Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2024 (4) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (4) TMI 580 - ITAT CHENNAIRevision u/s 263 - Disallowance of STCG - FMV determination of shares - assessee and eight investment companies are not directly related by virtue of shareholding - as per CIT AO has failed to verify the issue of ‘short term capital loss’ declared by the assessee from sale of unquoted equity shares pertaining to eight investment companies in right perspective of law, even though, the assessee has escalated the price of the shares to derive artificial ‘short term capital loss’ HELD THAT:- When Fair Market Value of the shares when allotted was not on par with face value of shares, in our considered view, no prudent businessman will venture into subscribe to said shares. Further, the analysis financial statements of eight companies as explained by the PCIT clearly reveals that the valuation has been done to arrive at Fair Market Value of shares, is not in accordance with Rule 11UA of the Income Tax Rules, 1962. Although, the assessee claims that it has agreed to subscribe to shares of eight companies at face value to recover unpaid/ unsecured loans from said companies, but said claim was unsubstantiated. From the above and also from the reasons given by the PCIT in their order u/s. 263 it is abundantly clear that although, the assessee and eight investment companies are not directly related by virtue of shareholding, but because of control and management, they can be considered as related parties. Since, the transactions between the assessee and eight companies were not ‘at arm’s length price’ the resultant loss declared by the assessee from transfer of equity shares can at best be treated as structured transactions to derive undue benefit of ‘short term capital loss’. Although, the assessee has claimed excessive loss from sale of equity shares of eight companies and allowed to carry forward to subsequent years, the AO has failed to carry out required enquiries he ought to have been carried out in light of Explanation-2 to Sec. 263 of the Act, and thus, in our considered view, the assessment order passed by the AO u/s. 143(3) definitely becomes prejudicial to the interest of the Revenue. Therefore, no error in the findings recorded by the PCIT to set aside the assessment order passed by the AO as erroneous in so far as it is prejudicial to the interest of the Revenue and thus, we are inclined to uphold the findings of the PCIT and dismiss the appeal filed by the assessee.
|