The Dy. CIT, Central Circle-2, Vadodara V. Shri Atul Dalmia, Vadodara

ITSSA 322/AHD/2017

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4780 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 10-04-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 29-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Capital asset; Gift; Business income; Income from undisclosed sources; Share purchase agreement; Fair market value; Corroborative evidences; Capital Gains
• Section: 68; 63; 28; 271(1)(c); 143(3); 54F; 2(14); 153A; 143(1); 274; 64; 43; 48; 73; 72; 13; 153; 22

Judgement Text

, ‘D’ । IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD (Convened through Virtual Court) BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR & SHRI WASEEM AHMED, ACCOUNTANT MEMEBR आयकर अपील (एस. एस.) सं./I.T( SS) .A. No. 318/Ahd/2017 ( Assess ment Ye ar : 2008-09) Th e Dy . Co mmi s si on er of In co me- tax Ce ntr al C ir cle -2 , Ro o m N o. 60 8, 6 t h F loo r, Aa ya k ar B ha va n, R ace Co ur se Ci rc le, V ad oda ra / V s . S mt. Se e ma Da l mi a Bl ock N o. 1 4A , “U DA N” , Gre en A cr es , V il la ge A mpa d, Ta l. & D is . : Bar od a यी ल सं./ ीआ आर सं./P A N / G IR N o . : A C V P D 2 6 4 6 J (अपील Appellant) . . ( य / Respondent) & आयकर अपील (एस. एस.) सं./I.T( SS) .A. No. 319/Ahd/2017 ( Assess ment Ye ar : 2008-09) Th e Dy . Co mmi s si on er of In co me- tax Ce ntr al C ir cle -2 , Ro o m N o. 60 8, 6 t h F loo r, Aa ya k ar B ha va n, R ace Co ur se Ci rc le, V ad oda ra / V s . S mt. M i ta A ni l Pa t el Pl ot No .8 , R. S. N o. 79 , Nea r Na r mad a Ca n al, Se vas i, V ad od ara यी ल सं./ ीआ आर सं./P A N / G IR N o . : A C P P P 2 3 9 9 J (अपील Appellant) . . ( य / Respondent) & IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 2 - आयकर अपील (एस. एस.) सं./I.T( SS) .A. No. 321/Ahd/2017 ( Assess ment Ye ar : 2008-09) Th e Dy . Co mmi s si on er of In co me- tax Ce ntr al C ir cle -2 , Ro o m N o. 60 8, 6 t h F loo r, Aa ya k ar B ha va n, R ace Co ur se Ci rc le, V ad oda ra / V s . Sh ri A nil R . Pa te l Pl ot No .8 , R. S. N o. 79 , Nea r Na r mad a Ca n al, Se vas i, V ad od ara यी ल सं./ ीआ आर सं./P A N / G IR N o . : A D K P P 1 9 0 5 E (अपील Appellant) . . ( य / Respondent) & आयकर अपील (एस. एस.) सं./I.T( SS) .A. No. 322/Ahd/2017 ( Assess ment Ye ar : 2008-09) Th e Dy . Co mmi s si on er of In co me- tax Ce ntr al C ir cle -2 , Ro o m N o. 60 8, 6 t h F loo r, Aa ya k ar B ha va n, R ace Co ur se Ci rc le, V ad oda ra / V s . Sh ri At ul N a nd ki s ho re Da l mia Bl ock N o. 1 4A , “U DA N” , Gre en A cr es , V il la ge A mpa d, Ta l. & D is . : Bar od a यी ल सं./ ीआ आर सं./P A N / G IR N o . : A B O P D 1 8 4 0 Q (अपील Appellant) . . ( य / Respondent) अपील र स /Appellant by : Shri Aarsi Prasad, CIT.D.R. य क र स / Respondent by : Sh ri Mi li n Me ht a, Sh ri Bh avi n Ma rf at i ya , Sh ri Nir mi t Me ht a & Ms . A mr in Pat ha n, A .R s. स क र! D a t e o f H e a r i n g 08/03/2022 "#$% क र! /D a t e o f P r o n o u n c e m e n t 11/04/2022 IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 3 - ORDER PER MAHAVIR PRASAD, JM: The captioned four Revenue’s appeals in case of four different assessees arise fro m the respective orders of the Co mmissioner of Inco me Tax (Appeals) (‘CI T( A) ’) against different assessme nt years as tabulated below: IT ( S S ) A N o s . N a m e o f a s s e s s e e A Y C IT ( A ) ’ s o r d e r d a t e d A O ’ s o r d e r d a t e d A O ’ s o r d e r u n d e r S e c t i o n 3 1 8 / A h d / 1 7 S m t . S e e m a D a l m i a 2 0 0 8 - 0 9 2 1 . 0 3 . 1 7 2 9 . 1 2 . 1 7 1 5 3 C r . w . s . 1 5 3 A r . w . s . 1 4 3 ( 3 ) o f t h e In c o m e T a x A c t , 1 9 6 1 ( i n s h o r t ‘ t h e A c t ’ ) 3 1 9 / A h d / 1 7 S m t . M i t a A n i l P a t e l 2 0 0 8 - 0 9 - D o - 2 6 . 0 2 . 1 6 - D o - 3 2 1 / A h d / 1 7 S h r i A n i l R . P a t e l 2 0 0 8 - 0 9 - D o - 0 7 . 0 3 . 1 6 1 5 3 A r . w . s . 1 4 3 ( 3 ) o f t h e A c t 3 2 2 / A h d / 1 7 S h r i A t u l N a n d k i s h o r e D a l m i a 2 0 0 8 - 0 9 - D o - 2 9 . 0 2 . 2 0 1 6 - D o - 2. Since, in all appeals facts & circumstances are co mmon, therefore, for the sake of brevity, we would like to dispose of these matters b y wa y of a co mmon order. I T( SS)A No. 322/Ahd/2017 in case of Shri Atul N. Dal mia is taken as lead case for disposal of the above appeals. IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 4 - 3. The ground of appeal raised by Re venue in IT(SS)A No. 322/Ahd/2017 in case of Shri Atul N. Dal mia read as u nder: 1 . ( a ) O n t h e f a c t s a n d c i r c u m s t a n c e s o f t h e c a s e an d i n l a w , t h e L d . C I T ( A ) - 1 2 , A h m e d a b a d h a s e r r e d i n d e l e t i n g t h e e n t i r e a d d i t i o n t o t h e t u n e o f R s . 1 1 , 6 2 , 6 9 , 9 0 7 7 - . T h e a d d i t i o n w a s b a s e d o n t h e s e i z e d e - m a i l c o n v e r s a t i on s . H e n c e , t h e a d d i t i o n h a s e r r o n e o u s l y b e e n d e l e t e d b y t h e L d . C I T ( A ) - 1 2 , A h m e d a b a d . ( b ) T h e L d . C I T ( A ) - 1 2 , A h m e d a b a ' d h a s e r r e d i n d e l et i n g t h e a d d i t i o n o n a c c o u n t o f c o n s i d e r i n g s a l e o f 1 0 0 % s h a r e s o f R L L t o M / s L u p i n L t d . a s ' B u s i n e s s I n c o m e ' a n d c o n s i d e r e d i t a s I n c o m e f r o m ' C a p i t a l G a i n s ' . T h e sa m e i s e r r o n e o u s a s t h i s i s n o t m e r e l y t r a n s f e r o f t h e s h ar e s o f a c o m p a n y b u t t h e ' l o c k , s t o c k a n d b a r r e l ' s a l e w i t h a n o n - c o m p e t e a n d n o n - s o l i c i t c l a u s e i n t h e A r t i c l e 9 o f t h e S P A , w h i c h c l e a r l y a t t r a c t s t h e p r o v i s i o n s u / s 2 8 ( v a ) . He n c e , t h e L d . C 1 T ( A ) - 1 2 , A h m e d a b a d h a s e r r o n e o u s l y t r e a t e d t he s a m e a s I n c o m e u n d e r t h e h e a d ' C a p i t a l G a i n s ' , i n s te a d o f ' B u s i n e s s I n c o m e ' . ( c ) T h e L d . C I T ( A ) - 1 2 , A h m e d a b a d h a s e r r e d i n c o n s i d e r i n g t h a t t h e r e i s n o i n c r i m i n a t i n g m a t e r i a l f o u n d i n t h e s e a r c h , f o r a s s u m i n g j u r i s d i c t i o n b y t h e A O . T he r e i s a h u g e l y i n c r i m i n a t i n g m a t e r i a l f o u n d i n t h e f o r m o f e - m a i l s ( w h e n c o m p a r e d w i t h S h a r e P u r c h a s e A g r e e m e n t ). H e n c e , t h e L d . C I T (A ) - 1 2 , A h m e d a b a d h a s e r r o n e o u s l y c o n c l u d e d t h a t t h e r e i s n o i n c r i m i n a t i n g m a t e r i a l fo u n d , , f o r a s s u m i n g j u r i s d i c t i o n b y t h e A O . 2 . O n t h e f a c t s a n d c i r c u m s t a n c e s o f t h e c a s e a n d in l a w , t h e L d . C I T ( A ) - 1 2 , A h m e d a b a d h a s e r r e d i n d e l e t i n g t h e e n t i r e a d d i t i o n o f R s . 3 4 , 5 9 , 5 5 , 1 0 0 / - . T h e a d d i t i o n w a s b as e d o n t h e e v i d e n c e s f o u n d d u r i n g t h e c o u r s e o f s e a r c h , w hi c h c l e a r l y s h o w s t h a t S h r i A t u l N D a l m i a a n d S h r i A n i l R P a t e l h a v e c r e a t e d s u b t e r f u g e t r a n s a c t i o n s t o a v o i d p a y m en t o f t a x e s . H e n c e , t h e a d d i t i o n h a s e r r o n e o u s l y b e e n d e le t e d b y t h e L d . C I T ( A ) - 1 2 , A h m e d a b a d . 3 . ( a ) O n t h e f a c t s a n d c i r c u m s t a n c e s o f t h e c a s e an d i n l a w , t h e L d . C I T ( A ) - 1 2 , A h m e d a b a d h a s e r r e d i n d e l e t i n g th e e n t i r e a d d i t i o n o f R s . 3 , 4 5 , 2 0 , 5 0 8 / - . T h e a d d i t i o n w a s b a s e d o n t h e e v i d e n c e s f o u n d d u r i n g t h e c o u r s e o f s e a r c h , w h i c h c l e a r l y s h o w s t h a t S h r i A t u l N D a l m i a h a s a l s o s o l d h i s s h a r e h o l d i n g s t o L u p i n L t d . a t t h e r a t e o f R s . 1 5 4 .3 7 p e r s h a r e , n e i t h e r t h e c o n d i t i o n s p r e c e d i n g t h e t r a n s f er o f s h a r e s b y S h r i A n i l R P a t e l t o S h r i A t u l N D a l m i a no r t h e c o n d i t i o n s s u c c e e d i n g t h e t r a n s f e r o f s h a r e s j u s t i fy t h e v a l u e a t w h i c h t h e s h a r e s h a v e b e e n t r a n s f e r r e d b y S h r i An i l R IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 5 - P a t e l t o A t u l N D a l m i a a t t h e r a t e o f R e . l p e r s h a re . H e n c e , t h e a d d i t i o n h a s e r r o n e o u s l y b e e n d e l e t e d b y t h e L d. C I T f ( A ) - 1 2 , A h m e d a b a d . ( b ) T h e L d . C I T ( A ) - 1 2 , A h m e d a b a d h a s e r r e d i n c o n s i d e r i n g t h a t t h e r e i s n o i n c r i m i n a t i n g m a t e r i a l f o u n d i n t h e s e a r c h , f o r a s s u m i n g j u r i s d i c t i o n b y t h e A O . T he r e i s a h u g e l y i n c r i m i n a t i n g m a t e r i a l f o u n d i n t h e f o r m o f e - m a i l s ( w h e n c o m p a r e d w i t h S h a r e P u r c h a s e A g r e e m e n t ). H e n c e , t h e L d . C I T (A ) - 1 2 , A h m e d a b a d h a s e r r o n e o u s l y c o n c l u d e d t h a t t h e r e i s n o i n c r i m i n a t i n g m a t e r i a l fo u n d , , f o r a s s u m i n g j u r i s d i c t i o n b y t h e A O . ” 4. With regard to issues under consideration, the AO observed as under: 5. Differenc e of Rs. 5,68,61,048/- in sale consideration of Ruba min Laboratories Li mited- 5.1 During the course of assessment proceedings, it was observed that assessee has sold 6,52,432 shares of Ruba min Laboratories li mited to Lupin Li mi ted and has shown the sale consideration of Rs.7,02,99,053/-. The total capital gain shown is of Rs,6,55,91,422/-. Out of this amount, assessee has clai med exe mption u/s 54 of the Act of Rs 6,09,82,053/- (54EC Rs.50,00,000 + 54F 5,59,82,053) and the capital gain offered for taxation before clai ming set off is of Rs. 46,09,369/- and after set off the capital gain offered for taxation is of Rs. 9,91,462/- After the verification of sub mission of assessee and the seized material, assessee was issued show cause notice dated 15.01.2016, relevant portion is as under : “ ... ... ... ... . 5 . O n t h e p e r u s a l o f s e i z e d m a t e r i a l ( A n n e x u r e A - 7 ) (H a r d D i s k I n f o r m a t i o n ) s e i z e d f r o m t h e o f f i c e o f R u b a m i n L i m it e d , S y n e r g y H o u s e , IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 6 - B a r o d a , a n o f f e r l e t t e r f r o m L u p i n P h a r m a d a t e d 2 8 .0 8 . 2 0 0 7 h a s b e e n f o u n d a n d s e i z e d . T h i s o f f e r l e t t e r h a s b e e n d u l y si g n e d b y t h e r e p r e s e n t a t i v e o f L u p i n L i m i t e d , S h r i R a m e s h S w a m i na t h a n (P r e s i d e n t , F i n a n c e a n d P l a n n i n g L u p i n L i m i t e d ) . A s p e r t h i s l et t e r , L u p i n L i m i t e d h a d m a d e a n o f f e r a m o u n t i n g t o R s 4 2 , 5 0 , 0 0 , 0 0 0 / - f or a c q u i r i n g 1 0 0 % f u l l y p a i d u p e q u i t y s h a r e c a p i t a l o f R u b a m i n L a b o ra t o r i e s l i m i t e d . . F u r t h e r o n g o i n g t h r o u g h v a r i o u s m a i l s e x c h a n g e d b et w e e n S h r i A t u l D a l m i a a n d v a r i o u s f i n a n c e d e p a r t m e n t h e a d s o f R u b am i n L i m i t e d , i t i s s e e n t h a t a l o n g w i t h L u p i n t h e r e w e r e o t h e r o f f e r s f o r t h e s a m e t r a n s a c t i o n f r o m o t h e r p a r t i e s t h e v a l u e o f w h i c h is r a n g i n g b e t w e e n 4 4 t o 4 5 c r o r e . T h u s t h e r e i s n o h u m a n p r o b a b i l i t y t h at t h e d i r e c t o r s o f R u b a m i n w i l l a c c e p t a n o f f e r a t s u c h a l o w e r p r i c e o f R s 3 6 . 8 1 c r o r e . T h u s w h e n L u p i n i t s e l f h a s m a d e o f f e r f o r R s 4 2 , 5 0 ,0 0 , 0 0 0 / - , t h e n t h e r e i s n o r e a s o n w h y t h e r e a l a g r e e m e n t w o u l d b e d o n e at a p r i c e l o w e r t h a n t h a t . T h u s i t i s s e e n t h a t L u p i n h a s p a i d a t o t a l am o u n t o f R s 4 2 , 5 0 , 0 0 , 0 0 0 / - a s p u r c h a s e c o n s i d e r a t i o n f o r t h e p ur c h a s e o f 1 0 0 % s h a r e h o l d i n g a l o n g w i t h t h e B u s i n e s s o n a g o i n g c o n ce r n . H e n c e t h e r e i s s u p p r e s s i o n o f b u s i n e s s r e c e i p t s ( R s 4 2 , 5 0 , 0 0 , 0 0 0 - R s 3 6 , 8 l , 3 8 , 9 5 2 / - ) t o t h e t u n e o f R s 5 , 6 8 , 6 1 , 0 4 8 / - b y t h e s e l l e r s o n t h e s a l e o f s h a r e s a n d b u s i n e s s o f t h e c o m p a n y R u b a m i n L a b o r a t o r i e s L i m i t ed . T h u s y o u a r e r e q u e s t e d t o s h o w c a u s e w h y t h e u n a c c o u n t e d r e c e i p ts o f R s 5 , 6 8 , 6 1 , 0 4 8 / - i n p r o p o r t i o n o f y o u r s h a r e h o l d i n g i n t h e c o m p a n y s h o u l d n o t b e a d d e d t o y o u r i n c o m e a n d t a x e d i n y o u r h a n d s a s u n d i s c l o s e d r e c e i p t s . ... ... ... . . ... ... ... . . ” 5.2 In response to the sa me, assessee has furnished its reply dated 01.02.2016. The main contentions raised by the assessee are as follows: a. Assessee has mainly contended that with respect to A.Y.2008-09, the assessment proceedings have been deemed co mpleted under section 143(1) of the I T Act and hence the scope of assessme nt would be limit ed to incriminating material itself. b. Further with respect to the issue of difference in sale consideration, assessee has stated that the offer of Rs 42.50 crore was subject to some adjust me nts and hence the final deed IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 7 - was done only at Rs 36.81 crore thus there is no suppression of income . 5.3 This office has c arefully perused the argu ments given b y the assessee but the y a re not accepta ble for following reasons: 5.3.1 Rebut tal of objec tion at point a: 1. With respect to first objection regarding scope of assessment, it is to be noted that in the entire scheme of section 153A of the Act, there is no prohibition for the assessing authority to restrict the enquiry to incrimin ating material itself. It is expressly provided u/s 153A of the Act that the AO shall assess or reassess the "total Inco me" of the six assessment years . For clarity section 153A is reproduced herewith as follows: " 1 5 3 A ( 1 ) N o t w i t h s t a n d i n g a n y t h i n g c o n t a i n e d i n s e c ti o n 1 3 9 , s e c t i o n 1 4 7 , p e r s o n w h e r e a s e a r c h i s i n i t i a t ed u n d e r s e c t i o n 1 3 2 o r b o o k s o f a c c o u n t , o t h e r d o c u m e n t s o r a n y a s s e t s a r e r e q u i s i t i o n e d u n d e r s e c t i o n 1 3 2 A a f t e r th e 3 1 s t d a y o f M a y , 2 0 0 3 , t h e A s s e s s i n g O f f i c e r s h a l l – ( a ) i s s u e n o t i c e t o s u c h p e r s o n r e q u i r i n g h i m t o f u r n i s h w i t h i n s u c h p e r i o d , a s m a y b e s p e c i f i e d i n t h e n o t i c e , t h e r e t u r n o f i n c o m e i n r e s p e c t o f e a c h a s s e s s m e n t y e a r f a l l i n g w i t h i n s i x a s s e s s m e n t y e a r s r e f e r r e d t o i n c l a u s e ( b ) , i n t h e p r e s c r i b e d f o r m a n d v e r i f i e d i n t h e p r e s c r i b e d m a n n e r a n d s e t t i n g f o r t h s u c h o t h e r p a r t i c u l a r s a s m a y b e p r e s c r i b e d a n d t h e p r o v i s i o n s o f t h i s A c t s h a l l , s o f a r a s m a y b e , a p p l y a c c o r d i n g l y a s i f s u c h r e t u r n w e r e a r e t u r n r e q u i r e d t o b e f u r n i s h e d u n d e r s e c t i o n 1 3 9 ; ( b ) a s s e s s e e o r r e a s s e s s t h e t o t a l i n c o m e o f s i x a s s e s s m e n t y e a r s i m m e d i a t e l y p r e c e d i n g t h e a s s e s s m e n t y e a r r e l e v a n t t o t h e p r e v i o u s y e a r i n IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 8 - w h i c h s u c h s e a r c h i s c o n d u c t e d o r r e q u i s i t i o n i s m a d e : " 2. Thus under the provisions of section 153A, the assessing officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years i mmediatel y pre ceding the assessment year relevant to previous year in which search was made . Another significant feature of this section is that the AO is e mpower ed to assess or reassess the Total income of the aforesaid years . Thus wording of the section is very clear and there is no a mbiguity „ Act has clearly required assessee to furnish the return for all the six assessment years whether incri minating mater ial has been found or not. Further act has specifically requires the AO to assess or reassess the total income of six assessment yea rs. Had the intention of Act been to r estrict the scope of assessment onl y f or those years for which some material has been found, act would have mentioned that in the proviso. Thus act clearly states that assessmen t or reassess ment has to be done for all the six years. When there is no ambiguity in the wording of the act, there is no need to interpret the section in different wa y. 3. Again the proviso to section 153A clearl y states that total income of the six assessment years has to be assessed. Had the intention of the act has been to restrict the scope to the incri minating mat erial found, act would have mentioned so in the provisos. But here again section is very clea r that for 153A assessments have to be made in totality . The AO IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 9 - shall assess the total income of six assessment years which means the said total income includes inco me which was returned in the earlier return, the inco me which was unearthed during search and the inco me which was not the subject matter of a foresaid two incomes. Thus here again when the section sa ys in clear language that total income has to be assessed , no different interpretation can be attached to it. 4. The objection of the assessee that only pending assessment shall abate and co mpleted assess ments will not be disturbed is also not in line with the section itself. Further this can be specifically understood when we co mpare this with earlier block assessment s che mes under section 158BC. Block assessment proceeding would lead to one block assessment for undisclosed income and regular assessment were preserved resulting into mu ltiple assessments. Se c tion 153A has been introduced to withdraw multiple assessments and hence the power is given to AO to decide total inco me of the assessee under one assess ment order for 1 year .. As under 153A , there is no room for multiple assessments, the provision has been made that pending assessment will be abated i.e. it will be merged to search assessment for the deter mination of total income as onl y one order has to be passed for disclosed and undisclosed income . With respect to completed assessment the y will be reassessed as the section 153A asks AO to assess or reassess the total income . That's wh y IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 10 - the word reassess has been introduced in the section for co mpleted assessments. 5. A perusal of section 153A shows that it starts with a non obstante clause relating to normal assess ment procedure which is covered by sections 139, 147, 148, 151 and 153 . These sections applicability of whi ch has been excluded relate to returns, a ssessments and re assessment provisions. So if an order is alread y in existence u/s 143(3)/ 143(1) having obviously been passed prior to the initiation of search, the assessing officer is empo wered to reopen those proceedings and reassess the total inco me, taking note of the unearthed inco me, if an y, duri ng the search. For this purpose the fetters imposed upon the Assessing officer by the strict procedure to assume jurisdiction to reopen assessment under section 147 and 148 have been re moved by the non obstente clause with which subsection (1) of section 153A opens. The ti me li mit to reope n the assessment or ti me li mit for co mpl etion of assessment or the procedure for reopening as prescribed u/s!47, 149 and 151 , 153 has been done awa y with in a case covered by section 153A. Thus as per going by the provisions in section 153A , assessing officer under section 153A has been entrusted to assess or reassess the total income of assessee for all six years, without following any proc edure that might be required under section 147, 139, 148 , 151 or 153. 6. Reference is also i nvited to the following case laws: IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 11 - CIT vs Anil Ku mar Bhatia on 7th August 2012( Delhi High Court) Canara Housing Development Co mpan y vs DCI T( Karnataka High Court) Th e HonlDle Ah me dabad Tribunal in the case of Dr. M ansukh Kanjibhai Shah v. ACI T(129 ITD 376) has held that once the warrant of authorization or requisition is issued and search is conducted 85 Panchanama is drawn, all the relevant six assess ment years would get reopened irrespective of an y incri minating material is found or not in respect of an y particular assessment year falling within the relevant six assessment years. 7. Without prejudice to the above facts, it is stated that the above objections as stated by assessee are not applicable to the case of his as the incri minating material has been found and related to the above issue. During the course of search various incri minating documents have been found fro m the hard disk which was found and seized from the pre mises at Rubamin Li mited, S ynergy House, Ba roda, annexed as Annexure A-10. These documents are in the nature of various mails exchanged between Shri Atul Dal mia and various heads of Rubamin . The transaction mentioned in the mail is related to transfer of shares of Ruba min Laborat ories Lli mited. F urther an offer letter fro m Finance head of Lupin has also been found and inventorised in Annexure A-7(Hard Disk Information) which has bearing on the deter mination of income on this issue. Now these documents which were found during the search were not available .when the assessment order u/s IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 12 - 143(1) of the I T Act was passed. Hence the argu me nts of the assessee on this count are also not valid. The details of incriminating material found related to assessee has been discussed in the following paragraphs. 5.3.2 Rebut tal of objec tion at point b : 1. During the course of search on perusal of seized ma terial (Annexure A-7) (Hard Disk Infor mation) seized from the office of Rubami n Li mited, S yner gy House, Baroda, an offer letter has b een found and seized. For clarity the copy of offer letter is reproduced in assessment order . 2. This offer letter has been duly signed by the represent ative of Lupin Li mited, Shri Ra mesh S wa minathan(President, Finance and Planning Lupin Li mited).As per this letter, Lupin Li mited has made an offer a mounting to Rs.42,50,00000/-for acquiring 100% full y paid up share capital alongwith business of Ruba min Labora tories Li mited. The above letter is also agreed, accepted and signed by Shri Atul Dal mia . As per the submission of assessee, it is men tioned that offer made 'in the offer letter of Rs 42.50 crore was subject to adjustments as mentioned in para 2 of t he said offer l etter. The details of adjust ments made to initial offer as mentioned by assessee are as follows: Consideration as per offer: 4250.00 lacs Adjust ments: Bad inventory 309.601acs IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 13 - Loss 104.001acs Land 70.00lacs Fees to Yes Bank 85.001acs Total 568.60 Sale consideration as per agree me nt 3681.401acs . 3. This office has verified the submi ssion of assessee but could not find force in it. Firstly it is to be noted that though offer letter mentions about some adjust ments, it is nowhere quantified by it. W.r.t issue of inventory in this regard, it is submi tted that as per para 2 of this offer letter it is mentioned that "in any case, if any such working capital related to assets are not paid by the buyer(i.e Lupin) at the time of transaction but are subsequently recovered through best efforts of the buyer , the proceeds will be given to sellers . Therefore sale proceeds of the working capital or inventories shall be over and above the purchase consideration fixed of Rs 42,50,00,000/- as per the offer letter dated 28th August 2007. Thus purchase consideration is Rs 42,50,00,000/- and value of inventory is over and above the sa me . 4. Further it is to be mentioned that the adjust ments on account of land and fees to yes bank have neither been mentioned in offer letter nor in final agree ment. But with respect to land as per para 2(vi) of the offer letter, it is mentioned that Ruba min has clear title and ownership to all part and parcel of land admeasuring approximatel y 30 acres, on part of which Ruba min has present IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 14 - manufacturing activity. The cost for clear title has to borne by pro mote rs. Thus the land cost has no bearing on the offer made of Rs 42.50 crore. Further para 4 of the offer letter ment ions that Rubamin will facilitate the purchase of adjacent land about 10 acres. But it has no bearing on the transaction under discussion. It means that pro moters have received the extra consideration for facilitating the transaction of land discussed above and the offer of 42.5 c rore does not include the consideration for this facility. So there is no force in the argument of assessee that 70 lacs have to be reduced fro m the offer value. 5. With respect to fees to Yes Bank, it nowhere finds mention in the offer letter. As per the oral discussion with A.R of the assessee, it was submitted that pa yment to Yes Bank was made as a commission for facilitating the transfer of this transaction. But no proof in this regard is submitted. Further offer letter nowhere me ntions adjustmen t on account of co mmi ssion payments. 6. Most importantly it is submitt ed that some mails exchanged between Shri Vikas Da wra, Atul Dal mia and Aja y Agarwal ha ve been found fro m the pre mise s of Ruba min Li mited, S ynerg y House, Baroda. The cop y of these mails are also reproduced in assessment order. Fro m the mails, i t is observed by t he AO that offers and deliberations mad e through mail ar e related to sale of the IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 15 - business of Rubamin Laboratories Li mited(R LL) . As sessee has submitted that these are not relevant mails. But it can be seen that the discussion in these mails is with respect to sale of Rubamin Laborator y itself. First mail is fro m Shri Atul Dal mia to S hri Vikas Dawra dated 09.08.2007which states that the valuation will conclude to Rs. 45 crore. Second mail is dated 13.08.2007 i.e in the period when Ruba min was i n the process of sale of Ruba min Laboratories Ltd. and was evaluating various offers. In this mail, Shri Atul Dal mia has st ated to Vikas Da wra, who is from Invest ment banking in Yes bank that as per his calculation Rs 45 crore plus 15 crore will be good valuation . The mail also mentions about Lupin offer. So there is no force in assessee's argument that this ma il is not related to sale of RLL. Further mail between Atul Dal mia and Aja y Agarwal dated 16th August 2007 is also related to the sa me issue. Shri Aja y Agar wal was the CFO of Rubamin during that period and Khanna is some person fro m Lupin with who m the talks in this matter are going on. The subject of the mail is Lupi n. It contains the draft of agree ment with Lupin. In the same mail it is mentioned that Khanna has co me upto 44 and pleading Vikas not to insist for 45. Thus it me ans that the offer fro m Lupin has co me for Rs 44 crore as mentioned in the mail. Thus fro m the discussion, it is clear that all the mails are relat ed to transaction of sale of Rubamin Laboratories Li mited. These are certainly the incri minating mails which depict the true offers ma de and the deliberations on these issues. IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 16 - 7. Thus on going through the seized material it is found that the offer for sale of Ruba min has co me upto 44 crore. Lupin itself has made the offer fo r Rs.44 crore as per the mail attached above. Thus, it can be said that Lupin has initially made of fer for Rs. 44 crore and after certain adjust ment, the of ficial offer was made of Rs. 42.5 crore which was also ac cepted by Ruba mi n. 8. Thus on the basis of above discussion, it is held that the actual consideration received from the Lupin is that of Rs 42.50 crore. Thus value of share comes to Rsl78.21/share. The assessee was in possession of 6,52,432 shares which were sold to Lupin alongwith business of the company at the rate of Rs 178.21/share. Thus the consideration received is of Rs.11,62,69,907/- from the sale of 6,52,432 shares at the price of Rs.178.21/- per share instead of Rs. 7,02,99,053/- as shown by the assessee. Thus there is difference of Rs.4 ,59,70,854/- and suppression of inco me to that extent. Penalty proceedings u/s 271(1)(c) of the Act are b eing initiated separately for concealme nt of income . 6. Issue of Capital gain vs Business Inco me 6.1 On verification of share purchase agree ment between sellers and Lupin Ltd, it was observed by the AO that Lupin has acquired the shareholding of compa ny alongwith entire business as a going concern. Thus, assessee was issued show cause notice dated 15.01.2016, relevant portion is as follows : IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 17 - “ ... ... ... ... ... 5 . F u r t h e r o n v e r i f i c a t i o n o f S h a r e P u r c h a s e a g r e e me n t b e t w e e n s e l l e r s a n d L u p i n L t d , i t i s s e e n t h a t t h e r e a r e v ar i o u s c l a u s e s w h i c h e l a b o r a t e t h e f a c t t h a t L u p i n h a s a c q u i r e d t he s h a r e h o l d i n g o f c o m p a n y a l o n g w i t h t h e e n t i r e b u s i n e s s o f t h e c o mp a n y , R u b a m i n L a b o r a t o r i e s L i m i t e d . O n g o i n g t h r o u g h v a ri o u s c l a u s e s , i t i s s e e n t h a t t h r o u g h t h i s a g r e e m e n t L u p i n P h a r m a h a s a c q u i r e d t h e b u s i n e s s o f t h e c o m p a n y i . e . b u s i n e s s o f m a n u f ac t u r e , m a r k e t i n g , d i s t r i b u t i o n a n d s a l e o f f i n e c h e m i c a l , A P I a n d i n t e r m e d i a r i e s u s e d i n P h a r m a c e u t i c a l i n d u s t r y o n a g o i n g c o n c e r n b a s i s w i t h t h e e n t i r e s h a r e h o l d i n g o f t h e co m p a n y . T h u s i t i s s e e n t h a t e n t i r e c o n t r o l a n d m a n a g e m e n t o v e r t h e b u s i n e s s a n d t h e c o m p a n y h a s b e e n t r a n s f e r r e d b y t h e s e l l e r s t o t h e p u r c h a s e r i . e . L u p i n P h a r m a . T h u s y o u a r e r e q u e s t e d t o s h o w c a u s e w h y t h e t o t a l c o n s i d e r a t i o n r e c e i v e d b y y o u on t r a n s f e r o f s h a r e h o l d i n g a l o n g w i t h b u s i n e s s o f R u b a m i n L a b o r a t or i e s L i m i t e d s h o u l d n o t b e c o n s i d e r e d a s b u s i n e s s r e c e i p t s a n d ga i n a r i s i n g t h e r e o n s h o u l d n o t b e c o n s i d e r e d a s i n c o m e f r o m b u si n e s s r a t h e r t h a n c a p i t a l g a i n a s s h o w n b y y o u i n y o u r r e t u r n o f i n c o m e . . . . . . . . . . . . . ... ... ... ... . . ” 6.2 In response to the sa me, assessee has furnished his reply dated 01.02.2016. On this issue, assessee has again raised si milar objections with reference t o scope of 153 assessment. The detailed reply to those objections has already bee n made in the first issue. Hence the sa me ar guments are not repeated. Other than the above assessee has raised objection that the shares were held as investment since inception, assessee has received dividends fro m the same and were classified as such in the books of accounts. Before going into the objections of assessee, it is necessar y to verify fa cts of the case which are as follows: 1 . L u p i n P h a r m a c e u t e a l s L i m i t e d p u r c h a s e d 1 0 0 % o f th e c u r r e n t i s s u e a n d p a i d u p c a p i t a l o f t h e c o m p a n y f re e o f a l l e n c u m b r a n c e s , a l o n g w i t h t h e b u s i n e s s o f t h e c o m p a n y a s a g o i n g c o n c e r n , o n t h e t e r m s a n d c o n d i t i o n s a n d i n t h e m a n n e r s e t o u t i n t h e a g r e e m e n t a s p e r C l a u s e D o f t h e IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 18 - S h a r e P u r c h a s e A g r e e m e n t d a t e d 2 6 t h S e p t e m b e r 2 0 0 7 d u l y s i g n e d b y t h e p u r c h a s e r a n d t h e s e l l e r s a n d t h e c o mp a n y . 2 . I t i s m e n t i o n e d i n t h e C l a u s e B o f t h e A g r e e m e n t t h a t t h e s e l l e r s [ S h r i A t u l N D a l m i a , S h r i A n i l R P a t e l a n d p e r s o n s s e t o u t i n A n n e x u r e 1 A , a c t i n g t h r o u g h t h e i r c o n s t it u t e d a t t o r n e y M r . S h r i A t u l N D a l m i a] a r e t h e l e g a l a n d b e n e f i c i a l o w n e r s o f 2 3 , 8 4 , 7 8 3 s h a r e ( h e r e a f t e r d e fi n e d ) w h i c h r e p r e s e n t 1 0 0 % o f t h e c u r r e n t i s s u e d a n d p a i d u p s h a r e c a p i t a l o f t h e c o m p a n y , m o r e p a r t i c u l a r l y d e sc r i b e d i n A n n e x u r e 1 h e r e t o . 3 . F u r t h e r ' B u s i n e s s " h a s b e e n d e f i n e d u n d e r A r t i c le 1 . 1 . 4 a s t h e b u s i n e s s o f m a n u f a c t u r e , m a r k e t i n g , d i s t r i b u t i on a n d s a l e o f f i n e c h e m i c a l s , A P I a n d i n t e r m e d i a t e s u s e d i n t h e p h a r m a c e u t i c a l i n d u s t r y . 4 . " T r a n s a c t i o n " h a s b e e n d e f i n e d i n A r t i c l e 1 . 1 . 2 t o m e a n t h e s a l e o f t h e s h a r e s c o m p r i s i n g t h e e n t i r e s h a r e h o l d in g o f t h e c o m p a n y b y t h e s e l l e r s t o t h e p u r c h a s e r a n d t h e p u rc h a s e t h e r e o f b y t h e p u r c h a s e r f r o m t h e s e l l e r s a l o n g w i th t h e B u s i n e s s a t a n d f o r t h e P u r c h a s e C o n s i d e r a t i o n i n a c c o r d a n c e w i t h t h e t e r m s s e t o u t i n t h i s A g r e e m e n t. F u r t h e r t h e r e a r e v a r i o u s c l a u s e s m e n t i o n e d b e l o w wh i c h f u r t h e r e l a b o r a t e s t h e f a c t t h a t L u p i n h a s a c q u i r e d t h e s h a r e h o l d i n g o f t h e c o m p a n y a l o n g w i t h t h e e n t i r e bu s i n e s s o f t h e c o m p a n y ; R u b a m i n L a b o r a t o r i e s L t d . 5 . A r t i c l e 2 . 1 & 2 . 2 : s a l e a n d p u r c h a s e o f t h e s h a re s i t i s m e n t i o n e d t h a t t h e P u r c h a s e C o n s i d e r a t i o n s h a l l i n cl u d e c o n s i d e r a t i o n f o r t h e t r a n s f e r a n d a s s i g n m e n t o f t he b u s i n e s s a s a g o i n g c o n c e r n s , g o o d w i l l , i n t e l l e c t u al p r o p e r t y r i g h t , i n r e l a t i o n t o t h e b u s i n e s s o r o t h er w i s e o w n e d o r u s e d b y t h e c o m p a n y t o t h e p u r c h a s e r i n t he m a n n e r s e t o u t h e r e i n . T h e r e f o r e t h e p u r c h a s e c o n s id e r a t i o n o f R s . 1 5 4 . 3 7 p e r s h a r e c o m p r i s e s t h e p a y m e n t s m a d e f o r t h e p u r c h a s e o f s h a r e s a n d t h e p u r c h a s e o f b u s i n e s s o n a g o i n g c o n c e r n . 6 . O n p e r u s a l o f A r t i c l e 9 a s m e n t i o n e d i n t h e A g r ee m e n t , i t i s c l e a r l y e v i d e n t t h a t L u p i n P h a r m a h a s p a i d t h e P u r ch a s e C o n s i d e r a t i o n f o r t h e n o n - c o m p e t e a n d n o n s o l i c i t cl a u s e s a s e n s h r i n e d i n t h e A g r e e m e n t . C l a u s e 9 . 1 . 1 s t a t e s t h a t s e l l e r s w i l l n o t d i r e c t l y o r i n d i r e c t l y e n g a g e i n an y b u s i n e s s a c t i v i t y w h i c h c o m p e t e s w i t h t h e b u s i n e s s o f t h e c om p a n y . C l a u s e 9 . 1 . 2 s t a t e s t h a t s e l l e r s b e i n g k e y p r o m o t e rs a r e i n p o s s e s s i o n o f t r a d e s e c r e t s a n d c o n f i d e n t i a l i n f o r ma t i o n o f t h e b u s i n e s s o f t h e c o m p a n y t h u s t h e y w i l l n o t r e n de r a n y s e r v i c e s a s e m p l o y e r o r c o n s u l t a n t i n a n y b u s i n e s s s i m i l a r IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 19 - t o b u s i n e s s o f t h e c o m p a n y . F u r t h e r i t p u t s r e s t r i ct i o n s o n s e l l e r s t o p a r t i c i p a t e i n t h e m a n a g e m e n t o f t h e s i mi l a r c o m p a n y o r h a v i n g i n v e s t m e n t i n t h e b u s i n e s s F u r t h er 9 . 2 c o n t a i n s n o n s o l i c i t c l a u s e s . T h e c l a u s e 9 . 2 . 1 p u t s r e s t r i c t i o n o n p r o m o t e r s i n t e r f e r e w i t h , t o i n d u c e a n y s e n i o r e x e c u t i v e e m p l o y e e o r u s e t h e s e r v i c e s o f a ny e m p l o y e e w h o i s u n d e r c o n t r a c t o f t h e c o m p a n y . F u r th e r i t r e s t r i c t s p r o m o t e r s t o s o l i c i t f r o m c o m p a n y a n y c o nt r a c t , o r i n t e r f e r e i n a n y p r o j e c t o r i n d u c e a n y c l i e n t f r o m o f f e r i n g s i m i l a r s e r v i c e s . T h u s t h e s e a r e t h e i m p o r t a n t c l a us e s w h i c h r e q u i r e p r o m o t e r s t o n o t c a r r y o u t a n y a c t i v i t y i n r e l a t i o n t o s i m i l a r l i n e o f b u s i n e s s a n d f u r t h e r i t r e s t r i c t s th e m f r o m s h a r i n g a n y k n o w h o w , p r o d u c t i n f o r m a t i o n , c l i e n t d e t a i l s , e t c . I n a d d i t i o n t h e s e l l e r s h a v e a l l o w e d L u p i n P h a r m a to u s e t h e o f f i c e p r e m i s e s , a c c o u n t i n g s o f t w a r e a n d t h e n am e o f " R u b a m i n " a s m e n t i o n e d u n d e r A r t i c l e 1 0 " S h a r e d S e rv i c e s " . T h u s O n t h e b a s i s o f a b o v e m e n t i o n e d d e f i n i t i o n o f i m p o r t a n t c l a u s e s e n s h r i n e d i n t h e S h a r e P u r c h a s e A g r e e m e n t d a t e d 2 6 t h S e p t e m b e r 2 0 0 7 , i t c a n b e c l e ar l y c o n c l u d e d w i t h o u t a n y a m b i g u i t y t h a t L u p i n h a s a c q ui r e d t h e e n t i r e s h a r e h o l d i n g o f t h e c o m p a n y i . e . 2 3 , 8 4 , 78 3 s h a r e s w h i c h r e p r e s e n t 1 0 0 % o f t h e c u r r e n t i s s u e d a n d p a i d u p s h a r e c a p i t a l o f t h e c o m p a n y , f r e e o f a l l e n c u m b r a nc e s , a l o n g w i t h t h e B u s i n e s s o f t h e c o m p a n y a s a g o i n g co n c e r n . T h e r e f o r e , t h r o u g h t h i s A g r e e m e n t , L u p i n P h a r m a h a s a c q u i r e d t h e B u s i n e s s o f t h e c o m p a n y i . e . t h e b u s i ne s s o f m a n u f a c t u r e , m a r k e t i n g , d i s t r i b u t i o n a n d s a l e o f f in e c h e m i c a l s , A P I a n d i n t e r m e d i a t e s u s e d i n P h a r m a c e u ti c a l i n d u s t r y o n a g o i n g c o n c e r n b a s i s a l o n g w i t h t h e e nt i r e s h a r e h o l d i n g o f t h e c o m p a n y . F u r t h e r , i t h a s b e e n no t i c e d t h a t t h e c o m p a n y a c q u i r e d b y L u p i n c o n t i n u e d t o f u nc t i o n a f t e r i t s a c q u i s i t i o n . 6.3 In this background, section 28(va) beco mes applicable as follows: " P r o f i t s a n d g a i n s o f b u s i n e s s o r p r o f e s s i o n . 2 8 . T h e f o l l o w i n g i n c o m e s h a l l b e c h a r g e a b l e t o i n co m e - t a x u n d e r t h e h e a d " P r o f i t s a n d g a i n s o f b u s i n e s s o r p ro f e s s i o n " , — [ ( v a ) a n y s u m , w h e t h e r r e c e i v e d o r r e c e i v a b l e , i n ca s h o r k i n d , u n d e r a n a g r e e m e n t f o r - ( a ) n o t c a r r y i n g o u t a n y a c t i v i t y i n r e l a t i o n t o a ny b u s i n e s s ; o r IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 20 - ( b ) n o t s h a r i n g a n y k n o w - h o w , p a t e n t , c o p y r i g h t , t r a d e - m a r k , l i c e n c e , f r a n c h i s e o r a n y o t h e r b u s i n e s s o r c o m m e r c i a l r i g h t o f s i m i l a r n a t u r e o r i n f o r m a t i o n o r t e c h n i q u e l i k e l y t o a s s i s t i n t h e m a n u f a c t u r e o r p r o c e s s i n g o f g o o d s o r p r o v i s i o n f o r s e r v i c e s : " 6.4 In the instant case on verification of the agreement following facts are brought out: 1. The agree ment not only provided for transfer of shares but also envisaged the transfer/ renunciation of the manage men t of the co mpan y 2. Taxpa yers were re quired to hand over business asets such as emplo ye e data base , product data base, customer proposals , etc , contracts, etc. 3. Taxpa yer agree d to non c o mpete clauses which prevented the m fro m undertaking similar business for the period of two year s. 4 There were specific clauses for non solicitation of present and future e mployees of the compan y an d contracts of the co mpan y. 6.5 Therefore, after discussing the contents of the Agree ment, it is beyond any doubt that the entire control and manage ment over the business and the co mpan y has been transferred b y the sellers to the purchaser, i.e. Lupin Phar ma. Thus, the whole business has been transferred to Lupin Pharma on a going concern basis by the sellers as mentioned in this Agree ment. I n this context, it is relevant to highlight the cardinal principles enunciated in the Judgment of the Chandigarh bench of the Inco me Tax Appellate Tribunal in the case of Su me et Taneja IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 21 - and Harbir Sing h Khurana dated 8th June 2012. The Inco me - tax Appellate Tribunal has held in its judg ment that substantial sale of unlisted equity shares by th e pro moters of the co mpan y will be treated as business income and not capital gains in the hands of the transferor. 6.6 The Hon ’ble ITAT in paragraph no. 16 & 17 in its judg ment has re marked that – " 1 6 . T a k i n g i n t o c o n s i d e r a t i o n t h e e n t i r e r e t y o f f ac t s a n d c i r c u m s t a n c e s o f t h e c a s e a n d a g r e e m e n t e n t e r e d i n to b e t w e e n t h e p a r t i e s a s r e f e r r e d t o b y u s i n t h e p a r a s h e r e i n a b ov e , i t i s a p p a r e n t t h a t t h e t r a n s a c t i o n i n q u e s t i o n w a s i n t he n a t u r e o f p u r c h a s e o f b u s i n e s s b y t h e i n c o m i n g c o m p a n y . T h e tr a n s a c t i o n e n t e r e d i n t o b e t w e e n t h e a s s e s s e e b e f o r e u s a s s h a re h o l d e r o f M / s E x c e l C a l l n e t P r i v a t e L i m i t e d a n d t h e M a n a g i n g D i r ec t o r s o f M / s P u g m a r k s I n t e r w e b P v t . L t d . w a s n o t m e r e l y f o r t h e t r a n s f e r o f s h a r e s o f t h e c o m p a n y b u t w a s i n f a c t t r a n s f e r o f ma n a g e m e n t o f t h e c o m p a n y t o t h e p u r c h a s e r w i t h a r i d e r o f n o n i n te r f e r e n c e b y t h e s e l l e r s w h o w e r e t h e D i r e c t o r s o f t h e c o m p a n y . R e f e r e n c e i s m a d e t o t h e A r t i c l e 2 . 1 o f t h e a g r e e m e n t d a t e d 2 6 . 3. 2 0 0 5 w h e r e i n t h e s e l l e r i . e . t h e a s s e s s e e b e f o r e u s w a s r e f r a i n ed f r o m d a y - t o d a y m a n a g e m e n t o f t h e f r o m t h e d a t e o f t h e a g r e e m e n t . In a d d i t i o n , t h e s e l l e r s i . e . t h e s h a r e h o l d e r s o f t h e c o m p a n y w e r e to h a n d o v e r t h e E m p l o y e e D a t a b a s e , P r o d u c t s D a t a b a s e , C u s t o m e r S u p po r t , N e w C l i e n t p r o p o s a l s i n p i p e l i n e , O t h e r p r o s p e c t s a n d cu s t o m e r ' s d a t a b a s e , P a y m e n t R e c o v e r y a n d C u s t o m e r . 2 d a n a g e m e nt c a s e s , C o n t r a c t , V e r b a l C o m m i t m e n t s , B a n k i n g I n f o r m a t i o n , s o f t w a r e / l i c e n s e s a n d a n y o t h e r p r o p e r t y t h a t w a s ac q u i r e d u n d e r t h e t e n u r e o f t h e S e l l e r s w o r k i n g w i t h t h e C o m p a n y . B e c a u s e o f t h e c o m p l e x i t y o f t h e h a n d i n g o v e r o p e r a t i o n b y t h e s e ll e r s i . e . t h e s h a r e h o l d e r s o f t h e c o m p a n y t o t h e M a n a g i n g D i r e c t or o f t h e n e w c o m p a n y , t h e p a r t i e s e n t e r e d i n t o a g r e e m e n t o n 2 6 . 3. 2 0 0 5 a n d h a d c o m p l e t e d t h e p r o c e s s o n 2 4 . 7 . 2 0 0 5 . I f i t w a s a m e re s a l e o f t h e i n v e s t m e n t b y w a y o f s h a r e h o l d i n g b y t h e a s s e s s e e th e n t h e s a i d e x e r c i s e w a s n o t r e q u i r e d . E v e n t h e s a l e c o n s i d e r a ti o n a g r e e d u p o n b e t w e e n t h e 1 3 p a r t i e s i n c l u d i n g t h e c o n s i d e r at i o n o n a c c o u n t o f n o n - c o m p e t e c o v e n a n t w a s p a i d i n i n s t a l lm e n t o v e r a p e r i o d o f t i m e . F u r t h e r t h e t r a n s f e r o f s h a r e s i n ef f e c t t r a n s l a t e d i n t o r e n u n c i a t i o n o f m a n a g e m e n t b y t h e s e l l e r D i r e ct o r s i n f a v o u r o f t h e p u r c h a s e r w h i c h i s a p p a r e n t f r o m A r t i c l e 5 . 1. 1 o f t h e a g r e e m e n t w h i c h e n u n c i a t e d t h e d e l i v e r y o f e f f e c t i ve r e s i g n a t i o n i n w r i t i n g b y t h e D i r e c t o r s a s p a r t o f t h e a c t i v i t ie s o f t h e c o m p l e t i o n . T h e n e x t p o i n t u n d e r c o n s i d e r a t i o n i s th e n o n - c o m p e t e IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 22 - c o v e n a n t s a g r e e d u p o n b e t w e e n t h e p a r t i e s a s p e r A rt i c l e 8 , u n d e r w h i c h A r t i c l e 8 . 4 c l e a r l y s t a t e d t h e s e l l e r a g r e e s n o t t o e n g a g e d i n a n y c a l l c e n t r e , b u s i n e s s p r o c e s s o u t s o u r c i n g o r I T e n a b l e d s e r v i c e s b u s i n e s s i n t h e S t a t e s o f C h a n d i g a r h , P u n ja b , H a r y a n a o r H i m a c h a l P r a d e s h w i t h i n a r a d i u s o f 1 0 0 K m s f r o m C ha n d i g a r h f o r a p e r i o d o f 2 y e a r s f r o m t h e d a t e o f t h i s a g r e em e n t . F u r t h e r n o n - c o m p e t e c o v e n a n t s i m p o s e d a r e s t r i c t i o n u p o n t he s e l l e r D i r e c t o r s t o d i r e c t l y o r i n d i r e c t l y s o l i c i t a b u s i ne s s t h a t t h e c o m p a n y h a s d o n e s i n c e i t s i n c e p t i o n w i t h o u t p r i o r w r i t t e n p e r m i s s i o n o f t h e c o m p a n y . U n d e r A r t i c l e 8 . 1 0 t h e r e w a s r e n u n c i a t i o n o f b r a n d e q u i t y o f t h e c o m p a n y b y t h e s e l l e r s i n f a v o u r o f t h e p u r c h a s e r a s t h e p a r t i e s a g r e e d t h a t t h e s e l l e r s w i l l n o t t a k e a d v a n t a g e o f t h e b r a n d e q u i t y o f t h e c o m p an y b y u s i n g a n y n a m e s , l o g o s , t r a d e m a r k s , p a r t n e r s h i p s , a f f i l i at i o n s , n a m e s e t c . A s p e r p a r a 8 . 1 1 t h e s e l l e r s c a n n o t u s e d o m a i ns t h a t c o n t a i n t h e w o r d E x c e l a n d w o u l d n o t u s e o r c l a i m t h e d o m a in n a m e w w w . E x c e l . n e t c o m . A r t i c l e 9 o f t h e a g r e e m e n t f u r t h er r e f e r t o n o n - s o l i c i t a t i o n o f e m p l o y e e s c o v e n a n t w h e r e b y t h e s e ll e r w i l l n o t d i r e c t l y o r i n d i r e c t l y s o l i c i t , h i r e , e m p l o y , i n d u ce o r a t t e m p t t o i n d u c e a n y p r e s e n t o r f u t u r e e m p l o y e e o f t h e c o m p a ny o r t h e p u r c h a s e r , " 1 7 . I n v i e w t h e r e o f w e a r e i n a g r e e m e n t w i t h t h e o rd e r s o f t h e a u t h o r i t i e s b e l o w t h a t t h e t r a n s a c t i o n i n q u e s ti o n w a s n o t m e r e t r a n s f e r o f c a p i t a l a s s e t w i t h i n t h e m e a n in g o f s e c t i o n 2 ( 1 4 ) o f t h e A c t b u t w a s i n f a c t t r a n s f e r of b u s i n e s s a s i t w a s t h e a s s e s s e e w h o w a s p r e v e n t e d f r o m d o i n g b u s i n e s s . F u r t h e r i t w a s t h e a s s e s s e e w h o h a d g i v e n u p h i s r i g h t s t o d o b u s i n e s s a n d i . e . h o w h e r e c e i v e d t h e c o n s i d e r a t i o n b y w a y o f p r i c e o f s h a r e s f i x e d a t R s. 9 4 / - a s a g a i n s t f a c e v a l u e o f R s . 1 0 / - p e r s h a r e . T h e p r o f i ts a r i s i n g i n t h e s a i d t r a n s a c t i o n b y w a y o f t r a n s f e r o f s h a r e i s a s s e s s a b l e i n t h e h a n d s o f t h e a s s e s s e e a s p r o f i t s u n d e r s e c t i o n 2 8 ( v a ) o f t h e A c t . We f i n d n o m e r i t i n t h e p l e a o f t h e a s s e s s e e t h a t t h e s a i d s h a r e s w e r e h e l d o n l y f o r t he p u r p o s e s o f i n v e s t m e n t . T h e s a i d s h a r e s w e r e h e l d b y t h e a s se s s e e b e c a u s e o f h i s a s s o c i a t i o n w i t h M / s E x c e l C a l l n e t Pr i v a t e L i m i t e d a n d w e r e t h e m o d e o f h o l d i n g i n t h e s a i d c om p a n y b y t h e a s s e s s e e , o f w h i c h h e w a s t h e M a n a g i n g D i r e ct o r a n d w a s a l s o e n g a g e d i n c a r r y i n g o n t h e b u s i n e s s o n d a y- t o - d a y b a s i s . S u c h i n v e s t m e n t w a s i n t h e b u s i n e s s b e i n g c ar r i e d o n b y t h e a s s e s s e s a n d i n v i e w o f t h e t e r m s o f t h e a g re e m e n t a g r e e d u p o n b e t w e e n t h e p a r t i e s i . e . n o n p a y m e n t o f u p f r o n t s h a r e p r i c e o f t h e s h a r e s s o l d b y t h e a s s e s s e e a n d t h e f i x a t i o n o f t h e a g r e e d s a l e p r i c e o f t h e s h a r e s w h ic h w a s n o t i n c o n s e n s u s w i t h t h e m a r k e t p r i c e t a b u l a t e d f r o m th e r e s u l t s s h o w n b y t h e a s s e s s e e a n d a l s o n o n - c o m p e t e c o v e n a n t s a g r e e d u p o n b y t h e a s s e s s e e a n d o t h e r s h a r e h o l d e r s f o r c a r r y i n g o n t h e b u s i n e s s o f B P O i n t h e s p e c i f i e d a r e a o f C h a n d i g a r h , f u l l y s u p p o r t t h e v ie w t a k e n IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 23 - b y t h e a u t h o r i t i e s b e l o w . I n t h e e n t i r e t y o f t h e f ac t s a n d c i r c u m s t a n c e s , w e a r e i n a g r e e m e n t w i t h t h e o r d e r s o f t h e a u t h o r i t i e s b e l o w t h a t t h e g a i n a r i s i n g f r o m t h e t ra n s f e r o f s h a r e i s t o b e a s s e s s e d a s i n c o m e f r o m b u s i n e s s . T he p r o v i s i o n s o f s e c t i o n 2 8 ( v a ) o f t h e A c t a r e s q u a r e ly a p p l i c a b l e t o t h e p r e s e n t f a c t s o f t h e c a s e . C o n s e qu e n t l y , t h e g r o u n d o f a p p e a l r a i s e d b y t h e a s s e s s e e i s d i s m i s s ed . 1 8 . T h e f a c t s a n d t h e i s s u e s a r i s i n g i n I T A N o . 1 1 0 2 / C h d / 2 0 0 9 a r e s i m i l a r t o t h e f a c t s a n d i s s u e s i n I TA N o . 1 1 0 1 / C h d / 2 0 0 9 a n d o u r d e c i s i o n i n I T A N o . 1 1 0 1 / C h d / 2 0 0 9 s h a l l a p p l y m u t a t i s m u t a n d i s t o I TA N o . 1 1 0 2 / C h d / 2 0 0 9 . T h e g r o u n d o f a p p e a l r a i s e d b y t he a s s e s s e e i s d i s m i s s e d . 1 9 . 1 n t h e r e s u l t , b o t h t h e a p p e a l s r e l a t i n g t o a s s es s m e n t y e a r 2 0 0 6 - 0 7 f i l e d b y t h e d i f f e r e n t a s s e s s e e s a r e di s m i s s e d . O r d e r p r o n o u n c e d i n t h e o p e n c o u r t o n t h i s 8 t h d a y o f J u n e , 2 0 1 2 . S d / - S d / - ( M E H A R S I N G H ) ( S U S H M A C H O WL A ) A C C O U N T A N T M E M B E R J U D I C I A L M E M B E R D a t e d 8 t h J u n e , 2 0 1 2 S U R E S H / R a t i C o p y t o : T h e A p p e l l a n t / T h e R e s p o n d e n t / T h e C I T / T h e C I T ( A )/ T h e D R A s s i s t a n t R e g i s t r a r , I T A T , C h a n d i g a r h " 6.7 The instant case of transfer of business by sellers is si milar to the issues raised in the ca se before the Hon' ble ITAT, Chandigarh Bench. In the above case law the Hon'ble ITAT has mentioned that the transaction was in fact tra nsfer of manage ment of the compan y to the purchaser with a rider of non-interference by the sellers who were the directors of the co mpan y. Ther efore, the Hon'ble ITAT has held that the gain arising from the t ransfer of share is to be assessed as income fro m business. Hence, the Hon'ble ITAT has held that provisions of section 28(va) of the Inco me-tax Act ar e squarely applicable to the present facts of the case. Further it is to be IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 24 - mentioned that the Hon'ble High Court of Pu njab and Haryana in the case of Sumeet Ta neja vs CIT , Supneet Kaur vs CIT has affirmed the ruling of the ITAT as mentioned above. On the basis of the principles enunciated in the order of Hon’ble HC , the gain arising from the transfer of shares as per the Share Purchase Agree ment to be assessed as income f ro m business and section 28(va) of the Inco me-tax Act shall be applicable on the transfer of shares b y the sellers to Lupin. 6.8 The sellers have in their respective returns of income have shown capital gain on the sale of shares and the business to Lupin Phar ma . Th e sellers have also clai med various deductions u/s.54 as well as set off their respective short term c apital loss or long ter m capital loss from their respective gains on the sale of shares and the business of Ruba min Laboratories Ltd. The deduction u/s.54, the benefit of set off short ter m or long ter m capital losses the benefits of indexation shall not be available to the sellers (assessees) and the entire proceeds received by the m shall be taxed under the head of business inco me. Hence, the sale proceeds received by the assessee, on sale of share alongwith business of Rubamin Lab oratories Ltd. in proportion tohisshare holding, of Rs. 11,62,69,907/- is treated as business income of the ass essee for the year under consideration instead of long term capi tal gain as has been claimed b y the assessee. Penalty proceed ing u/s 271(l)(c) of the Act a re being initiated for fur nishing of inaccurate particulars of income and there by leading to conceal men t of inco me . [Business inco me : Rs.11,62,69,907/-] IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 25 - 7. Issue of transfer of shares of Rubamin Li mi ted at Rs 1/- per share. 7.1 During the course of assessment pr oceedings, it was noted by the AO that one of the Directors of the compan y S hri Anil R Patel has transferred 10,90,000 shares of Ruba min Li mited at the price of Rs 1/- per share to Shri Atul Dal mia . On the basis of facts on record and seized material, assessee was given showcause notice which read as foll ows: “ ... ... ... . . 3 . D u r i n g t h e c o u r s e o f a s s e s s m e n t p r o c e e d i n g s , i t i s f o u n d t h a t y o u h a v e p u r c h a s e d 1 0 , 9 0 , 0 0 0 s h a r e s o f R u b a m in L i m i t e d f r o m S h r i A n i l R P a t e l a t t h e p r i c e o f R s 1 / - p e r s ha r e . T h e s h a r e s h a v e b e e n p u r c h a s e d o n 0 4 . 0 7 . 2 0 0 7 . T h u s c o s t o f i n ve s t m e n t a s s h o w n i n y o u r b o o k s o f a c c o u n t s i s R s 1 0 , 9 0 , 0 0 0 / - . I n r e s p e c t o f t h i s i s s u e , v a r i o u s i n c r i m i n a t i n g m a t e r i a l i s f o u n d a n d s e i z e d f r o m t h e p r e m i s e a t o f f i c e o f R u b a m i n L i m i t e d , S y n e r g y Ho u s e , B a r o d a w h i c h i s d i s c u s s e d h e r e u n d e r a . S h a r e h o l d e r ' s a g r e e m e n t d a t e d 0 6 . 0 6 . 2 0 0 3 , a n n e xe d a s A n n e x u r e A - l ( P g n o 8 - 4 3 ) f o u n d a n d s e i z e d f r o m t h e o f f i c e o f R u b a m i n L i m i t e d b . S h a r e h o l d e r ' s a g r e e m e n t d a t e d 3 1 . 0 8 . 2 0 0 5 , a n n e xe d a s A n n e x u r e A - l ( p g 4 8 t o 5 5 ) f o u n d a n d s e i z e d f r o m th e o f f i c e o f R u b a m i n L i m i t e d c . S h a r e h o l d e r ' s a g r e e m e n t d a t e d 1 5 . 1 2 . 2 0 0 6 , a n n e x ed a s A n n e x u r e A - l ( p g 5 5 - 6 6 ) , s e i z e d f r o m t h e o f f i c e o f R u b a m i n L i m i t e d d . V a r i o u s d o c u m e n t s , e - m a i l s a n n e x e d a s A n n e x u r e A- 7 ( H a r d D i s k i n f o r m a t i o n ) , f r o m t h e o f f i c e o f R u b a m in L i m i t e d . F r o m t h e p e r u s a l o f t h e d o c u m e n t a t ( a ) , i t i s s e e n t h a t t h i s a g r e e m e n t p r o v i d e s f o r m e t h o d s f o r v a l u a t i o n o f s h ar e s . T h e m e t h o d c o n s i d e r s t h e p e r f o r m a n c e o f t h e c o m p a n y , t he p o s i t i o n o f i t s a s s e t s a n d l i a b i l i t i e s , y i e l d o f c o m p a n y b a s e d o n p a s t r e c o r d s a n d f u t u r e c a p a c i t i e s a n d p o t e n t i a l b e i n g d e t e r m i n ed b y t h e m a r k e t f o r c e s . T h u s t h e m e t h o d o f v a l u a t i o n f o r s h a r e s w a s p r e s c r i b e d t o p r o t e c t f i n a n c i a l i n t e r e s t o f e a c h p a r t y . I n t h e l at e r a g r e e m e n t s v a r i o u s a m e n d m e n t s o r m o d i f i c a t i o n s w e r e m a d e , i n w h i c h t h e c o n c e r n h a s b e e n r e f l e c t e d b y p a r t i e s t o t h e a g r e e me n t r e g a r d i n g s u b s e q u e n t s a l e o f s h a r e s b y D a l m i a g r o u p a t a h i g he r p r i c e t h a n IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 26 - a t w h i c h t h e s h a r e s w o u l d b e t r a n s f e r r e d t o S h r i A tu l N D a l m i a , t h e n t h e e x c e s s s o r e c e i v e d w o u l d b e s h a r e d b e t w e e n D a l m i a G r o u p a n d P a t e l g r o u p i n p r o p o r t i o n a s e x i s t i n g p r io r t o a g r e e m e n t F u r t h e r c o n c e r n i s a l s o s h o w n r e g a r d i n g th e v a l u e o f s h a r e s d e t e r m i n e d a s p e r t h e m e t h o d s o f v a l u a t i o n as m e n t i o n e d i n s h a r e h o l d e r s a g r e e m e n t d a t e d 0 6 . 0 6 . 2 0 0 3 b e i n g l e s s t h a n t h e m a r k e t r a t e . I n . t h a t c a s e t o p r o t e c t t h e i n t e r e s t o f s e l l e r , t h e e x c e s s a m o u n t s o r e c e i v e d w o u l d b e s h a r e d b e t w e e n Pa t e l G r o u p a n d D a l m i a g r o u p . 7 . 3 T h u s t h r o u g h o u t t h e v a r i o u s a g r e e m e n t m a d e , i t c a n b e s e e n t h a t t h e b a s i c c o n c e r n o f P a t e l G r o u p w a s t o r e c e i ve t h e t r u e v a l u e s h a r e s a s p e r t h e p o t e n t i a l o f t h e c o m p a n y w h e n e v e r t h e s h a r e s a r e t r a n s f e r r e d i n f a v o u r o f D a l m i a G r o u p . T h u s o n t h e b a c k g r o u n d o f e x a m i n a t i o n o f t h e s e a g r e e m e n t s w h i c h a r e f o u n d a n d s e i z e d d u r i n g t h e c o u r s e o f s e a r c h p r o c e e d i n g s , i t i s s e e n t h a t t h e d e t e r m i n a t i o n o f t h e v a l u e o f s h a r e s a t R s I / - p e r s h a r e i s t o t a l l y o u t o f s y n c w i t h t h e c o n d i t i o n s p r e c e d e n t to t h e t r a n s f e r o f s h a r e s . T h e a g r e e m e n t s e n t e r e d p r i o r t o s h a r e t r a n sf e r a n d i n s t a n c e o f s h a r e t r a n s f e r i s t o t a l l y o p p o s e d t o e ac h o t h e r . F u r t h e r t h e c o p y o f s e i z e d m a t e r i a l m e n t i o n e d a t (d) s h o w s t h a t p r i c e o f s h a r e w a s m u c h m o r e t h a n t h e p r i c e o f R s 1/ - p e r s h a r e . - S h a r e s w e r e a l l o t t e d t o e m p l o y e e s u n d e r E S O P a t R s 8 0 / - p e r s h a r e i n M a r c h 2 0 0 7 - S h a r e s o f R u b a m i n L i m i t e d (N o o f s h a r e s - 2 1 9 8 5 3 1 ) t r a n s f e r r e d t o I n d i a A d v a n t a g e F u n d - V t h r o u g h i t s i n v e s t m e n t m an a g e r I C I C I V e n t u r e F u n d m a n a g e m e n t C o m p a n y a t R s 3 1 8 . 3 9 / - p e r sh a r e ( R s 1 0 / - p e r s h a r e + p r e m i u m o f R s 3 0 8 . 3 9 / - p e r s h a r e ) , d a t e o f t r a n s f e r - 0 6 . 0 7 . 2 0 0 7 - S h a r e t r a n s a c t i o n b e t w e e n s a m e p r o m o t e r s a t R s 9 4 /- p e r s h a r e i n 2 0 0 3 a n d t h e r e a f t e r t h e r e h a s b e e n s u b s t a n t i a l i m p ro v e m e n t i n t h e p e r f o r m a n c e o f t h e c o m p a n y - T w o a s s o c i a t e p a r t n e r s h i p f i r m s w e r e a c q u i r e d b y co m p a n y i n r e c e n t p a s t t h e d a t e o f t r a n s f e r a n d s h a r e s a l l o t t ed b y c o m p a n y a t R s 2 2 5 / - p e r s h a r e T h u s o n t h e b a s i s o f t h e s e i z e d d o c u m e n t s a n d f a c t s a v a i l a b l e o n r e c o r d , i t i s s e e n t h a t m a r k e t v a l u e o f s h a r e s o f Ru b a m i n l i m i t e d a s o n t h e d a t e o f t r a n s f e r w a s m u c h m o r e t h a n t h e ra t e a t w h i c h t h e y h a v e b e e n t r a n s f e r r e d . T h e v a l u e o f s h a r e s a s p e r t h e s e i z e d d o c u m e n t i s r a n g i n g f r o m R s 8 0 / - t o R s 3 1 8 . 3 9 / - p e r s h a r e , b u t i t i s n o w h e r e n e a r b y t o v a l u e a d o p t e d b y a s s e s s e s f o r t h e t r a n s f e r o f s h a r e s . I t i s w o r t h w h i l e t o n o t e t h a t t h e d a t e o f tr a n s f e r o f s h a r e s b e t w e e n A n i l R P a t e l a n d A t u l D a l m i a i s 0 4 . 0 7 . 2 0 0 7 w h i l e t h e d a t e o f t r a n s f e r o f s h a r e s b e t w e e n R u b a m i n L i m i t e d a n d In d i a A d v a n t a g e F u n d - V t h r o u g h I C I C I V e n t u r e s i s 0 6 . 0 7 . 20 0 7 , T h u s t h e r e i s h a r d l y a n y t i m e l a g b e t w e e n t h e t w o t r a n s ac t i o n . S t i l l t h e p r i c e a d o p t e d f o r o n e t r a n s a c t i o n i s s u b s t a n t i a l l y l o w e r t h a n p r i c e IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 27 - a d o p t e d f o r t h e o t h e r . T h u s t h e f a c t a n d c i r c u m s t a nc e s l e a d i n g t o t r a n s f e r o f s h a r e s h o w s t h a t a s s e s s e e S h r i A t u l D a lm i a h a s n o t c o r r e c t l y d e c l a r e d o r d i s c l o s e d t h e c o n s i d e r a t i o n pa i d b y h i m a n d t h e r e i s u n d e r s t a t e m e n t o r c o n c e a l m e n t o f c o n s i d e r at i o n i n t h i s r e s p e c t . T h u s i n t h i s r e s p e c t , y o u a r e r e q u e s t e d t o s h o w c a us e w h y t h e m a r k e t r a t e o f R s 3 1 8 . 3 9 / - s h o u l d n o t b e a d o p t e d a s t h e p r i c e p a i d f o r t h e t r a n s f e r o f s h a r e s o f 1 0 , 9 0 , 0 0 0 / ~ b e t w e e n Sh r i A n i l R P a t e l a n d S h r i A t u l D a l m i a a n d t h e a d d i t i o n a l c o n s i d e r a t io n p a i d b y y o u s h o u l d n o t b e c o n s i d e r e d a s y o u r u n d i s c l o s e d i n v e s tm e n t a n d a d d e d t o y o u r t o t a l i n c o m e f o r t h e r e l e v a n t a s s e s s me n t y e a r . ... ... ... ... ... . . ” 7.2 In response to the sa me , assessee made his submi ssion dated 02.02.2016 which has been perused but not found acceptable by AO on following grounds: 7.2.1 Assessee has submitted that issue under consideration has been verified during the course of regular assessment proceedings „ In this matter it is stated that no scrutiny assessment proce edings u/s 143(3) of the I T Act have taken place in the case of assessee for A.Y 2008-09. So the issue has never been verified in the case of scrutiny proceedings of assessee himself. Though scrutiny a ssessment proceedings have taken place for A.Y 2009-10, the issue mentioned above was not under consideration for that relevant yea r. 7.2.2 Secondly, it is pointed out that shareholders agreement mentioned at Sr. no. (a) to (c) of t he show cause notice were found and seized during the course of search proceedings. There is no evidence to show that these docu ments were considered in the regular assessment proceedings of Shri Anil R Patel also. These shareholders agree ments were never furnished by assessee nor considered by depart me nt earlier. Further these are IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 28 - the i mportant docu ments which show the intent behind the transaction of transfer of shares. Though they pertai n to period before date of search, these agree ments are vital for considering the history and intent of transfer of share. Thus there is no point in argu ment of ass essee that the agree ments are not rel evant. 7.2.3 Further it is to be mentioned that annexure A-10 seized fro m the pre mises of Ruba min Li mi ted contain the mails which are relevant for considering this transaction. The mail dated 01.07.2007 written by Milin Mehta, auditor of the co mpan y to Rajesh Gupta and copy to Atul Dal mia and others discuss about this transaction. It mentions that the earlier shareholder agree ment has to be replaced with new one and earlier for mula for deter mination of value of share has to be replaced with new for mula giving the fair market v alue of shares.. Further it mentions that the transaction should happen in such a wa y so as to avoid tax fro m such. Thus these mails are i mportant document which contain valuable discussion of the pricing of shares between the two pro moters . Thus there is no point in assessee's argu me nt w.r .t no incri mi nating material being found. 7.2.4 Co ming to the merits of the case, the assessee's arguments w.r .t transfer of shares at price of Rs 1/- per share are not acceptable considering the background in which this transaction has taken place. I n this context, it is relevant to highlight the conditions precedent to the transfer of shares by Sh ri Anil R. Patel to Shri Atul .N Dal mi a. The genesis of the transfer of shares between the promoters and the reasons for such restructuring are enshrined in the Shareholder's Agree ment IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 29 - dated 6th June, 2003 between Shri Anil R Patel Fa mily (group) and Shri Atul N Dal mia fa mil y (group). The reason for entering into the Shareholder's Agreement dated 6th June 2003 is mentioned on page no.41 of seized document (the Shareholder's Agree ment is annexed fro m page no.8 to 43) annexed as Annexure A-l found and seized fro m the office of Ruba min Li mited, which is as under: "..AND WHERE AS the parties have expressed a desire to bring a clarity about the futur e f unctioning of the co mpany and chart a p ath of grow th and mu tual r ights and relationship between the groups s o as to avoid any possible conflicts and ma ke path of succession defined . AND WHERE AS in pursuance of the discussion betw een the parties hereto it has been decided that on and from t he date of the agreemen t, Patel Group shall transfer 1% of the shares held by the m in favour of Dalmia Grou p on the agreed consideration and the relationship betw een the parties in the conduct, ma nage men t and inter se relationship shall be governed by the presen t a gree ment ." The i mportant an d relevant provisions of this Shareholder's Agree ment related to the share transfer between the pro moters of the compan y " Ruba min Li mited' are mentioned on page on.8 to 43 of Annexure A-l seized fro m t he office of Rubamin Ltd at S ynerg y House, Baroda. The Shar e Holders agreement dated 06/06/2003 is attached herewith as Annexure A. It is mentioned under the head Ter ms of Agree ment that, the agree ment would IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 30 - last till both the groups continue to hold the shares of the co mpan y. Further 1% shares of Ruba min Ltd have been transferred through this agreement at the rate of Rs. 94.52 per share. Under the head "valuation of the shares of the co mpan y" (point no.6) it is mentioned that the valuation of the shares of the compan y would be done in the manner and method provided in Schedule 3 to the agree ment. Fur ther it is mentioned that if the shares are acquired over a period of time jn different lots in different financial yea rs, the financial figures applicable to the respective years would be the basis for deciding the valuation of the shares. Moreover, it is mentioned that where the valuation of the shares is required to be determined on any date during the first quarter of the financial year , then the valuation shall be carried out based on the figures of the first day of the financial year . In case, if t he transfer of the shares takes place on an y other day other than the first quarter of a financial year , then the valuation will be carried out as of the first da y of the financial year and thereafter the aggregate valuation will be increased by the p roportionate profits of the compan y up to the date of the close of the i mmediatel y preceding quarter for the incomplete year during which the shares are proposed to be transferred. Further under point no. 6.5 it is mentioned that it has been agreed between the parties that Dalmia group will be per mitted to determine the manner in which the shares of the Patel group is to be acquired and also use the mode of buyback of shares at the relevant time and in such an event also, the valuation of the shares to Patel group shall effectively and financially be the sa me as has been arrived in accordance with the present agreement i.e. the Shareholders' Agree me nt dated 6 t h IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 31 - June 2003. Theref ore, as per the clause no.6, it is evident that the shares have to be transferred by Shri Anil R Pat el to Shri Atul N Dal mia in stages 1 to 3 and the shares to be transferred have to be valued as per the met hods of valuation mentioned under Schedule 3. The methods of valuation motioned in this Shareholder's Agree ment prescribe t hree steps: " S T E P : 1 A s c e r t a i n i n g t h e v a l u e o f t h e D i v i s i o n (P h ar m a c e u t i c a l D i v i s i o n , M e t a l D i v i s i o n a n d Z i n c D i v i s i o n ) a s p e r t h e N e t A s s e t V a l u e m e t h o d (N A V ) . S T E P : 2 A s c e r t a i n i n g t h e v a l u e o f t h e D i v i s i o n a s p er t h e y i e l d C a p i t a l i z a t i o n M e t h o d (Y C M ) . S T E P : 3 Wo r k i n g o u t t h e w e i g h t e d a v e r a g e o f t h e v a l ue a r r i v e d a t b y a b o v e m e t h o d a s p e r t h e w e i g h t s a s s i g n e d t o b o t h t he m e t h o d s . I n c a s e w h e r e v a l u e a s p e r t h e Y C M i s l e s s t h a n t h e N A V t h en t h e Y C M w i l l b e i g n o r e d o n t h e p r i n c i p l e t h a t t h e m i n i m u m v a l u e o f t h e d i v i s i o n s h a l l b e N A V . S T E P : 4 A f t e r t h e a b o v e , t h e f o l l o w i n g i t e m s s h o u l d b e a d d e d b e i n g t h e M a r k e t v a l u e o f t h e s u r p l u s a s s e t s ( a s r e d u c e d b y t h e t a x i m p a c t o f r e v a l u a t i o n ) a n d i n v e s t m e n t s . I n v e s t m e n t s i n b u s i n e s s e s c o m m e n c e d w i t h i n l a s t 3 ye a r s w i l l b e v a l u e d a t t h e h i g h e r o f t h e f o l l o w i n g t w o v a l u e s : ( i ) A s p e r t h e m e t h o d a d o p t e d f o r v a l u i n g p h a r m a b us i n e s s o f t h e c o m p a n y ; o r ( i i ) I n c r e a s e i t s v a l u a t i o n @ 6 % p . a . f r o m t h e d a te o f i n v e s t m e n t ( m i n i m u m r e t u r n ) p r o v i d e d t h e s a i d b u s i ne s s i s c o n t i n u e d o n t h e d a t e o f v a l u a t i o n . I n v e s t m e n t s i n a s s e t s o t h e r t h a n i n b u s i n e s s e s ( l i k e i n v e s t m e n t i n s e c u r it i e s , f i x e d a s s e t s , b o n d s , e t c ) w i l l b e v a l u e d a t t h e m a r k e t v al u e a s r e d u c e d b y t h e t a x i m p a c t o n r e v a l u a t i o n . A f t e r a r r i v i n g a t t h e v a l u e a s p e r S t e p 3 o f t h e r es p e c t i v e d i v i s i o n , t h e a g g r e g a t e t h e r e o f , t o g e t h e r w i t h t h e v a l u e o f t h e s u r p l u s a s s e t s w i l l b e t h e v a l u e o f t h e c o m p a n y w i l l b e t h e v a l u e o f e a c h s h a r e o f t h e c o m p a n y . " Hence, the method prescribed in this Shareholder's Agree ment is scientific and considers the perfor mance of the co mpan y, the position of its assets and liabilities, the yield of the co mpan y IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 32 - based on past records and future capacities and the potential of the compan y bein g deter mined by market forces. Th erefore the method is logical and was incorporated to protect the interest of each part y without co mpro mising the interest of the compan y. 7.2.5 Further, certain modifications/a mend ments were introduced vide shareholder's agree ment dated 31st day of August 2005 men tioned on page no.48 to 55 of Annexure A-l. The cop y of evi dence is attached in assessment order as Annexure B. F r o m the perusal o f clause no.l mentioned on page no.50 of annexure A-l, seized fro m the office of Ruba min Ltd., it is evident that the shares acquired by Dalmia group shall have a lock-in period of l(one) ye ar fro m the date of a cquisition of such shares and those shares cannot be transferred by Dal mia group at a price higher than the price at which the shares are so acquired from Pa tel group. However, if this condition is not followed by Dal mia group then the excess so realized on the transfer of those shares acquired fro m Patel group shall be distributed between Dal mia group and Patel group in the ratio of their inter-se shareholding, immediately prior to acquisition of shares b y Dal mia group. 7.2.6 Further, another Shareholder's Agree ment was entered into on 15 t h day of De ce mber 2006 between Shri Atul Dalmia fa mil y and Shri Anil R Patel fa mil y as appearing on page no. 55 to 66 of Annexure A-l seized fro m the office of Ruba min Ltd. Cop y of which is annexed as Annexure C. On page no. 6 0,61,&62 of Annexure A-l, under clause 2(B) and 2(C) it is men tioned that the Parties (Dal mia and Patel groups) recognize that there is IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 33 - possibility of marke t value of the shares being different fro m the valuation of the shares calculated in accordance w ith the provisions of the Shareholders agree ment . Hence t o elucidate this concern, the agree ment restric ts Dalmia group to sell the shares within a period of one year fro m the date of purchase at a price higher than the price the Dal mia Group acquired the said shares from the Patel Group. I n case, if the rest riction is not followed (as it is evident in this case) then the consideration received in excess of the price betw een price at w hich the acquired shares are sold by the Dalmia group would be distributed betw een bot h the groups in t he ratio of their pre acquisition shareholding ratio. Therefore, as per the perusal of these clauses it is clearl y evident that there is an apparent concern/ regarding shares being transferred at a value lower than the ma rket value in the process of transfer of shares by Shri Anil R Pat el to Shri Atul N Dal mia . In this process, Shri Anil R Patel wo uld be at a loss. To co mpensate this loss agree ment mentions about sharing the excess received between both the groups in the ratio of their pre acquisition shareholding ratio. However, in reality by cr eating a facade ,the real substance and the real concern of Shri Anil R Patel was apparently not addressed in the transactions under consideration. The sa me was, howe ver, taken care of by wa y of payments of the actual value of the shares made out of the books of accounts which precisely was the reason why this transaction, which apparently is disadvantageous to Shri Anil R Patel, has been a greed upon and accepted on paper by both these parties. IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 34 - 7.2.7 On 30 t h da y o f June 2007, another Shareholder's Agree ment in the context of Rubamin Li mited was en tered into between Dal mia g roup represented by Shri Atul N Dalmia and Patel group represented by Shri Anil R Patel. This Agree ment is found annexed on page no. 67 to 86 of Annexure A-l . The reason for entering into this Agreement dated 30th June 2007 is mentioned on page on.84 of Annexure A-l page no. 84 of Annexure A-l under point no. C & D, the cop y of ag ree ment is attached herewith as Annexure D. Though there is no mention of the methods of valuation of shares, nonetheless it can be rightly concluded that the soul of this 'agree ment' derives its strength fro m the Sh areholder's Agree ment dated 6th day of June 2003: wherein the methods of valuation of shares are specifically mentioned. Further, various modifications were made to the Shareholder's Agree ment dated 6 t h June 2003; as discussed earlier, wherein concern has been reflected by parti es to the Agree ment regarding the subsequent sale of shares by Dal mia group at a higher price than the price at which the shares would be transferred to Shri Atul N Dali ma group, then the excess so received would be shared between Dal mia group and Patel group in proportion as existing prior to the Agree ment. Further concern is also shown regarding the value of shares deter mined as per the methods of valuation me ntioned in Schedule 3 of Shareholder's Agreement dated 6th June 2003, being less than the market rate. I n that case, to protect the interest of the seller of transferor i.e. Shri Anil R P atel (Patel IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 35 - group), the excess a mount so received would be shared between Patel and Dal mia group. In addition to this, the Shareholders Agree ment dated 30th June 2007 contains the provisions of Trans mission of Shares mentioned on page no. 75 & 76 of the seized document Annexure A-l. As per clause no. 10.1, it is mentioned that the shareholders have agreed that upon the death of Anil Patel, Atul Dal mia will have a right to acquire all the shares held by the Patel Group from the successors in law of Anil Patel or an y P erson to whom such shares h ave been bequeathed under the Will of Anil Patel or otherwise and the other Shareholders of the Patel Group at the FMV, payable no later in ninety days f ro m the date of exercise of this right by Atul Dal mi a. Clause no 10.4 mentions about the appointment of an independent Valuer who shall deter mine the fair ma rket value of the shares on the basis of the value of the compan y on a going concern basis and after taking into account of underlying assets and future prospects of the co mpan y. Therefore on perusal of this clause also it is evident that the shares have to be trans mitted to Shri Atul N Dal mia at the fair market value afte r the death of Shri Anil R Patel. Hence there should not be any reason to believe that there were c onditions present which warranted the shares to be transferred by Shri Anil R Patel to Shri Atul N Dal mia at Re.l per share, i.e. much below than the FMV of the shares on the date of transfer. 7.2.8 Therefore, there was alwa ys a conc ern of the protection of rights of each party to the various agree ments and the protection of rights cover the rights of each part y in ter ms of control and IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 36 - manage ment of compan y as well as the financial interest of each party. Hence, it is also evident that there was no business expediency or exigency for the i mpending share transfer between Shri Anil R Patel and Shri Atul N Dali ma . F urther, During the course of assessment, asses see submitted that as the issues between both the groups were not solved amica bly, hence they agreed to appoint Shri Mihir J Thakore. The c opy of Arbitration dated 5th June 2007 was sub mitted by the as sessee during the course of assessment proce edings. Fro m its perusal, it can be gathered that even in the Arbitration agree me nt as well the basic concern of the Patel group was to receive the true value of shares as per the potential of the co mpan y whenever the shares are transferred in favour of Dal mia group. This issue has been discussed in point no. 11 of Arbitration Agree ment dated 5th June 2007. The copy of agree me nt is attached herewith as Annexure E. As per clause 11(3), it is mentioned that the old shareholders' agree ment required Patel group to dispose-off shares to Dal mia group at the price deter mined as per the formula provided for in the shareholders' agree ment, irresp ective of true value of the share and the potential of the co mpany. Further , it is mentioned that for better running of the compan y a new shareholder's agree ment ought to be entered into between the parties wherein no such clauses (the price dete r mined as per t he for mula provided for in the shareholder's agree ment ) should be found IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 37 - and the Patel group should be entitled to get the true value of the shares. 7.2.9 Hence, if all the Shareholder's Agree ment and the Arbitration Agreement are read together, it can be reliably construed that the basic concern of Patel group was to receive the true value/ market value of share based on the potential of the compan y a nd its future progress. Therefore, the deter mination of the value of shares at Rs.l per share is totally out of sync with the conditions precedent to the transfer of shares. The Agree ments entered prior to share transfer and the instance of share transfer appears to be totally antithetical and opposed to each other. The right s of the group i.e. Patel group is totally ignored and the purpose for which the Shareholder's Agree ment and the Arbitration Agree ment were ente red upon, i.e. to protect and define the rights and obligations of each group (Patel group and Dal mia group) and the furtherance of growth of the co mpany are totally ignored. Further, the Arbitration Agree men t without giving any reason has directed the Patel group to transfer 10,90,000 equity shares of the company to the Dal mi a group at a consideration of Re. 1.00 per share. Therefore , through the award of Arbitration Agree ment, Patel group did not get the true value of the share transferred as per the potential of the co mpan y, as desired by Patel group through various Shareholder's Agree ment ( discussed earlier) as well as in the Arbitration Agree ment, The construction of Arbitration Agree ment merel y s erves the IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 38 - purpose of a cloak or grab of legal document to hide the otherwise colorable transaction. Hence, the conditions precedent to the transfer of shares do not in any wa y support the basis of transfer of shares fro m Patel group to Dal mia group at Re.1.00 per sha re. This is mer el y a mechanis m of colourable transaction adopted by Shri Anil R Patel to a void the incidence of tax on the transfer of shares (10,90,000 equity shares) to Shri Atul N Dalmia at Re. 1.00 each. 7.2.10 So me e- mails have been found annexed in Annexure A-10 fro m the office of Ruba min Li mited, S ynerg y House, Vadodara. On the perusal of infor mation in the mail server seized fro m the office pre mise of th e assessee co mpan y annexed as Annexure A-10, a mail dated 01/07/2007, written by the auditor of the compan y Shri Milin Mehta from K C Mehta and Co to Mr. Rajesh Gupta, price House Water Coopers asking for his expert opinion is found (copy has been marked to Shri Atul N Dal mia , Shri R ajesh Aggarwal a nd Shri Aja y Aggarwal). As per this mail, it is clearly mentioned that through a shareholder's agree ment entered into the year 2003, the shareholding was changed to 51:49 between Shri Atul Dal mia and Shri Anil R Patel respectively and 1% of shares of Shri Anil R Patel was purchased by Shri Atul N Dal mia at Rs.94 per share. Further, it is mentioned a new shareholding agree ment has been entered upon by Shri Atul N Dal mia and Shri Anil R Patel, whereb y pr efixed for mula for share valuation for inter-se transfer of shares was substituted with fair value deter mined b y IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 39 - valuer. In addition, it is mentioned that no right is given to either party to either forcefull y sell or forcefully purchase the shares fro m other pro moters. It is also mentioned on the mail that through this shareholder's agree ment it was agreed by the two parties (Shri Atul N Dal mi a and Shri Anil R Patel) that the shareholding pattern between the pro moters inter-se should be changed to 60:40 fro m existing 51:49. This would involve transfer of 9% s hares of Shri An il R Patel to Sh ri Atul N Dal mia . In addition, the mail also mentions certain other facts which shows that price of share was much more than the price of Rs 1/- per share and which should be considered. The above mail is r eproduced in assess ment order. - It is mentioned that shares were allotted to employe es under ESOP at Rs.80 per shares; 1,40,000 shares were allotted in March 2007 at Rs.80 per share. -Co mpan y is signing an agree ment with private investor who will be buyi ng 19% of equity of the compan y at Rs 321.90 per share -Share transaction between sa me pr o moters in 2003 at Rs 94/- per share and thereafter there has been substantial i mprove ment in th e perfor mance of the co mpan y -Two associate partnership fir ms were acquired by co mpan y in recent past the date of transfer and shares allotted by co mp a ny at Rs 225/- per share. IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 40 - Therefore, fro m the perusal of this mail, it is clearl y evident that the shares have to be valued as per fair value deter mined b y va luer and shares of the co mpan y have been transferred to private equity investor at a much higher price. Fro m the details found in the case of Ruba min Li mited , it is seen that Shares of Rubami n Li mited (Nu mber of shares=2198531) were transferred to India Advantage Fund -V through its investment manager ICICI Venture Fund manage ment Co mpany at Rs 318.39/- per share on 06.07.2007 i.e. just two da ys after the date of transfer of shares between Anil R Patel and Atul N Dal mia . Therefore, there was no reason to transfer the shares by Shri Anil R Patel and Shri Atul N Dal mia at R e. 1 pe r share. 7.2.11 Moreover on a note of restructuring of Ruba min Ltd. Found from Anne xure A-7 fro m Ru ba min Ltd., S yn er gy House, Baroda, it is me ntioned that on 1/4/2006 (i.e. on the eve of De merger of Phar ma Division from Ruba min Ltd.) the book value per share of Rubamin Ltd. is Rs. 210.51.The note is reproduced as below: 1 . P h a r m a B u s i n e s s o f t h e c o m p a n y i s d e m e r g e d i n t o a s e p a r a t e c o m p a n y n a m e d R u b a m i n L a b o r a t o r i e s L i m i t e d , H i g h c o u r t h a s a p p r o v e d t h e d e m e r g e r w . e . f. 1 " A p r i l 2 0 0 6 . T h e p u r p o s e o f a b o v e d e - m e r g e r a n d m e r g e r i s t o m a k e R u b a m i n L i m i t e d a f o c u s e d M e t a l c o m p a n y h a v i n g i n t e r e s t i n C o b a l t , C o p p e r a n d Z i n c r e l a t e d b u s i n e s s I n d e m e r g e r , a l l t h e a s s e t s a n d l i a b i l i t i e s o f p h a r m a c e u t i c a l b u s i n e s s ( D a b h a s a ) a s o n 1 " A p r i l , 2 0 0 6 w i l l b e t r a n s f e r r e d t o n e w d e m e r g e d c o m p a n y a t b o o k v a l u e . T h e b o o k v a l u e o f t h e P h a r m a c e u t i c a l B u s i n e s s ( D a b h a s a ) a s o n 1 s t A p r i l 2 0 0 6 w a s R s , 2 2 . 3 3 c r o r e s ( s u b j e c t t o c h a n g e a f t e r c o m p l e t i o n o f d u e IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 41 - d i l i g e n c e ) A c c o r d i n g l y t h e p u r c h a s e c o n s i d e r a t i o n s h a l l b e R s . 2 2 , 3 3 c r o r e s w h i c h s h a l l b e d i s c h a r g e d b y a l l o t m e n t o f 2 , 3 6 5 , 0 0 4 E q u i t y S h a r e s o f R s . 1 0 e a c h o f R u b a m i n L a b o r a t o r i e s L i m i t e d a t a p r e m i u m o f R s . 8 4 . 4 0 p e r s h a r e t o t h e e x i s t i n g s h a r e h o l d e r s o f R u b a m i n L i m i t e d . A f t e r t h e d e - r e s e r v a t i o n o f z i n c o x i d e f r o m S S I l i st i n t h e r e c e n t F i n a n c e B i l l 2 0 0 6 , t o c o n s o l i d a t e a l l t he z i n c o x i d e b u s i n e s s o f t h e g r o u p a t o n e p l a c e , M / s Z i n c o l l i e d ( I n d i a ) a n d M / s Z i n c o l l i e d I n d u s t r y , t w o p a r t n e r s h i p f i r m s o f t h e g r o u p h a v i n g Z i n c O x i d e { M e t a l g r a d e } m a n u f a c t u r i n g p l a n t s i n D a m a n a r e b e i n g m e r g e d i n t o R u b a m i n L i m i t e d o n g o i n g c o n c e r n b a s i s w . e . f . 1 s t J u l y 2 0 0 6 . T h e p u r c h a s e c o n s i d e r a t i o n w i l l b e t h e b o o k v a l u e o f t h e f i r m s a s o n 3 0 t h J u n e 2 0 0 6 w h i c h i s R s , 1 0 . 9 4 c r o r e s ( s u b j e c t t o c h a n g e a f t e r c o m p l e t i o n o f d u e d i l i g e n c e ) . T h e b o o k v a l u e o f R u b a m i n L i m i t e d (e x c l u d i n g P h a r m a B u s i n e s s ) i s R s . 5 2 . 6 3 c r o r e s ( s u b j e c t t o c h a n g e a f t e r c o m p l e t i o n o f d u e d i l i g e n c e ) . T h e t o t al N o . o f s h a r e s o f R L a s o n 1 s t J u l y 2 0 0 6 w a s 2 5 . 0 0 l a c s , h e n c e b o o k v a l u e p e r s h a r e i s R s . 2 1 0 . 5 1 . B a se d o n t h i s v a l u a t i o n , t o t a l 5 , 1 9 , 8 7 1 s h a r e s o f R L w i l l b e i s s u e d t o p a r t n e r s o f t h e s e t w o f i r m s a s p u r c h a s e c o n s i d e r a t i o n . 3 . R u b a m i n L i m i t e d i s i s s u i n g b o n u s s h a r e s i n t h e r a t i o o f 3 s h a r e s a g a i n s t e a c h s h a r e s . H e n c e a f t e r t h i s b o n u s i s s u e , c o m p a n y ' s p a i d u p s h a r e c a p i t a l w i l l i n c r e a s e f r o m R s . 2 . 5 0 c r o r e s t o R s . 1 0 , 0 0 c r o r e s . T h e r e s e r v e s o f t h e c o m p a n y w i l l r e d u c e t o t h a t e x t e n t . 4 . We a r e w o r k i n g t o r a i s e t h e s h a r e c a p i t a l t h r o ug h p r i v a t e e q u i t y r o u t e . We e x p e c t t o r a i s e f u n d t o t he t u n e o f R s , 5 0 - 6 0 c r o r e s b y t h i s r o u t e . T h e f u n d s wi l l b e d e p l o y e d i n t h e c o m p a n y ' s g r o w t h p l a n s a t O R C o n g o a n d I n d i a . 7.2.12 Further a certific ate dated 02.08.2007 regarding net worth of Shri Anil R Patel duly signed b y a Chartered Accountant has been found and seized fro m office of Ruba min Ltd. at S yne rg y House, Baroda as Annexure A-5, Pa ge no 133. It is stated at sr.no.3 of this certificate that as per the certificate dated 10.07.2007 the invest ment in shares of Ruba min Li mited IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 42 - by Shri Anil R Patel is valuing Rs 24,55,41,120/-, As on 31.03.2008, Shri Anil R Patel was holding 30,69,264 number of shares of Rubami n Li mited. As per the records furnished by assessee, there is no transfer of shares of Ruba min Ltd. b y Shri Anil R. Patel a fter 10.07.2007. Thus the number of s hares held by hi m as on 10.07.2007 is taken as 30,69,264. Thus the value of shares of Rubamin Li mited as per the certificate furnished by Shri Anil R Patel as on 10.07.2007 is Rs 80/- per share. The copy of certificat e dated 02.08.2007 as found and seized is reproduced in assess ment order. 7.2.13 Further, in the mail dated 01/07/2007 as discussed above in point no 9, certain questions for consideration have been posed which reads as under: 1 ) H o w t h i s t r a n s a c t i o n o f t r a n s f e r o f s h a r e s s h o u ld b e e f f e c t e d s o a s t o a v o i d l i t i g a t i o n o n m a t t e r s o f v a l u a t i o n , c a p i t a l g a i n s , t a x o n t h e g i f t s , e t c ? 2 ) C a n w e t a k e t h e r e c o u r s e t o e i t h e r g i f t of s h a r e s o r t r a n s f e r a t t o k e n c o n s i d e r a t i o n ? On perusal of the questions for consideration, it is a mpl y evident that both the parties were concerned about incidence of tax if the transaction is effected on paper at fair mark et value of the shares involved and they were l ooking for wa ys and means so as to avoid tax in respect of income arising from such transaction and, hence, the transfer of shares was to be constructed in such manner to avoid taxation as well as litigation as regard taxation. Therefore, to avoid it being treated as gift transaction, the shares were t ransferred on paper at token IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 43 - consideration of rupee 1.00 as mentioned above. Hence, the whole transaction is nothing but a sha m transaction which does not have any rea sonableness and is merel y a devic e to avoid taxation. Fro m the above discussion it is seen that Shri Anil R Patel and Shri Atul N Dalr nia have created subterfuge transactions to avoid payment o f taxes. Shri Anil R Patel has ad opted the mechanis m of col orable transaction in collusion with Shri Atul N Dal mia , whereb y he has avoidend pa ying the capital gains-tax by creating a 'f or m' or transaction which is devoid of ay rationale and serves only motive of avoidance of taxation. It also helped Shri Atul Dalmi ya in parking his unaccounted income in acquiring assets in the for m of shares fro m Shri Anil R Patel. 7.2.14 Ex-post Facto, it is evident to trace the path of circu mstances (events) which led to the transfer of shares. Fro m the genesis of discord or dispute i.e. the Shareholder's Agree ment dated 6th June 2003 till the Arbitration Agree ment dated 5th June 2007 (prior to the transfer of shares) it is clearly visible and evident that the Shareholder's Agree me nt and the Arbitration Agree ment ai med at securing the rights and obligations of each party (Patel group and Dalmia group). In the course of these Agree ments, Patel group has reiterated its rights in the form of rec eiving the true value of shares on its transfer to Dal mia group. This true means the fair ma rket value of the share (which is also discussed in the Shareholder's Agree ment). Hence, the chain of events leading to the Arbitration Agree ment IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 44 - and the subsequent transfer of shares clearly postulate that the shares will / would be transferred by Patel group to Dal mia group at fair ma r ket value which should be considered as the true value of shares, thereb y protec ting the interest of the Patel group. Further receiving the true value of shares would also mean that there is a fair exchange between Patel group and Dal mia group whereby the Dal mia group has enhanced its shareholding and Patel group is being compensated of the loss on transfer of shares to the extent of reduction of shareholding in the compan y b y the means of receipt of true value of shares. Therefore, there i s an exchange/ sale transaction wherein the shareholding of one party is incr eased and the reduction in shareholding of another party is co mpensated in the for m of value of shares paid to the party. However, in the instant case, as per the for m c reated by Shri An il R Patel and Shri Atul N Dal mia (the Arbitration Agree ment and the subsequent share transfer) an unequal exchange transaction has been created. 7.2.15 The assessee in his submission has cited the following case laws which a re discussed hereunder: CIT vs George Henderson & Co. Ltd (1967)66 ITR 622 (SC)- This case law enunciated that the full value of consideration is the price bargained for by the parties to the sale. But, in the case of the assessee it does not appear that despite all disputes and disagreement (as discussed earlier) Rs.l per share would be the "price bargained for " b y the part y to the sale. The price bargained for has to be seen in the context of conditions precedent to the transfer (as discussed earlier) and IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 45 - the reasonability of transaction considering the human probabilities of maxi mizing profit. In this context the decision of Hon'ble Supreme Court in the case of Sumati Dayal Vs. Commissioner of Income- tax[1995] 214 ITR 801(SC) is relevant wherein the Hon'ble Court has given judgment on the basis of surrounding circumstances and applying the test of human probabilities. Thus it is beyond human probabilities that one would sell the shares at a loss when all the surrounding circu mstances indicate towards the fact that Shri Anil R Patel wanted fair market price for the sale of his shares. F u r t h e r i n t h e c a s e o f G e o r g e H e n d e r s o n & C o L t d , th e H o n ' b l e S u p r e m e C o u r t h a s o b s e r v e d t h a t i f c e r t a i n c o n d i t i on s a r e s a t i s f i e d a s m e n t i o n e d i n t h e f i r s t p r o v i s o t o s e c ti o n 1 2 B ( 2 ) o f 1 9 2 2 A c t , t h e m a r k e t v a l u e o f t h e a s s e t s t r a n s f e r r ed , t h o u g h n o t e q u i v a l e n t t o t h e f u l l v a l u e o f t h e c o n s i d e r a t i o n fo r t h e t r a n s f e r , m a y b e d e e m e d t o b e t h e f u l l v a l u e o f t h e c o n s i d e r at i o n . T o g i v e r i s e t o t h i s f i c t i o n t h e t w o c o n d i t i o n s o f t h e f i r st p r o v i s o a r e 1 . T h a t t h e t r a n s f e r o r w a s d i r e c t l y o r i n d i r e c t l y c o n ne c t e d w i t h t h e t r a n s f e r e e a n d 2 . T h a t t h e t r a n s f e r w a s e f f e c t e d w it h t h e o b j e c t o f a v o i d a n c e o r r e d u c t i o n o f t h e l i a b i l i t y o f t h e a s s es s e e u / s 1 2 B o f 1 9 2 2 A c t . In the instant case both the conditions are fulfilled i.e. the transferor is directly or indirectly c onnected with the transferee and the transfer was effected with the object of avoidance or reduction of the liability. The transferor and the transferee are the co-promotors of the company and there is substantial reduction of the liability to pay tax by Shri Anil R Patel as he has not transferred the shares at the fair market va lue or not even at the value at which he has not sold the shares previously to Shri Atul N Dal mia. Further the transfer has also not covered IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 46 - the principles as enshrined in the share holders agreement. Thus in this case market value has to be considered as full value of consideration. F u r t h e r , a s s e s s e e h a s r e f e r r e d t o t h e c a s e o f C I T vs . G i l l a n d e r s A r b u t h n o t & C o . ( 1 9 7 3 ) 8 7 I T R 4 0 7 ( S C ). I n t h e c a s e o f C I T v s . G i l l a n d e r s A r b u t h n o t & C o . ( 1 9 7 3 ) 8 7 I T R 4 O 7 ( S C ) , t h e i r l o r d s h i p h a s o b s e r v e d t h a t i n t h e c a s e o f s a l e f o r a p r i c e , t h e r e i s n o q u e s t i o n o f a n y m a r k e t v a l u e u n l i k e i n t h e c a s e o f a n e x c h a n g e . In this case, the Hon'ble Court has made a differenc e between sale and exchange. Even in the c ontext of sale, the Hon'ble Supre me Court has mentioned that in case of sales to which the first proviso to sub section (2) of section 12B is not attracted, all that we have to see is what is the consideration bargained for. Even if we c onsider that the share transfer between Shri Anil R Patel and Atul N Dal mia is sale transaction, then also it cannot be said that Re.l per share was the price bargained for by Shri Anil R Patel if we refer to the conditions precedent to the share transfer. Th e transfer of share s at Re. 1 share is me rel y a facade created by both the parties. The arrange ment has the character of 'exchange transaction' where the transaction has been given a form of unequal exchange transaction-wherein substantial shareholding has been transferred at almos t no value negligible value. The transaction of shares which has taken place between Anil R Patel and Atul N Dal mia is "an unequal exchange transaction" wherein substantial shareholding has been transferred to Shri Atul N Dal mia by Shri Anil R Pa tel at no cost or negligible cost. This is mer e ly a facade to ca mouflage the real transaction. IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 47 - Hence, as the transaction has the nature and spirit of exchange transaction therefore applying the sound principles enunciated in the judgment of Hon’ble Supre me Court in CIT vs. Gillanders Arbuthnot & Co. (1973)87 ITR 4O7 (SC) , it ma y be rightly concluded the mar ket value has to be adopted in the case of an exchange. Therefo re, the ma rket value should also be applied in the instant case. Even the other case laws as refer re d by assessee have different facts than the case of assessee and hence cannot be considered to be applicable to the case of assessee. On the above men tioned analysis of the facts and circu mstances leading to the share transfer (as discussed earlier), a reasonable inference has to be drawn which shows that there is understatement or concealment of consideration in respect of the transfer. Market value of shares is the price which has accrued to the assessee on the transfer of shares which is the full value of consideration accruing to the assessee. On the basis of above mentioned analysis, it is seen that Shri Anil R Patel and Shri Atul N Da l mia have create d a sha m transaction which is devoid of any logic and reasoning. The transaction is in favour of one part y at the detriment of the other party which is totally in contradiction with the existing facts and circumstances precedent to the share transfer. Therefore, artifici al for m has been created by the assessees Shri Atul R Patel and Shri Atul N Dal mia to circumvent the substance underlyi ng the transaction. IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 48 - On the basis of the above mentioned discussion, it is evident that Shri Anil R Patel has transferred the shares to Shri Atul N Dal mia at Rs 1 per share by cr eating a mechanis m of colorable transaction as discussed supra. Therefore it is apparent that Shri Anil R Patel has received part of the sale proceeds out of the books and Shri Atul N Dal mia has paid part of the proceeds which is not reflected in his books of accounts. 7.2.16 On the basis of above mention discussion, it is relevant to quote the principles enunciated in various case laws related to Colorable Transaction which is squarely ap plicable in principle in the facts of this case. It is most pertinent to mention here that a deliberate attempt to subvert the law to obtain tax benefit is an illegal act and i mper missible. The law on the subject has been laid down by the Hon’ble Supre me Court in the case of McDow ell & Co. Ltd.v. CIT[1985] 154 ITR148/22 Taxman 11. Relevant extract fro m the head note is given below: - " T a x p l a n n i n g m a y b e l e g i t i m a t e p r o v i d e d i t i s w i t hi n t h e f r a m e w o r k o f t h e l a w . C o n l o u r a b l e d e v i c e s c a n n o t b e p a r t o f t a x p l a n n i n g a n d i t i s w r o n g t o e n c o u r a g e o r e n t e r t a i n t h e b e l i e f t h a t i t i s h o n o u r a b l e t o a v o i d t h e p a y m e n t o f t a x b y d u bi o u s m e t h o d s . I t i s t h e o b l i g a t i o n o f e v e r y c i t i z e n t o p a y t h e t a x e s h o n e s t l y w i t h o u t r e s o r t i n g t o s u b t e r f u g e s ( e m p h a s i s S u p p l i e d ) T h e r e i s b e h i n d t a x a t i o n l a w s a s m u c h m o r a l s a n c t i on a s i s b e h i n d a n y o t h e r w e l f a r e l e g i s l a t i o n a n d i t i s a p re t e n c e t o s a y t h a t a v o i d a n c e o f t a x a t i o n i s n o t u n e t h i c a l a n d t h at i t s t a n d s o n n o l e s s a m o r a l p l a n e t h a n h o n e s t p a y m e n t o f t a x a t i o n . T h e p r o p e r w a y t o c o n s t r u e a t a x i n g s t a t u t e , w h i l e c o n s i d e r i n g a d e v i c e t o a v o i d t a x , i s n o t t o a s k w h e t h e r t h e p r o v i s i o n s s h ou l d b e c o n s t r u e d l i t e r a l l y o r l i b e r a l l y n o r w h e t h e r t h e t r a n s a c t i o n i s n o t u n r e a l a n d n o t p r o h i b i t e d b y t h e s t a t u t e , b u t w h e t h e r t h e t r a ns a c t i o n i s a d e v i c e t o a v o i d t a x a n d w h e t h e r t h e t r a n s a c t i o n i s s u c h t h a t t h e j u d i c i a l p r o c e s s m a y a c c o r d i t s a p p r o v a l t o i t . I t i s n e i t h e r f a i r IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 49 - n o r d e s i r a b l e t o e x p e c t t h e L e g i s l a t u r e t o i n t e r v e ne a n d t a k e c a r e o f e v e r y d e v i c e a n d s c h e m e t o a v o i d t a x a t i o n . I t i s u p t o t h e c o u r t o f t a k e s t o c k t o d e t e r m i n e t h e n a t u r e o f t h e n e w a nd s o p h i s t i c a t e d l e g a l d e v i c e s t o a v o i d t a x a n d t o e x p o s e t h e d e v i c es f o r w h a t t h e y r e a l l y a r e a n d t o r e f u s e t o g i v e j u d i c i a l b e n e d i c t io n . " Further , in the case of Union of India & Ors. Vs. Playworld Electronics (P) Ltd. & Anr. (1990) 184 ITR 308 (SC), it was reiterated that tax planning ma y be legitimate provided it is within the fra me work of the law. It was stated that colourable devices cannot be part of tax planning. The HonlDle Supreme Court has made an i mportant pronouncement in the case of work men of Ass ociated Rubber Industry Ltd. V. Associated Rubber industry Ltd. [1986] 157 ITR 77 (SC), where the court held thus: "it is the d uty of the court, in every case w here ingenuity is expended to avoid taxing and w elfare legislations, to get behind the smo ke screen and discover the true state of affairs. The court is not to be satisfied with form and leave w ell alone the substance of a transaction." In CIT v. Durga Prasad More (1971) 82 ITR 540, the Supre me Court held as hereunder: " i t i s t r u e t h a t a n a p p a r e n t m u s t b e c o n s i d e r e d r e al o n l y i f i t i s s h o w n t h a t t h e r e a r e r e a s o n s t o b e l i ev e t h a t t h e a p p a r e n t i s n o t t h e r e a l . T h e T a x i n g A u t h o r i t i e s w er e n o t r e q u i r e d t o p u t o n b l i n k e r s w h i l e l o o k i n g a t t h e d oc u m e n t s p r o d u c e d b e f o r e t h e m . T h e y a r e e n t i t l e d t o l o o k i n to t h e s u r r o u n d i n g c i r c u m s t a n c e s t o f i n d o u t t h e r e a l i t y of t h e r e c i t a l s m a d e i n t h o s e d o c u m e n t s . " It would also be pertinent to refer to what has been pronounced by th e Hon'ble Supre me Court in the judgment in Sumati Dalyal v. CIT (1995) 214 ITR 801, reiterating the law IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 50 - laid down in CIT v. Durga Prasad More (1971)82 ITR 540(SC) that an apparent must be considered real onl y if it is shown that there are re asons to believe that the apparent is not the real and that the Taxing Authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. Therefore, it is clear fro m the above judg ments that the burden is on the assessee to show that the receipt is not of an income nature by giving an explanation; the inco me Tax Officer is not expected to put blinkers and accept it as it is; it is open to him to pr obe further and find out whether the apparent is real or not and take a decision on such probing, in the light of human probabilities. Ho wever, he s hould not act unreasonably. The test of hu ma n probability is most significant to be referred to the circu mstances such as in the present case where the assessee has used colorable device for avoidance of tax and it would be i mportant to refer to the decision in the case of Som Nath Maini v. CIT [2008] 306 ITR 414 (punj. & Ha r.). In this case, the assessee in his return declared loss from sal e of gold jeweller y and also declared a short- ter m c apital gain fro m sale of shares so that the two almost ma tch each other. This si mple tax planning beca me ineffective after the Assessing Officer disbelieved the astronomical share price increase applying the test of human probability. The Ass essing Officer observed that short-term capital gains were not genuine inasmu ch as the assessee had purchased 45000 shares of Ankur international Ltd. At var ying ra tes fro m Rs . 2.06 t Rs. 3.1 per shar e and sold the m within a short span of six-seven months at the rate var ying IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 51 - fro m Rs. 47.75 pa isa to Rs.55. Eve n though the two respective transactions for purchase and sale of shares were routed through two different brokers, yet the Assessing Officer did not believe the astronomical r ise in share price of a co mpan y fro m Rs .3 to Rs.55 in a short-ter m. The assessee lost its case before the Tribunal. Confir ming the order of the Tribunal, the Punjab and Har yana High Court held that the burden of proving that income is subject to tax is on the revenue but, on the facts, to show that the transaction is genuine, burden is pri maril y on the assessee. As per the Court, the Assessing Officer is to apply t he test of human probabilities for deciding genuineness or otherwise of a particular transaction. Mere leading of the evidence that the transaction was genuine, cannot be conclusive. An y such evidence is required to be assessed by the Assessing Officer in a reasonable way. Genuineness of the transaction can be rejected in case the assessee leads evidence which is not trustworthy, and t he department does not lead any evidence on such an issue. Mid East Part Folio Management Ltd. Vs. CIT (2003) 81 TTJ ( Mum)(SB)37, it was held that McDowell is more of an approach to the facts of a particular case than any inviolable rule laid down regarding tax evasion. It is a call to the Courts and Tribunals to expose subterfuges, colorable devices and dubious methods in tax cases. It is a caution administered that lawful dues to the state cannot be withheld under sche mes acquired off-the -shelf or through transactions that have no co mmercial or ec onomic value or by taking certain preordained steps which are calculated to cancel out each other. The IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 52 - approach in such cases must be to take the entire transaction or arrange ment as a whole and see i f it makes an y e conomic or co mmercial sense without attaching weight to the steps that go to make up the sche me , each of which ma y be legall y valid. The genuineness of the arrange ment has to be viewed not in relation to every step taken. McDo well therefore, did not depart fro m what-has alread y been laid down by the Supre me Court earlier except that the law regarding tax evasion was restated in much stronger expressions such as "dubious device", subterfuge, colorable transaction", etc. The ju dgment did not per mit the income Tax Authorities to rewrite or make a new c ontract for the parties nor did it say that they could not go behind the documentation in an atte mpt to find out the real intention of the parties. If the rea l intention of the parties is discovered to be something different fro m the intention professed in the document, the inc o me Tax Authorities are at libert y to brand the sa me as a subterfuge or a dubious device or a colourable transaction. An identical issue arose in the case of ICICI Ltd. In respect of boiler purchase from and leased back to Gujarat Electricit y Board (GEB) and therefore the sa me was also referred to the Special Bench and the ICICI Ltd., wa s added as an appellant. Wh ile discussing the judg ment of the Supre me Court, in the case of McDowell and Co. Ltd. (supra), the Tribunal (SB) had, inter alia noted that the Courts and Tribunals had to expose subterfuges, colourable device, and dubious methods in tax case, that the lawful dues to the State cannot be withheld through sche mes of subterfuge, a colourable device, and a dubious me thod, that the approach in such cases must be to take the entire arrange ment as a whole and see if it makes IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 53 - any econo mic or co mmercial sense without attaching weight to the steps that go to ' make up the arrange ment or the sche me , each of which ma y be legall y valid, that the genuineness of the arrange ment has to be viewed not in relation to every step taken to achieve that result but in relation to the final result, that one has to look at the truth of the transaction (and if per missible) by going behind the facade of documen tation or the series of steps taken, that the Courts (and Tribunals) alwa ys have the freedo m to 'go behind' the documents to find out the real intention of the party, that the ru le presupposes that in a given case the real intention of the parties to a document/transaction/ arrange ment could be different fro m what it appe ars fro m it ex f acie, that the court must normally proceed on the basis of the professed intention, but if that is under doubt or is disputed or is challenged, then its power to find out the real intention of the parties by ignoring the apparent has to be and has alwa ys been conceded, that in case of make believe arrangement or a subterfuge or a dubious or a colourable device adopted , the Court will be me rel y re moving the facade to expose the real intention of the parties cleverly cloaked and if that intention is discovered to be the evasion of taxes, it cannot be given effect to merel y because all the steps taken as co mponent parts of the arrange ments are legally corr ect or valid, that the right of the parties to enter into transactions according to their free will and choice has alwa ys been protected, the only rider being that both the professed intention and the real intention should be the sa me , that all c o mmercial a rrange ments and documents or transactions have to be given effect to even though they result IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 54 - in a deduction of the tax liability, provided that they are genuine, bonafide and not colourable transaction. On the basis of the above mentioned discussion it is evident that Shri Anil R Patel has transferred the shares (10,90,000 shares of Rubamin Li mit ed) to Shri Atul N Dal mia at Rs 1 per share by creating a mechan is m of colorable transaction as discussed supra. Therefore it is apparent that Shri Anil R Patel has received part of the sale proceeds out of the books and Shri Atul N Dal mia has paid part of the proceeds which is not reflected in his books of accounts. 7.3 Thus on the basis of above discussion and facts on record, the full value of consideration is calculated adopting the fair market value of shares on the date of transfer. From the various evidences as discussed above, it is gathered that fair market value of shares of Ruba min Li mited was much more t han Rs 1/- per share at which the transaction is recorded in his books of accounts. It is pertinent to note that shares of Rubami n Li mited (No of shares- 2198531) transferred to India Advantage Fund-V through its investment manager ICICI Venture Fund manage ment Co mpany at Rs 318.39/-per share(Rs 10/- per share + pre miu m of Rs 308.39/- per share) on - 06.07.2007. India Advantage Fund is the third party i nvestor to whom the shares have been transferred at the price of Rs 318.39/- per share. The shares have been transferred between Anil R Patel and Atul Dal mia on 04.07.2007. Thus there hardly an y ti me lag between the two transactions. Thus considering that the transactions with third party are done at the ma rket rate, the fair market value as IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 55 - on the date of transfer is taken at Rs 318.39/- per share. Thus full value of consideration is as follows: Full value of consideration =1090000* 318.39/- per share=Rs 34,70,45,100/- Less: Value of consideration shown in books of accounts=Rs 10,90,000/- Unaccounted Inv est ment= Rs 34,59,55,100/-. Accordingly, Rs. 34,59,55,100/- is added back to the total income of the assessee for I the yea r under consideration. Penalty proceeding u/s 271(l)(c) of the Act are being init iated for conceal ment of inco me . [Addition : Rs 34,59,55,100/-] 8. Transfer of shares of Ruba min Laboratories Limite d by Shri Anil R Patel to Shri At ul N Palima. 8.1 Shri Anil R Pat el has transferred 1,94,800 shares of Ruba min Laboratories Ltd. On 5th Ma y 2007 at Re.l per share to Shri Atul N Dal mia and subsequently the sa me shares along with the business of the compan y were transferred by Shri Atul N Dal mi a to Lupin Ltd. at Rs. 154.37 per share. Shri Anil R Patel also transferred his re ma ining shares of Rubamin Laboratories Ltd., to Lupin at Rs. 154.37 per share within two months of transfer of shares to Shri Atul N Dal mia. Hence, the transfer of shares at Re. 1 by Shri Anil R Patel to Shri Atul N Dal mia is devoid of an y reasonableness and business prudence. IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 56 - The act of Shri Anil R Patel is more be wildering considering that the shares were transferred at the rate of Rs. 154.37 per share within two months of the transfer by Shri Anil R Patel to Shri Atul N Dal mi a at Re . 1. Considering the above fact, assessee w as issued show cause notice as follow s: “............ 4. Further on verification of record, it is seen that you have purchased 1,98,000/-shares of Ruba min Laboratories Li mited on 04.07.2007 at Rs I/- per share fro m Shri Anil R Patel and subsequently the sa me shares alongwith the business of the compan y were transf erred b y you to Lupin li mited at Rs 154.37/- per share. You have also transferred your r e maining shares to Lupin Limited at Rs 154.37/- per share on 25.09.2007. This fact of purchase of shares at less than ma rket value see ms bewildering after consideration of seized documents and facts on record which are discussed hereunder -In the context of Rubamin Laborat ories Li mited, there is separate shareholder's agree ment dated 30.06.2007, which is found annexed in Annexure A-7(back up of computer hard disk) seized fro m the of fice of Ruba min Li mited. This agree ment talks about the equal ter ms and price to be fixed for the transfer of shares to the other group and to the third party , thus the shares transferred should have IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 57 - been transferred on the same ter ms and at the same price as was done in the case of shares transferred to Lupin. Therefore on the basis of conditions prevalent prior to the transfer of shares, it is observed that there was neither an y co mpelling reason nor any rationale behind the transfer of shares at the rate ofRs I/-per share. Thus you are requested to showcause why the market rate of Rs 154.37/- should not be adopted as the purchase price paid for the transfer of shares of 1,98,000/- between Shri Anil R Patel and Shri Atul Dal mia and the additional price paid by you s hould not be considered as your undisclosed investment and added to your total income for the relevant assessment year . ..........” 8.2. In response to the sa me , assessee made sub mission dated 02.02.2016, which is perused but not found acceptable for following reasons: 8.2.1 It is to be noted that Rubamin Lab oratories Limited was part of Ruba min Li mited till June 2006. Thus the shareholders agree ment as discussed in the issue of transfer of shares of Ruba mi n Li mited also discussed about the transfer of shares of Ruba min Laboratories Limited. Thus as discussed in previous issue the incidents preceding the transfer of shares and the instance of transfer of shares a re dia metrically o pposed to each other. Thus the argumen ts regarding shareholders agree ment dated 2003 and subsequent amend ments and i mplications are not repeated here as those agreement s included IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 58 - the issues of Phar ma Division also as it was part of Ruba min Li mited at that point of ti me. 8.2.2 In the case of Ruba min Laboratories Ltd, there is no evidence of Arbitration Agree ment and the assessee, Ruba min Li mited has also not furnished any Arbitration Agree ment. Ruba min Laboratories Li mited bec a me a separate e ntity fro m Ruba min Li mited by the order of Hob’ble High Court dated 19th day of June 2006 in the Scheme of De merger . In the context of Ruba min Laboratories Ltd also there is a separate Shareholder's Agree ment dated 30th June 2007 which is found annexed in Annexure A/7 (back-up of computer hard disc) seized from the office of Ruba mi n Li mited, which is annexed as Annexure-F. Under point no. C&D the reasons for entering into Shareholder's Agree ment between Patel group and Dal mia group are mentioned which can be read as under C . T h e S h a r e h o l d e r s h a v e a g r e e d t h a t t h e i r r e s p e c t iv e r i g h t s a n d o b l i g a t i o n s w i t h r e g a r d t o t h e i r b u s i n e s s r e l a ti o n s h i p b e t w e e n t h e m i n t e r s e a n d w i t h t h e C o m p a n y w i l l b e i n t e r p r e t e d , a c t e d u p o n a n d g o v e r n e d s o l e l y t o a c c or d a n c e w i t h t h e t e r ms a n d c o n d i t i o n s o f t h i s A g r e e m e n t a n d t h e M e mo r a n d u m o f A s s o c i a t i o n a n d A r t i c l e s o f A s s o c i a t io n o f t h e C o m p a n y . D . T h e S h a r e h o l d e r s h a v e a g r e e d t o ... . . t h i s A g r e e men t f o r t h e p u r p o s e o f r e c o r d i n g t h e ... . . a g r e e m e n t s c o n c e r ni n g t h e f i n a n c i n g , o p e r a t i o n a n d ma n a g e me n t o f t h e C o mpa n y a n d t h e i r mu t u a l r i g h t s a n d o b l i g a t i o n s . N O W T H E R E F O R E , i n c o n s i d e r a t i o n o f t h e a b o v e p r e mi se s a n d t h e mu t u a l p r o m i s e s a n d c o v e n a n t s h e r e i n , t h e mu t u al b e n e f i t s t o b e d e r i v e d t h e r e f r o m a n d o t h e r g o o d a n d v a l u a b l e c on s i d e r a t i o n , t h e r e c e i p t a n d s u f f i c i e n c y o f w h i c h a r e h e r e b y a c kn o w l e d g e d , t h e P a r t i e s a g r e e a s f o l l o w s : 1 . D e f i n i t i o n s a n d I n t e r p r e t a t i o n 1 . 1 D e f i n i t i o n s . I n t h i s A g r e e m e n t , u n l e s s t h e c o n t e x t o t h e r w i s e r e q u i r e s o r e x p r e s s l y p r o v i d e s , t h e IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 59 - f o l l o w i n g w o r d s s h a l l h a v e t h e f o l l o w i n g m e a n i n g r e s p e c t i v e l y : R u b a m i n L a b o r a t o r i e s L t d . P a g e 2 P r o m o t e r s ’ S h a r e d h o ld e r s ’ A g r e e m e n t After verif ying various clauses of this agreement, it can be observed that before offering the shares for sale/transfer etc. to any third party, th e shares have to be offered to the other group by giving a notice in writing (the selling notice) to the shareholders of the other group of his intention to sell his shares, spelling out-the number of shares beneficially o wned by the offerer, the nu mber of shares which make up the offered shares and the price at which the of fered shares are p roposed to be sold(the "offer price") and the ter ms and conditions of the sale of the Offered shares (the offer ter ms) . In this case the "offer price" mea ns the price at which he intends to sell the shares to the third party which in present case means at the rate of Rs. 154.37 per share as per Lupin Agree me nt and the negotiations prior to the final Agre e ment. There fore there was no reason to sell the sa me shares a t Re. 1 per share when the offer price as per t his agree ment was Rs.154.37 per share. 8.2.3 Further, it is mentioned under clause 7.6 that if offeree by an y reason do not purchase the entire offered share then the re maining of shares can be sold to third party but at a price equal to or in excess of the offer t er ms and on terms no more favorable than the offer ter ms . Hen ce Shri Anil R Patel should not have transferred the shares to Lupin at a price equal to the price at which the shares were transferred to Shri Atul N Dal mi a and should have been transferred at equal ter ms. Ther efore this Agree ment talks about equal ter ms and price to be fixed for the IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 60 - transfer of shares to the other group and to third party, hence the shares transferred to Shri Atul N Dal mia should have been transferred on the sa me ter ms and at the sa me price as was done in the case of shares transferred to Lupin (i.e. the off er price as discussed in previous paragraph). 8.2.4 In addition to this, the shareholders Agree ment dated 30 t h June 2007 contains the provisions of Trans mission of Shares mentioned on page no.76 of the seized docu ment An nexure A-l. As per clause no. 10.1, it is mentioned that the shareholders have agreed that upon the death of Anil Patel, Atul Dal mia will have a right to acquire all the shares held by the Patel Group fro m the successors in law of Anil Patel or any Perso n to whom such shares have been bequeathed under the Will of Anil Patel or otherwise and the other Shareholders of the Patel Group at the FMV, pa yable no later than ninety da ys fro m the date of exercise of this right by Atul Dal mia. Clause no 10.4 mentions about the appoint ment of an Independent Valuer who shall deter mine the fair market value of the shares on the basis of the value of the co mpany on a going concern basis and after taking into account of underlying assets and future prospect of the co mpan y. Therefo re on perusal of this clause also it is evident that the shares have to be transmitt ed to Shri Atul N Dal mia at the fair market value after the death of Shri Anil R Patel. Hence there should not be an y r eason to believe that there were conditions present which war ranted the shares to be transferred by Shri Anil R Patel to Shri Atul N Dal mia at Re. 1 per share, i.e. much below than the FMV of the shares on the date of transfer. IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 61 - 8.2.5 Hence, on the basis of conditions precedent to the share transfer by Shri Anil R Patel to Shri Atul N Dal mia it is clearly evident that there was alwa ys a concern shown by P atel group that the shares might be transferred to Dal mia group and Dal mia group would pay t he consideration which would be less than the true value of the shares (based on the potential of the co mpan y) or the fair market value of the shares as on the date of transfer. Therefore, on the basis of conditions prevalent prior to the transfer of shares there was neither any co mp elling reason nor any rationale or motive behind the transfer of shares at the rate of Rs. 1 per share s. 8.2.6 Further, it has been noticed that Ruba min Laboratories Ltd has been acquired by Lupin phar ma ceuticals Ltd through share Purchase Agree me nt dated 20 t h Septe mber 2007 by ac quiring all the existing shareholding of the compan y. Under clause no.B of the share Purchase Agree ment dated 26 t h September 2007, it is mentioned that “the sellers are the legal and beneficial ow ners of 23,84,783 shares (hereinafter define d), which represent 100% of the cu rrent issued and paid up share capital of the company more particularly described in Annexure 1 her e to”. Further, in the Article 1 (Def initions 85 Contention) point no. 1.1.18, “the Purchase Consideration” is mentioned, which reads as under: “Purchase Consideration” shall man the sum of the payments to be made b y the purchaser to the sellers, as more accuratel y s et out in the payment Schedule in Article 4.1 below. The P urchase Consideration shall co mprise of IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 62 - an a mount of Rs .154.37 per share.” Further, in pa yme nt schedule is me ntioned in Annexure-4 of the share purchase Agree ment. As per the Annexure-4 (pa yment Schedule) all the shareholders comprising 23,84,783 shares is totality have been purchase for a total consideration of Rs. 36,91,38,952 crores at the ra te of Rs.154.37 per share. Thus as per this agree ment, it is evident to point out that apart fro m other shareholders Shri Anil R Patel has also sold his re maining of shares held by him a t the rate of Rs. 154.37 per share. Further, Shri Atul N Dal mia has also sold his shareholdings to Lupin at the rate of Rs. 154.37 per share which also includes 1,94,800 shares received fro m Shri Anil R Patel at the rate of Re . 1 per share. Hence, neither the conditions precedent to the transfer of shares by Shri Anil R Pa tel to Shri Atul N Dal mi a nor the conditions post transfer of shares justif y the value at which the shares have been transferred by Shri Anil R Pat el to Atul N Dalmia at the rate of Re.l per share. Therefore , there is neither any reason nor any rationale for transferring 194800 shares of Ruba min laboratories ltd at the rate of Rs.l per share by shri Anil R Patel to Shri Atul N Dal mia when it is clearl y evident that all the shares of Rubami n Laboratories Ltd was to be purchased at the rate of Rs. 154.37 per share within two months of the transfer of these shares. It is not possible that the shareholders were ignorant of mark et price of the shares held by the m or the negotiations with parties (including Lupin) for the acquisition of Ruba min Labor atories Ltd as both are the co pro moters of the co mpan y. IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 63 - 8.2.7 On the basis of above mentioned discussion it is i mperative to discuss the motive for entering into such an arrange ment (transfer of shares at the rate of Rs. 1 per share) which is mer el y a sha m tr ansaction or colorable transaction having no rationale and the purpose is only to evade taxes due on the transfer of shares b y Shri Anil R Patel to Shri Atul N Dal mia . Shri Anil R Patel and Shri Atul N Dal mia were full y aware of the negotiations with Lupin and other persons interested in acquiring Ruba min Laboratories Ltd (being the pro moters/ Directors of the compan y). The y wer e fully a ware of the price that RLL’s sale would fetch in market or bidding . Hence, the y enter ed into a colorable transaction whereb y Shri Anil R Patel transferred 1,94,800 shares to Shri Atul N Dal mia at the rate of R e.l per share wh en the sa me sha res were subsequently acquired by Lupin at the rate of Rs. 154.37 per share. It is beyond co mprehen sion and against human probabilities that if Shri Anil R Patel was going to receive handsome consideration against the sale of his shares of RLL to a third party acquirer then what was the reason that forced him to sell the shares at Re .l per share and that too only 1,94,800 shares and not the whole shareholding of Rubamin Laboratories Ltd. In this direction it is worth mentioning the fact that at the end of the relevant financial year Shri Atul N Dalmia had Short term Capital loss on mutual fund of Rs, 1,94,43,667/- and short term capital loss on Nifty Future of Rs. l,44,35,804/- (as per the submission made by the assessee), whereas Shri Anil R Patel did not have and such loss to be set off against the gain IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 64 - received on the sale of shares to Lupin Ltd, Hence Shri Atul N Dal mia has set off his short term losses against 1,94,800 shares received fro m Shr i Anil R Patel on transfer. Hence t he whole transaction was planned by Shri Anil R Patel and Shri Atul N Dal mia , wherein Shri Anil R Patel avoided paying taxes on the transfer of shares to Shri Atul N Dalmia and Shri Atul N Dal mia had the cushion to absorb the gain out of the sale of 1,98,000 shares to Lupin at Rs.154.37 per share. Hence the whole series of transaction is nothing but a creation of semblanc e of legal mechanis m to hide or subterfuge the otherwise colourable transaction. Shri Atul N Dal mia had purchased the units of Mutual Fund in the month of 3 r d October 2007 and the record date was 14.1.2008, whereb y the as sessee received dividend in excess of Rs. 3 crores and thereafter he sold the units of MF at a loss of Rs. 19443667 before the end of the relevant F.Y in order to set off the loss against the short term gain received on the transfer of share fro m Shri Anil R Patel, No prude nt person would sell his share/units at a loss when there was n o exigency. Further it can be seen that the only purspose to sell the units of Mutual funds was to receive losses in order to set off with the short ter m capital gain. But in real sense there is no loss as the assessee has received Dividend in excess of Rs 3 crores on the record date. 8.2.8 Fro m the perusal of the mail server data, Annexure A-10, it has been found that several mail s have been written to the auditor of the co mpan y as well as the mails have been exchanged between the key persons of the compan y, wherein the concern regarding taxation on the sale of shares to Lupin IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 65 - Phar ma have been raised. In this regard, a mail dated 01/07/2007 (copy enclosed herewith), written b y the auditor of co mpan y to Mr . Rajesh Gupta, Price House Wat er Coopers asking for his expert -pinion is found (copy has been marked to Shri Atul N Dal mi a Ra jesh Agar wal and Aja y Agar wal ). As per this mai l it is clearly mentioned that through a shareholder's agree ment entered into the year 2003, the shareholding was changed to 51:49 between Shri Atul Dal mia and Shri Anil R Patel respectively and 1% of shares of Shri Anil R patel was purc hased by Shri At ul N Dal mia at Rs. 94 per share. Further, it is mentioned a new shareholding agree ment had been entered upon by Shri Atul N Da mia And Shri Anil R Patel, whereb y pr efixed for mula for share valuation for inter-se transfer of shares was substituted with fair value deter mined by valuer. Further, in the same mail dated 01/07/2007, certain questions for consideration have been posed which reads as under: 1) How this transaction of transfer of shares should be effected so as to avoid litigation on matters of valuation, capital gains, tax on the gifts, etc? 2) Can we take the recourse to either gift of shares or transfer at token consideration? On perusal of the questions for consideration, it is a mpl y evident that the transfer of shares was to be constructed in such IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 66 - a manner to avoid taxation or litigation. Therefore t o avoid it being treated as a gift transaction, the shares were transferred at a token consideration of rupee las mentioned above. Hence, the whole transaction is noting but a sha m transaction which does not have any rea sonableness and is merel y a devic e to avoid taxation by Shri Anil R Patel. 8.2.9 Therefore prior to the acquisition of shareholding of Dal mia group and Patel group and others by Lupin Pha r ma Ltd., an arrange ment o r a facade or subterfuge was creat ed by Shri Anil R Patel in collusion with Shri Atul N Dal mia to evade tax due on the transfer of shares of Ruba min Laboratories Ltd by Shri Anil R Pa tel to Shri Atul N Dal mia. As per this arrange ment 1,94,800 shares were transferred to Shri Atul N Dal mia at Re . 1 e ach share. Hence no incidence of tax arose in the hands of Shri Anil R Patel and simultaneously when Shir Atul N Dal mia transferred these shares in the sche me of acquisition to Lupin, he set off his short term c apital loss against the gain on the sale of these shares. Therefore , no tax on this transfer was paid by Shri Atul N Dal mia as well. Moreover, there was no reason for transferring the shares at Rs. 1 b y Shr i Anil R Patel wh en he along with Shri Atul N Da l mia were equally a ware of the prospect of sale of these shares to Lupin Phar ma at market rate or more than market r ate. In this context it is again reiterated that colorable devices can not be part of tax planning. The various judgeme nts as discussed in earlier issue are squarely applicable to this issue also. To avoid repetition they are not discussed separately here though it perfectl y applies to this issue also. As has been he ld by the IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 67 - Hon'ble Supre me Court in the judgment in Su mati Da yal v. CIT (1995) 214 ITR 801, reiterating -he law laid down in CIT v. Durga Prasad More (1971) 82 ITR 540(SC) that an apparent must be considered real only if it is shown that there are reasons to believe that the apparent is not the real and that the Taxing Authorities are entitled to look into the surrounding circu mstances to fine out the reality and the matter has to be considered by a pplying the test of human probabilities. Therefore, it is clear fro m the above judg ments that the burden is on the assessee to show that the receipt is not of an income nature by giving an explanation; the income Tax Officer is not expected to put blinkers and accept it as it is; it is open to him to probe further and find out whether the apparent is real or not and take a decision on such probing, in the light of hu man probabilities. 8.3. Thus on the basis of above discussion and facts on record, the full value of consideration is calculated adopting the fair market value of shares on the date of transfer. From the various evidences as discussed above, it is gathered that fair market value of shares of Ruba min Labo ratories Li mited was mu ch more than Rs l/-per share at which the transaction is recorded in his books of accounts. It is pertinent to note that 100% shares of Ruba min Laboratories Li mited alongwith business as a going concern has been transferred to Lupin Li mited which is a third party at the rate of Rs 154.37/- as per the share purchase agree ment per sha re. But as discussed in Para 5, the a ctual price at which the shares have been transferred is Rs.178.21 per share. Thus full v alue of consideration is as follows: IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 68 - Full value of consideration =1,94,800* 178.21 per share=Rs 3,47,15,308/- Less: Value of consideration shown in books of accounts=Rs.1,94,800/- Unaccounted Inv est ment= Rs 3,45,20,508/-. 8.4 Accordingly, Rs. 3,45,20,508/- is added back to the total income of the assessee for the ye ar u nder consideration. Penalt y proceeding u/s 271(l)(c) of the Act are being initiated for conceal ment of inco me . [Addition : Rs 3,45,20,508/-] 9. After discussion and on the basis of the data made available on record, the total income of the assessee is computed as under: I n c o m e f r o m b u s i n e s s a s d i s c u s s e d a b o v e i n p a r a 5 &6 R s . 1 1 , 6 2 , 6 9 , 9 0 7 / - A s d i s c u s s e d i n p a r a 7 a b o v e R s . 3 4 , 5 9 , 5 5 , 1 0 0 /- A s d i s c u s s e d i n p a r a 8 a b o v e R s . 3 , 4 5 , 2 0 , 5 0 8 /- I n c o m e f r o m o t h e r S o u r c e s R s . 2 9 , 6 7 9 / - G r o s s T o t a l I n c o m e... R s . 4 9 , 6 7 , 7 5 , 1 9 4 / - L e s s : D e d u c t i o n ( c h a p t e r V I - A R s . 1 , 0 0 , 0 0 0 / - T o t a l a s s e s s e d I n c o m e ... R s . 4 9 , 6 6 , 7 5 , 1 9 4 / - ... . . u / s 2 8 8 A ... R s . 4 9 , 6 6 , 7 5 , 1 9 0 / - 10. Assessed u/s 153A r.w.s . 143(3) of the Act 1961. Tax and interest u/s. 234A & B charged as applicable as per ITNS 150 which for ms part of this order. Issued demand notice and Challan accordingly. Issued notice u/s 274 r.w.s . 271(1)(c) of the Act. IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 69 - 11. Thereafter , assessee preferred first statutory appeal b efore the learned CIT(A) who granted relief to the assessee with following observations: “ 5 . 4 A f t e r h a v i n g p e r u s e d t h e a s s e s s m e n t o r d e r a n d t h e w r i t t e n s u b m i s s i o n s o f t h e a p p e l l a n t a n d a f t e r h e a r i n g b o t h t h e s i d e s , I h a v e n o t e d t h a t t h e r e i s n o d i s p u t e t h a t G o p a k u m a r ( s u p r a ) w h i c h s u p p o r t s h i s c o n t e n t i o n t h a t t h e r e i s n o r e s t r i c t i on / l i m i t a t i o n i n t h e p l a i n l a n g u a g e o f s . 1 5 3 A w i t h r e g a r d t o s c o p e o f a d d i t i o n s w h i c h c a n b e m a d e w h i l e r e f r a i n i n g u / s 1 5 3 A i n " u n ab a t e d " a s s e s s m e n t , A O h a s n o t b e e n a b l e t o d e m o n s t r a t e a s t o h o w a n d w h y t h e c o n t r a r y a n d b i n d i n g v i e w i n t h e a s s e s s m e n t h a d - r e m a i n e d u n a b a t e d a s o n t h e d a t e o f t h e s e a r c h . A f te r p e r u s i n g t h e A u t h o r i t i e s r e l i e d u p o n b y b o t h t h e s i d e s , I h a v e al s o n o t e d t h a t t h o u g h A O h a s r e l i e d o n K e r a l a H C d e c i s i o n i n J u r i sd i c t i o n a l H C d e c i s i o n s i n S a u m y a C o n s t r u c t i o n P u t . L t d . 3 8 7 I T R 52 9 ( G u j ) a n d i n D e s a i C o n s t r u c t i o n 3 8 7 I T R 5 5 2 (G u j ) s u p p o r t i n g A R ' s c o n t e n t i o n m u s t n o t b e f o l l o w e d . A t t h e s a m e t i m e , I h a v e n o t e d t h a t t h e A O i n t h e a s s e s s m e n t o r d e r h a s c e r t a i n l y re f e r r e d t o a n d r e l i e d u p o n s o m e s e i z e d d o c u m e n t s b e f o r e m a k i n g t h e i m p u g n e d a d d i t i o n s . A s p e r t h e A R , t h e s e s e i z e d d o c u m e n t s r ef e r r e d t o b y t h e A O a r e n o t " i n c r i m i n a t i n g " b e c a u s e t h e s e a r e s i m p l e r o u t i n e d o c u m e n t s / c o m m u n i c a t i o n s i n n o r m a l c o u r s e a n d t h e co n t e n t s o f t h e s e " d o c u m e n t s " d o n o t d i s c l o s e e v e n r e m o t e l y a n y u n a c c o u n t e d t r a n s a c t i o n / r e c e i p t / p a y m e n t , t h e i n f o r m a t i o n a b o u t w h i c h , h a s b e e n o r m i g h t h a v e b e e n w i t h h e l d f r o m t h e d e p a r t m e nt o r w h i c h " u n e a r t h s " o r e v e n r e m o t e l y i s i n d i c a t i v e o f a n y " un a c c o u n t e d " t r a n s a c t i o n o r a n y u n d i s c l o s e d i n c o m e , a n d h e n c e t h e r a t i o o f S a u m y a C o n s t r u c t i o n ( s u p r a ) a n d K a b u l C h a wl a 6 2 t a x m a n n . c o m 4 1 2 w o u l d s q u a r e l y a p p l y . O n t h e o t h e r h a n d , t h e A O s u b m i t t e d t h a t d o c u m e n t s r e l i e d u p o n b y t h e A O a r e i n c r i m i n a t i n g i n a s m u c h a s t h e s e w e r e n o t p r o d u c e d n o r w o u l d h a ve b e e n p r o d u c e d d u r i n g r e g u l a r a s s e s s m e n t a n d t h e y r e v e a l t h e t r u e a n d f r a u d u l e n t / s h a m n a t u r e o f u n d e r l y i n g t r a n s a c t i o n s an d t h e r e f o r e b e i n g o f " i n c r i m i n a t i n g " n a t u r e , t h e a d d i t i o n s f o u nd e d o n s u c h i n c r i m i n a t i n g s e i z e d d o c u m e n t s a r e n o t h i t b y r a t i os o f S a u m y a C o n s t r u c t i o n o r o f K a b u l C h a w l a ( s u p r a ). A f t e r a p pr e c i a t i n g t h e r i v a l c o n t e n t i o n s a n d a f t e r p e r u s i n g t h e d o c u m e n t s r e l i e d u p o n b y t h e A O , I h a v e c o m e t o t h e c o n c l u s i o n t h a t b e f o r e th e g r o u n d s r a i s e d b y t h e a p p e l l a n t c a n b e a d j u d i c a t e d , t h e i s su e w h e t h e r e a c h / a n y o f t h e s e i z e d d o c u m e n t r e l i e d u p o n b y t h e A O i s " i n c r i m i n a t i n g " w i t h i n t h e m e a n i n g a n d s p i r i t o f r at i o o f t h e J u r i s d i c t i o n H C i n S a u m y a C o n s t r u c t i o n ( 2 0 1 6 ) 3 8 7 IT R 5 2 9 ( G u j ) s o a s t o c o n f e r v a l i d j u r i s d i c t i o n o n t h e A O t o r e vi s i t t h e i s s u e ( s ) a n d m a k e r e l a t e d a d d i t i o n s i n f r e s h a s s e s s m e n t u / s 1 5 3 A , n e e d t o b e a d j u d i c a t e d . F o r t h i s p u r p o s e , d e t a i l e d e x a m i n a ti o n o f t h e s e i z e d d o c u m e n t s r e l i e d u p o n b y t h e A O w o u l d b e n e ce s s a r y . T h e IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 70 - n e x u s o f s u c h d o c u m e n t s w i t h t h e a d d i t i o n m a d e b y th e A O w o u l d a l s o n e e d t o b e e x a m i n e d . A s t h i s e s s e n t i a l l y a l s o i n v o l v e s g o i n g i n t o t h e f a c t s l e a d i n g t o e a c h o f t h e a d d i t i o n s , I p r o p o s e t o f i r s t l y a d j u d i c a t e t h e g r o u n d s 2 - 5 c h a l l e n g i n g t h e a d d i t i o ns o n m e r i t a f t e r w h i c h I w o u l d r e v e r t t o t h e s e ( 1 . 1 , 1 . 2 , 2 . 1 , 3 . 1 , 4 . 1 a n d 5 . 1 ) l e g a l g r o u n d s . 8 . I h a v e c a r e f u l l y c o n s i d e r e d t h e m a t e r i a l a v a i l a bl e o n r e c o r d . I h a v e a l s o v e r y m i n u t e l y g o n e t h r o u g h t h e " O f f e r L e t t e r " s i g n e d b y b o t h t h e p a r t i e s a n d a v a i l a b l e o n p a g e s 7 t o 1 0 o f t h e a s s e s s m e n t o r d e r . I h a v e a l s o g o n e t h r o u g h t h e e - m ai l e x c h a n g e s p r i n t e d b y t h e A O o n p a g e s 1 3 - 1 5 o f t h e a s s e s s m e n t o r d e r . I h a v e a l s o n o t e d t h a t w h i l e t h e " O f f e r L e t t e r " d a t e d 2 8 / 8/ 2 0 0 7 o f f e r e d l u m p - s u m c o n s i d e r a t i o n o f R s . 4 2 . 5 c r o r e s , t h e s a m e i s d o u b t l e s s l y s u b j e c t t o u n d e r l y i n g p r e s u m p t i o n s a n d c o n d i t i o n a l it i e s a s s t i p u l a t e d i n c l a u s e 2 o f t h e O f f e r L e t t e r . T h e L d . A O h a s , d e s p i t e h i s a t t e n t i o n h a v i n g b e e n i n v i t e d t o t h e s a m e , n o t t a k e n n o t e o f t h e s a m e a n d h a s u n d u l y e m p h a s i z e d o n l y t h e c o n s i d e r a t io n p o r t i o n o f R s . 4 2 . 5 c r o r e s . I h a v e f u r t h e r n o t e d t h a t i n d e e d th e A O h a s c o r r e c t l y n o t e d t h a t i n t e r n a l e - m a i l e x c h a n g e s p r i nt e d o n p a g e s 1 3 - 1 5 o f t h e a s s e s s m e n t o r d e r a n d r e l i e d u p o n b y h im r e v e a l t h a t t h e a p p e l l a n t a n d o t h e r " s e l l e r s " o f s h a r e s o f R L L u n d o u b t e d l y d i d e x p e c t , w a n t , v i s u a l i z e o r d r e a m t h e d e a l w i t h L u p in p o s s i b l y t o b e f e t c h i n g a m o u n t s o f R s . 4 4 - 4 5 c r o r e s . A s s u c h , t h e e m a i l o f t h e a p p e l l a n t p r i n t e d b y t h e A O o n p a g e 1 4 o f t h e a s s e ss m e n t o r d e r a l s o r e f e r s t o e x p e c t e d o r d e s i r e d t o t a l c o n s i d e r a ti o n f o r t h e d e a l a t R s . 4 5 + 1 5 c r o r e s , t h o u g h , i t i s e x p l a i n e d b y t h e A R t h a t i t i s e v i d e n t f r o m t h e v e r y e - m a i l o n p a g e 1 5 o f t h e a s s es s m e n t o r d e r t h a t " 1 5 " i n t h e s a i d e - m a i l r e f e r s t o d e b t - c o m p o n en t o n t h e a s s e t s i d e o f b a l a n c e - s h e e t a n d i s n o t e v e n r e m o t e l y i n d ic a t i v e o f " e x p e c t e d c o n s i d e r a t i o n " , a n d , " 4 5 " d o e s r e f e r t o ex p e c t e d i n i t i a l c o n s i d e r a t i o n w h i c h w a s o f c o u r s e s u b j e c t t o v a r i o us p r o s a n d c o n s a s i s t o b e n o r m a l l y e x p e c t e d t o b e i n - b u i l t in s u c h c o m m e r c i a l d e a l s . A s p e r t h e A R , t h e A O h a s c o n t r a di c t e d h i s o w n i n f e r e n c e / c o n c l u s i o n i n , o n o n e h a n d r e l y i n g o n " o ff e r e d c o n s i d e r a t i o n " a s p e r t h e O f f e r L e t t e r , w h i l e a t t he s a m e t i m e , o n t h e o t h e r h a n d , o v e r l o o k i n g t h e f i g u r e o f 4 5 + 1 5 i n o n e o f t h e e m a i l s , a n d a l s o i n o v e r l o o k i n g c o n t e n t s o f c l a u s e 2 o f t h e O f f e r L e t t e r , t h e r e b y e m p h a s i z i n g A O ' s o w n d e m o n s t r a t e d su s p i c i o n a b o u t v a l i d i t y o f h i s o w n a c t i o n o f r e l y i n g o n a n ex e c u t o r y , i n c h o a t e , n e g o t i a t i o n - s t a g e a n d t e n t a t i v e e - m a i l c om m u n i c a t i o n s ( s u c h r e l i a n c e i n a n y c a s e , t h o u g h , a s p e r t h e A R , h a s n o l e g a l m e r i t a l s o ) . I h a v e t a k e n n o t e o f t h e f i n a l s h a r e - pu r c h a s e a g r e e m e n t ( S P A ) e n t e r e d i n t o b y t h e a p p e l l a n t w i t h L u p i n d a t e d 2 6 / 9 / 2 0 0 7 ( P B p a g e 1 1 2 } w h i c h , a s r i g h t l y s u b m i t t e d b y t h e A R , i s f i n a l l y " e x e c u t e d " a s a g a i n s t m e r e l y t r a n s i e n t , i n ch o a t e , c o n d i t i o n a l a n d " e x e c u t o r y " O f f e r L e t t e r o f L u p i n . H a v i n g p e r u s e d a l l t h e s e r e l e v a n t d o c u m e n t s a n d h a v i n g n o t e d t h e re l e v a n t f a c t o r s a s a b o v e , I f i n d t h a t t h e A R i s a b s o l u t e l y r i g h t t ha t t h e r e i s n o t a n i o t a o f e v i d e n c e b r o u g h t o n r e c o r d b y t h e A O , e v e n a f t e r a n IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 71 - e x t r a o r d i n a r y a n d i n t r u s i v e a c t i o n u / s 1 3 2 , t o e s t ab l i s h , o r e v e n s u s p e c t , t h a t e v e n a r u p e e i n a d d i t i o n t o w h a t h a s b e e n m e n t i o n e d i n S P A h a s b e e n r e c e i v e d b y t h e a p p e l l a n t o r a n y o th e r s e l l e r o f t h e s h a r e s o f R L L . T h e A O h a s p r o c e e d e d m e r e l y o n co n j e c t u r e s . S h e h a s m e r e l y s u r m i s e d , w i t h o u t a n y e v e n i n d i c a t i ve e v i d e n c e , t h a t t h e a p p e l l a n t " m u s t h a v e r e c e i v e d " t h e e x t r a sa l e c o n s i d e r a t i o n a s p e r t h e O f f e r L e t t e r . T h o u g h , i n my c o n s i d e r e d o p i n i o n , i t i s a l s o a w h o l l y i r r e l e v a n t c o n s i d e r a t io n f o r t h e A O a s t o w h y a t a l l s h o u l d t h e a p p e l l a n t a c c e p t a c o n s i d er a t i o n l o w e r t h a n t h a t s t i p u l a t e d i n O f f e r L e t t e r o f L u p i n , p a r ti c u l a r l y w h e n t h e O f f e r L e t t e r i t s e l f c o n t a i n e d i n c l a u s e 2 , t h e f a c to r s w h i c h w o u l d e n t a i l d o w n w a r d r e v i s i o n o f c o n s i d e r a t i o n a f t e r " d ue d i l i g e n c e " , t h e a p p e l l a n t h a s s t i l l a n d n e v e r t h e l e s s s a t i s f a c t or i l y d e m o n s t r a t e d a n d e s t a b l i s h e d t h e r e a s o n s f o r a c c e p t a n c e o f l o w e r c o n s i d e r a t i o n a s u n d e r : Particulars Amount (Rs. in Crores). Amount (Rs. in Crores) Per share value (No. of Shares) 23,84,783 Consideration offered as per letter dated 28/8/2007 42.50 178.21 Less: Adjustments Bad inventory 3.096 Loss for year till date 1.04 Transfer of Land 0.70 Recovery of Fees to Yes Bank 0.85 5.6860 *Adjustment on account of Supplementary Agreement 0.1805 5.8665 Net Consideration receivable as per Share Purchase Agreement dated 26-9-2007 36.8140 (36.6335) 154.37 (153.61) *re-payment (refund) made as per supplementary SPA dated 26/9/2007 9 . E m p h a s i z i n g t h e o b v i o u s s a n c t i t y , i n t e g r i t y a n d c o n c l u s i v e n e s s o f e v i d e n c e o f c o n s i d e r a t i o n f o r t h e d e a l a t R s . 3 6 . 8 1 4 0 c r o r e s a s p e r S P A , w h i c h h a s o n l y b e e n c o n j e c t u r a l l y a n d n e e d l e s s l y d o u b t e d b y t h e A O w i t h o u t e v e n a t t e mp t i n g t o i m p e a c h b y b r i n g i n g i n a n y r e l e v a n t e v i d e n c e s b y t he A O , t h e A R h a s a l s o b r o u g h t t o m y n o t i c e , a n d e s t a b l i s h e d b y pr o d u c i n g t h e c o p i e s o f b a n k s t a t e m e n t s , t h a t t h e d e a l c o n s i d e r a ti o n a s p e r S P A d a t e d 2 6 / 9 / 2 0 0 7 w a s e v e n f u r t h e r r e q u i r e d t o b e r e du c e d a s p e r t h e v e r y t e r m s o f S P A b y w a y o f e x e c u t i o n o f a . s u p p l e m e n t a r y S P A , t h o u g h u n s i g n e d a n d u n d a t e d ( p a g e 1 8 7 - 1 9 1 o f pa p e r b o o k ) . A s p e r t h i s s u p p l e m e n t a r y a g r e e m e n t , a n e t a d j u st m e n t a m o u n t o f R s . 1 8 . 0 5 l a c s ( R s . 4 7 , 0 7 , 0 0 0 / - T o b e p a i d. L e s s - R s . 2 9 , 0 1 , 2 3 6 / - T o b e r e c e i v e d ) h a s b e e n r e d u c e d fr o m e a r l i e r a g r e e d c o n s i d e r a t i o n o n a c c o u n t o f v a r i o u s f a c t o r s l i s t e d t h e r e i n , a n d f u r t h e r , p r o - r a t a a m o u n t s h a v e a l s o b e e n p a i d / re f u n d e d t o L u p i n b y c h e q u e s b y e a c h e x - s h a r e h o l d e r o f R L L a s ev i d e n c e d b y b a n k - s t a t e m e n t s f u r n i s h e d a n d a s p e r t h e d e t a i l s a va i l a b l e o n p a g e n o . 1 9 1 o f t h e p a p e r b o o k . T h e A R s u b m i t t e d t h a t t h i s s u b s e q u e n t a n d i n d e p e n d e n t e v e n t w o u l d f u r t h e r e s t a b l i s h t h e le g a l , u n i m p e a c h a b l e a n d b i n d i n g s a n c t i t y a n d i n t e g r i t y o f t h e S P A a n d o f a m o u n t o f c o n s i d e r a t i o n r e c e i v e d a s m e n t i o n e d in S P A r . w . IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 72 - S u p p l e m e n t a r y S P A . T h e A O h a s . w i t h o u t b r i n g i n g a n y a d v e r s e e v i d e n c e o n r e c o r d , s i m p l y b r u s h e d a s i d e t h e s e e x p la n a t i o n s a n d c o n t e n t s o f S P A a n d s u p p l e m e n t a r y S P A a n d in d e e d b a s e d h i s d e c i s i o n o n i r r e l e v a n t c o n s i d e r a t i o n s l i k e e - m ai l e x c h a n g e s w h i c h h a d p r e c e d e d e v e n t h e O f f e r L e t t e r o f L u p i n da t e d 2 8 / 8 / 2 0 0 7 . I c a n n o t a g r e e m o r e w i t h t h e A R , a n d h e i s a b s o l u t e l y r i g h t t h a t t h e n e g o t i a t i o n s t a g e " O f f e r L e t t e r " i s su e d b y L u p i n a n d " a c c e p t e d " b y t h e a p p e l l a n t i s o b v i o u s l y a n e x e c u t or y a n d c o n d i t i o n a l o f f e r o f c o n s i d e r a t i o n o f R s . 4 2 . 5 c r o re s m a d e b y L u p i n , w h i c h a s p e r t h e v e r y s a m e d o c u m e n t , w a s s u b j e c t , t o d o w n w a r d a d j u s t m e n t a s p e r " u n d e r l y i n g a s s u m p t i o n s " i n c l a u s e 2 a n d " a f t e r d u e d i l i g e n c e " a s p e r c l a u s e 3 o f t h e O ff e r L e t t e r d a t e d 2 8 / 8 / 2 0 0 7 . C l a u s e 2 ( i i i ) c l e a r l y s t i p u l a t e s d o w n w a rd a d j u s t m e n t , a n d i n d e e d , a s r i g h t l y p l e a d e d b y t h e A R , t h e b e s t p e r s o n t o d e c i d e t h e i s s u e a s t o w h e t h e r a n d i f y e s w h a t a m o u n t o f su c h d o w n w a r d a d j u s t m e n t m a y b e a c c e p t a b l e , i s o n l y t h e a p p e l l a nt , a n d , A O h a s n e i t h e r a n y a u t h o r i t y n o r a n y l e g a l s a n c t i o n i n s e a t i n g i n j u d g m e n t o v e r t h e w i s d o m a n d p r o p r i e t y o f a p p e l l an t ' s ( a n d o t h e r s h a r e h o l d e r s ' ) s u c h d e c i s i o n o f a c c e p t a n c e o f l o w e r c o n s i d e r a t i o n . A s p e r b u l l e t - p o i n t 5 i n c l a u s e 5 o f O f f e r L e t t e r , " P o s t f i n a n c i a l , l e g a l a n d t e c h n i c a l d u e d i l i g e n c e , L u p i n w i l l c o n f i r m t h e f i n a l v a l u a t i o n n u m b e r a n d w i l l p r o v i d e t h e l e g a l d o c u m e n t a t i o n d r a f t , I n m y c o n s i d e r e d o p i n i o n , t h e A O c l e a r l y e r r e d i n re l y i n g o n t h i s O f f e r L e t t e r c o n t a i n i n g s u c h c a t e g o r i c a l t e n t a t i ve n e s s a n d s u c h p o s s i b i l i t y o f d o w n w a r d a d j u s t m e n t , i n p r e f e r e n c e to a n d i n c o m p l e t e d i s r e g a r d o f f i n a l S P A d a t e d 2 6 / 9 / 2 0 0 7 . T h e r e i s a b s o l u t e l y n o e v i d e n c e o f a n y c a s h o r a d d i t i o n a l p ay m e n t r e c e i v e d b y t h e a p p e l l a n t . T h e e - m a i l o r o t h e r c o m m u n i c a t i o ns b e t w e e n t h e p a r t i e s / s t a k e h o l d e r s t o a n a g r e e m e n t p r e c e d i n g t h e f i n a l S P A (a s n o t e d a n d p r i n t e d b y t h e A O o n p a g e s 1 3 - 1 5 o f a s s e ss m e n t o r d e r ) w h i c h i n a n y c a s e h a v e b e e n e x c h a n g e d b e f o r e e v e n t h e O f f e r L e t t e r d a t e d 2 8 / 8 / 2 0 0 7 , h a v e a b s o l u t e l y n o b e a r i n g o r r e l e v a n c e f o r t h e i s s u e t o b e d e c i d e d ( a m o u n t o f c o n s i d er a t i o n " r e c e i v e d o r a c c r u e d " ) e n a b l i n g o r e m p o w e r i n g t h e A O t o d i s c ar d t h e w e l l - d o c u m e n t e d " f u l l v a l u e o f c o n s i d e r a t i o n " o f R s . 3 6 .8 2 c r o r e s a s d e p i c t e d i n S P A . A s s u c h , S e c t i o n 4 8 o f t h e A c t e x pl i c i t l y r e f e r s a n d r e q u i r e s t h e A O t o a d o p t o n l y " f u l l v a l u e o f c o n s i d e r a t i o n r e c e i v e d o r a c c r u i n g a s a r e s u l t o f t h e t r a n s f e r " f o r c o m p u t i n g t h e C a p i t a l G a i n s . Wi t h o u t a n y e v i d e n c e o f r e c e i p t b y o r a c c r u a l t o t h e a p p e l l a n t o f a n y a d d i t i o n a l / u n r e c o r d e d c o n s i d e ra t i o n, n o s u b s t i t u t i o n o r r e p l a c e m e n t o f d o c u m e n t e d c o n s i d e r at i o n o n p r e s u m p t i v e b a s i s i s p e r m i s s i b l e i n l a w . A s s u c h , I u n h e s i t a t i n g l y a g r e e w i t h t h e L d . A R t h a t t h e r e i s a b s o l u t e l y n o cr e d i b l e m a t e r i a l w i t h t h e A O t o e v e n s u s p e c t t h a t m o r e t h a n w h a t i s s t i p u l a t e d i n S P A h a s b e e n r e c e i v e d a s c o n s i d e r a t i on f o r t r a n s f e r o f s h a r e s b y t h e a p p e l l a n t . T h e s o u n d a n d t e n a b l e e x p l a n a t i o n o f f e r e d b y t h e a p p e l l a n t f o r " d i f f e r e n c e " b e t w e e n "c o n s i d e r a t i o n a s p e r O f f e r L e t t e r 9 a n d " c o n s i d e r a t i o n a s p e r S P A ", f o r w h i c h t h e p r o v i s i o n i s m a d e i n t h e O f f e r L e t t e r i t s e l f , h a s al s o b e e n b a s e t e s s t y a n d c a s u a l l y r e j e c t e d b y t h e A O . C o n s e q ue n t l y , t h e A O IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 73 - i s a l s o i n e r r o r o f l a w i n o n l y p a r t i a l l y a n d c o n v en i e n t l y r e a d i n g t h e O f f e r L e t t e r t h u s d o i n g a n i m p e r m i s s i b l e i n t e r pr e t a t i o n a l d a m a g e t o t h e e v i d e n t i a r y i n t e g r i t y o f t h e d o c u m e n t. I t i s e l e m e n t a r y a n d s e t t l e d p r i n c i p l e o f l a w t h a t t h e d oc u m e n t h a s t o b e r e a d a s a w h o l e a n d t h e A O ( o r t h e a p p e l l a n t ) i s n o t a u t h o r i z e d t o p a r t i a l l y a n d c o n v e n i e n t l y r e a d t h e s a m e b y i g n or i n g o t h e r p a r t s o f t h e s a m e d o c u m e n t . T h u s , I f i n d t h a t t h e ad d i t i o n m a d e b y t h e A O i s b a s e d m e r e l y o n i l l - f o u n d e d s u s p i c i o n , c on j e c t u r e s a n d s u r m i s e s a n d h a s n o f o u n d a t i o n i n a n y a d v e r s e e v i d en c e b r o u g h t o n r e c o r d . A s e x p l a i n e d b y A p e x C o u r t i n U m a c h a r a n S h a w & B r o s v . C I T [ 1 9 5 9] 3 7 T T R 2 7 1 ( S C ) , s u s p i c i o n , h o w s o e v e r s t r o n g , c a n n o t p a r t a k e t h e c h a r a c t e r o f e v i d e n c e . T h u s , a d d i t i o n m a d e b y t h e A O m e r e l y o n c o n j e c t u r e s , b y r e l y i n g o n i r r e l e va n t p r e - o f f e r l e t t e r ( p r e - 2 8 / 8 / 2 0 0 7 ) e - m a i l e x c h a n g e s f o r d o u b t i ng t h e s a n c t i t y a n d c o n c l u s i v e e v i d e n t i a r y v a l u e o f t h e S P A d a t e d 26 / 9 / 2 0 O 7 a n d a l s o b y i g n o r i n g v i t a l p a r t s o f t h e v e r y d o c u m e n t (O f f e r L e t t e r o f L u p i n ) - r e l i e d u p o n b y h i m a n d a l s o b y r e j e c t i n g t he p l a u s i b l e a n d s u b s t a n t i a t e d e x p l a n a t i o n o f f e r e d b y t h e a p p e l la n t , h a s a b s o l u t e l y n o m e r i t s a n d d e s e r v e s t o b e d e l e t e d . I m a y q u o t e f r o m t h e i n s t r u c t i v e a n d o f t - q u o t e d o b s e r v a t i o n s o f H o n . S C i n U m a c h a r a n S h a w & O t h e r s ( 1 9 5 9 } 3 7 I T R 2 7 1 ( S C ) f o r t h e m a n d a t e t h a t m e r e s u s p i c i o n c a n b e n o b a s i s f o r a d di t i o n a n d t h a t s u s p i c i o n c a n n o t p a r t a k e t h e c h a r a c t e r o f e v i de n c e : " T h e D e p a r t m e n t c o n t e n d s t h a t o n e o f t h e u n u s u a l f ea t u r e s w a s t h a t t h o u g h t h e b a l a n c e s o f t h e p a r t n e r s w e r e f l u c t u a t i n g a s t h e i r d r a w i n g s w e r e m a d e , t h e p r o f i ts c o n t i n u e d t o b e d i v i d e d e q u a l l y . T h i s i s n o d o u b t an u n u s u a l f e a t u r e , b u t i t d e p e n d s u p o n h o w t h e d r a w i n g s w e r e c o n s i d e r e d b y o t h e r s . T h e r e w a s a n a r r a n g e m e n t i n th e d e e d i t s e l f f o r s u c h d r a w i n g s , a n d l o o k i n g a t t h e c i r c u ms t a n c e s o f t h e f a m i l y t h e d r a w i n g s d u r i n g a y e a r c o u l d n o t b e s a i d t o b e t o o e x t e n s i v e a s o t h e r s h a d w i t h d r a w n l a r g e s u m s a l s o i n t h e i r t u r n . T a k i n g i n t o c o n s i d e r a t i o n t h e e n t i r e c i r c u m s t a n c e s o f t h e c a s e , w e a r e s a t i s f i e d t h a t t h e r e w a s n o m a t e r i a l on w h i c h t h e I n c o m e - t a x O f f i c e r c o u l d c o m e t o t h e c o n c l u s i o n t h a t t h e f i r m w a s n o t g e n u i n e . T h e r e a r e m a n y s u r m i s e s a n d c o n j e c t u r e s , a n d t h e c o n c l u s i o n i s t h e r e s u l t o f s us p i c i o n w h i c h c a n n o t t a k e t h e p l a c e o f p r o o f i n t h e s e m a t t er s . " 1 0 . T h u s a n d t h e r e f o r e , i t i s h e l d t h a t t h e c o n s i d er a t i o n u n d e r t h e S P A p a i d b y L u p i n a n d r e c e i v e d b y t h e a p p e l l a n t a n d o t h e r s , a s e v i d e n c e d b y S P A , i s n o m o r e t h a n R s . 3 6 . 8 1 4 c r o r e s g i v i n g a p e r - s h a r e c o n s i d e r a t i o n o f R s . 1 5 4 . 3 7 . A c c o r d i n g l y , t h er e i s n o u n d e r s t a t e m e n t o f " f u l l v a l u e o f c o n s i d e r a t i o n r e c ei v e d b y o r a c c r u i n g t o t h e a p p e l l a n t ” d i s c l o s e d b y h i m i n t h e r e t u r n o f i n c o m e a t R s . 7 , 0 2 , 9 9 , 0 5 3 / - . I t i s t h e r e f o r e a l s o h e l d t h a t t h e a m o u n t o f R s . 4 , 5 9 , 7 0 , 8 5 4 / - h e l d b y t h e A O a s u n r e c o rd e d IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 74 - c o n s i d e r a t i o n a s h a v i n g b e e n r e c e i v e d b y t h e a p p e l la n t h a s n o m e r i t s a n d t h e r e f o r e t h e a d d i t i o n s o m a d e t o t h e t un e o f R s . 4 , 5 9 , 7 0 , 8 5 4 / - i s d e l e t e d . G r o u n d s 2 . 2 a n d 2 . 3 a re t h u s a l l o w e d . ” 1 3 . P e r c o n t r a , t h e A O w h o a t t e n d e d r e l i e d h e a v i l y o n a s s e s s m e n t o r d e r a n d a l s o d r e w m y a t t e n t i o n t o t h e s t a t u t o r y pr o v i s i o n s o f s . 2 8 ( v a ) t o p o i n t o u t t h a t e x c l u s i o n p r o v i d e d b y p r o vi s o i s o n l y f o r s u b - c l a u s e ( a ) o f c l a u s e ( v a ) a n d n o t f o r c l a u s e ( b) . I n o t h e r w o r d s , i t w a s t h e s u b m i s s i o n o f t h e A O t h a t s u m s r ec e i v e d u n d e r n o n - s h a r i n g k n o w - h o w o r c o p y r i g h t s e t c s h a l l s t i l l b e t a x a b l e u / s 2 8 ( v a ) ( b ) , a n d t h e r e f o r e , i f n o t t h e w h o l e , a t l e a st p a r t o f t h e c o n s i d e r a t i o n r e c e i v e d o n t r a n s f e r o f s h a r e s m u s t be h e l d t o h a v e b e e n r i g h t l y t a x e d u n d e r s . 2 8 ( v a ) ( b ) . I h a v e c a r e fu l l y p e r u s e d a n d c o n s i d e r e d t h e m a t e r i a l o n r e c o r d a n d h a v e p a a t i e n tl y h e a r d b o t h t h e s i d e s . T h e A O h a s , t o b e g i n w i t h , n o t d i s p u t e d t h e o b v i o u s t h a t t h e t r a n s f e r r e d s h a r e s , c l e a r l y h a v i n g b e e n h e l d a s i n v e s t m e n t o r a s p r o m o t e r s h a r e - h o l d i n g , b u t f o r t h e f a c t o f t r a ns f e r o f t h e m b e i n g a l o n g w i t h " c o n t r o l a n d m a n a g e m e n t " a n d a l s o a l o n g w i t h " t h e w h o l e b u s i n e s s o f R L L a s a g o i n g c o n c e r n " , a r e c a p i t a l a s s e t w i t h i n t h e m e a n i n g o f s . 2 (1 4 ) , m o r e p a r t i c u l a r l y af t e r i n s e r t i o n o f E x p l a n a t i o n b e l o w s . 2 (1 4 ) b y F i n a n c e A c t , 2 0 1 2 . T he A R i s a l s o r i g h t t h a t a t t h e t i m e o f d e m e r g e r o f R L L , t h i s o b vi o u s p o s i t i o n h a s a l s o b e e n a c c e p t e d b y t h e D e p a r t m e n t . I n o t h e r w o r ds , t h e A O h a s c l e a r l y n o t a l l e g e d t h a t t h e s h a r e s t r a n s f e r r e d w e re " s t o c k i n - t r a d e " o f t h e a p p e l l a n t o r t h a t t h e y w e r e " n o t c a p it a l a s s e t " . A s s u c h , t h e A O h a s n o t p o i n t e d t o a n y f a c t o n t h e b a si s o f w h i c h i t c a n b e h e l d t h a t t h e s h a r e s h e l d b y a p p e l l a n t a s i nv e s t m e n t a r e n o t C a p i t a l A s s e t a s d e f i n e d i n s . 2 ( 1 4 ) . A s r i g h t l y s ub m i t t e d b y t h e A R d u r i n g t h e c o u r s e o f h e a r i n g , o n c e s h a r e s a r e c a p i ta l a s s e t , h o w i n l a w t h e t r a n s f e r o f s u c h c a p i t a l a s s e t i s h e l d b y th e A O t o r e s u l t i n t o b u s i n e s s i n c o m e i s n o t a t a l l s p e l t o u t b y t h e A O e x c e p t b y r e l y i n g o n C h a n d i g a r h T r i b u n a l D e c i s i o n i n S u m e e t Ta n e j a ( s u p r a ) . I a m a t c o m p l e t e l o s s t o u n d e r s t a n d a n d d ig e s t a s t o w h i c h p r o v i s i o n o f s . 2 8 m a k e s , a n d w h i c h p r o v i s i o n o f s . 4 5 e x c l u d e s , t h e t r a n s a c t i o n a m e n a b l e t o C a p i t a l G a i n s w h e n " s a l e o f e n t i r e s h a r e h o l d i n g " " a l o n g w i t h c o n t r o l a n d m a n a g em e n t " " w i t h b u s i n e s s a s a g o i n g c o n c e r n " i s u n d e r t a k e n b y w a y of t r a n s f e r o f s h a r e s h e l d i n d i s p u t a b l y a s " c a p i t a l a s s e t " a s d e f in e d u / s 2 ( 1 4 ) . A O n e i t h e r i n a s s e s s m e n t o r d e r n o r d u r i n g h e a r i n g ha s t h r o w n l i g h t o n t h i s a s p e c t . Wi t h u t m o s t r e s p e c t , a f t e r p er u s i n g t h e e x - p a r t e T r i b u n a l d e c i s i o n r e l i e d u p o n b y t h e A O a s j ux t a p o s e d w i t h D e l h i H C d e c i s i o n i n S h i v R a j G u p t a a n d S C d e c i s i o n i n V o d a f o n e ( b o t h s u p r a ) , I a m c o n v i n c e d t h a t t h e s e f a c t o r s ( o f t r a n s f e r o f c o n t r o l & m a n a g e m e n t , t r a n s f e r o f b u s i n e s s a s g o i n g c o n c e r n a n d a l s o s o m e n o n - c o m p e t e / n o n - s o l i c i t c l a u s e s a s a p a r t o f t h e d e a l } a r e i n n o w a y r e l e v a n t . A s s u c h , i n m y c o n s i d e r e d op i n i o n , a n d a s e x p l a i n e d i n V o d a f o n e , s h a r e s o f a c o m p a n y a r e i n d ee d a b u n d l e o f r i g h t s , a n d a r e o b v i o u s l y c a p i t a l a s s e t a s d e f i n e d u / s 2 ( 1 4 ) , a n d c o n s e q u e n c e s w h i c h f o l l o w ( i . e . t r a n s f e r o f c o n t r o l/ m a n a g e m e n t IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 75 - a n d t r a n s f e r o f b u s i n e s s ) o n a c c o u n t o f " t r a n s f e r " o f s h a r e s c a n h a v e n o b e a r i n g , a n d n o s u c h b e a r i n g h a s b e e n e n v i sa g e d u / s 2 (1 4 ) o r u / s 2 8 , s o a s t o e n a b l e t h e A O o n f a c t s o r i n l a w t o c o n s i d e r s u c h t r a n s f e r a s " b u s i n e s s " . A s s u c h , n e w ly i n s e r t e d E x p l a n a t i o n b e l o w s . 2 (1 4 ) c a t e g o r i c a l l y a n d s p e c i fi c a l l y i n c l u d e s " r i g h t s i n c l u d i n g t h e r i g h t s o f c o n t r o l a n d m a n a g e me n t i n r e l a t i o n t o a n I n d i a n C o m p a n y " w i t h i n t h e d e f i n i t i o n o f " p r op e r t y " f o r s u c h r i g h t s t o b e C a p i t a l A s s e t . T h u s , t h e m a j o r p i l l a r o f A O ' s a c t i o n f a l l s a n d h a s n o v a l i d i t y i n l a w . A s r i g h t l y s u b m i tt e d b y t h e A R , t h e C B D T L e t t e r N o . F . N o . 2 2 5 / 1 2 / 2 O 1 6 / I T A . I I d a t e d Ma y 2 , 2 0 1 6 a l s o c l e a r l y p r e s c r i b e s s u c h i n t e r p r e t a t i o n i n g e n er a l . T h e f a c t o r s t o b e c o n s i d e r e d r e l e v a n t b y t h e A O a s p e r p a r a 3 of t h e C B D T l e t t e r , c a n n o t o b v i o u s l y a n d b y n o s t r e t c h o f i m a g in a t i o n , i n c l u d e t h e s c e n a r i o w h e n s h a r e s h e l d a s i n v e s t m e n t a r e s o ld a s a b u l k i n a s o l i t a r y t r a n s a c t i o n . T h e A O i s a b s o l u t e l y w r o n g i n u n r e a s o n a b l y s t r e t c h i n g a n d t w i s t i n g t h e f a c t s a n d o b s e r v i n g t h a t i t i s " c l e a r l y e v i d e n t " t h a t L u p i n h a s p a i d " t h e p ur c h a s e c o n s i d e r a t i o n f o r t h e n o n - c o m p e t e a n d n o n - s o l i c i t cl a u s e s a s e n s h r i n e d i n t h e A g r e e m e n t " w h e n e v e n i f a p a r t o f t h e c o n s i d e r a t i o n r e c e i v e d b y t h e a p p e l l a n t w a s t o w a r d s " n o n - c o m p e t e " a n d " n o n - s o l i c i t " c o v e n a n t s , i t i s p a t e n t l y w r o n g t o h o l d t h a t t h e w h o l e o f t h e c o n s i d e r a t i o n f o r t r a n s f e r o f s h a r e s i s e x c l u s i v e l y t o w a r d s s u c h " n o n - c o m p e t e " a n d " n o n - s o li c i t " c o v e n a n t s. M o r e o v e r , a f t e r p e r u s a l o f O f f e r L e t t e r d a t e d 2 8 / 8 / 2 0 O 7 a n d S P A d a t e d 2 6 / 9 / 2 0 O 7 I f u l l y a g r e e w i th t h e L d . A R t h a t n e i t h e r L u p i n a t t a c h e d a n y v a l u e t o s u c h " n o n -c o m p e t e " o r " n o n - s o l i c i t " c l a u s e i n O f f e r L e t t e r , n o r h a s t h e ap p e l l a n t u n d e r t a k e n a n y a c t i v i t y i n P h a r m a b u s i n e s s e v e n a f te r l a p s e o f 8 - 9 y e a r s s o a s t o i m p l y t h a t s u c h r e s t r a i n t b y w a y o f " n o n - c o m p e t e " o r " n o n - s o l i c i t " c l a u s e s h a d " v a l u e " e n o u g h w h i c h re s u l t e d i n t o t r a n s f e r o f a n y " a s s e t " b y t h e a p p e l l a n t t o L u p i n th r o u g h S P A . T h e A R i s a l s o r i g h t i n p o i n t i n g o u t t h a t c l a u s e ( v a ) in s e c t i o n 2 8 h a s b e e n b r o u g h t i n t o b r i n g w i t h i n t h e t a x n e t t h e e x cl u s i v e a n d s t a n d - a l o n e t r a n s a c t i o n s o f u n d e r t a k i n g " n o n - c o m p e te " a n d " n o n - s o l i c i t " o r " n o n - s h a r i n g " r e s t r a i n t s f o r a c o n s i d e ra t i o n , w h i c h r e c e i p t s w e r e h i t h e r t o n o t o f f e r e d b y t h e r e c i p i e n ts o f c o n s i d e r a t i o n e v e n f o r c a p i t a l g a i n s c l a i m i n g s u c h r e c e i p t s t o b e m e r e c a p i t a l r e c e i p t s w i t h o u t a n y u n d e r l y i n g t r a n s fe r o f a n y a s s e t . M o r e o v e r , t h e L d . A R h a s a l s o t a k e n m e t h r o u g h p r o vi s o o f s e c t i o n 2 8 ( v a ) w h i c h c a t e g o r i c a l l y e x c l u d e s f r o m t h e p u r v i ew o f c l a u s e ( v a ) t h e s u m s r e c e i v e d o n a c c o u n t o f t r a n s f e r o f r ig h t t o c a r r y o n b u s i n e s s , w h i c h i s c h a r g e a b l e u n d e r t h e h e a d ' C a p i ta l G a i n s ' . T h e A O i s r i g h t i n h i s s u b m i s s i o n s d u r i n g t h e h e a r i n g th a t n o n - s h a r i n g o f k n o w - h o w e t c a s d e t a i l e d i n s . w o u l d f a l l u / s 2 8( v a ) ( b ) w h i c h h a s n o t b e e n e x c l u d e d b y p r o v i s o . B u t i n m y o p i n i o n, w h e n t h e c o n s i d e r a t i o n r e c e i v e d o n t r a n s f e r o f a c a p i t a l a s se t h a s d u l y b e e n d i s c l o s e d u n d e r t h e h e a d C a p i t a l G a i n s , a s p r e s c r i be d b y C B D T l e t t e r d a t e d 2 / 5 / 2 0 1 6 , a n d o t h e r w i s e a l s o , u n l e s s t h e r e a r e c o m p e l l i n g a n d p a t e n t j u s t i f i c a t i o n s, " H e a d S h i f t i n g " a t t e m p t b y t h e A O i s n o t w a r r a n t e d , M o r e o v e r a n d m o r e r e c e n t l y, a s h e l d b y IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 76 - S C i n V o d a f o n e ( s u p r a ) , a l u m p s u m c o n s i d e r a t i o n c an n o t b e a l l o c a t e d / d i v i d e d t o a s s i g n t o e a c h c o m p o n e n t o f an o v e r a l l d e a l o f t r a n s f e r o f s h a r e s . O n a j o i n t r e a d i n g o f s e c t i on 2 ( 1 4 ) , s e c t i o n 2 8 ( v a ) r . w . p r o v i s o t h e r e t o , s e c t i o n 4 5 ( 1 ) , s e c t i o n 4 7 ( v i b ) , s e c t i o n 4 8 a n d s e c t i o n 5 0 B , a n d B o a r d l e t t e r n o . F . N o . 2 2 5 / 1 2/ 2 0 1 6 / I T A . I I d a t e d M a y 2 , 2 0 1 6 I h a v e f o r m e d a c o n s i d e r e d o p i n i on t h a t a t r a n s a c t i o n o f s a l e o f e n t i r e s h a r e h o l d i n g i n a c o mp a n y h e l d a s i n v e s t m e n t / c a p i t a l a s s e t w h i c h r e s u l t s e v e n t u a l l y in t o c o m p l e t e t r a n s f e r o f t h e c o m p a n y a l o n g w i t h r i g h t s o f c o n t r ol a n d m a n a g e m e n t , " l o c k , s t o c k a n d b a r r e l , a s a r e t h e f a ct s i n t h e p r e s e n t c a s e , r e m a i n s c h a r g e a b l e u n d e r t h e H e a d ' C ap i t a l G a i n s ' a s h e l d b y D e l h i H i g h C o u r t i n S h i v R a j G u p t a ( s u p ra ) . T h e A O h a s e r r e d i n a t t e m p t i n g t o b r i n g t h e t r a n s a c t i o n w it h i n u / s 2 8 ( v a ) b y u n r e a s o n a b l y s t r e t c h i n g a n d t w i s t i n g t h e f a c t s . T h e A R i s a b s o l u t e l y r i g h t t h a t o n c e t h e g a i n s a r e o f f e r e d a s C a p i t a l G a i n s , i t h a s t o b e f i r s t l y s h o w n b y t h e A O t h a t t h e a m o u nt i s w r o n g l y s h o w n u n d e r t h i s h e a d r a t h e r t h a n a t t e m p t i n g t o s h ow t h a t h o w " i t c o u l d a n d p o s s i b l y s h o u l d h a v e b e e n o f f e r e d u n d e r th e H e a d B u s i n e s s ' " . I t i s i m p o r t a n t t o n o t e t h a t i n S h i v R aj G u p t a ( s u p r a ) , t h e c o n s i d e r a t i o n f o r t r a n s f e r o f s h a r e s ( f o r e n t i re s h a r e h o l d i n g ) w a s o f f e r e d a n d b r o u g h t t o t a x o n l y u n d e r t h e h e a d C a p i t a l G a i n s , . a n d A O f u r t h e r h e l d t h a t t h e c o n s i d e r a t i o n r e c e i v ed w a s a c t u a l l y m o r e b y a n a m o u n t c o l o u r a b l y r e c e i v e d b y t h e a p p e l la n t u n d e r a s e p a r a t e a g r e e m e n t p u r p o r t e d l y f o r " n o n - c o m p e t e " r es t r a i n t s ( a n d c l a i m e d w h o l l y e x e m p t ). T h e a c t i o n w a s a p p r o v e d b y H C a n d e v e n " n o n - c o m p e t e " r e c e i p t w a s b r o u g h t t o t a x o n l y u n d e r t h e H e a d C a p i t a l G a i n s a s p a r t o f t h e d e a l o f t r a n s f e r o f s ha r e s . O b v i o u s l y , w h e n t h e p r e s e n t a p p e l l a n t h a s s h o w n t h e w h o l e c o n si d e r a t i o n u n d e r t h e h e a d C a p i t a l G a i n s , t h e A O ' s a t t e m p t i n br i n g i n g t h e a m o u n t t o t a x u / s 2 8 ( v a ) h a s n o v a l i d i t y . I t i s t h e r e f o r e h e l d t h a t t h e g a i n s a r i s i n g o n a c c o u n t o f t r a n s a c t i o n o f s a l e o f s h a r e s o f R L L w a s r i g h t l y d i s c l o s e d b y t h e a p p e l l a n t u n d e r t he h e a d ' C a p i t a l G a i n s ' . T h e r e i s n o d i s p u t e o r a n y a d v e r s e o b s e r v a t i o n o f t h e A O w i t h r e g a r d t o t h e c o s t o f a c q u i s i t i o n a nd t h e q u a n t i f i c a t i o n o f c a p i t a l g a i n s a s d i s c l o s e d b y t h e a p p e l l a n t . C o n s e q u e n t l y , t h e w h o l e a d d i t i o n o f R s . 1 1 , 6 2 , 6 9 , 9 07 / - i s h e l d w h o l l y w i t h o u t m e r i t a n d I h a v e n o h e s i t a t i o n i n d el e t i n g t h e s a m e . A c c o r d i n g l y , t h e a d d i t i o n o f R s . 1 1 , 6 2 , 6 9 , 9 0 7/ - i s h e r e b y d e l e t e d . T h e a p p e l l a n t g e t s e q u i v a l e n t r e l i e f . G ro u n d s N o . 3 . 2 a n d 3 . 4 a r e t h u s a l l o w e d . 1 5 . 2 H a v i n g a n a l y z e d t h e m a t e r i a l o n r e c o r d a s a b o ve , a n d a f t e r g r a s p i n g t h e b a s i s o f t h e A O i n m a k i n g t h e a d d i t i o n a n d t h e a p p e l l a n t ' s o b j e c t i o n s t h e r e t o , a n d a f t e r e n g a g i n g w i t h t h e r e l e v a n t f a c t s , I h a v e c o m e t o a c o n s i d e r e d c o n c l u si o n , w h i c h , i n m y c o n s i d e r e d o p i n i o n , m o r e o r l e s s a l s o e m e r g e s o n i t s o w n a n d i n d e e d e f f o r t l e s s l y , t h a t t h e A O h a s p r o c e e d e d o n no c r e d i b l e a n d r e l e v a n t e v i d e n c e a t a l l , a s r i g h t l y c o n t e n d e d b y th e A R , i n b r i n g i n g t h e a m o u n t o f R s . 3 4 , 5 9 , 5 5 , 1 0 0 / - t o t a x u /s 6 9 B a s " u n e x p l a i n e d i n v e s t m e n t " i n t h e h a n d s o f t h e a p p e l la n t . A s s u c h , I IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 77 - t e n d t o a g r e e w i t h e a c h o f t h e A R ' s r e b u t t a l s f o r ea c h o f t h e m a i n p l a n k s o f t h e A O a s e x t r a c t e d b y m e a b o v e . F i r s t l y , t h e A O o f t h e c o u n t e r - p a r t y ( A R P ) (s e l l e r o f s h a r e s w h o d i s c l o s e d t r a n s a c t i o n u n d e r t h e h e a d C a p i t a l G a i n s ) , a s a l s o t h e A O o f t he g r o u p - p e r s o n s n a m e l y N a n d k i s h o r D a l m i a , G y a n D a l a m i a a n d M i t a D a l m i a ( w h o s h o w e d s i m i l a r p u r c h a s e @ R e . 1 ) h a ve , i n o r d e r s p a s s e d b y t h e m u / s 1 4 3 ( 3 ) f o r t h e r e l e v a n t as s e s s m e n t y e a r 2 0 0 8 - 0 9 b e f o r e t h e d a t e o f t h e s e a r c h , h a v e a c c e p t ed , a f t e r d u e v e r i f i c a t i o n , t h e g e n u i n e n e s s o f t h e t r a n s a c t i o n o f s a l e / p u r c h a s e o f s h a r e s o f R L @ R e . 1 / - i n p u r s u a n c e t o t h e A r b i t r a ti o n A w a r d . A O w a s u n d e r h e a v y o n u s t h e r e f o r e t o d e m o n s t r a t e c r e d ib l e b a s i s , b a s e d o n r e l i a b l e e v i d e n c e r a t h e r t h a n c o n j e c t u r e s , f o r d i f f e r i n g f r o m a c o - o r d i n a t e O f f i c e r , o r h e r o w n p r e d e c e s s o r ( A . Y 2 0 0 9 - 1 0 ) w h i l e d i s t u r b i n g t h e s a n c t i t y o f f i n a l i t y o f t h e i ss u e , w h i c h , i n m y o p i n i o n , h a s n o t a t a l l b e e n e v e n a t t e m p t e d t o h a v e b e e n d i s c h a r g e d b y t h e A O . I t i s a l s o e v i d e n t t h a t t h e AO h a s i n d e e d e r r e d i n o n l y p a r t i a l l y , c o n v e n i e n t l y a n d t w i s t e d l y r e a d i n g t h e e - m a i l o f M i l i n M e h t a d a t e d 1 / 7 / 2 0 0 7 . T h e s a i d e - m a i l, s e e k i n g o p i n i o n / a d v i c e , i s n o t a t a l l s e e k i n g a d v i c e o n " t ax - a v o i d a n c e t h r o u g h d u b i o u s m e a n s " a s h a s b e e n r e a d b y t h e A O , b u t i s , w h i l e g i v i n g f u l l d e t a i l s o f t h e b a c k - g r o u n d , m e r e l y s e e ki n g a d v i c e o n s t r u c t u r i n g t h e d e a l w h i l e " a v o i d i n g l i t i g a t i o n " o n v a r i o u s i s s u e s i n c l u d i n g t h e t a x - m a t t e r s . T h e A O h a s h e l d a n d t r e at e d t h e t r a n s a c t i o n t o b e " s h a m " a n d " c o l o u r a b l e " , w i t h o u t c a t e g o r i c a l l y p o i n t i n g o u t t h a t h o w t h e p u r c h a s e w h i c h i n f a c t h as b e e n u n d e r t a k e n a t R e . 1 a n d t h e b a c k - g r o u n d f o r w h i c h i s e s t a b l i s h e d b y c r e d i b l e a n d c o g e n t e v i d e n c e s , a n d w h e n t h e s e l le r a l s o i s n o t s h o w n t o h a v e r e c e i v e d a n y o t h e r b e n e f i t s b y d i r e c t o r c i r c u i t o u s m e a n s , c a n a t a l l b e c o n s i d e r e d " s h a m " s i m p l y b e c a us e r e c e i p t / p a y m e n t o f s u c h " l o w c o n s i d e r a t i o n " s o m e h o w f r u s t r a t e s t h e A O . A p p e l l a n t i s a l s o r i g h t t h a t " w h y ” o f a t r an s a c t i o n i s p r i m a r i l y f o r t h e p a r t i e s t o a t r a n s a c t i o n t o d e c i de , a n d w h e n t h e A O s u s p e c t s " n o n - g e n u i n e n e s s " , s h e m u s t " b r i d g e t h e g a p " b e t w e e n " s u s p i c i o n " a n d " e v i d e n c e " r a t h e r t h a n a c t in g a s i f s u s p i c i o n i n i t s e l f s u f f i c e s a s e v i d e n c e . T h e A R i s a l s o r i g h t t h a t w h e n t h e t r a n s a c t i o n s o f E S O P a n d e q u i t y p a r t i c i p a ti o n b y I n d i a A d v a n t a g e F u n d i n R L h a v e h a p p e n e d a t t h e r a t e s b e tw e e n R s . 8 0 a n d 3 1 8 , a n d t h a t " v a l u a t i o n u n d e r t h e We a l t h - t a x Ac t ( p a g e 3 6 o f t h e a s s e s s m e n t o r d e r ) i s n e a r l y R s . 4 0 p e r s h a r e , i t r e m a i n s a n e s t a b l i s h e d a n d a c c e p t e d p o s i t i o n t h a t t h e t r a n s a c ti o n a t R e . 1 p e r s h a r e i s o b v i o u s l y b e l o w t h e " m a r k e t r a t e " o r " t r u e v a l u e " o f s h a r e s . T h o u g h " w h y s h o u l d i t b e s o " m a y b e a n a s p ec t w h i c h c o u l d p r o m p t t h e A O f o r n e c e s s a r y e n q u i r y / i n v e s t i g at i o n , b u t t h a t i n i t s e l f p a r t i c u l a r l y i n t h e b a c k g r o u n d o f A r b i t r at i o n A w a r d d a t e d 5 / 6 / 2 0 0 7 c a n n o t p e r s e b e , i n t h e a b s e n c e o f o t h e r c r e d i b l e e v i d e n c e s , a r e l e v a n t c o n s i d e r a t i o n f o r d e c i d i n g t he d u b i o u s n e s s o r o t h e r w i s e o f t h e t r a n s a c t i o n . I a l s o a g r e e w i t h t h e L d . A R t h a t t h e s a i d e - m a i l d a t e d 1 / 7 / 2 0 0 7 m u c h e m p h a s i z e d b y th e A O t o a l l e g e t h a t t h e s a m e e s t a b l i s h e s t h e c o l l u s i v e n e ss o f t h e t r a n s a c t i o n e n t e r e d i n t o f o r a v o i d a n c e o f t a x h a s in d e e d b e e n IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 78 - c o n v e n i e n t l y r e a d i n a t w i s t e d w a y b y t h e A O . T h e m a i l d a t e d 1 / 7 / 2 0 0 7 i s a m a i l s e e k i n g a d v i c e . T h e f u l l b a c k g ro u n d i n c l u d i n g t h e c o m m e n t t h e r e i n t h a t " t h e o l d S H A l i k e l y t o r a is e s e v e r a l c o n s t r a i n t s i n f u t u r e t o b o t h t h e g r o u p s " h a s b e e n c o n v e n i e n t l y o v e r l o o k e d b y t h e A O . I n m y c o n s i d e r e d o p i n i o n , t h e t w o q u e s t i o n s r e f e r r e d f o r c o n s i d e r a t i o n o f t h e c o n s u l ta n t i n t h e s a i d m a i l c a n i n n o w a y a t a l l e v e n r e m o t e l y i m p l y t h a t t h e m a i l r e p r e s e n t s c o l l u s i v e n a t u r e o f t h e t r a n s a c t i o n . I a l s o a g r e e w i t h t h e L d . A R t h a t t h e r e i s n o e v i d e n c e a t a l l ( e x c e p t t h e t r a n s a c t i o n b e i n g a t l e s s t h a n " t r u e v a l u e " ) i n p o s s e s s i o n o f th e A O t o c o n c l u d e t h a t t r a n s a c t i o n i s a c o l o u r a b l e d e v i c e . A s s u c h , t h e t r a n s a c t i o n a c h i e v e s a r e a l p u r p o s e a n d a r e a l a n d i r r e v e r s i b l e c h a n g e i n t h e p a r t i e s ' p o s i t i o n s r a t h e r t h a n b e i n g a m e r e h o l l o w d o c u m e n t a t i o n . T h e t r a n s a c t i o n i s a l s o n o t o n e w h i ch i s a f a c t u a l n u l l i t y . T h e t r a n s a c t i o n i s a l s o n o t a m e r e f o r m w it h o u t s u b s t a n c e . I t n o t o n l y h a s p r o d u c e d t a n g i b l e a n d i n t e n d e d f i n an c i a l a n d c o r p o r a t e c o n s e q u e n c e s f o r p a r t i e s t h e r e t o w h o , t o wa r d s a p u r s u i t o f q u i e t u s i n t e r s e h a v e c o m e a d i d e m , b u t h a s a l s o b e e n d u l y d i s c l o s e d i n t h e r e t u r n s o f i n c o m e f i l e d a t a p p r o p ri a t e t i m e b y t h e p a r t i e s . T h e A O h a s w i t h o u t a n y i o t a o f e v i d e n c e i n h e r p o s s e s s i o n b r a n d e d t h e w h o l e A r b i t r a t i o n p r o c e e d i n g s a n d A r b i tr a t i o n A w a r d t o b e s h a m o r c o l l u s i v e . Wh i l e i t i s t r u e , a n d r i g ht l y s o p l e a d e d b y t h e A O b o t h i n t h e a s s e s s m e n t o r d e r a n d d u r i n g h e a ri n g , t h a t " A O i s n o t r e q u i r e d t o p u t b l i n k e r s o n h e r e y e s " a n d t ha t " s h e m a y t a k e r e c o u r s e t o s u r r o u n d i n g c i r c u m s t a n c e s a n d a s p e c t s of h u m a n p r o b a b i l i t i e s " , a s r u l e d b y A p e x C o u r t , b u t i t i s al s o e q u a l l y t r u e t h a t t h e s e r u l i n g s o f t h e S C d o n o t c e r t a i n l y a u t h or i z e t h e A O t o a c t o n n o e v i d e n c e o r t o a c t a r b i t r a r i l y o r d r a w a dv e r s e i n f e r e n c e f r o m w h o l l y i r r e l e v a n t m a t e r i a l ( m a i l d a t e d 1 / 7 / 2 0 0 7 ) t h a t t o o b y r e a d i n g t h e s a m e p a r t i a l l y a n d c o n v e n i e n t l y . Wh i l e A O m u s t n o t " p u t b l i n k e r s " , s h e m u s t a l s o n o t , m o r e i m p o r t a n t l y, s e c t w i s t e d l y o r s t a r t s e e i n g w h a t i s n o t v i s i b l e t o o t h e r s o r w hi c h d o e s n o t e x i s t a t a l l . T h e A O h a s i n d e e d n o t a p p r e c i a t e d t h a t t h e p r e - 2 0 0 7 S H A s d o u b t l e s s l y i n d i c a t e t h e g r o w i n g c o n c e r n s a n d t a k i ng o f p o s i t i o n s b y p a r t i e s t h e r e t o . Wh e n t h e t w o g r o u p s j o i n t l y a g re e f o r A r b i t r a t i o n p r o c e e d i n g s a n d a l s o a c t u p o n t h e c o n s eq u e n t A w a r d , i t i s w h o l l y u n c o n c e i v a b l e w h y A O f i n d s t h e s a m e " un b e l i e v a b l e " o r ' s h a m " w i t h o u t b r i n g i n g i n a n y r e l e v a n t e v i d e n c e e v e n a f t e r a c t i o n u / s 1 3 2 . M o r e o v e r , a n d m o r e i m p o r t a n t l y , A R i s a b s o l u t e l y r i g h t t h a t t h e A r b i t r a t i o n A w a r d d a t e d 5 / 6 / 2 0 0 7 , w hi l e d i r e c t i n g t r a n s f e r a t R e . 1 p e r s h a r e s o a s t o a c h i e v e 6 0 : 4 0 h o l d i n g r a t i o b e t w e e n t h e t w o g r o u p s , a l s o d r a f t e d a n e w S H A , w h ic h w a s a l s o e x e c u t e d o n 3 0 / 6 / 2 0 0 7 a n d w h i c h i s e v i d e n t l y l e s s co m p l e x a n d l e s s s t r a n g u l a t i n g t o p a r t i e s t h e r e t o a n d s u c h n e w S H A i s a n i n t e g r a l a n d i m p o r t a n t p a r t o f t h e q u i e t u s b r o u g h t i n b y A r b i t r a t o r . I h a v e a l s o p e r u s e d t h e A r b i t r a t i o n A wa r d a n d t h e s u b m i s s i o n s m a d e b e f o r e h i m b y t h e p a r t i e s t o g e t an i n s i g h t i n t o t h e " c u r i o u s d e a l a t R e . 1 / - p e r s h a r e " . I t i s e v i de n t t h a t t h e S H A d a t e d 6 / 6 / 2 0 0 3 w i t h s u b s e q u e n t a m e n d m e n t s t h e r e to , w a s c o n c e i v e d b y b o t h t h e p a r t i e s t o b e , i n a n u t s h e l l , i r r i t a t i n g , IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 79 - s t r a n g u l a t i n g a n d a d r a g o n p r o g r e s s o f t h e c o m p a n y R L . T h e A r b i t r a t o r , i n p a r a 1 5 p a s s e d t h e f o l l o w i n g o r d e r : T h e s h a r e - h o l d e r s ' a g r e e m e n t d a t e d 6 t h J u n e , 2 0 0 3 , i s d e c l a r e d t o b e v o i d a n d u n e n f o r c e a b l e a n d d e s e r v e s t o b e s u b s t i t u t e d b y a f r e s h S H A a s p e r A n n e x u r e A . I d i r e c t t h e P a t e l G r o u p t o t r a n s f e r 1 0 , 9 0 , 0 0 0 / - e q u i t y s h a r e s of t h e c o m p a n y t o t h e D a l m i a g r o u p a t a c o n s i d e r a t i o n o f Re . 1 p e r s h a r e " 1 5 . 3 I n m y c o n s i d e r e d o p i n i o n , t h e A r b i t r a t i o n A w a rd , w h i c h h a s b e e n b a s e l e s s l y ' t a r n i s h e d b y t h e A O , i s a v a l i d a nd l e g a l l y e n f o r c e a b l e d o c u m e n t w h i c h h a s p e r m a n e n t l y t r a n s f o rm e d t h e r i g h t s a n d o b l i g a t i o n o f t h e p a r t i e s t h e r e t o a n d w hi c h h a s a l s o b e e n d u l y e v i d e n c e d t o h a v e b e e n a c t e d u p o n . T h e r e i s a b s o l u t e l y n o " f a c t u a l n u l l i t y " , o r " m e r e f o r m a n d n o s u b s t a n ce " o r " s e l f - c a n c e l l a t i o n " o r " d u b i o u s n e s s " a b o u t t h e s a m e . C o n se q u e n t l y , t h e d e a l a t R e . 1 f o r a c h i e v i n g 6 0 : 4 0 i n c o n s e q u e n c e o f a n d t o g i v e e f f e c t t o A r b i t r a t i o n A w a r d i s i n d e e d a g e n u i n e t r an s a c t i o n a c h i e v i n g m e a n i n g f u l a n d r e a l p u r p o s e p e r m a n e n t l y pr o d u c i n g r e a l , f i n a n c i a l a n d c o r p o r a t e c o n s e q u e n c e s . T h u s , I h a v e n o h e s i t a t i o n w h a t - s o - e v e r i n h o l d i n g t h a t t h e t r a n s a ct i o n o f t r a n s f e r o f s h a r e s a t R e . 1 p e r s h a r e i s a g e n u i n e t r a n s a c t i o n w i t h i n t h e f o u r c o r n e r s o f l a w a n d t h e r e i s n o c o l ou r a b i l i t y o r d u b i o u s n e s s a b o u t t h e s a m e . H a d i t b e e n t h e f i n d i n g o f t h e A O t h a t a n y o t h e r b e n e f i t h a s f l o w n f r o m D a l m i a G r o u p t o P a t e l G r o u p a n d f u r t h e r t h a t s u c h t r a n s f e r o f b e n e f i t s i s a c o m p o s i t e , c o l l u s i v e a n d i n t e g r a l p a r t o f t h e " d e a l o f t r a n s f er o f s h a r e s a t R e . 1 " , t h o u g h s t r u c t u r e d i n d e p e n d e n t l y / s e p a r a t e l y , t h e n c e r t a i n l y I w o u l d h a v e f o u n d t h a t t o b e a r e l e v a n t c o n s i d e r a t i on a n d p o s s i b l y a l s o f o u n d m y s e l f i n a g r e e m e n t w i t h t h e A O . S i m i l a rl y , h a d t h e r e b e e n a n y e v i d e n c e o n r e c o r d , a s a g a i n s t m e r e p r e s u mp t i o n , t h a t a n y u n a c c o u n t e d p a y m e n t h a s i n f a c t b e e n m a d e b y t he a p p e l l a n t t o S h r i A n i l P a t e l , t h e n a l s o p o s s i b l y I w o u l d h a v e c o n c u r r e d w i t h t h e A O ' s f i n d i n g o f c o l o u r a b i l i t y . I h a v e f o r m y s at i s f a c t i o n a n d a s a n a b u n d a n t c a u t i o n a l s o o b t a i n e d t h e b a n k a c c o u n t s o f P a t e l m e m b e r s f o r M a y - A u g u s t 2 0 0 7 a n d I f i n d n o r e c e i p t fr o m a n y m e m b e r o f D a l m i a . H o w e v e r , i n c o m p l e t e a b s e n c e o f e v e n a n i o t a o f e v i d e n c e i n t h i s b e h a l f , L d . A R i s a b s o l u t e l y r ig h t t h a t a t t r i b u t i o n o f c o l o u r a b i l i t y o r d u b i o u s n e s s t o t h e t r a n s a c t i o n b y t h e A O r e m a i n s b a s e l e s s a n d t h e r e f o r e a l s o t h e f i n di n g o f t h e A O t h a t t h e i m p u g n e d t r a n s a c t i o n b e t w e e n t h e a p p e l l a n t a n d A n i l P a t e l i s a s u b t e r f u g e m u s t b e h e l d t o b e b a s e d o n no e v i d e n c e o n o n e h a n d a n d a g a i n s t t h e e v i d e n c e o n r e c o r d o n t h e o t h e r . T h e A R i s a l s o r i g h t i n s u b m i t t i n g t h a t w h a t t h e A O i n l a w c o u l d h a v e d o n e , i n t h e f a c e o f t h e l e g a l l y u n q u e s t i o n a b l e t r an s a c t i o n , w a s t o e x a m i n e w h e t h e r t h e a p p e l l a n t i s c h a r g e a b l e t o t a x u / s 5 6 { v i i ) ( c ) o r w h e t h e r S h r i A n i l P a t e l i s c h a r g e a b l e u n d e r t h e G i f t T a x A c t . A s s u c h , a s r i g h t l y s u b m i t t e d b y t h e A R , t h e l e g i s la t u r e h a s i n d i r e c t l y v i s u a l i z e d a n d r e c o g n i z e d t h e f u l l v a l i di t y o f a IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 80 - t r a n s a c t i o n o f t r a n s f e r o f p r o p e r t y f o r a c o n s i d e r at i o n l e s s t h a n " f a i r m a r k e t v a l u e " b y i n s e r t i n g s e c t i o n 5 6 ( v i i ) ( c ). T h e A R i s a l s o r i g h t w h e n h e s u b m i t s i n t h e s a m e b r e a t h t h a t t h e me r e f a c t t h a t s u c h i n s e r t i o n o f s e c t i o n 5 6 { v i i ) ( c ) h a s c o m e i n t o e f f e c t f r o m 1 / 1 0 / 2 0 0 9 a n d t h a t t h e r e f o r e t h e a p p e l l a n t c o u l d n ot b e b r o u g h t t o t a x u n d e r s u c h n e w l y i n s e r t e d p r o v i s i o n s n o t a p p l i ca b l e f o r t h e y e a r u n d e r r e f e r e n c e , c a n n o t i n i t s e l f a l s o b e a g ro u n d t o b r a n d s u c h a l e g a l l y r e c o g n i z e d t r a n s a c t i o n a s a " s u b t e r fu g e " . T h e A R i s a l s o r i g h t t h a t n o t r a n s a c t i o n c a n b e h e l d t o b e " sh a m " f o r t h e s o l e r e a s o n o f " c o n s i d e r a t i o n b e i n g l e s s t h a n t h e m a r k e t v a l u e " , p a r t i c u l a r l y l o o k i n g t o t h e f a c t t h a t , l e g i s l a t u r e w h e n c o n s i d e r e d s o n e c e s s a r y , h a s e n a c t e d e n a b l i n g d e e m i n g p r o v i s i on s l i k e s e c t i o n 5 0 C , o r t a x i n g p r o v i s i o n s l i k e s e c t i o n 5 6 ( v i i ) ( c ) . I a m o f t h e c o n s i d e r e d o p i n i o n t h a t f o r h o l d i n g a t r a n s a c t i o n to b e s h a m o r s u b t e r f u g e , t h e A O i s o b l i g e d t o e s t a b l i s h t h a t t h ro u g h a s e r i e s o f a p p a r e n t l y u n c o n n e c t e d t r a n s a c t i o n s , i n s u m t o t a l , n o r e a l c o n s e q u e n c e e x c e p t o n e o f t a x - e v a s i o n o r t a x - r e d u c ti o n h a s b e e n a c h i e v e d b y t h e p a r t y i n a n o r c h e s t r a t e d a n d d u b i o us l y e x e c u t e d s e r i e s o f a p p a r e n t t r a n s a c t i o n s w i t h t a x - e v a s i o n b ei n g t h e o n l y h i d d e n p u r p o s e . A s a g a i n s t t h i s , i n t h e p r e s e n t c a s e , t h e r e i s a s i n g l e a n d s t a n d - a l o n e t r a n s a c t i o n w i t h o u t a n y " n u ll i t y " e v e n a l l e g e d b y t h e A O . T a x - a n g l e , b u t c e r t a i n l y n o t t a x- e v a s i o n , i s n o t o n l y n o t a t a l l h i d d e n b u t i s l o u d a n d p a t e n t , b u t a t t h e s a m e t i m e , s u c h " t a x - a n g l e " i s u n q u e s t i o n a b l y n o t t h e p ur p o s e o f t h e d e a l t h o u g h i t i s i n d e e d a c o n s e q u e n c e , w h i c h i s b ou n d t o b e t h e r e i n e v e r y t r a n s a c t i o n . T h e r e i s n o e v i d e n c e o f " s e l f - c a n c e l l a t i o n " o r " a p p a r e n t b e i n g d i f f e r e n t f r o m r e al " . T h u s a n d t h e r e f o r e , i n m y c o n s i d e r e d o p i n i o n , t h e i m p u g n e d tr a n s a c t i o n h a s t o b e h e l d a s h a v i n g n o e v i d e n c e o f e v i l i t y , n o c o l o r o f c o l o u r a b i l i t y , n o s e m b l a n c e o f s h a m n e s s a n d n o s h a de o f s h a d i n e s s s o a s t o b e v a l i d l y b r a n d e d o r t r e a t e d a s " s h a m " o r " s u b t e r f u g e ' ' . I n o t h e r w o r d s , I h a v e n o h e s i t a t i o n i n h o l d i n g t h a t t h e t r a n s a c t i o n i s r e a l , m e a n i n g f u l a n d g e n u i ne a n d t h u s a s o n e h a v i n g b e e n v a l i d l y a n d g e n u i n e l y e n t e r e d i n t o a n d a c t e d u p o n w i t h i n p e r m i s s i b l e l i m i t s o f f o u r c o r n e r s o f la w . I n t h i s b e h a l f , a n d b e f o r e p a r t i n g , I w o u l d a l s o q u o t e f r o m S u p r e m e C o u r t d e c i s i o n i n V o d a f o n e a s q u o t e d i n S h i v R a j G u p t a ( su p r a ) a n d f r o m D e l h i H i g h C o u r t d e c i s i o n i n D . S . B i s t & S o n s ( s u p r a ) w l i i c h t o u c h u p o n t h e c o n c e p t o f c o l o u r a b i l i t y , a n d w h i c h s a n c t i f y m y f i n d i n g t h a t t h e i m p u g n e d d e a l o f t r a n s f e r o f s h a r es o f R L a t R e . 1 p e r s h a r e c a n n o t i n l a w b e t r e a t e d a s " s h a m " o r " s u b t e r f u g e " (E m p h a s i s m i n e ) : 3 1 . H o n ' b l e t h e C h i e f J u s t i c e S . H . K a p a d i a r e f e r r e d t o F u r n i s s ( I n s p e c t o r o f T a x e s ) v . D a w s o n [ 1 9 8 4] 1 A l l E F 5 3 0 ( H L . ) a n d o b s e r v e d t h a t t h e . d e c i s i o n w a s a n e x t e n si o n o f R a m s a y p r i n c i p l e R a m s a y W. T , L t d . v . I R C 1 9 8 2 A C 3 00 ( H L ) ) a s i t h e l d t h a t o n f a c t s t h e i n s e r t e d s t e p h ad n o b u s i n e s s p u r p o s e o t h e r t h a n d e f e r m e n t o f t a x a n d D aw s o n r e c o n s t r u c t e d t h e t r a n s a c t i o n n o t o n t h e d i c t u m t h at IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 81 - a n y t h i n g d o n e t o d e f e r t a x s h o u l d b e i g n o r e d b u t o n t h e p r e m i s e t h a t i n s e r t e d t r a n s a c t i o n d i d n o t c o n s t i t u te " d i s p o s a l " u n d e r t h e r e l e v a n t F i n a n c e A c t . H o n ' b l e t h e C h i e f J u s t i c e t h e r e a f t e r h a d n o h e s i t a t i o n i n r e c o r d i n g th a t t h e t a x a u t h o r i t i e s i n E n g l a n d s t a r t e d r e j e c t i n g e v e r y c a s e o f s t r a t e g i c i n v e s t m e n t / t a x p l a n n i n g o n t h e p r e t e x t t ha t i t a m o u n t e d t o a n d w a s w i t h t h e o b j e c t o f e v a d i n g t a x . N o t i c i n g t h i s i l l - d i s p o s e d e f f e c t , i n C r a v e n ( I n s p ec t o r o f T a x e s ) v . Wh i t e ( S t e p h e n ) [ 1 9 8 8] 3 A l l E R 4 9 5 , i t w a s h e l d t h a t t h e R e v e n u e c a n n o t s t a r t w i t h t h e q u e s t i o n a s t o w h e t h e r t h e t r a n s a c t i o n w a s t a x d e f e r m e n t o r s a v i n g d e v i c e b u t c a n a p p l y t h e l o o k a t t e s t t o a s c e r t a i n i t s t r ue n a t u r e . G e n u i n e s t r a t e g i c p l a n n i n g i s a c c e p t a b l e a n d n o t a b a n d o n e d . T h u s , t h e j u d g m e n t e l u c i d a t e s a n d e x p l a i n s t h e E n g l i s h j u d g m e n t s a n d t h e i r r a t i o . T h e m a j o r i t y j u dg m e n t i n M c D o w e l l ' s & C o . L t d . c a s e ( s u p r a ) w a s r e f e r r e d t o h o l d t h a t t a x p l a n n i n g m a y b e l e g i t i m a t e , p r o v i d e d i t i s w i t h i n t h e f r a m e w o r k o f l a w , b u t c o l o u r a b l e d e v i c e s c a n n o t b e a p a r t o f t a x p l a n n i n g a n d i t w a s w r o n g t o e n c o u r a g e a n d en t e r t a i n t h e b e l i e f t h a t i t i s h o n o u r a b l e t o a v o i d p a y m e n t of t a x b y r e s o r t i n g t o d u b i o u s m e t h o d s . F u r t h e r , t h e m a j o r i t y d e c i s i o n a g r e e d w i t h t h e v i e w e x p r e s s e d b y R e d d y , J . o n l y i n r e l a t i o n t o t a x e v a s i o n t h r o u g h c o l o u r a b l e d e v i c e b y r e s o r t in g t o d u b i o u s m e t h o d s a n d s u b t e r f u g e s . I t d i d n o t h o l d t ha t t a x p l a n n i n g i s i l l e g i t i m a t e , i l l e g a l a n d i m p e r m i s s i b l e. T h e o p i n i o n a n d v i e w e x p r e s s e d b y R e d d y J , w a s o n l y i n t h e c o n t e x t o f a r t i f i c i a l a n d c o l o u r a b l e d e v i c e s . T h e r ea f t e r , u n d e r t h e h e a d i n g i n t e r n a t i o n a l t a x a s p e c t s o f h o l di n g s t r u c t u r e s " r e f e r e n c e w a s m a d e t o R a m s a y p r i n c i p l e a n d i t w a s r e i t e r a t e d t h a t l o o k a t p r i n c i p l e a s e n u n c i a t e d r e q u i r e s t h e R e v e n u e o r t h e C o u r t t o l o o k a t t h e d o c u m e n t o r t r a n s a c t i o n i n t h e c o n t e x t t o w h i c h i t p r o p e r t y b e lo n g e d , i . e . t o u n d e r s t a n d t h e r e a l n a t u r e o f t h e t r a n s a c t i o n , on e h a s t o l o o k a t t h e e n t i r e t r a n s a c t i o n a s a w h o l e a n d n o t to a d o p t a d i s s e c t i n g a p p r o a c h . T h e l o o k a t t e s t i s t o a s c e r t ai n t h e t r u e l e g a l c h a r a c t e r o f t h e t r a n s a c t i o n i n a h o l i s t i c m an n e r . G e n u i n e s t r a t e g i c p l a n n i n g w i t h r e g a r d t o t h e h o l d in g , s t r u c t u r e , b u s i n e s s o p e r a t i o n s , i s s u e s r e l a t i n g t o i n v e s t m e n t e t c . u n d e r t a k e n f o r c o r p o r a t e b u s i n e s s p u r p o s e s h o ul d n o t b e t r e a t e d a s a r t i f i c i a l o r c o l o u r a b l e d e v i c e . I n th e s a i d c a s e , i t w a s h e l d t h a t t h e t r a n s a c t i o n s w e r e n o t a c o l o u r a b l e d e v i c e . R e f e r e n c e w a s m a d e t o ' We s t m i n s t e r p r i n c i p le 1 a s e x p o u n d e d i n T h e C o m m i s s i o n e r s o f I n l a n d R e v e n u e v . H i s G r a c e t h e D u k e o f W e s t m i n s t e r l 9 3 5 A l l E . R . 2 5 9 , t h a t w h e n t h e d o c u m e n t a n d t r a n s a c t i o n i s g e n u i n e , t h e c o u r t c a n n o t g o b e h i n d i t t o s o m e s u p p o s e d l y u n d e r l y i n g s u b s t a n ce . I t w a s o b s e r v e d t h a t i n W. T R a m s a y L t d ' s c a s e ( s u p r a ) th e H o u s e o f L o r d s d i d n o t d i s c a r d t h e s a i d p r i n c i p l e bu t r e a d i t i n a p r o p e r c o n t e x t b y h o l d i n g t h a t " d e v i c e " w h i c h w a s c o l o u r a b l e i n n a t u r e h a s t o b e i g n o r e d a s a f i s c a l n u l l i t y . IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 82 - T h u s , W. T R a m s a y L t d ' s c a s e ( s u p r a ) l a i d d o w n a p r i nc i p l e o f s t a t u t o r y i n t e r p r e t a t i o n r a t h e r t h a n i m p o s i n g a t a x a v o i d a n c e d o c t r i n e o n t a x l a w s . I t w a s e l u c i d a t e d t h a t W e s t m i n s t e r p r i n c i p l e d o e s n o t c o m p e l t h e c o u r t t o l o o k i n t o t h e d o c u m e n t o r t h e t r a n s a c t i o n i n i s o l a t i o n fr o m t h e c o n t e x t t o w h i c h i t p r o p e r l y b e l o n g e d . T h e t a s k o f t h e c o u r t w a s t o a s c e r t a i n t h e r e a l n a t u r e o f t h e t r a n s a c t i o n a n d w h i l e d o i n g s o , t h e c o u r t h a s t o l o o k a t t h e e n t i r e t r a n sa c t i o n a s a w h o l e a n d n o t a d o p t a d i s s e c t i n g a p p r o a c h . T h e c o n te n t i o n t h a t w e c a n n o t l o o k t h r o u g h a n d e x a m i n e t h e r e a l n at u r e o f t h e t r a n s a c t i o n i n v i e w o f t h e a u t h o r i t a t i v e p r o n o un c e m e n t o f t h e S u p r e m e C o u r t i n V o d a f o n e I n t e r n a t i o n a l H o l id a y s B . V . L t d ' s . c a s e (s u p r a ) a p p r o v i n g t h e v i e w t a k e n A z a d i B a c h a o A n d o l a n ' s c a s e ( s u p r a ) i s n o t a p p o s i t e a nd c o n g r u o u s . 3 2 . I n h i s c o n c u r r e n t j u d g m e n t , K . S , R a d h a k r i s h n a n , J . h a s e l a b o r a t e l y e x a m i n e d t h e I n d i a n a n d E n g l i s h d e c i s i on s o n t h e q u e s t i o n o f t a x a v o i d a n c e a n d t a x e v a s i o n . T h e f o l l o w i n g o b s e r v a t i o n s o f L o r d T o m l i n i n We s t m i n s t e r ' s c a s e (s u p r a ) w e r e q u o t e d : - " E v e r y m a n i s e n t i t l e d i f h e c a n t o o r d e r h i s a f f a ir s s o a s t h a t t h e t a x a t t a c h i n g u n d e r t h e a p p r o p r i a t e A c t s i s l e s s t h a n i t o t h e r w i s e w o u l d b e . I f h e s u c c e e d s i n o r d e r i n g t h e m s o a s t o s e c u r e t h i s r e s ul t , t h e n , h o w e v e r u n a p p r e c i a t i v e t h e C o m m i s s i o n e r s o f I n l a n d R e v e n u e o r h i s f e l l o w t a x p a y e r s m a y b e o f h is i n g e n u i t y , h e c a n n o t b e c o m p e l l e d t o p a y a n i n c r e a s e d t a x . T h i s s o - c a l l e d d o c t r i n e o f ' t h e s u b s t a n c e ' s e e m s t o m e t o b e n o t h i n g m o r e t h a n a n a t t e m p t t o m a k e a m a n p a y n o t w i t h s t a n d i n g t h a t h e h a s s o o r d e r e d h i s a f f a i r s t h a t t h e a m o u n t o f t a x s o u g h t f r o m h i m i s n o t l e g a l l y c l a i m a b l e . " 3 3 . L o r d A t k i n d i s s e n t e d s t a t i n g " t h a t t h e s u b s t a n ce o f t h e t r a n s a c t i o n w a s t h a t w h a t w a s b e i n g p a i d w a s r e m u n e r a t i o n . " T h e r e a f t e r , t h e p r i n c i p l e s w h i c h e m er g e d f r o m t h i s G r a c e t h e D u k e o f We s t m i n s t e r c a s e ( s u p r a) w e r e s t a t e d a s : - " (1 ) A l e g i s l a t i o n i s - t o r e c e i v e a s t r i c t o r l i t e r al i n t e r p r e t a t i o n ; ( 2 ) A n a r r a n g e m e n t i s t o b e l o o k e d a t n o t i n b y i t s e c o n o m i c o r c o m m e r c i a l s u b s t a n c e b u t b y i t s l e g a l fo r m ; a n d ( 3 ) A n a r r a n g e m e n t i s e f f e c t i v e f o r t a x p u r p o s e s e ve n i f i t h a s n o b u s i n e s s p u r p o s e a n d h a s b e e n e n t e r e d i n t o to a v o i d t a x . " IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 83 - ... ... ... ... ... ... ... ... ... ... ... . V o d a f o n e T e s t s 3 9 . E x p r e s s i o n s " t a x a v o i d a n c e , t a x e v a s i o n a n d t a x m i t i g a t i o n " a r e o f t e n s p o k e n a b o u t , b u t d i f f e r e n t l y u n d e r s t o o d . R u l e o f l a w m a n d a t e s a n d r e q u i r e s a m e as u r e o f c e r t a i n t y i n u n d e r s t a n d i n g t h e s a i d t e r m s . J u r i s t i c e x p l i c a t i o n s o n t h e s u b j e c t a r e i n d i c a t i v e o f e q u i vo c a t i n g a n d d i v e r g e n t s t a n d p o i n t s . T h e d i s t i n c t i o n b e t w e e n t h e e x p r e s s i o n s ; t a x a v o i d a n c e , t a x e v a s i o n a n d t a x m i ti g a t i o n h a s b e e n a s u b j e c t m a t t e r o f s e v e r a l e r u d i t e a r t i c le s w i t h d i f f e r e n t p e r s p e c t i v e s l i k e M o r a l i t y o n T a x A v o i d a nc e b y Z o e P r e b b l e a n d J o h n P r e b b l e ; I n t e r p r e t a t i o n o f T a x S t at u t e s : t a x a v o i d a n c e a n d t h e i n t e n t i o n o f t h e P a r l i a m e n t by J u d i t h F r e e d m a n ; T a x A v o i d a n c e , T a x E v a s i o n a n d T a x M i t i g at i o n b y P h i l i p B a k e r ; a n d , C o r p o r a t e S o c i a l R e s p o n s i b i l it y a n d T a x A v o i d a n c e : A c o m m e n t a n d r e f l e c t i o n b y J o h n H a s s e l d i n e a n d G r e g o r y M o r r i s . We a c k n o w l e d g e b e n e fi t o f e x p o s i t i o n a n d a n a l y s i s i n t h e s e a r t i c l e s a s w e e l ab o r a t e o n t h e s a i d d i s t i n c t i o n . D i s c u s s i o n e v e n a f t e r V o d a f o ne I n t e r n a t i o n a l H o l i d a y s B . V . c a s e ( s u p r a ) i s r e f l e c ti v e t h a t p e n e t r a t i n g a n d p e r f e c t c l a r i t y o f t h e s a i d t e r m s is n o t e a s y t o d i s c e r n a n d d e t e r m i n e . T o u s t h e d e t e r m i n a t i o n an d r a t i o i n V o d a f o n e I n t e r n a t i o n a l H o l i d a y s B . V ' s c a s e (s u p ra ) i s c l e a r . 4 0 . T h e a f o r e s a i d d e c i s i o n i n V o d a f o n e I n t e r n a t i o n al H o l i d a y s B . V s c a s e (s u p r a ) d o e s n o t p r e s c r i b e c r i t er i o n s i m p l y p r e d i c a t e d o n p r e o r d a i n e d , c i r c u l a r o r s e l f c a n c e l l i n g t r a n s a c t i o n s w i t h a s t e p o r s t e p s h a v i n g n o c o m m e r c i a l o r b u s i n e s s p u r p o s e o t h e r t h a n o b t a i n i n g t a x a d v a n t a g e . T h e d e c i s i o n d o e s n o t e x e r t t h e d o c t r i n e o f e c o n o m i c s u b s t a n c e . T h e r a t i o s t e e r s c l e a r f r o m u s in g t h e s a i d t e s t s o r p r i n c i p l e s . T h e s a i d p r o p o s i t i o n s a n d p r e m i s e a s s p e c i f i c t e s t s s t a n d s d i s a p p r o v e d a n d r e j e c t e d . 4 1 . T h e p r e c i s e t e s t e n u n c i a t e d a n d p r e s c r i b e d a s a t e n e t , n e g a t e s a n d d i s q u a l i f i e s c o l o u r a b l e d e v i c e , d e c e i t a n d s h a m a s a l e g i t i m a t e a n d a c c e p t a b l e t a x e v e n t . T h e s e t e rm s h a v e s o m e - w h a t e t h i c a l a n d c a s u i s t i c a l c o n n o t a t i o n s a n d a r e t h e e l e c t i v e t e s t o r d i f f e r e n t i a t i n g t a x p l a n n i n g f r o m a b u s i v e t a x a v o i d a n c e . 4 2 . T o a p p r e c i a t e t h e c o n c e p t o f a b u s i v e t a x a v o i d an c e , i t w o u l d b e a p p r o p r i a t e t o f i r s t d e l i n e a t e w i t h p r e c i si o n t h e e x p r e s s i o n s " t a x m i t i g a t i o n " a n d " t a x e v a s i o n " a s th e i r b o u n d a r i e s a n d c o n f i n e s w o u l d e n a b l e u s t o d r a w l i ne s a m o n g s t t h e f o u r c o n c e p t s ; t a x m i t i g a t i o n , t a x e v a si o n , a c c e p t a b l e t a x a v o i d a n c e a n d a b u s i v e t a x a v o i d a n c e . E a c h o f t h e s a i d e x p r e s s i o n s i n v o l v e s a n e l e m e n t o f t a x p l a n n i n g . IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 84 - I t w o u l d b e h a r d t o c o n c e i v e o f a s i t u a t i o n w h e r e th e a s s e s s e d d o e s n o t i n d u l g e t o s o m e s o r t o f t a x p l a n ni n g , b e i t t a x m i t i g a t i o n , a c c e p t a b l e t a x a v o i d a n c e , a b u s i v e ax a v o i d a n c e o r t a x e v a s i o n . "T a x p l a n n i n g " , b e i n g c o m m o n t o a l l s i t u a t i o n s , c a n n o t b e t h e d i s t i n g u i s h i n g f e at u r e , b u t n a t u r e a n d c h a r a c t e r o f t h e p l a n n i n g a n d i t s n e x u s n t h t h e t r a n s a c t i o n i s d e c i s i v e . 4 3 . T a x m i t i g a t i o n i n s i m p l e w o r d s w o u l d r e f e r t o a t a x p a y e r t a k i n g a d v a n t a g e o r b e n e f i t o f a b e n e f i c e n t p r o v i s io n u n d e r t h e t a x c o d e a n d c o m p l y i n g w i t h t h e r e q u i s i t e s t o hi s l o w e r t h e t a x l i a b i l i t y . I n t h e w o r d s o f L o r d N o l a n i n C IR v . Wi l l o u g h b y [ 1 9 9 7] 4 A l l E R 6 5 , i t i s : - “ T h e h a l l m a r k o f t a x m i t i g a t i o n , o n t h e o t h e r h a n d , i s t h a t t h e t a x p a y e r t a k e s a d v a n t a g e o f a f i s c a l l y a t t r a c t iv e o p t i o n a f f o r d e d t o h i m b y t h e t a x l e g i s l a t i o n a n d g e n u i n e ly s u f f e r s t h e e c o n o m i c c o n s e q u e n c e s t h a t P a r l i a m e n t i n t e n d e d t o b e s u f f e r e d b y t h o s e t a k i n g a d v a n t a g e o f t h e o p t i o n " . T h e a f o r e s a i d q u o t e u s e s t h e e x p r e s s i o n " e c o n o m i c c o n s e q u e n c e s t h a t P a r l i a m e n t i n t e n d e d " w h i c h a s p e r s o m e , c a u s e s c o n f u s i o n a n d i s s e l f c o n t r a d i c t o r y . H o w e v e r, t h e s a i d c r i t i c i s m o v e r l o o k s t h a t i f t h e i n t e n t i o n o f th e P a r l i a m e n t i s c l e a r a n d u n a m b i g u o u s ; t a k i n g a d v a n t ag e o r b e n e f i t a s e n v i s a g e d b y t h e p r o v i s i o n i s a c a s e o f t a x m i t i g a t i o n . E v e n i n c a s e o f d e b a t e , w h e n t h e i n t e n ti o n o f t h e P a r l i a m e n t i s f a v o u r a b l e a n d a d j u d i c a t i o n d e c i d e s th e q u e s t i o n i n f a v o u r o f t h e a s s e s s e e , i t w o u l d b e a ca s e o f t a x m i t i g a t i o n . C o u r t s a r e t r u s t e d a n d g i v e n t h e p o w e r t o d e t e r m i n e a s t o w h a t w a s t h e i n t e n t o f t h e P a r l i a m en t w h i l e e n a c t i n g a p a r t i c u l a r p r o v i s i o n . Wh e n t h e c o u r t d e ci s i o n i n t e r p r e t i n g t h e l e g i s l a t i v e i n t e n t i s i n f a v o u r o f t h e a s s e s s e e , t h e r e i s n o a v o i d a n c e o f t a x b e c a u s e t h e c o n d u c t i s c o n s i s t e n t w i t h t h e t a x i n g p r o v i s i o n . I f t h e r e i s no t a x a v o i d a n c e , t h e q u e s t i o n o f a b u s i v e t a x a v o i d a n c e d oe s n o t a r i s e , f o r t h e l a t t e r r e f e r s t o a p a r t i c u l a r c a t e g or y o f t r a n s a c t i o n s t h a t a r e u n a c c e p t a b l e b e i n g p e j o r a t i v e, i . e . s h a m , c o l o u r a b l e d e v i c e o r d e c e i t f u l a n d i s d i s t i n ct f r o m t a x m i t i g a t i o n . A l b e i t , w h e r e t h e P a r l i a m e n t ' s i n t e n t i on i s t o t h e c o n t r a r y a n d t h e f i n d i n g n e g a t e s t h e a s s e s s e e ' s s u bm i s s i o n , i t w o u l d b e a c a s e o f t a x a v o i d a n c e , w h e t h e r a c c e p ta b l e o r a b u s i v e i s a d i f f e r e n t a n d a n o t h e r m a t t e r . T h u s , t he t e r m " t a x m i t i g a t i o n " i s s i m p l e , i n t e l l i g i b l e a n d u n e q u iv o c a l . I t i s a p o s i t i v e t e r m a n d r e f e r s t o t h e a s s e s s e d t a k i n g be n e f i t o r a d v a n t a g e o f a p r o v i s i o n w h i c h t h e t a x c o d e i n t e n d s a n d w a n t s t o c o n f e r . D e d u c t i o n s u n d e r C h a p t e r V I A , e x e mp t i o n s u n d e r S e c t i o n s 1 0 A , 1 0 A A , 1 0 B e t c . o f t h e A c t a r e al l p r o v i s i o n s r e l a t i n g t o t a x m i t i g a t i o n . I f a n a s s e s se e t a k e s b e n e f i t o r a d v a n t a g e b y c o m p l y i n g w i t h t h e s t i p u l a te d IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 85 - c o n d i t i o n s t h e r e i n t o r e d u c e h i s t a x l i a b i l i t y , i t w o u l d b e a c a s e o f t a x m i t i g a t i o n . 4 4 . T a x e v a s i o n i s i l l e g a l a n d c o n s i s t s o f w i l l f u l v i o la t i o n o r c i r c u m v e n t i o n o f a p p l i c a b l e t a x l a w s t o m i n im i s e t a x l i a b i l i t y . T h e a s s e s s e d b r e a c h e s t h e r e l e v a n t l a w an d i t i n v o l v e s c o n t u m a c i o u s b e h a v i o u r o r a c t u a l k n o w l e d g e o f w r o n g d o i n g . T h i s c a n h a p p e n w h e n a n a s s e s s e e d e l i b e r a t e l y f a i l s t o r e p o r t a n i t e m i n t h e i n c o m e t a x r e t u r n , o r k n o w i n g l y c l a i m s a d e d u c t i o n w h i c h h e i s a w a r e h e i s n o t e n t i t l e d t o , o r c o n s c i o u s l y o m i t s t o s u p pl y i n f o r m a t i o n e v e n w h e n t h e r e i s d u t y t o f u r n i s h t h e s a i d d e t a i l s . I t c a n a l s o a p p l y t o s i t u a t i o n s w h e n t h e as s e s s e e f a i l s t o c l a r i f y a m a t t e r , w h i c h h a s b e e n m i s u n d e r st o o d b y t h e i n c o m e t a x a u t h o r i t i e s , a n d k e e p s q u i e t . I n t h es e c a s e s , t h e r e i s e l e m e n t o f w i l l f u l n e s s , d i s h o n e s t y o r c o n te m p t u o u s c o n d u c t o r e v e n a b s e n c e o f h o n e s t b e l i e f . I f t h e t a x p a y e r c a n n o t s h o w t h a t h e h a d a n h o n e s t b e l i e f t h a t h e w as n o t l i a b l e t o t a x o r l i a b l e t o a l o w e r t a x , t h e n p r i m a f a c i e s u c h c o n d u c t w o u l d f a l l w i t h i n t h e a m b i t / s c o p e o f t a x e va s i o n . 4 5 . T a x a v o i d a n c e b y e l i m i n a t i o n w o u l d m e a n t h e r e si d u a l a n d s u r p l u s , a f t e r w e e x c l u d e c a s e s o f t a x m i t i g a t io n a n d t a x e v a s i o n . T a x m i t i g a t i o n a n d t a x e v a s i o n a r e t w o e n d p o i n t s . I t i s e a s i e r a n d m o r e b e n e f i c i a l t o f o l l o w t h i s d i sc e r n m e n t t o d e f i n e t a x a v o i d a n c e , f o r t h e c o n f i n e s a n d b o u n d s of t a x m i t i g a t i o n a n d t a x e v a s i o n a r e e a s i e r t o d e c i p h e r an d d e f i n e l e g a l l y a n d a l s o i d e n t i f y w i t h s o m e e x a c t n e s s i n p ra c t i c e . ( R e f e r T a x A v o i d a n c e , T a x E v a s i o n & T a x M i t i g a t i o n b y P h i l i p B a k e r . ) 4 6 . I t i s e q u a l l y i m p o r t a n t t o d i s t i n g u i s h a n d d i f fe r e n t i a t e a c c e p t a b l e t a x a v o i d a n c e a n d a b u s i v e t a x a v o i d a n c e . T h e S u p r e m e C o u r t i n C I T v . A . R o m a n & C o . [ 1 9 6 8 } 6 7 I TR 1 1 , a t p . 1 7 h a d o b s e r v e d : - " A v o i d a n c e o f t a x l i a b i l i t y b y s o a r r a n g i n g c o m m e r ci a l a f f a i r s t h a t c h a r g e o f t a x i s d i s t r i b u t e d i s n o t p ro h i b i t e d . A t a x p a y e r m a y r e s o r t t o a d e v i c e t o d i v e r t t h e i n c o me b e f o r e i t a c c r u e s o r a r i s e s t o h i m . E f f e c t i v e n e s s o f t h e d e v i c e d e p e n d s n o t u p o n c o n s i d e r a t i o n s o f m o r a l i t y , b u t o n t h e o p e r a t i o n o f t h e I n c o m e - t a x A c t . L e g i s l a t i v e i n j u n ct i o n i n t a x i n g s t a t u t e s m a y n o t , e x c e p t o n p e r i l o f p e n a l t y, b e v i o l a t e d , b u t i t m a y l a w f u l l y b e c i r c u m v e n t e d . " 4 7 . I n c l e a r a n d c a t e g o r i c a l t e r m s t h e a f o r e s a i d r at i o w a s r e s o n a t e d a n d a p p r o v e d b y t h e S u p r e m e C o u r t i n t h e V o d a f o n e I n t e r n a t i o n a l H o l i d a y s B . V ' s c a s e ( s u p r a ) . T h u s , t h e t e s t o f ' d e v o i d o f b u s i n e s s p u r p o s e ' o r ' l a c k of e c o n o m i c IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 86 - s u b s t a n c e ' i s n o t a c c e p t e d a n d a p p l i e d i n I n d i a a s i t i s t o o b r o a d a n d u n s a t i s f a c t o r y . T h e s a i d t e s t , i f a r d e n t ly a p p l i e d , w o u l d c o n t r a d i c t a n d w o u l d b e i r r e c o n c i l a b l e w i t h t a x p a y e r s ' r i g h t t o a r r a n g e o n c e a f f a i r s w i t h i n d i e c o n f i n e s o f l a w , w h i c h i s n o t p r o h i b i t e d o r b a r r e d . 4 8 . N a t u r a l l y , t h e d i v i d i n g l i n e b e t w e e n a c c e p t a b l e a n d a b u s i v e t a x a v o i d a n c e c a n n o t b e d e d u c e d o r i n f e r r e d f r o m l o w e r i n g o r e l i m i n a t i o n o f t h e t a x l i a b i l i t y . L a t t er i s t h e c o n s e q u e n c e a n d t h e t a x e f f e c t . I t i s t h e p o s t f a c to c o n s e q u e n c e u n d e r t h e t a x c o d e o f t h e e v e n t s e l e c t ed b y t h e a s s e s s e d . T h e t e s t a p p l i e d s h o u l d n o t c u r t a i l t h e fr e e d o m o f c h o i c e t o a d o p t a p a r t i c u l a r t r a n s a c t i o n o r c o m b i n at i o n o f t r a n s a c t i o n s t o r e d u c e o r e l i m i n a t e t h e t a x l i a b i l it y . 4 9 . A t t h e s a m e t i m e , t h e d i v i d i n g l i n e a s p e r t h e r a t i o i n Vo d a f o n e I n t e r n a t i o n a l H o l i d a y s B . V s c a s e ( s u p r a ) is e t h i c a l l y p r i n c i p l e d a n d m o r a l i s t i c a s t a x a v o i d a n ce i s d i s a p p r o v e d w h e n t h e a s s e s s e e a d o p t s a c o l o u r a b l e de v i c e , d u b i o u s n e s s a n d o t h e r w i s e i n d u l g e s i n a s h a m a r r a n ge m e n t o r t r a n s a c t i o n . T h i s w o u l d m e a n t h a t p r e - o r d a i n e d , c i r c u l a r o r s e l f - c a n c e l l i n g t r a n s a c t i o n w i t h a s t e p o r s t e p s h a v i n g n o c o m m e r c i a l p u r p o s e o r l a c k o f e c o n o m i c o r b u s i n e s s p u r p o s e c o u l d i n a g i v e n c a s e b e , t h o u g h no t n e c e s s a r i l y , a r e l e v a n t f a c t , y e t t h e y a r e n o t t h e t o u c h s t o n e , y a r d s t i c k o r t h e f i n a l t e s t . T h e s e c o u ld b e c i r c u m s t a n c e s o r f a c t s t o i n f e r a n d d i s c e r n w h e t h e r t h e t a x a b l e e v e n t s e l e c t e d w a s a c o l o u r a b l e d e v i c e , s h am o r d e c e i t a n d n o t t h e t a x e v e n t i n t e n d e d b y t h e p a r t i es . R i g h t t o c h o i c e t o s e l e c t t h e m o s t b e n e f i c i a l l e g a l w a y an d m a n n e r t o e x e c u t e a t r a n s a c t i o n i s u n q u e s t i o n a b l e an d p e r e n n i a l . A t a c t i s n o t t h e t e s t ; r a t h e r t h e c o r r up t a n d m e n d a c i o u s c o n d u c t , i . e . c o l o u r a b l e d e v i c e , s h a m o r d e c e i t , i s t h e s p e c i f i e d b r i g h t l i n e , d i v i d i n g a c c e p t a b l e ta x a v o i d a n c e f r o m a b u s i v e t a x a v o i d a n c e . 5 0 . T h e a s s e s s e d i s w e l l w i t h i n h i s r i g h t t o c h o o s e a n y o n e e v e n t b e t w e e n t w o o r m o r e e v e n t s a n d s e l e c t a n e v e n t t o m i n i m i z e o r r e d u c e h i s t a x l i a b i l i t y. T h e A c t , i . e . t h e I n c o m e T a x A c t , 1 9 6 1 , i m p o s e s a n d s a d d l e s t a x l i a b il i t y o n t h e c h o s e n t a x e v e n t . T h e A c t p e r s e , u n l e s s a p r o v i s i o n s o s t i p u l a t e s , d o e s n o t r e s t r i c t o r c u r t a i l t h e r i g h t o f c h o i c e . T a x i s d e t e r m i n e d a n d g e t s c r y s t a l l i z e d o n t h e t a x e v e n t a d o p t e d b y t h e a s s e s s e e . F o r e x a m p l e , i n V o d a f o n e I n t e r n a t i o n a l H o l i d a y s B . V ’ s c a s e ( s u p r a ) , t h e a s s es s e e h a d s e v e r a l o p t i o n s a n d t h e r e f o r e , r i g h t t o c h o o s e a p ar t i c u l a r t a x e v e n t . A s l o n g a s t h e c h o i c e i s w i t h i n t h e f r a me w o r k o f l a w , t h e A s s e s s i n g O f f i c e r c a n n o t d i s t u r b t h e t a x ef f e c t o r l i a b i l i t y , w h i c h i s t h e c o n s e q u e n c e o f t h e e v e n t . Th e c h o i c e IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 87 - o f t h e a s s e s s e e i s n o t a b r o g a t e d o r i n v a l i d a t e d . F or e x a m p l e , a c o m p a n y h a s s e v e r a l l e g a l o p t i o n s , a n d t h e r e f o r e , r i g h t t o c h o o s e h o w t o d i s p o s e o f a c a p it a l a s s e t , a s i n V o d a f o n e I n t e r n a t i o n a l H o l i d a y s B . V s c a s e (su p r a ) . S i m i l a r l y , a n a s s e s s e e c a n o p t f o r a n d h a s m u l t i p l e o p t i o n s f o r r a i s i n g d e b t t o f i n a n c e b u s i n e s s e x p a n s i o n p l a ns . T h e a s s e s s e d m a y h a v e s e v e r a l l e g a l l y p e r m i s s i b l e a l t e rn a t i v e s t o e f f e c t a n d d i v i d e t h e a s s e t s o n p a r t i t i o n . S u c h e x a m p l e s a r e n u m e r o u s . T h e c h o i c e n i g h t r e s u l t i n m i t i g a t i o n o f t a x l i a b i l i t y , b u t t h e t a x e f f e c t w o u l d n o t c l a s s i f y o r h e l p u s d i f f e r e n t i a t e b e t w e e n t a x a v o i d a n c e a n d a b u s i ve t a x a v o i d a n c e . A n y a t t e m p t t o m i n i m i z e o r e l i m i n a t e t ax l i a b i l i t y w o u l d n o t m a k e t h e c h o i c e o f t h e t a x p a y er a b u s i v e t a x a v o i d a n c e . T h e f o u n d a t i o n o f t h e s a i d p r i n c i p l e i s t h a t t h e t a x c o d e b y i t s n a t u r e d i f f e r e n t i a t e s b e t w e e n di f f e r e n t t y p e s o f a c t i o n s , t r a n s a c t i o n s , a r r a n g e m e n t s a n d a ct i v i t i e s a n d t h e n i d e n t i f i e s a n d s t i p u l a t e s t h e c o n s e q u e n c e s, " h e t a x c o d e , i . e . t h e I n c o m e T a x A c t , 1 9 6 1 i s r u l e b a s e d an d c o m p l e x . T h e A c t i s n o t e n t i r e l y p r i n c i p l e b a s e d . Th e p r o v i s i o n s a r e r e a d a n d a p p l i e d . P r i n c i p l e o f p u r po s i v e i n t e r p r e t a t i o n b o t h i n f a v o u r o f R e v e n u e o r a s s e s s ed c a n b e a p p l i e d b u t w i t h i n f o u r c o r n e r s o f l a w . I n f a c t , i n s o m e c a s e s , t h e a s s e s s e d m a y f i n d t h e m s e l v e s t a x e d a t a h i g h e r l i a b i l i t y f o r f a i l u r e t o c h o o s e a m o r e t a x f r i e n d l y e v e n t . B u t t h e r i g h t o f c h o i c e i s h e d g e d w i t h o n e s i g n i f i c a n t c o n d i t i o n . T h e e v e n t s e l e c t e d , a s n o t i c e d a b o v e a n d s u b s e q u e n tl y , s h o u l d b e r e a l a n d n o t a c o l o u r a b l e d e v i c e , s h a m a nd d e c e i t . 5 1 . T a x r e d u c t i o n i s n o t a n e v i l i f y o u d o n o t d o it e v i l l y [ M u r p h y L o g g i n g C o . v . U S [ 1 9 6 7 ] 3 7 8 F . 2 d 2 2 2 ] . T h e a s s e s s e e a c t s e v i l l y w h e n t h e r e i s c a m o u f l a g e o r d ub i o u s i t y t o m a s k a n d m a s q u e r a d e t h e r e a l i n t e n t o f t h e t r a n sa c t i o n w h i c h t h e p a r t i e s i n t e n d e d a n d t h e d o c u m e n t ( s ) / t r a n s a c t i o n ( s ) , i s a t v a r i a n c e w i t h t h e a c t u a l i n t e n t . T h e a s s e s s e d i n s u c h c a s e s d o e s n o t c h o o s e t h e r e a l e v e n t a s o n e f r o m t h e m u l t i p l e c h o i c e s , b u t a d o p t s a s h a m o r c o l o u r a b l e e v e n t . T h e a s s e s s e d t h e n a c t s f r a u d u le n t l y , d e c e i t f u l l y o r i n a c o r r u p t m a n n e r . H e d o e s n o t c h oo s e a n e v e n t w h i c h i s u s e f u l , v i a b l e a n d t e n a b l e , b u t e m p lo y s d e c e p t i o n a n d v i s o r s t o p r e t e n s e a s t a t e o f a f f a i r w h i c h i s d i f f e r e n t f r o m t h e a c t u a l o r r e a l s t a t e o f a f f a i r s . T h e e v e n t p r o p o u n d e d i s c o n t r a r y t o h i s i n t e n t i o n . W h e n t h e ev e n t s e l e c t e d i s a r t i f i c i a l i t c a n b e t r e a t e d a s c o l o u r ab l e , d e c e i t f u l o r s h a m . T h e a r t i f i c i a l e v e n t i s o n e w h i ch p u r p o r t s t o b e o n e t h i n g b u t i n f a c t i s a n o t h e r . T hu s , a b u s i v e t a x a v o i d a n c e i s a m a t t e r o f e v i l i n t e n t i o n a n d a r e s u l t o f d i s h o n e s t b e h a v i o u r o f t h e a s s e s s e d . . . . . ." T h e D e l h i H i g h C o u r t i n D . S . B i s t & S o n s h e l d a s un d e r : IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 88 - T h e a g r e e m e n t , d a t e d 2 0 - 8 - 1 9 6 3 , h a d b e e n h e l d t o b e a v a l i d a g r e e m e n t e n t e r e d i n t o b y t w o p a r t i e s w h o w e r e d e a li n g w i t h e a c h o t h e r a t a r m ' s l e n g t h . A s t h e a g r e e m e n t wa s g e n u i n e , a s h e l d b y t h e T r i b u n a l , a n d t h e t w o p a r t ie s h a d i n d e p e n d e n t l y c o m e t o t h a t a g r e e m e n t a s c o m m e r c i a l ly e x p e d i e n t , t h e i n c o m e t a x a u t h o r i t i e s c o u l d n o t l i gh t l y o v e r t h r o w t h a t a g r e e m e n t u n l e s s t h e r e w e r e c o g e n t c i r c u m s t a n c e s e x i s t i n g o n t h e r e c o r d . T h e a u t h o r i t ie s d i d n o t h o l d t h a t t h e l o a n w a s n o t a d v a n c e d i n t h e o r d in a r y c o u r s e o f b u s i n e s s . T h u s , i n c a s e a l o s s r e s u l t e d , i t w o u l d b e a l l o w a b l e a s a d e d u c t i o n e i t h e r a s a b a d d e b t o r a s l o s s i n c i d e n t a l t o b u s i n e s s . F u r t h e r , n o c i r c u m s t a n c e s we r e a v a i l a b l e o n t h e r e c o r d t o c o m e t o t h e c o n c l u s i o n th a t t h e d i s t r i b u t i o n o f t h e t o t a l p r i c e o v e r t h e a s s e t s w a s n o t i n a c c o r d a n c e w i t h t h e c o m m e r c i a l p r a c t i c e . U n d e r t h e t a x i n g s y s t e m i t w a s u p t o t h e a s s e s s e e t o c o n d u c t h i s b u si n e s s a n d i n h i s w i s d o m , t h e a s s e s s e e m a y e n t e r i n t o c o m m e r c ia l t r a n s a c t i o n s w i t h a n o t h e r p a r t y w h o i s a d i d e m w i t h t h e a s s e s s e e a s t o t h e t e r m s a n d c o n d i t i o n s . I n t h e a b se n c e o f a n y c o l l u s i o n b e t w e e n t h e t w o , i t w a s n o t p o s s i b l e t o v a r y t h e t e r m s o n t h e f a c t s a n d i n t h e c i r c u m s t a n c e s o f t h e c a s e . 1 5 . 4 M o r e o v e r, t h e a d d i t i o n i n t h e h a n d s o f t h e a p p e l l a n t h a s b e e n m a d e b y t h e A O a s " u n e x p l a i n e d i n v e s t m e n t " , w hi c h , a s p e r A O , " m u s t h a v e b e e n m a d e / p a i d b y a p p e l l a n t " o u t o f u n a c c o u n t e d s o u r c e s . T h i s a l l e g a t i o n a n d c o n c l u s i o n o f t h e A O ba s e d t h e r e o n h a s r i g h t l y b e e n c h a l l e n g e d a n d d e s c r i b e d b y t h e A R a s p r e p o s t e r o u s . E v e n i f t h e t r a n s a c t i o n i s i n d e e d s h am o r i s a s u b t e r f u g e , s t i l l i t h a s n o t b e e n b r o u g h t o u t o r e xp l a i n e d b y t h e A O , a n d i t d o e s n ' t a p p e a l t o t h e s e n s e o f f a i r n e s s o r r e a s o n , a s t o h o w c o u l d t h e a p p e l l a n t b e h e l d t o h a v e m a d e " u n a c co u n t e d i n v e s t m e n t " ? T h e r e i s n o e v i d e n c e a t a l l o n r e c o r d f o r t h i s f i n d i n g b y t h e A O . T h e r e i s o n l y a c o n j e c t u r e , p r e s u m p t i o n a n d s u r m i s e a n d i n d e e d n o f i n d i n g a t a l l t h a t a p p e l l a n t m a d e a ny p a y m e n t m o r e t h a n R e . 1 p e r s h a r e . I n t h i s b a c k g r o u n d , I h a v e t o o b s e r v e t h a t e v e n i f t h e A O ' s f i n d i n g a b o u t c o l o u r a b i l i t y o f t h e t r a n s a c t i o n i s u p h e l d , t h e n a l s o I w o u l d h a v e f o u n d t h e a d d i t i o n ma d e b y t h e A O t o b e n o t s u s t a i n a b l e o n f a c t s o r i n l a w . Wh i l e m a ki n g t h i s a d d i t i o n , t h e A O h a s f i r s t l y s u r m i s e d t h a t " a m o u n t i n e x c e s s o f R e . 1 p e r s h a r e " m u s t h a v e b e e n p a i d b y t h e a p p e l l a nt . S e c o n d l y , t h e A O h a s f u r t h e r s u r m i s e d t h a t s u c h p a y m e n t m u s t h a v e b e e n m a d e b y t h e a p p e l l a n t i n c a s h . I a g r e e w i t h t h e c o nt e n t i o n o f t h e L d . A R t h a t a d d i t i o n u / s 6 9 B a s " d e e m e d i n v e s t m e n t " c a n n o t b e m a d e i n l a w i n t h e a b s e n c e o f c l e a r a n d c a t e g o r i c a l e v i d e n c e ( a s a g a i n s t m e r e i n f e r e n c e o r m e r e s u r m i s e ) . T h e t w i n le g a l c o n d i t i o n s r e q u i r e d t o b e s a t i s f i e d f o r m a k i n g t h e a d d i t i o n u /s 6 9 B a r e t h a t t h e r e m u s t b e e v i d e n c e o n r e c o r d t h a t p a y m e n t h a s be e n m a d e a n d s e c o n d t h a t s u c h p a y m e n t / i n v e s t m e n t h a s n o t b e e n r e c o r d e d i n t h e b o o k s o f a c c o u n t . N o n e o f t h e c o n d i t i o n s c a n b e s a i d t o h a v e b e e n s a t i s f i e d m e r e l y o n t h e b a s i s o f i n f e r e n c e / s ur m i s e w h e n n o IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 89 - c a t e g o r i c a l e v i d e n c e h a s b e e n b r o u g h t o n r e c o r d o r e v e n r e f e r r e d t o b y t h e A O . T h e f a c t s a r e c o v e r e d b y a s e r i e s o f d e c i s i o n s r e l ie d u p o n b y t h e A R a n d a l s o b y S u p r e m e C o u r t d e c i s i o n s i n G e o r g e H e n d e r s o n & C o . ( s u p r a ) a s a l s o i n G i l l a n d e r s A r b u th n o t & C o . ( s u p r a ) , a n d t h e r e f o r e t h e a d d i t i o n b e i n g w h o l l y w it h o u t m e r i t , s t a n d s d e l e t e d . 1 5 . 5 I n c o n c l u s i o n , i t i s h e l d t h a t t h e t r a n s a c t i o n o f p u r c h a s e o f s h a r e s o f R L b y t h e a p p e l l a n t f r o m A n i l P a t e l i s a g e n u i n e t r a n s a c t i o n . T h e r e i s n o e v i d e n c e o n r e c o r d t o c o n cl u d e t h a t a p p e l l a n t p a i d a n y a m o u n t m o r e t h a n R e . 1 p e r s h a r e f o r t h i s p u r c h a s e . C o n s e q u e n t l y , a d d i t i o n o f R s . 3 4 , 5 9 , 5 5 , 1 0 0 m a d e b y t h e A O i s d e l e t e d . G r o u n d s 4 . 2 t o 4 . 4 a r e a l l o w e d . 1 7 . 2 I h a v e d u l y c o n s i d e r e d t h e f a c t s o n r e c o r d a n d p e r u s e d t h e a s s e s s m e n t o r d e r a n d t h e w r i t t e n s u b m i s s i o n s o f t h e a p p e l l a n t . I n m y c o n s i d e r e d o p i n i o n , e x c e p t t h e a b s e n c e o f " A r b i tr a t i o n A w a r d " , t h e f a c t s l e a d i n g t o t h e p r e s e n t a d d i t i o n b y t h e A O a r e e x a c t l y i d e n t i c a l t o t h e f a c t s o b t a i n i n g w i t h r e g a r d t o t h e a d d i t i o n i n c o n n e c t i o n w i t h t r a n s a c t i o n o f t r a n s f e r o f s h a r e s of R L a t R e . 1 p e r s h a r e . I f i n d r e a s o n a n d p e r s u a s i o n i n A R ' s s u bm i s s i o n t h a t t h e r e i s c o m p e l l i n g i m p l i c a t i o n i n t h e A w a r d t o r e as o n a b l y i n f e r t h a t a c h i e v i n g 6 0 : 4 0 r a t i o i n R L L a l s o c o u l d a n d w ou l d b e a n i m p l i e d b u t i n t e g r a l n e c e s s i t y a n d i n t e g r a l p a r t t he d e l i b e r a t i o n / c o n c e r n s l e a d i n g t o A r b i t r a t i o n A w a r d o f s o a s t o a c h i e v e i n t e n d e d q u i e t u s . T h e L d . A O ' s a r g u m e n t t h at t h e t r a n s a c t i o n i s m e a n t t o d e f r a u d t h e r e v e n u e , h a s a ls o n o s u b s t a n c e i n a s m u c h a s e v e n i f t h e t r a n s a c t i o n i s t o b e c o n si d e r e d " s h a m " , t h e o n l y c o n s e q u e n c e v i s - a - v i s t h e a p p e l l a n t w o u l d b e l e s s e r c a p i t a l g a i n s . T h e f i n d i n g o f " t r a n s a c t i o n b e i n g s ha m " c a n n o t , e v e n i n t h e w i l d e s t d r e a m s , l e a d t o a c o n c l u s i o n o f u n a c c o u n t e d i n v e s t m e n t b y a p p e l l a n t . E v e n t h e A O ' s o b s e r v a t i o n , a l l e g a t i o n a n d a r g u m e n t t h a t t h e a p p e l l a n t h a d " s p a c e " o n a c c o u n t o f s h o r t t e r m c a p i t a l l o s s o n m u t u a l f u n d s a n d o n N I F T Y f u t u r e s an d t h e r e f o r e t h e t r a n s a c t i o n i s a c c o m m o d a t i v e a n d c o l l u s i v e i s al s o w i t h o u t s u b s t a n c e a n d w h o l l y w i t h o u t v e r i f i c a t i o n o f b a s i c f a c t s . A s r i g h t l y s u b m i t t e d b y t h e A R , t h e a p p e l l a n t , o n l y a f t e r p u r c h a s i n g t h e s h a r e s f r o m A R P o n 4 / 7 / 2 0 0 7 ( p a y m e n t d e b i t e d i n b a nk a c c o u n t o n 9 / 7 / 2 0 0 7 ) a n d o n l y a f t e r e a r n i n g t h e c a p i t a l g a in s o n f u r t h e r s a l e t o L u p i n , h a s e n t e r e d i n t o t r a n s a c t i o n s w h i c h r e s u l t e d i n t o S T C L a s u n d e r : S r . N o . S c r i p D a t e o f P u r c h a s e D a t e o f s a l e R e s u l t ( a p p r o x . ) 1 U T I I n d . F u n d 4 / 1 0 / 2 0 0 7 1 5 / 1 / 2 0 0 8 - 1 . 9 4 c r o r e s 2 N I F T Y f u t u r e 3 / 1 2 / 2 0 0 7 1 5 / 0 1 / 2 0 0 8 - 1 . 4 4 c r o r e s 3 D i v i d e n d I n c o m e ( t a x - f r e e ) + 3 . 6 c r o r e s 4 N e t R e s u l t O . 2 2 c r o r e s 1 7 . 3 T h u s , n o t h i n g m u c h c a n b e r e a d i n t o o r f o u n d su p p o r t f r o m t h e f a c t o f s h o r t t e r m c a p i t a l l o s s h a v i n g b e e n o f fs e t b y s h o r t t e r m IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 90 - c a p i t a l g a i n s . I h a v e a l r e a d y h e l d t h a t t h e r e i s n o c r e d i b l e m a t e r i a l w i t h t h e A O t o t r e a t t h e t r a n s a c t i o n a s s ha m o r s u b t e r f u g e . I h a v e a l s o h e l d t h a t e v e n i f t h e t r a n sa c t i o n i s h e l d t o b e a s u b t e r f u g e , n o a d d i t i o n a s u n a c c o u n t e d i n v e s t me n t u / s 6 9 B c a n b e m a d e i n t h e h a n d s o f t h e a p p e l l a n t i n t h e a bs e n c e o f a n y p o s i t i v e e v i d e n c e o f " e x t r a a n d u n a c c o u n t e d p a y m e n t" b r o u g h t o n r e c o r d b y t h e A O . T h u s , i t i s h e l d , f o l l o w i n g t h e r e a s o n i n g g i v e n i n p a r a 1 5 a b o v e t h a t t h e t r a n s a c t i o n o f p u r c h a s e of s h a r e s o f R L L b y t h e a p p e l l a n t a t R e . 1 p e r s h a r e i s a g e n u i ne t r a n s a c t i o n a n d n o t a t a l l a s h a m , c o l l u s i v e o r c o l o r a b l e t r a n sa c t i o n . T h u s , t h e r e i s n o m e r i t i n t h e a d d i t i o n o f R s . 3 , 4 5 , 2 0 , 5 0 8/ - m a d e b y t h e A O . T h e a d d i t i o n i s t h e r e f o r e d e l e t e d . A p p e l l a n t ge t s e q u i v a l e n t r e l i e f . R e l a t e d g r o u n d s s u c c e e d . L e g a l G r o u n d s 1 . 1 , 1 . 2 , 3 . 1 , 4 . 1 a n d 5 . 1 1 8 . N o w I t u r n t o t h e l e g a l g r o u n d s b a s e d o n t h e r at i o o f S a u m y a C o n s t r u c t i o n ( s u p r a ) r a i s e d b y t h e a p p e l l a n t. A s d i s c u s s e d a t a p p r o p r i a t e p l a c e s ( s u p r a ) , I h a v e c a t e g o r i c a l l y h e l d t h a t t h e r e i s n o c r e d i b l e m a t e r i a l , s e i z e d o r o t h e r w i s e , i n p os s e s s i o n o f t h e A O j u s t i f y i n g a n y o f t h e a d v e r s e o b s e r v a t i o n s m a d e , a d v e r s e i n f e r e n c e s d r a w n , a d v e r s e f i n d i n g s g i v e n o r f o r a n y o f t h e a d d i t i o n s m a d e b y h e r . A f t e r h e a r i n g t o v e h e m e n t a r g u m e n t s o f t h e A R , a f t e r p e r u s i n g t h e w r i t t e n s u b m i s s i o n s f i l e d b y t h e a p p e l l a n t , a n d a f t e r g i v i n g t h o u g h t f u l c o n s i d e r a t i o n t o t h e s am e , I m a y t a b u l a t e t h e a d d i t i o n - w i s e s e i z e d d o c u m e n t s r e f e r r ed t o b y t h e A O f o r s u p p o r t i n g t h e a d d i t i o n s m a d e b y h e r , a n d t h e r ea f t e r m a y a d j u d i c a t e t h e r e l a t e d l e g a l g r o u n d s 2 . 1 t o 5 . 1 b e fo r e f i n a l l y a d j u d i c a t i n g G r o u n d s 1 . 1 . a n d 1 . 2 . A d d i t i o n o f R s . 4 , 5 9 , 7 0 , 8 5 4 / - ( G r o u n d 2 . 1 ) : T h e f o l l o w i n g s e i z e d d o c u m e n t s h a v e b e e n r e l i e d u p on b y t h e A O i n t h e a s s e s s m e n t : S r . N o . P a g e N o . o f t h e A s s t t . O r d e r D e s c r i p t i o n o f d o c u m e n t C r u x o f S u b m i s s i o n s b y A R 1 2 , 7 - 1 0 O f f e r L e t t e r d a t e d 2 8 / 8 / 2 0 0 7 N o e v i d e n c e o f p a y m e n t o f m o r e t h a n a g r e e d t o a m o u n t . E x e c u t o r y a n d c o n d i t i o n a l d o c u m e n t , n o e v i d e n t i a r y v a l u e o n c e f i n a l S P A d a t e d 2 6 / 9 / 2 0 0 7 e x e c u t e d . 2 5 V a r i o u s M a i l e x c h a n g e s -A n n e x u r e A - 1 0 a n d A - 7 N o p a r t i c u l a r a d v e r s e c o n t e n t . 3 1 3 E -m a i l c o m m u n i c a t i o n d a t e d 9 / 8 / 2 0 0 7 f r o m t h e a p p e l l a n t t o V i k a s D a w r a R e f e r s t o " s t r o n g f e e l i n g s " o f a p p e l l a n t a b o u t d e a l a t " 4 5 c r o r e s ” . N o e v i d e n c e o f u n a c c o u n t e d t r a n s a c t i o n , o r IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 91 - u n a c c o u n t e d r e c e i p t o r p a y m e n t . 4 1 4 E -m a i l c o m m u n i c a t i o n d a t e d 1 3 / 8 / 2 0 0 7 f r o m t h e a p p el l a n t t o V i k a s D a w r a A p p e l l a n t ' s m e r e o p i n i o n t h a t " 4 5 + 1 5 ” i s a g o o d v a l u a t i o n . N o e v i d e n c e o f u n a c c o u n t e d t r a n s a c t i o n , r e c e i p t o r p a y m e n t . 5 1 5 E -m a i l c o m m u n i c a t i o n d a t e d 1 6 / 8 / 2 0 0 7 f r o m t h e a p p e l l a n t t o A j a y A g a r w a l " K h a n n a o f L u p i n h a s c o m e u p t o 4 4 " , N o e v i d e n c e o f u n a c c o u n t e d t r a n s a c t i o n , r e c e i p t o r p a y m e n t . 1 8 . B a s e d o n t h e a b o v e , i t i s t h e c o n t e n t i o n o f t h e L d . A R , a s d i s c u s s e d i n p a r a 5 a b o v e t h a t t h e r e i s n o i n c r i m i na t i n g s e i z e d m a t e r i a l i n p o s s e s s i o n o f t h e A O s o a s t o e n a b l e h im i n m a k i n g a d d i t i o n i n t h i s u n a b a t e d a s s e s s m e n t w h i c h h a d a t t ai n e d f i n a l i t y b e f o r e t h e d a t e o f s e a r c h . H a v i n g p e r u s e d t h e a s s e ss m e n t o r d e r a n d h a v i n g c o n s i d e r e d t h e r e l e v a n c e o f t h e s e p u r p o rt e d l y " i n c r i m i n a t i n g m a t e r i a l " , a n d h a v i n g a l s o n o t e d t h at e v e n t i l l t h e c o m p l e t i o n o f t h e a s s e s s m e n t f r a m e d b y t h e A O , t h e re i s n o o t h e r c r e d i b l e a n d i n d e p e n d e n t m a t e r i a l b r o u g h t o n r e c o r d b y t h e A O t o s u p p o r t h i s f i n d i n g t h a t i n f a c t R s . 4 2 . 5 c r o r e s h a s b e e n r e c e i v e d a s c o n s i d e r a t i o n t o w a r d s t r a n s f e r o f e n t i r e s h a r e h ol d i n g i n R L L, I h a v e c o m e t o a c o n s i d e r e d c o n c l u s i o n t h a t n o n e o f t h e a b o v e f i v e s e i z e d d o c u m e n t s w o u l d q u a l i f y t o b e " i n c r i m i n a t i n g" . A s r i g h t l y s u b m i t t e d b y t h e A R , t h e p l a i n d i c t i o n a r y m e a n i n g of " i n c r i m i n a t i n g " i s " to b e m a k i n g s o m e o n e a p p e a r g u il t y o f a c r i m e o r w r o n g d o i n g " . T h u s , t h e d o c u m e n t t o b e i n c r i m i n a ti n g s o a s t o b e v a l i d l y c o n f e r r i n g j u r i s d i c t i o n u / s 1 5 3 A o r 1 5 3 C f o r t r i g g e r i n g A O ' s " i n t e r f e r e n c e " h a s n e c e s s a r i l y t o r e c o r d a " t r a n s a c t i o n " w h i c h a t l e a s t p r i m a f a d e i n d i c a t e s u n a c c o u n t e d/ c a s h / d o u b t f u l t r a n s a c t i o n . T h e d o c u m e n t r e l i e d u p o n b y t h e A O a s p e r t a i n i n g t o t h e a p p e l l a n t a n d t r e a t e d b y h e r a s i n c r i m i n a t i n g ar e u n q u e s t i o n a b l y n o t i n c r i m i n a t i n g i n a s m u c h a s n o n e o f t h e m r e c o r d a n y c o m p l e t e d o r p r o p e r t r a n s a c t i o n , l e a v e as i d e s u c h t r a n s a c t i o n p o i n t i n g t o w a r d s g u i l t o r w r o n g - d o i n g or a c t o f t a x e v a s i o n o f a p p e l l a n t . A s a l r e a d y h e l d b y m e , t h e e - m a i l c o m m u n i c a t i o n s a n d t h e O f f e r L e t t e r o f L u p i n a r e t he m s e l v e s f u t u r i s t i c a n d t e n t a t i v e i n n a t u r e a n d p r o b a b i l i s t ic i n t e n o r . I n m y c o n s i d e r e d o p i n i o n n o n e o f t h e d o c u m e n t s a r e a l s o ca p a b l e o f r e m o t e l y e v i d e n c i n g a n y m e a n i n g f u l w r o n g d o i n g , a c c om p l i s h e d o r e v e n p l a n n e d , b y t h e a p p e l l a n t . I f s u c h c o m m u n i c a t io n s e v i d e n c i n g t h e n e g o t i a t i o n s - s t a g e b a r g a i n i n g o r c o n t e m p l a t i o n s a b o u t a f u t u r e d e a l a r e t a k e n t o b e w i t h i n t h e a m b i t o f b e in g " i n c r i m i n a t i n g " , w i t h o u t i n s i s t i n g o n p r i m a f a c i e ev i d e n c e o f u n a c c o u n t e d t r a n s a c t i o n o n s u c h d o c u m e n t s , a l l a n d e v e r y d o c u m e n t s e i z e d d u r i n g t h e c o u r s e o f a s e a r c h p e r t ai n i n g t o a l l r e c o r d e d a n d d u l y d i s c l o s e d t r a n s a c t i o n s w o u l d a l s o f a l l w i t h i n t h e c a t e g o r y o f b e i n g " i n c r i m i n a t i n g " . M y p e r u s a l of t h e d e c i s i o n s i n c l u d i n g J u r i o d i c t i o n a l H C D e c i s i o n s i n S a u m y a C o ns t r u c t i o n IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 92 - ( s u p r a ) a n d J a y a b e n R a t i l a l S o r a t h i a (r e l i e d u p o n in S a u m y a ) a n d o t h e r d e c i s i o n s o n t h e i s s u e e n l i g h t e n m e t h a t H o n . H C s a n d T r i b u n a l h a v e n a r r o w e d o r ' r e a d d o w n ' t h e s c o p e o f A O ' s p o w e r u / s 1 5 3 A p r i m a r i l y o n t h e b a s i s o f f u n d a m e n t a l p r i nc i p l e t h a t " u n a b a t e d a s s e s s m e n t s " h a v e a t t a i n e d f i n a l i t y b e f o re t h e s e a r c h w h i c h c a n ' t b e a r b i t r a r i l y a n d l i g h t l y u n s e t t l e d b y t h e A O m e r e l y b e c a u s e t h e r e i s s e a r c h a c t i o n u / s 1 3 2 a n d a l s o m e re l y b e c a u s e t h e a s s e s s m e n t n e e d s t o b e r e - f r a m e d u / s 1 5 3 A a s s t a t u to r i l y r e q u i r e d . T h e " t r i g g e r i n g " o r " e n a b l i n g " s e i z e d m a t e r i a l i n th i s b e h a l f , t h e r e f o r e , b y n e c e s s a r y i m p l i c a t i o n , m u s t n e c e s s a r i l y J u s t i f y , o n i t s o w n f a c e , r e v i s i t i n g t h e i s s u e b y t h e A O. T h a t o n l y w o u l d , i n o t h e r w o r d s , b e " i n c r i m i n a t i n g " , f o r v a l i d l y c o n f e rr i n g j u r i s d i c t i o n o n t h e A O w h i l e r e - f r a m i n g a n " u n a b a t e d " a s s e s s m e n t u / s 1 5 3 A f o r m a k i n g a p a r t i c u l a r a d d i t i o n . P r e s e n t l y , t h e " s e i z ed d o c u m e n t s " r e l i e d u p o n b y t h e A O t o " i n t e r f e r e " w i t h a n a l r e a dy c o n c l u d e d i s s u e a r e d e v o i d o f a n y c a t e g o r i c a l e v i d e n c e o f a n y u n a p p r o v a b l e ( p l a n n e d o r c o n c l u d e d ) a c t i o n o r o f a n y u n a c c o u n t e d o r u n a c c o u n t a b l e t r a n s a c t i o n o f t h e a p p e l l a n t a n d a r e t h e r e f o r e d u m b a t b e s t a n d w h o l l y i r r e l e v a n t a t w o r s t . H a d t h e r e be e n i n A O ' s p o s s e s s i o n a s e i z e d r e c o r d o f a c t u a l r e c e i p t / p a y m e nt o f o r e v e n a n a g r e e m e n t / u n d e r t a k i n g t o p a y / r e c e i v e i n f u t u r e a n ad d i t i o n a l a n d u n a c c o u n t e d a m o u n t o f e v e n a s i n g l e r u p e e i n c o n n e ct i o n w i t h t h e t r a n s a c t i o n , o r o f a d e f r a u d i n g d e s i g n o r d e a l , t h a t w o u l d h a v e i n d e e d c o n f e r r e d a v a l i d j u r i s d i c t i o n o n A O t o " i n t e r f e r e " a n d u n d e r t a k e n e c e s s a r y e n q u i r y a n d m a k e t h e a d d i t io n . A n o t h e r t e s t w o u l d b e t h a t " t h a t r e l e v a n t d o c u m e n t w h i c h w as n o t p r o d u c e d o r w h i c h m i g h t n o t b e p r o d u c e d b e f o r e t h e A O d u r i n g o r i g i n a l a s s e s s m e n t " c o u l d r i g h t l y b e t r e a t e d a s " i n c r i m i n a ti n g ” . I n m y c o n s i d e r e d o p i n i o n , t h e s e i n t e r n a l c o m m u n i c a t i o n s un d e r t a k e n a t n e g o t i a t i o n s t a g e h a v e b e c o m e r e d u n d a n t a n d i r r e l e va n t o n c e f i n a l t r a n s a c t i o n s h a v e t a k e n p l a c e , a n d t h e r e f o r e w h e t h er o r n o t t h e s a m e w e r e n o t p r o d u c e d o r m i g h t n o t b e p r o d u c e d b e fo r e t h e A O i s a n i r r e l e v a n t c o n s i d e r a t i o n . M o r e o v e r , w h e n a b u s i ne s s m a n o r h i s a s s o c i a t e s e n t e r i n t o h u n d r e d s o f m a i l - c o m m u n i c a t i on s , w h i c h o f t h e m " m i g h t n o t b e p r o d u c e d " i s a n u n e n d i n g a n d a n e q u a l l y m e a n i n g l e s s e n q u i r y . T h e A O , t h e r e f o r e , d o u b t l e s s l y a n d p o s i t i v e l y m u s t s h o w i n c r i m i n a l i t y i n t h e v e r y s e i z e d d o c u m e n ts r e l i e d u p o n b y h e r t o v a l i d a t e h e r " g e t t i n g t r i g g e r e d " f o r u n s et t l i n g a c o n c l u d e d i s s u e . F i n a l l y , m y f i n d i n g s o n m e r i t ( s u pr a ) w o u l d a l s o i n d i c a t e t h a t I h a v e a l r e a d y h e l d t h e s e d o c u m e n t s to b e i r r e l e v a n t a n d c o n s e q u e n t l y a n d o b v i o u s l y t h e r e f o r e t o b e n o t i n c r i m i n a t i n g . T h u s , I a g r e e w i t h t h e L d . A R t h a t A O h a s e x c e e d e d h e r a u t h o r i t y , a s e x p l a i n e d i n S a u m y a C o n s t r u c t i o n ( s u pr a ) b y G u j a r a t H i g h C o u r t , i n " i n t e r f e r i n g " w i t h a n a l r e a dy c o n c l u d e d i s s u e a n d i n m a k i n g t h e a d d i t i o n o n a n i s s u e f o r w hi c h t h e r e w a s n o r e l e v a n t a n d c r e d i b l e e n a b l i n g i n c r i m i n a t i n g s e iz e d d o c u m e n t i n h e r p o s s e s s i o n . A c c o r d i n g l y , g r o u n d n o . 2 . 1 s u c c ee d s . C a p i t a l G a i n s v . B u s i n e s s I n c o m e ; R s . 1 1 , 6 2 , 6 9 , 9 0 7 / -( G r o u n d 3 . 1 ) IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 93 - 1 9 . T h e o n l y s e i z e d d o c u m e n t r e f e r r e d t o b y t h e A O f o r h o l d i n g t h a t t h e i n c o m e i s t o b e t a x e d u n d e r t h e h e a d ' B u s in e s s I n c o m e ' a n d n o t u n d e r t h e h e a d ' C a p i t a l G a i n s ' i s t h e s h a r e p u r c h a s e a g r e e m e n t ( S P A ) d a t e d 2 6 / 9 / 2 0 0 7 b e t w e e n t h e a p p e l l an t ( s e l l e r s ) a n d L u p i n L t d . T h e a p p e l l a n t , i n t h e r e t u r n s o f i n co m e f i l e d a t a p p r o p r i a t e t i m e , d i s c l o s e d t h i s v e r y t r a n s a c t i o n as d e p i c t e d i n S P A d a t e d 2 6 / 9 / 2 0 0 7 f o r d i s c l o s i n g t h e r e l e v a n t C a pi t a l G a i n s . I t d o e s n o t e s c a p e t h e n o t i c e o f t h e r e a d e r o f t h e a s se s s m e n t o r d e r t h a t A O h a s s i m p l y a n a l y z e d v a r i o u s c l a u s e s o f S P A a n d s e c ti o n 2 8 ( v a ) o f t h e A c t b e f o r e c o m i n g t o h e r c o n c l u s i o n r e c o r d ed b y h e r i n p o i n t s 1 t o 4 o f p a g e 2 0 o f t h e a s s e s s m e n t o r d e r. T h e A O h e r s e l f h a s n o t e d o n p a g e n o . 2 3 o f t h e o r d e r t h a t n o t o n l y t h e a p p e l l a n t a n d o t h e r s e l l e r s h a v e d i s c l o s e d t h e s e v e r y t r a n s a ct i o n s i n t h e r e t u r n o f i n c o m e b u t t h e a p p e l l a n t h a s a l s o c l a i m e d d e d u c t i o n s u / s 5 4 E C / 5 4 F a n d a l s o c l a i m e d s e t o f f o f c a p i t a l l o s s e s. T h e i s s u e t o b e d e c i d e d t h e r e f o r e i s t h a t c a n t h e S P A , r e l i e d u po n e x c l u s i v e l y b y t h e A O f o r m a k i n g t h e a d d i t i o n , b e h e l d t o b e " in c r i m i n a t i n g " . I n m y c o n s i d e r e d o p i n i o n , t h e t r a n s a c t i o n o f s a l e of s h a r e s t o L u p i n i n p u r s u a n c e t o S P A d a t e d 2 6 / 9 / 2 0 0 7 h a s a l r e ad y b e e n d i s c l o s e d i n t h e r e t u r n o f i n c o m e b y t h e a p p e l l a n t . I t i s i m p o s s i b l e t o h o l d t h a t t h e r e i s a n y t h i n g i n c r i m i n a t i n g i n t h e v e r y S P A w h i c h h a s b e e n a c t e d u p o n a n d d i s c l o s e d i n t h e r e t ur n o f i n c o m e b e f o r e t h e d a t e o f t h e s e a r c h b y t h e a p p e l l a n t . I t i s a l s o i m p o s s i b l e t o h o l d t h a t t h i s f u n d a m e n t a l d o c u m e n t wo u l d n o t h a v e b e e n o r m i g h t n o t b e p r o d u c e d b e f o r e t h e A O . T h u s in m y c o n s i d e r e d o p i n i o n , t h e r e i s n o t h i n g i n c r i m i n a t i n g s e i z e d d u r i n g t h e c o u r s e o f t h e s e a r c h w h i c h c a n t r i g g e r t h e a c t io n o f t h e A O i n p r o c e e d i n g i n c h a n g i n g t h e h e a d o t i n c o m e f r o m C a p it a l G a i n t o B u s i n e s s I n c o m e . T h u s , I a m i n c l i n e d t o a l l o w g r o u n d n o . 3 . 1 a l s o. A d d i t i o n o f R s . 3 4 , 5 9 , 5 5 , 1 0 0 / - a s U n a c c o u n t e d I n v e s tm e n t o n p u r c h a s e o f s h a r e s o f R L ( G r o u n d N o . 4 . 1 ) 2 0 . T h e i n c r i m i n a t i n g d o c u m e n t s r e f e r r e d t o b y t he A O a r e a s u n d e r : S r . N o . P . N o . o f t h e a s s e s s m e n t o r d e r D e s c r i p t i o n o f t h e d o c u m e n t C r u x o f s u b m i s s i o n s b y A R 1 2 4 S h a r e h o l d e r s ' a g r e e m e n t d a t e d 6 / 6 / 2 0 0 3 F o r m a l d o c u m e n t . N o t h i n g s u s p i c i o u s . D e c l a r e d v o i d b y A r b i t r a t i o n a w a r d d a t e d 5 / 6 / 2 0 0 7 . N o e v i d e n t i a r y v a l u e . 2 2 4 S h a r e h o l d e r s ' a g r e e m e n t d a t e d 3 1 / 8 / 2 0 0 5 A s a b o v e . 2 4 S h a r e h o l d e r s ' a g r e e m e n t d a t e d 1 5 / 1 2 / 2 0 0 6 A s a b o v e . IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 94 - 4 3 2 E -m a i l o f M i l i n M e h t a d a t e d 1 / 7 / 2 0 0 7 S e e k s a n a d v i c e o n t h e " s t r u c t u r e " o f f u t u r e t r a n s a c t i o n . N o t h i n g f i s h y o r " i n c r i m i n a t i n g " . 5 3 5 N o t e o n r e s t r u c t u r i n g o f R L N o n e g a t i ve i n f e r e n c e o r s u s p i c i o n p o s s i b l e . 6 3 6 , 3 7 V a l u a t i o n C e r t i f i c a t i o n K . A . 3 1 i a h a C o . E v i d e n c e t h a t m a r k e t v a l u e o f s h a r e s o f R L i s h i g h e r t h a n Re . 1 p e r s h a r e, w h i c h i n f o r m a t i o n t h e A O a l r e a d y h a s . N o t h i n g i n c r i m i n a t i n g t o t r i g g e r " i n t e r f e r e n c e " . 2 0 . 1 T h e L d . A O h a s h e l d t h e s e d o c u m e n t s t o b e " i n cr i m i n a t i n g " e n o u g h s o a s t o j u s t i f y t h e a d d i t i o n i n u n a b a t e d a ss e s s m e n t b e i n g r e t r a i n e d b y h e r n / s 1 5 3 A . M y p e r u s a l a n d e x a m i n a t io n o f t h e s e s e i z e d d o c u m e n t s , a s h e l d b y m e i n d i s c u s s i o n o n m er i t s o f t h e a d d i t i o n , d o n o t l e a d m e t o a c o n c l u s i o n t h a t t h e do c u m e n t s a r e " i n c r i m i n a t i n g i n n a t u r e " t o b e g i n w i t h . A s s u c h t hr e e s h a r e h o l d e r s ' a g r e e m e n t s a r e e n t e r e d i n t o b e t w e e n th e t w o p r o m o t e r g r o u p s a n d a r e r o u t i n e i n n a t u r e . N o t h i n g a t a l l c a n b e c o n s i d e r e d t o b e i n c r i m i n a t i n g i n t h e m u n l e s s a t w is t e d , p a r t i a l a n d p u r p o r t e d v i e w a b o u t t h e s a m e i s t a k e n , a s h a s b e e n d o n e b y t h e A O . O b v i o u s l y t h e r e i s n o t h i n g t o r e m o t e l y s u g ge s t i n t h e s e s h a r e h o l d e r a g r e e m e n t s t h a t t h e t r a n s a c t i o n o f p u r ch a s e o f s h a r e s o f R L a t R e . 1 , w h i c h h a s b e e n c o m p l e m e n t a r i t y s h o w n b y t h e a p p e l l a n t a n d S h r i A n i l P a t e l i n t h e i r r e s p e c t i v e re t u r n s o f i n c o m e b e f o r e t h e s e a r c h , a n d e v e n e x a m i n e d b y A O o f t h e ap p e l l a n t i n s u b s e q u e n t A s s e s s m e n t Y e a r a n d b y A O o f A R P b y a c o- o r d i n a t e A O , i s " c o l o u r a b l e " o r t h a t t h e r e i s a n y t h i n g w r o n g, u n d e r s t a t e d o r f r a u d u l e n t . M o r e o v e r , i n l i g h t o f t h e A r b i t r a t i on A w a r d d a t e d 5 / 6 / 2 0 0 7 w h i c h a l s o w a s s u b m i t t e d t o / c o n s i d e r e d b y t h e A O s o f A n i l P a t e l a n d o f o t h e r G r o u p m e m b e r s i n a s s e s s m e n ts u / s 1 4 3 ( 3 ) b e f o r e t h e s e a r c h , t h e s e S H A s w e r e a l s o d e c l a r e d v oi d v i d e c l a u s e 1 5 o f t h e A w a r d , t h u s s t r i p p i n g t h e s e S H A s o f a n y ev i d e n t i a r y v a l u e , w h i c h f a c t w a s a l s o s t a t e d u / s 1 3 2 ( 4 ) a n d i n c o m m u n i c a t i o n t o D D I T d a t e d 6 / 6 / 2 0 1 3 a n d 1 / 7 / 2 0 1 3 ( P B P N o . 3 7 - 4 8 ). T h e s e S H A s h a v e n o t h i n g i n t h e n a t u r e o f b e i n g " i n c r i m i n at i n g " i n t h e m - s e l v e s s o a s t o " t r i g g e r " A O ' s j u r i s d i c t i o n i n r e - vi s i t i n g t h e i s s u e . S i m i l a r l y , t h e e - m a i l f r o m S h r i M i l i n M e h t a i s c l e ar l y t i t l e d " C a s e f o r O p i n i o n " . N o r e f e r e n c e t o a n y s u s p i c i o u s o r u n ac c o u n t e d t r a n s a c t i o n u n d e r t a k e n o r l i k e l y t o b e u n d e r t a k e n is f o u n d i n t h e s a i d e - m a i l . I m y s e l f h a v e a l s o f o u n d i t i n t r i g u i n g a s t o h o w a l s o n o t e o n r e s t r u c t u r i n g (p a g e 3 5 o f a s s e s s m e n t o r d e r ) i s r e l e v a n t a n d h o w a l s o t h e c e r t i f i c a t e o f K . A . S h a h d a t e d 2 /8 / 2 0 0 7 i n d i c a t e s a n y t h i n g e x c e p t t h e f a c t t h a t " t r u e v a l u e " o f t h e sh a r e r e c e i v e d o n t r a n s f e r b y t h e a p p e l l a n t i s m o r e t h a n R e . 1 p e r s ha r e , w h i c h f a c t i s n o t o n l y w h o l l y i r r e l e v a n t , t h e s a m e i s a l s o l o ud l y a n d p a t e n t l y i n d i c a t e d i n t h e r e t u r n o f i n c o m e b y t h e a p p e l l a n t a t a p p r o p r i a t e t i m e b e f o r e s e a r c h . I d o n o t t h i n k t h e d o c u m e n t s w h i c h s h o w t h e " t r u e v a l u e " t o b e m o r e t h a n t h e t r a n s a c t e d c o n s i d er a t i o n IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 95 - w i t h o u t s i m u l t a n e o u s l y s h o w i n g t h a t a h i g h e r c o n s i de r a t i o n t h a n t h e t r a n s a c t e d c o n s i d e r a t i o n o f R e . 1 h a s c h a n g e d h an d s c a n , w i t h r e g a r d t o t r a n s a c t i o n o f p u r c h a s e o f s h a r e s b y t h e a p p e l l a n t , b e r e g a r d e d a s i n c r i m i n a t i n g . I a g r e e w i t h t h e L d . A R t h e r e f o r e , t h a t t h e t r a n s a c t i o n s s h o w i n g t h e " t r u e v a l u e " o f t h e s ha r e s o f R L a t R s . 8 0 , R s . 9 4 , R s . 3 1 8 e t c . w a s a l r e a d y d i s c l o s e d i n t h e r e t u r n s o f i n c o m e a n d i n t h e B a l a n c e S h e e t o f R L a n d t h a t t h e re i s n o i n c r i m i n a t i n g s e i z e d m a t e r i a l r e l i e d u p o n b y t h e A O w h i c h c a n b e s a i d n o t t o b e a l r e a d y w i t h t h e D e p a r t m e n t o r w h i c h m i g h t n o t b e p r o d u c e d b y t h e a p p e l l a n t . I a l s o a g r e e w i t h t h e L d. A R t h a t t h e r e i s n o t h i n g i n c r i m i n a t i n g i n t h e s e d o c u m e n t s s o a s to v a l i d a t e t h e a s s u m p t i o n o f j u r i s d i c t i o n b y t h e A O i n " i n t e r f e r i ng " w i t h t h e c l o s e d a n d c o n c l u d e d i s s u e a n d m a k i n g t h e a d d i t i o n . A s s u c h S a u m y a C o n s t r u c t i o n ( s u p r a ) i s s q u a r e l y a p p l i c a b l e a n d i n a b s e n c e o f a n y m e a n i n g f u l l y i n c r i m i n a t i n g s e i z e d m at e r i a l i n p o s s e s s i o n o f t h e A O , t h e A O c o u l d n o t h a v e m a d e t hi s a d d i t i o n o f R s . 3 4 , 5 9 , 5 5 , 1 0 0 / - i n t h i s " u n a b a t e d a s s e s s m e n t ". G r o u n d N o . 4 . 1 s t a n d s a l l o w e d . A d d i t i o n o f R s . 3 , 4 5 , 2 0 , 5 0 8 / - a s U n a c c o u n t e d I n v e s t me n t o n p u r c h a s e o f s h a r e s _ o f R L L ( G r o u n d 5 . 1 ) 2 1 . T h e o n l y s e i z e d d o c u m e n t r e f e r r e d t o b y t h e A O w h i l e m a k i n g t h e a d d i t i o n i s s h a r e h o l d e r s ' a g r e e m e n t d a t e d 3 0 / 6 /2 0 0 7 , R e f e r r i n g t o t h e c o n t e n t s o f t h e s a i d s h a r e h o l d e r s ' a g r e e m e n t , t h e L d . A O h a s o b s e r v e d t h a t t h e a g r e e m e n t t a l k s a b o u t " t h e e q u a l t e r m s a n d p r i c e t o b e f i x e d f o r t r a n s f e r o f s h a r e s t o t h e o t h e r g r o u p a n d t o t h e t h i r d p a r t y " . T h u s , a s p e r t h e A O , t h e s h a r e s , s h o u l d h a v e b e e n t r a n s f e r r e d o n t h e s a m e t e r m s a n d a t t h e s a m e p r i c e a s w a s d o n e i n t h e c a s e o f s h a r e s t r a n s f e r r e d t o L u p i n . T h e A O h a s t h e r e a f t e r r e f e r r e d t o a n d a n a l y z e d v a r i o u s c l a u s e s o f t h e s h a r e h o l d e r s ' a g r e e m e n t t o c o n c l u d e t h a t a s p e r c l au s e 7 . 3 C o f t h e s a i d a g r e e m e n t t h e p r i c e t o b e r e a l i z e d b y S h r i A n il P a t e l c o u l d n o t h a v e b e e n l e s s t h a n t h e p r i c e a t w h i c h s h a r e s ha v e b e e n o f f e r e d t o L u p i n . A f t e r t h o r o u g h a n d r e p e a t e d p e r u sa l o f t h e o n l y s e i z e d d o c u m e n t n a m e l y s h a r e h o l d e r s ' a g r e e m e n t d a t ed 3 0 / 6 / 2 0 0 7 , I a m u n a b l e t o p e r s u a d e m y s e l f t o s e e a n y " i n c r i m i na l i t y " i n t h e s a i d s h a r e h o l d e r s ' a g r e e m e n t . T h e v e r y i s s u e h a s b ee n p r o b e d a n d c o n s i d e r e d i n a s s e s s m e n t u / s 1 4 3 ( 3 ) o f S h r i A n i l P at e l b e f o r e t h e d a t e o f t h e s e a r c h a n d n o t h i n g a d v e r s e h a s b e e n n o te d b y t h e A O o f S h r i A n i l P a t e l . I n a n y c a s e , t h e s h a r e h o l d e r s ' a g r e e m e n t i n i t s e l f i s e s s e n t i a l l y a d o c u m e n t w h i c h w a s n o t o n l y c o n s i d e r e d b y t h e A O o f S h r i A n i l P a t e l , t h e s a m e c a n b y n o s t r e tc h o f i m a g i n a t i o n b e h e l d t o b e a d o c u m e n t w h i c h m i g h t n ot b e p r o d u c e d i f c a l l e d f o r b y t h e A O . M o r e o v e r , t h e d o c u m e n t i t se l f , o b v i o u s l y g o v e r n s t h e f u t u r e r e l a t i o n s h i p o f t w o p r o m o t e r g r ou p s i n t e r s e a n d v i s - a - v i s R L L . T h e r e i s n o r e c o r d i n t h i s S H A o f a n y u n a c c o u n t e d t r a n s a c t i o n u n d e r t a k e n o r p l a n n e d o r o f a n y p a y m e n t o f r e c e i p t n o t r e c o r d e d o r n o t l i k e l y t o be r e c o r d e d i n b o o k s o r o f a n y c o n s p i r a c y o r c o l l u s i o n . E v e n w i t h o u t t h i s IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 96 - d o c u m e n t , i t i s a v a l i d c u r i o s i t y o n t h e p a r t o f t he A O t o w o n d e r a s t o w h y t h e t r a n s a c t i o n b e t w e e n t h e a p p e l l a n t a n d A ni l P a t e l s h o u l d b e a t R e . 1 p e r s h a r e a s a g a i n s t s i m i l a r t r a n s a c t i on w i t h i n s h o r t t i m e t h e r e a f t e r w i t h L u p i n a t r o u g h l y R s . 1 5 4 . 3 7 p er s h a r e . B u t s u c h c u r i o s i t y , w i t h o r w i t h o u t t h e s e i z e d d o cu m e n t r e l i e d u p o n b y t h e A O ( S H A d a t e d 3 0 / 6 / 2 0 0 7 ) , d o e s n o t , i n m y c o n s i d e r e d o p i n i o n , c o n f e r j u r i s d i c t i o n o n A O u / s 1 5 3 A t o r e v i s i t a c o n c l u d e d i s s u e i n t h i s " u n a b a t e d a s s e s s m e n t " . V a l i d l y i n c r i m i n a t i n g d o c u m e n t a u t h o r i z i n g t h e A O in r e v i s i t i n g t h i s i s s u e i n a s s e s s m e n t u / s 1 5 3 A , i n m y c o n s i d e r e d o p i n i o n , w o u l d b e a l o o s e p a p e r / d o c u m e n t / d i a r y o r a n y s u c h i n h e r e nt l y i n c r i m i n a t i n g m a t e r i a l , o r w h i c h r e c o r d s s o m e ot h e r d u b i o u s a n d c i r c u i t o u s a r r a n g e m e n t , w h i c h p r i m a f a c i e i n d i c a t e t h a t c o n s i d e r a t i o n , i n c a s h o r i n k i n d , o f a n a m o u n t m o re t h a n a t R e . l p e r s h a r e h a s b e e n p a i d o r p l a n n e d . T h e s h a r e h o l d e r s ' a g r e e m e n t r e l i e d u p o n a n d c o n s i d e r e d b y A O t o b e i n c r i m i n a t i ng i s a b a l d d o c u m e n t w i t h r e g a r d t o a n y i n c r i m i n a l i t y a n d t h e AO h a s m e r e l y u s e d t h e d o c u m e n t t o a r g u e t h a t h e r c o n j e c t u r e t h a t a p p e l l a n t " m u s t h a v e p a i d " R s . 3 , 4 5 , 2 0 , 5 0 8 / - f r o m u n a c c o u n t e d s o u r c e s i s w e l l - f o u n d e d . I t h e r e f o r e h o l d t h a t t h e r e i s n o i n c r i m i n a t i n g m a t e r i a l i n p o s s e s s i o n o f t h e A O s o a s t o a u t h o r i z e h e r t o r e - v i s i t t h e i s s u e o f p u r c h a s e o f s h a r e s o f R L L b y t h e a p p e ll a n t a t R e . 1 a n d t o m a k e t h e i m p u g n e d a d d i t i o n w h i l e f r a m i n g r e -a s s e s s m e n t u / s 1 5 3 A i n t h i s a s s e s s m e n t w h i c h h a d a t t a i n e d f i n al i t y b e f o r e t h e d a t e o f t h e s e a r c h a n d h a d t h e r e f o r e r e m a i n e d un a b a t e d w i t h i n t h e m e a n i n g o f s e c o n d p r o v i s o t o s e c t i o n 1 5 3A . I n o t h e r w o r d s , t h e A O i n d e e d e x c e e d e d h e r a u t h o r i t y u / s 1 5 3A w h i l e m a k i n g t h e a d d i t i o n d e h o r s a n y i n c r i m i n a t i n g s e i z ed m a t e r i a l e n a b l i n g h e r i n t h i s b e h a l f , a n d t h u s v i o l a t e d t h e l a w a s l a i d d o w n b y J u r i s d i c t i o n a l H i g h C o u r t i n S a u m y a C o n s t r u ct i o n ( s u p r a ) a n d o t h e r A u t h o r i t i e s . C o n s e q u e n t l y g r o u n d n o . 5 . 1 i s a l s o a l l o w e d . 2 2 . T h u s , w h i l e a l l o w i n g g r o u n d n o . 2 . 1 , 3 . 1 , 4 . 1 a nd 5 . 1 a s a b o v e , I h a v e h e l d t h a t t h e r e i s n o " i n c r i m i n a t i n g m a t e r i a l " i n p o s s e s s i o n o f t h e A O s o a s t o e n a b l e h e r i n l a w t o r e - v i s i t t h e r e l e v a n t i s s u e s i n u n a b a t e d a s s e s s m e n t b e i n g r e f r a me d b y h e r u / s 1 5 3 A . A s n o n e o f t h e a d d i t i o n s a s m a d e b y t h e A O a re s u p p o r t e d b y a n y i n c r i m i n a t i n g s e i z e d m a t e r i a l , t h e A O w a s d ut y - b o u n d t o m e r e l y " r e i t e r a t e " t h e t o t a l i n c o m e o f t h e a p p e l l a nt w h i c h h a d a t t a i n e d f i n a l i t y b e f o r e t h e d a t e o f t h e s e a r c h . A c c o r d i n g l y , g r o u n d n o . 1 . 1 a n d 1 . 2 a r e a l s o a l l o w e d . 12 Now, Revenue has co me before us by wa y of se cond statutory appeal. IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 97 - 13. We have heard both parties and perused the ma terial available on record. 13.1 The Assessee transferred the shares of RLL to Lupin vide Share Purchase Agreement (“SPA”) dated 26-9-2007 at Rs.36.63 crores (page 112-156). The Deputy Commissioner of Income Tax, Central Circle-2, Vadodara (“the AO”) has treated the difference between the offer letter and the final price as per the SPA as unaccounted income (Rs.42.50 crores less Rs. 36.81 crores). 13.2 It is argued by the learned AR that the initial offer was subject to various adjustments. The working of sale consideration and adjustments made to the initial offer is as under: Particulars Amount (Rs. in Crores) Amount (Rs. in Crores) Per share value (No. of Shares) 23,84,783 Consideration offered as per letter dated 28- 8-2007 42.50 178.21 Less: Adjustments Bad inventory 3.096 Loss for year till date 1.04 Transfer of Land 0.70 Recovery of Fees to Yes Bank 0.85 Adjustment on account of Supplementary Agreement 0.1805 5.8665 Net Consideration receivable as per Share Purchase Agreement dated 26-9-2007 36.6335 153.61 13.2.1 Detailed explanation of all the above adjustments has been given in the original submission dated 17-11-2016 from Para 50 to 57. The sale consideration was fixed after considering the above adjustments. The IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 98 - ld. AO has completely ignored these adjustments and adopted the initial offer value. 13.2.2 The Assessee in the submissions made before the ld. AO had explained each and every adjustment with corroborative evidences. 13.2.3 Issue regarding bad inventory, we can see that in the offer letter, in point no iii) of para 2, it is mentioned that the Offer Value shall be subject to adjustments on account of non-moving/unrealizable inventory, unrecoverable debts, receivables that are outstanding for a period of 180 days and are found unrecoverable/non-saleable in mutual discussions with management to the satisfaction of Lupin, and any other assets that are susceptible to diminution in value. The statement showing non-moving inventory as on 31-08-2007 was filed before the ld. AO during the course of search assessment (page no. 140 to 142). The list of the said inventory with the values thereof also finds specific mention in the Share Purchase Agreement itself (Page No. 112 to 156). The ld. AO has not controverted any of the submissions / factual aspect of this adjustment. In view of the same the adjustment on account of value of non-moving inventory amounting to Rs. 3,09,61,711 is allowed. 13.4 Issue regarding loss for year till date, it is evident that this adjustment has been made on account of loss of RLL for the period ended 31-08-2007. As per the profit and loss account for the period ended 31-08- 2007, the loss of RLL amounts to Rs. 103.74 Lacs (Pg. No. 178). This loss has been reduced from the initial offer value of Rs. 42,50,00,000. This adjustment has not been controverted by the ld. AO. IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 99 - 13.5 Issue regarding transfer of Land, it is stated that RLL is situated at Dabhasa. The Plant of RLL was situated on a piece of land and adjacent to the said land was another land which belonged to RL. At the time when the particulars of the Dabhasa plant was given, the land which belonged to RL was also included in the proposal and accordingly, the price of Rs. 42.50 crore was arrived at. The details of the lands included in the initial offer price are as under: Particulars Block No. Value as per Sale Deed Pg. No. Lands at Dabhasa 48 49,50,420 157 Land at Dabhasa 66 8,32,600 157 Land at Dabhasa 60 12,16,970 329 Total 69,99,990 13.6 The initial offer price was computed at Rs. 42,50,00,000 on 28-08- 2007 (Pg. No. 107). Thereafter, a due diligence process and a valuation of assets of RLL was carried out. In the said process, it was noticed that the lands at Dabhasa carrying Block No. 48, 66 and 60, were included in the assets of RLL while computing the initial offer price but did not include the said land. Since the offer included the said piece of land also, RL did the conveyance of these lands to RLL. This resulted into an amount payable to RL by RLL amounting to Rs. 70.00 lacs. This increased the liability of RLL and accordingly, the purchase price was reduced by the said sum. It is submitted that RLL discharged the said liability to RL. 13.7 Issue regarding fees to Yes Bank, it is fact that the Assessee had availed services of Yes Bank for facilitating transfer of shares to Lupin Ltd. Lupin Ltd had incurred expenditure in regards to fees to Yes Bank on behalf of the Assessee, for availing these services. Hence, the amount of fees amounting to Rs. 85 Lacs incurred by Lupin Ltd has been recovered IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 100 - by way of reducing the same from the initial offer value. Copy of the bill raised by YES Bank is attached at page no. 341 of the paper book. It is pertinent to mention that the ld. AO has doubted that no services were provided by Yes Bank without even appreciating that the AO herself relied on the emails which are exchanged by the person (Mr. Vikas Dawra) working in Yes Bank and therefore this contention of the AO is devoid of any merit and merely a product of suspicion. 13.8 Supplementary Agreement to Share Purchase Agreement Rs. 18,05,764, it is submitted that the ld. AO ignored the Supplementary Agreement to the Share Purchase Agreement dated 26-9-2007. Refer page 186 to 190 for the Supplementary Agreement to the Share Purchase Agreement dated 26-9-2007. Vide the said agreement a net downward adjustment of Rs.18,05,764 was made by Lupin Limited to the sale consideration on account of amount of Rs. 29,01,236 payable for sale of bad inventories and Rs. 47,07,000 recoverable from the shareholders on account of recovery for warranties. Therefore, the sale consideration per share after considering the adjustment of Rs.18,05,764 would work out to Rs. 153.61. Hence, the value per share of Rs. 153.61 would have to be considered and the ld. AO has incorrectly adopted Rs. 154.37 per share as the alleged price per share. 13.9 After considering the impugned order and hearing both sides, we therefore hold that the actual sale consideration for transfer of shares of RLL to Lupin Limited is Rs. 36.63 crores and not Rs. 42.50 crores. Considering the same, the ld. CIT(A) has correctly deleted the addition made by the ld. AO. We do not find any infirmity in the order of learned CIT(A). Thus, this ground of the Revenue is dismissed. IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 101 - 13.10 The ld. AO has also referred to some e-mails exchanged between the Assessee and various finance department head of RL in which offers made by some other interested parties for acquiring 100% stake of RLL have been discussed. It is submitted that e-mails referred to by the AO are irrelevant. It is submitted that once the share purchase agreement dated 26- 09-2007 has been executed and even accepted by the ld. AO, the emails, discussing various potential considerations is of no relevance and same cannot be considered as incriminating in nature. 13.11 Following is the table showing irrelevance of the e-mails relied upon by the ld. AO: Material relied upon by the AO Date of Material Pg. No. of Assessment Order How it is non-Incriminating Initial Offer Letter 28-08-2007 2, 7-10 Offer Letter is redundant once the final share purchase agreement is executed on 26- 09-2007. It is an executory and conditional document, not binding on the Assessee. E-mail from Assessee to Vikas Dawra (Yes Bank) 09-08-2007 13 No evidence of unaccounted transaction. Refers to “strong feelings” of the Assessee. Further, the email is even before Initial Offer Letter and hence redundant. E-mail from Assessee to Vikas Dawra (Yes Bank) 13-08-2007 14 No evidence of unaccounted transaction. Merely an opinion of Assessee. Further, the email is even before Initial Offer Letter and hence redundant. E-mail from Assessee to Ajay Agrawal 16-08-2007 15 No evidence of unaccounted transaction. Further, the email is even before Initial Offer Letter and hence redundant. 13.12 We are of the opinion that considering the above, it can be appreciated that none of the documents relied upon by the ld. AO are IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 102 - incriminating in nature and therefore no addition can be made based on such documents. Hence, it is submitted that ld. CIT(A) has correctly deleted the addition of Rs. 11,62,69,907 on account of alleged unaccounted consideration. 13.13 We hold that the ld. CIT(A) has correctly deleted the addition considering the decision of Hon’ble Gujarat High Court in the case of PCIT v. Saumya Construction (387 ITR 529) wherein it has been held that no addition can be made in an assessment u/s 153A, if no incriminating material is found during the search. In the present case, the decision of the Hon’ble Gujarat High Court is squarely applicable as no incriminating material found during the course of the search. Hence, the ld. CIT(A) has correctly deleted the addition made by relying on the decision of Hon’ble Gujarat High Court. 13.14 Grounds No: 1(b)- Income from transfer of RLL shares to Lupin Ltd. treated as Business Income instead of Capital Gains 13.14.1 The ld. AO treated the gains arising from transaction on sale of shares of RLL to Lupin Ltd as business income instead of income under the head capital gains and consequently also denied the of benefits indexation, deduction u/s. 54EC, 54F and set off of capital loss. 13.14.2 As we can see at the time of demerger of RLL from Rubamin Limited (“RL”), the issue was examined by the ld. AO as part of the regular assessment in the case of the Assessee for AY 2007-08, and the ld. AO held that the said shares of RLL and also RL are “capital assets”. Copy of the return of income, computation of total income, the reply submitted by the Assessee on this issue and assessment order is attached at page nos. 378 to 396. IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 103 - 13.14.3 As we can see that the issue of the nature of income arising on account of transfer of shares had come up for verification before the AO in the case of the Assessee’s wife for A.Y. 2008-09 itself and the AO had held the gains as Capital gains. A copy of the return of income, computation of total income, the reply submitted and assessment order in case of Smt. Seema A Dalmia is attached at page nos. 370 to 377. 13.14.4 It is argued that the Finance Act, 2012 inserted explanation to Section 2(14) of the Act with retrospective effect from 1-4-1962, thereby clarifying the definition of “Capital Asset”. The explanation to section 2(14) clearly provides to include right of management or control in an Indian Company in the definition of capital asset. The explanation is clarificatory in nature and though introduced by the Finance Act, 2012, has retrospective effect from 01-04-1962. The Assessee on sale of shares, has transferred right of management and control of RL to the buyer and consequently transferred a capital asset to the buyer. Hence, the gains arising on transfer of capital asset, being right of management and control, shall be taxable under the head capital gains. 13.14.5 The AO has invoked provisions of Section 28(va) of the Act to treat gain on transfer of RLL shares as business income. Your kind office will appreciate that clause (i) of proviso to section 28(va) provides that section 28(va) shall not apply in case of any sum received or receivable in cash or kind, on account of transfer of the right to manufacture, produce or process any article or thing or right to carry on any business or profession, which is chargeable under the head "Capital gains". It is submitted that the right of management and right to carry on business is squarely covered under the definition “Capital Asset” as per explanation to Section 2(14). IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 104 - Therefore as per clause (i) of proviso to section 28(va), the income cannot be treated as business income u/s 28(va). 13.14.6 Our attention was drawn to the facts that Section 50 B of the Act duly provides that sale of the undertaking or division would be treated as sale of the capital asset and taxed accordingly. It is submitted the term undertaking is defined in Explanation 1 to Section 2 (19AA) which mention that undertaking means a business as a whole. This would include all intangible and management control. It is submitted that when the entire undertaking is considered to be a capital asset, the shares of a company which owns industrial undertaking has also to be considered to be a capital asset and sale therefore should be charged only to capital gains. 13.14.7 Learned AR alternatively argued that even if section 28(va) of the Act is invoked, the consideration which is attributable to the non- compete covenant only could be taxed as business income and not otherwise. In this connection we have to invite your kind attention to the Initial offer letter issued by the Lupin Limited. Careful verification of the Initial offer letter would reveal that there was no non-compete covenant. Lupin Ltd. had agreed to purchase for the offered consideration without the said non-compete covenant and the Assessee had agreed to sell the same at the said consideration. However, the said covenant was introduced for the first time in the SPA and no additional consideration for thereof was paid. Accordingly, no part of the consideration could be attributed to the non-compete covenant. Therefore, no part of the income can be treated as business income. Hence, it is held that the ld. CIT(A) has correctly treated the income from transfer of shares of RLL as income under the head “Capital Gains”. IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 105 - 13.14.8 In view of the above, we hold that the ld. CIT(A) has correctly deleted the addition considering the decision of Hon’ble Gujarat High Court in the case of PCIT v. Saumya Construction (387 ITR 529) wherein it has been held that no addition can be made in an assessment u/s 153A, if no incriminating material is found during the search. In the present case, the decision of the Hon’ble Gujarat High Court is squarely applicable as no incriminating material found during the course of the search. Hence, we hold that ld. CIT(A) has correctly deleted the addition made by relying on the decision of Hon’ble Gujarat High Court. 13.15 Now, we come to issue regarding alleged unaccounted investment on transfer of RL shares by Anil R Patel (“ARP”) to the Assessee. 13.15.1 The AO has held that the Assessee has understated the consideration paid by him, for purchase of shares of RL from ARP. The AO adopted the rate of Rs.318.39/- per share as the consideration paid for the transfer of shares of RL and computed the consideration paid at Rs. 34,70,45,100 (10,90,000 x Rs.318.39). Consequently, the AO made addition of Rs. 34,59,55,100 (Rs.34,70,45,100 – Rs.10,90,000) to the income of the Assessee. 13.15.2 The Assessee and ARP had entered into an arbitration agreement to resolve the differences pertaining to shareholding in RL. ARP has given a detailed account of circumstances that existed due to which he and the Assessee entered into arbitration. In the arbitration proceedings, all the above mentioned facts were taken into cognizance, and accordingly direction was given to the transferor to transfer the shares to the Assessee at Re. 1 per share. It is submitted that the price of Re. 1 has been ruled by the arbitrator keeping the nature of transaction and the above mentioned IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 106 - circumstances in mind. Since, this is an inter transfer of shares, and the main purpose of the said transaction was to change the shareholding of the company, the price of Re. 1 was adjudged by the arbitrator. There was no intention of the shareholders to enrich themselves on the sale of their shares in RL. 13.15.3 As we can see that all the above facts were also presented at the time of regular assessment of ARP for the year under consideration, in which the then AO confirmed the returned income of ARP. Same are part of the assessment order at page no. 419 to 420. 13.15.4 Surprisingly, the AO has on pure assumptions rejected the price of Re. 1 for transfer of shares of RL and as further alleged that the shares of RL were transferred at an assumed price of Rs. 318.39 per share. It is kindly submitted that the transactions referred to by the AO i.e. allotment of shares to India Advantage Fund and under ESOP are commercial transactions of RL and same are duly accounted for in the Books of Accounts of RL and same does not take away the fact that ARP transferred shares of RLL at Re. 1 on account of an Arbitral award. It is submitted that all the facts go on to prove that the actual transaction has taken place between the Assessee and ARP at Re. 1 per share and therefore the market price or fair value of the shares are not relevant consideration. 13.15.5 The AO in the assessment order has alleged that the Arbitration award is colorable device adopted by the Assessee to evade payment of tax. It is submitted that the Arbitration order dated 05-06-2007 is one of the documents which were seized / found / produced during the search / post search proceedings. The Assessee during the course of search proceedings has given a statement on oath which is attached from pg. no. 10 to 20. The Assessee has submitted the Arbitration award/order by Shri IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 107 - Mihir Thakur dated 05-06-2007 in his statement dated 28-04-2013 (Page. No. 15). Relevant extract of the statement of the Assessee is reproduced as follows: “Q.30 In response to question no. 33 to 37 asked during the course of recording of statement u/s. 132(4) during the course of search proceedings at your residence on 27.4.2013, you had furnished information in respect of shares of Rubamin Laboratories Limited purchased from Anil R Patel. Please explain how the value of shares was determined and the transaction was executed. Also substantiate any information furnished by you during the course of statement dated 27.4.2013. Ans. 30 I am submitting the Arbitration Award by Shri Mihir Thakur who is a senior lawyer in Ahmedabad. In my earlier statement dated 27-04- 2013, I had mentioned him as a retired judge which was stated by mistake. This award clearly state the sequence of events because of which Dalmia’s were given 60% shareholding.” 13.15.6 On the perusal of the above, we have noticed that in the statement recorded during the course of search itself the Arbitration Award was referred for transfer of shares. This itself shows that the transfer of shares to the Assessee by ARP was under special circumstances and based on the order of the Arbitrator. We therefore submit that the allegation of the AO that the award was a colorable devise without bring any material suggesting so is purely based on imagination and far from truth. 13.15.7 Based on the above statement, the Assessee on oath has clearly confirmed the existence of arbitration award/order which gave clear statutory direction to the transferor to transfer the shares of RL at Rs. 1 per share. Further, a statement recorded u/s. 132(4) being spontaneous is considered to true and correct unless pointed out otherwise. 13.15.8 As we can see that against the above, the AO has not brought on record any material to show how the Arbitration Award is colorable. IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 108 - We therefore submit that the allegation of the AO are to be rejected and the issue may please be decided in favour of the Assessee. 13.15.9 It is fact that no provision in any law, permits arbitrary adoption of value of unquoted shares. The Assessee has given clear justification and reasoning as to arrival of value of shares of RL at Rs. 1 per share. Further, the Assessee has also submitted the relevant documents directly related to the determination of value of shares at Re. 1 per share. In contrast, the AO has not furnished any evidence or material to substantiate his claim of valuing the shares transferred to the Assessee at Rs 318.39. 13.15.10 The learned AR relied on following decisions: a. CIT vs. George Henderson and Co. Ltd. [1967] 66 ITR 627 (SC) b. CIT vs. Gillanders Arbuthnot & Co. 87 ITR 407 (SC) c. CIT vs. Ballabgarh Refractories Ltd. [2005] 144 Taxman 781 (Delhi) d. D.S. Bist & Sons vs. Commissioner of Income [1984] 149 ITR 276 (Delhi) 13.15.11 We hold that the ld. CIT(A) has correctly deleted the addition considering the decision of Hon’ble Gujarat High Court in the case of PCIT v. Saumya Construction (387 ITR 529) wherein it has been held that no addition can be made in an assessment u/s 153A, if no incriminating material is found during the search. In the present case, the decision of the Hon’ble Gujarat High Court is squarely applicable as no incriminating material found during the course of the search. Hence, the ld. CIT(A) has correctly deleted the addition of Rs.34,59,55,100/- made by relying on the decision of Hon’ble Gujarat High Court. IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 109 - 13.16 Now, we come to issue regarding alleged unaccounted investment on transfer of RLL shares by ARP to the Assessee 13.16.1 The AO has contended that the Assessee has not correctly declared or disclosed the consideration paid by him, for purchase of shares of RLL from ARP, and there is understatement of consideration. The AO adopted the rate of Rs. 178.21/- per share as the consideration paid for the transfer of shares of RLL and computed the consideration paid at Rs. 3,47,15,308 (1,94,800 x Rs. 178.21). Consequently, the AO has made addition of Rs. 3,45,20,508 (Rs. 3,47,15,308 – Rs. 1,94,800) to the income of the Assessee. 13.16.2 Therefore, we hold that there is no intention on the part of the Assessee to evade tax, since the Assessee has shown higher capital gain, in view of cost of acquisition of Re. 1 per share and full value of consideration at Rs. 153.61 per share. The Assessee has also paid tax at a higher rate, being applicable on short term capital gain arising on account transfer of shares of RLL to Lupin. Further, the Assessee has explained in detail the reason and circumstances behind the decision of making an internal transfer of shares at a price of Rs. 1 per share in the Ground No. 2. 14. On the other hand, learned D.R. relied on the assessment order and has nothing to controvert the finding of learned CIT(A). 15. Considering the above, since during search no incriminating material was seized or found from the possession of the assessee, we hold that the ld. CIT(A) passed detailed and reasoned order and has correctly deleted the addition of Rs. 3,45,20,508 as income of the Assessee. Thus, order of learned CIT(A) does not require any kind of interference at our end. IT(SS)A Nos. 318, 319, 321 & 322/Ahd/2017 (DCIT vs. Smt. Seema Dalmia & Ors.) - 110 - 16. In the result, we d is miss the appeal of the Revenue. 17. Since, we have d is missed the appeal of the Revenue in connecting ITA No.322/Ahd/2017 18. Since, we have d is missed the appeal of the Revenue in connecting IT(SS )A No .322/Ahd/2017 (in case of Shri Atul Dal mia ) for A.Y. 2008-09, in simi lar facts and circu mstances, therefore, the same shall apply mut atis mutandis in other three appeals. 19. In the result, all captioned four appeals filed by Re venue are dis missed. Sd/- Sd/- ( WASEEM AHMED) (MAHAVIR PRASAD) ACC OUNTANT MEMB ER JUDICIAL MEMBER Ahmedabad: Dated 11/04/2022 True Copy S.K.SINHA ेश ! " #े" / Copy of Order Forwarded to:- &. र / Revenue 2. आ दक / Assessee ). सं*ं+, आयकर आय - / Concerned CIT 4. आयकर आय - - अपील / CIT (A) 0. 1 2 3ीय 4 4 +,5 आयकर अपील!य अ+,कर%5 अहमद * द / DR, ITAT, Ahmedabad 8. 3 9: ; ल / Guard file. By order/आद श स 5 उप/सह यक पं ीक र आयकर अपील!य अ+,कर%5 अहमद * द । This Order pronounced in Open Court on 11/04/2022