE BOOKS OF ACCOUNT AND WAS ALSO ACCEPTED BY THE ASSESSING OF FICER. THE TERMS OF ALLOTMENT OF SHARES CLEARLY SPELLED OUT THAT THE AS SESSEE HAD SUBSCRIBED 4,40,000 SHARES @ RS. 900 PER SHARE TOTAL AMOUNTING TO RS. 39.60 CRORES OUT OF WHICH RS. 29.70 CRORES STOOD REMITTED BY THE ASSESSEE. LD. COUNSEL HAS EXPLAINED THAT THE ASSESSEE PAID CALL MONEY OF RS. 19.80 CRORES ON APPLICATION MONEY BEING 50% OF THE SUBSCRIPTION PRI CE AND A SUM OF RS. 9.90 CRORES AS FIRST CALL MONEY. THE PAYMENT OF TOTA L AMOUNT TO RS. 29.70 CRORES IS EVIDENT FROM THE RECORD AS WELL AS OTHER D OCUMENTARY EVIDENCE SUBMITTED BY THE ASSESSEE BEFORE THE AUTHORITIES BE LOW. HOWEVER, ON ACCOUNT OF CASH CRUNCH IT WAS FOUND EXPEDIENT TO TRA NSFER THESE SHARES OF M/S HH INTERIOR AND AUTO COMPONENT PVT. LTD. TO ONE OF THE GROUP CONCERN M/S SHARASH FINANCE & INVESTMENT COMPANY PV T. LTD.. THE LD. COUNSEL HAS REFERRED TO THE VARIOUS DOCUMENTS PRODU CED BEFORE THE ASSESSING OFFICER WHICH INCLUDES THE COPY OF MINUTES OF MEETINGS OF BOARD OF DIRECTORS OF ASSESSEE DATED 23/3/2009, THE COPY OF SHARE TRANSFER AGREEMENT BETWEEN THE ASSESSEE AND M/S SHARASH FINAN CE & INVESTMENT COMPANY PVT. LTD. DATED 23/3/2009, COPY OF INDEMNIT Y BOND DATED 24/3/2009 GIVEN BY M/S SHARASH FINANCE & INVESTMENT COMPANY PVT. LTD. FOR TRANSFER OF SHARES. COPY OF LETTER DATED 23/3/2 009 BY M/S SHARASH ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 46 FINANCE & INVESTMENT COMPANY PVT. LTD. FOR REQUEST OF TRANSFER OF SHARES, COPY OF RETURN OF INCOME AND COPY OF ORDER PASSED U /S 153A READ WITH SECTION 143(3) OF THE ACT IN THE CASE OF M/S SHARAS H FINANCE & INVESTMENT COMPANY PVT. LTD., COPY OF ORDER OF THE LD. CIT(A) IN CASE OF M/S SHARASH FINANCE & INVESTMENT COMPANY PVT. LTD. WHEREIN THE ALLOTMENT OF SHARES IN FAVOUR OF M/S SHARASH FINANC E & INVESTMENT COMPANY PVT. LTD. WERE NOT DISPUTED BY THE ASSESSING OFFICER OR BY THE LD. CIT(A). THE LD. COUNSEL HAS FURTHER SUBMITTED THA T THE COMPANIES TO THE TRANSITIONS ARE INDEPENDENT LEGAL ENTITIES AND THE TRANSACTION BETWEEN THE COMPANIES ARE NOT BARRED BY ANY LAW. THE LOSS INC URRED BY THE ASSESSEE IS A LEGITIMATE AND REAL TRANSACTION DULY SUPPORTED BY THE DOCUMENTARY EVIDENCE AS WELL AS RECORDED IN THE REGU LAR BOOKS OF ACCOUNT OF THE ASSESSEE AS WELL AS THE OTHER COMPANY CONNECT ED TO THE TRANSACTION. THE BOOKS OF ACCOUNT ARE DULY AUDITED WI THOUT ANY QUALIFYING REMARKS BY THE AUDITORS ON THESE TRANSACTIONS. THE L D. COUNSEL CONTENDED THAT MERELY BECAUSE THE PARTIES TO THE TRANSACTIONS ARE THE GROUP COMPANIES CANNOT BE A REASON OR GROUND FOR HOLDING THE TRANSACTION AS SHAM WHEN THERE IS NO MATERIAL OR FACT TO SHOW THAT T HE TRANSACTION OF TRANSFER OF SHARES AND LOSS ARISING FROM THE SAID T RANSFER IS NOT A REAL OR GENUINE. ALL THE GROUP ENTITIES ARE ASSESSED TO TAX AND THE TRANSACTION OF PURCHASE OF SHARES BY M/S SHARASH FINANCE & INVESTM ENT COMPANY PVT. ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 47 LTD. AS WELL AS PAYMENT OF THE FINAL CALL MONEY OF R S. 9.90 CRORES BY THE SAID COMPANY WAS NOT DISPUTED BY THE ASSESSING OFFIC ER WHILE PASSING THE ASSESSMENT ORDER U/S 143(3) OF THE ACT. HE HAS REFE RRED TO THE ASSESSMENT ORDER DATED 28/3/2014 PASSED U/S 153A RE AD WITH SECTION 143(3) OF THE ACT IN THE CASE OF M/S SHARASH FINANC E & INVESTMENT COMPANY PVT. LTD.. THE SHARES OF M/S HH INTERIOR AND AUTO COMPONENT PVT. LTD. WERE SUBSCRIBED BY THE SEVEN GROUP COMPANI ES INCLUDING THE ASSESSEE AT THE SAME RATE OF PREMIUM. THE INVESTMEN T MADE BY ALL OTHER GROUP COMPANIES HAS BEEN DULY RECORDED AND ACCEPTED IN THEIR BOOKS OF ACCOUNT AND ALSO ASSESSED TO TAX BY THE DEPARTMENT WHEN THERE IS NO DISPUTE REGARDING THE SUBSCRIPTION OF THE SHARES BY THE OTHER GROUP COMPANIES THEN THE SAID INVESTMENT MADE BY THE ASSE SSEE ON THE SIMILAR TERMS CANNOT BE DOUBTED. THUS, ONCE THE FACT OF ALLO TMENT OF SHARES IS NOT IN DISPUTE THEN THE FACT OF TRANSFER OF SHARES CANNOT BE DISPUTED WHEN ALL RELEVANT EVIDENCE AS WELL AS FINAL CALL MONEY OF RS. 9.90 CRORES PAID BY M/S SHARASH FINANCE & INVESTMENT COMPANY PVT. LTD. WERE PRODUCED BEFORE THE ASSESSING OFFICER. THE LD. COUNSEL HAS FU RTHER SUBMITTED THAT SHARE CERTIFICATES WERE ALSO ISSUED IN FAVOUR OF M/S SHARASH FINANCE & INVESTMENT COMPANY PVT. LTD. HENCE THE TRANSFER OF SHARES BY THE ASSESSEE AND SUBSEQUENTLY THE FINAL ALLOTMENT IN FA VOUR OF M/S SHARASH FINANCE & INVESTMENT COMPANY PVT. LTD. AFTER THE FI NAL CALL MONEY ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 48 PAYMENT OF RS. 9.90 CRORES. WAS DULY ESTABLISHED FR OM THE RECORD. HENCE, THE COUNSEL HAS SUBMITTED THAT WHEN THE ASSESSEE PRO DUCED ALL THE RELEVANT SUPPORTING EVIDENCE TO ESTABLISH THE FACT OF SUBSCRIPTION TO THE SHARES OF M/S HH INTERIOR AND AUTO COMPONENT PVT. L TD. AND SUBSEQUENT TRANSFER OF THE SHARES TO M/S SHARASH FINANCE & INV ESTMENT COMPANY PVT. LTD. THEN TREATING THE SAID TRANSACTION AS BOGUS OR SHARE IS WITHOUT ANY BASIS BUT ONLY A PROPOSED ASSUMPTION WHICH IS CONTR ARY TO THE FACTS ON RECORD. THE ASSESSING OFFICER PRESUMED THE TRANSACTI ON AS FORFEITURE OF SHARE APPLICATION MONEY WHEREAS IT WAS A TRANSFER OF SHARES BY THE ASSESSEE WHICH HAS RESULTED SHORT TERM CAPITAL LOSS. IN SUPPORT OF HIS CONTENTION, THE LD COUNSEL HAS RELIED UPON THE DECI SION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. GRACE COLLIS 2 48 ITR 232 AND SUBMITTED THAT THE HON'BLE SUPREME COURT HAS HELD T HAT THE DEFINITION TRANSFER AS PER SECTION 2(47) OF THE ACT CONTEMPL ATES THE EXTINGUISHMENT OF RIGHTS IN A CAPITAL ASSET DISTINCT AND INDEPENDE NT OF SUCH EXTINGUISHMENT CONSEQUENT UPON THE TRANSFER THEREOF . THUS, ONCE THE ASSESSEE HAS TRANSFERRED ITS RIGHT IN SHARES OF M/S HH INTERIOR AND AUTO COMPONENT PVT. LTD. THEN IT IS A TRANSFER OF CAPITA L ASSET AS PER DEFINITION U/S 2(24) OF THE ACT. HE HAS RELIED UPON THE DECISI ON OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF DCIT VS. BPL SANYO FINANCE LTD. 312 ITR 63 (KAR) AND SUBMITTED THAT THE RELINQUISHMENT OF ASSE T OR EXTINGUISHMENT OF ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 49 ANY RIGHT THEREIN FALL IN THE DEFINITION OF TRANSFE R U/S 2(47) OF THE ACT. IN THE SAID CASE, THE FORFEITURE OF SHARE APPLICATION MONEY WAS HELD TO BE RELINQUISHMENT OF ASSET OR EXTINGUISHMENT OF RIGHT THEREIN. HE HAS RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT DATED 20/01/2010 IN THE CASE OF CIT VS. SHRI CHAND RATAN BAGRI IN ITA NO. 31 /2010. THE LD COUNSEL HAS ALSO RELIED UPON THE FOLLOWING DECISIONS : (I) SHREE MINAKSHI MILLS LTD. VS. CIT 31 ITR 28 (SC) (II) UNION OF INDIA VS AAZADI BACHAO ANDOLAN 263 I TR 706 (SC) THUS, THE LD COUNSEL HAS SUBMITTED THAT THE TRANSACT ION IS TO BE TESTED AS PER THE PROVISIONS OF SECTION 45 OF THE ACT AND NOT U/S 28 TO 41 OF THE ACT. THEREFORE, THE ASPECT OF COMMERCIAL SUBSTANCE I S NOT RELEVANT FOR THE TRANSACTION OF TRANSFER OF CAPITAL ASSET. NO INCRIM INATING MATERIAL OR FACT WAS FOUND OR DETECTED DURING THE SURVEY U/S 133A OF THE ACT. ALL THE FACTS AS NARRATED IN THE REPORT OF THE DDIT (INV.), FARIDA BAD ARE ALREADY ON THE RECORD AND IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE STATEMENT RECORDED DURING THE SURVEY HAS NOT EVIDENTIARY VALU E WITHOUT CORROBORATING EVIDENCE. IN SUPPORT OF HIS CONTENTIO N, HE HAS RELIED UPON THE FOLLOWING DECISIONS: (I) PAUL MATHEWS & SONS VS. COMMISSIONER OF INCOME-TAX 263 ITR 101 (KER) ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 50 (II) COMMISSIONER OF INCOME-TAX VS. S. KHADER KHAN SON 300 ITR 157 (MAD). (III) COMMISSIONER OF INCOME-TAX, SALEM VS. S. KHADER KHAN SON 352 ITR 480 (SC). THE LD. COUNSEL HAS REFERRED TO THE SERIES OF DECISI ONS ON THIS POINT THAT THE STATEMENT RECORDED DURING THE SURVEY HAS NOT EV IDENTIARY VALUE IN ABSENCE OF ANY CORROBORATING/DOCUMENTARY EVIDENCE. HE HAS ALSO REFERRED TO THE INSTRUCTION FILE NO. 286/2003 DATED 10/03/20 03 AS WELL AS THE INSTRUCTION NO. FILE NO. 286/98/2013 DATED 18/03/20 14 ISSUED BY THE CBDT AND SUBMITTED THAT THE CBDT HAS REPEATEDLY SUSPE CTED THE TAXING AUTHORITY THAT INSTEAD OF OBTAINING THE STATEMENT U NDER HANDS OF COERCION DURING THE SEARCH OR SURVEY MORE EMPHASIS BE GIVEN IN COLLECTING THE DOCUMENTARY EVIDENCE. NO JUSTIFICATION FOR THE ASSE SSING OFFICER TO RELY UPON EITHER ALLEGED ADMISSION OF THE DIRECTOR DURIN G THE COURSE OF SURVEY PROCEEDINGS SO AS TO DENY THE LEGITIMATE CLAIM. THE LD. COUNSEL HAS SUBMITTED THAT AS SOON AS SHARES WERE ALLOTTED TO TH E ASSESSEE EVEN THOUGH THEY WERE PARTLY PAID, THESE WERE OWNED BY THE ASSESSEE AND THUS BECAME CAPITAL ASSET. THE AMOUNT PAID BY THE A SSESSEE AGAINST THE ALLOTMENT OF SHARES WAS NOT FORFEITED BY THE ISSUING COMPANY BUT PARTLY PAID SHARES WERE TRANSFERRED BY THE ASSESSEE TO M/S SHARASH FINANCE & INVESTMENT COMPANY PVT. LTD. WITHOUT ANY CONSIDERATI ON RESULTING LOSS OF RS. 29.70 CRORES AS SHORT TERM CAPITAL LOSS. THE RIG HT TO SUBSCRIBE THE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 51 DEBENTURE AT A DISCOUNTED PRICE IS A VALUABLE RIGHT AND THE VALUE OF RIGHT TO SUBSCRIBE IN THE DEBENTURES AT DISCOUNTED PRICE IS INCLUDED IN THE PRICE OF THE SHARES OF M/S HH INTERIOR AND AUTO COMPONENT PVT. LTD. THE ASSESSEE TRANSFERRED THE SHARES ALONE AND RETAINED THE RIGHT TO SUBSCRIBE THE DEBENTURES ISSUED AT DISCOUNTED PRICE, THE INCO ME TAX AUTHORITIES CANNOT QUESTION THE JUSTIFICATION OF THE DECISION T AKEN BY THE ASSESSEE COMPANY. THE PRUDENCY AND BUSINESS DECISION CAN ALON E BE TAKEN BY A BUSINESSMAN AND THE ASSESSING OFFICER CANNOT STEP I NTO THE SHOES OF A BUSINESS MAN TO JUDGE THE PRUDENCY OF THE DECISION. IT IS PREROGATIVE OF THE BUSINESSMAN TO ORGANIZE ITS AFFAIRS IN A MANNER BEST SUITED TO IT AND THE REVENUE AUTHORITY CANNOT STEP INTO THE SHOES OF THE BUSINESSMAN. THE REVENUE CANNOT QUESTION THE TRANSACTION ON THE GROU ND THAT THE SAME WAS NOT PRUDENT AND CONSEQUENTLY HELD AS SHAM. THE LD. C OUNSEL HAS SUPPORTED HIS CONTENTION WITH THE FOLLOWING DECISIONS : (I) CIT VS. MALAYALAM PLANTATIONS LTD. 53 ITR 140 ( SC) (II) CIT VS. WALCHAND & CO. 65 ITR 381 (SC). 18. ON THE OTHER HAND, THE LD CIT-DR HAS SUBMITTED THAT THE LOSS CLAIMED BY THE ASSESSEE IS NOT PERMISSIBLE AS PER T HE PROVISIONS OF THE ACT AS THE BASIC NATURE OF THE TRANSACTION DOES NOT IMP LY AS TRANSFER OF CAPITAL ASSET OR SHORT TERM CAPITAL LOSS. IN FACT, IT IS FO RFEITURE OF THE MONEY PAID BY THE ASSESSEE FOR ALLOTMENT OF SHARES AS THE ASSE SSEE CLAIMED TO HAVE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 52 TRANSFERRED THESE SHARES WITHOUT ANY CONSIDERATION T O SISTER CONCERNS. DURING THE SURVEY PROCEEDINGS AS WELL AS IN POST SUR VEY INVESTIGATIONS OF M/S KRISHNA MARUTI GROUP AND M/S ROLTA PVT. LTD., I T WAS FOUND THAT THE TRANSACTION OF SALE AND PURCHASE OF SHARES BETWEEN M /S HH INTERIOR AND AUTO COMPONENT PVT. LTD. AND THE ASSESSEE IS NOT A TRANSACTION BETWEEN THE TWO INDEPENDENT PARTIES. THERE IS NO DISPUTE THAT SH. ASHOK KAPUR AND HIS FAMILY MEMBERS OWNED AND HAVING CONTROLLED O VER THE GROUP COMPANIES INCLUDING M/S HH INTERIOR AND AUTO COMPON ENT PVT. LTD.. HENCE, IT IS CLEAR THAT THE SHARE APPLICATION MONEY OF RS. 20.70 CRORES GIVEN BY THE ASSESSEE TO M/S HH INTERIOR AND AUTO C OMPONENT PVT. LTD. AND CONSEQUENT FORFEITURE OF SAME IS NOT A TRANSACT ION BETWEEN THE TWO INDEPENDENT PARTIES. TWO RELATED PARTIES HAVE ENTERED INTO THIS TRANSACTION IN ORDER TO CREATE A FICTITIOUS LOSS IN THE HAND OF THE ASSESSEE. THE SAID LOSS ARTIFICIALLY GENERATED WITH A VIEW TO BE SET OFF AGAINST THE GAIN ACCORDING TO THE ASSESSEE ON ACCOUNT OF SALE O F SHARES OF M/S ADVANCE AUTOMATION & PROCESS CONTROL PVT. LTD.. THE ASSESSING OFFICER HAS CLEARLY BROUGHT OUT THE FACT THAT THERE WAS NO F INANCIAL PROBLEMS AT THE TIME WHEN THE SHARES WERE CLAIMED TO HAVE BEEN TR ANSFERRED WITHOUT ANY CONSIDERATION AS THE ASSESSEE RECEIVED HUGE FUN D OF RS. 71.36 CRORES ON SALE OF SHARES OF M/S ADVANCE AUTOMATION & PROCE SS CONTROL PVT. LTD.. THUS THE ENTIRE TRANSACTION OF PURCHASE AND SALE AND CREATING ARTIFICIAL ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 53 SHORT TERM CAPITAL LOSS WAS A PRECONCEIVED DESIGN TO AVOID TAX LIABILITY ON THE CAPITAL GAIN ARISING FROM SALE OF SHARES AS WELL AS OTHER INCOME. THE ASSESSEE INSTEAD OF TRANSFERRING THE SHARES TO THE GROUP CONCERN WITHOUT ANY CONSIDERATION WOULD HAVE REQUESTED FOR EXTENSIO N OF TIME FOR MAKING THE PAYMENT OF FINAL CALL MONEY OF RS. 9.90 CRORES AS ALL THESE COMPANIES ARE GROUP COMPANIES AND IT WAS NOT DIFFICULT FOR THE M TO GET THE EXTENSION OF TIME. EVEN OTHERWISE WHEN THE ASSESSEE WAS HOLDING 77800 BONUS SHARES OF M/S L&T LTD. WHICH COULD FETCH MUCH MORE T HAT 99 CRORES REQUIRED FOR MAKING THE PAYMENT OF FINAL CALL MONEY THEN THE DECISION FOR TRANSFERRING THE SHARES WITHOUT ANY CONSIDERATION IS A STRUCTURE TRANSACTION WITH A VIEW TO AVOID TAX. HE HAS RELIED U PON THE ORDERS OF THE AUTHORITIES BELOW. 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF SHORT TERM CAPITAL LOSS OF TRANSFER OF SHARES OF M/S HH I NTERIOR AND AUTO COMPONENT PVT. LTD. ON THE GROUND THAT THE TRANSACT ION ITSELF IS NOT GENUINE AND IT IS SHAM. THE ASSESSING OFFICER HAS GI VEN THE REASONS FOR TREATING THE TRANSACTION AS SHAM THAT THE MOTIVE TO ENTER INTO THE ALLEGED TRANSFER IS TO AVOID TAX ON CAPITAL GAIN OF RS. 65. 00 CRORES ARISING FROM SALE OF SHARES OF OTHER COMPANIES AND FURTHER THE T RANSACTION IS BETWEEN THE RELATED PARTIES, THEREFORE, NOT AT THE A RMS LENGTH. IT IS ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 54 PERTINENT TO NOTE THAT A TRANSACTION IS SAID TO BE BOGUS OR SHAM IF IT IS SHOWN ON PAPER BUT IS NOT A REAL TRANSACTION, THEREF ORE, WHAT IS PURPORTED OR APPARENT IS NOT REAL BUT IT HAS BEEN GIVEN A COL OUR OF TRANSACTION. IN OTHER WORDS A TRANSACTION IS ARRANGED OR DESIGNED IN SUCH A WAY THAT IT IS NOT AN ACTUAL TRANSACTION OF TRANSFER OF ASSET OR G OODS AND THE CONSIDERATION HAS NOT CHANGED HANDS BUT IT IS GIVEN ONLY A COLOUR OF SUCH TRANSACTION. ACCORDINGLY, A COLOURABLE DEVICE CANNO T BE ALLOWED AS PART OF TAX PLANNING. IT IS SETTLED PROPOSITION OF LAW THAT EACH AND EVERY TAX PLANNING IS NOT ILLEGAL OR ILLEGITIMATE OR IMPERMIS SIBLE. TAX PLANNING MAY BE LEGITIMATE PROVIDED IT IS WITHIN THE FRAMEWORK OF LAW, HOWEVER, COLOURABLE DEVICE CANNOT BE A PART OF TAX PLANNING AND THEREFORE NOT PERMISSIBLE UNDER THE LAW. EVEN AVOIDING OF TAX LIAB ILITY BY PERMISSIBLE TAX PLANNING OR SO ARRANGING THE COMMERCIAL AFFAIRS THA T CHANGE OF TAX IS REDUCED IS NOT PROHIBITED AND A TAX PAYER MAY RESOR T TO SUCH PLANNING TO MINIMIZE THE TAX LIABILITY. THE ASSESSEE IS ENTITLED TO ARRANGE HIS AFFAIRS AS TO AVOID TAXATION BUT THE ARRANGEMENT MUST BE REAL AND GENUINE AND NOT SHAM OR MAKE BELIEVE. THERE IS A DISTINCTION BETWEEN THE LEGITIMATE AVOIDANCE AND TAX EVASION AS HELD BY THE HONBLE GU JARAT HIGH COURT IN THE CASE OF SHAKARLAL BALABHAI VS. ITO 100 ITR 97 (G UJ), THEREFORE, THE GENUINE ARRANGEMENT WOULD BE PERMISSIBLE AND MAY RES ULT IN AN ASSESSEE ESCAPING TAX. THESE ARE WELL SETTLED LEGAL PROPOSITIO NS AS CONSIDERED FROM ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 55 TIME TO TIME BY THE HON'BLE HIGH COURTS AS WELL AS T HE HON'BLE SUPREME COURT IN THE VARIOUS DECISIONS INCLUDING THE DECISI ON IN THE CASE OF MC. DOWELL & CO. LTD. VS. COMMERCIAL TAX OFFICER 154 ITR 148 (SC) AS WELL AS IN THE CASE OF UNION OF INDIA VS. AAZADI BACHAO AND OLAN (SUPRA). THUS, THE LEGITIMATE TAX PLANNING WITHIN THE FRAMEWORK OF LAW IS PERMISSIBLE. IF WE ANALYSE THE PRESENT MATTER IN THE LIGHT OF THE SE TTLED LEGAL PROPOSITIONS, WE FIND THAT THE TRANSFER OF SHARES BY THE ASSESSEE WAS ACTUAL AND REAL TRANSACTION AS EVIDENT FROM THE REL EVANT RECORD AND SEQUENCE OF EVENTS TAKEN PLACE COMPLETING THE CHAIN OF SEQUENCES REQUIRED FOR A GENUINE TRANSACTION. THERE IS NO DENI AL THAT THE ASSESSEE SUBSCRIBED 4,40,000 EQUITY SHARES OF M/S HH INTERIO R AND AUTO COMPONENT PVT. LTD. AND PAID A TOTAL AMOUNT OF RS. 29.70 CRORES EXCEPT THE LAST CALL MONEY PAYMENT OF RS. 9.90 CRORES AND AT THIS STAGE, THE ASSESSEE DECIDED TO TRANSFER THOSE SHARES TO M/S SH ARASH FINANCE & INVESTMENT COMPANY PVT. LTD. WHICH IS A GROUP COMPAN Y WITHOUT ANY CONSIDERATION IN FACT A TOKEN CONSIDERATION OF RS. ONE. IT IS PERTINENT TO NOTE THAT THE SUBSCRIPTION OF SHARES BY THE ASSESSE E OF M/S HH INTERIOR AND AUTO COMPONENT PVT. LTD. WAS NOT A SIMPLE CASE O F ALLOTMENT OF SHARES BUT THIS SUBSCRIPTION ALSO CARRIED ANOTHER R IGHT OF SUBSCRIPTION OF THE EQUAL NUMBER OF DEBENTURES OF FACE VALUE OF RS. 100 AT A DISCOUNTED PRICE OF RS. 10 AND CARRIED INTEREST @ 14% PER ANNU M. THEREFORE, THE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 56 PREMIUM PAID AGAINST THE ISSUE OF SHARES IN FACT WAS RECEIVED BACK IN THE SHAPE OF DISCOUNT IN SUBSCRIPTION OF THE DEBENTURES OF THE SAID COMPANY. HENCE, THE ASSESSEE EVEN IF TRANSFERRED THE SHARES WITHOUT ANY CONSIDERATION AND INCURRED LOSS OF RS. 29.7 CRORES IN CONSEQUENCE OF THE SAID TRANSFER THE RIGHT TO SUBSCRIBE THESE DEBENTUR ES WAS RETAINED BY THE ASSESSEE AND NOT TRANSFERRED ALONGWITH SHARES. THE AS SESSING OFFICER AS WELL AS THE LD. CIT(A) HAS NOT CONSIDERED THESE TRANS ACTIONS FROM THE PROSPECTIVE OF THE RIGHT ACQUIRED BY THE ASSESSEE T O SUBSCRIBE THE DEBENTURES AT DISCOUNTED RATE AND THE BENEFIT ON A CCOUNT OF DISCOUNT IN SUBSCRIPTION OF THE DEBENTURE OFFSET THE PREMIUM PA ID ON THE SUBSCRIPTION OF EQUITY SHARES. THE ASSESSING OFFICER HAS NOT DISP UTED THE DOCUMENTS IN RESPECT OF THE SUBSCRIPTION OF THE SHARES, HOWEVER, THE OBJECTION OF THE ASSESSING OFFICER IS THE MOTIVE OF THE ASSESSEE TO TRANSFER THE SHARES SO AS TO CREATE THE SHORT TERM CAPITAL LOSS TO BE SET OFF AGAINST THE CAPITAL GAIN ARISING FROM THE TRANSFER OF SHARES AS WELL AS OTHER INCOME. WE FIND THAT AS PER THE RECORD PRODUCED BY THE ASSESSEE, TH E CLAIM OF TRANSFER OF SHARES BY THE ASSESSEE TO M/S SHARASH FINANCE & INV ESTMENT COMPANY PVT. LTD. HAS BEEN ESTABLISHED WITHOUT ANY IOTA OF D OUBT. THE ASSESSEE PRODUCED COPY OF MINUTES OF MEETINGS OF THE BOARD WH EREIN A RESOLUTION WAS PASSED FOR TRANSFER OF SHARES. AN AGREEMENT BETWE EN THE ASSESSEE AND M/S SHARASH FINANCE & INVESTMENT COMPANY PVT. L TD. WHEREBY THE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 57 SHARES IN QUESTION WERE TRANSFERRED BY THE ASSESSEE IN FAVOUR OF THE SAID COMPANY. THE INDEMNITY BOND WAS ALSO EXECUTED BY M/S SHARASH FINANCE & INVESTMENT COMPANY PVT. LTD. TO PAY THE FINAL CAL L MONEY DUE AGAINST THE SHARES SO THAT THE RIGHT TO SUBSCRIBE THE DEBEN TURES BY THE ASSESSEE WOULD NOT BE AFFECTED DUE TO DEFAULT IN PAYMENT OF C ALL MONEY. IT IS NOT IN DISPUTE THAT THE FINAL CALL MONEY OF RS. 9.9 CRORES WAS PAID BY M/S SHARASH FINANCE & INVESTMENT COMPANY PVT. LTD. AND THE SHARES WERE FINALLY TRANSFERRED IN FAVOUR OF THE SAID COMPANY. THE ASSESSING OFFICER HAS NOT BROUGHT ANYTHING ON RECORD OR HAS GIVEN A F INDING THAT THE PAYMENT OF FINAL CALL MONEY WAS NOT ACTUALLY MADE BY M/S SHARASH FINANCE & INVESTMENT COMPANY PVT. LTD. BUT IT WAS MA DE BY THE ASSESSEE. THEREFORE, TO ARRIVE AT A CONCLUSION THAT THE TRANSACTION IS NOT GENUINE BUT ONLY SHOWN ON THE PAPER, THE ASSESSING O FFICER OUGHT TO HAVE ESTABLISHED THE FACT THAT IT WAS NOT A REAL TRANSFER BUT ONLY A COLOUR IS GIVEN AS A TRANSFER OF SHARES. THE OTHER FACT OF THE TRANSFER OF SHARES BEING AGREEMENT BETWEEN THE PARTIES, THE ISSUE OF SH ARE CERTIFICATE IN THE NAME OF M/S SHARASH FINANCE & INVESTMENT COMPANY PV T. LTD. ARE DULY ESTABLISHED FROM THE RECORD. THE ASSESSING OFFICER WI THOUT GIVING ANY FINDING THAT THE DOCUMENTS AND SHARE CERTIFICATES A RE BOGUS HAS HELD THAT THE TRANSACTION IS BOGUS ON THE GROUND THAT THE MOT IVE OF TRANSACTION BETWEEN THE RELATED PARITIES IS TO SET OFF THE ARTIF ICIAL CAPITAL LOSS AGAINST ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 58 THE CAPITAL GAIN AND THEREBY AVOID THE TAX LIABILIT Y BY THE ASSESSEE ON THE CAPITAL GAIN. EVEN IF IT IS ACCEPTED FOR THE SAKE O F ARGUMENT THAT THE MOTIVE OF THE TRANSFER WAS TO REDUCE OR AVOID THE TA X LIABILITY ON THE CAPITAL GAIN BUT IF THE SAID TRANSACTION IS REAL AN D IS PERMISSIBLE UNDER THE LAW THEN THE MERE MOTIVE WOULD NOT RENDER THE SAME AS BOGUS TRANSACTION. IN THE CASE OF DCIT VS. BPL SANYO FINAN CE LTD. (SUPRA), THE HONBLE KARNATAKA HIGH COURT WHILE CONSIDERING AN IS SUE OF CAPITAL LOSS ON FORFEITURE OF SHARE APPLICATION MONEY HAS HELD IN P ARA 7 TO 13 AS UNDER: 7. TO DECIDE THE QUESTION OF LAW AS FORMULATED HEREIN ABOVE, IT IS NECESSARY TO LOOK INTO THE DEFINITION OF TRANSFER AS APPEARIN G IN SECTION 2(47) OF THE ACT, RELEVANT PORTION THEREOF IS REPRODUCED HEREIN BELOW : '2.(47) 'TRANSFER, IN RELATION TO A CAPITAL ASSET, INCLUDES, ( I ) THE SALE, 'EXCHANGE' OR RELINQUISHMENT OF THE ASSET ; OR ( II ) THE EXTINGUISHMENT OF ANY RIGHTS THEREIN ; OR ( III ) THE COMP ULSORY ACQUISITION THEREOF UNDER ANY LAW ; OR ( IV ) IN A CASE WHERE THE ASSET IS CONVERTED BY THE OWNER THEREOF INTO, OR IS TREATED BY HIM AS, STOCK-IN-TRADE OF A BUSINESS CARRIED ON BY HIM, SUCH CONVERSION OR TREATMENT; ' 8. THE TRIBUNAL HAS CONSIDERED THE MEANING OF THE WORD 'ALLOTMENT', AS APPEARED IN THE GUIDE TO THE COMPANIES ACT, 1956. THE SAME IS REPRODUCED HEREINBELOW : 'WHAT IS TERMED 'ALLOTMENT IS GENERALLY NEITHER MOR E NOR LESS THAN THE ACCEPTANCE BY THE COMPANY OF THE OFFER TO TAKE SHAR ES. TO TAKE THE COMMON CASE, THE OFFER IS TO TAKE A CERTAIN NUMBER OF SHARES OR SUCH A LESS NUMBER AS MAY BE ALLOTTED. THAT OFFER IS ACCEPTED B Y THE ALLOTMENT EITHER OF THE TOTAL NUMBER MENTIONED IN THE OFFER OR A LES S NUMBER, TO BE TAKEN BY THE PERSON WHO MADE THE OFFER, THIS CONSTITUTES A B INDING CONTRACT TO TAKE THAT NUMBER ACCORDING TO THE OFFER AND ACCEPTANCE. TO MY MIND, THERE IS NO MAGIC WHATEVER IN THE TERM 'ALLOTMENT' AS USED I N THESE CIRCUMSTANCES. IT IS SAID THAT THE ALLOTMENT IS AN APPROPRIATION O F A SPECIFIC NUMBER OF ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 59 SHARES. AN ALLOTMENT IS AN APPROPRIATION, NOT OF SP ECIFIC SHARES, BUT OF A CERTAIN NUMBER OF SHARES.' 9. THE ABOVE PASSAGE HAS BEEN QUOTED IN THE COMMENTARY OF THE COMPANIES ACT MENTIONED HEREIN ABOVE FROM A DECISION IN FLORENCE LAND AND PUBLIC WORKS CO., IN RE [1885] 29 CH D 421 AT 426. 10. ON ACCOUNT OF THE AFORESAID FACT THAT THE BINDING C ONTRACT EXISTED BETWEEN THE ASSESSEE AND THE INVESTEE COMPANY, THE IRRESIST IBLE CONCLUSION THAT CAN BE DRAWN ON THE AFORESAID FACTS AND CIRCUMSTANCES I S THAT AS SOON AS THE ALLOTMENT IS MADE, THE ASSESSEE WOULD BE DEEMED TO HAVE ACQUIRED A RIGHT IN SUCH SHARES EVEN IF THE CALL MONIES OR THE FULL FACE VALUE OF THE SHARES HAS NOT BEEN PAID. THUS, IN A CASE WHERE ONLY SHARE APPLICATION MONEY IS PAID AND THE BALANCE IS YET TO BE PAID ON ACTUAL AL LOTMENT OF SHARES, THE HOLDER OF SUCH ALLOTMENT WOULD BE RECOGNISED AS A M EMBER OF THE INVESTEE COMPANY. THUS, IT CANNOT BE SAID THAT THE ASSESSEE HAD NOT ACQUIRED RIGHT IN SUCH SHARES ON ACCOUNT OF ITS FAILURE TO DEPOSIT THE BALANCE AMOUNT FOR ALLOTMENT OF SHARES. THE AFORESAID VIEW WOULD ATTRA CT THE PROVISIONS OF SECTION 2(47) OF THE ACT. THE EXTINGUISHMENT OF ANY RIGHTS THEREIN AS APPEARED IN SECTION 2(47) OF THE ACT, COVERS EVERY POSSIBLE TRANSACTION RESULTING IN THE DESTRUCTION, ANNIHILATION, EXTINCT ION, TERMINATION, CESSATION OR CANCELLATION, BY SATISFACTION OR OTHERWISE OF AL L OR ANY OF THE BUNDLE OF RIGHTS WHETHER QUALITATIVE OR QUANTITATIVE, WHICH T HE ASSESSEE HAS IN A CAPITAL ASSET WHETHER OR NOT SUCH AN ASSET IS CORPO REAL OR INCORPOREAL. 11. IN THE CASE ON HAND CONSEQUENT TO THE ASSESSEE'S DE FAULT IN NOT PAYING THE BALANCE OF MONEY ON ALLOTMENT, ITS RIGHT IN THE SHA RES STOOD EXTINGUISHED ON ITS FORFEITURE BY THE INVESTEE COMPANY. THE LOSS SUFFERED BY THE ASSESSEE, I.E., NON-RECOVERY OF SHARE APPLICATION M ONEY IS CONSEQUENT TO THE FORFEITURE OF ITS RIGHT IN THE SHARES AND THE S AME IS TO BE UNDERSTOOD TO BE WITHIN THE SCOPE AND AMBIT OF TRANSFER. IN THIS VIEW OF THE MATTER, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT IT WOULD AMO UNT TO SHORT-TERM CAPITAL LOSS TO THE ASSESSEE. NO OTHER POINT WAS UR GED BEFORE US. 12. WITH REGARD TO THE EXTINGUISHMENT OF ANY RIGHTS, WE MAY PROFITABLY REFER TO THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CIT V. MRS. GRACE COLLIS [2001] 248 ITR 323 . IN THE SAID CASE, IT HAS BEEN HELD AS UNDER (PAGE 329) : 'IT IS TRUE THAT THE DEFINITION OF 'TRANSFER' IN SE CTION 2(47) OF THE ACT IS AN 'INCLUSIVE' DEFINITION AND, THEREFORE, EXTENDS TO E VENTS AND TRANSACTIONS WHICH MAY NOT OTHERWISE BE 'TRANSFER' ACCORDING TO ITS ORDINARY, POPULAR AND NATURAL SENSE.' 13. FOR THE AFORESAID REASONS, WE ARE OF THE CONSIDERED OPINION THAT THE QUESTIONS POSED HAVE TO BE ANSWERED IN FAVOUR OF TH E ASSESSEE AND AGAINST THE REVENUE. THE APPEAL ACCORDINGLY STANDS DISPOSED OF. ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 60 THE HON'BLE HIGH COURT HAS ACCEPTED THE LOSS ON ACCO UNT OF FORFEITURE OF SHARE APPLICATION MONEY DUE TO NON-PAYMENT OF THE B ALANCE AMOUNT OF ALLOTMENT OF SHARES AS CAPITAL LOSS ARISING FROM TR ANSFER OF CAPITAL ASSET BEING RELINQUISHMENT OF ASSET/EXTINGUISHMENT OF THE RIGHT THEREIN. IN THE CASE IN HAND, THE ASSESSEE DECIDED TO TRANSFER THE SHARES TO THE GROUP CONCERN INSTEAD OF OPTING THE FORFEITURE OF SHARE A PPLICATION MONEY ALREADY PAID BY THE ASSESSEE. THE TRANSFER TO THE G ROUP COMPANY INSTEAD OF ALLOWING THE FORFEITURE WAS A DECISION TAKEN BY TH E ASSESSEE IN ITS BEST INTEREST AS THE ASSESSEE WAS HAVING A RIGHT TO SUBSC RIBE IN THE DEBENTURES CARRYING 14% PER ANNUM AT A DISCOUNTED PRICE OF RS. 10 EACH. THEREFORE, WHEN THE FORFEITURE IS HELD AS TRANSFER OF CAPITAL A SSET BY THE HON'BLE HIGH COURT THEN THE TRANSFER OF SHARES FOR CONSIDERATION OF BALANCE CALL MONEY TO BE PAID BY THE TRANSFEREE IS A CASE ON BETTER FO OTINGS TO BE HELD AS TRANSFER OF CAPITAL ASSET AND A CAPITAL LOSS FROM T HE SAID TRANSFER. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SHRI CHAND RATAN BAGRI IN ITA NO. 31/2010 (SUPRA) HAS ALSO UPHELD THE VIEW THA T THE FORFEITURE OF CONVERTIBLE WARRANTS HAS RESULTED INTO EXTINGUISHMEN T OF RIGHTS OF THE ASSESSEE TO OBTAIN THE SHARES AND THEREFORE, HAS RE SULTED CAPITAL LOSS IN THE HANDS OF THE ASSESSEE. THEREFORE, AS FAR AS THE TRANSACTION OF TRANSFER OF SHARES IN QUESTION IS CONCERNED, THE SAME IS NOT HING BUT TRANSFER OF CAPITAL ASSET AS HELD IN THE VARIOUS DECISIONS RELI ED UPON BY THE ASSESSEE. ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 61 19.1 ONCE THE ASSESSEE HAS PRODUCED ALL RELEVANT EV IDENCE TO ESTABLISH THE GENUINENESS AND THE TRANSACTION ACTUALLY TAKEN PLACE THEN TREATING THE SAME AS BOGUS ON THE GROUND THAT THE MOTIVE OF THE TRANSACTION IS TO AVOID THE TAX LIABILITY IS NOT SUSTAINABLE IN LAW. TH E ASSESSING OFFICER HAS MISUNDERSTOOD THE ENTIRE FACTS AND THE NATURE OF TR ANSACTION AS RECORDED AT PAGE NO. 16 OF THE ASSESSMENT ORDER AS UNDER: HENCE, IT IS AMPLY CLEAR THAT THE COMPANY M/S HH I NTERIOR AND AUTO COMPONENT PVT. LTD. {FORMERLY KNOWN AS M/S SKH AUTO COMPONENT S LIMITED} IS AN ENTITY OWNED AND CONTROLLED BY SH. ASHOK KAPUR. THUS, THE SHARE APPLICATION MONEY OF RS. 29.70.00.000/- GIVEN BY M/S ANGEL INFRASTRUCTURE PRIVATE LIMITED TO M/S HH INTERIOR AND AUTO COMPONENT PVT. LTD. AND THE CONSE QUENT FORFEITURE OF THE SAME BY HH INTERIOR AND AUTO COMPONENT PVT. LTD. IS NOT A TRANSACTION BETWEEN TWO INDEPENDENT PARTIES. THESE TWO RELATED PARTIES HAVE ENTERED INTO THIS T RANSACTION IN ORDER TO CREATE A FICTITIOUS LOSS IN THE HANDS O F M/S ANGEL INFRASTRUCTURE PRIVATE LIMITED. THE LOSS HAS BEEN ARTIFICIALLY GENERATED T O BE SET-OFF AGAINST THE GAIN ACCRUING TO M/S ANGEL INFRASTRUCTURE PRIVATE LIMITE D ON ACCOUNT OF SALE OF SHARES OF ADVANCED AUTOMATION & PROCESS CONTROL PVT. LTD. MOREOVER, ON PERUSAL OF SUBMISSION FILED BY THE AS SESSEE, IT IS TRANSPIRED THAT THE COMPANY ANGEL INFRASTRUCTURE PVT. LTD. HAS CALL ED THE MEETING OF BOARD OF DIRECTORS TO DECIDE THE SALE THE SHARES OF SKH AUTO COMPONENTS PVT. LTD. TO SHARSH FINANCE & INVESTMENT P. LTD. AND BOARD MEETI NG WAS HELD ON 23 . 03.2016 (AFTER CONDUCTING THE SURVEY BY INVESTIGATION TEAM ON 03.03.2016) . THEREFORE, CALLING THE BOARD MEETING ON 23.03.2016 AND PASSING A RESOLUTION IS THIS REGARD IS AN AFTERTHOUGHT PLAN SO THAT ASSESSEE COMPANY CAN C OVER UP THE TAX LIABILITY ACCRUED ON ACCOUNT OF CAPITAL GAIN UNDER THE SHADOW OF BOGUS LOSS. IF THE SAID LOSS WERE GENUINE, THE REMEDIAL ACTION COULD HAVE B EEN TAKEN BY THE COMPANY IMMEDIATELY AND NOT AFTER A GAP OF SEVEN YEARS. THEREFORE, THE ASSESSING OFFICER HAS GIVEN MUCH EMPH ASIS ON THE POINT THAT IT WAS A FORFEITURE OF THE MONEY PAID BY THE AS SESSEE AND SINCE SUBSCRIPTION OF SHARES BY THE ASSESSEE OF A RELATED PARTY, THEREFORE THE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 62 ASSESSING OFFICER WAS OF THE VIEW THAT THE FORFEITUR E IS NOTHING BUT A PREDESIGNED TRANSACTION BETWEEN THE RELATED PARTIES TO CREATE FICTITIOUS LOSS. THIS OBSERVATION OF THE ASSESSING OFFICER IS C ONTRARY TO THE FACTS ON RECORD THAT IT WAS NOT A FORFEITURE OF MONEY PAID BY THE ASSESSEE AS SHARE APPLICATION AND CALL MONEY BUT IT WAS A TRANSFER OF THE SHARES AFTER ALLOTMENT AND BEFORE THE FINAL CALL MONEY WAS TO BE PAID BY THE ASSESSEE. THEREFORE, THE CONSIDERATION FOR TRANSFER IN REAL TE RM IS THE FINAL CALL MONEY OF RS. 9.90 CRORES TO BE PAID BY THE ASSESSEE WAS FINALLY PAID BY THE TRANSFEREE COMPANY. THE SECOND OBJECTION OF THE ASSESSING OFFICER IS THAT THE BOARD MEETING WAS HELD ON 23/3/2016 AFTER T HE SURVEY DATED 03/3/2016 IS IN FACT ABSOLUTE INCORRECT AND CONTRAR Y TO THE FACT THAT THE SAID BOARD MEETING WAS HELD ON 23/3/2009 AND NOT ON 23/3/2016, THEREFORE, THE QUESTION OF AFTERTHOUGHT PLAN DOES N OT ARISE AS HELD BY THE ASSESSING OFFICER. THE LD CIT-DR HAS FAIRLY ACCEPTED THIS FACT THAT THE BOARD MEETING WAS HELD ON 23/3/2009 AND NOT ON 23/03 /2016 AS IT WAS RIGHTLY RECORDED BY THE LD. CIT(A) AT PAGE NO. 167 O F THE IMPUGNED ORDER. AS REGARDS THE STATEMENT RECORDED BY THE INVESTIGAT ION WING, FARIDABAD, WE FIND THAT THERE IS NOTHING IN THE STATEMENT TO SH OW THAT THE TRANSACTION IS BOGUS. THE RELEVANT PARA OF THE STATE MENT IS RECORDED BY THE LD. CIT(A) AT PAGE NO. 44 TO 46 AS UNDER: ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 63 Q.19. PLEASE REFER TO THE SALE OF SHARES OF M/S ANG EL INFRASTRUCTURE PVT. LTD. AND M/S ADVANCED AUTOMATION & PROCESS CONTROL PVT. LTD. PRO VIDE THE COMPLETE DETAILS OF THE TOTAL SALE CONSIDERATION CAPITAL GAIN ARISING AND T HE CONSEQUENT SET OFF OF LOSSES THROUGH VARIOUS TRANSACTIONS ENTERED INTO BY M/S ANGEL INFR ASTRUCTURE PVT. LTD.. THE TRANSACTION WAS DONE ON 12/09/2008. ANS. THE DETAILS ARE AS UNDER: 1. TOTAL SALE CONSIDERATION FOR SHARES OF M/S ADVAN CE AUTOMATION AND PROCESS CONTROL PVT. LTD. 154 CR (APPROX) 2. SHARES OF M/S ANGEL INFRASTRUCTURE PVT. LTD. 77 CR. 3. CAPITAL GAINS ARISING IN THE HAND OF M/S ANGEL INFRASTRUCTURE PVT. LTD. (CLAIM TO BE VERIFIED) 65 CR. 4. LOSS SET OFF THROUGH FORFEITURE BY M/S HH INTERI OR AND AUTO COMPONENT PVT. LTD. 30 CR. 5. LOSS SET OFF THROUGH AGREEMENT TO SELL WITH M/S LAUREL INFRASTRUCTURE PVT. LTD. 24 CR 6. LOSS SET OFF THROUGH SALE OF SHARES OF L&T STOC K MARKET TRANSACTIONS 11 CR. (APPROX) I AM SUBMITTING A COPY OF THE TRIAL BALANCE OF M/S ANGEL INFRASTRUCTURE PVT. LTD. THAT REFLECTS THE ABOVE LOSSES. Q.20 PLEASE REFER TO THE DISCUSSION ABOVE, IT HAS B EEN CLEARLY BROUGHT OUT THAT THE TRANSACTION ENTERED BY THE M/S ANGEL INFRASTRUCTURE PVT. LTD. WITH THE GROUP COMPANY ARE SAME (SHOULD BE SHAM) TRANSACTION IN ORDER TO A VOID PAYING THE DUE TAXES ON THE CAPITAL GAIN OF RS. 65 CR. AND DISCUSSED ABOVE. PLE ASE EXPLAIN. ANS. IN THIS REGARD WE WOULD LIKE TO SUBMIT THAT TH E TRANSACTION ENTERED BY THE GROUP COMPANIES WERE WITH A VIEW TO FURTHER THE BUSINESS INTEREST OF THE ENTITIES INVOLVED. HOWEVER SINCE THESE ENTITIES BELONG TO THE KRISHNA GROUP AND ARE OWNED AND OPERATED BY SH. ASHOK KAPUR SERIOUS ALLEGATIONS HAVE BEEN LE VELED REGARDING THE GENUINENESS OF THE TRANSACTION WE ALSO UNDERSTAND THAT DOUBTS HAS BEEN RAISED REGARDING THE TRANSACTION NOT BEING AT ARM LENGTH PRICES. IN VIEW OF THE ABOVE WE HEREBY UNDERTAKE THAT WE WILL FORGO THE CLAIM OF THE LOSSES ON THE F OLLOWING TRANSACTION: S. NO. DESCRIPTION OF THE TRANSACTION AMOUNT INVOLV ED F.Y. INVOLVED 1. LOSS ON ACCOUNT OF FORFEITURE OF SHARE APPLICATION MONEY BY M/S HH INTERIOR AND AUTO COMPONENT PVT. LTD. 30 CR 2008-09 2. LOSS ON ACCOUNT OF SALE OF PROPERTY AT PRESTIGE MALL TO M/S LAUREL INFRASTRUCTURE PVT. LTD. 24 CR 2008-09 TOTAL 54 CR. THUS AS DIRECTED WE WILL FILE A REVISED RETURN IN T HE CASE OF M/S ANGEL INFRASTRUCTURE PVT. LTD. (PAN AAFCA2023B) FOR THE A.Y. 2009-10 (PE RTAINING TO F.Y. 2008-09) AFTER DISALLOWING THE LOSS CLAIMED OF RS. 54 CR. AS DISCU SSED ABOVE. ACCORDINGLY AN AMOUNT OF RS. 54 CR WILL BE OFFERED TO TAX AS PER THE PROVISI ON OF INCOME TAX ACT, 1961. THE DUE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 64 TAXES ON THIS AMOUNT RS. 54 CR. WILL BE PAID AS SOO N AS POSSIBLE. I AM AUTHORIZED TO GIVE THE ABOVE COMMITMENT AS M/S ANGEL INFRASTRUCTU RE PVT. LTD. IS ONE OF MY GROUP COMPANY OWNED AND OPERATED BY ME THROUGH MY EMPLOYE ES. Q. 21 DO YOU WANT TO SAY ANYTHING ELSE? ANS. IT IS HEREBY CLARIFIED THAT THE ABOVE SAID UND ERSTANDING HAS BEEN PROVIDED IN ORDER TO AVOID LITIGATION AND TO BUY PEACE IN MIND WITH A REQUEST NEITHER PENALTY NOR ANY PUNITIVE ACTION MAY KINDLY BE INITIATED AGAINST GROUP. THUS, THE SO CALLED SURRENDER WAS OBTAINED BY THE SEA RCH TEAM AND THE SAME IS WITHOUT ANY INCRIMINATING MATERIAL. THEREFORE , THE STATEMENT RECORDED DURING THE SURVEY PROCEEDINGS WITHOUT DOCUM ENTARY EVIDENCE CANNOT BE A BASIS TO MAKE THE ADDITION IN ABSENCE O F ANY CORROBORATING EVIDENCE. THE CBDT IN THE INSTRUCTION NO. 286/2/2003 DATED 10/03/2003 HAS DIRECTED THE TAXING AUTHORITIES TO REFRAIN FROM SUCH CONFESSIONS IF NOT BASED ON RELIABLE EVIDENCE AS THE SAME DOES NOT SER VE ANY USEFUL PURPOSE. IT WAS THEREFORE, ADVISED THAT THERE SHOULD BE FOCUS AND CONCENTRATION ON COLLECTION OF EVIDENCE OF INCOME, WHICH LEADS TO THE INFORMATION ON WHAT HAS NOT BEEN DISCLOSED OR IS NO T LIKELY TO BE DISCLOSED. IT IS A CLEAR DIRECTION BY THE CBDT THAT WHILE RECORDING STATEMENT DURING THE COURSE OF SEARCH AND SEIZURE A ND SURVEY OPERATIONS, NO ATTEMPT SHOULD BE MADE TO OBTAIN CONFESSION AS T O THE DISCLOSED INCOME. THESE DIRECTIONS WERE REITERATED BY THE CBDT I N THE INSTRUCTION NO. F. NO. 286/98/2013-IT DATED 18/3/2014, THEREFORE , THERE ARE UNAMBIGUOUS GUIDELINES AND INSTRUCTIONS BY THE CBDT THAT UNDUE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 65 INFLUENCE/COERCION IN RECORDING OF STATEMENTS SHALL BE VIEWED BY THE BOARD ADVERSELY. HENCE IN ABSENCE OF ANY TANGIBLE M ATERIAL FOUND DURING THE SURVEY PROCEEDINGS, THE STATEMENT RECORDED WOULD NOT BE SUFFICIENT TO MAKE THE ADDITION. THERE IS NO DISPUTE AS WE HAVE DIS CUSSED ALL THE FACTS WHILE DECIDING THE ISSUE OF VALIDITY OF REOPENING TH AT ALL THESE TRANSACTIONS WERE DULY RECORDED IN THE BOOKS OF ACCOUNT OF ALL TH E RELEVANT PARTIES AND ALSO DISCLOSED IN THE RETURN OF INCOME FILED BY THE ASSESSEE AS WELL AS THE OTHER PARTY. THE REVENUE HAS ACCEPTED THE INVESTMEN T IN THE SHARES OF M/S HH INTERIOR AND AUTO COMPONENT PVT. LTD. MADE B Y THE OTHER GROUP COMPANIES AS WELL AS IN CASE OF M/S SHARASH FINANCE & INVESTMENT COMPANY PVT. LTD. WHILE PASSING THE ORDER U/S 153A R EAD WITH SECTION 143(3) OF THE ACT. THIS FACT HAS NOT BEEN DISPUTED B Y THE DEPARTMENT BEFORE US THAT THE ASSESSING OFFICER HAS NOT DISTUR BED THESE TRANSACTIONS IN THE HAND OF THE OTHER GROUP CONCERNS INCLUDING M /S SHARASH FINANCE & INVESTMENT COMPANY PVT. LTD.. FURTHER IT IS THE DEC ISION OF THE ASSESSEE TO MANAGE ITS FINANCIAL AFFAIRS IN THE BEST INTERES T OF THE ASSESSEE AND IN THE PREVAILING CIRCUMSTANCES. EVEN IF A DECISION IS NOT IN THE INTEREST OF THE ASSESSEE, THE ASSESSING OFFICER CANNOT SUBSTITU TE THE SAME OR STEP INTO THE SHOE OF THE ASSESSEE TO JUDGE THE PRUDENCE OF THE DECISION. THE SCOPE OF ENQUIRY AND DECISION IN THE ASSESSMENT PRO CEEDINGS IS TO EXAMINE THE CORRECTNESS AND ELIGIBILITY OF THE CLAI M AS PER THE PROVISIONS ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 66 OF THE ACT AND NOT TO JUDGE THE PRUDENCE OF THE DEC ISION OF THE ASSESSEE. IT IS SETTLED RULE OF LAW THAT THE PRUDENCY AND COMM ERCIAL EXPEDIENCY OF THE DECISION IS THE PREROGATIVE OF THE BUSINESSMAN AND THE TAXING AUTHORITY CANNOT SUBSTITUTE THE DECISION TAKEN BY T HE BUSINESSMAN. THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. MALAYAL AM PLANTATIONS LTD. 53 ITR 140 (SC) HAS HELD THAT IT IS PREROGATIVE OF T HE BUSINESSMAN TO ORGANIZE ITS AFFAIRS IN A MANNER BEST SUITED TO IT AND THE REVENUE AUTHORITY CANNOT STEP INTO THE SHOES OF BUSINESS MAN. IT IS N OT FOR THE REVENUE TO ATTACK THE TRANSACTION ON THE GROUND THAT THE SAME WAS IMPRUDENT. ONCE THE TRANSACTION IS TREATED AS TRANSFER OF CAPITAL A SSET THEN THE PROVISIONS OF SECTION 40A(2) OF THE ACT CANNOT BE ATTRACTED DU E TO THE REASON THAT THE TRANSACTION IS BETWEEN THE RELATED PARTIES. SINC E THE CLAIM IS SHORT TERM CAPITAL LOSS AND NOT THE BUSINESS LOSS SUFFERE D BY THE ASSESSEE, THEREFORE, IT WOULD NOT ATTRACT THE PROVISIONS OF SE CTION 40A(2) OF THE ACT. MOREOVER, IT IS OTHERWISE NOT A PAYMENT TO THE RELAT ED PARTY SO AS TO FALL IN THE CATEGORY OF TRANSACTION BETWEEN THE SPECIFIED PERSONS AS PER SECTION 40A(2) OF THE ACT. 19.2 ACCORDINGLY, IN VIEW OF THE ABOVE DISCUSSION AS WELL AS THE FOLLOWING THE VARIOUS DECISIONS ON THE POINT WE HOLD THAT THE TRANSACTION OF TRANSFER OF SHARES IN QUESTION CANNOT BE TREATED AS NON-GENU INE MERELY BECAUSE THE ASSESSEE INCURRED LOSS AND SET OFF OF THE SAME AGAINST THE CAPITAL ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 67 GAIN. HENCE, THE ORDERS OF THE AUTHORITIES BELOW QUA THIS ISSUE ARE SET ASIDE AND THE ADDITION MADE BY THE ASSESSING OFFICE R IS DELETED. 20. GROUND NO. 3 OF THE ASSESSEES APPEAL IS REGARD ING DISALLOWANCE OF LOSS ON SALE OF COMMERCIAL SPACE. ON 31/07/2004 M/S GOLD CAUSE CONSTRUCTION PVT. LTD. PURCHASED COMMERCIAL PLOT NO . 23 MEASURING 11427 SQ.MTR. AT SHIVAJI PLACE DISTRICT CENTRE, MAIN RING ROAD, RAJA GARDEN, NEW DELHI FROM MUNICIPAL CORPORATION OF DELHI (MCH) SLUM AND JJ DEPARTMENT REMUNERATIVE PROJECTS CELL IN OPEN AUCTI ON ALONGWITH ALL PERPETUAL LEASEHOLD RIGHTS IN THE SAID PLOT. IN TH E MONTH OF MARCH, 2005, M/S GOLD CAUSE CONSTRUCTION PVT. LTD. ALLOTTED COMM ERCIAL SPACE TO VARIOUS PARTIES INCLUDING 5 PARTIES AS UNDER: SR. NO. NAME OF THE BUYER TOTAL AREA (SQ.FT) RATE PER SQ. FT. TOTAL SALE CONSIDERATION ON I) ABR AUTO PVT. LTD. 11676.17 4,231 4,94,00,000/ - II) SHARSH FINANCE & INVESTMENT CO. PVT. LTD. 34686.29 4,199 14,56,50,000/ - III) MR. ASHOK KAPUR 23,723.34 4,198 9,96,00,000/ - IV) MRS. ARTI KAPUR 4,817.32 4,235 2,04,00,000/ - V) ROZ KA MEO COMPONENT PVT. LTD. 34,439.42 4,178 14,39,00,000/ - TOTAL 1,09,342.53 45,89,50,000/ - THUS, THE TOTAL COMMERCIAL SPACE MEASURING 109342.53 SQ.FT WAS ALLOTTED TO THE ABOVE FIVE PARTIES FOR A TOTAL CONSIDERATION OF RS. 45,89,50,000/-. THEREAFTER THE ASSESSEE ON 15/09/2008 PURCHASED COMM ERCIAL SPACE ALLOTTED TO THESE PARTIES THROUGH FIVE SEPARATE AGR EEMENTS FOR A TOTAL ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 68 CONSIDERATION OF RS. 54.44 CRORES. THUS THE ASSESSE E PURCHASED RIGHTS OF THE COMMERCIAL SPACE MEASURING 1,09,342.53 SQ.FT AT PARADISE MALL TO BE CONSTRUCTED AT SHIVAJI PLACE, DISTRICT CENTRE, MAIN RING ROAD, RAJA GARDEN, NEW DELHI. THEREAFTER THE ASSESSEE SOLD THE S AID COMMERCIAL SPACE/RIGHT IN COMMERCIAL SPACE TO M/S LAUREL INFRA STRUCTURE PVT. LTD. ON 12/3/2009 FOR A CONSIDERATION OF RS. 30,18,41,600/- AND AS A RESULT THE ASSESSEE INCURRED LOSS OF RS. 24,25,83,400/- FROM S ALE OF THE SAID COMMERCIAL SPACE TO A GROUP CONCERNED. INITIALLY AS PER THE AGREEMENT DATED 12/3/2009 BETWEEN THE ASSESSEE AND M/S LAUREL INFRASTRUCTURE PVT. LTD., A SUM OF RS. 7,54,60,400/- WAS RECEIVED AT THE TIME OF THE SAID AGREEMENT AND THE BALANCE CONSIDERATION OF RS. 22,6 3,81,200/- WAS TO BE RECEIVED WITHIN A PERIOD OF 10 DAYS I.E. UP TO 22/3/ 2009, HOWEVER, SUBSEQUENTLY AS PER THE AMENDED AGREEMENT DATED 22/ 3/2009 THE TIME PERIOD FOR PAYMENT OF THE BALANCE CONSIDERATION WAS EXTENDED BY A PERIOD OF SIX MONTHS. THE ASSESSEE CLAIMED LOSS OF R S. 24,25,58,400/- IN ITS RETURN OF INCOME WHICH WAS DISALLOWED BY THE ASSES SING OFFICER ON THE GROUND THAT A TRANSACTION OF SALE IS BOGUS AND CONS EQUENTLY THE CLAIM OF SHORT TERM CAPITAL LOSS ARISING FROM ALLEGED SALE O F COMMERCIAL SPACE IS ALSO BOGUS. THE ASSESSING OFFICER HAS ALSO DISALLOWED THE TRANSFER EXPENSES OF RS. 25,000/- CLAIMED BY THE ASSESSEE. TH E LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFF ICER. ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 69 21. BEFORE US, THE LD COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER HAS GIVEN THE REASONS FOR TREATIN G THE TRANSACTION AS BOGUS THAT THE SALE AND PURCHASE AGREEMENTS WERE ON NON-JUDICIAL STAMP PAPER OF RS. 50/- AND ARE NOT REGISTERED WITH STAMP AUTHORITIES. HOWEVER, THE SALE AND PURCHASE ARE TWO ELEMENTS WHICH MOVE IN TANDEM TO COMPLETE A SALE TRANSACTION. THE DEPARTMENT HAS ACCE PTED ONE ELEMENT OF THE TRANSACTION IN THE HAND OF THE PURCHASER THEN H OW THE TRANSACTION OF THE SALE IN THE HAND OF THE ASSESSEE CAN BE TREATED AS BOGUS, THEREFORE, NO PRESUMPTION CAN BE RAISED AGAINST THE GENUINENES S OF THE SECOND ELEMENT. THE LD COUNSEL HAS POINTED OUT THAT IN THE INSTANT CASE, THE SALE BY THE SELLER (FIRST ALLOTTEE) WAS ACCEPTED AND THER EFORE, THERE CANNOT BE CASE FOR DENIAL OF PURCHASE OF THE COMMERCIAL SPACE BY THE ASSESSEE. FURTHER THE TRANSACTION OF PURCHASE WAS EXECUTED ON NON-JUDICIAL STAMP PAPER OF RS. 50/- WHICH WAS ACCEPTED BY THE ASSESSIN G OFFICER WHEREAS THE SALE OF THE SAME COMMERCIAL SPACE ON NON-JUDICI AL STAMP PAPER OF RS. 56/- CANNOT BE DISPUTED. FURTHER THE ASSESSING OFFI CER HAS RAISED OBJECTION OF NON-REGISTRATION OF THE AGREEMENTS BUT IN THE CASE OF THE ASSESSEE WHAT WAS THE TRANSFERRED AND SOLD WAS THE RI GHT IN THE COMMERCIAL SPACE IN A MALL TO BE CONSTRUCTED. THUS, THE LD COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT AS PER THE DEFINITION O F SECTION 2(47) OF THE ACT ONCE THE RIGHT IN THE CAPITAL ASSET/IMMOVABLE P ROPERTY IS EXTINGUISHED, ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 70 IT AMOUNTS TO TRANSFER OF THE PROPERTY. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF AHMADABAD BENCHES O F THE TRIBUNAL IN THE CASE OF SMT. SAPNABEN DIPAKBHAI PATEL VS. ITO 73 TAX MANN.COM 288. HE HAS ALSO RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA OF BOMBAY VS. C OMMISSIONER OF INCOME-TAX 260 ITR 491 AS WELL AS DECISION OF HON'BLE SUPREME COURT IN THE CASE OF K.P. VARGHESE VS. ITO 131 ITR 597 AND SU BMITTED THAT THE HONBLE COURT HAS HELD THAT IT IS NOT ENOUGH FOR TH E REVENUE TO SHOW THAT THE FAIR MARKET VALUE OF PROPERTY AS ON THE DATE OF TRANSFER EXISTS FULL VALUE CONSIDERATION DECLARED BY THE ASSESSEE. IN RE SPECT OF THE TRANSFER BY ANY AMOUNT OF NOT LESS THAN 15% OF THE VALUE SO DECLARED WHEN THERE IS NO CASE OF ASSESSING OFFICER THAT THE CONSIDERAT ION FOR TRANSFER HAS BEEN UNDERSTATED BY THE ASSESSEE OR THE CONSIDERATI ON ACTUALLY RECEIVED BY THE ASSESSEE IS MORE THAN WHAT IS DECLARED OR DIS CLOSED BY IT THEN THE BURDEN IS ON THE ASSESSING OFFICER TO ESTABLISH THA T THE ASSESSEE HAS NOT CORRECTLY DECLARED OR DISCLOSED THE CONSIDERATION R ECEIVED BY IT. THE ENTIRE CONSIDERATION OF THE ASSESSING OFFICER IS ON THE PO INT THAT THE ASSESSEE HAS DECLARED SHORT TERM CAPITAL LOSS IN ORDER TO AV OID THE TAX LIABILITY ON THE CAPITAL GAIN. THE LD COUNSEL THEN SUBMITTED THAT THE CENTRAL ASPECT OF THE ISSUE HAS NOT BEEN APPRECIATED BY THE ASSESSING OFFICER THAT THE PROPERTY WAS UNDER CONSIDERATION AND IN ABSENCE OF A NY IMMOVABLE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 71 PROPERTY HAVE NOT BEEN CONSTRUCTED, THERE WAS NO OCC ASION FOR EXECUTION OF REGISTRATION OF TITLE OF THE PROPERTY U/S 17 OF THE REGISTRATION ACT, 1908. THE PROPERTY WAS FINALLY CONSTRUCTED IN THE YEAR 2016 , THUS ONCE THE PROPERTY WAS UNDER CONSTRUCTION, THE ALLEGATION AND BASIS TO ASSUME THAT NON-REGISTRATION OF THE DOCUMENT WOULD NOT TRANSFER THE TITLE IS MISCONCEIVED AND UNTENABLE. THE ASSESSING OFFICER HA S RAISED OBJECTION THAT THE TRANSACTIONS WERE BETWEEN THE RELATED PARTIE S AND THERE WAS NO FINANCIAL CRISIS TO SALE THE PROPERTY IN DISTRESS. HOWEVER, WHEN THE ASSESSING OFFICER HAS NOT DISPUTED THE FAIR MARKET PRICE OF THE PROPERTY AS ON THE DATE OF SALE AND ALSO ACCEPTED THE PURCHASE OF THE SAID COMMERCIAL SPACE IN THE HAND OF M/S LAUREL INFRASTRUCTURE PVT. LTD. THEN THE SAID TRANSACTION CANNOT BE DENIED IN THE HAND OF THE ASS ESSEE. AT THE TIME OF PURCHASE BY THE ASSESSEE, THE SALE WAS DULY ACCEPTED IN THE CASE OF SELLING PARTIES AND WHEN THE PROPERTY WAS SOLD BY THE ASSESSEE, THE TRANSFER WAS ACCEPTED BY THE ASSESSING OFFICER IN TH E HAND OF THE PURCHASER M/S LAUREL INFRASTRUCTURE PVT. LTD., THER EFORE, THE TRANSACTION OF PURCHASE AND SALE IN THE HAND OF THE ASSESSEE CANNO T BE DENIED. THE LD. COUNSEL HAS FURTHER CONTENDED THAT WHEN THE PROVISI ONS OF DOMESTIC TRANSFER PRICES AS SPECIFIED IN SECTION 92BA ARE NO T APPLICABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AS THE SAID AME NDMENT WAS MADE BY THE FINANCE ACT, 2012 W.E.F. 01/04/2013 THEN IT C ANNOT BE A GROUND ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 72 FOR TREATING THE TRANSACTION AS NOT AT ARMS LENGTH OR BOGUS. THE LD. COUNSEL HAS FURTHER CONTENDED THAT THE TRANSACTIONS OF PURCHASE AND SALE OF COMMERCIAL SPACE IN QUESTION IS REAL ONE AND THE REFORE, MERELY BECAUSE THE ASSESSEE HAS INCURRED LOSS ON THE SAID TRANSACT ION, THE SAME CANNOT BE TREATED AS BOGUS. HE HAS POINTED OUT THAT THE OR IGINAL ALLOTTEES OF THE COMMERCIAL SPACE FROM WHOM THE ASSESSEE PURCHASED, H AVE PAID FULL CONSIDERATION ON OR BEFORE 04/11/2014 AND THE TRANS ACTION OF THE SAID PURCHASE AND SUBSEQUENT SALE TO THE ASSESSEE WAS DUL Y RECORDED IN THEIR BOOKS OF ACCOUNT INCLUDING BALANCE SHEET WHICH HAS B EEN ACCEPTED BY THE DEPARTMENT. THE ASSESSEE SOLD THE SAID COMMERCIAL SP ACE TO M/S LAUREL INFRASTRUCTURE PVT. LTD. VIDE THE AGREEMENT DATED 1 2/3/2009 AND THE CONSIDERATION RECEIVED BY THE ASSESSEE ON THE DATE OF AGREEMENT AND THEREAFTER AS PER THE EXTENDED PERIOD IS PART OF TH E RECORD AND DULY REFLECTED IN THE BANK ACCOUNT OF THE PARTIES AS WELL AS IN THE BOOKS OF ACCOUNT, THEREFORE, THE TRANSACTION OF SALE AGAINST THE SAID CONSIDERATION WHICH HAS EXCHANGED HAND HAS BEEN ESTABLISHED FROM T HE RECORD. HENCE, THE LD COUNSEL HAS PRAYED THAT ONCE THE ASSESSEE HA S ESTABLISHED THE GENUINENESS OF THE CLAIM AND PRODUCED ALL THE RELEV ANT EVIDENCE THEN THE SHORT TERM CAPITAL LOSS IS LIABLE TO BE ALLOWED AND THE ADDITION MADE BY THE ASSESSING OFFICER MAY BE DELETED. ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 73 22. ON THE OTHER HAND, THE LD CIT-DR HAS SUBMITTED THAT THE ASSESSEE CLAIMED TO HAVE SOLD THE COMMERCIAL SPACE VIDE AGRE EMENT DATED 12/3/2009 WHICH IS EXECUTED ON A NON-JUDICIAL STAMP PAPER OF RS. 50/- AND THEREFORE, IN ABSENCE OF REGISTRATION OF THE AG REEMENT IT IS NOT A VALID TRANSACTION OF TRANSFER OF IMMOVABLE PROPERTY. THE A LLEGED TRANSACTION OF PURCHASE AS WELL AS SALE WERE BETWEEN THE RELATED PART IES AND WERE NOT MADE AT ARMS LENGTH PRICE, THEREFORE, IN ABSENCE O F THE PRESENT CIRCUMSTANCES, THE SALE OF THE COMMERCIAL SPACE AT HUGE LOSS OF RS. 24.25 CRORES DOES NOT SUPPORT THE NORMAL TRANSACTION OF T RANSFER OF COMMERCIAL SPACE. HENCE, THE ASSESSING OFFICER HAS RIGHTLY RAI SED THE OBJECTION ABOUT THE TRANSACTION NOT AT ARMS LENGTH. THE ENTIRE TRA NSACTION OF PURCHASE AND SALE BETWEEN THE RELATED PARTIES ARE ARRANGED WIT H THE VIEW TO AVOID TAX ON THE CAPITAL GAIN AND THEREFORE, THESE TRANSA CTIONS ARE NOT REAL TRANSACTIONS BUT ONLY ARRANGED WITH A DESIGN TO AVOI D TAX. IT IS TO BE NOTED THAT AS PER THE ACCOUNT OF M/S GOLD CAUSE CON STRUCTION PVT. LTD. (DEVELOPER), AS APPEARING IN THE BOOKS OF ACCOUNT O F M/S SHARASH FINANCE & INVESTMENT CO. P. LTD., A SUM OF RS. 14,56,50,000 /- WAS APPEARING AS DEBIT BALANCE ON 01/04/2008 AND THE SAME AMOUNT WAS CREDITED ON 01/04/2008 THROUGH A GENERAL ENTRY WITH A NARRATION BY ADVANCE AGAINST THE PROPERTY. A SIMILAR POSITION IS IN RESPECT OF R EMAINING AGREEMENTS EXCEPT IN CASE OF SH. ASHOK KAPUR WHEREIN DEBIT BALA NCE WAS APPEARING ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 74 AS ON 01/04/2008 AND A SUM OF RS. 9.96 CRORES WERE C REDITED ON 01/04/2008 THROUGH A GENERAL ENTRY. HENCE, THE ENTI RE TRANSACTION OF PURCHASE OF COMMERCIAL SPACE BY THE FIVE COMPANIES FROM WHOM THE ASSESSEE PURCHASED THE SAID COMMERCIAL SPACE WAS NOT FREE FROM DOUBT. SINCE ALL THE COMPANIES TO THE TRANSACTION OF PURCH ASE AND SALE ARE A GROUP COMPANIES AND CONTROLLED BY ONE SH. ASHOK KAP UR, THEREFORE, THESE ARE NOTHING BUT STRUCTURED TRANSACTION IN ORDER TO INCUR CAPITAL LOSS WHICH MAY BE SET OFF AGAINST THE CAPITAL GAIN ON SALE OF SHARES BY THE ASSESSEE. THE ASSESSEE HAS NOT EXPLAINED THE CIRCUMSTANCES WHI CH HAS COMPELLED THE ASSESSEE FOR SELLING THE COMMERCIAL SPACE AT SU CH A HUGE LOSS WITHIN A SHORT PERIOD OF SIX MONTHS OF ITS PURCHASE. THEREFOR E, WHEN THE ENTIRE TRANSACTIONS OF PURCHASE, SALE AND BOOKS OF LOSS IS ARISING FROM THE ARRANGEMENTS BETWEEN THE RELATED PARTIES THEN THE TR ANSACTION WAS RIGHTLY HELD AS BOGUS TRANSACTIONS FOR THE SOLE PURPOSE OF CREATING SHORT TERM CAPITAL LOSS TO BE SET OFF AGAINST THE TAXABLE INCO ME. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 23. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER DISALLOWED THE LOSS ON SALE OF COMMERCIAL SPACE MEASURING 1,09,342.53 SQ.FT IN PAR ADISE MALL, SHIVAJI PLACE, DISTRICT CENTRE, MAIN RING ROAD, RAJA GARDEN , NEW DELHI. IT IS NOT IN DISPUTE THAT THE COMMERCIAL SPACE WHICH IS SUBJEC T MATTER OF ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 75 TRANSACTION WAS YET TO BE CONSTRUCTED BY THE DEVELOP ER M/S GOLD CAUSE CONSTRUCTION PVT. LTD.. INITIALLY THE COMMERCIAL SP ACE IN QUESTION WAS ACQUIRED BY FIVE PERSONS FOR A TOTAL CONSIDERATION OF RS. 45,89,50,000/-, THE DETAILS OF THE COMMERCIAL SPACE ALLOTTED BY THE DEVELOPER TO THESE FIVE PERSONS HAVE BEEN REPRODUCED IN THE FOREGOING PARAG RAPH OF THIS ORDER. THUS, IT IS CLEAR THAT THE COMMERCIAL SPACE WAS INITI ALLY ALLOTTED IN THE MONTH OF MARCH, 2005. THE ASSESSEE PURCHASED THE SAI D RIGHTS OF THE COMMERCIAL SPACE MEASURING 1,09,342.53 SQ.FT IN PAR ADISE MALL, SHIVAJI PLACE, DISTRICT CENTRE, MAIN RING ROAD, RAJA GARDEN , NEW DELHI FOR A CONSIDERATION OF RS. 54.44 CRORES VIDE AGREEMENT DA TED 15/9/2008. THE DETAILS OF THE TRANSACTIONS ARE AS UNDER: SR. NO. NAME OF THE BUYER TOTAL AREA (SQ.FT) TOTAL SALE CONSIDERATION. I) ABR AUTO PVT. LTD. 11676.17 5,85,39,000/ - II) SHARSH FINANCE & INVESTMENT CO. PVT. LTD. 34686.29 17,28,39,000/ - III) MR. ASHOK KAPUR 23,723.34 11,89,68,800/ - IV) MRS. ARTI KAPUR 4,817.32 2,32,40,200/ - V) ROZ KA MEO COMPONENT PVT. LTD. 34,439.42 17,08,13,000/ - TOTAL 1,09,342.53 54,44,00,000/ - SUBSEQUENTLY ON 12/3/2009, THE ASSESSEE SOLD THE RI GHTS IN THE COMMERCIAL SPACE IN QUESTION TO THE GROUP COMPANY M /S LAUREL INFRASTRUCTURE PVT. LTD., FOR A CONSIDERATION OF RS . 30,18,41,600/- VIDE AGREEMENT DATED 12/3/2009. THE MAIN OBJECTION OF THE ASSESSING OFFICER IS THAT THE PURCHASE AND SALE IN QUESTION WAS THROUG H UNREGISTERED ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 76 AGREEMENTS AND THEREFORE, THE TRANSACTIONS ARE NOT VALID. FURTHER THE ASSESSING OFFICER HAS HELD THAT THE TRANSACTION IS NOT AT ARMS LENGTH, THEREFORE, THE TRANSACTION CLAIMED BY THE ASSESSEE ARE BOGUS TRANSACTION FOR CLAIMING LOSS TO BE SET OFF AGAINST THE PROFITS ON SALE OF SHARES. IT IS PERTINENT TO NOTE THAT THE ACQUISITION OF THE RIGHT OF COMMERCIAL SPACE IN THE MALL WAS ALSO THROUGH UNREGISTERED AGREEMENTS AN D SIMILARLY THE ASSESSEE TRANSFERRED THE SAID RIGHT OF COMMERCIAL S PACE THROUGH UNREGISTERED AGREEMENTS. THE ASSESSING OFFICER HAS NOT DISPUTED THE TRANSACTION OF PURCHASE OF THE SAID COMMERCIAL SPAC E BY FIVE COMPANIES/PERSONS IN THEIR ASSESSMENTS AND FURTHER THE ASSESSING OFFICER HAS ALSO ACCEPTED THE TRANSACTION OF PURCHASE OF TH E SAID COMMERCIAL SPACE BY M/S LAUREL INFRASTRUCTURE PVT. LTD. FROM T HE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE HAS REFERRED TO THE ASSESS MENT ORDERS IN RESPECT OF THESE PARTIES AND POINTED OUT THAT THE ASSESSING OFFICER HAS NOT DISPUTED THE FACT OF INITIAL ALLOTMENT OF THE COMME RCIAL SPACE TO THESE FIVE PERSONS AND ALSO ACCEPTED THE TRANSACTION OF PURCHA SE OF COMMERCIAL SPACE BY M/S LAUREL INFRASTRUCTURE PVT. LTD. FROM T HE ASSESSEE. THE LD. CIT-DR HAS NOT DISPUTED THE FACT THAT THE DEPARTMEN T HAS NOT DISPUTED THE TRANSACTIONS IN THE HANDS OF THE OTHER PARTIES EITHER FIVE PERSONS FROM WHOM THE ASSESSEE PURCHASED OR THE PURCHASER TO WHOM THE ASSESSEE SOLD THE COMMERCIAL SPACE. SINCE IT IS THE ASSESSEE WHO HAS CLAIMED THE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 77 LOSS FROM THE TRANSACTION OF PURCHASE AND SALE OF C OMMERCIAL SPACE, THE ASSESSING OFFICER HAS QUESTION THE TRANSACTION AND DISALLOWED THE CLAIM BY TREATING THE SAME AS BOGUS. THEREFORE, ONCE THE TRAN SACTION WAS ACCEPTED IN THE CASE OF PERSONS FROM WHOM THE ASSESSEE HAS PU RCHASED THE COMMERCIAL SPACE AS WELL AS IN THE HAND OF THE PERSO N TO WHOM THE ASSESSEE HAS SOLD THE COMMERCIAL SPACE IN QUESTION THEN THE GENUINENESS OF THE TRANSACTION CANNOT BE QUESTIONED AND THE SAM E CANNOT BE A GROUND FOR DENYING THE CLAIM OF SHORT TERM CAPITAL LOSS. THE ASSESSING OFFICER CANNOT TAKE A DIFFERENT STAND ON THE SAME T RANSACTION IN CASE OF DIFFERENT PARTIES TO THE SAME TRANSACTION, THEREFOR E, ACCEPTING THE TRANSACTIONS IN THE HANDS OF OTHER PARTIES IT IS NO T PERMISSIBLE TO QUESTION THE TRANSACTION IN THE HAND OF THE ASSESSEE. AS FAR AS THE NON-REGISTRATION OF THE AGREEMENT IS CONCERNED, IT IS ALSO NOT IN DI SPUTE THAT IT IS NOT A TITLE DOCUMENT IN RESPECT OF AN IMMOVABLE PROPERTY BUT WHA T IS TRANSFERRED THROUGH THESE AGREEMENTS IS A RIGHT IN THE IMMOVABL E PROPERTY. THEREFORE, THE RIGHT OF COMMERCIAL SPACE IN THE MALL YET TO BE CONSTRUCTED WAS TRANSFERRED THROUGH THE AGREEMENT AND ONCE THE T RANSACTION WAS ACCEPTED IN CASES OF BOTH THE PARTIES I.E. SELLER A S WELL AS PURCHASER AND CONSIDERATION HAS CHANGE HANDS AND FINALLY DEVELOPE R GIVEN POSSESSION OF THE CONSTRUCTED COMMERCIAL SPACE TO THE FINAL PURCH ASER THEN THE SAID TRANSACTION CANNOT BE HELD TO BE BOGUS FOR WANT OF R EGISTRATION OF THE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 78 AGREEMENT. THE ASSESSING OFFICER HAS NOT DISPUTED TH E PURCHASE CONSIDERATION PAID BY THE ASSESSEE TO THE SELLERS WH O ARE FIVE PERSONS AND EVEN NOT DISPUTED THE TRANSACTION OF ALLOTMENT OF T HE SPACE BY THE DEVELOPER TO THOSE FIVE PERSONS AGAINST THE CONSIDE RATION. ONCE THE CONSIDERATION HAS CHANGED HANDS FROM ONE PARTY TO A NOTHER PARTY THEN THE ENTRIES IN THE BOOKS OF ACCOUNT WILL NOT CHANGE THE TRANSACTION FROM GENUINE TO NON-GENUINE. THE TERMS AND CONDITIONS UND ER WHICH THE PURCHASE AND SALE OF THE COMMERCIAL SPACE TOOK PLAC E BETWEEN THE PARTIES HAS BEEN STRICTLY COMPLIED WITH BY EACH OF T HE PARTIES THROUGH PAYMENT OF THE CONSIDERATION AND CORRESPONDENCE OF ACKNOWLEDGEMENT OF TRANSFER APART FROM THE EXECUTION OF THE AGREEMENTS . THEREFORE, ONCE THE PAYMENT OF CONSIDERATION BY THE ASSESSEE AS WELL AS RECEIPT OF THE SALE CONSIDERATION BY THE ASSESSEE IS ESTABLISHED FROM T HE RECORD AS IT HAS CHANGE HANDS THROUGH BANKING CHANNELS THEN THE TRAN SACTION CANNOT BE HELD AS AN ARTIFICIAL TRANSACTION. SINCE IT IS NOT AN IMMOVABLE PROPERTY BUT IT WAS ONLY A RIGHT IN THE IMMOVABLE PROPERTY, THERE FORE, WHEN ALL THE PARTIES TO THE TRANSACTION IN QUESTION HAVE ACCEPTE D THE TRANSACTION THROUGH AGREEMENTS AND THE ASSESSING OFFICER HAS AC CEPTED THE SAME IN THE HAND OF ALL OTHER PARTIES THEN THE TRANSACTION IN HAND OF THE ASSESSEE CANNOT BE QUESTIONED. ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 79 23.1 THERE MAY BE A POSSIBILITY OF UNDERSTATEMENT OF THE SALE CONSIDERATION WHICH HAS RESULTED LOSS OF RS. 24.25 C RORES TO THE ASSESSEE, HOWEVER, THE ASSESSING OFFICER HAS NOT EVEN MADE ANY ATTEMPT TO DETERMINE THE FAIR MARKET PRICE OF THE COMMERCIAL S PACE AS ON THE DATE OF SALE AND FURTHER IT IS NOT THE CASE OF THE ASSESSIN G OFFICER THAT THE ASSESSEE HAS RECEIVED THE CONSIDERATION MORE THAN W HICH IS DECLARED BY THE ASSESSEE. THEREFORE, THOUGH THE TRANSACTION IS BETWEEN THE RELATED PARTIES BUT ONCE THE ASSESSING OFFICER HAS NOT GIVE N A FINDING THAT THE SALE CONSIDERATION IS SUPPRESSED OR UNDERSTATED THE N THE TRANSACTION BETWEEN THE RELATED PARTIES CANNOT BE HELD AS BOGUS. EVEN OTHERWISE WHEN IT IS A TRANSACTION OF SALE OF CAPITAL ASSET, T HERE IS NO PROVISION IN THE ACT TO ADOPT A DEEMED CONSIDERATION ON THE PRINCIPL E OF TRANSFER PRICING. THE PROVISIONS OF DOMESTIC TRANSFER PRICING HAS BEEN BROUGHT INTO STATUTE BY THE FINANCE ACT, 2012 W.E.F. 01/4/2013, THEREFORE , THE SAID PROVISION U/S 92BA OF THE ACT ARE NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION. FURTHER SINCE THIS IS NOT A BUSINESS TRANSACTION OR SALE OF THE STOCK IN TRADE BUT IT IS A TRANSACTION FALLING UNDER THE PRO VISIONS OF SECTION 45 OF THE ACT, THEREFORE, THE PROVISIONS OF SECTION 40A(2 )(B) OF THE ACT ARE NOT APPLICABLE. THERE MUST BE A CONSISTENCY AND UNIFORMI TY OF VIEW WHILE TAKING THE DECISION BY THE ASSESSING OFFICER ON THE TRANSACTION ARISING AND RESULTING FROM ONE COMMON EXERCISE OF RELINQUISHMEN T OF RIGHT BY ONE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 80 PARTY AND ACQUISITION OF THE SAME BY ANOTHER. THUS, THE ASSESSING OFFICER IS NOT PERMITTED TO TAKE TWO OPPOSITE STANCE; ONE IN THE CASE OF ONE PARTY AND ANOTHER IN THE CASE OF OTHER PARTY OF THE SAME TRANSACTION. THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING THAT EI THER THE PRICE OF THE COMMERCIAL SPACE IS EXCESSIVE OR THE SALE PRICE IS SUPPRESSED IN COMPARISON TO THE FAIR MARKET PRICE OF THE SAME. FU RTHER THE ASSESSING OFFICER ACCEPTED THE SALE OF RIGHT OF COMMERCIAL SP ACE IN QUESTION IN HAND OF THE PURCHASER WHILE PASSING THE ASSESSMENT U/S 1 53A READ WITH SECTION 143(3) OF THE ACT IN THE CASE OF M/S LAUREL INFRASTRUCTURE PVT. LTD. VIDE ORDER DATED 24/3/2014. COPY OF THE SAID ORDER IS PLACED AT PAGE NO. 704 TO 707 OF THE PAPER BOOK. THEREFORE, WHEN THE TR ANSACTION OF PURCHASE AND SALE IS REAL AS EVIDENT FROM THE RECOR D AS WELL AS FROM THE FACTS OF PAYMENT AND RECEIPT OF THE CONSIDERATION T HEN THE ACTION OF THE ASSESSING OFFICER TREATING THE TRANSACTION AS SHAM OR BOGUS IS WITHOUT ANY TANGIBLE MATERIAL RATHER CONTRARY TO THE FACTS DULY SUPPORTED AND SUBSTANTIATED BY EVIDENCE. THE LD. CIT(A) HAS CONFIR MED THE DISALLOWANCE ON THE SIMILAR LINES AS IT WAS DISALLOWED BY THE ASSE SSING OFFICER, HENCE IN ABSENCE OF ANY FACT OR FINDING GIVEN BY THE ASSESSI NG OFFICER THAT EITHER THE PURCHASE PRICE WAS EXCESSIVE OR THE SALE PRICE I S SUPPRESSED THE ADDITION MADE BY DISALLOWING THE SHORT TERM CAPITAL LOSS IS NOT JUSTIFIED AND THE SAME IS DELETED. ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 81 24. NOW WE TAKE UP THE REVENUES APPEAL, WHEREIN THE R EVENUE HAS RAISED FOLLOWING GROUNDS: (I) WHETHER IN THE FACT AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THE CAPITAL GAINS ON SALE OF 1377 EQUITY SHARES OF M/S ADVANCE AUTOMATION & PROCESS CONTROL PVT. LTD. AS LONG TERM CAPITAL GAIN WITHOUT APPRECIATING THE FACT THAT IN THE GUISE OF SALE OF SHARE THE ASSESSEE HAS SOLD IMMOVA BLE PROPERTY SITUATED AT PLOT NO. 187, HSIDC GURGAON AND THAT TH E SAID TRANSACTION IS IN THE NATURE OF SHORT TERM CAPITAL GAIN? (II) WHETHER IN THE FACTS AND IN THE CIRCUMSTANCE O F THE CASE AND IN LAW, THE LD. CIT WAS JUSTIFIED IN NOT APPRECIATING THE F ACTS BROUGHT ON RECORD BY THE AO AFTER PIECING THE CORPORATE VEIL A ND BRING TO THE FORE THE BASIC FACTS OF THE CASE RELATING TO THE SALE OF SHARES OF M/S ADVANCE AUTOMATION AND PROCESS CONTROL PVT. LTD.? (III) WHETHER IN THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT WAS JUSTIFIED IN ALLOWING THE APPEAL OF THE ASSESSEE AND THUS DIRECTING THE AO TO ALLOW SET OFF OF SHORT TER M CAPITAL LOSS ON SALE OF SHARES OF M/S L&T WITHOUT APPRECIATING THE FACTS AS BROUGHT ON RECORD BY THE AO? THE APPELLANT CRAVES THE RIGHT TO AMEND ALTER OR A DD TO ANY OF THE GROUNDS OF APPEAL GIVEN ABOVE. 25. GROUNDS NO. 1 AND 2 OF THE REVENUES APPEAL ARE INTERLINKED AND ARE REGARDING PROFIT ON SALE OF SHARES OF M/S ADVAN CE AUTOMATION & PROCESS CONTROL PVT. LTD. TREATED BY THE ASSESSING OFFICER AS SHORT TERM CAPITAL GAIN AS AGAINST THE LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE WHICH WAS ACCEPTED BY THE LD. CIT(A). THE ASSESSEE ACQ UIRED 50% OF THE SHARE HOLDING EQUAL TO 1377 SHARES OF M/S ADVANCE A UTOMATION & PROCESS CONTROL PVT. LTD. ON 05/5/2006. THE REMAINING 50% S HARES WERE HELD BY ONE SHRI ASHOK KUMAR MUNJAL 37.5% AND M/S H&H REAL ESTATE PVT. LTD. 12.5%. THEREAFTER THE ENTIRE SHARE HOLDING OF M/S A DVANCE AUTOMATION & ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 82 PROCESS CONTROL PVT. LTD. WAS DISINVESTED BY ALL THR EE SHARE HOLDERS INCLUDING THE ASSESSEE TO M/S ROLTA PVT. LTD. ON 21 /7/2008. THE ASSESSEE CLAIMED THE PROFIT ON SALE OF THE SHARES AS LONG TE RM CAPITAL GAIN AS THE SHARES WERE SOLD AFTER MORE THAN TWO YEARS OF ACQUISI TION. HOWEVER, THE ASSESSING OFFICER HELD THAT IT IS A TRANSACTION OF SALE OF IMMOVABLE PROPERTY HELD BY M/S ADVANCE AUTOMATION & PROCESS C ONTROL PVT. LTD. THROUGH TRANSFER OF THE ENTIRE HOLDINGS AND TREATED THE PROFIT AS SHORT TERM CAPITAL GAIN. THE LD. CIT(A) HAS ACCEPTED THE CL AIM OF THE ASSESSEE AND HELD THAT THE LAND WAS OWNED BY THE COMPANY WHICH IS A SEPARATE LEGAL ENTITY AND THEREFORE WHAT WAS TRANSFERRED BY TH E ASSESSEE WAS ONLY SHARES OF THE SAID COMPANY AND NOT THE PROPERTY OWNE D BY THE COMPANY. 26. BEFORE US, THE LD CIT-DR HAS SUBMITTED THAT DU RING THE SURVEY AND POST SURVEY INVESTIGATION, SHRI RAJIV AG ARWAL, DIRECTOR OF M/S ROLTA PVT. LTD. IN HIS STATEMENT STATED THAT M/S RO LTA PVT. LTD. WANTED TO BUY LAND AND BUILDING IN AN AROUND GURGAON AND IDEN TIFIED THE LAND WHICH WAS OWNED BY M/S ADVANCE AUTOMATION & PROCESS CONTRO L PVT. LTD.. THE PRICE OF THE PROPERTY WAS NEGOTIATED AT RS. 154 CROR ES, HOWEVER, SUBSEQUENTLY, THE PROPERTY WAS PURCHASED BY TAKING O VER 100 SHARES OF M/S ADVANCE AUTOMATION & PROCESS CONTROL PVT. LTD. AS IT WAS AGREED BY THE SHAREHOLDERS OF THE SAID COMPANY. THIS CLEARLY E STABLISHED THAT THE UNDERLYING ASSET WAS SOLD AND TRANSFER OF SHARES OF M/S ADVANCE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 83 AUTOMATION & PROCESS CONTROL PVT. LTD. WAS ONLY A F ACADE TO MINIMIZE THE TAX LIABILITY. THUS, THE LD. CIT-DR HAS SUBMITTED TH AT THE SUBSTANCE OF THE TRANSACTION IS TRANSFER OF THE IMMOVABLE PROPERTY B EING LAND AND BUILDING THROUGH THE TRANSFER OF ENTIRE SHAREHOLDINGS OF THE SAID COMPANY. SINCE THE SAID PROPERTY WAS SOLD LESS THAN THREE YEARS FRO M THE DATE OF ACQUIRING THE SHARES BY THE ASSESSEE, THEREFORE, TH E PROFIT ARISING FROM THE SAID TRANSACTION WAS TREATED AS SHORT TERM CAPIT AL GAIN BY THE ASSESSING OFFICER. HE HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 27. ON THE OTHER HAND, THE LD COUNSEL FOR THE ASSES SEE HAS SUBMITTED THAT THE FINDING OF THE ASSESSING OFFICER ARE BASED ON FUNDAMENTAL MISCONCEPTION OF BOTH THE FACTS AND LAW. IT WAS CONT ENDED THAT THE ASSESSING OFFICER HAS NOT DISPUTED THAT THERE WAS TR ANSFER OF SHARES ALONE BY THE ASSESSEE AS SHARE HOLDER OF M/S ADVANCE AUTO MATION & PROCESS CONTROL PVT. LTD.. THE ASSESSEE RECEIVED THE SALE CO NSIDERATION ON ACCOUNT OF SALE OF SHARES OF M/S ADVANCE AUTOMATION & PROCE SS CONTROL PVT. LTD. AND NOT ON ACCOUNT OF SALE OF LAND AND BUILDING EVE N THERE WAS NO DOCUMENT FOR TRANSFER OF THE IMMOVABLE PROPERTY BEI NG LAND AND BUILDING OWNED BY THE SAID COMPANY. THUS, UNDER NO STRETCH OF IMAGINATION, IT CAN BE HELD THAT THE ASSESSEE TRANSFERRED ANY IMMOVABLE PROPERTY AND NOT SHARES. THE LAND AND BUILDING WAS OWNED BY M/S ADVANCE AUTOMATION & PROCESS CONTROL PVT. LTD. AND NOT BY THE SHAREHOLDE RS AND THEREFORE, THE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 84 SALE OF LAND AND BUILDING CAN BE DONE ONLY BY THE C OMPANY AND NOT BY THE SHAREHOLDERS. THUS, THE LD COUNSEL HAS SUBMITTED THA T IT IS ONLY A CASE OF SALE OF SHARES, THEREFORE, THE PROFIT FROM THE TRAN SACTION IS LONG TERM CAPITAL GAIN. HE HAS FURTHER CONTENDED THAT IT IS S ETTLED PROPOSITION OF LAW THAT THE REVENUE IS ENTITLED TO INVOKE THE LIFTING OF CORPORATE VEIL IF THE FACT SO WARRANTS BUT ONUS IS ON THE REVENUE TO ESTABLISH THE DOMINION OBJECT OF THE TRANSFER AND HOW THE SAID TRANSACTION RESULTE D INTO EVASION OR AVOIDANCE OF TAX. THERE IS NO MATERIAL ON RECORD WHI CH COULD ESTABLISH THAT THE TRANSACTION OF SALE OF SHARES WOULD RESULT IN ANY FORM OF TAX EVASION OR AVOIDANCE BY THE ASSESSEE. HE HAS RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF VODAFONE I NTERNATIONAL HOLDINGS B.V. VS UNION OF INDIA 341 ITR 1 (SC) AND SUBMITTED THAT THE HON'BLE SUPREME COURT HAS HELD THAT THE TRANSACTION OF SHAR E HAS TO BE ACCEPTED AS SUCH AND SUCH A TRANSACTION CANNOT BE RECATEGORI SED AS THE TRANSACTION OF CONTROLLING INTEREST OR BUSINESS SHALL BE HELD B Y THE COMPANY WHOSE SHARES HAVE BEEN TRANSFERRED. THE LD. COUNSEL HAS P OINTED OUT THAT IN THE SAID CASE ALSO, THE REVENUE ATTEMPTED TO ASSESS THE CAPITAL GAIN ON SALE OF CAPITAL ASSET HELD BY THE COMPANY AND THEREBY TO LO OK THROUGH THE AGREEMENTS TO BRING TO THE TAX AND INCOME IN RESPEC T OF THE SALE CONSIDERATION ARISING ON SALE OF SHARES. HOWEVER, TH E HON'BLE SUPREME COURT HAS HELD THAT IT IS NOT LOOK THROUGH TEST B UT LOOK AT TEST WHICH ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 85 MUST BE APPLIED SO AS TO ACCEPT THE CLAIM OF THE AS SESSEE. THE LD. COUNSEL HAS ALSO RELIED UPON THE DECISION OF HON'BLE SUPREM E COURT IN THE CASE OF UNION OF INDIA VS. AAZADI BACHAO ANDOLAN (SUPRA) AN D SUBMITTED THAT THE DOCTRINE OF PIERCING THE VEIL OF INCORPORATION CANN OT BE APPLIED IN GENERAL BUT IT CAN BE APPLIED ONLY TO LIFE THE MAST AND TO TAKEN INTO ACCOUNT WHAT LIES BEHIND IN ORDER TO PREVENT FRAUD. THEREFORE, I N THE NORMAL CASE OF TRANSACTION EVEN RESULTING IN REDUCTION OF TAX LIAB ILITY WOULD NOT WARRANT APPLIED THE DOCTRINE OF LIFTING OF CORPORATE VEIL. HE HAS SUPPORTED THE ORDER OF THE LD. CIT(A). 28. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS NOT DI SPUTED THAT THE ASSESSEE ACQUIRED 50% SHAREHOLDING OF M/S ADVANCE A UTOMATION & PROCESS CONTROL PVT. LTD. ON 05/05/2006. THE STATUS OF THE ASSESSEE QUA M/S ADVANCE AUTOMATION & PROCESS CONTROL PVT. LTD. IS ONLY THE SHARE HOLDER HOLDING 50% OF THE EQUITY SHARES OF THE SAID COMPANY. THE OWNERSHIP OF THE SAID COMPANY GOT CHANGED WHEN THE AS SESSEE ALONGWITH OTHER SHARE HOLDERS SHRI ASHOK KUMAR MUNJAL AND H&H REAL ESTATE PVT. LTD. SOLD THE ENTIRE SHAREHOLDING OF M/S ADVANCE AU TOMATION & PROCESS CONTROL PVT. LTD. TO M/S ROLTA PVT. LTD.. THE SAID T RANSACTION OF SALE OF SHARE WAS UNDISPUTEDLY AFTER MORE THAN TWO YEARS FROM THE DATE OF ACQUISITION. THE ASSESSEE CLAIMED THE PROFIT ARISING FROM THE SALE OF ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 86 SHARES AS LONG TERM CAPITAL GAIN AND THE SAID CLAIM CANNOT BE DISPUTED IN NORMAL CIRCUMSTANCES OF SALE OF SHARES AFTER TWO YEA RS, HOWEVER, THE ASSESSING OFFICER HELD THAT THE COMPANY M/S ADVANCE AUTOMATION & PROCESS CONTROL PVT. LTD. WAS HAVING ONLY THE ASSET AS PLOT OF LAND AND BUILDING THEREON AND THEREFORE, WHAT WAS SOLD BY THE ASSESSEE AND OTHER SHAREHOLDERS OF THE SAID COMPANY WAS THE ASSET BEING THE LAND AND BUILDING. ACCORDINGLY, THE ASSESSING OFFICER TREATE D THE SALE OF SHARES OF M/S ADVANCE AUTOMATION & PROCESS CONTROL PVT. LTD. AS THE TRANSACTIONS OF SALE OF LAND AND CONSEQUENTLY THE GAIN WAS TREATE D AS SHORT TERM CAPITAL GAIN BEING THE SALE WAS LESS THAN THREE YEAR S. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE TRANSACTION OF ENTIR E SHARE HOLDING WAS A DESIGN TO PLAY FRAUD WITH THE SOLE PURPOSE OF AVOIDI NG TAX BUT THE TRANSACTION AS SUCH WAS NOT QUESTIONED BY THE ASSESS ING OFFICER. THE ASSESSING OFFICER HAS TRIED TO LIFT THE CORPORATE V EIL AND HELD THAT BEHIND THE TRANSACTION OF SALE OF SHARES WHAT WAS REALLY TRA NSFERRED WAS THE LAND HELD BY THE SAID COMPANY. IT IS PERTINENT TO NOTE T HAT WHEN THE LAND WAS OWNED AND HELD BY M/S ADVANCE AUTOMATION & PROCESS C ONTROL PVT. LTD. THEN THE SAID ASSET CAN BE SOLD ONLY BY THE SAID CO MPANY OR ON BEHALF OF THE SAID COMPANY. THE SHAREHOLDERS HAVE NOT OWNERSHI P RIGHT OR TITLE OVER THE ASSET HELD BY THE COMPANY AND CONSEQUENTLY HAVE NO RIGHT TO TRANSFER THE ASSET IN THEIR PERSONAL CAPACITY. THE PURCHASER OF THE SHARE HOLDING OF ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 87 M/S ADVANCE AUTOMATION & PROCESS CONTROL PVT. LTD. FROM THE ASSESSEE MIGHT HAVE THE INTEREST IN THE LAND AND BUILDING HE LD BY THE COMPANY AND THEREFORE, THE SAID MOTIVE OF THE PURCHASER CANNOT BE A REASON OR GROUND FOR LIFTING THE CORPORATE VEIL AND RECLASSIFYING TH E TRANSACTION FROM SALE OF SHARES TO SELL OF LAND AND BUILDING. THEREFORE, THE MOTIVE OF M/S ROLTA PVT. LTD. WHO HAS ACQUIRED THE ENTIRE SHAREHOLDING OF M/S ADVANCE AUTOMATION & PROCESS CONTROL PVT. LTD. FROM THE ASSESSEE AND O THER SHAREHOLDERS WOULD NOT CHANGE THE NATURE OF TRANSACTION WARRANTING THE LIFTING OF CORPORATE VEIL. EVEN OTHERWISE THE PURCHASER OF SHAR EHOLDINGS WOULD NOT BECOME THE OWNER OF LAND AND BUILDING HELD BY M/S AD VANCE AUTOMATION & PROCESS CONTROL PVT. LTD. AS THE OWNERSHIP OF THE LAND WILL REMAIN INTACT WITH M/S ADVANCE AUTOMATION & PROCESS CONTROL PVT. L TD.: BEING THE 100% HOLDING COMPANY, M/S ROLTA PVT. LTD. WOULD BE A BLE TO CONTROL THE AFFAIRS OF THE SAID COMPANY AND CAN USE THE BUSINES S ASSET TO ITS BEST INTEREST THEREFORE, THE TRANSACTION WHICH WAS ONLY SA LE OF SHARES CANNOT BE RECLASSIFIED AS SALE OF LAND. THE LD. CIT(A) HAS CONSIDERED AND DECIDED THIS ISSUE IN PARA 4 TO 4.8 AS UNDER: 4 . I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPEL LANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. IT MAY BE MENTIO NED THAT THE WORD 'COMPANY' IMPORTS AN ASSOCIATION OF NUMBER OF INDIV IDUALS FORMED FOR A COMMON PURPOSE. WHEN SUCH AN ASSOCIATION IS INCORPO RATED, IT BECOMES A ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 88 BODY CORPORATE, A LEGAL ENTITY, SEPARATE AND DISTI NCT FROM SUCH INDIVIDUALS. SUCH INCORPORATION MUST OWE ITS EXISTENCE TO A STAT UTORY AUTHORITY. THE CORPORATION/COMPANY, IN LAW, IS A JURISTIC PERSON A ND HAS A SEPARATE LEGAL ENTITY OF ITS OWN. ONCE INCORPORATED, THE ENTITY OF COMPANY IS ENTIRELY SEPARATE FROM THAT OF ITS SHAREHOLDERS. IT BEARS IT S OWN NAME; HAS A SEAL OF ITS OWN; ITS ASSETS ARE SEPARATE AND DISTINCT FROM THOSE OF ITS MEMBERS; IT CAN SUE AND BE SUED EXCLUSIVELY FOR ITS OWN PURPOSE ; LIABILITY OF MEMBERS OR SHAREHOLDERS IS LIMITED TO THE CAPITAL INVESTED BY THEM; CREDITORS OF COMPANY CANNOT OBTAIN SATISFACTION FROM THE ASSETS OF SHAREHOLDERS/MEMBERS OF COMPANY AND SIMILARLY CREDI TORS OF MEMBERS/SHAREHOLDERS HAVE NO RIGHT TO THE ASSETS OF COMPANY. THIS POSITION WAS RECOGNISED IN SALOMON V. SALOMON & CO. 1897 AC 22. WHEN THE SHARES OF A COMPANY ARE BOUGHT, IT CANNOT BE SA ID THAT THE SHAREHOLDER ACQUIRED ANY INTEREST IN THE ASSETS OF THE COMPANY, THEREFORE BY THE SAME ANALOGY WHEN THE SHARES ARE TRANSFERRED, IT CANNOT BE SAID THAT THE SHAREHOLDERS HAS TRANSFERRED THE ASSETS OF THE COMP ANY. IT MAY BE MENTIONED THAT IN CASE OF MRS. BACHA F. GUZDAR VS C IT 27 ITR 01, IT WAS OBSERVED BY THE HONBLE APEX COURT THAT: THAT A SHAREHOLDER ACQUIRES A RIGHT TO PARTICIPATE IN THE PROFITS OF THE COMPANY MAY BE READILY CONCEDED BUT IT IS NOT POSSIBLE TO ACCEPT THE CONTENTION THAT THE SHAREHOLDER ACQUIRES ANY INTERE ST IN THE ASSETS OF THE COMPANY. THE USE OF THE WORD 'ASSETS' IN THE PASSAGE QUOTED ABOVE CANNOT BE EXPLOITED TO WARRANT THE INFERENCE THAT A SHAREHOLDER, ON INVESTING MONEY IN THE PURCHASE OF SHARES, BECOMES ENTITLED TO THE ASSETS OF THE COMPANY AND HAS ANY SHARE IN THE PROPERTY OF THE COMPANY. A SHAREHOLDER HAS GOT NO INTEREST IN THE PROPERTY OF THE COMPANY THOUGH HE HAS UNDOUBTEDLY A RIGHT TO PARTICIPATE IN THE PROFI TS IF AND WHEN THE COMPANY DECIDES TO DIVIDE THEM. THE INTEREST OF A S HAREHOLDER VIS-A-VIS THE COMPANY WAS EXPLAINED IN THE SHOLAPUR MILLS CAS E [1950] SCR 869 AT 904. THAT JUDGMENT NEGATIVES THE POSITION TAKEN UP ON BEHALF OF THE APPELLANT THAT A SHAREHOLDER HAS GOT A RIGHT IN THE PROPERTY OF THE COMPANY. IT IS TRUE THAT THE SHAREHOLDERS OF THE CO MPANY HAVE THE SOLE DETERMINING VOICE IN ADMINISTERING THE AFFAIRS OF T HE COMPANY AND ARE ENTITLED, AS THE ARTICLES OF ASSOCIATION, TO DECLAR E THAT DIVIDENDS SHOULD BE DISTRIBUTED OUT OF THE PROFITS OF THE COMPANY TO TH E SHAREHOLDERS BUT THE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 89 INTEREST OF THE SHAREHOLDER EITHER INDIVIDUALLY OR COLLECTIVELY DOES NOT AMOUNT TO MORE THAN A RIGHT TO PARTICIPATE IN THE P ROFITS OF THE COMPANY. THE COMPANY IS A JURISTIC PERSON AND IS DI STINCT FROM THE SHAREHOLDERS. IT IS THE COMPANY WHICH OWNS THE PROP ERTY AND NOT THE SHAREHOLDERS.' (EMPHASIS SUPPLIED). 4.1 IT IS TO BE NOTED THAT THE IMMOVABLE PROPERTY UNDER CONSIDERATION AT PLOT NO. 187, HSIDC GURGAON WAS OWNED BY M/S AAPCPL ONLY AND NOT BY ITS SHAREHOLDERS AND THEY WERE NOT HAVING AUTHORITY OR RIGHT OVER THE ASSETS OF M/S AAPCPL. THE TITLE OF THE IMMOVABLE PROPERTY REM AINED WITH M/S AAPCPL, EVEN AFTER THE TRANSFER OF EQUITY SHARES BY THE APPELLANT COMPANY ALONG WITH OTHER TWO SHARE HOLDERS TO M/S ROLTA IND IA LTD. THE POSSESSION AND ENJOYMENT OF THE IMMOVABLE PROPERTY REMAINED WI TH M/S AAPCPL. THE THREE SHAREHOLDERS OF M/S AAPCPL HAVE TRANSFERR ED THEIR SHAREHOLDINGS ONLY AND NOT THE IMMOVABLE PROPERTY O F M/S AAPCPL. 4.2 IT MAY BE MENTIONED THAT IN THE CASE OF VODAFO NE INTERNATIONAL HOLDINGS VS UNION OF INDIA AND ANOTHER 341 ITR 01 (SC), IT W AS OBSERVED BY THE HONBLE APEX COURT THAT: 'A CONTROLLING INTEREST IS ON INCIDENT OF OWNERSHIP OF SHARES IN A COMPANY, SOMETHING WHICH FLOWS OUT OF THE HOLDING OF SHARES. A CONTROLLING INTEREST IS, THEREFORE, NOT AN IDENTIFIABLE OR DISTINCT CAPITAL ASSET INDEPENDENT OF THE HOLDING OF SHARES. THE CONTROL OF A COMPANY RESIDES IN THE VOTING POWER OF ITS SHAREHOLDERS AND SHARES REPRESENT AN INTEREST OF A SHAREHOLDER WHICH IS MADE UP OF VARIOUS RIGHTS CONTAINED IN THE CONTRACT EMBE DDED IN THE ARTICLES OF ASSOCIATION. THE RIGHT OF A SHAREHOLDER MAY ASSUME THE CHARACTER OF A CONTROLLING INTEREST WHERE THE EXTENT OF THE SHAREH OLDING ENABLES THE SHAREHOLDER TO CONTROL THE MANAGEMENT. SHARES, AND THE RIGHTS WHICH EMANATE FROM THEM, FLOW TOGETHER AND CANNOT BE DISS ECTED. THE TAX CONSEQUENCES OF A SHARE SALE WOULD BE DIFFE RENT FROM THE TAX CONSEQUENCES OF AN ASSET SALE. A SLUMP SALE WOULD INVOLVE TAX CONSEQUENCES WHICH COULD BE DIFFERENT FROM THE FAX CONSEQUENCES OF A SALE OF ASSETS ON ITEMIZED BASIS' (EMPHASIS SUPPLIED) ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 90 4.3 IT IS TO BE NOTED THAT THE DISPUTE UNDER CONSID ERATION IS SQUARELY COVERED BY THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF BHORUKA ENGINEERING INDUSTRIES. LTD. 356 ITR 25 (KAR.), WHE REIN, IT WAS HELD THAT: 19. IN VIEW OF THE JUDGMENT OF THE APEX COURT IN VODAFONE, IT IS HELD THAT 'TAX PLANNING MAY BE LEGITIMATE PROVIDED IT IS WITHIN TH E FRAMEWORK OF LAW'. 'COLOURABLE DEVICES CANNOT BE A PART OF TAX PLANNIN G AND IT IS WRONG TO ENCOURAGE OR ENTERTAIN THE BELIEF THAT IT IS HONOUR ABLE TO AVOID PAYMENT OF TAX BY RESORTING TO DUBIOUS METHODS'. IT IS AN OBLI GATION OF EVERY CITIZEN TO PAY THE FAXES WITHOUT RESORTING TO SUBTERFUGES. THEREFORE, THOUGH ALL TAX PLANNING IS ILLEGAL / ILLEGITIMATE / IMPERMISSIBLE, THE REVENUE CANNOT TAX A SUBJECT WITHOUT A STATUTE TO SUPPORT AND IN THE COU RSE WE ALSO ACKNOWLEDGE THAT EVERY TAXPAYER IS ENTITLED TO ARRA NGE HIS AFFAIRS SO THAT HIS TAXES SHALL BE AS LOW AS POSSIBLE AND THAT HE I S NOT BOUND TO CHOOSE THAT PATTERN WHICH WILL REPLENISH THE TREASURY. A CITIZEN MAY LEGITIMATELY CLAIM THE ADVANTAGE OF ANY EXPRESS: TERMS OR OF ANY OMISSIONS THAT HE CAN FIND IN HIS FAVOUR IN FAXING STATUTES. HIS LEGAL RI GHT SO TO DISPOSE OF HIS CAPITAL AND INCOME AS TO ATTRACT UPON HIMSELF THE L EAST AMOUNT OF TAX IS FULLY RECOGNIZED. THE LEGAL RIGHT OF TAXPAYER TO DE CREASE THE AMOUNT OF WHAT OTHERWISE WOULD BE HIS TAXES, OR ALTOGETHER TO AVOID THEM BY MEANS WHICH TIRE LAW PERMITS, CANNOT BE DOUBTED. IF THE TAXPAYER IS IN A POSITION TO CARRY THROUGH A TRANSACTION IN TWO ALTERNATIVE W AYS, ONE OF WHICH WILL RESULT IN LIABILITY TO TAX AND THE OTHER OF WHICH W ILL NOT, IS AT LIBERTY TO CHOOSE THE LATTER AND TO DO SO EFFECTIVELY IN THE A BSENCE OF ANY SPECIFIC TAX AVOIDANCE PROVISION. THE FACT THAT THE MOTIVE F OR A TRANSACTION MAY BE TO AVOID TAX DOES NOT INVALIDATE IT UNLESS A PAR TICULAR ENACTMENT SO PROVIDES. A TAX-SAVING MOTIVATION DOES NOT JUSTIFY THE TAXIN G AUTHORITIES OR THE COURTS IN NULLIFYING OR DISREGARDING A TAXPAYER 'S OTHERWISE PROPER AND BONA FIDE CHOICE AMONG COURSES OF ACTION. TAX PLANN ING MAY BE LEGITIMATE PROVIDED IT IS WITHIN THE FRAMEWORK OF LAW. THE INT ENTION OF THE LEGISLATURE IN A TAXATION STATUTE IS TO BE GATHERED FROM THE LA NGUAGE OF THE PROVISIONS PARTICULARLY WHERE THE LANGUAGE IS PLAIN AND UNAMBI GUOUS. IN A TAXING ACT, IT IS NOT POSSIBLE TO' ASSUME ANY INTENTION OR GOVE RNING PURPOSE OF THE STATUTE MORE THAN WHAT IS STATED IN THE PLAIN LANGU AGE. THEREFORE, AS LONG AS THE ARRANGEMENT OF THE ASSESSEE TO AVOID PAYMENT OF TAX DO NOT CONTRAVENE ANY STATUTORY PROVISION AND IS ACHIEVED WITHIN THE FOUR CORNERS OF LAW, IT CANNOT BE FOUND FAULT WITH. IF T HE TRANSACTION IN QUESTION IS SHAM OR COLOURABLE AND ENTERED INTO WITH THE SOL E INTENTION OF EVADING PAYMENT OF TAX, THEN SUCH A TRANSACTION WOULD NOT H AVE ANY LEGITIMACY. THEREFORE, A COLOURABLE DEVICE CANNOT BE A PART OF TAX PLANNING. THEREFORE, IN EACH CASE, THE TRANSACTION IN QUESTIO N AND THE MATERIAL ON ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 91 RECORD HAS TO BE CAREFULLY EXAMINED TO FIND OUT WHE THER THE TRANSACTION IS 'SHAM' OR 'UNREAL' OR 'COLOURABLE DEVICE TO EVADE PAYMENT OF TAX. 20. IN THE INSTANT CASE, AS SET OUT ABOVE, ACCORDI NG TO THE REVENUE, ON THE DAY THE ASSESSEE TRANSFERRED THEIR SHARE FROM BFSL, THE ONLY PROPERTY WHICH WAS AVAILABLE IN BFSL WAS THIS LAND. BEFORE TRANSFER OF THE SHARES, THE BFSL HAS SYSTEMATICALLY REDUCED THIS INVESTMENT EXCEPT THAT OF THE LAND INSTEAD OF TRADING ITS SHARES THROUGH BSE. THE SHARES WERE' TR ADED THROUGH MAGADH STOCK EXCHANGE. IN THE AGREEMENT ENTERED INTO FOR T RANSFER OF SHARES, REFERENCE IS ONLY MADE TO THE SALE OF THE LAND. THE REFORE, WHAT WAS ATTEMPTED TO FOR TRANSFER OF SHARES IS NOTHING BUT THE TRANSFER OF IMMOVABLE PROPERTY. ON THE DATE OF TRANSFER, BFSL HAS BECOME A SHELL COMPANY. THEREFORE, IT WAS A DELIBERATE STRUCTURAL DEVICE TO AVOID TAX IMPLICATIONS. THE GRIEVANCE IS, THE PROPERTY WHICH WAS PURCHASED FOR 3.75 CRORE WAS SOLD TO A CONSIDERATION OF RS. 89,28,36,500/-, THE ASSES SEE SHARE BEING RS. 20,29,08,626/- WITHOUT PAYING CAPITAL GAIN TAX. FRO M THESE FACTS, IT IS CLEAR DLFCDL PAID THE MARKET VALUE AND PURCHASED THE SHAR ES FROM THE ASSESSEE. THEREFORE, THE TRANSACTION OF SHARES IS NOT A NOMIN AL ONE. IT IS NOT A SHAM TRANSACTION. IT IS A REAL TRANSACTION FOR VALUABLE CONSIDERATION. THE EFFECT OF THE TRANSACTION IS DLFCDL HAVING ACQUIRED THE SH ARES BECAME ENTITLED TO ENJOY THE ASSET OF THE COMPANY WHICH WAS HELD BY BFSL. FOR EFFECTING THE SAID TRANSFER, INSTEAD OF TRADING THOSE SHARES THROUGH BANGALORE STOCK EXCHANGE, IT WAS TRADED THROUGH MAGADH STOCK EXCHAN GE. THE MATERIAL ON RECORD SHOWS NO TRADING ACTIVITIES TOOK PLACE IN TH E BSE TO THE' RELEVANT PERIOD. THE ATTEMPT ON THE PART OF THE ASSESSEE TO TRADE THEIR SHARES THROUGH OTHER STOCK EXCHANGE WAS NOT FULFILLED. BUT THEY WERE ABLE TO TRADE THE SAID SHARES THROUGH MAGADH STOCK EXCHANGE WAS F ULFILLED THOUGH THE TRADING LICENCE OF MAGADH STOCK EXCHANGE HAD BEEN S USPENDED EARLIER, SUBSEQUENTLY IT WAS REVOKED AND AFTER SUCH REVOCATI ON, THE ASSESSEE TRADED THE SHARES THROUGH MAGADH STOCK EXCHANGE AND THEREF ORE, THE REQUIREMENTS OF SELLING HAS BEEN COMPLIED WITH. FOR EACH SHARE, THE ASSESSEE WANTED PERMISSION FROM SEBI WITHOUT BEING MADE AVAILABLE TO THE OPEN PUBLIC AT A PRICE OF RS. 2,250/-. WHEN IT IS T RADED THROUGH MAGADH STOCK EXCHANGE, EACH SHARE HAS FETCHED A SUM OF RS. 4,290/- AND BFSL ADMITTEDLY HAS PAID RS. 89,28,36,500/- FOR THE ENTI RE EXTENT OF 15 ACRES OF LAND FOR WHICH, A SUM OF RS. 20,29,08,626/- BEING T HE SHARE VALUE OF THE ASSESSEE. IN THE LIGHT OF THESE UNDISPUTED FACTS, IT CANNOT B E SAID THAT THE TRANSFER OF SHARE BY THE ASSESSEE TO BFSL WAS A COL OURABLE DEVICE TO AVOID PAYMENT OF TAX. IF BFSL HAS SOLD THE SHARES BY EXEC UTING A REGISTERED SALE DEED AND RECEIVED THE SALE CONSIDERATION, THEN, BFS L OUGHT TO HAVE PAID CAPITAL GAINS ON THE SAID CONSIDERATION. THAT IS ON E MODE THROUGH WHICH BFSL-COULD HAVE SOLD THE PROPERTY BELONGING TO IT. THE LAW ALSO PROVIDES ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 92 FOR TRANSFER OF SHARES BY THE SHAREHOLDERS AND THIS ROUTE THE ASSESSEE HAS ADOPTED IN THE INSTANT CASE. BY TRANSFERRING 98.3% OF SHARES HELD BY THE SHAREHOLDERS, VIRTUALLY, THE COMPLETE CONTROL OF TH E COMPANY HAS BEEN HANDED OVER TO THE BFSL AND THEY HAVE RECEIVED THE CONSIDERATION FOR THE SHARES HELD BY THEM, MAY BE PROPORTIONATE TO THE VA LUE OF THE LAND ON THE DATE OF TRANSFER. BUT THAT DOES NOT MAKE THE TRANSA CTION 'COLOURABLE' OR 'UNREAL' OR 'SHAM.' 21 24. IN THE INSTANT CASE, THE ASSESSEE IS HOLDING TH E SHARES IN BFSL FROM 01.10.1984. THEREFORE, IT IS A LONG TERM CAPITAL AS SET. THE TRANSACTION HAS TAKEN PLACE SUBSEQUENT TO 28.09.2004 AS SUCH THE S ECOND CONDITION IS FULFILLED. THEY HAVE PAID THE SECURITY TRANSACTION TAX TO MAGADHA STOCK EXCHANGE. WHERE ALL THESE THREE CONDITIONS STIPULAT ED UNDER SECTION 10(38) OF THE ACT ARE FULFILLED, THE ASSESSEE IS ENTITLED TO THE BENEFIT FLOWING THEREFROM I.E., THE INCOME FROM SUCH TRANSFER SHALL , NOT BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE FOR THE PREVIOUS YEAR. MERELY BECAUSE IF A REGISTERED SALE DEED HAS BEEN EXECUTED BY BFSL SELL ING THE LAND IN FAVOUR OF DFL-CDL IN WHICH EVENT CAPITAL GAIN SHOULD HAVE BEEN PAID ON THE SALE CONSIDERATION, IS NO REASON TO HOLD THAT WHEN A SHA REHOLDER OF BFSL TRANSFER HIS SHARE FOR A CONSIDERATION, AFTER COMPL YING WITH THE LEGAL REQUIREMENTS, IS NOT ENTITLED TO THE BENEFIT OF TAX EXEMPTION. ALL THE AUTHORITIES ARE CARRIED AWAY BY THIS ASPECT: OF THE MATTER AND BECAUSE THE ASSESSEE WAS ABLE TO AVOID PAYMENT OF INCOME TAX, C ONSEQUENTLY THE DEPARTMENT WAS DEPRIVED OF THE TAX, THEY HAVE COME TO THE CONCLUSION THAT IT IS A COLOURABLE DEVICE AND TAX PLANNING TO AVOID PAYMENT OF TAX. THE ASSESSEE BY RESORTING TO SUCH O TAX PLANNING, H AS TAKEN ADVANTAGE OF THE BENEFIT OF THE LAW OR THE LOOPHOLES IN THE LAW, WHICH HAD ENURED TO HIS BENEFIT. AFTER SEEING HOW THIS LOOPHOLE HAS BEEN EX PLOITED WITHIN FOUR CORNERS OF THE LAW, IT IS OPEN TO THE PARLIAMENT TO AMEND THE LAW PLUGGING THE LOOPHOLE. HOWEVER, BY ANY JUDICIAL INTERPRETATI ON WE CANNOT READ INTO THE SECTION, WHICH WAS NOT INTENDED TO, BY THE PARL IAMENT AT THE TIME OF ENACTING THIS PROVISION. THE LANGUAGE EMPLOYED IN S ECTION 10(38) OF THE ACT IS SIMPLE AND UNAMBIGUOUS AND IT MAKES NO DISTINCTION BETWEEN THE TRANSFER OF SHARE OF COMPANY WITH AN IMMOVABLE ASSE T AND MOVABLE ASSET, INSTEAD OF EXECUTING A SALE DEED IN RESPECT OF THE IMMOVABLE PROPERTY BY THE COMPANY, WHICH IS OWNING THE LAND. IF THE SHAREHOLDER CHOOSES TO TRANSFER THE LANDS AND PART WITH THE LAN D TO THE PURCHASER OF THE SHARES, IT WOULD BE A VALID LEGAL TRANSACTION I N LAW AND MERELY BECAUSE THEY WERE ABLE TO AVOID PAYMENT OF TAX, IT CANNOT BE SAID TO BE A COLOURABLE DEVICE OR A SHAM TRANSACTION OR AN UNREA L TRANSACTION. ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 93 25. AS SET OUT ABOVE, THE TRANSACTION IS REAL, VAL UABLE CONSIDERATION IS PAID, ALL LEGAL FORMALITIES ARE COMPLIED WITH AND WHAT IS TRANSFERRED IS THE SHARES AND NOT THE IMMOVABLE PROPERTY. THE FINDING OF THE ASSESSING AUTHORITY THAT IT IS A TRANSFER OF IMMOVABLE PROPER TY IS CONTRARY TO LAW AND CONTRARY TO THE MATERIAL ON RECORD. THEY COMMIT TED A SERIOUS ERROR IN PROCEEDING ON THE ASSUMPTION THAT THE EFFECT OF TRA NSFER OF SHARE IS TRANSFER OF IMMOVABLE PROPERTY AND THEREFORE, IF TH E VEIL OF THE COMPANY IS LIFTED WHAT APPEARS TO THEM IS TRANSFER OF IMMOV ABLE PROPERTY. SUCH A FINDING IS IMPERMISSIBLE IN LAW. UNFORTUNATELY, THREE AUTHORITIES COMMITTED THE VERY SAME MISTAKE WHICH IS EX FACIE, ILLEGAL, C ONTRARY TO SETTLED LEGAL POSITION AND THEREFORE, REQUIRES TO BE SET ASIDE. I N THAT VIEW OF THE MATTER, WE PASS THE FOLLOWING ORDER: (A) APPEAL IS ALLOWED. (B) THE IMPUGNED ORDER PASSED BY ALL THE THREE AUT HORITIES IS HEREBY SET ASIDE. (C) THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE.' (EMPHASIS SUPPLIED) 4.4 IN THE CASE OF DCIT VS MAYA APPLIANCES (P.) LTD . [2017] 82 TAXMANN.COM 447 (CHENNAI - TRIB.), THOUGH THE ISSUE WAS RELATIN G TO APPLICATION OF PROVISIONS OF SECTION 50C OF THE ACT BUT IT WAS HEL D BY THE HONBLE TRIBUNAL THAT BY TRANSFERRING THE SHARES, THE ASSETS OF THE COMPANY WERE NOT TRANSFERRED BY THE SHAREHOLDERS. IT WOULD BE APPROP RIATE TO REPRODUCE THE RELEVANT EXTRACTS AS UNDER: 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE MAIN CONTENTION OF THE ID. A.R IS THAT TH E PROVISIONS OF THE SECTION 50C DOES NOT ATTRACT TO THE TRANSACTIONS, WHICH ORE NOT REGISTERED WITH THE STOMP DUTY VALUATION AUTHORITY AND THERE WAS NO DIR ECT TRANSFER OF LAND AND BUILDING OR BOTH. IN THE PRESENT CASE, THE ASSESSEE COMPANY, SOLD THE SHORES OF M/S. GENERAL WOOD INDUSTRIES (P) LTD., AT ITS PREVA ILING BOOK VALUE TO THE FOLLOWING PERSONS : MR. T.T. VARADARAJAN 50% -12,000 SHORES AT RS. 100 - RS. 12 LAKHS MRS. MAYO VARADARAJAN 50% -12,000 SHORES OF RS. 10 0 - RS. 12 LAKHS ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 94 THUS, THE OWNERSHIP OF THE COMPANY VIZ. M/S. GENER AL WOOD INDUSTRIES (PJ LTD., NOW OWNED BY THE ABOVE TWO PERSONS JOINTLY. A CCORDING TO ID. ASSESSING OFFICER, THE ASSESSEE SOLD THE ACTUAL LAND AND BUIL DING IN THE GUISE OF SOLE OF SHORES TO THE ABOVE PERSONS AND THE PROVISIONS OF T HE SECTION 50C OF THE ACT IS APPLICABLE, THOUGH THE PROPERTIES ORE NOT REGISTERE D WITH THE STOMP VALUATION AUTHORITY. IN THE INSTANT CASE, WHAT WAS TRANSFERRED BY THE AS SESSEE, EVEN THE SHARES IN M/S. GENERAL WOOD INDUSTRIES (P) LTD. , AND NOT THE LAND AND BUILDING OR BOTH. THE ASSETS TRANSFERRED BEING THE SHARES , WHICH WAS NEVER PORT OF ASSESSMENT OF STAMP DUTY AUTHORITY OF THE S TATE GOVERNMENT. IN SUCH CIRCUMSTANCES THAT CANNOT BE NO QUESTION OF INVOKIN G THE PROVISIONS OF THE SECTION 50C OF THE ACT OR THERE IS NO DIRECT TRANSF ER AS ENUMERATED IN SEC.50C OF THE ACT R.W.S 2(47) OF THE ACT. BEING SO, LD. CIT (A) HAD TAKEN A CORRECT VIEW OF THE FACTS OF THE CASE BY PLACING RELIANCE ON THE JUDGEMENT OF KARNATAKA HIGH COURT IN THE CASE OF BHORUKA ENGINEERING INDS. LTD. (SUPRA) AND ALSO THE JUDGEMENT OF TRIBUNAL IN THE CASE OF ASIF ABDUL KAD ER FAZLANI (SUPRA). ACCORDINGLY, WE ARE INCLINED TO UPHOLD THE ORDER OF LD. CIT (A). HENCE, THE GROUND RAISED BY THE REVENUE STANDS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED .'(EMPHASIS SUPPLIED) 4.5 IN THE CASE OF IRFAN ABDUL KADER FAZLANI VS ACI T [2013] 29 TAXMANN.COM 424 (MUMBAI - TRIB.), THE ASSESSEE WAS A SHAREHOLDE R OF KMPL. THE COMPANY KMPL HAD ISSUED 3813 SHARES, OUT OF WHICH A SSESSEE WAS HOLDING 306 SHARES. KMPL ALSO OWNED TWO FLATS. DURING RELEV ANT ASSESSMENT YEAR, ASSESSEE ALONGWITH OTHER SHAREHOLDERS SOLD ALL THE SHARES OF KMPL TO ONE 'R'. THE INCOME EARNED FROM SALE OF SHARES WAS DECL ARED UNDER HEAD 'LONG TERM CAPITAL GAIN 1 . THE AO CONCLUDED THAT BY ENGINEERING THE SALE OF THE SHARES OF ALL OTHER SHAREHOLDERS OF THE COMPANY I.E . KMPL, THE ASSESSEE EFFECTIVELY TRANSFERRED THE IMMOVABLE PROPERTY BELO NGING TO THE ASSESSEE, THEREFORE, IT IS AN INDIRECT WAY OF TRANSFERRING TH E IMMOVABLE PROPERTIES I.E. FLATS, FOR LESSER CONSIDERATION AND, THEREFORE, THE PROVISIONS OF SECTION 50C HAD APPLICATION TO THE FACTS OF THE CASE. CONSEQUEN TLY, THE AO HAS APPLIED THE GUIDELINES PRICES OF THE FLATS AND WORKED OUT T HE CAPITAL GAINS. IT WAS HELD BY THE HONBLE ITAT, MUMBAI THAT: THE CAPITAL ASSETS THAT ARE COVERED UNDER THE PR OVISIONS ARE LAND OR BUILDING OR BOTH. EXPRESSION 'TRANSFER' SHALL HAVE TO BE A D IRECT TRANSFER AS DEFINED U/S ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 95 2(47) OF THE ACT WHICH DOES NOT INCLUDE THE TAX PLA NNING ADOPTED BY THE ASSESSEE. IT IS SETTLED ISSUE THAT THE PROVISIONS O F SECTION 50C ARE DEEMED PROVISIONS AND, THEREFORE, THE SAME HAVE TO BE INTE RPRETED STRICTLY IN ACCORDANCE WITH THE SPIRIT OF THE PROVISIONS. IN TH E LIGHT OF THE ABOVE LEGAL INTERPRETATION OF SECTION 50C OF THE ACT, WE NEED T O EXAMINE THE FACTS OF THE PRESENT CASE. IN THE INSTANT CASE, WHAT TRANSFERRED BY THE ASSESS EE ARE THE SHARES IN THE COMPANY AND NOT THE LAND OR BUILDING OR BOTH. ASSESSEE DOES NOT HAVE FULL OWNERSHIP ON THE FLATS WHICH ARE OWNE D BY THE COMPANY. THE TRANSFER OF SHARES WAS NEVER A PART OF THE ASSESSME NT OF THE STAMP DUTY AUTHORITIES OF THE STATE GOVERNMENT. THE COMPANY WA S DERIVING INCOME, TAXABLE UNDER THE HEAD 'INCOME FROM PROPERTY' FOR M ORE THAN A DECADE. THE EXPRESSION 'ASSESSABLE' IS INSERTED IN SECTION 50C( 1) OF THE ACT IS NOT RELEVANT FOR THE IMPUGNED ASSESSMENT YEARS. IN SUCH CIRCUMST ANCES, THE AO'S DECISION TO INVOKE THE PROVISIONS OF SECTION 50C TO THE TAX PLANNING ADOPTED BY THE ASSESSEE IS NOT PROPER AND IT DOES NOT HAVE THE SAN CTION OF THE PROVISIONS OF IT ACT.' (EMPHASIS SUPPLIED) 4.6 IN A RECENT DECISION DATED 13.12.2017, IN THE C ASE OF SHRI NAVRATTAN KOTHARI VS. ACIT IN ITA NO. 425/JP/2017, IT WAS OBS ERVED BY THE HONBLE ITAT, JAIPUR THAT: '7 FURTHER; REASSESSMENT PROCEEDINGS WERE INITIATED B Y THE AO ON THE PREMISE THAT THE ASSESSEE HAS NOT DISCLOSED THE PURCHASE CO NSIDER OF THE ALLEGED LAND, HOWEVER , IT IS PERTINENT TO NOTE THAT THE ASSESSEE DID NOT P URCHASE ANY LAND AS IT REMAINED WITH M/S SHRI KALYAN BUILDMART PVT. LTD. A ND THERE IS NO CHANGE OF THE OWNERSHIP OF THE SAID LAND AS BELONG TO M/S KAL YAN BUILD MART PVT. LTD. WE FIND THAT THERE IS NO TRANSACTION OF SALE AND PURCH ASE OF LAND IN QUESTION BETWEEN THE ASSESSEE AND SHRI MADAN MOHAN GUPTA. WH AT WAS TRANSFERRED BY SHRI MADAN MOHAN GUPTA AND HIS WIFE SMT. SHASHI KAL A GUPTA WERE THE SHARES OF M/S KALYAN BUILDMART PVT. LTD. WHICH OWNED THE L AND IN QUESTION. THERE MAY BE A CASE OF UNDER VALUATION OF SHARES AND UNDERSTA TEMENT OF CONSIDERATION PAID BY THE ASSESSEE HOWEVER , IT IS NOT A CASE OF PURCHASE OF LAND. (EMPHASIS SUPPLIED) 4.7 IT IS ALSO NOTED THAT THE APPELLANT HAS HELD T HE EQUITY SHARES OF M/S AAPCPL FOR MORE THAN A PERIOD OF 12 MONTHS, THEREFO RE, THESE SHARES BECOME THE LONG TERM CAPITAL ASSETS AND CONSEQUENTL Y, THE CAPITAL GAINS ON THE TRANSFER OF SUCH EQUITY SHARES IS TO BE ASSESSE D AS LONG TERM CAPITAL ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 96 GAINS. IF, TOR THE TIME BEING, IT IS ASSUMED THAT M /S AAPCPL HAS REDUCED ITS TAX LIABILITY ON SALE OF IMMOVABLE PROPERTY THROUGH SALE OF TRANSFER OF EQUITY SHARES BY THE THREE SHAREHOLDERS, AS ALLEGED BY THE AO IN THE ASSESSMENT ORDER, THEN THE ACTION HAS TO BE TAKEN I N THE HANDS OF M/S AAPCPL AND NOT IN THE HANDS OF THE APPELLANT. 4.8 IN VIEW OF THE ABOVE DISCUSSION, LOOKING TO TH E FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THAT THE AO WAS NOT JUSTIFIED IN CONCLUDING THAT THE APPELLANT HAS SOLD THE IMMOVABLE PROPERTY OWNED BY M/S AAPCPL, WHICH IS CONTRADICTORY TO THE FACT THAT EVEN AFTER THE TR ANSFER OF EQUITY SHARES BY THE APPELLANT COMPANY AND OTHER TWO SHAREHOLDERS, T HE IMMOVABLE PROPERTY WAS STILL IN THE NAME OF M/S AAPCPL, IT WA S IN ITS POSSESSION ONLY AND WAS BEING ENJOYED BY IT. THUS, THE AO IS HEREBY DIRECTED TO TREAT THE CAPITAL GAIN ON THE SALE OF SHARES OF M/S AAPCPL HE LD BY THE APPELLANT AS LONG TERM CAPITAL GAIN. HENCE, THIS GROUND OF APPEA L IS HEREBY ALLOWED. ONCE THE PLAIN AND SIMPLE FACT IS NOT IN DISPUTE TH AT WHAT IS TRANSFERRED BY THE ASSESSEE IS THE SHARES OF M/S ADVANCE AUTOMATIO N & PROCESS CONTROL PVT. LTD. AND NOT THE ASSET OWNED BY THE SAID COMPA NY THEN THE OWNERSHIP OF THE ASSET HELD BY THE COMPANY DOES NOT EFFECT BY CHANGE OF OWNERSHIP OF THE COMPANY ITSELF. THE CHANGE IN THE SH AREHOLDINGS OF THE COMPANY SHALL NOT AMOUNT TO CHANGE OF THE HOLDING O F ASSET BY THE COMPANY. IT IS SETTLED PROPOSITION OF LAW THAT THE C OMPANY IS SEPARATE LEGAL ENTITY THEN ITS SHARE HOLDERS. THE ASSET OWNED BY THE COMPANY WOULD REMAIN THE ASSET OF THE COMPANY IRRESPECTIVE O F CHANGE OF SHAREHOLDING OF SUCH COMPANY. THE CHANGING HANDS OF SHARES OF COMPANY ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 97 WOULD AMOUNT THE CHANGE OF OWNERSHIP OF THE COMPANY A ND NOT THE CHANGE OF OWNERSHIP OF THE ASSET HELD BY THE COMPAN Y. THE HON'BLE SUPREME COURT IN THE CASE OF VODAFONE INTERNATIONA L HOLDINGS B.V. VS UNION OF INDIA (SUPRA) WHILE CONSIDERING THE IDENTIC AL ISSUE IN PARA 168, 169 AND 179 HAS HELD AS UNDER: 168. SUBSTANTIAL TERRITORIAL NEXUS BETWEEN THE INCOME AN D THE TERRITORY WHICH SEEKS TO TAX THAT INCOME, IS OF PRIME IMPORTANCE TO LEVY TAX. EXPRESSION USED IN SECTION 9(1)( I ) IS 'SOURCE OF INCOME IN INDIA' WHICH IMPLIES THAT INCOME ARISES FROM THAT SOURCE AND THERE IS NO QUES TION OF INCOME ARISING INDIRECTLY FROM A SOURCE IN INDIA. EXPRESSI ON USED IS 'SOURCE OF INCOME IN INDIA' AND NOT 'FROM A SOURCE IN INDIA'. SECTION 9 CONTAINS A 'DEEMING PROVISION' AND IN INTERPRETING A PROVISION CREATING A LEGAL FICTION, THE COURT IS TO ASCERTAIN FOR WHAT PURPOSE THE FICTION IS CREATED, BUT IN CONSTRUING THE FICTION IT IS NOT TO BE EXTEN DED BEYOND THE PURPOSE FOR WHICH IT IS CREATED, OR BEYOND THE LANGUAGE OF SECTION BY WHICH IT IS CREATED. [SEE CIT V. SHAKUNTALA AIR 1966 SC 719, MANCHERI PUTHUSSERI AHMED V. KUTHIRAVATTAM ESTATE RECEIVER [1996] 6 SCC 185. 169. POWER TO IMPOSE TAX IS ESSENTIALLY A LEGISLATIVE FU NCTION WHICH FINDS IN ITS EXPRESSION ARTICLE 265 OF THE CONSTITUTION OF I NDIA. ARTICLE 265 STATES THAT NO TAX SHALL BE LEVIED EXCEPT BY AUTHOR ITY OF LAW. FURTHER, IT IS ALSO WELL SETTLED THAT THE SUBJECT IS NOT TO BE TAXED WITHOUT CLEAR WORDS FOR THAT PURPOSE; AND ALSO THAT EVERY ACT OF PARLIAMENT MUST BE READ ACCORDING TO THE NATURAL CONSTRUCTION OF ITS W ORDS. VISCOUNT SIMON QUOTED WITH APPROVAL A PASSAGE FROM ROWLATT, J. EXP RESSING THE PRINCIPLE IN THE FOLLOWING WORDS: 'IN A TAXING ACT ONE HAS TO LOOK MERELY AT WHAT IS CLEARLY SAID. THERE IS NO ROOM FOR ANY INTENDMENT. THERE IS NO EQUITY ABOU T A TAX. THERE IS NO PRESUMPTION AS TO TAX. NOTHING IS TO BE READ IN, NO THING IS TO BE IMPLIED. ONE CAN ONLY LOOK FAIRLY AT THE LANGUAGE USED. [ CAPE BRANDY SYNDICATE V. IRC [1921] 1 KB 64, P. 71 (ROWLATT, J.)]' 176. SECTION 9(1)( I ), THEREFORE, IN OUR CONSIDERED OPINION, WILL NOT APPLY TO THE TRANSACTION IN QUESTION OR ON THE RIGHTS AND EN TITLEMENTS, STATED TO HAVE TRANSFERRED, AS A FALL OUT OF THE SALE OF CGP SHARE, SINCE THE REVENUE HAS FAILED TO ESTABLISH BOTH THE TESTS, RES IDENT TEST AS WELL THE SOURCE TEST. ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 98 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND AS WELL AS THE SETTLED PROPOSITION OF LAW THAT THE TAX PLANNING MAY BE LEGI TIMATE PROVIDED ITS WITHIN THE FRAMEWORK OF LAW AND EVERY TAX PAYER IS ENT ITLED TO ARRANGE ITS AFFAIRS SO THAT HIS TAXES SHALL BE AS LOW AS POSSIBL E AND NOT BOUND TO CHOSE THAT PATTERN WHICH WILL REPLENISH THE TREASURY. WE HOLD THAT THE TRANSACTION OF SALE OF SHARES IS A REAL TRANSACTION OF TRANSFER OF SHARES AND NOTHING ELSE WHEN THERE IS NO ALLEGATION OF ANY FRAU DULENT INTENTION BEHIND THE TRANSACTION AND AVOIDANCE OF TAX BUT THE ASSESSEE HAS OFFERED THE INCOME AS LONG TERM CAPITAL GAIN WHICH WAS PROPOS ED BY THE ASSESSING OFFICER TO ASSESSEE AS SHORT TERM CAPITAL GAIN. ACCORDINGLY WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE LD. CIT(A) QUA THIS ISSUE. 29. GROUND NO.3 OF THE REVENUES APPEAL IS REGARDIN G DISALLOWANCE OF SHORT TERM CAPITAL LOSS ON SALE OF SHARES OF L&T LTD . BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 94(8) OF THE ACT, WHICH WAS DELETED BY THE LD. CIT(A). THE ASSESSEE PURCHASED 778 00 EQUITY SHARES OF L&T LTD. FOR A CONSIDERATION OF RS. 19,99,40,244/- I N THE MONTH OF SEPTEMBER, 2008. SUBSEQUENTLY M/S L&T LTD. HAS DECID ED TO ISSUE AND ALLOT BONUS SHARES IN THE RATIO OF 1:1 AND THE ASSE SSEE WAS ALLOTTED EQUAL NUMBER OF BONUS SHARES ON 08/10/2008. THEREAFTER THE ASSESSEE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 99 SOLD 77800 EQUITY SHARES IN THREE TRENCHES FOR A TO TAL CONSIDERATION OF RS. 7,05,13,409/-. THE DETAILS OF SALES OF SHARES ARE A S UNDER: DATE NO OF SHARES AMOUNT (RS.) 03/11/2009 58400 9,11,72,453/ - 19/03/2010 15440 2,49,56,444/ - 23/03/2010 3500 56,55,715/ - 29/03/2010 460 7,35,012/ - THUS, THE ASSESSEE INCURRED SHORT TERM CAPITAL LOSS OF RS. 12,94,26,835/- ON SALE OF 77800 EQUITY SHARES OF L&T LTD. DURING TH E ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER PROPOSED TO INVO KE SECTION 94(8) OF THE ACT CONTEMPLATES BONUS STRIPING AND THEREBY IGN ORING THE LOSS ARISING FROM THE SAID TRANSACTION OF PURCHASE AND SALE OF S HARES OF L&T LTD. THE ASSESSEE OBJECTED TO THE PROPOSED DISALLOWANCE, HOWEV ER, THE ASSESSING OFFICER FINALLY DISALLOWED THE CLAIM OF SHORT TERM C APITAL LOSS AND CONSEQUENTLY MADE THE ADDITION ON THIS ACCOUNT OF R S. 12,94,26,835/-. 30. ON APPEAL, THE LD CIT(A) HAS HELD THAT THE PROVI SIONS OF SECTION 94(8) OF THE ACT ARE NOT APPLICABLE IN CASE OF PURC HASE AND SALE OF SHARES AS THE SAID SECTION IS APPLICABLE ONLY IN CASE OF P URCHASE AND SALE OF UNITS. 31. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE R EVENUE HAS RAISED THIS GROUND. BEFORE US, THE LD CIT-DR HAS SUBMITTED THAT THE ASSESSING OFFICER HAS NOT ONLY INVOKED THE PROVISIONS OF SECT ION 94(8) OF THE ACT BUT ALSO HELD THAT THE PURCHASE AND SALE OF SHARES ARE NOT GENUINE TRANSACTION ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 100 AND DISALLOWED THE CLAIM OF SHORT TERM CAPITAL LOSS. THE LD CIT-DR HAS FURTHER CONTENDED THAT THE SALE OF SHARES IS AFTER THE BONUS SHARES WERE ISSUED AND CONSEQUENTLY THE COST OF ACQUISITION WOUL D BE ADJUSTED COST OF TOTAL NUMBER OF SHARES HELD BY THE ASSESSEE AFTER T HE BONUS ISSUED. THE LD. CIT-DR HAS RELIED UPON THE ORDER OF THE ASSESSI NG OFFICER. 32. ON THE OTHER HAND, THE LD COUNSEL FOR THE ASSES SEE HAS SUBMITTED THAT THE ASSESSEE SOLD THE ORIGINAL QUANTITY OF SHA RES HELD BY IT PRIOR TO THE BONUS SHARE ISSUED. THEREFORE, THE PURCHASE PRIC E OF THE ORIGINAL SHARES SHALL BE CONSIDERED FOR COMPUTING THE CAPITA L GAIN OR LOSS. THE COST OF BONUS SHARES IS NIL AND THEREFORE, ON SALE OF BO NUS SHARES, THE CAPITAL GAIN WOULD BE COMPUTED BY TAKING THE COST OF ACQUISI TION AT NIL. HE HAS FURTHER CONTENDED THAT THE ASSESSING OFFICER HIMSEL F ADMITTED THAT THE ASSESSEE HAD PURCHASED SHARES OF L&T LTD. AND SOLD SUCH SHARES AFTER HAVING RECEIVED BONUS SHARES, THEN THE FINDING OF T HE ASSESSING OFFICER QUESTIONING THE GENUINENESS OF THE TRANSACTION IS C ONTRARY TO THE ACCEPTED FACTS. HE HAS THUS, CONTENDED THAT THE ORDER OF THE ASSESSING OFFICER IS NOTHING BUT INVALID AND WITHOUT ANY BASIS JUST TO DI SALLOW THE CLAIM OF THE ASSESSEE. THE LD COUNSEL HAS SUBMITTED THAT THE DETA ILS OF PURCHASE AND SALE OF SHARES WERE VERY MUCH AVAILABLE ON RECORD AS THE SHARES WERE CREDITED IN THE DEMAT ACCOUNT OF THE ASSESSEE AND SO LD FROM THE DEMAT ACCOUNT OF ASSESSEE, THEREFORE, THE ENTIRE TRANSACT ION OF PURCHASE AND ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 101 SALE IS FROM THE DEMAT ACCOUNT OF THE ASSESSEE WHICH CANNOT BE DISPUTED. THE ASSESSEE ALSO PRODUCED ALL THE RELEVAN T DOCUMENTS BEING BROKERS NOTE, LEDGE ACCOUNT, TRANSACTION STATEMENT, COPY OF DEMAT ACCOUNT AND COPY OF THE BANK STATEMENT REFLECTING T HE PAYMENT OF PURCHASE CONSIDERATION AND RECEIPT OF SALE CONSIDER ATION. THE BONUS SHARES WERE ALSO REFLECTED IN THE LEDGER ACCOUNT AS WELL AS IN THE OTHER RECORD. IT IS ALSO A TRANSACTION WHICH CAN BE VERIF IED INDEPENDENTLY FROM INDEPENDENT SOURCES. HENCE, THE LD COUNSEL HAS SUBM ITTED THAT THE ASSESSING OFFICER WITHOUT CONDUCTING ANY ENQUIRY IN RESPECT OF THE GENUINENESS OF THE TRANSACTION HAS GIVEN A VERY CAS UAL AND VAGUE FINDING. HE HAS POINTED OUT THAT SINCE THERE ARE TWO LOT OF S HARES ACQUIRED BY THE ASSESSEE, ONE THE ORIGINAL LOT OF 77800 EQUITY SHAR ES AND SUBSEQUENTLY EQUAL NUMBER OF BONUS SHARES ISSUED BY THE COMPANY. THEREFORE, WHAT WAS SOLD BY THE ASSESSEE WAS THE ORIGINAL SHARES BASE D ON THE FIFO METHOD. HE HAS SUPPORTED THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 33. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE SHARES OF L&T LTD. ARE LISTED IN THE STOCK EXCHANGE AND FURTHER THE ASSESSING OFFICER ITSELF H AS GIVEN DETAILS OF PURCHASE, BONUS SHARES AND SALE OF THE SHARES BY TH E ASSESSEE IN THE ASSESSMENT ORDER. THEREFORE, THE QUESTION OF GENUINE NESS OF THE PURCHASE AND SALE OF SHARES WAS NOT THE SUBJECT MATT ER OF ENQUIRY OF THE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 102 ASSESSING OFFICER IN THE ASSESSMENT ORDER. HENCE, T HE CASUAL OBSERVATION OF THE ASSESSING OFFICER REGARDING THE GENUINENESS OF THE PURCHASE AND SALE IS CONTRARY TO THE ADMITTED FACTS ON RECORD. E VEN OTHERWISE WHEN THE ASSESSEE HAS PRODUCED ALL THE SUPPORTING EVIDENCE O F PURCHASE AND SALES SHARES OF L&T LTD. WHICH IS A LISTED COMPANY THEN IF THE ASSESSING OFFICER WAS HAVING ANY SERIOUS DOUBT ABOUT THE GENUINENESS O F THE TRANSACTION, THE SAME COULD HAVE BEEN VERIFIED BY CONDUCTING ANY INDEPENDENT ENQUIRY FROM INDEPENDENT SOURCES. HENCE, WE DO NOT F IND ANY SUBSTANCE OR MERITS IN THE SAID FINDING OF THE ASSESSING OFFI CER WHICH IS CONTRARY TO THE ADMITTED FACTS ON RECORD. AS REGARDS THE APPLIC ABILITY OF THE PROVISIONS OF SECTION 94(8) OF THE ACT WE NOTE THAT THE SAID PR OVISION IS APPLICABLE IN THE CASE OF PURCHASE AND SALE OF UNITS AND IN BETWEE N THE BONUS UNITS WERE ISSUED AND RECEIVED BY THE UNIT HOLDER. THERE IS A DISTINCTION IN THE LANGUAGE EMPLOYED IN SECTION 94(7) AND 94(8) OF THE ACT. THE PROVISIONS OF SECTION 94(7) ARE APPLIED TO SECURITIES AS WELL A S UNITS WHEREAS THE PROVISIONS OF SECTION 94(8) OF THE ACT STIPULATES T HE DISALLOWANCE OF LOSS ON PURCHASE AND SALE OF UNITS WITHIN THE SPECIFIC PE RIOD TO THE RECORD DATE SUBJECT TO THE CONDITION THAT THE ADDITIONAL UNITS WERE ALSO ALLOTTED WITHOUT ANY PAYMENT. THUS, THE PROVISIONS ENVISAGE DI SALLOWANCE OF LOSS ON PURCHASE AND SALE OF UNITS (MUTUAL FUNDS) AND NO T PURCHASE AND SALE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 103 OF SHARES OR SECURITIES. THE LD. CIT(A) DEALT THIS IS SUE IN PARA 3.1 TO 3.3 AS UNDER: 3.1 IT IS EVIDENT FROM THE ABOVE DETAILS THAT THE APPELLANT COMPANY HAS PURCHASED SHARES OF M/S L&T CUM BONUS I.E. IT WAS E NTITLED FOR THE BONUS SHARES AND WHEN, IT SOLD THE SHARES, THE PRICE WAS EX-BONUS I.E. PURCHASER WAS NOT ENTITLED FOR BONUS SHARES. THE BONUS SHARES WERE ISSUED TO THE APPELLANT ON 08.10.2008 WITHOUT ANY COST. IT COULD BE SEEN FROM THE PROVISIONS OF SECTION 94(8) OF THE ACT THAT THESE A RE APPLICABLE TO ONLY UNITS AND THE MEANING OF UNIT IS ASSIGNED TO IN CLAUSE (B) OF THE EXPLANATION TO SECTION 115AB WHICH PROVIDES THAT U NIT MEANS A UNIT OF A MUTUAL FUND OR UTI. THUS, IT IS CLEAR THAT EQUITY SHARES ARE NOT COVERED UNDER THE PROVISIONS OF SECTION 94(8) ACT AND AS SU CH THESE ARE NOT APPLICABLE IN THE INSTANT CASE UNDER CONSIDERATION. IT IS ALSO NOTED THAT AS PER PROVISIONS OF SECTION 55(2) (IIIA) OF THE ACT, THE COST OF ACQUISITION OF BONUS SHARES IS TO BE TAKEN AS NIL AND THEREFORE, T HE COST OF SHARES ACQUIRED CUM BONUS WOULD NOT BE DILUTED ON ACCOUNT OF ISSUE OF BONUS SHARES TO THE APPELLANT. 3.2 IT IS NOTED THAT THE SALE AND PURCHASE OF THESE SHARES WERE EXECUTED ON STOCK EXCHANGE THROUGH STOCK BROKERS AND THE APPELL ANT HAS PAID STT ON PURCHASE AS WELL SALE OF THESE SHARES. IT IS FURTHE R NOTED THAT THE AO HAS ISSUED SHOW CAUSE NOTICE U/S 94(8) OF THE ACT BUT H AS MADE DISALLOWANCE BY HOLDING THAT THE GENUINENESS OF THE PURCHASE AND SALE OF SHARES OF L & T COULD NOT BE PROVED BY THE APPELLANT AS THE COMPL ETE DETAILS WERE NOT PROVIDED. I FAIL TO UNDERSTAND ON WHAT BASIS, THE A O HAS ARRIVED TO THE CONCLUSION THAT THE PURCHASE AND SALE OF SHARES OF M/S L&T WERE NOT GENUINE WITHOUT DISCUSSING THE MATTER IN THE ASSESS MENT ORDER. 3.3 IN VIEW OF THE ABOVE DISCUSSION AND LOOKING TO THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THAT THE AO W AS NOT JUSTIFIED IN ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 104 DISALLOWING SHORT TERM CAPITAL LOSS OF RS. 12,94,26 ,835/- ON THE PURCHASE AND SALE OF SHARES OF M/S L & T AND THUS, THE AO IS HEREBY DIRECTED TO ALLOW THE SAME TO THE APPELLANT COMPANY. HENCE, THI S GROUND OF APPEAL IS HEREBY ALLOWED. IT IS CLEAR THAT IT IS NOT A CASE OF DIVIDEND STRIP ING AS PROVIDED IN SECTION 94(7) BUT IT IS A CASE OF BONUS ISSUE OF SHARES, TH EREFORE, THE PROVISIONS OF SECTION 94(8) OF THE ACT CANNOT BE APPLIED IN CASE OF PURCHASE AND SALE OF SHARES/SECURITIES. THE TERM UNIT IS DEFINED UNDER T HE EXPLANATION TO SECTION 94(8) OF THE ACT AS UNDER: SECTION 94(8) EXPLANATION. FOR THE PURPOSES OF THIS SECTION, ( A ) 'INTEREST' INCLUDES A DIVIDEND ; 81 [( AA ) 'RECORD DATE' MEANS SUCH DATE AS MAY BE FIXED BY ( I ) A COMPANY FOR THE PURPOSES OF ENTITLEMENT OF THE HO LDER OF THE SECURITIES TO RECEIVE DIVIDEND; OR ( II ) A MUTUAL FUND OR THE ADMINISTRATOR OF THE SPECIFIED UNDERTAKING OR THE SPECIFIED COMPANY AS REFERRED TO IN THE EXPLANATION TO CLAUSE ( 35 ) OF SECTION 10 , FOR THE PURPOSES OF ENTITLEMENT OF THE HOLDER OF THE UNITS TO RECEIVE INCOME, OR ADDITIONAL UNIT WITHOUT ANY CONSIDERATIO N, AS THE CASE MAY BE;] ( B ) 'SECURITIES' INCLUDES STOCKS AND SHARES ; ( C ) SECURITIES SHALL BE DEEMED TO BE SIMILA R IF THEY ENTITLE THEIR HOLDERS TO THE SAME RIGHTS AGAINST THE SAME PERSONS AS TO CAPITAL AND INTEREST AND THE SAME REMEDIES FOR THE ENFORCEMENT OF THOSE RIGHTS, NOTWITHSTANDING ANY DI FFERENCE IN THE TOTAL NOMINAL AMOUNTS OF THE RESPECTIVE SECURITIES OR IN THE FORM IN WHICH THEY ARE HELD OR IN THE MANNER IN WHICH THEY CAN BE TRANSFERRED; 82 [( D ) 'UNIT' SHALL HAVE THE MEANING ASSIGNED TO IT IN CLA USE ( B ) OF THE EXPLANATION TO SECTION 115AB .] ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 105 THEREFORE, AS PER CLAUSE (D), UNIT DEFINED AS THE ME ANING ASSIGNED TO IT IN CLAUSE (B) OF EXPLANATION TO SECTION 115AB OF THE A CT WHICH READS AS UNDER: ( B ) 'UNIT' MEANS UNIT OF A MUTU AL FUND SPECIFIED UNDER CLAUSE ( 23D ) OF SECTION 10 OR OF THE UNIT TRUST OF INDIA; THEREFORE, THE UNIT IS DEFINED AS UNIT OF MUTUAL FUN D OR UNIT TRUST OF INDIA. THE SAID DEFINITION OF UNIT DOES NOT INCLUDE SHARE OR SECURITY. WE MAY FORTIFY THIS VIEW BY THE DECISION OF BANGLORE B ENCHES OF THE TRIBUNAL IN THE CASE OF DCIT VS. B.G. MAHESH 43 TAXMANN.COM 1 58 (BANG TRIB) IN PARA 6.4.4 TO 6.4.7 AS UNDER: 6.4.4 SECTION 94(8) OF THE ACT WAS INTRODUCED W.E.F. 1.4 .2005 (VIZ. ASSESSMENT YEAR 2005-06) TO CURB THE PRACTICE OF CREATION OF LOSSES THROUGH BONUS STRIPPING AS HAS BEEN CARRIED OUT BY THE ASSESSEE IN THE CASE ON HAND. TH IS SECTION HAS BEEN INTRODUCED UNDER CHAPTER X OF THE ACT - 'SPECIAL PROVISIONS RELATING TO AVOIDANCE OF TAX'. SECTION 94 OF THE ACT IN CHAPTER X OF THE ACT BEARS THE HEADING ' AVOIDANCE OF TAX BY CERTAIN TRANSACTIONS IN SECURITIES.' THE PROVISIONS OF SECTION 94(8) OF THE ACT READ AS UNDER : '94 (8) WHERE ( A ) ANY PERSON BUYS OR ACQUIRES ANY UNITS WITHIN A PERI OD OF THREE MONTHS PRIOR TO THE RECORD DATE; ( B ) SUCH PERSON IS ALLOTTED ADDITIONAL UNITS WITHOUT AN Y PAYMENT ON THE BASIS OF HOLDING OF SUCH UNITS ON SUCH DATE; ( C ) SUCH PERSON SELLS O R TRANSFERS ALL OR ANY OF THE UNITS REFERRED TO IN CLAUSE (A) WITHIN A PERIOD OF NINE MONTHS AFTER SUCH DATE, WHI LE CONTINUING TO HOLD ALL OR ANY OF THE ADDITIONAL UNITS REFERRED TO IN CLAUSE ( B), THEN, THE LOSS, IF ANY, ARISING TO HIM ON ACCOUNT O F SUCH PURCHASE AND SALE OF ALL OR ANY OF SUCH UNITS SHALL BE IGNORED FOR THE PURPOSES OF COMPUTING HIS INCOME CHARGEABLE TO TAX AND NOTWITHSTANDING ANYTHING CONT AINED IN ANY OTHER PROVISION OF THIS ACT, THE AMOUNT OF LOSS SO IGNORED SHALL BE DE EMED TO BE THE COST OF PURCHASE OR ACQUISITION OF SUCH ADDITIONAL UNITS REFERRED TO IN CLAUSE (B) AS ARE HELD BY HIM ON THE DATE OF SUCH SALE OR TRANSFER. ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 106 EXPLANATION . FOR THE PURPOSES OF THIS SECTION, - ( A ) 'INTEREST' INCLUDES A DIVIDEND ; ( AA ) 'RECORD DATE' MEANS SUCH DATE AS MAY BE FIXED BY ( I ) A COMPANY FOR THE PURPOSES OF ENTITLEMENT OF THE HO LDER OF THE SECURITIES TO RECEIVE DIVIDEND; OR ( II ) A MUTUAL FUND OR THE ADMINISTRATOR OF THE SPECIFIED UNDERTAKING OR THE SPECIFIED COMPANY AS REFERRED TO IN THE E XPLANATION TO CLAUSE (35) OF SECTION 10 THE PURPOSES OF ENTITLEMENT OF THE HOLDE R OF THE UNITS TO RECEIVE INCOME, OR ADDITIONAL UNIT WITHOUT ANY CONS IDERATION, AS THE CASE MAY BE; ( B ) 'SECURITIES' INCLUDES STOCKS AND SHARES ; ( C ) SECURITIES SHALL BE DEEMED TO BE SIMILAR IF THEY ENTITLE THEIR HOLDERS TO THE SAME RIGHTS AGAINST THE SAME PERSONS AS TO CAPITAL AND I NTEREST AND THE SAME REMEDIES FOR THE ENFORCEMENT OF THOSE RIGHTS, NOTWITHSTANDIN G ANY DIFFERENCE IN THE TOTAL NOMINAL AMOUNTS OF THE RESPECT IVE SECURITIES OR IN THE FORM IN WHICH THEY ARE HELD OR IN THE MANNER IN WHICH THEY CAN BE TRANSFER RED; ( D ) 'UNIT' SHALL HAVE THE MEANING ASSIGNED TO IT IN CLA USE (B) OF THE EXPLANATION TO SECTION 115AB.' 6.4.5 BRIEFLY STATED, SECTION 94(8) OF THE ACT STATES TH AT THE LOSS, IF ANY, ARISING TO A PERSON ON ACCOUNT OF PURCHASE AND SALE OF ORIGINAL 'UNITS' SHALL BE IGNORED FOR THE PURPOSE OF COMPUTING HIS INCOME CHARGEABLE TO TAX I F THE FOLLOWING CONDITIONS ARE SATISFIED : ( I ) THE PERSON BUYS OR ACQUIRES A NY UNITS WITHIN A PERIOD OF 3 MONTHS PRIOR TO RECOR D DATE; ( II ) HE IS ALLOTTED ADDITIONAL UNITS (BONUS UNITS) WITHO UT ANY PAYMENT, ON THE BASIS OF HOLDING SUCH UNITS ON SUCH DATE; ( III ) HE SELLS OR TRANSFERS ALL OR ANY OF THE UNITS EXCLU DING BONUS UN ITS WITHIN A PERIOD OF NINE MONTHS FROM SUCH DATE; ( IV ) ON THE DATE OF SUCH TRANSFER HE CONTINUES TO HOLD A LL OR ANY (AT LEAST ONE) OF THE ADDITIONAL UNITS (VIZ. BONUS UNITS); THEN THE AMOUNT OF LOSS SO IGNORED SHALL BE DEEMED TO BE THE COST OF PURC HASE OR ACQUISITION OF SUCH ADDITIONAL UNITS AS ARE HELD BY HIM ON THE DATE OF SUCH SALE OR TRANSFER. 6.4.6 THE LEARNED CIT(APPEALS), HOWEVER, HAS OBSERVED TH AT THE PROVISIONS OF SECTION 94(8) OF THE ACT ARE APPLICABLE ONLY TO 'UNITS' WHI CH MEANS UNITS OF MUTUAL FUNDS ONLY. THERE IS NO AMBIGUITY IN THE MATTER AS THE EXPLANAT ION IN SECTION 94(8) OF THE ACT CLEARLY DEFINES 'SECURITIES' AS INCLUDING 'STOCKS AND SHARE S' AND DEFINES 'UNITS' TO HAVE THE ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 107 SAME MEANING AS ASSIGNED IN EXPLANATION TO SECTION 115AB OF THE ACT; WHEREIN 'UNITS' ARE DEFINED AS UNITS OF MUTUAL FUNDS ONLY. IN THIS VIEW OF THE MATTER, THE PROVISIONS OF SECTION 98(4) OF THE ACT HAVE NO APPLICABILITY TO S ECURITIES, WHICH INCLUDES SHARES. 6.4.7 THE LEARNED CIT(APPEALS) ALSO OBSERVED THAT IN A S IMILAR PROVISION INTRODUCED TO CURB DIVIDEND STRIPPING I.E. SECTION 94(7) OF THE A CT, BOTH UNITS AND SECURITIES ARE INCLUDED. SECTION 94(7) OF THE ACT FOR 'BONUS STRIP PING' WAS INTRODUCED BY FINANCE ACT, 2001 W.E.F. 1.1.2003 WHEREAS SECTION 94(8) OF THE A CT FOR 'BONUS STRIPPING' WAS INTRODUCED IN FINANCE ACT, 2004 W.E.F. 1.4.2005. HE NCE IT CAN BE INFERRED THAT THE INTENTION OF LEGISLATIVE WAS TO EXCLUDE THE SHARES OF COMPANIES FROM THE AMBIT OF THE PROVISIONS OF SECTION 94(8) OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION IN PARAS 6.3.1 TO 6.4.7 OF THIS ORDER, WE CONCUR WITH THE FINDING OF THE LEARNED CIT(APPEALS) THAT THERE IS NO LEGISLATIVE AUTHORITY TO DENY THE LOSS INTENTION ALLY CREATED BY THE ASSESSEE; FOR WHAT THE LAW HAS NOT ENVISAGED AND HAS SPECIFICALLY EXCL UDED CANNOT BE READ INTO THE SAME BY THE ASSESSING OFFICER. WE, THEREFORE, UPHOLD THE OR DER OF THE LEARNED CIT(APPEALS). IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE A ND WHEN THE SUBJECT MATTER OF PURCHASE AND SALE OF SHARES AND NOT THE U NITS, THEREFORE, THE PROVISIONS OF SECTION 94(8) OF THE ACT ARE NOT APPL ICABLE, ACCORDINGLY WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LD. CIT(A) QUA THIS ISSUE, THE SAME IS UPHELD. 34. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH DECEMBER, 2018. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 06 TH DECEMBER, 2018 *RANJAN ITA 464 & 761/JP/2018_ M/S ANGEL INFRASTRUCTURE P LTD. VS DCIT 108 VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S ANGEL INFRASTRUCTURE (P) LTD., JA IPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE DCIT/A.C.I.T., CIRCLE-2, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 464 & 761/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR
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