DCIT, Jaipur V. MODERN DENIM, Jaipur

ITA 792/JPR/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2161 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 25-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA
• Assessee Lawyers: HIMANSHU GOYAL CA DHK
• Keywords: Depreciation; Cost of acquisition; Fair market value; Reason to believe; Unabsorbed depreciation
• Section: 143(3); 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH HKKXPAN] YS[KK LNL; ,OA JH DQY HKKJR ] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 792/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6, JAIPUR. CUKE VS. M/S MODERN DENIM, A-4, VIJAY PATH, TILAK NAGAR, JAIPUR. PAN NO.: AABCM 0861 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI VARINDER MEHTA (CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI HIMANSHU GOYAL (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 11/04/2017 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 27/04/2017 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THIS IS THE APPEAL FILED BY THE REVENUE EMANATES FR OM THE ORDER OF THE LD. CIT(A)-II, JAIPUR DATED 15/09/2014 FOR THE A .Y. 2006-07 WHEREIN THE REVENUE HAS TAKEN ONLY ONE EFFECTIVE GROUND OF APPEAL, WHICH IS AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN HOLDING THAT NO BASIS HAS BEEN GIVEN FOR ADOPTING THE SALE CONSIDER ATION OF SHARES TO BE THE INDEX COST OF ACQUISITION. WITH OUT APPRECIATING THE FACT THAT DURING THE COURSE OF ASSESSMENT IT WAS NOTICED THAT NAMES/SIGNATURES OF ITA 792/JP/2014 DCIT VS. MODERN DENIM 2 AUTHORIZED SIGNATORIES AND ADDRESSES OF THE COMPANI ES TO WHOM SHARES WERE SOLD WERE DIFFERENT FROM WHAT WERE MENTIONED IN THE DEED OF ASSIGNMENT AND THE FINANCIAL CONDITION OF THE COMPANIES TO WHOM SHARE WERE CLAIMED TO HAVE BEEN SOLD WAS NOT SOUND ENOUGH AS THE INCOME DECLARED BY THESE COMPANIES WAS LESS THAN EVEN RS. 50,000/- IN A.Y. 2006-07. EVEN THE CONFIRMATIONS HAVE BEEN PREPARED ON PLAIN PAPER AND NAMES OF THE AUTHORIZED SIGNATORIES ARE ALSO NOT WRI TTEN ON EITHER OF THE CONFIRMATION. 2. THE ASSESSEE FILED RETURN OF INCOME ON 29/11/2006 DECLARING NIL INCOME AFTER ADJUSTMENTS OF BROUGHT FORWARD LOSSES A ND UNABSORBED DEPRECIATION. THE CASE WAS COMPLETED U/S 143(3) OF TH E INCOME TAX ACT, 1961 (IN SHORT THE ACT) ON 18/12/2008. THE CASE WAS R EOPENED BY ISSUING NOTICE U/S 148 OF THE ACT ON 30/3/2011 AND THE ASSESSMENT WAS FINALIZED U/S 143(3)/148 OF THE ACT ON 28/11/2011. 3. AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A), WHO HAS SUSTAINED REOPE NING OF THE ASSESSMENT AGAINST WHICH THE ASSESSEE HAS NOT FILED ANY APPEAL. THE REVENUE IS IN APPEAL ONLY WITH REGARD TO DISALLOWANCE OF LONG TERM CAPITAL LOSS OF RS. 80,88,79,697/-, WHICH HAS BEEN ALLOWED WHI LE DECIDING THE GROUND NO. 2 AND 3 OF THE ASSESSEES APPEAL BY HOLD ING AS UNDER:- 4.3 I HAVE PERUSED THE FACTS OF CASE, THE ASSESSME NT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE CONTENTION OF THE ASSESSING OFFICER IS THAT THE SHARES OF M/S. MODERN SYNTEX (INDIA) LTD. (MSIL) OUGHT TO HAVE ITA 792/JP/2014 DCIT VS. MODERN DENIM 3 BEEN DEMATERIALIZED SO THAT THE SAME COULD HAVE BEE N SOLD THROUGH STOCK EXCHANGE ON WHICH IT WAS LISTED. THE APPELLAN T HAS STATED THAT TRADING IN SHARES OF MSIL ON THE STOCK EXCHANGE HAD BEEN SUSPENDED SINCE 7.01.2002. THEREFORE, THESE SHARES COULD NOT HAVE BEEN SOLD THROUGH THE STOCK EXCHANGE. IT HAS FURTHER BEEN CON TENDED THAT THIS TRANSACTION AMOUNTS TO SELLING THE COMPANY AND THER EFORE, THE SALE CONSIDERATION HAS NOT BEEN CORRECTLY REPORTED. THE APPELLANT HAS STATED THAT IT OWNS ONLY ABOUT 16% OF THE SHARE CAPITAL AN D DOES NOT OWN 100% OF THE SHARES AS CONTENDED BY THE ASSESSING OF FICER. THEREFORE, IT IS NOT A CASE WHERE THE COMPANY ITSELF IS BEING SOL D. FURTHER, THE APPELLANT HAS STATED THAT M/S MSIL HAS BEEN DECLARE D A SICK COMPANY BY THE BIFR AND HAS A NEGATIVE NET WORTH. THE APPEL LANT HAS ALSO FURNISHED AN EXPLANATION REGARDING THE NAMES / SIGN ATURES OF AUTHORIZED SIGNATORY AND ADDRESSES OF THE COMPANY B EING DIFFERENT IN THE DEED OF ASSIGNMENT AND THE CONFIRMATION. FURTHE RMORE, IT HAS BEEN STATED BY THE APPELLANT NO BASIS HAS BEEN GIVEN FOR ADOPTING THE SALE CONSIDERATION OF THE SHARES TO BE THE INDEXED COST OF ACQUISITION. I AGREE WITH THE APPELLANT THAT THERE IS NO BASIS OR DOCUMENTARY EVIDENCE TO ADOPT THE SALE VALUE OF SHARES TO BE THE INDEXED CO ST OF ACQUISITION EXCEPT TO NULLIFY THE LONG TERM CAPITAL LOSS CLAIME D BY THE ASSESSEE. EVEN THE INTRINSIC VALUE OF SHARES CANNOT BE ASCERTAINED IN THE ABSENCE OF COMPUTATION OF VALUATION OF SHARES. THERE IS NO MAT ERIAL ON RECORD TO INDICATE THAT THE SALE CONSIDERATION OF SHARES IS S UPPRESSED/ UNDER- REPORTED. IN VIEW OF THE ABOVE, THE ACTION OF THE A SSESSING OFFICER OF DISALLOWING THE LONG TERM CAPITAL LOSS, ON SALE OF SHARES OF M/S MSIL, IS NOT UPHELD. GROUND NO. 3 & 4 IS ALLOWED. 4. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD CIT DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFF ICER AND SUBMITTED ITA 792/JP/2014 DCIT VS. MODERN DENIM 4 THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN GRANTING RE LIEF TO THE ASSESSEE FOR THE REASON THAT THE FINANCIAL CONDITION OF THE COMP ANY TO WHOM THE SHARES WERE SOLD WAS NOT SOUND. FURTHER WHY THESE COM PANIES HAD PURCHASED SHARES WHEN THE COMPANYS SHARES WERE HAVI NG NEGATIVE NET WORTH. THUS ALL THESE TRANSACTIONS WERE SHAME TRANSAC TIONS AND IT IS A COLORFUL DEVICE TO DEFRAUD THE REVENUE. 5. ON THE CONTRARY, THE LD AR OF THE ASSESSEE HAS S UBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AD SOLD 1,84,05,000/- SHARES OF M/S MODERN SYNDEX (I) LIMITED FOR TOTAL C ONSIDERATION OF RS. 3,68,10,000/- TO INVITATION INVESTMENT P. LTD. (1,0 0,00,000 SHARES) SHOWN AS SOLD @ RS. 2/- PER SHARE TOTALING TO RS. 2,0 0,00,000/- AND TRISHUL TRADERS PVT. LTD. (84,05,000 SHARES) SHOWN AS SOLD @ RS. 2 PER SHARE AT RS. 1,68,10,000/-. THE ASSESSEE CALCULATED INDEXED COST OF ACQUISITION OF THE SHARES AT RS. 84,56,89,697/- AND AFTER REDUCING THE RECEIPT OF 3,68,10,000/- LONG TERM CAPITAL GAIN LOS S OF RS. 80,88,79,697/- WAS CLAIMED IN THE RETURN OF INCOME. M/S MODERN SYN TEX (I) LIMITED (MSIL) WAS EARLIER LISTED IN JAIPUR STOCK EXCHANGE, HOWEVER, ON 07/1/2002 THE TRADING IN THE SHARES OF MSIL WERE SUS PENDED. THE ASSESSEE WAS HOLDING 16% OF THE TOTAL SHARES CAPITAL OF MSIL. THUS, THE SHARES WERE SUBSCRIBED IN THE EARLIER YEARS AND THE ISSUE IS NOT IN ITA 792/JP/2014 DCIT VS. MODERN DENIM 5 DISPUTE. THE MSIL WAS A SISTER CONCERN OF THE ASSESSE E COMPANY. THE NET WORTH OF THE COMPANY ON THE DATE OF SALE OF SHAR ES WAS NEGATIVE, WHICH WAS CLEAR FROM THE BALANCE SHEET FOR THE FINANC IAL YEAR 2004-05 OF MSIL. THIS TRANSACTION WAS NOT THROUGH STOCK EXCHANGE . THE SHARES WERE NOT IN D-MAT ACCOUNT. THESE SHARES WERE PLEDGED WITH THE BANK. THE SALES HAD BEEN AFFECTED THROUGH ASSIGNMENT DEED. THE LD AR HAS FURTHER SUBMITTED AS UNDER:- I. THE FIRST ALLEGATION IS REGARDING BASIS OF ADOPT ING THE SALE CONSIDERATION OF SHARES TO BE THE INDEX COST OF ACQUISITION. A) YOUR HONOUR LD. AO WHILE MAKING DISALLOWANCE HAS HELD THAT THE SALES CONSIDERATION SHOWN BY THE ASSESSEE CANNOT BE RELIE D UPON AND THEREFORE THE SALE CONSIDERATION IS ASSUMED TO BE AT PAR WITH THE INDEXED COST OF ACQUISITION AND CONSEQUENTLY DISALLOWED THE WHOLE L OSS. B) YOUR HONOUR ASSESSEE HAS SUBMITTED ALL THE DETAI LS TO JUSTIFY THE SALE PRICE OF THE TRANSACTION. LD. AO HAS ONLY DOUBTED THE SIGNAT URES ON THE CONFIRMATION. HOWEVER, HAS NOT GIVEN ANY ADVERSE COMMENT THAT THE SE PAYMENTS WERE NOT MADE BY THESE BUYER COMPANIES TO THE ASSESSEE. C) FURTHER IT IS AN UNDISPUTED FACT THAT THE MISL H AS BEEN DECLARED AS A SICK COMPANY BY THE BIFR ON 17.11.2005 DUE TO HEAVY LOSS ES SUFFERED DURING THE PERIOD OF WORLDWIDE RECESSION IN THE TEXTILE INDUST RY DURING THE PERIOD 1997- 98 TO 2006-07 WHICH CLEARLY JUSTIFY THE REASON FOR LOW SALE PRICE OF RS. 2/- AND FURTHER THE NET-WORTH OF THE ASSESSEE COMPANY IS (- ) RS. 14,726/-LD. AO CANNOT RAISE THE ISSUE WHY THE AMOUNT IS FIXED AT R S. 2/- AND NOT MORE THAN RS. 2/- WHEN D) FURTHER ASSESSEE HAS SUBMITTED PAN NO, NAME & AD DRESSES, INCOME TAX RETURNS OF THESE COMPANIES WHICH COULD BE USED BY T HE AO TO MAKE INDEPENDENT ENQUIRIES. E) YOUR HONOUR IT IS A FUNDAMENTAL PRINCIPLE THAT I F IT IS ALLEGED THAT ASSESSEE HAS RECEIVED LESS CONSIDERATION THE REVENUE SHOULD HAVE PROVED THAT ASSESSEE ITA 792/JP/2014 DCIT VS. MODERN DENIM 6 HAS RECEIVED MORE CONSIDERATION. THE ONUS IS UPON T HE REVENUE TO PROVE THAT SOMETHING MORE HAS BEEN GIVEN TO THE ASSESSEE. THE MATTER HAS BEEN LEFT ONLY BY MAKING AN ALLEGATION AND ADDITION HAS BEEN MADE IN SURMISES AND CONJECTURES IGNORING THE FACTS ON RECORDS. RELIANCE BEING PLACED ON THE JUDGEMENT OF HONBLE APEX COURT IN THE CASE OF K.P. VARGHESE V. INCOME-TAX OFFICER 131 ITR 597 (SC ) 18 . WE MUST, THEREFORE, HOLD THAT SUB-SECTION (2) OF S ECTION 52 CAN BE INVOKED ONLY WHERE THE CONSIDERATION FOR THE TRANSFER HAS B EEN UNDERSTATED BY THE ASSESSEE OR, IN OTHER WORDS, THE CONSIDERATION ACTU ALLY RECEIVED BY THE ASSESSEE IS MORE THAN WHAT IS DECLARED OR DISCLOSED BY HIM AND THE BURDEN OF PROVING SUCH UNDERSTATEMENT OR CONCEALMENT IS ON TH E REVENUE. THIS BURDEN MAY BE DISCHARGED BY THE REVENUE BY ESTABLISHING FA CTS AND CIRCUMSTANCES FROM WHICH A REASONABLE INFERENCE CAN BE DRAWN THAT THE ASSESSEE HAS NOT CORRECTLY DECLARED OR DISCLOSED THE CONSIDERATION R ECEIVED BY HIM AND THERE IS UNDERSTATEMENT OR CONCEALMENT OF CONSIDERATION IN R ESPECT OF THE TRANSFER. SUB-SECTION (2) HAS NO APPLICATION IN CASE OF AN HO NEST AND BONA FIDE TRANSACTION WHERE THE CONSIDERATION RECEIVED BY THE ASSESSEE HAS BEEN CORRECTLY DECLARED OR DISCLOSED BY HIM, AND THERE I S NO CONCEALMENT OR SUPPRESSION OF THE CONSIDERATION. WE FIND THAT, IN THE PRESENT CASE, IT WAS NOT THE CONTENTION OF THE REVENUE THAT THE PROPERTY WAS SOLD BY THE ASSESSEE TO HIS DAUGHTER-IN-LAW AND FIVE OF HIS CHILDREN FOR A CONSIDERATION WHICH WAS MORE THAN THE SUM OF RS. 16,500 SHOWN TO BE THE CON SIDERATION FOR THE PROPERTY IN THE INSTRUMENT OF TRANSFER AND THERE WA S UNDERSTATEMENT OR CONCEALMENT OF THE CONSIDERATION IN RESPECT OF THE TRANSFER. IT WAS COMMON GROUND BETWEEN THE PARTIES AND THAT WAS A FINDING O F FACT REACHED BY THE INCOME-TAX AUTHORITIES THAT THE TRANSFER OF THE PRO PERTY BY THE ASSESSEE WAS A PERFECTLY HONEST AND BONA FIDE TRANSACTION WHERE THE FULL VALUE OF THE CONSIDERATION RECEIVED BY THE ASSESSEE WAS CORRECTL Y DISCLOSED AT THE FIGURE OF RS. 16,500. THEREFORE, ON THE CONSTRUCTION PLACE D BY US, SUB-SECTION (2) HAD NO APPLICATION TO THE PRESENT CASE AND THE ITO COULD HAVE NO REASON TO BELIEVE THAT ANY PART OF THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT SO AS TO JUSTIFY THE ISSUE OF A NOTICE UNDER SECTIO N 148. THE ORDER OF REASSESSMENT MADE BY THE ITO PURSUANT TO THE NOTICE ISSUED UNDER SECTION 148 WAS ACCORDINGLY WITHOUT JURISDICTION AND THE MA JORITY JUDGES OF THE FULL BENCH WERE IN ERROR IN REFUSING TO QUASH IT. ITA 792/JP/2014 DCIT VS. MODERN DENIM 7 F) LD. CIT(A) HAS DEALT WITH THIS ISSUE AT PG. 8 PARA 4.3 OF THE ORDER AND HELD THAT SINCE THERE IS NO BASIS OR DOCUMENTARY EVIDENCE TO ADOPT THE SALE VALUE OF SHARES TO BE THE INDEXED COST OF ACQUISITION EXCEPT TO NULLIFY THE LONG TERM CAPITAL LOSS CLAIMED AND THERE IS NO MATERIAL ON RE CORD TO INDICATE THAT THE SALE CONSIDERATION OF SHARES IS SUPPRESSED/ UNDER R EPORTED. G) THUS. LD. CIT(A) HAS PASSED THE WELL- REASONED O RDER AND SAME IS LIABLE TO STAND. II. THE SECOND ALLEGATION IS NAMES/ SIGNATURES OF T HE AUTHORIZED SIGNATORIES AND ADDRESSES OF THE COMPANIES TO WHOM THE SHARES WERE SOLD WERE DIFFERENT FROM WHICH WERE MENTIONED IN THE DEED OF ASSIGNMENT. A) THIS ALLEGATION HAS ALSO BEEN DEALT BY THE CIT(A ) AT PG. 8 AND PARA 4.3 OF THE ORDER AND HE RELIED UPON THE SUBMISSIONS MADE BY TH E ASSESSEE. BEFORE THE CIT(A), ASSESSEE HAS GIVEN A GENUINE REASON FOR THE ABOVE MENTIONED DIFFERENCES. SUBMISSION OF THE ASSESSEE IS QUOTED A T PG. 7 LAST PARA OF THE CIT(A) ORDER. B) ASSESSEE SUBMITTED THAT THE DEED OF ASSIGNMENT I S DATED. 21.3.2006 AND THE DEED OF ASSIGNMENT HAS BEEN SIGNED BY THE DIRECTOR/ AUTHORISED SIGNATORY ON THE DATE OF EXECUTION OF DEED. SO FAR AS SIGNING OF CONFIRMATION IS CONCERNED, THE SAME IS AS PER LETTER DATED. 14.11.2011 AND HAS BEEN SIGNED BY THE DIRECTOR/ AUTHORISED SIGNATORY. SIMPLY BECAUSE THE SIGNATURE IS DIFFERENT AFTER A GAP OF OVER 5 YEARS IT WOULD NOT MEAN THAT THE CONFIRMATION IS INCORRECT. THUS, ALLEGATION MADE BY THE LD.AO IS COMPLETELY O N DOUBT AND HAS NO BASIS FOR MAKING SUCH HUGE DISALLOWANCE. III. THE THIRD ALLEGATION IS FINANCIAL CONDITION OF THE COMPANIES TO WHOM SHARES WERE SOLD WAS NOT SOUND: A) YOUR HONOUR LD. AO IN PARA 3.3 HAS MADE THE ALLEGATION THAT COMPANIES TO WHOM THE SHARES HAVE BEEN SOLD DOES NOT APPEAR TO B E FINANCIALLY SOUND AS IS EVIDENT FROM THE INCOME DECLARED BY THESE COMPAN IES WHICH IS BELOW RS. 50,000/- FOR THE AY 2006-07. ITA 792/JP/2014 DCIT VS. MODERN DENIM 8 B) YOUR HONOUR IT IS SURPRISED TO NOTE HERE THAT WH ETHER THE RETURNED INCOME IN ISOLATION IS THE INDICATOR OF THE CREDITWORTHINESS OF THE BUYERS ? C) ASSESSEE HAS FURNISHED THE COPY OF INCOME TAX RE TURN & CONFIRMATION, NAME & ADDRESSES OF THESE PARTIES. IF THE LD. AO HAD ANY DOUBT IN HIS MIND HE COULD HAVE MADE INDEPENDENT INQUIRY FROM SUCH BUYERS. THU S, LD. AOS AGAIN MADE THE ALLEGATIONS IN GUESSES. D) THERE IS NO REQUIREMENT IN THE LAW THAT THE SELL ER SHOULD ASCERTAIN THE NET WORTH OF THE COMPANY BEFORE SELLING THE SHARES TO T HE BUYER. THUS, THE ALLEGATIONS MADE BY THE LD. AO IS PURELY A GUESS WORK AND ORDER PASSED BY THE LD. CIT(A) IS LIABLE TO BE SUSTAINED. 16. ONGOING THROUGH THE ASSESSMENT ORDER, YOUR HONO UR WILL NOTICE THAT THE AO HAS NOT DELETED THE SALE OF SHARES PER SE. THE AOS ALLEGATION IS THAT THE SALE CONSIDERATION SHOWN BY THE ASSESSEE CANNOT BE RELIE D UPON AND HE HAS ASSUMED THE SALE CONSIDERATION EQUIVALENT TO THE IN DEXED COST OF ACQUISITION. THE ASSESSEE, IN THE PRESENT CASE, HAS DECLARED THE ACTUAL SALE CONSIDERATION RECEIVED BY IT. THE ONUS WAS UPON THE AO TO BRING M ATERIAL TO DEMONSTRATE THAT ASSESSEE HAS RECEIVED ANY CONSIDERATION OVER A ND ABOVE THE SALE CONSIDERATION DECLARED BY IT. IN THE ABSENCE OF ANY MATERIAL OR EVIDENCE BEING BROUGHT ON RECORD, THE ADDITION MADE BY THE A O ON THIS ACCOUNT CANNOT BE SUSTAINED. THIS ISSUE IS SQUARELY COVERED BY THE JUDGMENTS OF THE VARIOUS COURTS INCLUDING HONBLE SUPREME COURT. THU S THE MOMENT THE CONSIDERATION STATED IS SUBSTITUTED BY ANY OTHER FI GURE THE IMPLICATION OF THE SAME WILL BE THAT THE ACTUAL CONSIDERATION IS THE S UBSTITUTED CONSIDERATION AND THUS MONEY HAS ACTUALLY PASSED ON FROM THE BUYE R TO THE SELLER. THIS CAN BE THE BASIS ONLY WHEN THERE ANY MATERIAL OR EVIDEN CE TO SUPPORT. THE SAME CANNOT BE ASSUMED ON THE BASIS OF SURMISES AND CONJ ECTURE. THE LAW AS LAID DOWN BY THE SUPREME COURT ON THE INTERPRETATION OF SECTION 48 IS VERY CLEAR WHERE A DISTINCTION HAS BEEN MADE BETWEEN THE TOTAL CONSIDERATION AND THE FAIR MARKET VALUE. IT IS HELD THAT IN SECTION 48 TH E WORDS USED ARE TOTAL CONSIDERATION AND HENCE FAIR MARKET VALUE CANNOT BE SUBSTITUTED PURPOSE OF COMPUTATION OF CAPITAL GAIN. THE LD. AR RELIED ON THE FOLLOWING CASE LAWS: 1. CIT VS. GEORGE HENDERSONB AND CO, LTD. (1967) 66 ITR 622 (SC) ITA 792/JP/2014 DCIT VS. MODERN DENIM 9 2. CIT, CALCUTTA VS. GILLANDERS ARBUTHNOT AND CO. (1 973) 87 ITR 407 (SC) 3. CIT VS. SMT. NILOFER I SINGH (2009) 309 ITR 233 ( DEL). 4. CIT VS. M/S GUJARAT NRE COKE LIMITED ITA NO. 193 OF 2013, GA NO. 3485 OF 2013 DATED 06/3/2014 (CAL HIGH COURT ). 5. CIT VS. PUNEET SABHARWAL (2011) 338 ITR 485 (DEL) 6. CIT VS. ABHINAV KUMAR MITTAL (2013) 351 ITR 20 (DE L) 7. DEV KUMAR JAIN VS ITO & ANR. (2009) 309 ITR 240 (D EL) 8. CIT DELHI VS SHAKUL;TALA DEVI (2009) 316 ITR 46 (D EL). 9. CIT VS SMT. SURAJ DEVI (2010) 328 ITR 604 (DEL) 10. CIT VS. PREM NATH NAGPAL (2007) 214 CTR 51 (DHC) 11. CIT VS. ASHOK KHETRAPAL (2007) 294 ITR 143 (DEL.) 12. CIT VS. DINESH JAIN HUF (2013) 352 ITR 0629 (DEL) 13. CIT VS. MAHESH KUMAR (2011) 196 TAXMAN 415 (DEL.) 14. CIT VS. AGILE PROPERTIES P. LTD. (2014) 45 TAXMA NN.COM 512 (DEL) 15. CIT VS. RACHNA AGARWAL ITA 701/2012 DATED 09 TH JULY, 2014 (HON'BLE DELHI HIGH COURT) 16. CIT VS. M/S JAIPUR GOLDEN TRANSPORT CO. (REGD) IT A NO. 1387/2010 DATED 09 TH SEPT., 2010 (HON'BLE DELHI HIGH COURT) 17. CIT VS. BAJRANG LAL BANSAL (2011) 335 ITR 572 (D EL) 18. CIT VS. ABHINAV KUMAR MITTAL (2013) 351 ITR 20 (D EL) 19. CIT VS. GULSHAN KUMAR (DECD) (2002) 257 ITR 703 ( DEL) 20. CIT VS. MS. SUSHILA MITTAL (2001) 250 ITR 531 (D EL) 21. CIT VS DISCOVERY ESTATES PVT. LTD. (2013) 356 ITR 159 (DEL). ITA 792/JP/2014 DCIT VS. MODERN DENIM 10 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON THE RECORD AND ALSO GONE THROUGH THE VARIOUS CASE LAWS RELIED UPON. THE UNDISPUTED FACT GATHERED F ROM THE RECORD THAT THE ASSESSEE COMPANY INVESTED IN THE SHARES OF MSIL , WHICH WAS A SISTER CONCERN OF THE ASSESSEE. THESE SHARES TOTALING TO 1, 84,05,000 WERE ACQUIRED BY THE ASSESSEE ON THE FOLLOWING DATES, 1,1 8,25,000 ON 01/4/1993, 32,90,000 ON 05/10/1994 AND 32,90,000 ON 05/10/1995. DURING THE YEAR, THE ASSESSEE CLAIMED THE SALE CONS IDERATION OF RS. 3,68,10,000 OF THE SALE OF 1,84,05,000 SHARES @ 2/- PER SHARE. IT IS ALSO PERTINENT TO NOTE THAT THE TRADING IN THE SHARES OF MSIL WAS SUSPENDED IN THE STOCK EXCHANGE W.E.F. 07/1/2002. FURTHER THESE S HARES WERE ALSO NOT SOLD BY WAY OF DELIVERY BUT ON THE BASIS OF DEED OF ASSIGNMENT DATED 30/3/2006. IT WAS CLAIMED THAT THESE SHARES WERE SOLD THROUGH PRIVATE NEGOTIATIONS. IT IS ALSO A FACT THAT AT THE RELEVAN T TIME MSIL WAS HAVING NEGATIVE WORTH BY 147.27 CRORES. THUS, THE MARKET WORT H OF THESE SHARES ON THE DATE OF SALE WAS NIL/ZERO. THE ASSESSING OFFIC ER DOUBTED THE PURCHASER COMPANIES ON THE BASIS THAT THE FINANCIAL CONDITION OF THESE COMPANIES TO WHOM THE SHARES CLAIMED TO HAVE BEEN SO LD WAS NOT SOUND. NOW WE ANALYSE THE ACCOUNTS/BALANCE SHEET OF T HESE COMPANIES, WHO WERE CLAIMED TO HAVE PURCHASED THE SHARES. 1,00,0 0,000 SHARES WERE CLAIMED TO HAVE SOLD TO INVITATION INVESTMENT P VT. LTD.. THE GROSS ITA 792/JP/2014 DCIT VS. MODERN DENIM 11 TOTAL INCOME DECLARED IN THE RETURN OF INCOME FILED ON 4/11/2006 FOR ASSESSMENT YEAR 2006-07 WAS OF RS. 40,862/-. THE COM PANY HAS NOT PAID ANY ADVANCE TAX AND SELF ASSESSMENT TAX. THE C LAIM WAS MADE ONLY OF TDS TOTALING TO RS. 20,493/-. THE ADDRESS GIVEN IN THE RETURN OF INCOME WAS OF OFFICE NO. 30, 3 RD FLOOR, 111/115, DADISETH AGIARY LANE, MUMBAI, MAHARASTRA. THE SUBSCRIBED SHARE CAPITAL OF THIS COMPANY WAS RS. 10.00 LACS. THE RESERVE AND SURPLUS DECLARED WER E RS. 81,96,033/-. THE LOAN FUNDS DECLARED WAS NOT RS. 91,96,033/-. THE INVENTORY SHOWN WERE RS. 5,11,27,069/-. THE LD AR WAS ASKED TO FILE T HE DETAILS OF THE INVENTORIES DURING THE APPELLATE PROCEEDINGS BUT HE HAS FAILED TO DO SO. THE SALES DECLARED WERE OF RS. 5,53,89,406/- BUT THE DETAILS OF THE SAME WAS ALSO NOT MADE AVAILABLE. THUS, THE SPECIFIC DETAI LS OF SCRIPT-WISE ASKED BY THE BENCH WITH REGARD TO THE SALES AND THE CLOSING STOCK (INVENTORY), WHICH WERE NOT SUBMITTED. THE CONFIRMATI ON LETTER SUBMITTED FROM INVITATION INVESTMENT PVT. LTD. DATED 14/11/20 11 PLACED AT PAGE NO. 129 OF THE PAPER BOOK SHOWS THE ADDRESS OF THE C OMPANY AS 14-A, PAPER BOX ESTATE, MAHAKALI CAVES ROAD, ANDHERI (EAS T), MUMBAI 400093. THE ADDRESS GIVEN IN THE RETURN OF INCOME FILED FOR ASSESSMENT YEAR 2007-08 PLACED AT PAGE NO. 131 OF THE PAPER BOOK OF INVITATION INVESTMENT PVT. LTD. AT 7/A, GROUND FLOOR, DHAN BHA VAN NO. 1, GAZDAR STREET, CHIRA BAZAR, MUMBAI, MAHARASTRA. THUS, THERE WERE THREE ITA 792/JP/2014 DCIT VS. MODERN DENIM 12 DIFFERENT ADDRESSES ON THREE DOCUMENTS. THE INCOME D ECLARED IN THE ASSESSMENT YEAR 2007-08 WAS RS. 46,922/- AND IN THAT YEAR ALSO NO ADVANCE AND SELF ASSESSMENT TAX WAS PAID, ONLY TDS WAS CLAIMED. THE FACTS REGARDING THE OTHER PURCHASER I.E. TRISHUL TRAD ERS PVT. LTD. AS GATHERED FROM THE RECORDS ARE THAT THE ADDRESS GIVE N IN THE CONFIRMATION LETTER DATED 14/11/2011 WAS 805, A WING, CORPORATE AVENUE, SONAWALA ROAD, GOREGAON (EAST), MUMBAI-93. THE ADDRESS GIVEN IN THE RETURN OF INCOME FILED FOR ASSESSMENT YEAR 2007-08 WAS 803-A, ADITI, MHADA, S.V. NAGAR, ANDHERI-WEST, MUMBAI. THE RETURNED INCOME FOR ASSESSMENT YEAR 2006-07 AND 2007-08 WAS FOR RS. 26,775 AND RS. 9465/ - RESPECTIVELY. ADVANCE AND SELF ASSESSMENT TAX WAS NOT PAID, ONLY TD S WAS CLAIMED. THE TOTAL SHARE CAPITAL OF THE COMPANY WAS OF RS. 9,7 0,000/- ONLY AND THE RESERVE AND SURPLUS DECLARED WERE RS. 79,16,450/ -. THE LD AR HAS NOT PRODUCED FURTHER DETAILS OF THE SALES AND CLOSI NG STOCK AS DECLARED IN THE P&L ACCOUNT EVEN WHEN THESE WERE ASKED BY THE BE NCH. ALL THESE FACTS IN RESPECT OF THESE TWO PURCHASE COMPANIES SUG GEST THAT THESE COMPANIES WERE NOT HAVING SUFFICIENT WORTH TO PURCH ASE THE SHARES OF CRORES OF RUPEES WHEN THE MARKET VALUE OF THE SHARE S WAS ZERO DUE TO THE NEGATIVE NET WORTH OF THE COMPANY MSIL AND WHEN THE SALES OF THE SHARES WERE SUSPENDED AT STOCK EXCHANGE. THE TRANSACT ION WAS CLAIMED TO BE THROUGH NEGOTIATIONS BUT HOW THESE TWO COMPANI ES OF SMALL WORTH ITA 792/JP/2014 DCIT VS. MODERN DENIM 13 AGREED TO PURCHASE SHARES OF NEGATIVE WORTH BY PAYIN G CRORES RUPEES. BY THIS TRANSACTION, THE ASSESSEE HAD CLAIMED LOSS OF RS. 80,88,29,697/- ON THE INQUIRY FROM THE BENCH. LD. AR STATED THAT THE ASSESSEE HAD NOT UTILIZED THE BENEFIT OF THIS LOSS TILL DATE. THEREFO RE, ALL THESE FACTUAL ASPECTS NEED TO BE LOOKED INTO PRIOR TO FINALIZATIO N OF THE ISSUE. HENCE, IN THE INTEREST OF JUSTICE AND EQUITY, THE ISSUES UNDE R APPEAL ARE RESTORED BACK TO THE FILE OF LD. CIT(A) TO DECIDE DE NOVO. AC CORDINGLY, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES O NLY. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 27/04/2017. SD/- SD/- DQY HKKJR HKKXPAN (KUL BHARAT) (BHAGCHAND) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 27 TH APRIL, 2017 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE DCIT, CIRCLE-6, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- M/S MODERN DENIM, 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. 792/JP/2014) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR