TMI Blog2008 (12) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... the said company resulted in loss for the earlier four assessment years and ultimately the business of the said company has come to a standstill. In such circumstances, the assessee was contemplating disposing of his shares in the said company. The face value of the share was Rs. 10 per share. The assessee sold 63,330 shares of Rs. 10 each, for a consideration of Rs. 4 per share, to his father. The said transaction resulted in long-term capital loss. In his return of income, the assessee set off the said loss against business income. 3. The assessment was completed under section 143(3) and the above position was shown by the assessee in his return which was accepted by the Assessing Authority. 4. On a scrutiny of the records of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f against the business income of the assessee. On the basis of the above findings, the Commissioner disallowed the capital loss of Rs. 7,76,611 reported by the assessee, and modified the assessment in that manner. 5. The assessee is aggrieved and, therefore, in appeal before us. 6. The following grounds are raised by the assessee before the Tribunal:- (1) The transaction entered into by the appellant was not prohibited by law. The genuineness of the transaction was not doubted by the Assessing Officer. There could be two opinions on the issue of valuation of shares and whether the assessee had resorted to colourable device or not. The Assessing Officer had taken the view that the break up value cannot be taken on the fact of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Chartered Accountant appearing for the assessee. 8. It is the case of the learned C.A. that the sale transaction of shares is covered by documentary evidence as required by the Companies Act and, therefore, the sale transaction of shares made by the assessee to his father cannot be treated as sham transaction. Once the transaction could not be treated as sham, the ultimate result of transaction should be accepted as the natural consequence of the transaction. Therefore, the Commissioner has gone wrong in disregarding the long-term capital loss returned by the assessee. 9. It is the case of the ld. CA that all the necessary particulars were placed before the Assessing Authority at the time of scrutiny assessment made under section 143 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CA further relied on the judgment of the Madras High Court in the case of Venkata Krishna Rice Co. v. CIT [1987] 163 ITR 129 and argued that the expression "prejudicial to the interests of the revenue" is not to be construed in a petty forgoing manner, but must be given a dignified construction. Relying on the judgment of the Madras High Court in the case of CIT v. Sakthi Charities [2000] 244 ITR 226, the ld. CA argued that the power of revision cannot be exercised as a matter of course, but it must be exercised to correct some error in the orders passed by the Assessing Officer. He submitted that there is no such a case in assessment order and, therefore, revision order must be held unlawful. 12. Shri Shaji P. Jacob, the learned sen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of computing the capital gains. We do not have any iota of disagreement to the legal propositions advanced by the ld. CA. 14. But, we have to state that the principle of law and such propositions must be applied depending upon the facts of each case. The break-up value of the shares may not be a valid statutory tool in working out the capital gains as argued by the ld. CA. It is a statutory rule for the purpose of wealth tax. But, the case is that even if that rule is not applicable, it was the duty of the Assessing Officer to verify and examine the intrinsic value of shares transferred by the assessee in favour of his father. Then only the Assessing Officer can compare the consideration stated in the agreement with the de facto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of each share is Rs. 19.33. It is against the above break-up value that the shares were sold for Rs. 4 per share. This huge difference in sale value was definitely a matter of concern which called for a thorough examination of the circumstances leading to such a transaction. The Assessing Officer has not considered this aspect. Therefore, we have to hold that the assessment order was erroneous. 16. The resorted method by the assessee on sale of the shares has gone to reduce the taxable income of the assessee by way of setting-off of the loss against the positive business income. Therefore, the transaction has resulted in prejudice to the interests of the revenue. Therefore, as rightly argued by the ld. senior DR, the assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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