SINGHAL CREDIT MANAGEMENT, Jaipur V. ACIT, Alwar

ITA 853/JPR/2011

• Counselvise Citation: 85323114 RSA 2011
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 03-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: R N GOYAL
• Keywords: Capital asset; Gift; Search and seizure; Loose papers; Double taxation relief; Share purchase agreement; Principle of natural justice; Cost of acquisition; Fair market value; Avoidance of tax; Non compliance; Sham transactions; Reason to believe; Documents seized
• Section: 143(3); 142(1); 153A; 234B; 133(6); 56; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.853/ JP/2011 ASSESSMENT YEAR 2007-08 PAN: AACCS 4310 G M/S. SINGHAL CREDIT MANAGEMNT LTD VS. THE ACIT E-127, INDUSTRIAL AREA, BHIWADI CENTRAL CIRCLE ALWAR ALWAR (APPELLANT ) (RESPONDENT) ITA NO.854/ JP/2011 ASSESSMENT YEAR 2007-08 PAN: AACCS 4312 E M/S. SINGHAL SECURITIES (P) LTD VS. THE ACIT E-127, INDUSTRIAL AREA, BHIWADI CENTRAL CIRCLE ALWAR ALWAR (APPELLANT ) (RESPONDENT) ITA NO.855/ JP/2011 ASSESSMENT YEAR 2007-08 PAN: AACCS 9202 K M/S. SNR RUBBERS (P) LTD VS. THE ACIT E-127, INDUSTRIAL AREA, BHIWADI CENTRAL CIRCLE ALWAR ALWAR (APPELLANT ) (RESPONDENT ASSESSEE BY : SHRI R.N. GOYAL AND SHRI RAKESH AG ARWAL DEPARTMENT BY : SHRI SUNIL MATHUR DATE OF HEARING: 18-01-2012 DATE OF PRONOUNCEMENT: 31-01-2012 ORDER PER N.L. KALRA, AM:- THE ASSESSEE HAS FILED APPEALS AGAINST DIFFERENT O RDERS OF THE LD. CIT(A)-CENTRAL, JAIPUR DATED 18-08-2011, 17-08-2011 AND 19-08-201 1 FOR THE ASSESSMENT YEAR 2007-08 2 RESPECTIVELY. FIRST OF ALL, WE TAKE UP THE GROUNDS OF APPEAL OF M/S. SINGHAL CREDIT MANAGEMENT LTD. IN ITA NO. 853/JP/2011 FOR THE ASSE SSMENT YEAR 2007-08 2.1 THE GROUND OF APPEAL RAISED BY THE ASSESSEE AR E AS UNDER:- 1 THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS FACTS BY HOLDING THAT THE ORDER PASSED U/S 153A R.W.S. 143(3) IS NO T SUFFERING FROM ANY INFIRMITY AND NOT BAD IN LAW 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS FACTS BY NOT RECOGNIZING THE SALE OF 25000 EQUITY SHARES OF M/S. BLOSSOM AUTOMOTIVES PVT. LTD. @ RS. 100/- PER SHARE DULY RECORDED IN TH E BOOKS OF ACCOUNTS AND CONSEQUENTLY, CONFIRMING THE ADDITION OF RS. 54,43, 750/- MADE BY THE AO, WORKED OUT, WITHOUT DISCHARGING ONUS, ON SURMISES A ND CONJECTURES PERVERSE TO FACTS AND PROVISIONS OF LAW. 3. THE LD AO AS WELL AS THE LD. CIT(A) HAS ERRED IN LAW AND FACTS OF THE CASE IN HOLDING THE TRANSFER OF SHARES TO M/S.T ECHPRO SYSTEM LTD. INSTEAD TO M/S. YUTHIKA COMMERCIAL PVT LTD. AS WELL AS WORKING OUT SHORT TERM CAPITAL GAIN ON SALE OF LAND 4. THE LD. AO HAS ERRED IN LAW IN CHARGING INTEREST U/S 234B (3) OF I.T. ACT AS WELL AS LD. CIT(A) ERRED IN IGNORING LE GAL POSITION OF SECTION 234B OF INCOME TAX ACT, 1961 2.2 THE ASSESSEE COMPANY FILED THE RETURNED INCOME DECLARING TOTAL INCOME OF RS. 23,92,172/-. THE SEARCH AND SEIZURE OPERATION WAS C ARRIED OUT AT THE RESIDENCE OF SH. S.K. SINGHAL AND OTHERS ON 17.9.2008. THE PROCEEDINGS U/ S 153A WERE INITATED AGAINST THE ASSESSEE COMPANY. THE ASSESSEE COMPANY ENGAGED IN THE SALE AND PURCHASE OF EQUITY SHARES OF THE COMPANIES AND DECLARING INCOME FROM T HIS BUSINESS. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY SOLD OUT 35000 E QUITY SHARES OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. ON 28.4.2006 THROUGH TWO SALE BILLS TO M/S YUTHIKA COMMERCIAL PVT. LTD. @ 100/- PER SHARE. THE ASSESSEE COMPANY P URCHASED THESES EQUITY SHARE OF RS. 3 10/- ON PREMIUM OF RS. 90/- PER EQUITY SHARE. AGAIN ST SALE OF 10,000 EQUITY SHARE OF BLOSSOM AUTOMOTIVE PVT. LTD., BHIWADI, THE ASSESSEE RECEIVED SALE CONSIDERATION ON 28.4.2006 AND THE SHARES WERE GOT TRANSFERRED ON 1 5.5.2006. THE CONSIDERATION OF RS. 25,00,000/- OF REMAINING SHARES WAS CREDITED THROUG H CHEQUE ON 19.7.2006.THE PURCHASER OF THESE SHARES GOT TRANSFERRED ON 31.7 .2006. 2.3 ON THE BASIS OF NAME OF THE ASSESSEE COMPANY APPEARING ON THE WARRANT OF AUTHORIZATION, PROCEEDING U/S 153A WERE INITIATED A GAINST THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O FOUND THAT THE ASSESSEE COMPANY SOLD OUT 35000 EQUITY SHARES OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. ( BAPL) VIDE BILLS DATED 28.4.2006 FOR CONSIDERATION OF RS. 100/- PER EQUITY SHARE TO M/S YUTHIKA COMMERCIAL PVT. LTD., KOLKOTA.(YCPL). IN LATER PART OF THE ORDER, THE SHO RT NAME BAPL & YCPL WILL BE USED TO AVOID INCONVENIENCE. THEA.O TREATED SALE OF 10000 E QUITY SHARE TO YCPL @100/- PER SHARE AS GENUINE BUT REMAINING 25000 EQUITY SHARE W ERE TREATED AS THE SAME WERE TRANSFERRED TO AVOID SHORT TERM CAPITAL GAIN IN THE HANDS OF THE ASSESSEE I.E. BAPL ON ACCOUNT OF THE FOLLOWING REASONS:- A) THERE WEE AN MOU BETWEEN TECHPRO, BAPL AND SHRI PRE M KUMAR GARG ON 17-07-2006 VIDE WHICH IT WAS AGREED TO SELL THE SHARES OF BAPL TO TECHPRO @ RS. 318/- PER SHARE. B) THE SHARES WERE TRANSFERRED TO YCPL AFTER THE DATE OF MOU AS WELL AS SALE PROCEEDS REALIZED IN THE BANK A/C ON 19.7.2006 AFTER THE DATE OF MOU. C) THE LEARNED A.O TOOK INTO CONSIDERATION TWO EVIDENC ES WHICH SUGGEST THAT THE SHARE TRANSFER IS MAKE BELIEVE ARRANGEMENT. PHO TO COPY OF MOU WITHOUT IT ANNEXURE SEIZED DURING THE COURSE OF SEA RCH. SECONDLY REGISTER OF SHARE TRANSFER OF BAPL STATED AS SEIZED FROM TH E RESIDENCE OF SHRI S.K. SINGHAL CONTAINING DETAILS OF DATE OF SHARE TRANSFE R AND BOARD MEETING ETC. THAT THE SHARE TRANSFER OF BAL WAS TO AVOID CAPITAL GAIN IN THE HANDS OF ASSESSEE COMPANY. 4 D) THE LEARNED A.O. WAS OF VIEW THAT ENTIRE SHARE HOL DING WAS IN THE CONTROL OF SH. S.K. SINGHAL AND HIS ASSOCIATE AND SH. PREM GARG AND HIS ASSOCIATES HENCE, 3,82,000/- EQUITY SHARES WERE TRANSFERRED T O 9 KOLKOTTA BASED COMPANIES @100/- PER SHARE JUST BEFORE THE MOU DAT ED 17.7.2006 TO MITIGATE SHORT TERM CAPITAL GAIN IN THEIR HANDS. E) THE LEARNED A.O CONCLUDED THAT THE ONLY ASSET WITH BAPLWAS PLOT OF LAND NO.SPP-496-497 IA. BHIWADI WHICH WAS PURCHASE D ON 5.4.2006 FOR CONSIDERATION OF RS. 4,01,00,000/- . TO AVOID STAMP DUTY ON SALE OF LAND TO THE TECHPRO SYSTEM LTD. THE ASSESSEE COMPANY SOLD T HE ENTIRE SHARE HOLDING TO THE TECHPRO SYSTEM LTD WHEN THE BOOK VAL UE OF PLOT OF LAND REMAINED THE SAME AS BEFORE TRANSFER OF SHARES. F) THE LEARNED A.O. CONSIDERED THE MANNER IN WHICH SHA RES OF BAPL WERE TRANSFERRED TO THE KOLKOTTA BASED COMPANIES @ RS.10 0/- PER SHARE AND AFTER LAPSE OF SOME TIME THE KOLKOTTA BASED COMPANI ES TRANSFERRED THE SHARE HOLDING OF BAPL TO TECHPRO SYSTEM LTD. @ 318/ - PER SHARE AS A DEVICE TO AVOID TAX. G) THE LEARNED A.O. LINKED THE SALE VALUE OF SHARE @ 3 18/- PER EQUITY SHARE OF BAPL WITH THE MOU AND THE CONTENTS OF THE MOU AR E AS UNDER:- IN THE MOU WITH M/S TECHPRO SYSTEMS LTD. FOLLOWIN G TERMS WERE AGREED UPON BETWEEN THE PARTIES: I) THE TECHPRO WILL MAKE A PAYMENT TO THE SELLER AN D TO THE OTHER SHARE HOLDERS OF BLOSSOM IN PROPORTIONATE OF THEIR SHARE SHARE HOLDING IN BLOSSOM, TO THE TUNE OF RS. 12.72 CRORE (RUPEES TWE LVE CRORES SEVENTY TWO LAC ONLY) I.E. RS. 318/- PER SHARE TOWARDS SAL E OF EQUITY SHARES OF RS. 10/- EACH. I) THE TECHPRO SHALL PAY RS. 92,50,000/-(RS.NINETY U TWO LACS FIFTY THOUSAND ONLY OUT THE TOTAL CONSIDERATION AS EARNES T MONEY TO THE SELLER. THE BALANCE PAYMENT WILL BE MADE ON OR BEFORE 20 TH OCTOBER 2006. III) THE TECHPRO WILL ALSO MAKE THE PAYMENT TO THE BLOSS OM TO THE TUNE OF RS. 27,50,000/-(RUPEES TWENTY SEVEN LACS FI FTY THOUSAND ONLY) TO CLEAR THE LIABILITIES EXISTING AS ON THE D ATE OF MOU. IV) THE SELLER AND ALL OTHER SHARE HOLDERS OF THE COMPA NY SHALL TRANSFER THEIR ENTIRE SHAREHOLDING OF BLOSSOM IN FAVOUR OF T ECHPRO OR THEIR REPRESENTATIVE ON OR BEFORE 20 TH OCTOBER 2006. V) THE TECHPRO WILL PAY THE TRANSFER CHARGES TO RIICO LTD. AS PER PREVAILING RATE AT THE TIME OR PAYMENT, THE PRESENT LIABILITY IS TO THE TUNE OF RS. 17,64,840/- (RUPES SEVENTEEN LACS SIXTY FOUR THOUSAND EIGHT HUNDRED FORTY ONLY). 2.4 PARA 4(D) FROM THE ASSESSMENT ORDER IS REPRODU CED AS UNDER:- 5 D) PLOT OF LAND WAS NOT SOLD DIRECTLY AND TRANSFE RRING OF SHARE WAS RESORTED IN ORDER TO SAVE ON STAMP DUTY INVOLVED IN TRANSFERRING OF LAND. SOLE INTENTION BEHIND TRANSFER OF SHARE BY THE SHAR E HOLDERS OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. WAS TO SELL PLOT OF LA ND ;HELD BY THE COMPANY AT BHIWADI TO M/S TECHPRO SYSTEM LTD. FOR W HICH THE VALUE OF THE PLOT WAS AGREED BETWEEN THE SHARE HOLDERS OF M/ S BLOSSOM AUTOMOTIVE PVT. LTD.& M/S TECHPRO SYSTEM LTD. AT RS. 12.72 CRORES AS IS EVIDENT FROM PARA B OF THE MOU WHICH HAS BEEN GIV EN THE NAME CONSIDERATION WHICH IS REPRODUCED BELOW:- THE TECHPRO WILL MAKE A PAYMENT TO THE SELLER AND T O THE OTHER SHARE HOLDERS OF BLOSSOM IN PROPORTIONATE OF THEIR SHARE HOLDING IN BLOSSOM, TO THE TUNE OF RS. 12.72 CRORES ( RUPEES TWELVE CRORES SEVENTY TWO LAC ONLY) I.E. RS. 318/- PER SHARE TOWARDS SALE OF EQUI TY SHARES OF RS. 10/- EACH. FROM THE LANGUAGE OF THE PARA OF THE MOU AS GIVEN ABOVE, IT IS EVIDENT THAT PAYMENT OF RS.12.72 CRORES FOR THE PLOT OF LAN D WAS TO BE PAID THE SHARE HOLDERS OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. I N PROPORTION OF THEIR SHARE HOLDING IN; THE COMPANY. AS SUCH IT IS NOT TH E TRANSFER OF SHARES BUT TRANSFER OF PLOT OF LAND THROUGH THE MODE OF SHARE TRANSFERRING. E) TRANSFERRING OF SHARES BY SHAREHOLDERS OF BAP TO KOLKATA BASED COMPANIES @RS.100/- PER SHARE AND RE-TRANSFERRING O F SAME SHARES TO M/S TECHPRO SYSTEM LTD. @318/- PER SHARE WITHIN A PERIO D OF 3 MONTHS WAS A SHAM PAPER TRANSACTION RESORTED TO BY THE SHAREHOLD ERS OF M/S BAPL TO REDUCE THEIR CAPITAL GAIN LIABILITY. THE LEARNED VIDE NOTICE U/S 142(1) ISSUED THE QUES TIONNAIRE VIDE PARA-5 OF THE ORDER MAY KINDLY BE PERUSED. THE LEA RNED A.O. WORKED OUT SHORT TERM CAPITAL GAIN RS. 76,21,250/- ON SALE OF 35000 EQUITY SHARES, EVEN THOUGH THE LEARNED A.O. IN THIS QUESTIONNAIRE COMPUTED NET ASSET VALUE OF RS. 104.84 PER EQUITY SHARE AFTER TAKING I NTO CONSIDERATION OF VALUE OF ASSET I.E. PLOT OF LAND OF RS. 4,19,38,816 /-. ON FINALITY QUANTIFIED SHORT TERM CAPITAL GAIN OF RS. 54,43,750/- ON SALE OF 25000 EQUITY SHARES OF BAPL. 2.5 BEFORE THE AO , THE ASSESSEE COMPANY REPLIED AS UNDER:- I) NO MOU WITH M/S TECHPRO SYSTEMS LTD. WAS SIGNED NOR SH. PREM KUMAR GARG WAS AUTHORIZED TO SELL ASSESSEES SHARES . II) AS PER ANNEDUREA OF THE MOU DATED 17.7.2006 WITH M/S TECHPRO SYSTEMS LTD.., THE ASSESSEE IE. M/S SINGHAL CREDIT MANAGEMENT LTD. HAS NOT ;TRANSFERRED ANY SHARES TO M/S TECHPRO SYSTEMS LTD. AS THE NAME OF THE ASSESSEE DOES NOT A PPEAR IN 6 ANNEXURE-A. OF MOU SUPPLIED AFTER COLLECTION U/S 13 3(6) OF THE I.T. ACT, 1961 FROM M/S TECHPRO SYSTEMS LTD.. III) THE ASSESSEE WAS ALLOTTED 35000 EQUITY SHARES OF RS . 10 EACH AT A PREMIUM OF RS. 90 PER SHARE IN FEBRUARY, 2006 WHICH WERE SOLD BY IT TO YCPL AT A PRICE OF RS. 100 PER SHARE. PAYMENT OF WHICH WAS RECEIVED BY IT ;THROUGH ACCOUNT PAYEE CHEQUES AMOUN T TO RS. 10 LACS ON 28.04.2006. IV) EVEN ON THE AGM DATED 20.09.2006 M/S YCPL IS A SHAR E HOLDER OF M/S BAPL TO WHOM THE SHARES OF BAPL HAVE BEEN TRAN SFERRED BY THE ASSESSEE. V) THE ASSESSEE HAS NEITHER ENTERED INTO A CONTRACT TO TRANSFER ANY SHARE TO M/S TECHPRO SYSTEM LTD. NOR HAS RECEIVED A NY PAYMENT FROM IT VI) IT IS ILLEGAL TO ASSESS THE TAX ON CAPITAL GAIN FRO M TRANSFER OF SHARE AS CAPITAL GAIN FROM TRANSFER OF LAND IN THE HANDS OF THE ASSESSEE. 2.6 THE FINDINGS OF THE AO ARE SUMMARIZED AS UNDER: - WHATEVER THE ASSESSEE HAS SUBMITTED OR RELIED UPON IN HIS REPLY DATED 24.12.2010 WHICH HAS BEEN SUMMARIZED ABOVE IS NOT B EING DENIED FOR THE REASON THAT THE CASE OF THE ASSESSEE CAN NOT BE DEC IDED IN ISOLATION BECAUSE ASSESSEE IS ONE OF THE PLAYERS OF THE GAME INVOLVIN G AROUND MORE THAN 15 PLAYERS WHO ARE EITHER FAMILY MEMBERS OR CONCERNS O F THE FAMILY, NAMELY SH. REKESH KUMAR, SH. SANJEEV KUMAR ARE BROTHERS, M\S R.K. AGARAWAL & SONS(HUF) IS THE OF SH. RAKESH KUMAR, LIKE WISE M\S GERIPWELL STEEL PVT LTD . ,M\S LAMBARDAR CONCRETE PVT LTD., ARE THE CLO SELY HELD COMPANIES OF SH. RAKESH KUMAR & SH. SANJEEV KUMARS FAMILY. SIMILARL Y, M\S SINGHAL SECUITIES PVT LTD. M\S SINGHAL CRRDIT MANAGEMENT PV T. LTD.M\S SNR RUBBERS PVT LTD., ARE THE CLOSELY HELD COMPANIES OF SH. SUR ENDRA KUMAR SINGHAL AND HIS FAMILY FROM WHOSE RESIDENCE DOCUMENTS REGARDING THE TRANSFER OF SHARE OF M\S BLOSSOM AOTOMOTIVE LTD., AND OTHER RELATED DOCU MENTS HAVE BEEN SEIZED. DOCUMENTS RELIED UPON, REASONS PUT FORWARD APPARENT LY APPEARS TO BE GENUINE BUT THE DOCUMENTS SEIZED AND THE CIRCUMSTANCES RELA TING TO TRANSFER OF SHARE BY THE ASSESSEE TO KOLKATA BASED COMPANIES GIVE RISE T O CONTRADICTIONS WHICH PROVES THAT THE TRANSACTIONS OF SHARE WHICH THE ASS ESSEE HAS ENTERED WITH KOLKATA BASED COMPANY WAS JUST A FAADE/COLORABLE DEVICE TO REDUCE ITS CAPITAL GAIN LIABILITY.WITHOUT FURTHER GOING INTO A NY DETAIL THE CONTRADICTIONS AS MENTIONED BELOW ARISING FROM THE DOCUMENTS SEIZE D FROM THE ASSESSEE AND OTHER SHAREHOLDERS OF M\S BLOSSOM AUTOMOTIVE PVT LT D. WILL ANSWER ALL THE QUERIES. I) THE ASSESSEE HAS BASICALLY RELIED UPON ANNEXUREA OF THE MOU DATED 17.07.2006 BY CONTESTING THAT AS PER THE ANNE XURE HE HAS NOT TRANSFERRED ANY SHARE TO M\S TECHPRO SYSTEM LTD AND HAS TRANSFERRED 35000 SHARES HELD BY IT TO M\S YUTHIKA COMMERCIAL PVT. 7 LTD. AFTER THE DATE OF MOU I.E. 17.07.2006 THE ASSE SSEE COMPANY HAS RECEIVED PAYMENT FOR THE SAME ON 19.07.2006. TH ERE IS NO DENYING THAT THE ASSESSEE RECEIVED RS 25 LACS VIDE CHEQUE NO. 72949 ON 18.07.2006 FROM M\S YUTHIKA COMMERCIAL PVT LTD . HOWEVER, IT IS ALSO WORTH NOTICING THAT THE REGISTE R OF SHARE TRANSFER OF M\S BLOSSOM AUTOMOTIVE PVT LTD. SEIZE D FROM THE RESIDENCE OF SH. SURENDER KUMAR SINGHAL WHICH GIVES THE DETAIL OF SHARE TRANSFERS ALONG WITH DATE OF REGISTRATION /TR ANSFER, DATE OF MEETING , PARTICULARS OF SHARE TRANSFERRED ,TRANSFE ROR AND TRANSFEREE. (ANNEXURE- A) TELLS A DIFFERENT STORY. AS PER THE REGISTER OF SHARES M/S SINGHAL CREDIT MANAGEMENT LTD. TRANSFERRED 100 00 SHARE ON 10.05.2006 & 25000 SHARES ON 31.07.2006, WHICH HE C LAIMS WHERE TRANSFERRED TO M/S YUTHIKA COMMERCIAL PVT LTD BEFOR E 17.07.2006 I.E. THE DATE OF WHICH MOU WITH M/S TECHPRO SYSTEM S LTD. WAS ENTERED INTO FOR TRANSFERRING THE SHARE OF M/S BLOS SOM AUTOMOTIVE PVT LTD. BY THE SHARE HOLDERS. IN THIS REGARD IT IS BAFFLING WHY THE ASSESSEE TRANSFERRED 25000 SHARES TO M\S YUTHIKA CO MMERCIAL PVT LTD , KOLKATA BASED COMPANY @ RS 100/- SHARE WHEN A S PER MOU DATED 17.07.2006, M/S TECHPRO SYSTEM LTD, ACQUIRED THESE 25000 SHARE FROM M.S YUTHIKA COMMERCIAL PVT LTD @ RS 318/ - SHARES WITHIN A PERIOD OF 3 MONTHS OF TRANSFER OF THESE SH ARE BY THE ASSESSES TO M\S YUTHIKA COMMERCIAL PVT LTD. WHY THE ASSESSEE INCURRED A LOSS OF RS 54,50,000/- (25000*218) BY SELLING 25000 SHARE TO M\S YUTHIKA COMMERCIAL PVT LTD., @100/- PE R SHARE WHEN IT HAD A WILLING BUYER IN M\S TECHPRO SYSTEMS LTD. WHO HAD ALREADY ENTERED INTO MOU ON 17.07.2006 WITH SHAREH OLDERS OF THE GROUP TO BUY THE SHARE @318/- PER SHARE. II) NOT ONLY THE REGISTER OF SHARE TRANSFER (ANNEXURE -A) BUT ALSO MINUTES OF THE BOARD MEETING OF DORECTOR OF M/S BLO SSOM AUTOMOTIVE PVT LTD HELD ON 31.07.2006 (ANNEXURE-B) ALSO PROVES THAT THE SHARES TO KOLKATA BASED COMPANIES NAMELY M /S SHREEVEER OVERSEAS PVT LTD., M/S SUPERTECH LEATHER PVT LTD., M/S TIP- TOP PROMOTERS PVT LTD., M/S DISPLAY COMMERCIAL PVT LTD. , & M/S YUTHIKA COMMERCIAL PVT LTD,. WERE TRANSFERRED ON 31 .07.2006. THE ASSESSEE HELD ALL THE 25000 SHARES ON 17.07.200 6, THE DATE ON WHICH MOU WITH M/S TECHPRO SYSTEMS LTD. FOR TRANSF ER OF SHARES WAS ENTERED INTO BY THE SHAREHOLDERS OF THE GROUP A ND ITS CLAIM THAT ON 17.07.2006 I.E. THE DATE OF MOU, IT HAD NO SHARE S OF M/S BLOSSOM AUTOMOTIVE PVT LTD. PROVES TO BE CONTRADICT ORY IN VIEW OF THE DETAIL GIVEN IN REGISTER OF SHARE TRANSFER A ND MINUTES OF BOARD MEETING OF THE COMPANY. III) ALTHOUGH THE ASSESSEE HAS RECEIVED PAYMENT OF RS. 25 LACS FROM M/S YUTHIKA COMMERCIAL PVT LTD. ON 18.07.2006 BUT I T CANNOT BE 8 SAID TO BE RECEIVED ON ACCOUNT OF TRANSFER OF SHARE S BECAUSE AS PER THE REGISTER OF SHARE TRANSFER (ANNEXURE-A) AND MI NUTES OF BOARD MEETING DATED 31.07.2006 (ANNEXURE-B) SHARE WERE STILL WITH THE ASSESSEE. IV) TRANSFER OF SHARE TO KOLKATA BASED COMPANIES BY THE SHAREHOLDERS AS HAS BEEN DISCUSSED IN THE PARES ABOVE IS NOTHING BUT RESORTING TO COLORABLE DEVICE TO AVOID PAYMENT OF TAX WHICH CAN NOT B ALLOWED EVEN IF IT APPARENTLY APPEARS TO BE WITHIN THE FOU R CORNERS OF LAW AS HAS BEEN HELD B Y HONBLE SUPREME COURT OF INDIA WHILE DEALING THE SLP IN THE CASE OF MCDOWELL AND CO. LIMITED. VS COMMERCIAL TAX OFFICE (154ITR 148) 1985 THAT, TAX PLANNING MAY BE LEGITIMATE PROVIDED IT IS WITHIN THE FRAMEWO RK OF LAW, COLOURABLE DEVICES CANNOT BE PART OF TAX PLANNING A ND IT IS WRONG TO ENCOURAGE OR ENTERTAIN THE BELIEF THAT IT IS HON OURABLE TO AVOID THE PAYMENT OF TAX BY RESORTING TO DUBLIOUS METHODS . IT IS THE OBLIGATION OF EVERY CITIZEN TO PAY THE TAXES HONEST LY WITHOUT RESORTING TO SUBTERFUGE. V) IT IS MORE IMPORTANT TO SEE THE INTENTION BEHIND TH E ACT OF A PERSON AND IS NOT TO BE GUIDED AS TO WHAT APPEARS ON THE SURFACE. IN THE CASE OF THE ASSESSEE AS HAS BEEN FOUND FROM THE FAC TS OF THE CASE DISCUSSED IN THE PRECEDING PARAS THAT THE INTENTION WAS TO TRANSFER PLOT OF LAND AND TO SAVE STAMP DUTY AND THEREFORE THE ASSESSEE RESORTED TO TRANSFER OF SHARES INSTEAD OF SELLING T HE PLOT DIRECTLY TO M/S TECHPRO SYSTEMS LTD. AT THE SAME TIME IN ORDER TO AVOID TAX LIABILITY ON ACCOUNT OF CAPITAL GAINS THE ASSEESEE SOLD THE SHARE @ OF RS. 100/- PER SHARE TO KOKATA BASED COMPANIES I NSTEAD OF @RS 318/- PER SHARE TO M/S TECHPRO SYSTEMS LTD. THOUGH THE SHAREHOLDERS ALREADY HAD MOU WITH THE SAID COMPANY. FROM THE FACTS AS NARRATED AND DISCUSSED IN DETAIL IN PRECE DING PARAS ALSO, IT IS EVIDENT THAT ULTIMATE INTENSION OF THE ASSESSES WAS TO SAVE ON STAMP DUTY AND TO REDUCE INCOME TAX LIABILITY ON AC COUNT OF CAPITAL GAIN. IT HAS BEEN HELD BY HONBLE SUPREME COURT IN ITS JUDGMENT IN THE CASE OF CIT VS. M/S. SUTLEJ COTTON MILLS SUPPL Y AGENCY LTD. 100 ITR 706 THAT IF THE DOCUMENTS INTENSION WAS TO CARRY ON AN ADVENTURE IN THE NATURE OF BUSINESS, THE PROFILE CA N BE TAXED. THE JUDGMENT SUPPORTS THE VIEW THAT THE INTENSION IS OF PARAMOUNT IMPORTANCE, THEREFORE, TAKING SUPPORT FROM THE JUDG MENT II HOLD THAT THE INTENSION OF THE ASSESSEE WAS TO AVOID TA X WHICH CANNOT BE ALLOWED. FURTHER THE HONBLE SUPREME COURT IN THE JUDGMENT REPORTED IN SUMATI DAYAL VS CIT (1995), 214 ITR REI TERATED THE LAW LAID DOWN IN CIT VS DURGA PRASHAD MORE(1971), 8 2 ITR 540 9 THAT THE APPARENT MUST BE CONSIDERED REAL ONLY IF I T IS SHOWN THAT THERE ARE REASON TO BELIEVE THAT THE APPARENT IS NO T THE REAL AND THAT THE TAXING AUTHORITIES ARE ENTITLED TO LOOK ONTO TH E SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND MATTER MU ST BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILITIES. IN THE CASE OF ASSESSEE FROM THE FACTS DISCUSSED IN VIEW OF THE DOCUMENTS F OUND REGARDING MOU AND TRANSFER OF SHARES, IT IS APPARENT T HAT IN REALITY IT WAS SALE OF PLOT TO M/S TECHPRO SYSTEMS LTD AND NOT OF SHARE S. WHOLE GAMUT OF TRANSFERRING THE SHARES OF M/S BLOSSOM AUT OMATIVE (P) LTD. BY THE ASESSEE ALONGWITH OTHER SHAREHOLDERS TO KOLKATA BASED COMPANIES AND TRANSFER OF SHARES WITHIN A PERIOD OF THREE MONTHS BY THE KOLKATA BASED COMPANIES TO M/S TECPRO SYSTEM S LTD ALTHOUGH APPARENTLY APPEARS TO BE GENUINE A TRANSAC TION BUT IN THIS CASE APPARENT IS NOT REAL BECAUSE TRANSFER OF SHARE TO KOLKATA BASED CAN NOT BE CONSIDERED TO BE A TRANSFER SINCE THE SH ARES ULTIMATELY LANDED UP WITH M/S TECHPRO SYSTEM LTD. WHERE THEY W ERE INDENTED TO BE AS PER THE MOU BETWEEN THE SHARE HOLDER & M/S TECHPRO SYSTEMS. (VI) TRANSFER OF SHARES BY THE SHARE HOLDERS OF M/S BLOSSOM AUTOMOTIVE PVT LTD WAS USED AS A TOOL BY THE SHARE HOLDER FOR TRANSFERRING THE PLOT OF LAND TO M/S TECHPRO SYSTEM LTD. HOWEVER, MODE OF TRANSFER OF AN ASSETS IS NOT DETERMINATIVE OF THE NATURE OF THE ASSETS IS WELL SUPPORTED BY THE JUDGEMENT IN TH E CASE OF VODAFONE INTERNATIONAL HOLDING B.V. V/S UNION OF IN DIA AND ANOTHER, 311 ITR 46 (BOMBAY HIGH COURT) WHEREIN IT HAS BEEN HELD THAT SHARES IN THEMSELVES MAY BE AN ASSETS I N SOME CASES LIKE THE PRESENT ONE, SHARES MAY BE MERELY A MODE O R A VEHICLE TO TRANSFER SOME OTHER ASSST(S). IN THE INSTANT CASE, THE SUBJECT MATTERS OF TRANSFER AS CONTRACTED BETWEEN THE PARTIES IS NO T ACTUALLY THE SHARES OF A CAYMAN ISLAND COMPANY, BUT THE ASSET(AS STATED SUPRA) SITUATED IN INDIA, THE CHOICE OF PETITIONER IN SELE CTING A PARTICULARS MODE OF TRANSFER OF THESE RIGHT ENUMERATED ABOVE WI LL NOT ALTER OR DETERMINE THE NATURE OR CHARACTER OF ASSET.} (VII) FACT OF CASE RELIED UPON AS ABOVE ARE ALSO SI MILAR TO CASE OF THE ASSESSEE . IN THE CASE OF ASSESEE, SUBJECT MATTER O F TRANSFER WAS AN ASSETS IN THE FORM 0F PLOT OF LAND WHICH WAS TRANSF ERRED THROUGH THE MEDIUM OF TRANSFER OF SHARES. FROM THE DISCUSSION ABOVE, IT ESTABLISHED THAT THE ASSETS TRANSFERRED WAS A PLOT OF LAND, ITS SALE VALUE WAS RS.127200000/- WHICH WAS TRANSFER THROUGH THE MODE OF SHARES TRANSFER WHICH TOO WERE PRICED AT RS.1272000 00/- (VIII) IN VIEW OF THE DISCUSSION AS ABOVE, IT IS HE LD THAT THE TRANSFER OF SHARES BY THE ASSESSEE ALONG WITH OTHER SHAREHOLDER OF M/S BLOSSOM AUTOMOTIVE (P) LTD TO KOLKATA BASED COMPANI ES WAS 10 SHAM. IN REALITY IT WAS TRANSFER OF SHARES TO M/S T ECHPRO SYSTEMS. AND THE TRANSFER OF SHARES WAS USED BY THE ASSESSEE AND OTHER SHAREHOLDER TO TRANSFER THE ONLY ASSETS I.E. PLOT O F LAND HELD BY M/SBLOSSOM AUTOMOTIVE (P)) LTD. SHORT TERM CAPITAL GAIN OF RS.87100000/- WAS EARNED ON TRANSFER OF ENTIRE TRAN SFER OF SHAREHOLDING TO THE M/S TECHPRO SYSTEM (P) LTD BY V IRTUE OF TRANSFERRING THEIR SHAREHOLDING OF M/S BLOSSOM AUTO MOTIVE (P) LTD TO M/S TECHPRO SYSTEMS LTD FOR THE PURPOSE OF TRANS FERRING THE PLOT OF LAND . AKLTHOUGH THE DOCUMENT REGARDING THE WHOLE TRANSACTION OF TRANSFER OF SHARES HAVE BEEN MANAGED TO CAMOUFLAGE THE REAL TRANSACTION OF TRANSFER OF PLOT OF LAND A ND OF EVADING OF CAPITAL GAIN TAX THEREON BUT AS HAS BEEN HELD BY TH E HONBLE SUPREME COURT IN THE CASE CIT VS. DURGA PARASAD MO RE ,82 ITR 540 THAT THE TAXING AUTHORITIES WERE NOT REQUIRED TO PUT ON BLINKERS WHILE LOOKING AT THE DOCUMENT PRODUCED BEF ORE THEM . THEY WERE ENTITLED TO LOOK IN THE SURROUNDING CIRCU MSTANCES TO FIND OUT THE REALITY OF THE RECITALS MADE IN THOSE DOCUM ENTS. IN THIS CASE CIRCUMSTANCES AS HAS BEEN DISCUSSED IN PRECED ING PARAS REVEAL THAT THE REAL INTENTION OF THE ASSESSEE WHIC H WAS TO AVOID TAX ON CAPITAL AGAIN . AN ASSESSING OFFICER IS REQU IRES TO KEEP IS EARS AND EYES OPEN AND USE THE FACULTIES OF HIS BRAIN TO DECIDE A CASE JUDICIOUSLY AND ON MERITS. IN THIS CASE UNDER SIGNE D CAN NOT SHUT HIS EYES TO THE OPEN SECRET THAT THERE IS A BLATANT ATTEMPT ON THE PART OF THE ASSESSEE TO EVADE TAX BY STAGE MANAGING THE DOCUMENTS. IN VIEW OF FOREGOING , IT IS HELD THAT THE ASSESS EE HAS EARNED A SHORT TERM CAPITAL GAIN FROM TRANSFER OF PLOT OF LAND THROUGH THE MODE OF SHARE TRANSFER WHICH COMPUTED AS UNDER PROPORTIONATELY ON THE BASI S OF HIS SAREHOLDING AND THE TOTAL SHORT TERM CAPITAL GAIN EARNED BY THE SHA REHOLDER SHORT TERM CAPITAL GAIN = AXB C 8,71,00,000 X 25,000 4,00,000 RS. 54,43,750/ - A: TOTAL SHORT CAPITAL GAIN EARNED BY THE SHAREHOL DERS B: NO. OF SHARES HELD AND TRANSFERRED BY THE ASSESS EE C: TOTAL SHARES OF M/S BLOSSOM AUTOMATIVE WHICH HAV E BEEN TRANSFERRED TO M/S TECHPRO SYSTEMS LTD. 2.7 THE LD. AR HAS MADE THE FOLLOWING SUBMISSION BE FORE THE LEARNED CIT(A):- 11 A) THERE WAS SEARCH WARRANT AGAINST THE COMPANY BUT NO SEARCH HAS BEEN CARRIED OUT AGAINST THE ASSESSEE COMPANY.THE SEARC H WARRANTS WERE SERVED ON THE INDIVIDUALS BUT THE SEARCH WARRANT WA S NOT SERVED ON THE COMPANY THROUGH ITS DIRECTORS. B) NO REQUISITION OF BOOKS OF ACCOUNTS WAS MADE UNDER SECTION 132A OR THERE NO SEIZURE OF ANY ASSETS/ DOCUMENTS/ RECORD OF THE COMPANY. C) THE PANCHNAMA PREPARED IS COMMON AND NO SPECIFIC FI NDING OR SEIZURE IS THERE AGAINST THE ASSESSEE COMPANY. D) THE SEARCH WARRANT AND IN PANCH NAMA THE NAME OF BL OSSOM AUTOMOTIVE PVT. LTD. HAS ALSO BEEN MENTIONED AT THE ADDRESS E- 127 INDUSTRIAL AREA, BHIWADI. THIS COMPANY ON THE DATE OF SEARCH WAS NEI THER HAVING THEIR OFFICE AT E-127 INDUSTRIAL AREA BHIWADI NOR THERE W AS ANY REQUISITION UNDER SECTION 132A OR IMPOUNDING / SEARCH AGAINST T HIS COMPANY IN THE PREMISES E-127 INDUSTRIAL AREA, BHIWADI. THEREFORE THE WHOLE APPROACH OF THE ASSESSING OFFICER WAS BIASED AND CONTRARY TO THE PROVISION OF SECTION 132/153A. HENCE THE ORDER PASSED UNDER SECTION 153 A IS BAD UNDER LAW. IN SUPPORT OF ABOVE WE WOULD LIKE TO SUBMIT THE FOL LOWING OBSERVATION FROM THE JUDICIAL RULING: M TRADING CORPORATION VS ASST CIT-020 SOT 0489-ITAT MUMBAI J BENCH-IT HAS BEEN OBSERVED BY THE HONOURABLE BENCH AS FOLLOWS: SECTION 132 OF THE INCOME TAX ACT THUS PROVIDES THE ACTS AND DEEDS TO BE CARRIED OUT BY THE SEARCH TEAM AT THE PREMISES OF T HE ASSESSEE. THE CONDUCT OF SEARCH INCLUDES ACTS ,DEEDS AND THINGS ENUMERATE D U/S132 OF THE INCOME TAX ACT WHICH AN AUTHORIZED OFFICER IS BOUND TO CARRY OUT IN ORDER TO COMPLETE THE PROCESS OF SEARCH. SEARCH IS AN INV ASION OF PRIVACY OF THE ASSESSEE AND ALL PROCEEDINGS CONNECTED WITH SEARCH NEED TO BE CARRIED OUT WITHIN THE FRAMEWORK OF THE PROVISION OF THE ACT. I N CASE OF NON COMPLIANCE TO THE PROVISION OF THE ACT BY THE AUTHO RIZED OFFICER, SUCH SEARCHES ARE INVALID AND ILLEGAL. IN THE PRESENT CA SE BEFORE US, NO SEARCH WAS CONDUCTED AGAINST THE ASSESSEE AS THE PREMISES OCCUPIED BY THE ASSESSEE WERE NOT ENTERED UPON AND SEARCHED BY THE AUTHORIZED OFFICER. MERE SEARCH OF THE PREMISES OWNED BY THE ASSESSEE B UT RENTED TO ANOTHER CONCERN DOES NOT BY ANY IMPLICATION PROVE THE CONDU CT OF SEARCH AGAINST THE ASSESSEE IN VIEW OF THE FACT THAT THE ASSESSEE WAS NOT AVAILABLE AT THE ADDRESS SEARCHED UPON. MERE MENTIONING OF NAME IN T HE PANCHNAMA DOES NOT LEAD TO THE CONCLUSION THAT A VALID SEARCH WAS CONDUCTED AGAINST THE ASSESSEE. IN THE TOTALITY OF CIRCUMSTANCES, WHERE N O SEARCH HAS BEEN CONDUCTED AGAINST THE ASSESSEE THERE IS NO ,MERIT I N THE ISSUE OF NOTICE U/S 153A OF THE INCOME TAX ACT UNDER WHICH THE JURISDIC TIONAL AREA OF OPERATION IN SIX ASSESSMENT YEARS IMMEDIATELY PRECE DING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR, IN WHICH SEARCH WAS CONDUCTED. IN CASE NO SEARCH IS CONDUCTED AGAINST THE PERSON, THE PERI OD OF OPERATION TO WHICH THE PROVISION OF SECTION 153A OF THE ACT IS BASELES S. THOUGH THE PROVISION OF SECTION OF 158BC OF THE ACT ARE NOT APPLICABLE T O SEARCHES CONDUCTED 12 AFTER 31-05-2003, BUT THE PROVISION OF SECTION 132 OF THE INCOME TAX ACT ARE CONTINUINING ON THE STATUTE IMPLYING THEREBY TH AT THE PROVISION OF SECTION 153A OF THE ACT ARE ONLY APPLICABLE IN CAS E VALID SEARCH IS CONDUCTED AGAINST THE ASSESSEE UNDER SECTION 132 OF THE ACT. ACCORDINGLY, WE DECLARE THE ASSESSMENT MADE AGAINST THE ASSESSEE UNDER THE PROVISION OF SECTION 143(3) READ WITH SECTION 153A OF THE INC OME TAX ACT ARE NULL AND VOID AND DIRECT THE ASSESSING OFFICER TO CANCEL THE SAME. THUS, THE ISSUE RELATED TO THE VALIDITY OF SEARCH RAISED BY T HE ASSESSEE IS ALLOWED. 2.8 THE A/R HAS ALSO MADE THE FOLLOWING SUBMISSIO NS BEFORE THE LD. CIT(A) I) THERE WAS NO SEIZURE OF ANY KIND OF SHARE TRANS FER REGISTER SEIZED FROM THE POSSESSION OF THE ASSESSEE COMPANY OR ITS DIREC TOR. II) THE COMPANY BLOSSOM AUTOMOTIVE PVT. LTD. WAS NO T OPERATING OR HAVING ANY OFFICE AT E-127 INDUSTRIAL AREA BHIWADI ON THE DATE OF SEARCH. THE ALLEGED SHARE TRANSFER REGISTER IF ANY IMPOUNDING FROM THE PREMISES OF BLOSSOM AUTOMORIVE PVT. LTD. HAS NOT BEEN PROVIDED TO THE A SSESSEE FOR CONFRONTATION. III) THE ALLEGED MOU BETWEEN PREM KUMAR GARG AND TECHPRO SYSTEM LTD. WAS NOT IMPOUNDING FROM THE ASESSEE COMPANY AS THE ASSESSEE COMPANY WAS NOT A PARTY TO IT. IV) IN THE ASSESSMENT ORDER THE LEARNED AO HAS NOT BROUGHT ON RECORD THE CONTENTS OF ALLEGED MOU WITH ITS ANNEXURE WHICH C ONTAINED THE NAME OF THE PERSONS WHO WERE HOLDING THE SHARES ON THE DA TE OF MOU (I.E. 17.07.2006). RATHER WHEN THE COPY OF ANNEXURE TO SA ID MOU WAS ASKED FROM THE ASSESSING OFFICER VIDE LETTER DATED 25.11.2010 , THE AO MADE A REMARK ON THE REQUEST LETTER AS FOLLOWS: MAY PLEASE BE NOTED THAT ANNEXURE A MENTIONED IN T HE MOU UNDER CONSIDERATION IN THE CASE OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. IS NOT FOUND & THEREFORE ITS NOT AVAILABLE WITH THE DEPARTMENT. TH ERE IS NO OTHER PAPER OTHER THAN WITH REGARD TO THE ISSUE OF SALE OF SHARES OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. V) THE LEARNED AO HAS WITH HELD THE VITAL INFORMATI ON RECEIVED BY HIM IN THE COURSE OF INQUIRY U/S 133(6) RECEIVED FROM TECHPRO SYSTEM LTD. VIDE THERE LETTER DATED 30.06.2010, THE LEARNED AO HAS OVER LO OKED THE INFORMATION WHEREIN THE PURCHASER OF SHARE OF M/S BLOSSOM AUTO MOTIVE PVT. LTD. HAS GIVEN FULL DETAILS OF TRANSFEROR, AS WELL AS DETAIL S OF PAYMENT MADE TO THEM. VI) THE LEARNED AO HAS PRESUMED THAT THE CONSIDERAT ION RECEIVED BY YUTHIKA COMMERCIAL PVT. LTD. FOR 25000 SOLD BY IT TO TECHPR O SYSTEM LIMITED HAS BEEN DIVERTED TO THE ASSESSEE COMPANY. THE LEARNED AO HA S NOT COME OUT WITH ANY CORROBORATIVE EVIDENCE IN THIS REGARDS. THE LEARNED AO HAS MADE INQUIRY FROM 13 YUTHIKA COMMERCAL PVT. LTD. WHICH HAS ALSO NOT BEE N BROUGHT ON RECORD NOR MADE AVAILABLE TO THE ASSESSEE COMPANY, IF ANYTHIN G ADVERSE, FOR CONFRONTATION. THE TRANSFEREE COMPANY YUTHIKA COMME RCIAL PVT. LTD. TO WHOM THE SHARES WERE SOLD BY THE ASSESSEE COMPANY, IS A VERY BIG SIZE NBFC, AS PER COPY OF BALANCE SHEET ENCLOSED. THE T RANSACTION WITH THE ASSESSEE COMPANY HAS BEEN CONFIRMED BY IT. THE S UBSEQUENT TRANSACTION WITH IT HAS BEEN COMFIRMED BY TECHPRO SYSTEM LTD. VII) THEREFORE THE ADDITIONS MADE BY LEARNED AO W ERE BASED ON PRESUMPTIONS WHICH WERE CONTRARY TO THE FACTS AND AGAINST THE SP IRIT OF LAW AND NATURAL JUSTICE. IN THIS REGARDS THE ASSESSEE PLACE RELIAN CE ON 169 TAXMAN 0130. VIII)SECTION 132(4A) OF THE ACT USES EXPRESSION IT MAY BE PRESUMED IT IS NOT OBLIGATORY ON THE ASSESSING AUTHORITY TO MAKE A PRESUMPTION. EVEN IF A PRESUMPTION IS REQUIRED TO BE MADE, THEM , AS HEL D IN CIT V. S.M.S. INVESTMENT CORPORATION PVT. LTD. (1994) 207 ITR 3 64 (RAJ.), THE PRESUMPTION IS A REBUTTABLE ONE AND RELATES TO A QUESTION OF F ACT. WHILE COMING TO THIS CONCLUSION, THE RAJASTHAN HIGH COURT RELIED UPON AND EARLIER DECISION RENDERED BY IT IN CIT V. S.M.S. INVESTMENT CORP ORATION (1988) 73 CTR (RAJ.) 184 : (1988) 173 ITR 393 (RAJ.) IX) EVEN IN ITO V. T. ABDUL MAJEED (1988) 169 IT R 440 (KER) IT HAS BEEN HELD AS FOLLOWS: IT IS TRUE THE SECTION 132 (4A) OF THE ACT. ENABL ES THE COURT TO PRESUME THE TRUTH OF THE CONTENTS OF SUCH BOOKS. HOWEVER I T IS A PRESUMPTION WHICH CAN BE REBUTTED MOREOVER, THE PRESUMPTION ENVISAGED THEREIN IS ONLY A FACTUAL PRESUMPTION. IT IS IN THE DISCRETION OF COURT, DEP ENDING UPON OTHER FACTORS, TO DECIDE, WHETHER THE PRESUMPTION MUST BE DRAWN. T HE EXPRESSION USED IN THE SUBSECTION IS MAY BE PRESUMED AS IS USED IN SEC TION 114 OF THE EVIDENCE ACT. 1872. IT IS NOT MANDATE THAT WHENEVER THE BOOKS OF ACCOUNT ARE SEIZED. THE COURT SHALL NECESSARILY DRAW THE PRESUMPTI ON, IRRESPECTIVE OF ANY OTHER FACTORS WHICH MAY DISSUADE THE COURT F ROM DOING SO X) THE LEARNED AO WHILE FRAMING THE ASSESSMENT HAS PROCEEDED ENTIRELY NO SURMISES AND JUNCTURES. THE TRANSACTION FOR SALE OF SHARES BY THE ASSESSEE COMPANY WAS A GENUINE TRANSACTION. THE COMPANY H AS ENTERED IN TO TRANSACTION FOR SALE OF 35000 SHARES ON 28.04.20 06, THE TRANSFER DEED DULY EXECUTED WAS DELIVERED FOR 10000 & 25000 SHARE BEFORE 17.07.2006. THE TRANSFEREE BEING HOLDER IN DUE COURSE HAVE SOL D THEIR SHARES TO WHICH THE ASSESSEE IS NOT A PARTY. XI) THE LEARNED AO HAS NOT UNDERSTOOD THE PROVISIO N OF COMPANIES ACT IN RESPECT OF SHARE TRANSFER PROCEEDINGS AS PROVID ED IN SECTION 108 OF THE COMPANIES ACT., 1956. THE COPY OF PROVISION OF SECTION 108 IS ENCLOSED FOR YOUR READY REFERENCE. AFTER EXECUTION OF TRANSFER INSTRUMENTS DATED 05.05.2006 & 14.07.2006 RESPECTIVELY FOR 10000 & 2 5000 SHARES THE TRANSFER 14 OF SHARES IN FAVOURE OF YUTHIKA COMMISSARIAL PVT. LTD. WERE DULY RECORDED ON 10.05.2006 & 31.07.2006 FOR 10000 & 25000 SHARES RESPECTIVELY. THE TRANSFER OF SHARES BY THE ASSESSEE COMPANY WAS CO MPLETE ON DELIVERY OF SHARE CERTIFICATES WITH TRANSFER DEED BEFORE 17 .07.2006 RESPECTIVELY FOR 10000 & 25000 SHARES AND CONSIDERATION THEREOF R ECEIVED ON 28.04.2006 AND 18.07.2006 FOR 10000 & 25000 SHARES RESPECTIVE LY . XII) THE LEARNED AO HAS DISBELIEVED THE GENUINEN ESS OF TRANSACTION IN SPITE OF THE FACT THAT THE TRANSFER OF SHARES WERE DU LY RECORDED AND PAYMENT RECEIVED BY THE ASSESSEE COMPANY WAS DULY VERFI ED. THE PARTICULARS OF TRANSFEREE WERE ALSO DULY RECORDED IN THE ANN UAL RETURN AS ON AGM HELD ON 20.09.2006, FILED WITH REGISTRAR OF COMPANIES. ANY PERSON HOLDING A VALID TRANSFER DEED FOR TH E SHARES BECOME A SHARE HOLDER IN DUE COURSE HOLDING A VALID TRANSFER DEED, AND BECOME A MEMBER, NO ENTRY IN THE REGISTER OF MEMBER OF THE COMPANY . SUBSEQUENT TO TRANSFER OF ASSETS, BY THE ASSESSEE C OMPANY THE TRANSFER IN CONSORTIUM WITH ORDER SHAREHOLDER, IN TO A BLOCK DE AL BY WAY OF A MOU ON 17 TH JULY,2006 AT A HEFTY CONSIDERATION AT THE RATE OF R S.318/ SHARE. THE BUYER OF SUCH SHARES WAS A COMPANY TECHPRO SYSTEMS LTD. THE CONSI DERATION SO FIXED BETWEEN THE SUBSEQUENT SELLER AND BUYER HAS NO RELATIONSHIP WITH THE ASSESSEE COMPANY AND THE PRICE OF SHARES FIXED AT A HIRE RATE NOT A CONCERN OF A ASESSEE COMPANY . THE COMPANY TECHPRO SYSTEM LTD. WAS HAVING SOME STR ATEGIC PLANNING AS STATED BY THE LEARNED AO AND THE ASSESSMENT ORDER IN PARA 3.5 WHICH IS REPRODUCED BELOW:- AFTER ACQUIRING THE TOTAL SHARE HOLDING OF M/S BLO SSOM AUTOMOTIVE PVT. LTD ,M/S TECHPRO SYSTEM LTD. INITI ATED THE PROCEDURE OF MERGER AND M/S BLOSSOM AUTOMOTIVE PVT. LTD. MERGED WITH ITS HOLDING COMPANY M/S TECHPRO SYSTEM LTD. W.E.F. 01.04.2008 PURSUANT TO THE ORDER DATED 10.07.2009 OF HONABLE HIGH COURT OF RAJASTHAN , JAIPUR BENCH , JAIPUR AND THE ORDER DATED 22.05.2009 OF HO NBLE HIGH COURT OF DELHI , NEW DELHI. DURING ASSESSMENT PROCEEDING THE ASSESSEE COMPANY H AS SUBMITTED ALL THE DETAILS OF THE TRANSFEREE COMPANY IN RESPECT OF ITS IDENTITY PARTICULARS OF BALANCE SHEET AND ANNUAL RETURN FILED WITH DEPARTMENT OF CO MPANY AFFAIRS, DETAILS OF INCOME TAX- PAN ETC. THE LEARNED AO HAS BROUGHT ON RECORD THE ABOVE FACTS NOR HE HAS BROUGHT ON RECORD THE FACTS OF INQUIRY CONDU CTED BY HIM. THE FACTS OF INQUIRY CONDUCTED BY LEARNED AO BE ASCERTAINED FROM HIS FILE. IF NO INQUIRY HAS BEEN CONDUCTED BY LEARNED AO, IT IS PRAYED THAT THE INQUIRY MAY KINDLY BE CONDUCTED BY YOUR KIND OFFICE, EXERCISING CO TERMIN US POWERS , WITH AN OPPORTUNITY OF AO AND TO ASSESSEE TO CROSS EXAMINE THE PARTY IF BEING CALLED IN PERSON. 15 AFTER THE TRANSACTION DONE BY THE ASSESSEE COMPANY WITH THE TRANSFREE COMPANY YUTHIKA COMMERCIAL PVT. LTD. VIDE INSTRUMEN T DATED 5.5.06 & 14.7.2006 RESPECTIVELY FOR 10000 & 25000 SHARES , Y UTHIKA COMMERCIAL PVT. LTD, HAS DONE FURTHER TRANSACTION ON 17.10.2006 BY SELLI NG 55000 SHARES TO TECHPRO SYSTEM LTD. THIS AUTHENTIC INFORMATION WAS AVAILABL E WITH ASSESSING OFFICER. THE LEARNED AO HAS NOT APPLIED HIS MIND, HOW YUTHIKA CO MMERCIAL PVT. LTD., COULD ESCAPE FROM RECORDING SHORT TERM CAPITAL GAIN IN IT S COMPUTATION OF INCOME FOR THE ASSESSMENT YEAR 2007-08 UNDER THE CIRCUMSTANCES WHE RE SUBSEQUENT SALE WAS DONE BY YUTHIKA COMMERCIAL PVT.LTD. TO TECPRO SYSTE MS LTD. THE ASSESSEE COMPANY HAS SOLD THE SHARES AT FAIR VA LUE OF THE SHARES AS ON THE DATE SALE .THE WORKING OF THIS WAS SUBMITTED TO AOTHE LEARNED AO HAS ROPED IN THE TRANSACTION DONE BY YUTHIKA COMMERCIAL PVT. LTD. WITH TECHPRO SYSTEM LTD. UNDER THE GRAB OF SHAM TRANSACTION INSPITE OF FACT THAT TECHPRO SYSTEM LTD., HAD CONFIRMED OF ACQUIRING THE SHARES FROM YUTHIKA COMMERCIAL PVT. LTD., AND THERE WAS NO INVOLVEMENT OF ASSESSEE COMPANY IN THE SECOND TRANSACTION. DURING SEARCH PROCEEDING THE TRANSACTION BY THE A SSESSEE COMPANY WITH YUTHIKA COMMERCIAL PVT. LTD., AND SUBSEQUENT TRANSA CTION BY YUTHIKA COMMERCIAL PVT.LTD., WITH TECHPRO SYSTEM LTD., WERE APPARENT, THE SEARCH WAS CONDUCTED ON 17.9.2008 AND THE ASSESSMENT WAS COMPL ETED ON 28.12.2010. THERE IS NO ADVERSE EVIDENCE IN RESPECT OF TRANSACTION DO NE BY ASSESSEE COMPANY AND SUBSEQUENT TRANSACTION DONE BY YUTHIKA COMMERCIAL P VT. LTD.WITH TECHPRO SYSTEM LTD. THE LEARNED AO HAS THE ASSESSMENT ONLY ON PRESUMPTI ON AND HAS NEITHER LOOKED INTO FORM NOR SUBSTANCE OF TRANSACTION. 2.9 THE LD CIT(A) CONFIRMED THE ADDITION AFTER OBSE RVING AS UNDER:- 1. AT THE OUTSET, IT IS MENTIONED THAT THE A.R HAS TAKEN THE GROUND AGAINST OF RS. 76,21,250/- INADVERTENTLY, WH EREAS THE ACTUAL ADDITION MADE BY THE A.O IS OF RS. 54,43,750/- . UN DISPUTED FACTS ARE THAT SHARES OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. A COMPAN Y INCORPORATED ON 19.7.05 WHICH PURCHASED A LAND ON 5.4.06 FOR RS. 4. 01 CRORE IN INDUSTRIAL AREA BHIWADI, WERE HELD BY MEMBERS OF S.K. SINGHAL FAMILY, COMPANIES HELD BY THEM, SANJEEV KUMAR SINGHAL AND HIS OTHER F AMILY MEMBER AND COMPANIES HELD BY THEM AS WELL AS SH. PREM KUMAR GA RG. SHARE HOLDERS OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. ENTERED INTO A MOU DATED 17.7.2006 WITH M/S TECHPRO SYSTEM LTD THROUGH AUTHO RIZED REPRESENTATIVE. SH. PREM KUMAR GARG, WHO ALSO A MAJ OR SHARE HOLDER OF M/S BLOSSOM AUTOMOTIVE PVT. LTD TO SELL THEIR SHARE HOLDING IN THE COMPANY TO M/S TECHPRO SYSTEM LTD. THIS MOU WAS NOT CACELLED AND RATHER ACTED UPON AS WAS CONFIRMED BY M/S TECHPRO S YSTEM LTD. VIDE THEIR LETTER DATED 3.7.10 IN RESPONSE TO NOTICE U/S 133(6 ) DATED 29.6.10 ISSUED BY 16 A.O. AS PER THIS MOU, 100% SHAREHOLDING OF M/S BLOS SOM AUTOMOTIVE PVT. LTD. WAS TO BE TRANSFERRED FROM THE EXITING SH ARE @ 318/- PER SHARE AT TOTAL CONSIDERATION OF RS. 12.72 CRORE TO M/S TECH PRO SYSTEM LTD. HOWEVER, ON PAPERS 3,18,00 SHARES OF M/S BLOSSOM AU TOMOTIVE PVT. LTD. WERE SHOWN TO BE TRANSFERRED TO 9 KOLKATA BASED COMPANIES @ RS. 100/- PER SHARES. LATER ON PAPER ALL THESE 9 KOLKATA B ASED COMPANIES HAVE SHOWN TO HAVE TRANSFERRED ALL THESE 3,18,000 SHA RES TO M/S TECHPRO SYSTEM LTD. AT THE SAME RATE I.E. @ RS. 318/-PER S HARES, AS WAS DECIDED IN MOU DATED 17.07.2006 BETWEEN THE ERSTWHILE SHAR EHOLDERS OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. & M/S TECHPRO SYSTEM LTD. SURPRISINGLY AND RATHER INTERESTINGLY, ALL THE 9 KOLKATA BASE D COMPANIES AUTHORIZED SAME SH. PREM KUMAR GARG TO SELL THEIR SHAREHOL DING TO M/S TECHPRO SYSTEM PVT. LTD. . IT IS INTERESTING TO REITERATE THAT SH. PREM KUMAR GARG WAS ALSO EARLIER AUTHORIZED BY EARLIER SHARE HO LDERS TO SELL THEIR SHAREHOLDING OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. TO M/S TECHPRO SYSTEM LTD. 2. IT IS QUITE SURPRISING THAT WHEN ERSTWHILE SHARE HOLDERS OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. INCLUDING THAT AP PELLANT HAVE ENTERED INTO MOU WITH M/S TECHPRO SYSTEM LTD. FOR SELL OF SHARES @ RS. 318/- PER SHARE ON 17.7.2006, THEN WHY ON SOME LATER DATE I.E. ON 31.7.06, THESE SHARES HOLDERS WILL SELL THE IMPUGNED SHARES TO 9 K OLKATA BASED COMPANIES THAT TOO AT A VERY LOW RATE I.E. @ RS.100/- PER SHA RE. OBVIOUSLY, THESE FACTS INFER THAT IT IS THE MAKE BELIEVE AFFAIR AND 9 KOLK ATA BASED PARTIES HAVE BEEN BROUGHT INTO THE SEEN ONLY TO MANAGE THE CIRC UITOUS ROUTE OF SALE OF SHARES OF IMPUGNED COMPANY SO THAT THE PROFIT CAN B E DIVERTED ON RECORD TO THESE 9 KOLKATA BASED COMPANIES, WHO HAD BY THEM SELVES MIXED BAG OF LOSS AND PROFITS RESULTING FROM OTHER TRANSACTION A ND ARE THUS ABLE TO ABSORB THE PROFIT REFLECTED IN APPARENT TRANSFER OF IMPUGN ED SHARES WITHOUT INCURRING TAX LIABILITY. 3 THE ARGUMENTS OF THE A.R. IS THAT THE ERSTWHI LE SHARE HOLDERS OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. HAVE SOLD 35000 SHARES TO KOLKATA BASED COMPANY NAMELY M/S YUTHIKA COMME RCIAL PVT. LTD. VIDE TWO SALE BILL DATED 28.4.2006 FOR SALE OF 10,000 AND 25,000 SHARES, WHICH IS WELL BEFORE THE DATE OF MOU I.E. 1 7.7.06. ON PERUSAL OF THE DETAILS, IT IS INTERESTINGLY NOTED THAT PAYMENT OF RS. 10,00,000/- RELATED TO 10,000 SHARES WAS MADE THROUGH CHEQUE NO. 191826 DATED 28.4.2006 AND SHARE TRANSFER FORM/DEED ALONG WITH SHARES WERE DELIVERED ON 7.5.2006. ON PERUSAL OF COPY OF SHARE TRANSFER FO RM RELATED TO 10,000 SHARES, IT IS SEEN THAT SAME IS SIGNED ON 10.5.2006 . BY THE TRANSFEROR AND TRANSFEREE.HOWEVER IT IS INTERESTING TO NOTE THAT I N RESPECT OF 25000 SHARES IT WAS CLAIMED THAT THEY WERE DELIVERED ON 15.07.06 . MOREOVER, EVEN THE PAYMENTS AGAINST THEM WERE NOT MADE AT THE RELEVANT POINT OF TIME BY THE BUYER. ON BEING CONFRONTED BY THE UNDERSIGNED, IT W AS CLAIMED BY A.R. OF APPELLANT THAT POST DATED CHEQUE WAS GIVEN BY THE B UYER HAVING DATE AS 17 18.7.2006. HOWEVER, NO INDEPENDENT EVIDENCE OF THE SAME COULD BE FILED BY THE AR TO SUBSTANTIATE THAT REALLY THE POST DATE D CHEQUE WAS ISSUED ON 28.4.2006 ITSELF AND NOT SOMEWHERE NEAR 18 TH JULY, 2006. ON THE CONTRARY, FROM PERUSAL OF THE CHEQUE NO. OF THIS CONTENDED PO ST DATED CHEQUE (CHEQUE NO. 0729479) CLAIMED TO BE ISSUED ON 28.4.2 006 ITSELF VIS--VIS THE CHEQUE NO. ISSUED ON 28.4.2006 (CHEQUE NO. 1918 26), IT IS SEEN THAT THE CLAIMED POST DATED CHEQUE IS ALTOGETHER FROM THE DI FFERENT SERIES OF THE CHEQUE BOOK. IF BOTH THE CHEQUES WERE ISSUED ON SAM E DATE, THEN THEY WOULD NORMALLY HAVE NEARBY NUMBER OR AT LEAST WILL BE FROM THE SAME SERIES OF THE CHEQUE BOOK. THIS BEING NOT SO, THE C LAIM OF THE APPELLANT THAT THE CHEQUE OF RS. 25 LAKH WAS POST DATED AND WAS IS SUED AT THE RELEVANT POINT OF TIME, IS NOT AT ALL ACCEPTED. 4. AS PER THE GUIDELINES AND RULES OF SEBI AS WELL AS REGISTRAR OF COMPANIES, ANY SELL OF SHARE IS TO BE EVIDENCED BY EXECUTION OF CONTRACT NOTE. IN THE INSTANT CASE, THE A.R. OF THE APPELLAN T FAILED TO FILE THE COPY OF CONTRACT NOTE DURING ASSESSMENT PROCEEDING OR EVEN IN THE APPELLANT PROCEEDING TO SUPPORT HIS CLAIM THAT SHARES WAS SOL D IN APIRL 2006. THE PLEA TAKEN FOR NON-EXECUTION OF CONTRACT WAS THE TR ANSACTION OF SELL OF SHARES WAS NOT ROUTED THROUGH RECOGNIZED STOCK EXCH ANGE, AS THE SHARES WERE NOT LISTED. HOWEVER, AS PER THE RULES AND GUID ELINES, THE EXECUTION OF CONTRACT NOTE IS REQUIRED EVEN IN THE CASE OF OFF-M ARKET TRANSACTION OF SHARES. IN THE ABSENCE OF CONTRACT NOTE, THE DATE O F SELL OF SHARE SO CLAIMED IS TOTALLY UNSUBSTANTIATED AND CANNOT BE ACCEPTED. THE NEXT BEST EVIDENCE FOR SELL OF SHARES IS THE DELIVERY OF SHARES BY THE TRANSFEROR ALONG WITH THE DULY SIGNED SHARE TRANSFER FORM. THE A.R HAS FURNIS HED THE COPY OF THE SHARE TRANSFER FORM TO SUPPORT HIS CLAIM. MAJOR DIF FERENCE IS NOTICED BETWEEN THE TWO TRANSACTIONS AS SEEN FROM THE PERUS AL OF SHARE TRANSFER FORM WHICH FURTHER PROVES THAT 25,000 SHARES WERE N OT SOLD BEFORE THE DATE OF MOU. ON PERUSAL OF COPY SHARES TRANSFER FORM, IT IS SEEN THAT THE SHARE TRANSFER FORM FOR 10,000 SHARES IS SIGNED ON 10.5.2 006, WHEREAS THE TRANSFER FORM FOR 25,000 SHARES IS SIGNED BY THE AP PELLANT COMPANY NO 31.7.2006. IF BOTH LOTS OF SHARES WERE SOLD ON THE SAME DATE, THEN NORMALLY THE SHARE TRANSFER FORM WOULD HAVE ALSO BEEN SIGNED ON THE SAME DATE. SO MUCH SO EVEN THE DATE OF ISSUE OF BLANK SHARE TRANS FER FORM BY THE REGISTRAR OF THE COMPANY WAS HAVING A GAP OF TWO MO NTHS FOR THE TRANSFER OF 25,000 SHARES. (SHARE TRANSFER FORM FOR 10,000 S HARES WERE GOT ISSUED FROM THE REGISTAR OF COMPANY ON 5.5.2006 AND FOR 25 ,000 SHARES SAME WAS GOT ISSUED ON 14.7.2006).THEREFORE, THE CLAIM T HAT 10,000 AS WELL AS 25000 SHARES WERE SOLD ON SAME DATE I.E. 28.4.2006 IS HAVING NO MERIT IN AS FAR AS SELL OF 25000 IS CONCERNED. IT IS EVIDENT THAT THESE 25,000 SHARES HAVE BEEN SOLD BY THE APPELLANT COMPANY WELL AFTER THE DATE OF MOU I.E. 17.7.2006. AS EVIDENT FROM THE SIGNATURE ON THE SHA RE TRANSFER FORM, IT IS EVIDENT THAT THESE 25,000 SHARES WERE SOLD BY THE A PPELLANT COMPANY SOMEWHERE NEAR 31.7.2006 AND THERE BY THE SHARE TRA NSFER FORM WAS SIGNED 18 ON 31.7.2006 AND DELIVERED TO THE BUYER ALONG WITH THE SHARES ON 31.7.2006 5. THE INFERENCE OF MAKE BELIEVE ARRANGEMENT IN RES PECT OF 25,000 SHARES IS FURTHER PROVED FROM THE FACT THAT NO ACTUAL PAYMENT HAS BEEN DONE BY PURCHASER AGAINST ORDER U/S 143(3) APP EAL NO 894/10-11 M/S SINGHAL CREDIT MANAGEMENT LTD.. A Y. 2007-08 CO MPANY TO THE APPELLANT COMPANY IN LIEU OF SELL OF 25000 SHARE BEFORE 17.07.06 I.E. THE DATE OF MOU , WHEREAS THE PAYMENT WAS MADE FOR SELL OF 10000 SHARES ON 28.04.02006 ITSELF. THE ISSUE HAS ALREADY BEEN D ISCUSSED I THE EARLIER PARA AND HENCE NOT REPEATED. 6. IF THE ARGUMENT SAKE , THE CONTENTION OF A. R. THAT THE APPELLANT AND OTHER ERSTWHILE SHARE HOLDER OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. HAVE SOLD SHARES TO THE 9KOLKATA BASED CO MPANIES WELL BEFORE 17.07.06 I.E. THE DATE OF MOU IS TREATED AS CORRECT (THOUGH NOT CORRECT), THEN WHAT WAS THE NEED OF THOSE ERSTWHILE SHARE HOL DERS TO ENTER INTO A MOU WITH M/S TECHPRO SYSTEMS LTD., BECAUSE AS PER THE A.R. VERSION , THEY HAD ALREADY SOLD THEIR SHARES TO 9 KOLKATA BAS ED COMPANIES AND THEY DID NOT OWN ANY SHARE OF THE COMPANY AS ON 17.07.20 06. MANAGEMENT OF M/S TECHPRO SYSTEMS LTD WOULD ALSO ENTER INTO MOU W ITH ONLY SUCH PERSONS WHO ARE SHAREHOLDERS OF THE COMPANY, AFTER DULY ASCERTAINING THIS FACT. IT ONLY INFERS THAT AS ON 17.07.2006 THE ERST WHILE SHAREHOLDERS OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. INCLUDING M.S SINGHAL SECURITIES PVT LTD. , M/S SINGHAL CREDIT MANAGEMENT LTD. & M/S S.N.R.RUBB ERS PV LTD. WERE CONTINUING . THUS ARGUMENT OF THE A.R. THAT SHARE W ERE ALREADY SOLD BY ERSTWHILE SHAREHOLDERS INCLUDING THE APPELLANT TO K OLKATA BASED COMPANY WELL BEFORE 17.07.2006, IS BASELESS. IT FURTHER STR ENGTHEN THE INFERENCE DRAWN BY THE AO THAT INTRODUCTION OF 9 KOLKATA BASE D COMPANIED IN BETWEEN IS JUST A MAKE BELIEVE AFFAIR IN ORDER TO R EDUCE THE TAX LIABILITY. THE OTHER ARGUMENT TAKEN BY THE A.R. IS THAT A.O , RELIED UPON SHARE TRANSFER REGISTER OF M/S BLOSSOM AUTOMOTIVE PVT LT D. BUT THE COPY OF SAME WAS NOT PROVIDED TO HIM AND RATHER SAME WAS N OT SEIZED. IT IS TO MENTION FIRSTLY THAT IF SUCH REGISTER GIVING DETAIL S OF TRANSFER OF SHARE OF M/S BLOSSOM AUTOMOTIVE PVT LTD. IS NOT AVAILABLE W ITH THE A.O. THEN HOW THE A.O. HAS GIVEN THE PRECISE AND SPECIFIC DETAILS OF THE TRANSFER OF SHARE IN THE BODY OF THE ASSESSMENT ORDER BY WAY OF LIST A & B. IT IS ONLY THAT THE SHARE TRANSFER REGISTER MAY NOT BE EXACTLY OR PHYSICALLY IN THE FORM OF REGISTER AND/OR MAY NOT HAVE THE HEADING SHARE TRA NSFER REGISTER SUPERSCRIBED ON IT, THAT IS WHY THE SAME SEEMS TO B NOT EASILY TRACEABLE BY THE PRESENT A.O. IN ANY CASE, WITHOUT FURTHER COMME NTING IN THIS ISSUE, EVEN OTHERWISE ON MERITS, IT IS SEEN THAT THE DETAI LS MENTIONED BY THE A.O FROM THAT REGISTER IS REGARDING DATE OF TRANSFER OF SHARE IN THE NEW NAME AND DATE OF BOARD MEETING.BUT MORE IMPORTANT THAN T HIS IS THE DATE OF SALE OF SHARE WHICH IS REFLECTED FROM THE DATE MENTIONED IN THE SHARE TRANSFER FORM. THE SHARE TRANSFER FORM HAS BEEN SIGNED BY TH E APPELLANT COMPANY 19 ON 31 ST JULY 2006 INFERRING THAT 50000 SHARE MENTIONED I N THE TRANSFER FORM WERE SOLD ON 31.07.2006. 7. IT IS PERTINENT TO MENTION HERE THAT OTHER TWO APPE ALS OF OTHER APPELLANT NAMELY M/S SINGHAL SECURITIES PVT. TD. AND M/S S.N.R.RUBBERS PVT.LTD. THE COMPANIES OF THE SAME GR OUP, WERE ALSO UNDER CONSIDERATION OF THE UNDERSIGNED. IN THE CASE OF M /S SINGHAL SECURITIES PVT. LTD. DURING THE APPEAL PROCEEDINGS, CLAIM WAS MADE THAT THE SHARES SOLD IN APRIL, 2006 WAS TRANSFERRED ON 12.07.06. AN D THIS CLAIM WAS MADE CONSIDERING THAT THE TRANSFER DEED IS DATED 12.07.0 6. AND THUS THE SHARES OF IMPUGNED COMPANY WERE TRANSFERRED BY THE M/S SINGH AL SECURITIES PVT. LTD. TO KOLKATA BASED COMPANY M/S NANDAN MERCANTILE PVT. LTD. ON 12.07.06.HOWEVER A.R. OF THE APPELLANT WAS UNABLE T O SUBSTANTIATE HIS ARUGMENT . RATHER ON PERUSAL OF SHARE TRANSFER FOR M OF SHARE OF 50000 SHARES OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. FROM M/S SINGHAL SECURITIES PVT. LTD. TO KOLKATA BASED COMPNIES, IT IS SEEN THA T THIS TRANSFER FORM WAS SIGNED ON 31.07.06. BY THE TRANSFEROR COMPANY AS IS QUITE EVIDENT FROM THE DATE MENTIONED IN THE SHARE TRANSFER FORM. THE DATE 12.07.06. REFERRED BY THE A.R. IS NOT THE DATE OF TRANSFER/DATE OF SEL L OF SHARE BY THE APPELLANT COMPANY BUT IT IS ACTUALLY THE DATE OF ISSUE OF BL ANK SHARE TRANSFER FORM BY THE REGISTRAR OF COMPANY , WHICH QUIT EVIDENT FROM DATE AVAILABLE ON THE ROUND SEAL OF THE REGISTRAR OF COMPANY AFFIXED ON T HE TOP OF SHARE TRANSFER FORM. FROM THE AFORESAID DETAILS AND EVIDENCE, IT IS PROV ED THAT THESE SHARE WERE SOLD BY THE APPELLANT COMPANY ON SOMEWHERE NEA R 31.07.2006 AND THEREBY THE SHARE ALONG WITH THE DULY SIGNED SHARE TRANSFER FORM WAS DELIVERED TO PURCHASER ON 31.07.2006.THIS ARGUMENT OF THE APPELLANT THAT THESE SHARES WERE TRANSFERRED BY THE APPELLANT COMP ANY WELL BEFORE THE DATE OF MOU WAS THUS FOUND TO BE TOTALLY BASELESS A ND REJECTED IN THE APPEAL ORDER DATED 17.08.2011 OF M/S SINGHAL SECURI TIES PVT. LTD IN APPEAL NO, 893/10-11. 8. SIMILARLY IN RESPECT OF SHARE OF M/S S.N.R. RUBB ERS PVT. LTD, THE CLAIM OF SHARES OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. BEING PRIOR TO THE MOU IS ALSO UNSUPPORTED AND UNSUBSTANTIATED BY THE INDEPENDENT EVIDENCE . RATHER THE COPY OF SHARE TRANSFER FORM C LEARLY REFLECTS THAT THESE SHARES HAVE BEEN SHOWN TO BE SOLD ON 31.07.06 BY TH E APPELLANT M/S S.N.R. RUBBERS PVT. LTD . TO KOLKATA BASED PARTY M /S NANDAN MERCANTILE PVT. LTD. FURTHER AS IN THE EARLIER TWO CASES THE RE IS NO ANY INDEPENDENT EVIDENCE OF ACTUAL PAYMENT TO THE APPELLANT ON CONT ENTED SALE OF SHARE BEFORE 17.07.06.I.E. THE DATE OF MOU. INFACT, ON BE ING ASKED IN THE APPEAL OF M/S S.N.R. RUBBERS PVT LTD., A.R. FILED COPY OF BANK STATEMENT WHICH REFLECTED THE CHEQUES WERE CREDITED IN THE BANK ACC OUNT OF M/S S.N.R. RUBBERS PVT LTD. ON 21.07.06 AFTER THE MOU. 9. IT IS WELL KNOWN FACT THAT NEGOTIATION FOR THE TRANSFER OF SHARE BY THE ERSTWHILE SHARE HOLDERS OF M/S BLOSSOM AUTOM OTIVE PVT LTD., WITH 20 THE MANAGEMENT OF M/S TECHPRO SYSTEMS LTD. WOULD HA VE BEEN GOING ON FOR 2-3 MONTHS EARLIER AS NUMBER OF SHARE HOLDERS A RE INVOLVED INCLUDING THAT OF APPELLANT AND PRICE OF SHARE ALSO NEED TO B E NEGOTIATED WITH DIFFERENT SHARE HOLDERS AND THAN IT HAS TO COME T O SOME UNIFORM PRICE / RATE FOR TRANSFER OF SHARE BY THE DIFFERENT SHARE H OLDERS. IT IS QUOTE UNBELIEVABLE THAT ON ONE SIDE THE SHARE HOLDERS I NCLUDING THAT OF APPELLANT WERE NEGOTIATING WITH M/S TECHPRO SYSTEM LTD. FOR THE PROPOSED MOU FOR TRANSFER/SELL OF SHARES OF M/S BLOSSOM AUTOMOT IVE PVT. LTD. AND ON THE OTHER SIDE THEY HAD ALREADY SOLD THE SHARES TO 9 KOLKATA BASED COMPANIES. 10 IT FURTHER PROVES THAT THE MAKE BELIEVE ARRA NGEMENT HAS BEEN MADE AFTER THESE APPELLANTS AND THEIR CONT ROLLING PERSON REALIZED ON ENTERING INTO MOU FOR SELL OF SHARES AT RS. 3 18/- PER SHARES THAT HEAVY TAX LIABILITY IS ARISING WHICH CAN BE R EDUCED BY INTRODUCING SOMEONE IN BETWEEN AND SHOWING THE SELL OF SHA RES TO THOSE INTERMEDIARIES AT REDUCED RATE. 11 THE A.R. HAS ARGUED THAT THE APPELLANT CO MPANY WAS NOT A PARTY TO SAID MOU. ON THE DATE OF MOU, APPELLANT COMPANY WAS NOT HOLING SHARES. THE APPELLANT COMPANY HAS RAISED A BILL ON 28.04.2006 TO THE BUYERS COMPANY. THE A.R. HAS ALSO ARGUED T HAT M/S TECHPRO SYSTEM LTD. WAS IN THE NEED OF LAND TO SIFT ITS WO RK NEAR TO NCR AND THE BHIWADI WAS THE NEAREST PLACE. THE TOTAL CONSID ERATION DEMANDED BY SHARESHOLDERS OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. A PPEARED TO THEM REASONABLE. HOWEVER, ASSESSEES COMPANYS DIRECTOR HAD NO KNOWLEDGE OF M/S TECHPRO SYSTEM LTD. AND ITS CORPORATE PLAN. I HAVE CONSIDERED THE ARGUMENTS OF THE A/R AS FAR AS DATE OF SALE OF SHARES CONTENDED TO BE 28.04.2006 BY THE A.R., IT HAD ALREADY BEEN DISCU SSED ABOVE THAT SAME IS NOT EVIDENCED BY CONTRACT NOTE BETWEEN THE PARTIES AND MOREOVER, THE SHARE TRANSFER FORMS HAVE BEEN SEIZED BY TH E APPELLANT COMPANY ON 10.05.2006 AND 31.07.2006 FOR 10000 AND 25000 S HARES RESPECTIVELY. FOR HANDING OVER THE SHARE CERTIFICATES AND TH E TRANSFER FORM TO THE PURCHASER COMPANY. IT ONLY INFERS THAT THOUGH 10000 SHARES WERE SOLD SOMEWHERE NEARER TO 10.05.006 BUT 25000 SHARES WERE SOLD SOMEWHERE NEARER TO 31.07.06 AND AT LEAST NOT BEFORE THE DATE OF MOU. ACCORDINGLY, THE OTHER ARGUMENT OF THE APPELLANT THAT ON THE D ATE OF MOU , THE APPELLANT COMPANY WAS NOT HOLDING THE SHARES ARE ALSO FOUND TO BE DEVOID ANY MERIT. THE ARGUMENT THAT DIRECTORS OF A PPELLANT COMPANY HAD NO KNOWLEDGE ABOUT M/S TECHPRO SYSTEM LTD. AND ITS PLAN IS ALSO INCORRECT. INFACT ON THE PERUSAL OF MOU DATED 17. 07.2006, IT IS SEEN THAT FIRSTLY THE MOU IS NOT ONLY BETWEEN SH. PREM KUMAR GARG WHO IS AUTHORIZED/ CONSTITUTED ATTORNEY AND M/S TECHPRO SY ATEMS PVT LTD. BUT M/S BLOSSOM AUTOMOTIVE PVT LTD. IS ALSO IS ONE OF T HE PARTY. INTERESTINGLY , ONE OF THE DIRECTOR NAMELY SMT. SHIKA SINGHAL, OF A PPELLANT COMPANY M/S 21 SINGHAL CREDIT MANAGEMENT HAS SIGNED THE MOU IN THE CAPACITY OF AUTHORIZED REPRESENTATIVE OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. MORE EVER AS PER THE MOU, SH. PREM KUMAR GARG & THE OTHER DIRECTORS OF BLOSSOM AUTOMOTIVE PVT LTD., ARE WILLING TO RESIGN FROM TH E DIRECTORSHIP OF THE COMPANY AS MENTIONED IN THE PARA 5 OF THE MOU. THU S IT ALSO PROVES THAT THE OTHER DIRECTORS OF M/S BLOSSOM AUTOMOTIVE PVT L TD. OUT OF WHICH, SOME OF THEM ARE ALSO DIRECTORS OF THE APPELLANT CO MPANY AND OTHER TWO COMPANIES OF THE SAME GROUP UNDER APPEAL , WERE IN THE KNOWLEDGE OF THE MOU.THE A.R. HAS FURNISHED LIST OF CERTAIN LISTED C OMPANIES TO SUPPORT THE ARGUMENT THAT THE SHARE PRICE MOVEMENT IS NOT BASED N VALUATION BUT IS ON MARKET SENTIMENTS. THE ARGUMENT IS DEVOID OF ANY MERIT IN VIEW OF FACT FIRSTLY THE APPELLANT GAS TAKEN EXAMPLE OF ONLY FEW LISTED COMPANIES THAT TOO THE COMPANIES NOT HAVING SIMILAR ACTIVITIES AS THAT OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. SECONDLY OUT OF THE TWO COMPAN IES DEALING IN THE LAND DEVELOPMENT IT IS SEEN THAT THE SHARE OF M/S A NSAL PROPERTIES AND INFRASTRUCTURE HAS RATHER GONE DOWN FROM RS 1155/- ON 28.04.06 TO RS 381/- ON 28.07.06. THUS IT CAN NOT AT ALL JUSTIFY THE CON TENTION OF THE A.R. THAT THE PRICES OF SHARES HAVE RISEN FROM APRIL, 2006 TO JUL Y 2006 ACCORDINGLY, NONE OF THESE ARGUMENTS OF THE A.R. ARE HAVING ANY MERIT AND THEREFORE REJECTED. 12. ALL THESE FACTS OF DATE OF SALE OF 25000 SHARES OF BEING AFTER THE DATE OF MOU IS QUITE EVIDENT FROM THE COPY OF S HARE TRANSFER FROM ITSELF WITHOUT TAKING ANY SUPPORT FROM ENTRIES IN T HE SHARE TRANSFER REGISTER. THUS ARGUMENT OF THE A.R. OF NON AVAILIBLITY OF SHA RES TRANSFER REGISTER OF WITH THE A.O IS OF NO EFFECT; IN AS FAR AS INFERE NCES SO DRAWN ARE CONCERNED . 13. IN VIEW OF THE DISCUSSION AS MADE HERE IN ABOVE AND ALSO IN VIEW OF OF THE VARIOUS REASON AS MENTIONED BY THE A .O. WHICH HAVE ALSO BEEN BRIEFLY NARRATED , THE A.O WAS JUSTIFIED IN H OLDING THAT TRANSFER OF 25000 SHARES BY THE APPELLANT AS WELL AS OTHER SHAR ES BY THE VARIOUS OTHER SHAREHOLDER OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. TO KOLKATA BASED COMPANIES AND SUBSEQUENT RE-TRANSFER BY THESE KOLKA TA BASED COMPANIES TO M/S TECHPRO SYSTEM LTD. WERE SHAM TRANSACTION A ND INFACT, THE ONLY ASSET BEING PLOT OF LAND HELD BY M/S BLOSSOM AUTOMO TIVE PVT. LTD WAS TRANSFERRED TO M/S TECHPRO SYSTEM LTD. DIRECTLY AND INTERMEDIARY KOLKATA COMPANIES HAVE ONLY BEEN USED TO AVOID / REDUCE TAX LIABILITY. IT IS REITERATED THAT IN ABSENCE OF ADVERSE MATERIAL BEIN G BROUGHT OUT ON RECORD REGARDING 10000 SHARES EARLIER TRANSFERRED BY THE A PPELLANT; A.O WAS FAIR ENOUGH NOT TO TREAT THAT TRANSACTION AS NON-GENUINE . HENCE THE ADDITION OF RS.54,43,750/- SO MADE BY THE A.O. IS HEREBY CONFIR MED IN THE INSTANT CASE OF THE APPELLANT. 2.10 THE SUBMISSION OF THE ASSESSEE BEFORE US ARE AS UNDER:-:- 22 IT IS SUBMITTED THAT NO PHYSICAL SEARCH OPERATION WAS CARRIED OUT AT THE BUSINESS OF THE ASSESSEE COMPANY, NO INCRIMI NATING DOCUMENTS WERE SEIZED FROM THE DIRECTORS OF THE ASSESSEE COMPANY O R FROM THE ASSESSEE. MORE OVER NOTHING SEIZED FOR THE ASSESSMENT YEAR UN DER CONSIDERATION. THEREFORE INITIATION OF PROCEEDING U/S 153A IS BAD IN LAW. IN CASE INITIATED PROCEEDING U/S 153A IN THE RECENT JUDGMENT IT HAS B EEN HELD, WHEN NOTHING INCRIMINATING WAS FOUND IN THE COURSE OF SEARCH REL ATING TO ANY OF THE ASSESSMENT YEARS, THE ASSESSMENTS FOR SUCH YEARS CO ULD NOT BE DISTURBED. ASSISTANT COMMISSIONER OF INCOME TAX V. SRJ PEETY S TEELS (P) LTD. (ITAT PUNE) DECISION ANNEXED AS ANNEXURE-X 1. THE ASSESSEE COMPANY SOLD OUT 35000 EQUITY SHARE S OF BLOSSOM AUTOMOTIVE PVT. LTD FOR CONSIDERATION OF RS . 100/- PER SHARE TO M/S YUTHIKA COMMERCIAL PVT. LTD. ON 28.4.2006 VIDE COMMON BILL, WHICH WERE PURCHASED FOR CONSIDERATION OF RS. 10 PER SHAR E AND PAID PREMIUM OF RS.90/- PER SHARE. THE ASSESSEE COMPANY RECEIVED CO NSIDERATION OF RS. 10,00,000/- AGAINST SALE OF 10000 EQUITY SHARE ON 2 8.4.2006 AND SIGNED THE TRANSFER DEED. THE PAYMENT OF REMAINING SHARE O F 25000 WAS RECEIVED THROUGH CHEQUE WHICH WAS CLEARED ON 19.7.2006 AND S IGNED THE SHARE TRANSFER DEED AT THE TIME OF RECEIPT OF CHEQUE IN R OUTINE MANNER AND BUISSNESS POLICIES OF THE COMPANY. THE ASSESSEE COM PANY WAS BOUND TO SALE EQUITY SHARE OF BLOSSOM AUTOMOTIVE PVT. LTD. I N ACCORDANCE TO SALE BILL RAISE AND CONSENT GIVEN BY THE BUYER BEFORE 17 .7.2006. ALTHOUGH ASSESSEE WAS NOT AWARE ABOUT RISE IN SHARE OF BLOSS OM AUTOMOTIVE PVT. LTD. AT THE TIME OF SALE. 3. THE LEARNED A.O. DISBELIEVED THE SALE OF SHARE B EFORE MOU AS THE 25000 EQUITY SHARE OF BLOSSOM AUTOMOTIVE PVT . LTD. WERE GOT TRANSFERRED BY THE COMPANY AFTER MOU, WHICH WAS NOT IN THE CONTROL OF SELLER BUT DEPENDS ON BUYER OF EQUITY WHEN TENDER F OR TRANSFER IN ITS NAME AND COMPANY TRANSFER THE SHARE IN ITS NAME. THEREFO RE THE LEARNED A.O AS WELL AS LEARNED CIT(A) NOT CONSIDERED THE SALE IN I SOLATION WITH TRANSFER OF SHARE. 4. THE LEARNED A.O TAKEN INTO CONSIDERATION TWO EVI DENCES WHICH SUGGEST THAT THE SHARE TRANSFER IS MAKE BELIE VE ARRANGEMENT. PHOTO COPY OF MOU WITHOUT IT ANNEXURE SEIZED DURING THE C OURSE OF SEARCH OPERATION. SECONDLY REGISTER OF SHARE TRANSFER OF BAPL STATED AS SEIZED FROM THE RESIDENCE OF SHRI S.K. SINGHAL CONTAINING DETAILS OF DATE OF SHARE TRANSFER AND BOARD MEETING ETC. BUT THESE DISCREPAN CIES ON WHICH A.O RELIED UPON PROVIDED TO THE ASSESSEE COMPANY DURIN G THE COURSE OF ASSESSMENT PROCEEDING AND THE SAME WAS FORMED THE P ART OF ASSESSMENT ORDER BUT ENCLOSED AS WELL AS NOT SUPPLIED ALONG WI TH ASSESSMENT ORDER. THE LEARNED A.O. ALSO NOT DISCUSSED THE DISCREPANCI ES IN THE ASSESSMENT ORDER ON WHICH RELIED UPON. IN THESE CIRCUMSTANCES WITHOUT CONFRONTING 23 WITH THE ASSESSEE THE ADDITION MADE AND VIOLATED NA TURAL JUSTICE. AFTER COMPLETION OF ASSESSMENT THE A.O. WAS REQUESTED TO SUPPLY SEIZED REGISTER OF SHARE TRANSFER OF BLOSSOM AUTOMOTIVE PV T. LTD. FROM THE RESIDENCE OF SH. S.K. SINGHAL. THE A.O. IN RESPONSE TO ABOVE LETTER SHOWN INABILITY TO SUPPLY IT AS THE SAME IS NOT FIND PLAC E OF SEIZURE MEMO OF LOOSE PAPERS. 3.1 WITH REGARDS TO ANOTHER EVIDENCE OF MOU DATED 1 7.7.2006, ON WHICH RELIED UPON BY THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDING ON 22.11.2010, THE AO WAS REQUESTED TO P ROVIDE US ANNEXURE- A OF THE MOU TO ASCERTAIN WHETHER ASSESSEE WAS ONE OF THE PARTY. THE AO ON THE REQUEST LETTER REMARKED THAT THE ANNEXURE-A OF THE MOU DATED 17.7.2006 TAKEN PLACE IN BETWEEN EXISTING SHARE HO LDERS AND M/S TECHPRO SYSTEMS LTD. SUBSEQUENTLY THE LEARNED A.O. SOUGHT T HE SAME ALONG WITH DETAILS PAYMENT TO THE SELLER SHARES FROM M/S TECHP RO SYSTEM LTD. BHIWADI. THE LEARNED A.O. BEFORE PASSING THE ASSESS MENT ORDER SUPPLIED THE INFORMATION COLLECTED U/S 133(6) OF THE I.T. AC T, 1961. ON PERUSAL OF ANNEXURE-A TO THE MOU DATED 17.7.2006 THE NAME OF T HE ASSESSEE COMPANY WAS NOT AVAILABLE BUT YUTHIKA COMMERCIAL PV T. LTD. WAS FIND PLACE AS SHARE HOLDER. IN VIEW OF THE FACT THE ASSE SSEE COMPANY WAS NOT ALL PARTY AT THE TIME OF MOU. IT IS FURTHER SUBMITTED T HAT THE A.O. NOT BROUGHT ON RECORD ANY CONTRARY EVIDENCE IN MAKING ADDITION OF 54,43,720/-. THE ONUS CAST UPON THE REVENUE IN MAKING ANY ADDITION, WHICH FACTOR TOTALLY ABSENT. 4. THE ALLEGATION OF THE A.O. THAT THE MAJOR SHARE HOLDING OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. IN THE CONTROL OF SH. S.K. SINGHAL AND HIS ASSOCIATE AND SH. PREM GARG AND HIS ASSOCIATES KEEPING IN MIND THAT 3,82,000/- EQUITY SHARES WERE TRANSFERRED TO 9 KOLK OTTA BASED COMPANIES @100/- PER SHARE JUST BEFORE THE MOU DATED 17.7.20 06 TO MITIGATE SHORT TERM CAPITAL GAIN IN THEIR HANDS. THE A.O NOT DISB ELIEVE THE IDENTITY OF THE BUYER OF EQUITY SHARE OF BLOSSOM AUTOMOTIVE PVT. LT D. GENUINENESS OF TRANSACTION OF SALE PROCEEDS RECEIVED BY THE SELLE R OF SHARE. THE SALE PROCEEDS OF SHARE BY THE ASSESSEE COMPANY REALIZED BEFORE RECEIPT OF SALE PROCEED OF SHARES OF BLOSSOM AUTOMOTIVE PVT. LTD. BY YUTHIKA COMMERCIAL PVT. LTD. TO M/S TECHPRO SYSTEM PVT. LTD . THE LEARNED A.O. RECOGNIZED THE SALE PROCEEDS OF RS . 25,00,000/- BUT REMARKED IN THE ORDER IT CAN NOT BE SAID THAT THE SALE PROCEED OF RS.25,00,000/- ACTUALLY AGAINST THE SALE OF EQUITY SHARE BLOSSOM AUTOMOTIVE PVT. LTD.. THEN THE A.O. WAS DUTY BOUND TO ASCERTAIN NATURE OF RECEIPT IN THE HANDS OF ASSESSEE COMPANY AND CAN BE TAKE NECESSARY OBSERVATION, WHICH WAS NOT DONE. 5. THE LEARNED A.O CONCLUDED THAT THE ONLY ASSET WI TH BLOSSOM AUTOMOTIVE PVT LTD. PLOT OF LAND NO.SP-496-497 IA. BHIWADI WAS 24 PURCHASED ON 5.4.2006 FOR CONSIDERATION OF RS. 4,01 ,00,000/- . TO AVOID STAMP DUTY ON SALE OF LAND TO THE TECHPRO SYSTEM LT D. CHOSEN THE WAY SALE OF ENTIRE SHARE HOLDING TO THE TECHPRO SYSTEM LTD W HEN THE BOOK VALUE OF PLOT OF LAND WAS REMAIN THE SAME AS BEFORE TRANSFE R OF SHARE. IN THIS CONTEXT IT IS SUBMITTED THAT THE IN CASE THE M/S BL OSSOM AUTOMOTIVE PVT. LTD. SALE LAND TO TECHPRO SYSTEM PVT. LTD. THEN STA MP DUTY PAYABLE BY THE BUYER OF LAND NOT THE CAST UPON THE SHARE HOLDERS. THE SHARE HOLDER INCURRED THE EXPENDITURE ON SHARE TRANSFER STAMP DU TY AT THE TIME TRANSFER OF SHARE. THEREFORE ALLEGATION LEVELED BY THE A.O. UNLAWFUL AND WITHOUT UNDERSTANDING THE LEGAL POSITION. 6.THE LEARNED A.O. CONSIDERED THE MANNER IN WHICH S HARE OF BAPL TRANSFERRED THE KOLKOTTA BASED COMPANIES @ RS.100/- PER SHARE AND AFTER LAPSE OF SOME TIME THE KOLKOTTA BASED COMPANIES TRA NSFERRED THE SHARE HOLDING OF BAPL TO TECHPRO SYSTEM LTD. @ 318/- PER SHARE. IN THE RECENT JUDGMENT OF HONBLE ALLAHABAD HIGH COURT IN THE CAS E OF CIT V/S ATMARAM TULSYAN AND OTHERS IT HAS BEEN HELD THAT TH E SHARE TRANSACTIONS DECLARED BY ASSESSEE CAN NOT BE DOUBTED MERELY ON THE GROUND THAT SHARES WERE LESSOR KNOWN COMPANIES AND THEIR VALUE CANNOT APPRECIATED TO THE LEVEL CLAIMED BY THE ASSESSEE. 7.THE LEARNED A.O. LINKED SALE OF LAND WITH THE SA LE VALUE OF SHARE @ 318/- PER EQUITY SHARE OF BLOSSOM AUTOMOTIVE PVT LT D. AS PER MOU WHICH HAS BEEN REPRODUCED BY THE AO AT PARA 3.3 OF THE ASSESSMENT ORDER. 8.TRANSFERRING OF SHARES BY SHAREHOLDERS OF BAPL TO KOLKATA BASED COMPANIES @RS.100/- PER SHARE AND RE-TRANSFERRING O F SAME SHARES TO M/S TECHPRO SYSTEM LTD. @318/- PER SHARE WITHIN A PERIO D OF 3 MONTHS WAS A SHAM PAPER TRANSACTION RESORTED TO BY THE SHAREHOLD ERS OF M/S BAPL TO REDUCE THEIR CAPITAL GAIN LIABILITY. THE ALLEGATIO N LEVELED BY THE A.O. WITHOUT ANY EVIDENCE CONTRARY TO THE FACTS , THE CO NTENTION OF THE A.O LEADS THAT THE SALE PROCEEDS OF EQUITY SHARE BY YUT HIKA COMMERCIAL PVT. LTD. REACHED TO THE ASSESSEE AFTER SALE OF SHARE OF BLOSSOM AUTOMOTIVE PVT. LTD. TO TECHPRO SYSTEM LTD WITHOUT EVIDENCES I N HIS POSSESSION MERELY SURMISES MAY KINDLY BE IGNORED AND DELETE TH E ADDITION MADE BY THE A.O. THE LEARNED CIT(A) ALSO FOLLOWED THE AOS VIEWS WITHOUT EVIDENCES AND SUSTAINED THE ADDITION. FINALLY IT IS SUBMITTED THAT THE SEARCH OPERATIONS WERE CARRIED OUT AT THE RESIDENCE OF SH. S.K. SINGHAL AND OFFICE PRE MISES. DURING THE COURSE OF SEARCH OPERATION INTENSIVE INVESTIGATION WERE MADE EVEN AFTER SEARCH. IN CASE ANY ASSET TRACED OUT, OUT OF BOOKS THEN IT CAN BE SAID THE ASSESSEE COMPANY ACQUIRED THE SAID ASSET OUT OF DIV ERTED FUNDS OF SHORT TERM CAPITAL GAIN. THE SEARCH PARTY NOT BROUGHT ON RECORD ANY SINGLE ASSET OUT OF BOOKS. EVEN CASH BALANCE ALSO TALLIED WITH BOOKS AS ON DATE OF SEARCH. IT IS NOT EASY TO MAKE PRESUMPTION OF DIVER SION OF SHORT TERM 25 CAPITAL GAIN TO AVOID TAXES WITHOUT EVIDENCES. IN V IEW OF THE ABOVE SUBMISSIONS IT IS PRAYED BEFORE YOUR HONOUR KINDLY DELETE ADDITION AND ALLOW THE RELIEF FOR WHICH THE ASSESSEE COMPANY IS LAWFULLY ENTITLED. 2.11 THE LD. DR HAS SUBMITTED AS UNDER:- THE RESPONDENT HEREIN SUBMITS THE FOLLOWING WRITT EN ARGUMENTS IN ADDITION TO THE VERBAL ARGUMENTS TO BE TAKEN DUR ING THE COURSE OF HEARING IN THE ABOVE APPEALS: 2. THE MAIN ISSUE IN THESE 3 APPEALS IS RELATED TO TH E SALE OF SHARES OF A COMPANY BLOSSOM AUTOMOTIVE PVT. LTD. (BAPL) BY THE ABOVE MENTIONED THREE ASSESSEES TO A THIRD PARTY NAMED M/ S TECHPRO SYSTEMS LTD. 3. BRIEF FACTS: THE BRIEF FACTS OF THESE CASES ARE THAT THE ASSESSE E COMPANIES WERE THE SHAREHOLDERS OF A COMPANY NAMED BLOSSOM AUTOMOT IVE PVT. LTD. (BAPL). THIS COMPANY WAS INCORPORATED ON 19.07.2005 AND ITS SHARES WERE HELD BY MEMBERS OF SH. SURENDRA KUMAR SINGHAL S FAMILY, COMPANIES HELD BY THEM, SH. SANJEEV KUMAR AGARWAL, SH. RAKESH KUMAR AGARWAL AND OTHER MEMBERS OF THEIR FAMILY AND COMPA NIES HELD BY THEM AND SH. PREM KUMAR GARG. M/S BLOSSOM AUTOMOTIVE (P) LTD. PURCHASED A PLOT NO. SP-496-497, INDUSTRIAL AREA, BHIWADI- 3010 19, DISTT. ALWAR, RAJASTHAN AS PER SALE DEED DATED 5.4.2006 FOR RS. 4 ,01,00,000/-(RS. FOUR CRORES ONE LAC ONLY) FROM M/S TELETUBE ELECTRONICS LTD. IN THEIR BOOKS OF ACCOUNTS THESE THREE ASSESSEES HA D SHOWN TO HAVE SOLD THEIR SHARES OF M/S BAPL TO SOME KOLKATA BASED COMPANIES AT THE RATE OF RS.100 PER SHARE. THE A.O FOUND THAT ON 17.07.2006 AN MOU WAS SIGNED AMONG SH. PREM KUMAR GARG, WHO WAS SHOWN AS AN AUTHORIZED/ CO NSTITUTED ATTORNEY AND A MAJOR SHARE HOLDER OF M/S BAPL, M/S TECPRO SY STEMS LTD.(TSL) AND BLOSSOM AUTOMOTIVE PVT. LTD.(BAPL) REPRESENTED BY SMT. SHIKA SINGHAL. AS PER THIS MOU, THE ENTIRE SHARE HOLDING OF M/S BAPL WAS TO BE TRANSFERRED TO M/S TSL FOR A TOTAL AMOUNT OF RS. 12 .72 CRORES WHICH AMOUNTED TO RS. 318 PER SHARE(FOR THE 4,00,000 SHAR ES OF THIS COMPANY). AS AGAINST THIS MOU, THE ASSESSEE GROUP, ON PAPER, SHOWED THAT OUT OF 4,00,000 SHARES OF BAPL, MAJORITY OF SHARES WERE SO LD TO NINE KOLKATA BASED COMPANIES AT A RATE OF RS. 100/- PER SHARE. T HE A.O WAS OF THE VIEW THAT THE SALE OF SHARES BY THIS GROUP TO THE KOLKAT A BASED COMPANIES WAS A MAKE BELIEVE ARRANGEMENT OR A COLOURABLE DEVICE TO AVOID PAYMENT OF TAXES. THE A.O FOUND THAT THE 100% SHARE HOLDING OF M/S BLOSSOM AUTOMOTIVES PVT. LTD. WAS TRANSFERRED FROM SH. S.K. SINGHAL AND HIS ASSOCIATES TO M/S TECHPRO SYSTEMS LTD. WITHIN A SPA N OF LESS THAN ONE 26 YEAR. THE TRANSACTION WOULD HAVE RESULTED INTO A SH ORT TERM CAPITAL GAIN OF RS. 8.72 CRORES IN THE HANDS OF SH. S.K.SINGHAL AND HIS ASSOCIATES AND THE SAME WOULD HAVE BEEN TAXABLE @ 30% BECAUSE THE TRAN SACTION WAS NOT THROUGH STOCK EXCHANGE AND NO STT WAS PAID ON IT. H OWEVER, TO SAVE THE SHORT TERM CAPITAL GAIN ARISING FROM THE TRANSACTIO N, THE GROUP ENTERED INTO A MAKE BELIEVE ARRANGEMENT INVOLVING 9 KOLKATA BA SED COMPANIES. ON PAPER, IT WAS CLAIMED THAT THE SHARES BY SH. S.K.SI NGHAL AND HIS ASSOCIATES WERE INITIALLY SOLD TO 9 KOLKATA BASED COMPANIES @ RS. 100- PER SHARE AND SUBSEQUENTLY KOLKATA BASED COMPANIES SOLD THE SHARE TO M/S TECHPRO SYSTEMS LTD. @ RS. 318/- PER SHARE. THERE ARE SEVER AL EVIDENCES WHICH CONCLUSIVELY PROVE THAT THIS WAS A MAKE BELIEVE ARR ANGEMENT AND THE TRANSACTIONS WERE PRE-DETERMINED. FIRST AND FOREMOS T EVIDENCE IS REGISTER OF SHARE TRANSFER OF M/S BLOSSOM AUTOMOTIVES PVT. LTD. SEIZED FROM THE RESIDENCE OF SH. SURENDRA KUMAR SINGHAL WHICH GIVES THE DETAILS OF SHARE TRANSFERS ALONGWITH DATE OF REGISTRATION/TRANSFER, DATE OF MEETING, PARTICULARS OF SHARE TRANSFERRED, TRANSFEROR AND TR ANSFEREE. ( ANNEXURE- A TO THE ASSESSMENT ORDER). ACCORDING TO THIS, ONLY 74,0 00 SHARES WERE TRANSFERRED BY THE ASSOCIATES OF SH. S.K.SINGHAL ON 10.05.2006 AND THE MAJORITY SHARES NUMBERING 3,08,000 WERE TRANSFERRED ON 31.07.2006. THIS SHOWS THAT THE MAJORITY OF SHARES I.E. 3,08,000 WER E TRANSFERRED TO KOLKATA BASED COMPANIES AFTER THE MOU DATED 17.07.2006 HAD BEEN ENTERED INTO WITH M/S TECHPRO SYSTEMS LTD. FROM THIS, IT WAS CLE AR THAT TRANSFER OF SHARES TO KOLKATA BASED COMPANIES WAS MADE AFTER TH E DATE OF MOU WITH M/S TECHPRO SYSTEMS LTD. IT IS EVIDENT THAT SHAREHO LDERS OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. ON REALIZING HEAVY TAX LIABILI TY ON ACCOUNT OF CAPITAL GAIN FROM TRANSFER OF SHARES, RESORTED TO COLOURABL E DEVICE OF TRANSFERRING THEIR SHAREHOLDINGS TO KOLKATA BASED COMPANIES AND LATER ON GETTING THESE SHARES TRANSFERRED FROM KOLKATA BASED COMPANIES TO M/S TECHPRO SYSTEMS LTD. AT THE SAME RATE I.E. RS. 318/- PER SHARE WHIC H WAS DECIDED IN MOU DATED 17.07.2006 WITH M/S TECHPRO SYSTEMS LTD. EVEN THE MINUTES OF BOARD OF DIRECTORS OF M/S TECHPRO SYSTEMS PVT. LTD. HELD ON 31.07.2006( ANNEXURE-B TO THE ASSESSMENT ORDER) ALSO CONFIRMS THAT THE SHARES OF THE COMPANY WERE TRANSFERRED TO KOLKATA B ASED COMPANIES ON 31.07.2006 I.E. AFTER THE DATE OF MOU WITH M/S TECH PRO SYSTEMS LTD. THE ASSESSEES CLAIMED THAT THEY HAD SOLD THEIR SHAR ES OF BAPL TO SOME KOLKATA BASED COMPANIES ON 29 TH APRIL 2006 THROUGH A SALE BILL AT A RATE OF RS. 100/- PER SHARE AND THEY DID NOT HAVE A NYTHING TO DO WITH THE TRANSACTION OF SALE OF THESE SHARES BY THESE KOLKAT A BASED COMPANIES TO TECHPRO SYSTEMS LTD. AT RS. 318/- PER SHARE. THE A. O DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE AND HELD THAT THESE ASSE SSES ACTUALLY SOLD THESE SHARES DIRECTLY TO M/S TECHPRO SYSTEMS LTD. AT RS. 318/- PER SHARE AND THE TRANSACTIONS OF SALE OF THE SHARES OF BAPL TO THE K OLKATA COMPANIES AND THEN SALE BY THE KOLKATA COMPANIES TO TECHPRO SYSTE MS ARE SHAM TRANSACTIONS AND MAKE BELIEVE ARRANGEMENT MADE TO A VOID PAYMENT OF TAX 27 BY SHARE HOLDERS OF BAPL ON THE TRANSACTIONS OF TRA NSFER OF THEIR SHARES DIRECTLY TO M/S TECHPRO SYSTEMS LTD. THE A.O HAS GONE ONE STEP FURTHER AND HAS OBSERVED THAT THE COMPANY BLOSSOM AUTOMOTIVE PVT. LTD.(BAPL) WAS NOT CARRYING OUT ANY ACTIVITIES AND OWNED ONLY ONE ASSET- A PIECE OF LAN D AT INDUSTRIAL AREA, BHIWADI. THE A.O HAS ALLEGED THAT ACTUALLY THE SHAR EHOLDERS OF BAPL WANTED TO TRANSFER THIS LAND TO M/S TECHPRO SYSTEMS LTD. INSTEAD OF DIRECTLY TRANSFERRING THE LAND THE SHAREHOLDERS TRA NSFERRED 100% SHARE HOLDING OF BAPL TO TSL. EVEN THE SHARE HOLDING WAS TRANSFERRED THROUGH THE CIRCUITOUS ROUTE OF KOLKATA BASED COMPANIES AS DISCUSSED ABOVE. ACCORDING TO THE A.O, THE TOTAL CONSIDERATION FOR S ALE OF THIS LAND WAS RS. 12,72,00,000/- AND THE COST OF ACQUISITION OF THE LAND WAS RS. 4,01,00,000/-. THEREFORE, THE SHARE HOLDERS OF BAPL EARNED CAPITAL GAIN OF RS. 8,71,00,000/- ( 12,72,00,000/- - 4,01,00,000/-) ON THIS TRANSACTION OF SALE OF LAND. THE SHORT TERM CAPITAL GAIN ON THIS T RANSACTION WAS ALLOCATED BY THE A.O IN THE HANDS OF THE SHARE HOLDERS IN PRO PORTION TO THEIR SHARE HOLDING IN THE BAPL. THE ADDITION MADE IN THE HANDS OF THESE THREE ASSES SES ARE AS FOLLOWS: 1) SINGHAL SECURITIES PVT. LTD. = 50,000 X 8,71,00,000/-= 1,08,87,500/- 4,00,000 2) SINGHAL CREDIT MANAGEMENT =25,000/- X 871,00,000/- = 54,43,750/- PVT. LTD. 4,00,000/- 3) SNR RUBBER PVT. LTD = 51,000/- X 8,71,00,000/- = 1,11,05,250/- 4,00,000/- 4. AGAINST THE ABOVE ADDITIONS THE ASSESSEES FILED APPEAL BEFORE CIT(A)-CENTRAL, JAIPUR. LD. CIT(A) CONSIDERE D THE VARIOUS ARGUMENTS OF THE ASSESSEES THOROUGHLY AND CONFIRMED THE ORDER OF THE A.O BY REJECTING THE CONTENTIONS OF THE ASSESSEE IN DET AIL. THE DETAILED REASONING GIVEN BY LD. CIT(A) ARE GIVEN IN PARA 9 O F HIS ORDER FOR ALL THESE THREE ASSESSEES. 5. NOW, THE ASSESSEES HAVE FILED THESE APPEALS AGAINS T THE ORDERS OF LD. CIT(A). IN THESE APPEALS, THE ASSESSE ES HAVE TAKEN THREE SUBSTANTIVE GROUNDS OF APPEAL. THE FIRST GROUND IS A TECHNICAL GROUND IN WHICH THE ASSESSEE HAS CALLED THE ORDER MADE BY THE A.O U/S 153A R.W.S 143(2) AS BAD IN LAW. THE 2 ND AND 3 RD GROUND ARE AGAINST THE MERIT OF THE ADDITION MADE BY THE A.O AND CONFIRMED BY LD. CIT(A ). IN RESPECT OF THESE GROUNDS, THE ASSESSEE HAS MADE A WRITTEN SUBMISSION AND HAS ALSO FILED PAPER BOOKS. MY COMMENTS ON THE VARIOUS ARGUMENTS O F THE ASSESSEE ARE DISCUSSED BELOW. 28 6. GROUND NO. 1 : IN THIS GROUND, THE ASSESSEE HAS CHALLENGED THE VALIDITY OF THE ORDER PASSED U/S 153A R.W.S 143 (2). THE VARIOUS CONTENTIONS MADE BY THE ASSESSEE ARE DEALT WITH BEL OW:- I) FIRST IT IS CLAIMED THAT THERE WAS A WARRANT AG AINST THE ASSESSEE BUT NO SEARCH WAS CONDUCTED BECAUSE THE WARRANT WAS NOT SERVED ON THE DIRECTOR OF THE COMPANY. THIS ARGUMENT IS NOT ACCEPTABLE BECAUSE THE WARRANT IS TO BE SERVED ON ANY PERSON AVAILABLE AT THE PREMISES AND NEED NO T BE SERVED ON THE DIRECTORS OF THE COMPANY. THE SEARCH HAS BEEN CONDU CTED IN THE PRESENCE OF TWO WITNESSES AS REQUIRED BY LAW AND A VALID PAN CHNAMA HAS BEEN PREPARED. II) SECOND, IT IS CONTENDED THAT A COMMON PANCHNAMA HAS BEEN PREPARED AND THERE IS NO SPECIFIC FINDING OF SEIZUR E IN THE CASE OF THE ASSESSEE. THIRD, IT IS CLAIMED THAT THE COMMON PANCHNAMA INCL UDED THE NAME OF M/S BLOSSOM AUTOMOTIVE PVT. LTD. (BAPL) ALSO WHI CH DID NOT HAVE OFFICE AT THE PREMISES E-127, INDUSTRIAL AREA, BHIW ADI. THESE TWO ARGUMENTS HAVE BEEN CONSIDERED AND REJECT ED BY LD. CIT(A) IN PARA 2.2 OF HIS ORDER ON PAGE. 3. THESE F INDINGS OF LD. CIT(A) ARE RELIED ON AND ARE NOT REPRODUCED HERE FOR THE S AKE OF BREVITY. III) IN THE WRITTEN SUBMISSIONS, THE ASSESSEE HAS RELIE D ON THE DECISIONS OF S.M TRADING CORPORATION VS. ACIT 20 SO T 489- ITAT MUMBAI J BENCH AND DR. MANSUKH KANJIBHAI SHAH VS. ACIT (2011) 129 ITD 376. THESE DECISIONS ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE AS THE FACTS IN THESE ARE TOTALLY DIFFERENT. IN THE CASE OF S.M. TRADING CORPORATION, THE SEARCH WAS CONDUCTED AT A PREMISES WHICH WAS OWNED BY THE ASSESSEE BUT R ENTED TO ANOTHER CONCERN. IN THE CASE OF DR. MANSUKH K. SHAH THOUGH WARRANT OF AUTHORIZATION WAS ISSUED IN THE NAME OF THE ASSESSE E, BEING MANAGING TRUSTEE OF THE TRUST, BUT NO SEARCH OPERATION WAS C ONDUCTED IN THE PREMISES OF THE ASSESSEE. EVEN IN THE WARRANT OF AUTHORIZATI ON, THE ADDRESS OF THE PLACE TO BE SEARCHED WAS NOT THE ADDRESS OF THE ASS ESSEE INDIVIDUAL. BUT, HERE THE WARRANT IS ISSUED IN THE NAME OF THE ASSES SEE AND THE ADDRESS OF THE PREMISES SEARCHED IS ALSO THE OFFICIAL ADDRESS OF THE ASSESSEE VIZ. E- 127, INDUSTRIAL AREA, BHIWADI. THE PANCHNAMA IS PRE PARED FOR THE SEARCH OPERATION CONDUCTED AT THIS PREMISES AND THE NAME O F THE ASSESSEE VERY MUCH APPEARS IN THE PANCHNAMA (COPY OF THE SEARCH W ARRANT AND THE PANCHNAMA ARE PLACED AT APB PAGES 1 TO 8) . IN VIEW OF THESE FACTS, IT IS 29 CLEAR THAT A VALID SEARCH AND SEIZURE OPERATION HAS BEEN CONDUCTED U/S 132 AND THE ORDER U/S 153A PASSED BY THE A.O IS AS PER LAW. 7. GROUND NO. 2 AND 3 : IN THESE GROUNDS, THE ASSESSEE HAS OBJECTED TO THE ACTION OF LD.CIT(A) IN UPHOLDING TH E ADDITION OF CAPITAL GAIN MADE BY THE A.O. DURING THE FIRST APPEAL STAGE, THE ASSESSEE PUT FOR TH A NUMBER OF ARGUMENTS AGAINST THE MERIT OF THE ADDITIONS MADE. LD.CIT(A) HAS CAREFULLY CONSIDERED ALL THESE ARGUMENTS AND HAS RE JECTED ALL OF THEM BY GIVING DETAILED REASONING. THESE REASONINGS HAVE BE EN GIVEN BY LD.CIT(A) IN HIS ORDER IN PARAS 9 AND 9.1 TO 9.10/9 .11/9.12 IN CASES OF THESE 3 ASSESSEES. I RELY ON THESE REASONS GIVEN BY LD. CIT(A). BESIDES THE ABOVE, IT IS SEEN THAT IN THE WRITTEN S UBMISSION FILED BY THE ASSESSEE BEFORE HONBLE ITAT, THE ASSESSEE HAS GIVEN 15 ARGUMENTS NUMBERED AS (A) TO (O) .THESE ARGUMENTS ARE NOT ACC EPTABLE AND ARE COUNTERED IN THE FOLLOWING DISCUSSION:- I) THE ASSESSEE HAS CLAIMED THAT THE AS MENTIONED BY T HE AO IN HIS ASSESSMENT ORDER, NO REGISTER OF SHARE TRANSFER FOR BAPL WAS SEIZED. IT IS CLAIMED THAT THE AO VIDE LETTER DT.15 .07.2011 HAD CONFIRMED THAT THERE WAS NO SUCH SHARE TRANSFER RE GISTER OF BAPL. THE ASSESSEE HAD MADE THIS CLAIM BEFORE LD.CIT(A) A LSO BUT LD.CIT(A) FELT THAT BECAUSE OF CHANGE IN THE AO, IT MAY NOT HAVE BEEN POSSIBLE FOR THE PRESENT AO TO TRACE SUCH REGI STER. EVEN OTHERWISE HE FELT THAT THE SHARE TRANSFER FORM CLEA RLY SHOWED THAT THE SHARES OF BAPL WERE TRANSFERRED BY THE ASSESSEE COMPANY ON 31.07.2006 ONLY. HOWEVER, ON THIS ISSUE, I MADE INQUIRY FROM THE AO. HE HAS CLARIFIED THROUGH A LETTER THAT HE DID NOT SUGG EST OR STATE THAT THE SEIZED MATERIAL PARTICULARLY THE ONE TITLED AS REG ISTER OF SHARE TRANSFER WAS NOT AVAILABLE AS PART OF THE SEIZED R ECORDS. THE ASSESSEE VIDE ITS LETTER DATED 18.05.2011 HAD REQUE STED PHOTOCOPIES OF CORRESPONDENCE RELATING TO 133(6)/131 OF THE I.T . ACT IN RESPECT OF WHICH THE ASSESSEE WAS INFORMED THAT THE DOCUMEN TS HAD BEEN GATHERED BY THE DEPARTMENT FROM THIRD PARTIES AND I F THE SAME WERE REQUIRED BY THE LD. CIT(A) IN APPELLATE PROCEEDINGS THEN THE SAME SHALL BE PROVIDED ON DEMAND TO THE LD. CIT(A) IN DU E COURSE. NO WHERE IN THE LETTER OF THE A.O, IT HAD BEEN STATED THAT THE DOCUMENTS ON THE BASIS OF WHICH ADDITION WAS MADE P ARTICULARLY REGISTER OF SHARE TRANSFER WAS NOT AVAILABLE WITH HIM. APPARENTLY THE ASSESSEE IS TRYING TO MISCONSTRUE THE FACTS AND MISINFORM THE APPELLATE AUTHORITIES TO DERIVE UNDUE BENEFITS FOR ITSELF. THIS DOCUMENT IS ACTUALLY ONE SINGLE PAGE AND IT IS PAGE NO. 22 OF 30 EXHIBIT 5 OF ANNEXURE AA SEIZED FROM THE RESIDENC E OF SH. SURENDRA KUMAR SINGHAL AT E-127, RIICO INDUSTRIAL A REA, BHIWADI, ALWAR. A COPY OF THIS PAGE HAS BEEN ENCLOS ED BY THE AO AS ANNEXURE A TO THE ASSESSMENT ORDER. THUS CLAIM OF THE ASSESSEE ABOUT THE NON- AVAILABILITY OF THIS REGIST ER IS WRONG. II) THE ASSESSEE HAS CLAIMED THAT THE MOU DATED 17. 07.2006 RELIED ON BY THE AO CONTAINED ONE ANNEXURE A AND IN THIS, THE ASSESSEE COMPANY WAS NOT SHOWN AS THE OWNER OF THE SHARES OF BAPL. THE ASSESSEE HAS FILED A COPY OF THIS ANNEXUR E A ON PAGE- 19 OF APB(FOR M/S SINGHAL SECURITIES LTD. IN THIS RESPECT, IT IS SUBMITTED THAT DURING THE AS SESSMENT PROCEEDINGS, THE ASSESSEE ASKED FOR A COPY OF SUCH ANNEXURE A TO THIS MOU BUT THE AO HAD CLEARLY WRITTEN ON THE SAME LETTER(APB PG. 22) THAT IN THE MOU FOUND BY THE DEPARTMENT THE RE WAS NO SUCH ANNEXURE A. NOW, THIS ANNEXURE A SUBMITTED IS MADE UP BY THE ASSESSEE AND HAS NO EVIDENTIARY VALUE. IT MA Y ALSO BE NOTED THAT THE MAIN MOU IS SIGNED BY THREE PERSONS BUT ON THIS ANNEXURE A THE SIGNATURE OF THE THIRD PERSON-SMT. SHIKHA S INGHAL IS NOT THERE. III) IT IS CLAIMED THAT THE AO MADE INQUIRIES FROM TECHPRO SYSTEM LTD. ABOUT THE TRANSACTIONS BETWEEN KOLKATA COMPANI ES AND TECHPRO SYSTEMS LTD. AND THIS COMPANY CONFIRMED THE SE TRANSACTION BUT THE AO DID NOT PROVIDE THE COPIES O F SUCH REPLIES GIVEN BY TSL. IN THIS REGARD, IT IS SUBMITTED THAT ON PAPER THE S HARES OF BAPL ARE SHOWN AS SOLD TO THE KOLKATA COMPANIES WHO ARE IN TURN SHOWN TO HAVE SOLD THEM TO TECHPRO SYSTEMS LTD. THE MAIN ALLEGATION OF THE AO IS THAT ALL THESE TRANSACTIONS ARE SHAM TRANSACTIONS AND A COLOURABLE DEVICE TO AVOID PAYME NT OF TAXES ON THE CAPITAL GAIN EARNED BY THE MAJOR SHARE HOLDERS OF BAPL. (IV) I T IS ARGUED THAT IN CASE OF SINGHAL SECURITIES LTD. , IT SOLD ONLY 50,000 SHARES TO NANDAN MERCANTILE PVT. LTD. BUT N ANDAN MERCANTILE SOLD 1,01,000 SHARES TO TECHPRO SYS. LTD . AND THE AO IGNORED THE REMAINING 51,000 SHARES. IN THIS REGARD, IT IS SUBMITTED THAT THE REMAINING 51,000 SHARES WERE SOLD BY ANOTHER COMPANY OF THE ASSESSEE GROUP VIZ. SNR RUBBER PVT. LTD. AND THE AO HAS MADE SIMILAR AD DITION IN CASE OF THIS COMPANY ALSO. ( V) IT IS CLAIMED THAT THE AO AND LD.CIT(A) IGNORED THE ANNUAL RETURN PREPARED BY BAPL ON 20.09.2006 IN WHICH THE KOLKATA COMPANIES ARE SHOWN AS THE OWNERS OF THE SHARES. 31 IN THIS REGARD, IT IS SUBMITTED THAT THIS ANNUAL RE TURN IS ALSO A PART OF THE COLOURABLE DEVICE CREATED BY THESE PERSONS W HICH HAS BEEN DISCUSSED ABOVE. VI) THE ASSESSEE HAS OBJECTED TO THE ACTION OF A.O IN MAKING ADDITION BY PRESUMING TRANSFER OF LAND OWNED BY M/S BAPL TO M/S TECHPRO SYSTEMS LTD. IT IS CLAIMED THAT THE TRANSFE R OF MANAGEMENT AND CONTROL OF A COMPANY BY WAY OF TRANSFER OF SHAR ES IS RECOGNIZED LEGALLY AND DOES NOT FALL UNDER TRANSFER OF IMMOVABLE PROPERTY. THE ASSESSEE HAS CONTENDED THAT THE LAND FOR WHICH THE A.O HAS CALCULATED THE CAPITAL GAIN WAS OWNED BY BA PL AND NOT BY THE ASSESSEE. IT IS ALSO CLAIMED THAT THE VALUE OF THE LAND HAS BEEN TAKEN AS THE TOTAL CONSIDERATION FOR SHARES OF BAPL PAID BY TECHPRO SYSTEMS LTD. WHICH IS NEITHER SUPPORTED WIT H ANY VALUATION OF LAND NOR PREVAILING DLC RATES. IN THIS RESPECT, IT IS SUBMITTED THAT THE COMPANY M /S BAPL ACTUALLY OWNED ONLY ONE ASSET WHICH WAS THE LAND PL OT NO. SP-496- 497, INDUSTRIAL AREA, BHIWARI ALWAR. THE 100% SHARE HOLDING OF THIS COMPANY WAS ACQUIRED BY M/S TECHPRO SYSTEMS LT D AND SUBSEQUENTLY M/S BAPL WAS MERGED IN M/S TSL. FROM T HESE FACTS, IT IS CLEAR THAT THE ULTIMATE AIM FOR UNDERT AKING ALL THESE TRANSACTIONS WAS TO TRANSFER THE LAND FROM M/S BAPL TO M/S TSL. FOR DOING SO THE SHARE HOLDERS OF M/S BAPL WHO JOIN TLY OWNED THIS LAND RESORTED TO THE CIRCUITOUS METHOD OF TRAN SFER OF 100% SHAREHOLDING TO TSL. IN THIS RESPECT, IN POINT NO. (VII) ON PAGE 12, THE A.O HAS CITED THE DECISION OF HONBLE BOMBAY HI GH COURT IN THE CASE OF VODAFONE INTERNATIONAL HOLDING B.V VS. UNION OF INDIA AND ANOTHER 311 ITR 46, IN WHICH HONBLE COURT HELD THAT SHARES IN THEMSELVES MAY BE AN ASSET IN SOME CASES LIKE TH E PRESENT ONE, SHARES MAY BE MERELY A MODE OR A VEHICLE TO TRANSFE R SOME OTHER ASSET(S). IN THE INSTANT CASE, THE SUBJECT MATTER O F TRANSFER AS CONTRACTED BETWEEN THE PARTIES IS NOT ACTUALLY THE SHARES OF A CAYMAN ISLAND COMPANY, BUT THE ASSETS(AS STATED SUP RA) SITUATED IN INDIA. THE CHOICE OF THE PETITIONER IN SELECTING A PARTICULAR MODE OF TRANSFER OF THESE RIGHTS ENUMERATED ABOVE WILL N OT ALTER OR DETERMINE THE NATURE OR CHARACTER OF ASSET . ON THE BASIS OF THIS DECISION, THE A.O HAS HELD THA T THE MODE OF TRANSFER OF AN ASSET IS NOT DETERMINATIVE O F THE NATURE OF THE ASSET AND THEREFORE, HE HAS CONCLUDED THAT THE TRANSFER OF SHARES BY THE SHAREHOLDERS OF BAPL WAS USED AS A TOOL BY T HE SHAREHOLDERS FOR TRANSFERRING THE PLOT OF LAND TO M /S TSL . 32 IN THE ALTERNATIVE , IT IS SUBMITTED THAT EVEN IF THE ADDITION IS NOT TREATED AS CAPITAL GAIN ON THE SALE OF PLOT OF LAND OF BAPL STILL THE ADDITION MAY BE SUSTAINED AS CAPITAL GAIN ON THE TRANSFER OF SHARES BY THE SHAREHOLDERS OF M/S BAPL @ RS. 318 PE R SHARE TO M/S TSL BY CONSIDERING THE COLOURABLE DEVICE ADOPTE D BY THESE SHAREHOLDERS AS DISCUSSED ABOVE. VII) THE ASSESSEE HAS STATED THAT THE A.O HAS WRONGLY TREATED THE KOLKATA BASED COMPANIES AS NON EXISTENT. IT HAS BEE N CLAIMED BY THE ASSESSEE THAT THE KOLKATA COMPANIES ARE VERY LA RGE SIZE COMPANIES HAVING SUBSTANTIAL CAPITAL AND SALES. IT IS CLAIMED THAT THE THREE ASSESSEES BEING CONSID ERED HERE SOLD THEIR SHARES OF BAPL TO THE KOLKATA COMPANIES ON 29 .04.2006 THROUGH A SALE BILL AND EXECUTED THE TRANSFER DEED ON 12.07.2006. IT IS CLAIMED THAT THE MOU DATED 17.07.2006 IS BETWEEN THE KOLKATA BASED COMPANIES AND M/S TSL AND THESE ASSESSEES HA VE NOTHING TO DO WITH THIS MOU. THESE ARGUMENTS OF THE ASSESSEE HAVE BEEN REBUTTED BY THE A.O AND ALSO BY LD. CIT(A) IN PARA 9. FIRST OF ALL, THE A.O HAS NEVER MENTIONED THAT THESE KOLKATA COMPANIES ARE NO N-EXISTENT. SECONDLY THESE KOLKATA COMPANIES BEING BIG DOES NOT MEAN THAT THEY CANNOT BE INVOLVED IN ARRANGING THE COLOURABLE DEVICE TO HELP ASSESSEE REDUCE ITS TAX LIABILITY. FURTHER, IT IS W RONG FOR THE ASSESSEES TO CLAIM THAT THE SHARES WERE SOLD BY THE M TO KOLKATA COMPANIES THROUGH SALE BILL DATED 29.04.2006 BECAUS E SHARES ARE NOT SOLD THROUGH SALE BILLS BUT CAN BE SOLD THROUGH CONTRACT NOTES ONLY. FURTHER, THE ASSESSEES HAVE WRONGLY CLAIMED T HAT THE TRANSFER DEED WITH KOLKATA BASED COMPANY WERE EXECUTED ON 12 .07.2006. THE TRANSFER DEED IS PLACED ON PAGE 70 OF THE APB I N THE CASE OF SINGHAL SECURITIES PVT. LTD.. IT MAY BE NOTED THAT AT THE TOP OF THIS FORM THERE IS A STAMP DATED 12.07.2006. THIS IS A D ATE ON WHICH THE SHARE TRANSFER FORM HAS BEEN ISSUED BY THE REGISTRA R OF COMPANIES. THE DATE, ON WHICH THIS FORM HAS BEEN EXECUTED BY T HE TRANSFEROR AND THE TRANSFEREE, IS 31.07.2006 WHICH IS MENTIONE D JUST ABOVE THE BOX FOR OFFICE USE ONLY. THUS, IT IS CLEAR THAT T HE TRANSFER DEED IS NOT EXECUTED ON 12.07.2006 BUT ON 31.07.2006 WHICH IS AFTER THE DATE OF MOU I.E 17.07.2006. FURTHER, THE SHARE TRA NSFER REGISTER OF BAPL SEIZED FROM THE RESIDENCE OF SH. S.K.SINGHAL, THE SHARES ARE SHOWN TO BE TRANSFERRED TO THE KOLKATA COMPANIES ON 31.07.2006 ONLY. VIII) THE ASSESSEE HAS ALSO CLAIMED THAT THE KOLKATA BASED COMPANIES HAVE ACCOUNTED THE TRANSACTION OF PURCHASE OF SHARE S AND PAYMENT 33 THEREOF TO THE ASSESSEES IN THEIR BOOKS OF ACCOUNT AND THEREFORE, IT CANNOT BE CALLED A MAKE BELIEVE ARRANGEMENT. IN THIS RESPECT, IT IS SUBMITTED THAT ALL THESE TRA NSACTION OF PURCHASE AND SALE OF SHARES OF BAPL TO THE KOLKATA COMPANIES AND M/S TECHPRO SYSTEMS LTD. MAY HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT OF VARIOUS PARTIES AND DOCUMENTS MUST HAVE BEEN PREPARED IN SUPPORT OF SUCH TRANSACTIONS BUT THE CASE OF THE DEPARTMENT IS THAT ALL THESE TRANSACTIONS AND DOCUMENTATION ARE A COLOURABLE DEVICE TO DISGUISE THE REAL TRANSACTION OF TRANSFER OF LA ND OF BAPL TO M/S TECHPRO SYSTEMS LTD. IX) THE ASSESSEE HAS CLAIMED THAT IT IS NOT THE CASE OF THE DEPARTMENT THAT THE ASSESSEES HAVE RECEIVED ANY INCOME/AMOUNT/ BENEFIT FROM M/S TSL OR FROM THE KOLKATA COMPANIES AND THE ADDIT ION IS BASED ON THE CONJECTURE THAT THE TRANSACTION WAS BETWEEN THE ASSESSEES AND M/S TSL. IN THIS RESPECT, IT IS SUBMITTED THAT IT IS NOT REQ UIRED FOR THE DEPARTMENT TO PROVE THAT THE ASSESSEES RECEIVED SOM E INCOME/AMOUNT/BENEFIT FROM THE KOLKATA COMPANIES. W HAT IS IMPORTANT IS THAT THE FACTS OF THIS CASE SUGGEST TH AT THE ASSESSEE GROUP HAS USED A COLOURABLE DEVICE TO AVOID PAYMENT OF TAX WHICH CANNOT BE ALLOWED. IN THE CASE OF CIT VS. DURGA PRASAD MORE 82 ITR 540 , HONBLE SUPREME COURT HELD THAT THE APPARENT MUST BE CONSIDERED REAL ONLY IF IT IS SHOWN THAT THERE ARE REASONS TO BELIE VE THAT THE APPARENT IS NOT THE REAL AND THAT THE TAXING AUTHOR ITIES ARE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER MUST BE CONSIDERED BY APPLYING THE T EST OF HUMAN PROBABILITIES. IN THE CASE OF M/S MCDOWELL AND COMPANY VS. CTO 154 ITR 148, HONBLE S.C HAS FURTHER STATED THAT TAX PLANNING MAY BE LEGITIMATE PROVIDED IT IS WITHIN THE FRAMEWORK OF L AW, COLOURABLE DEVICES CANNOT BE PART OF TAX PLANNING AND IT IS WR ONG TO ENCOURAGE OR ENTERTAIN THE BELIEF THAT IT IS HONOUR ABLE TO AVOID THE PAYMENT OF TAX BY RESORTING TO DUBIOUS METHODS. IT IS THE OBLIGATION OF EVERY CITIZEN TO PAY THE TAXES HONESTLY WITHOUT RESORTING TO SUBTERFUGES . IN THIS CASE, IT MAY BE NOTED THAT ALL THESE THREE ASSESSEES BELONG TO THE SAME GROUP AND ALSO ALL THE SHAREHOLD ERS OF M/S BAPL ARE CLOSELY ASSOCIATED WITH EACH OTHER. THERE ARE A NUMBER 34 OF UNUSUAL FACTS WHICH FORCE US TO THINK THAT WHAT IS APPARENT IS NOT REAL. THESE ARE AS FOLLOWS:- I) SOME OF THE SHAREHOLDERS OF BAPL SOLD THEIR SHARES TO THE KOLKATA BASED COMPANIES @ RS. 100 PER SHARE ON 10.05.2006 BUT THE SAME SHAREHOLDERS SOLD THE SAME SHARES TO M/S TECHPRO SYSTEMS LTD. @ RS. 318 PER SHARE BET WEEN 5.08.2006 AND 9.10.2006. THE NAMES OF SUCH SHAREHOL DERS AND THE NUMBER OF SHARES SOLD BY THEM IN THIS MANNE R ARE GIVEN IN LIST NO. A MADE BY THE A.O IN HIS ASSESSME NT ORDER. IT IS SURPRISING AS TO HOW CAN THE SHARE PRICE OF A PVT. LTD. COMPANY WHICH IS NOT FUNCTIONING CAN VARY SO MUCH FROM RS. 100 TO RS. 318 WITHIN 3-4 MONTHS AND WHY WOULD ANY SHAREHOLDER AGREE TO SELL AT SUCH DIFFERE NT RATES WITHIN SUCH A SHORT PERIOD. THE SHAREHOLDERS BELON GED TO THE PROMOTER GROUP ONLY AND VERY WELL KNEW THE WORT H OF THE COMPANY BAPL AND THE ASSET (LAND) OWNED BY IT. II) THE THREE COMPANIES BEING CONSIDERED HERE ARE THE G ROUP CONCERNS OF THE PROMOTERS. THE PROMOTERS VERY WELL KNEW THE WORTH OF THEIR COMPANY. THERE ARE NO REASONS WH Y THEY WILL SELL THEIR SHARES TO OUTSIDERS AT CONSIDERATIO N EQUIVALENT TO THE COST OF THEIR SHARES. IT MAY BE NOTED THAT B Y SELLING THEIR SHARES TO KOLKATA COMPANIES @ RS. 100 PER SHA RE, THESE ASSESSEES HAD FOREGONE THEIR PROFIT TO THE EX TENT OF RS. 218 PER SHARE. III) SH. PREM KUMAR GARG WAS A MAJOR SHAREHOLDER OF M/S BAPL. HE HAS HIMSELF SHOWN TO HAVE SOLD A SUBSTANTI AL PORTION OF HIS SHARES( 77,000 SHARES) TO A KOLKATA BASED COMPANY VIZ. M/S SHREEVAR OVERSEAS LTD. @ RS. 100 PER SHARE. SUBSEQUENTLY, HE ONLY IS AUTHORIZED BY THIS KOLKATA BASED COMPANY TO FURTHER SELL THEIR SHARES OF BAPL TO TECHPRO SYSTEMS PVT. LTD. @ RS. 318 PER SHARE. A COPY OF RESOLUTION PASSED BY THIS COMPANY IS ENCLOSED AT PAGE 73 OF DEPARTMENTS PAPER BOOK. IS IT NOT FISHY OR SURP RISING THAT I SELL MY SHARE TO SOMEBODY @ RS. 100 PER SHAR E AND THEN THE SAME SOMEBODY AUTHORIZES ME TO FURTHER NEG OTIATE THE SALE OF THESE SHARES AND SIGN THE TRANSFER DEED AND OTHER DOCUMENTS AND FOR THAT SOMEBODY I SELL THE SHARES @ RS. 318 PER SHARE ? 35 (IV) SH. PREM KUMAR GARG IS THE POWER OF ATTORNEY H OLDER FOR MANY OF THE INDIVIDUALS OF THIS GROUP(PG. 54 TO 69 DPB) WHO SOLD THEIR SHARES TO THE KOLKATA COMPANIES @ RS . 100 PER SHARE AND HE IS THE POWER OF ATTORNEY HOLDER OF ALL THESE 9 KOLKATA COMPANIES ALSO (PG. 70 TO 73 DPB) FOR WHO M HE IS SHOWN TO HAVE NEGOTIATED A RATE OF RS. 318/- PER SHARE WITH TECHPRO SYSTEMS LTD. SUCH INVOLVEMENT OF ONE PERSON CLEARLY SHOWS THAT ALL THESE TRANSACTIONS HA VE BEEN MANAGED AND MANIPULATED TO TRANSFER CAPITAL GAIN FR OM THE SHAREHOLDERS OF BAPL TO THE KOLKATA COMPANIES WHO E ITHER DID NOT HAVE TO PAY ANY TAX ON THESE TRANSACTIONS O R PAID VERY LESS TAX. THE ABOVE UNUSUAL AND IMPROBABLE INSTANCES SHOW THA T COLOURABLE DEVICE POINTED OUT BY THE A.O IS NOT A C ONJECTURE AND BASED ON SOLID EVIDENCES. THE A.O HAS RIGHTLY POINT ED OUT THAT THROUGH THE MOU DATED 17.07.2006, THE SHAREHOLDERS OF BAPL INTENDED TO SELL THEIR SHARES DIRECTLY TO M/S TECHP RO SYSTEMS LTD. @ RS. 318 PER SHARE. BUT WHEN THEY REALIZED THE HEAVY AMOUNT OF TAX THEY WILL BE REQUIRED TO PAY ON THE CAPITAL GAIN TH EY DECIDED TO INVOLVED 9 KOLKATA BASED COMPANY AND TRANSFERRED TH EIR PROFIT TO THESE COMPANIES WHO DID NOT HAVE TO PAY MUCH TAX ON THIS PROFIT ON ACCOUNT OF THEIR OTHER TRANSACTION. IN VIEW OF THE ABOVE DISCUSSION, IT IS SUBMITTED TH AT THE ORDER OF LD. CIT(A) IN THESE CASES MAY PLEASE BE UPHELD. 2.12 WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE IS A SHARE HOLDER OF THE COMPANY NAMED M/S. BLOSSOM AUTOMOTIVES PVT. LTD. THE COMPAN Y BAPL WAS INCORPORATED ON 19-07-2005. M/S. BAPL PURCHASED THE PLOT NO. S.P.4 96-497, INDUSTRIAL AREA, BHIWADI AS PER SALE DEED DATED 5-04-2006 FOR RS. 4.01 CRORES F ROM M/S. TELETUBE LTD. THE SHARES OF BAPL WERE HELD BY THE MEMBERS OF ASSESSEE FAMILY, T HE FAMILY MEMBERS OF SHRI SANJEEV KUMAR AGARWAL, SHRI RAKESH KUMAR AGARWAL. A ND SHRI PREM KUMAR GARG. OUT OF TOTAL SHARES OF 4.00 LACS, THE SHARES OF 1.46 LA CS WERE HELD BY THE ASSESSEE COMPANY AND FAMILY MEMBERS OF SHRI S.K. SINGHAL. THE HOLDING OF THE GROUP OF SHRI SINGHAL WAS TO THE 36 EXTENT OF 36.5%. THE ASSESSEE COMPANY WAS HAVING 35 ,000 SHARES. THESE 35,000 SHARES HAVE BEEN SOLD. FROM THE SALE OF 35,000 SHARES, THE ASSESSEE COMPANY SHOWED NIL CAPITAL GAIN. 10,000 SHARS WERE SOLD AT RS. 100/- PER SHARE AND THESE SHARES WERE ALSO ALLOTTED AT RS. 100/- PER SHARE. THE FACE VALUE OF THE SHARE WA S RS. 10/- PER SHARE AND AT THE ALLOTMENT, THE PREMIUM OF RS. 90/- PER SHARE WAS P AID FOR SHARES OF M/S. BLOSSOM AUTOMOTIVES PVT. LTD. THERE IS NO DISPUTE BETWEEN T HE ASSESSEE AND THE REVENUE SO FAR AS SALE OF 10,000 SHARES ARE CONCERNED. THE REVENUE IS OF THE VIEW THAT ASSESSEE HAS EARNED SHORT TERM CAPITAL GAIN OF RS. 54,53,750/- ON 25,00 0 SHARES. ACCORDING TO THE AO, THE ENTIRE SHARES OF M/S. BLOSSOM AUTOMOTIVES PVT. LTD. HAVE BEEN PURCHASED BY M/S.TECHPRO SYSTEM LTD. AT RS. 318/- PER SHARE. THE TOTAL CONSIDERATION FOR 4.00 LACS SHARES WILL BE RS. 12.72 CRORES. M/S. BLOSSOM AUTOM OTIVES PVT. LTD. PURCHASED A PLOT FOR A SUM OF RS. 4.01 CRORES. THUS THE CONSIDERATION OF RS. 12.72 CRORES WAS CONSIDERED AS VALUE OF THE PLOT AND BY REDUCING THE COST OF PLOT, THE PROFIT WAS DETERMINED AT RS. 8.71 CRORES. THUS THE PROFIT IS ON 4.00 LACS SHARES. THE AO ACCORDINGLY COMPUTED THE SHORT TERM CAPITAL GAIN OF RS. 54,43,750/- AS PER CALCULA TION GIVEN IN THE ASSESSMENT ORDER. CAPITAL GAIN : AXB C =8,71,00,000X25,000 4,00,000 = RS. 54,43,750/- A= TOTAL SHORT TERM CAPITAL GAIN EARNED BY THE SHAR EHOLDERS. B= NO. OF SHARE HELD AND TRANSFER BY THE ASSESSEE C= TOTAL SHARES OF M/S. BLOSSOM AUTOMOTIVES PVT. LT D. WHICH HAS BEEN TRANSFERRED TO M/S.TECHPRO SYSTEM LTD. 37 IN THE WRITTEN SUBMISSION, THE LD. DR HAS HEAVILY R ELIED UPON THE FACT THAT SHORT TERM CAPITAL GAIN HAS ARISEN IN THE HANDS OF THE SHRI S. K. SINGHAL AND HIS ASSOCIATES. WHEN THE PRIVATE LIMITED COMPANY IS INCORPORATED THEN PERSON BEHIND SUCH PRIVATE LIMITED COMPANY WILL APPROACH SOME OTHER PERSONS WHO MAY BECAME A C O-ASSOCIATE AND THEN THEY PERSUADE THEIR KNOWN PERSONS TO ACQUIRE SHARES OF PRIVATE LI MITED COMPANY. LOOKING TO THE BUSINESS ACUMEN OF THE PROMOTER, OTHER KNOWN PERSON S BECOME WILLING TO PURCHASE THE SHARES. SUCH INVESTMENT BY OTHER PERSONS IS FOR THE IR OWN BENEFIT. THE PROFITS AND LOSS ARISING, IF ANY, WILL ACCRUE TO THOSE PERSONS. IN T HE INSTANT CASE, IT HAS NOT BEEN ESTABLISHED THAT THE PERSONS WHO HAVE ACQUIRED THE SHARES HAVE NOT UTILIZED THE PROFIT EARNED BY THEM FOR THEIR OWN PURPOSES. THE SHARES WERE NOT HELD BY ONE SINGLE GROUP. THERE IS NOTHING ON RECORD TO SAY THAT THERE WAS A COLLUSION AMONGST T HE GROUP TO SELL ALL THE SHARES AT RS. 318/- PER SHARE. THE ASSESSEE COMPANY SOLD 10,000 S HARES ON 28-04-2006. OTHER SHARES WERE ALSO SOLD BY INVOICE DATED 28-04-2006. THE RE VENUE HAS HEAVILY RELIED ON THE MOU DATED 17-07-2006. THIS MOU IS AVAILABLE AT PAGES 7 2 TO 75 OF THE PAPER BOOK. THE MOU IS BETWEEN SHRI PREM KUMAR GARG, M/S.TECHPRO SYSTEM LTD. AND M/S. BLOSSOM AUTOMOTIVES PVT. LTD. IN THE MOU, IT IS MENTIONED T HAT SELLER ALONGWITH SHAREHOLDERS OF THE M/S. BLOSSOM AUTOMOTIVES PVT. LTD. HAVE ABSOLUT E RIGHT TO SELL THE SHARES FREE FROM LIEN CHARGES AND THE NAMES OF SUCH SHAREHOLDERS WER E GIVEN IN ANNEXURE A TO THE MOU. THIS ANNEXURE A TO THE MOU IS AVAILABLE AT PAGES 74 OF THE PAPER BOOK FILED BY THE ASSESSEE COMPANY. THE ANNEXURE TO THE MOU WAS NOT A VAILABLE WITH THE REVENUE AND THE SAME WAS OBTAINED FROM M/S.TECHPRO SYSTEM LTD. U/S 133(6) OF I.T. ACT. THIS IS CLEAR FROM PAGE 77 OF THE PAPER BOOK FILED BY THE ASSESSE E COMPANY. IN THE ANNEXURE A TO THE MOU, THE NAME OF THE COMPANY IS NOT APPEARING. HOWE VER, THE NAME OF M/S. YUTHIKA 38 COMMERCIAL PVT LTD. IS AVAILABLE IN THIS ANNEXURE A ND SHARE HOLDING OF THIS CONCERN IN ANNEXURE A WAS SHOWN AT 55,000 SHARES. THIS SHOWS T HAT AS ON 17-07-2006, THE ASSESSEE COMPANY HAS ALREADY SOLD THE SHARES TO M/S. YUTHIKA COMMERCIAL PVT LTD. THE REVENUE HAS RELIED THE DATE OF TRANSFER AS FROM THE DATE A S APPEARING IN THE TRANSFER FORM. IN THIS FORM, THE DATE IS MENTIONED AS 31-07-2006. THE REVE NUE IS OF THE OPINION THAT SHARES WERE TRANSFERRED SUBSEQUENTLY AND IN ORDER TO AVOID THE PAYMENT OF TAX, SUCH SHARES HAVE BEEN SHOWN TO HAVE BEEN SOLD ON 28-04-2006. 2.13 BEFORE US, THE LD. AR OF THE ASSESSEE COMPANY DREW OUR ATTENTION TO THE CONFIRMATIONS OF THE TRANSFER FORMS ISSUED BY M/S. YUTHIKA COMMERCIAL PVT LTD.. IN THIS, IT IS MENTIONED THAT 25,000 SHARES WERE PURCHASED B Y M/S. YUTHIKA COMMERCIAL PVT LTD. VIDE INVOICE DATED 28-04-2006 BY GIVING POST DATED CHQQUE. THE TRANSFER DEED DATED 14- 07-2006 WAS RECEIVED ON 15-07-2006. IN THE CASE OF TRANSFER OF SHARES, THE TRANSFER TOOK PLACE AS AND WHEN THE SHARES WERE DELIVERED. IT IS NOT NECESSARY THAT THERE SHOULD BE A CONTRACT NOTE. WHEN A PERSON WANTS TO GIFT THE SHAR ES THEN HE CAN HAND OVER THE TRANSFER DEED ALONGWITH SHARE CERTIFICATES TO THE DONEE. THI S SYSTEM WAS PREVALENT WHEN SHARES WERE IN THE PAPER FORM. IT WAS A NORMAL PRACTICE TH AT BLANK DEED WHICH IS TO BE GIVEN TO THE BUYER. IN CASE THE BUYER WANTS TO SELL IT BEFOR E GETTING IT TRANSFERRED IN HIS NAME THEN HE CAN SELL THOSE SHARES WITHOUT GETTING HIS NAME R EGISTERED AS SHAREHOLDER IN THE COMPANY REGISTER. THE HON'BLE APEX COURT IN THE CAS E OF HOWRAH TRADING COMPANY LTD. VS. CIT, (1959) 29 COM CASES 282: AIR 1959 SC 775 R ECOGNISED THE VALIDITY OF BLANK TRANSFERS. THE NAME OF THE TRANSFEROR IS ENTERED A ND THE TRANSFEROR SIGNS THE TRANSFER WITH THE SHARE SCRIP ANNEXED AND HANDS IT OVER TO THE TR ANSFEREE WHO IF HE CHOOSES, MAY 39 COMPLETE THE TRANSFER BY ENTERING HIS NAME AND THEN APPLY TO THE COMPANY TO REGISTER HIS NAME IN THE PLACE OF THAT OF THE TRANSFEROR. 2.14 IT IS INTERESTING TO NOTE THAT ALL THE SHARES OF M/S. BLOSSOM AUTOMOTIVES PVT. LTD. HAVE BEEN PURCHASED AT RS. 318/-PER SHARE BY M/S.TE CHPRO SYSTEM LTD. FROM THE SHAREHOLDERS WHO WERE HAVING THEIR HOLDING IN THE C OMPANY AS ON 17-07-2006. THE SHAREHOLDERS HAVING THE SHARES AS ON 17-07-2006 HAV E OFFERED THE GAIN ARISING FROM SALE OF SHARES BY TREATING THE SALE CONSIDERATION AT RS. 318/- PER SHARE. HENCE, IT IS NOT THE CASE THAT THERE IS A TAX EVASION. THE ENTITIES WHICH PUR CHASED THE SHARES BEFORE 17-07-2006 AND HAS OFFERED THE PROFIT. IT IS NOT THE CASE OF THE R EVENUE THAT SUCH ENTITIES HAVE GIVEN BACK PROFIT TO THE PERSONS FROM WHOM SUCH SHARES WERE PU RCHASED BEFORE 17-07-2006. HENCE, IT IS NOT THE CASE OF TAX EVASION. 2.15 BEFORE US, THE LD. DR SUBMITTED THAT THE DECIS ION OF HON'BLE APEX COURT IN THE CASE OF MC DOWELL AND COMPANY VS. CTO, 154 ITR 148 IS TO BE APPLIED AND THE DECISION OF HON'BLE APEX COURT IN THE CASE OF UNIO N OF INDIA VS. AZADI BACHAO ANDOLAN (2004) 10 SCC 1 (263 ITR 706) GIVEN BY THE TWO JUD GES OF THE BENCH WILL NOT BE APPLICABLE. THE HON'BLE APEX COURT IN THE CASE OF V ODAFONE INTERNATIONAL HOLDINGS B.V. VS. UNION OF INDIA AVAILABLE ON ITAT ONLINE HAS HEL D THAT THERE IS NO CONFLICT BETWEEN MC DOWELL AND COMPANY AND UNION OF INDIA VS. AZADI BACHAO ANDOLAN OR BETWEEN MATHURAM AGARWAL. IT WILL BE USEFUL TO REPRODUCE TH E FOLLOWING PARAGRAPH FROM THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF VODAF ONE INTERNATIONAL HOLDINGS B.V. (SUPRA) 57. BEFORE US, IT WAS CONTENDED ON BEHALF OF THE RE VENUE THAT UNION OF INDIA V. AZADI BACHAO ANDOLAN (2004) 10 SCC 1 NEEDS TO BE OVERRULED INSOFAR AS IT DEPARTS FROM MCDOWELL AND CO. LTD. V. CTO (1985) 3 SCC 40 230 PRINCIPLE FOR THE FOLLOWING:- I) PARA 46 OF MCD OWELL JUDGMENT HAS BEEN MISSED WHICH READS AS UNDER: ON THIS ASPECT C HINNAPPA REDDY, J. HAS PROPOSED A SEPARATE OPINION WITH WHICH WE AGREE . [I.E. WESTMINSTER PRINCIPLE IS DEAD]. II) THAT, AZADI BACHAO FAILED T O READ PARAS 41-45 AND 46 OF MC DOWELL IN ENTIRETY. IF SO READ, THE ONLY C ONCLUSION ONE COULD DRAW IS THAT FOUR LEARNED JUDGES SPEAKING THROUGH M ISRA, J. AGREED WITH THE OBSERVATIONS OF CHINNAPPA REDDY, J. AS TO HOW I N CERTAIN CIRCUMSTANCES TAX AVOIDANCE SHOULD BE BROUGHT WITHI N THE TAX NET. III)THAT, SUBSEQUENT TO MCDOWELL, ANOTHER MATTER CAME BEFORE THE CONSTITUTION BENCH OF FIVE JUDGES IN MATHURAM AGRAWAL V. STATE O F MADHYA PRADESH (1999) 8 SCC 667, IN WHICH WESTMINSTER PRINCIPLE WA S QUOTED WHICH HAS NOT BEEN NOTICED BY AZADI BACHAO. OUR ANALYSIS 58. BEFORE COMING TO INDO-MAURITIUS DTAA, WE NEED T O CLEAR THE DOUBTS RAISED ON BEHALF OF THE REVENUE REGARDING TH E CORRECTNESS OF AZADI BACHAO (SUPRA) OF THE SIMPLE REASON THAT CERTAIN TE STS LAID DOWN IN THE JUDGMENTS OF THE ENGLISH COURTS SUBSEQUENT TO THE C OMMISSIONERS OF INLAND REVENUE V. HIS GRACE THE DUKE OF WESTMINSTER 1935 ALL E.R. 259 AND W.T. RAMSAY LTD. V. INLAND REVENUE COMMISSIONER S (1981) 1 ALL E.R. 865 HELP US TO UNDERSTAND THE SCOPE OF INDO MA URITIUS DTAA. IT NEEDS TO BE CLARIFIED, THAT, MC DOWELL DEALT WITH T WO ASPECTS. FIRST, REGARDING VALIDITY OF THE CIRCULAR(S) ISSUED BY CBD T CONCERNING INDO- MAURITIUS DTAA. SECOND, ON CONCEPT OF TAX AVOIDANCE /EVASION. BEFORE US, ARGUMENTS WERE ADVANCED ON BEHALF OF THE REVENU E ONLY REGARDING THE SECOND ASPECT. 59. THE WESTMINSTER PRINCIPLE STATES THAT, GIVEN T HAT A DOCUMENT OR TRANSACTION IS GENUINE, THE COURT CANNOT GO BEHIND IT TO SOME SUPPOSED UNDERLYING SUBSTANCE. THE SAID PRINCIPLE HAS BEEN REITERATED IN SUBSEQUENT ENGLISH COURTS JUDGMENTS AS THE CARDINA L PRINCIPLE. 60. RAMSAY WAS A CASE OF SALE-LEASE BACK TRANSACTIO N IN WHICH GAIN WAS SOUGHT TO BE COUNTERACTED, SO AS TO AVOID TAX, BY ESTABLISHING AN 41 ALLOWABLE LOSS. THE METHOD CHOSEN WAS TO BUY FROM A COMPANY A READYMADE SCHEME, WHOSE OBJECT WAS TO CREATE A NEUT RAL SITUATION. THE DECREASING ASSET WAS TO BE SOLD SO AS TO CREATE AN ARTIFICIAL LOSS AND THE INCREASING ASSET WAS TO YIELD A GAIN WHICH WOULD BE EXEMPT FROM TAX. THE CROWN CHALLENGED THE WHOLE SCHEME SAYING THAT IT WA S AN ARTIFICIAL SCHEME AND, THEREFORE, FISCALLY IN-EFFECTIVE. IT WA S HELD THAT WESTMINSTER DID NOT COMPEL THE COURT TO LOOK AT A DOCUMENT OR A TRANSACTION, ISOLATED FROM THE CONTEXT TO WHICH IT PROPERLY BELONGED. IT IS THE TASK OF THE COURT TO ASCERTAIN THE LEGAL NATURE OF THE TR4ANSACTION A ND WHILE DOING SO IT HAS TO LOOK AT THE ENTIRE TRANSACTION AS A WHOLE AND NOT T O ADOPT A DISSECTING APPROACH. IN THE PRESENT CASE, THE REVENUE HAS ADOP TED A DISSECTING APPROACH AT THE DEPARTMENT LEVEL. 61 RAMSAY DID NOT DISCARD WESTMINSTER BUT READ IT I N THE PROPER CONTEXT BY WHICH DEVICE WHICH WAS COLOURABLE IN N ATURE HAD TO BE IGNORED AS FISCAL NULLITY. THUS, RAMSAY LAYS DOWN T HE PRINCIPLE OF STATUTORY INTERPRETATION RATHER THAN AN OVER-ARCHIN G ANTI-AVOIDANCE DOCTRINE IMPOSED UPON TAX LAWS. 6.2 FURNISS (INSPECTOR OF TAXES) V. DAWSON (1984) 1 ALL E.R. 530 DEALT WITH THE CASE OF INTER-POSITIONING OF A COMPANY TO EVADE TAX. ON FACTS, IT WAS HELD THAT THE INSERTED STEP HAD NO BUSINESS PUR POSE, EXCEPT DEFERMENT OF TAX ALTHOUGH IT HAD A BUSINESS EFFECT. DAWSON WE NT BEYOND RAMSAY. IT RECONSTRUCTED THE TRANSACTION NOT ON SOME FANCIED P RINCIPLE THAT ANYTHING DONE TO DEFER THE TAX BE IGNORED BUT ON THE PREMISE THAT THE INSERTED TRANSACTION DID NOT CONSTITUTE DISPOSAL UNDER THE RELEVANT FINANCE ACT. THUS, DAWSON IS AN EXTENSION OF RAMSAY PRINCIPLE. 63. AFTER DAWSON, WHICH EMPOWERED THE REVENUE TO RE STRUCTURE THE TRANSACTION IN CERTAIN CIRCUMSTANCES, THE REVENUE S TARTED REJECTING EVERY CASE OF STRATEGIC INVESTMENT/TAX PLANNING UNDERTAKE N YEARS BEFORE THE EVENT SAYING THAT THE INSERTION OF THE ENTITY WAS E FFECTED WITH THE SOLE INTENTION OF TAX AVOIDANCE. IN CRAVEN (INSPECTOR OF TAXES) V. WHITE (STEPHEN) (1983) 3 ALL. E.R. 495 IT WAS HELD THAT T HE REVENUE CANNOT START 42 WITH THE QUESTION AS TO WHETHER THE TRANSACTION WAS A TAX DEFERMENT/SAVING DEVICE BUT THAT THE REVENUE SHOULD APPLY THE LOOK A T TEST TO ASCERTAIN ITS TRUE LEGAL NATURE. IT OBSERVED THAT GENUINE STRATEG IC PLANNING HAD NOT BEEN ABANDONED. 64. THE MAJORITY JUDGMENT IN MC DOWELL HELD THAT T AX PLANNING MAY BE LEGITIMATE PROVIDED IT IS WITHIN THE FRAMEWORK O F LAW (PARA 45). IN THE LATTER PART OF PARA 45, IT HELD THAT COLOURABLE DE VICE CANNOT BE APART OF TAX PLANNING AND IT IS WRONG TO ENCOURAGE THE BELIEF TH AT IT IS HONOURABLE TO AVOID PAYMENT OF TAX BY RESORTING TO DUBIOUS METHOD S. IT IS THE OBLIGATION OF EVERY CITIZEN TO PAY THE TAXES WITHOUT RESORTING TO SUBTERFUGES. THE ABOVE OBSERVATIONS SHOULD BE READ WITH PARA 46 WHER E THE MAJORITY HOLDS ON THIS ASPECT ONE OF US, CHINNAPPA REDDY, J. HAS PROPOSED A SEPARATE OPINION WITH WHICH WE AGREE. THE WORDS THIS ASPEC T EXPRESS THE MAJORITYS AGREEMENT WITH THE JUDGMENT OF REDDY, J. ONLY IN RELATION TO TAX EVASION THROUGH THE USE OF COLOURABLE DEVICES AND B Y RESORTING TO DUBIOUS METHODS AND SUBTERFUGES. THUS, IT CANNOT BE SAID TH AT ALL TAX PLANNING IS ILLEGAL/ILLEGITIMATE/IMPERMISSIBLE. MOREOVER, REDDY , J. HIMSELF SAYS THAT THE AGREES WITH THE MAJORITY. IN THE JUDGMENT OF RE DDY, J. THERE ARE REPEATED REFERENCES TO SCHEMES AND DEVICES IN CONTR ADISTINCTION TO LEGITIMATE AVOIDANCE OF TAX LIABILITY (PARAS 7-10 , 17 & 18). IN OUR VIEW, ALTHOUGH CHINNAPPA REDDY, J. MAKES A NUMBER OF OBSE RVATIONS REGARDING THE NEED TO DEPART FROM THE WESTMINSTER AND TAX A VOIDANCE-THESE ARE CLEARLY ONLY IN THE CONTEXT OF ARTIFICIAL AND COLOU RABLE DEVICES. READING MCDOWELL, IN THE MANNER INDICATED HEREINABOVE, IN C ASES OF TREATY SHOPPING AND/OR TAX AVOIDANCE, THERE IS NO CONFLICT BETWEEN MCDOWELL AND AZADI BACHAO OR BETWEEN MCDOWELL AND MATHURAM A GRAWAL. WHILE TAXING THE INCOME, ONE HAS TO CONSIDER THE CH ARGING PROVISION OF INCOME TAX ACT. SECTION 48 OF THE ACT SAYS THAT SALE CONSIDERATION IS TO BE CONSIDERED FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN. IT IS NOWHERE MENTIONE D THAT FAIR MARKET VALUE IS TO BE 43 CONSIDERED FOR THE PURPOSE OF COMPUTING CAPITAL GAI N. IT IS NOT THE CASE OF THE REVENUE THAT ASSESSEE HAS RECEIVED SALE CONSIDERATION OVER AND A BOVE THE SALE CONSIDERATION SHOWN BY IT. THE ONUS WAS ON THE REVENUE TO ESTABLISH THE RE CEIPT OF CONSIDERATION OVER AND ABOVE THE SALE CONSIDERATION. ONE CANNOT MAKE THE ADDITIO N ON THE BASIS OF SURMISES AND CONJECTURES. 2.16 BEFORE ABOLITION OF GIFT TAX ACT, ONE WAS TO P AY GIFT TAX IN CASE THE CONSIDERATION IS LESS THAN THE FAIR MARKET VALUE. SUCH GIFT WAS T REATED AS DEEMED GIFT. EVEN AFTER ABOLITION OF GIFT TAX ACT, THE PROVISIONS OF INCOME TAX OF COMPUTING THE CAPITAL GAIN WERE NOT CHANGED. THUS IT CLEARLY SUGGESTS THAT ONE HAS TO CONSIDER THE SALE CONSIDERATION FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN. SECT ION 56(2)(VII) HAS BEEN INTRODUCED TO TREAT THE DIFFERENCE FAIR MARKET VALUE OF THE PROPE RTY AND THE CONSIDERATION. THIS PROVISION HAS BEEN INSERTED W.E.F. 01-10-2009. IN RESPECT OF TRANSFER OF SHARE OF PRIVATE LIMITED COMPANY, IT IS MENTIONED THAT FAIR MARKET VALUE IS TO BE DETERMINED AS PER RULE 11UA( C) (B). AS PER THIS RULE, THE FAIR MARKET VALUE OF UNQ UOTED EQUITY SHARE IS TO BE DETERMINED AS UNDER:- (A-L) X PV (PE) A: MEANS THE BOOK VALUE OF THE ASSETS IN THE BALAN CE SHEET L: MEANS THE BOOK VALUE OF LIABILITIES PE: MEANS THE TOTAL AMOUNT PAID FOR SHARE CAPITAL PU: MEANS THE PAID UP VALUE OF EQUITY SHARES EVEN AFTER 1-10-2009, THE FAIR MARKET VALUE OF THE UNQUOTED EQUITY SHARES IS TO BE DETERMINED ON THE BASIS OF BOOK VALUE OF THE ASSETS FOR COMPUTING INCOME U/S 56 OF THE ACT. IT HAS NOT BEEN PROVIDED THAT FAIR MARKET VALU E OF THE ASSETS AS CONTAINED IN BALANCE 44 SHEET OF THE COMPANY SHOULD BE CONSIDERED FOR ASCER TAINING THE VALUE OF THE SHARES. THE SHARE IS BUNDLE OF RIGHT AND IS DISTINCT FROM THE A SSETS OF THE COMPANY. SHARE ALSO REFERS TO THE VOTING POWER AND IN CASE THE ASSESSEE IS HAVING MORE THAN THE PARTICULAR NUMBER OF SHARES THEN IT CAN HAVE A CONTROLLING INTEREST. IN VODAFONE CASE, THE HON'BLE APEX COURT OBSERVED IT WAS A SHARE SALE AND NOT AN ASSET S ALE. A SALE MAY TAKE VARIOUS FORMS. ACCORDINGLY TAX CONSEQUENCES WILL VARY. THE TAX CON SEQUENCES OF A SHARE SALE WOULD BE DIFFERENT FROM THE TAX CONSEQUENCES OF AN ASSET SAL E. A SLUMP SALE WOULD INVOLVED TAX CONSEQUENCES WHICH COULD BE DIFFERENT FROM THE TAX CONSEQUENCES OF SALE OF ASSETS ON ITEMIZED BASIS. THE HON'BLE APEX COURT IN THE CASE OF VODAFONE (SUPRA) HAS OBSERVED THAT :- (16) A TRANSACTION HAS TO BE VIEWED FROM A COMMERCI AL AND REALISTIC PERSPECTIVE AND IT HAS TO BE DETERMINED WHETHER IT IS A SHARE SALE OR AN ASSET SALE BECAUSE THE TAX CONSEQUENCES OF A SHARE SALE WOULD BE DIFFERENT FROM THE TAX CONSEQUENCES OF AN ASSET SALE. A SLUMP SALE INV OLVES TAX CONSEQUENCES WHICH COULD BE DIFFERENT FROM THE TAX CONSEQUENCES OF A S ALE OF ASSETS ON ITEMIZED BASIS. (17) A TRANSACTION INVOLVING TRANSFER OF SHARES LOC K, STOCK AND BARREL CANNOT BE BROKEN UP INTO SEPARATE INDIVIDUAL COMPON ENTS, ASSETS OR RIGHTS SUCH AS RIGHT TO VOTE, RIGHT TO PARTICIPATE IN COMPANY MEET INGS, MANAGEMENT RIGHTS, CONTROLLING RIGHTS, CONTROL PREMIUM, BRAND LICENCES AND SO ON AS SHARE CONSTITUTE A BUNDLE OF RIGHTS. (18) THE CHARACTER OF A SLUMP TRANSACTION CANNOT BE ALTERED BY THE FORM OF THE CONSIDERATION, THE PAYMENT OF THE CONSIDERAT ION IN INSTALMENT OR ON THE BASIS THAT THE PAYMENT IS RELATED TO A CONTINGENCY PARTICULARLY WHEN THE TRANSACTION DOES NOT CONTEMPLATE SUCH A SPLIT UP. (19) MERELY BECAUSE SEPARATE VALUES IN RESPECT OF THE LUMP SUM CONSIDERATION HAS BEEN INDICATED DOES NOT MEAN THAT THE PARTIES HAD AGREED FOR THE PRICE PAYABLE FOR EACH SEPARATE ITEM. 45 IF IT WAS A SLUMP SALE THEN PROFIT WAS IN THE HAND S OF M/S. BLOSSOM AUTOMOTIVES PVT. LTD. THE SAME AO HAS MADE THE ASSESSMENT OF M/S. B LOSSOM AUTOMOTIVES PVT. LTD. AND IN THAT CASE, IT IS NOWHERE HELD THAT THE COMPANY H AS MADE SALE OF ASSETS. THE INCOME WHICH HAS BEEN TAXED IN THE HANDS OF M/S. BLOSSOM A UTOMOTIVES PVT. LTD. IS INCOME FROM HOUSE PROPERTY AND IT REPRESENTED THE RENTAL VALUE OF THE PLOT OWNED BY THE COMPANY. IN THE INSTANT CASE, THE AO HAS COMPUTED THE SHORT TER M CAPITAL GAIN BY CONSIDERING THE PROFIT ARISING ON ACCOUNT OF SALE OF LAND. THE SAM E AO HAS MADE THE ASSESSMENT IN THE CASE OF SHIKHA SINGHAL AND SHRI RAJAT SINGHAL IN WH ICH PROFIT HAS BEEN CONSIDERED LONG TERM CAPITAL GAIN ON SALE OF SHARES. IN THEIR CASE, THE SALE HAS NOT BEEN CONSIDERED AS A SALE OF ASSETS BUT HAS BEEN CONSIDERED SALE OF SHARES. I N CASE TRANSFER OF THE SHARES IS THEN LONG TERM CAPITAL GAIN ARISES IF HOLDING PERIOD OF IS ONE YEAR OR MORE WHILE IN THE CASE OF IMMOVABLE PROPERTY THE CAPITAL GAIN IS LONG TERM IN CASE THE PERIOD FOR HOLDING IS MORE THAN THREE YEARS. THE AO CANNOT BLOW HOT AND C OLD. THUS THE SALE OF SHARES IN THE CASE OF OTHER SHAREHOLDERS HAS BEEN CONSIDERED AS S ALE OF SHARES AND NOT SALE OF THE ASSETS. THEREFORE, THERE WAS NO CASE OF INCREASING THE CAPI TAL GAIN WHEN THERE IS NO IOTA OF EVIDENCE TO SUGGEST THAT THE ASSESSEE HAS RECEIVED CONSIDERATION OVER AND ABOVE THE CONSIDERATION RECEIVED. THE AO HAS NEITHER EXAMINED SHRI P.K. GARG NOR DIRECTORS OF THE M/S.TECHPRO SYSTEM LTD.. WITHOUT EXAMINING, THE AO COULD NOT HAVE DOUBTED THE GENUINENESS OF THE TRANSACTIONS. THE MOU WAS ACTED UPON AND THERE IS NOTHING ON RECORD WITH THE COMPANY WHICH PURCHASED THE SHARES FROM TH E ASSESSEE COMPANY AND HAS PASSED ON MONEY FROM M/S.TECHPRO SYSTEM LTD. TO THE ASSESS EE 2.17 WE DO AGREE THAT THE REVENUE HAS A RIGHT TO PI ERCE THE VEIL. HOWEVER, FOR THAT PURPOSE, THE REVENUE IS REQUIRED TO COLLECT THE EVI DENCE TO SHOW THAT WHAT IS APPARENT IS 46 NOT REAL. THE AO OBTAINED THE ANNEXURE FOR THE MOU FROM M/S.TECHPRO SYSTEM LTD. U/S 133(6) OF I.T. ACT. IN THAT ANNEXURE, THE NAME OF T HE ASSESSEE IS NOT APPEARING. THE AO HAS NEITHER EXAMINED ANY DIRECTOR OF M/S.TECHPRO SY STEM LTD. OR DIRECTOR THE ASSESSEE COMPANY. THE DATE OF 31-07-2006 AS APPEARING IN THE TRANSFER FORM DOES NOT CONCLUSIVELY SUGGEST THAT THE SHARES WERE TRANSFERRED ON THAT DA TE. THIS IS ALSO EVIDENT FROM THE FACT THAT THE ASSESSEE COMPANY RECEIVED CONSIDERATION IN HIS BANK ACCOUNT ON 19-07-2006. THE AO HAS NOT EXAMINED SHRI PAWAN KUMAR GARG WHO ACTED ON BEHALF OF OTHER SHAREHOLDERS FOR THE SALE OF THE SHARES OF THE ASSESSEE COMPANY TO M/S.TECHPRO SYSTEM LTD. THERE IS ALSO NO EVIDENCE TO SUGGEST THAT CALCUTTA BASED COM PANIES WERE IN ANY WAY CONNECTED WITH M/S. SINGHAL CREDIT GROUP OR WITH THE SHAREHOL DERS OF THE ASSESSEE COMPANY. IN CASE THE AO WAS OF THE OPINION THAT SUCH CALCUTTA BASED COMPANIES ACTED AS INTERMEDIARY FOR EVASION OF TAX THEN THE AO SHOULD HAVE AT LEAST EXA MINED THE DIRECTORS OF THE SOME OF THE COMPANIES. IT IS NOT THE CASE OF THE REVENUE THAT T HOSE CALCUTTA BASED COMPANIES HAVE NOT SHOWN PROFIT FROM SALE OF THE SHARES AT RS. 318/- P ER SHARE. IT IS ALSO NOT THE CASE OF THE REVENUE THAT ALL SHAREHOLDERS OF THE ASSESSEE COMP ANY SOLD THE SHARES TO THE CALCUTTA BASED COMPANIES AT RS. 100/- PER SHARE AND THEREAFT ER ALL THE SHARES WERE SOLD BY CALCUTTA BASED COMPANIES TO M/S.TECHPRO SYSTEM LTD. IF THER E ARE EVIDENCE IN THE FORM OF DOCUMENTS THEN THE MATERIALS ARE TO BE COLLECTED TO REBUT THE CONTENTS OF THE DOCUMENTS. WE THEREFORE, FEEL THAT IT WAS NOT A CASE WHERE THE RE WAS EVASION OF TAX BY SELLING THESE SHARES. 2.18 IN GROUND NO. 1, IT IS NOT DISPUTED BY THE ASS ESSEE COMPANY THAT SEARCH WARRANT WAS NOT ISSUED AGAINST THE ASSESSEE COMPANY. A SI NGLE SEARCH WARRANT CAN BE ISSUED IN THE NAME OF NUMBER OF CONCERNS. ONCE SEARCH WARRAN T HAS BEEN ISSUED THEN THE AO IS 47 REQUIRED TO PASS THE ASSESSMENT ORDER U/S 153A READ WITH SECTION 143(3) OF THE ACT. HENCE, THE GROUND NO. 1 OF THE ASSESSEE IS DISMISSE D. 2.19 THE SECOND GROUND OF APPEAL OF THE ASSESSEE IS AGAINST CONFIRMATION OF ADDITION OF RS. 55,34,750/-. WE HAD ALREADY DISCUSSED THIS ISSU E IN EARLIER PARAS. THERE IS NOTHING ON RECORD THAT THE ASSESSEE HAS RECEIVED CONSIDERATION OVER AND ABOVE CONSIDERATION SHOWN IN THE TRANSFER DEED FOR THE SALE OF SHARES. WE THE REFORE, FEEL THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS. 55,43,750/-. 2.20 THE THIRD GROUND OF APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN HOLDING THE TRANSFER OF SHARES OF M/S.TECHPRO SYSTE M LTD. INSTEAD OF M/S. YUTHIKA COMMERCIAL PVT LTD. AND WORKED OUT THE SHORT TERM C APITAL GAIN ON SALE OF LAND. 2.21 LOOKING TO THE DISCUSSIONS CONTAINED IN THIS O RDER, WE HOLD THAT THERE IS NO EVIDENCE TO SUGGEST THAT THE ASSESSEE COMPANY HAS S OLD THE SHARES TO M/S.TECHPRO SYSTEM LTD. THE ASSESSEE COMPANY HAS SOLD SHARES TO M/S. YUTHIKA COMMERCIAL PVT LTD. THERE IS A CASE OF SALE OF SHARES AND NOT SALE OF ASSETS. THUS THE THIRD GROUND OF APPEAL OF THE ASSESSEE IS DECIDED IN FAVOUR OF THE ASSESSEE. 2.22 THE 4 TH GROUND OF APPEAL OF ASSESSEE IS RELATING TO CHARGI NG OF INTEREST U/S 234B (3) OF THE ACT. THE CHARGING OF INTEREST IS MANDAT ORY AND THE ASSESSEE WILL GET THE CONSEQUENTIAL RELIEF. ITA NO. 854/ JP/2011 SINGHAL SECURITIES (P) L TD. 3.1 THE GROUND OF APPEAL RAISED BY THE ASSESSEE AR E AS UNDER:- 1 THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS FACTS BY HOLDING THAT THE ORDER PASSED U/S 153A R.W.S. 143(3) IS NO T SUFFERING FROM ANY INFIRMITY AND NOT BAD IN LAW 48 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS FACTS BY NOT RECOGNIZING THE SALE OF 50000 EQUITY SHARES OF M/S. BLOSSOM AUTOMOTIVES PVT. LTD. @ RS. 100/- PER SHARE DULY RECORDED IN TH E BOOKS OF ACCOUNTS AND CONSEQUENTLY, CONFIRMING THE ADDITION OF RS.1,08,87 ,500/- MADE BY THE AO, WORKED OUT, WITHOUT DISCHARGING ONUS, ON SURMIS ES AND CONJECTURES PERVERSE TO FACTS AND PROVISIONS OF LAW. 3. THE LD AO AS WELL AS THE LD. CIT(A) HAS ERRED IN LAW AND FACTS OF THE CASE IN HOLDING THE TRANSFER OF SHARES TO M/S.T ECHPRO SYSTEM LTD. INSTEAD TO M/S. NANDAN MERCANTILE PVT LTD. AS WELL AS WORKING OUT SHORT TERM CAPITAL GAIN ON SALE OF LAND 4. THE LD. AO HAS ERRED IN LAW IN CHARGING INTEREST U/S 234B (3) OF I.T. ACT AS WELL AS LD. CIT(A) ERRED IN IGNORING LE GAL POSITION OF SECTION 234B OF INCOME TAX ACT, 1961 3.2 IN THIS CASE THE FACTS ARE SIMILAR TO THE FACT OPENING STOCK THE M/S. SINGHAL CREDIT MANAGEMENT LTD. (SUPRA) EXCEPT THAT THIS COMPANY HA S TRANSFERRED THE SHARES TO M/S. NANDAN MERCANTILE (P) LTD. AS AGAINST M/S. YUTHIKA COMMERCIAL PVT LTD. LOOKING TO OUR FINDINGS IN THE CASE OF M/S. SINGHAL CREDIT MANAGEM NT LTD. (SUPRA), WE HOLD AS UNDER:- 1. GROUND NO. 1 OF THE ASSESSEE IS DISMISSED. 2. GROUND NO. 2 AND 3 OF THE ASSESSEE ARE ALLOWED . 4. GROUND NO. 4 OF THE ASSESSEE IS CONSEQUENTIAL IN NATURE ITA NO. 855/ JP/2011 SNR RUBBERS (P) LTD. 4.1 THE GROUND OF APPEAL RAISED BY THE ASSESSEE AR E AS UNDER:- 1 THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS FACTS BY HOLDING THAT THE ORDER PASSED U/S 153A R.W.S. 143(3) IS NO T SUFFERING FROM ANY INFIRMITY AND NOT BAD IN LAW 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS FACTS BY NOT RECOGNIZING THE SALE OF 51000 EQUITY SHARES OF M/S. BLOSSOM AUTOMOTIVES PVT. LTD. @ RS. 100/- PER SHARE DULY RECORDED IN TH E BOOKS OF ACCOUNTS AND CONSEQUENTLY, CONFIRMING THE ADDITION OF RS.1,11,05 ,250/- MADE BY THE AO, WITHOUT DISCHARGING ONUS, WORKED OUT ON SURMIS ES AND CONJECTURES PERVERSE TO FACTS AND PROVISIONS OF LAW. 49 3. THE LD AO AS WELL AS THE LD. CIT(A) HAS ERRED IN LAW AND FACTS OF THE CASE IN HOLDING THE TRANSFER OF SHARES TO M/S.T ECHPRO SYSTEM LTD. INSTEAD TO M/S. NANDAN MERCANTILE PVT LTD. AS WELL AS WORKING OUT SHORT TERM CAPITAL GAIN ON SALE OF LAND 4. THE LD. AO HAS ERRED IN LAW IN CHARGING INTEREST U/S 234B (3) OF I.T. ACT AS WELL AS LD. CIT(A) ERRED IN IGNORING LE GAL POSITION OF SECTION 234B OF INCOME TAX ACT, 1961 4.2 IN THIS CASE THE FACTS ARE SIMILAR TO THE FACT OPENING STOCK THE M/S. SINGHAL CREDIT MANAGEMENT LTD. (SUPRA) EXCEPT THAT THIS COMPANY HA S TRANSFERRED THE SHARES TO M/S. NANDAN MERCANTILE (P) LTD. AS AGAINST M/S. YUTHIKA COMMERCIAL PVT LTD. LOOKING TO OUR FINDINGS IN THE CASE OF M/S. SINGHAL CREDIT MANAGEM NT LTD. (SUPRA), WE HOLD AS UNDER:- 1. GROUND NO. 1 OF THE ASSESSEE IS DISMISSED. 2. GROUND NO. 2 AND 3 OF THE ASSESSEE ARE ALLOWED . 4. GROUND NO. 4 OF THE ASSESSEE IS CONSEQUENTIAL IN NATURE 5. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE P ARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31-01 -2012. SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 31/01/2012 *MISHRA COPY FORWARDED TO :- 1. M/S. SINGHAL CREDIT MANAGEMNT LTD., BHIWADI, JAIPUR 2. THE ACIT, CENTRAL CIRCLE- , ALWAR 3 THE LD. CIT BY ORDER 4. THE LD. CIT(A) 5 THE LD.DR 6 THE GUARD FILE (ITA NO.853,854 & 855/JP /1 1) A.R, ITAT, JAIPUR 50