TMI Blog2012 (4) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... res by treating the sale consideration at Rs. 318/- per share. Hence, it is not the case that there is a tax evasion. The entities which purchased the shares before 17-07-2006 and has offered the profit. It is not the case of the revenue that such entities have given back profit to the persons from whom such shares were purchased before 17-07-2006. Hence, it is not the case of tax evasion. - IT APPEAL NOS. 853 TO 855 (JP.) OF 2011 - - - Dated:- 31-1-2012 - R.K. GUPTA, N.L. KALRA, JJ. R.N. Goyal and Rakesh Agarwal for the Appellant. Sunil Mathur for the Respondent. ORDER N.L. Kalra, Accountant Member The assessee has filed appeals against different orders of the ld. CIT(A)-Central, Jaipur dated 18-08-2011, 17-08-2011 and 19-08-2011 for the assessment year 2007-08 respectively. First of all, we take up the grounds of appeal of M/s. Singhal Credit Management Ltd. in ITA No. 853/JP/2011 for the assessment year 2007-08 2.1 The ground of appeal raised by the assessee are as under:- "1. That the ld. CIT(A) has erred in law as well as facts by holding that the order passed u/s 153A r.w.s. 143(3) is not suffering from any infirmity and not bad in law 2. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enience. The A.O treated sale of 10000 equity share to YCPL @ 100/- per share as genuine but remaining 25000 equity share were treated as the same were transferred to avoid short term capital gain in the hands of the assessee i.e. BAPL on account of the following reasons:- "( a ) There were an MOU between Techpro, BAPL and Shri Prem Kumar Garg on 17-07-2006 vide which it was agreed to sell the shares of BAPL to Techpro @ Rs. 318/- per share. ( b ) The shares were transferred to YCPL after the date of MOU as well as sale proceeds realized in the bank a/c on 19.7.2006 after the date of MOU. ( c ) The learned A.O took into consideration two evidences which suggest that the share transfer is make believe arrangement. Photo copy of MOU without it annexure seized during the course of search. Secondly Register of share transfer of BAPL stated as seized from the residence of Shri S.K. Singhal containing details of date of share transfer and Board Meeting etc. That the share transfer of BAL was to avoid capital gain in the hands of assessee company. ( d ) The learned A.O. was of view that entire share holding was in the control of Sh. S.K. Singhal and his associate and Sh. Prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was not sold directly and transferring of share was resorted in order to save on Stamp Duty involved in transferring of land. Sole intention behind transfer of share by the share holders of M/s Blossom Automotive Pvt. Ltd. was to sell plot of land ;held by the company at Bhiwadi to M/s Techpro System Ltd. for which the value of the plot was agreed between the share holders of M/s Blossom Automotive Pvt. Ltd. M/s Techpro System Ltd. at Rs. 12.72 crores as is evident from para b of the MOU which has been given the name CONSIDERATION which is reproduced below:- The Techpro will make a payment to the Seller and to the other share holders of Blossom in proportionate of their share holding in Blossom, to the tune of Rs. 12.72 Crores ( Rupees Twelve Crores Seventy Two Lac only) i.e. Rs. 318/- per share towards sale of Equity shares of Rs. 10/-each. From the language of the para of the MOU as given above, it is evident that payment of Rs.12.72 crores for the plot of land was to be paid the share holders of M/s Blossom Automotive Pvt. Ltd. in proportion of their share holding in; the company. As such it is not the transfer of shares but transfer of plot of land through the mode of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation because assessee is one of the players of the game involving around more than 15 players who are either family members or concerns of the family, namely Sh. Rekesh Kumar, Sh. Sanjeev Kumar are brothers, M\s R.K. Agarawal Sons(HUF) is the of Sh. Rakesh Kumar, like wise M\s Geripwell Steel Pvt Ltd., M\s Lambardar Concrete Pvt Ltd., are the closely held companies of Sh. Rakesh Kumar Sh. Sanjeev Kumar's family. Similarly, M\s Singhal Securities Pvt Ltd. M\s Singhal Credit Management Pvt. Ltd. M\s SNR Rubbers Pvt Ltd., are the closely held companies of Sh. Surendra Kumar Singhal and His family from whose residence documents regarding the transfer of share of M\s Blossom Aotomotive Ltd., and other related documents have been seized. Documents relied upon, reasons put forward apparently appears to be genuine but the documents seized and the circumstances relating to transfer of share by the assessee to Kolkata based companies give rise to contradictions which proves that the transactions of share which the assessee has entered with Kolkata based company was just a fa ade/colorable device to reduce its capital gain liability. Without further going into any detail the contradicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Leather Pvt Ltd., M/s Tip- top Promoters Pvt Ltd., M/s Display commercial Pvt Ltd., M/s Yuthika Commercial Pvt Ltd,. Were transferred on 31.07.2006. The assessee held all the 25000 shares on 17.07.2006, the date on which MOU with M/s Techpro Systems Ltd. for transfer of shares was entered into by the shareholders of the group and its claim that on 17.07.2006 i.e. the date of MOU, it had no shares of m/s Blossom Automotive Pvt Ltd. proves to be contradictory in view of the detail given in Register of share Transfer and Minutes of Board meeting of the company. ( iii ) Although the Assessee has received payment of Rs. 25 lacs from M/s Yuthika commercial Pvt Ltd. On 18.07.2006 but it cannot be said to be received on account of transfer of shares because as per the Register of share Transfer (Annexure-A) and Minutes of Board Meeting dated 31.07.2006 (Annexure-B) share were still with the assessee. ( iv ) Transfer of share to Kolkata based companies by the shareholders as has been discussed in the pares above is nothing but resorting to colorable device to avoid payment of tax which can not b allowed even if it apparently appears to be within the four corners of law as has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... robabilities. In the case of Assessee from the facts discussed in view of the documents found regarding MOU and transfer of shares, it is apparent that in reality it was sale of plot to M/s Techpro Systems Ltd and not of shares. Whole gamut of transferring the shares of M/s Blossom Automative (P) Ltd. by the assessee alongwith other shareholders to Kolkata based companies and transfer of shares within a period of three months by the Kolkata based companies to M/s Techpro Systems Ltd although apparently appears to be genuine a transaction but in this case apparent is not real because transfer of share to Kolkata based can not be considered to be a transfer since the shares ultimately landed up with M/s Techpro System Ltd. where they were indented to be as per the MOU between the Share Holder M/s Techpro Systems. ( vi ) Transfer of Shares by the Share holders of M/s Blossom automotive Pvt Ltd was used as a tool by the Share Holder for transferring the plot of land to M/s Techpro System Ltd. However, mode of transfer of an assets is not determinative of the nature of the assets is well supported by the judgement in the case of Vodafone International Holding B.V. v. Union of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intention of the assessee which was to avoid tax on capital again. An assessing officer is requires to keep is ears and eyes open and use the faculties of his brain to decide a case judiciously and on merits. In this case under signed can not shut his eyes to the open secret that there is a blatant attempt on the part of the assessee to evade tax by stage managing the documents. In view of foregoing, it is held that the assessee has earned a Short Term Capital Gain from transfer of plot of land through the mode of share transfer which computed as under proportionately on the basis of his shareholding and the total Short Term Capital Gain earned by the shareholder Short Term Capital Gain = A B C 8,71,00,000 25,000 4,00,000 Rs. 54,43,750/- A: Total Short Capital Gain earned by the Shareholders B: No. of Shares held And Transferred by the assessee C: Total shares of M/s Blossom Automative which have been transferred to M/s Techpro Systems Ltd. 2.7 The ld. AR has made the following Submission before the learned CIT(A):- " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusion that a valid search was conducted against the assessee. In the totality of circumstances, where no search has been conducted against the assessee there is no, merit in the issue of notice U/s 153A of the Income Tax Act under which the jurisdictional area of operation in six assessment years immediately preceding the assessment year relevant to the previous year, in which search was conducted. In case no search is conducted against the person, the period of operation to which the provision of section 153A of the act is baseless. Though the provision of section of 158BC of the act are not applicable to searches conducted after 31-05-2003, but the provision of section 132 of the Income Tax act are continuining on the statute implying thereby that the provision of section 153A of the act are only applicable in case valid search is conducted against the assessee under section 132 of the act. Accordingly, we declare the assessment made against the assessee under the provision of section 143(3) read with section 153A of the Income Tax Act are null and void and direct the assessing officer to cancel the same. Thus, the issue related to the validity of search raised by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eet enclosed. The transaction with the assessee company has been confirmed by it. The subsequent transaction with it has been confirmed by Techpro System Ltd. ( vii ) Therefore the additions made by learned AO were based on presumptions which were contrary to the facts and against the spirit of law and natural justice. In this regards the assessee place reliance on 169 taxman 0130. ( viii ) Section 132(4A) of the Act uses expression "it may be presumed" it is not obligatory on the assessing authority to make a presumption. Even if a presumption is required to be made, them, as held in CIT v. S.M.S. Investment Corporation Pvt. Ltd. [1994] 207 ITR 364 (Raj.), the presumption is a rebuttable one and relates to a question of fact. While coming to this conclusion, the Rajasthan High court relied upon and earlier decision rendered by it in CIT v. S.M.S. Investment Corporation [1988] 73 CTR (Raj.) 184 : (1988) 173 ITR 393 (Raj.) ( ix ) Even in ITO v. T. Abdul Majeed [1988] 169 ITR 440 (Ker.) it has been held as follows: "It is true the section 132(4A) of the Act. Enables the court to presume the truth of the contents of such books. However it is a presumption which can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in to a block deal by way of a MOU on 17th July, 2006 at a hefty consideration at the rate of Rs. 318/ share. The buyer of such shares was a company Techpro Systems Ltd. The consideration so fixed between the subsequent seller and buyer has no relationship with the assessee company and the price of shares fixed at a hire rate not a concern of a assessee company. The company Techpro System Ltd. was having some strategic planning as stated by the learned AO and the assessment order in para 3.5 which is reproduced below:- "After acquiring the total share holding of M/s Blossom Automotive Pvt. Ltd, M/s Techpro System Ltd. initiated the procedure of merger and M/s Blossom Automotive Pvt. Ltd. merged with its holding company M/s Techpro System Ltd. w.e.f. 01.04.2008 pursuant to the order dated 10.07.2009 of Hon'able High Court of Rajasthan, Jaipur Bench, Jaipur and the order dated 22.05.2009 of Hon'ble High Court of Delhi, New Delhi". During assessment proceeding the assessee company has submitted all the details of the transferee company in respect of its identity particulars of balance sheet and annual return filed with department of company affairs, details of income tax- PAN etc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 54,43,750/-. undisputed facts are that shares of M/s Blossom Automotive Pvt. Ltd. a company incorporated on 19.7.05 which purchased a land on 5.4.06 for Rs. 4.01 crore in Industrial area Bhiwadi, were held by members of S.K. Singhal family, companies held by them, Sanjeev Kumar Singhal and his other family member and companies held by them as well as Sh. Prem Kumar Garg. Share holders of M/s Blossom Automotive Pvt. Ltd. entered into a MOU dated 17.7.2006 with M/s Techpro System Ltd through authorized representative. Sh. Prem Kumar Garg, who also a major share holder of M/s Blossom Automotive Pvt. Ltd to sell their shareholding in the company to M/s Techpro System Ltd. this MOU was not cancelled and rather acted upon as was confirmed by M/s Techpro System Ltd. vide their letter dated 3.7.10 in response to notice u/s 133(6) dated 29.6.10 issued by A.O. As per this MOU, 100% shareholding of M/s Blossom Automotive Pvt. Ltd. was to be transferred from the exiting share @ 318/- per share at total consideration of Rs. 12.72 crore to M/s Techpro System Ltd. However, on papers 3,18,00 shares of M/s Blossom Automotive Pvt. Ltd. were shown to be transferred to 9 Kolkata based companies @ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere delivered on 15.07.06. Moreover, even the payments against them were not made at the relevant point of time by the buyer. On being confronted by the undersigned, it was claimed by A.R. of appellant that post dated cheque was given by the buyer having date as 18.7.2006. However, no independent evidence of the same could be filed by the AR to substantiate that really the post dated cheque was issued on 28.4.2006 itself and not somewhere near 18th July, 2006. On the contrary, from perusal of the cheque no. of this contended post dated cheque (Cheque no. 0729479) claimed to be issued on 28.4.2006 itself vis- -vis the cheque no. issued on 28.4.2006 (Cheque no. 191826), it is seen that the claimed post dated cheque is altogether from the different series of the cheque book. If both the cheques were issued on same date, then they would normally have nearby number or at least will be from the same series of the cheque book. This being not so, the claim of the appellant that the cheque of Rs. 25 lakh was post dated and was issued at the relevant Point of time, is not at all accepted. 4. As per the guidelines and rules of SEBI as well as Registrar of companies, any sell of share is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the fact that no actual payment has been done by purchaser against order u/s 143(3) Appeal no 894/10-11 - M/s Singhal Credit Management Ltd.. A Y. 2007-08 company to the appellant company in lieu of sell of 25000 share before 17.07.06 i.e. the date of MOU, whereas the payment was made for sell of 10000 shares on 28.04.02006 itself. The issue has already been discussed I the earlier Para and hence not repeated. 6. If the argument sake, the contention of A. R. that the appellant and other erstwhile share holder of M/s Blossom Automotive Pvt. Ltd. have sold shares to the 9 Kolkata based companies well before 17.07.06 i.e. the date of MOU is treated as correct (Though not correct), then what was the need of those erstwhile share holders to enter into a MOU with M/s Techpro Systems Ltd., because as per the A.R. version, they had already sold their shares to 9 Kolkata based companies and they did not own any share of the company as on 17.07.2006. Management of M/s Techpro Systems Ltd would also enter into MOU with only such persons who are shareholders of the company, after duly ascertaining this fact. It only infers that as on 17.07.2006 the erstwhile shareholders of M/s Bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.07.06.However A.R. of the appellant was unable to substantiate his argument. Rather on perusal of share transfer form of share of 50000 shares of M/s Blossom Automotive Pvt. Ltd. from M/s Singhal Securities Pvt. Ltd. to Kolkata based companies, it is seen that this transfer form was signed on 31.07.06. by the transferor company as is quite evident from the date mentioned in the share transfer form. The date 12.07.06. referred by the A.R. is not the date of transfer/date of sell of share by the appellant company but it is actually the date of issue of blank share transfer form by the registrar of company, which quit evident from date available on the round seal of the Registrar of company affixed on the top of share transfer form. From the aforesaid details and evidence, it is proved that these share were sold by the appellant company on somewhere near 31.07.2006 and thereby the share along with the duly signed share transfer form was delivered to purchaser on 31.07.2006.This argument of the appellant that these shares were transferred by the appellant company well before the date of MOU was thus found to be totally baseless and rejected in the appeal order dated 17.08.2011 of M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal consideration demanded by shareholders of M/s Blossom Automotive Pvt. Ltd. appeared to them reasonable. However, assessee's company's director had no knowledge of M/s Techpro system Ltd. and its corporate plan. I have considered the arguments of the A/R As far as date of sale of shares contended to be 28.04.2006 by the A.R., It had already been discussed above that same is not evidenced by contract note between the parties and moreover, the share transfer forms have been seized by the appellant company on 10.05.2006 and 31.07.2006 for 10000 and 25000 shares respectively. For handing over the share certificates and the transfer form to the purchaser company. It only infers that though 10000 shares were sold somewhere nearer to 10.05.006 But 25000 shares were sold somewhere nearer to 31.07.06 and at least not before the date of MOU. Accordingly, the other argument of the appellant that on the date of MOU, The appellant company was not holding the shares are also found to be devoid any merit. The Argument that directors of appellant company had no knowledge about M/s Techpro System Ltd. and its plan is also incorrect. Infact on the perusal of MOU dated 17.07.2006, it is seen that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent re-transfer by these Kolkata based companies to M/s Techpro System Ltd. were sham transaction and infact, the only asset being plot of land held by M/s Blossom Automotive Pvt. Ltd was transferred to M/s Techpro System Ltd. directly and intermediary Kolkata companies have only been used to avoid / reduce tax liability. It is reiterated that in absence of adverse material being brought out on record regarding 10000 shares earlier transferred by the appellant; A.O was fair enough not to treat that transaction as non-genuine. Hence the addition of Rs. 54,43,750/- so made by the A.O. is hereby confirmed in the instant case of the appellant.'' 2.10 The submission of the assessee before us are as under:- "It is submitted that no physical search operation was carried out at the business of the assessee company, no incriminating documents were seized from the directors of the assessee company or from the assessee. More over nothing seized for the assessment year under consideration. Therefore initiation of proceeding u/s 153A is bad in law. In case initiated proceeding u/s 153A in the recent judgment it has been held, when nothing incriminating was found in the course of search re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. After completion of assessment the A.O. was requested to supply seized Register of share transfer of Blossom Automotive Pvt. Ltd. from the residence of Sh. S.K. Singhal. The A.O. in response to above letter shown inability to supply it as the same is not find place of seizure memo of loose papers. 3.1 With regards to another evidence of MOU dated 17.7.2006, on which relied upon by the A.O. During the course of assessment proceeding on 22.11.2010, the AO was requested to provide us Annexure-A of the MOU to ascertain whether assessee was one of the party. The AO on the request letter remarked that the Annexure-A of the MOU dated 17.7.2006 taken place in between existing share holders and M/s Techpro Systems Ltd. Subsequently the learned A.O. sought the same along with details payment to the seller shares from M/s Techpro System Ltd. Bhiwadi. The learned A.O. before passing the assessment order supplied the information collected u/s 133(6) of the I.T. Act, 1961. On perusal of Annexure-A to the MOU dated 17.7.2006 the name of the assessee company was not available but YuthiKa Commercial Pvt. Ltd. was find place as share holder. In view of the fact the assessee company was not all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Techpro System Ltd. @ 318/- per share. In the recent judgment of Hon'ble Allahabad High Court in the case of CIT v. Atmaram Tulsyan and others it has been held that the share transactions declared by assessee can not be doubted merely on the ground that shares were lessor known companies and their value cannot appreciated to the level claimed by the assessee. 7. The learned A.O. linked sale of land with the sale value of share @ 318/- per equity share of Blossom Automotive Pvt Ltd. as per MOU which has been reproduced by the AO at para 3.3 of the assessment order. 8. Transferring of shares by shareholders of BAPL to Kolkata based companies @ Rs.100/- per share and re-transferring of same shares to M/s Techpro System Ltd. @ 318/- per share within a period of 3 months was a sham paper transaction resorted to by the shareholders of M/s BAPL to reduce their capital gain liability. The allegation leveled by the A.O. without any evidence contrary to the facts, the contention of the A.O leads that the sale proceeds of equity share by Yuthika Commercial Pvt. Ltd. reached to the assessee after sale of share of Blossom Automotive Pvt. Ltd. to Techpro System Ltd without evidences i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f M/s BAPL, M/s Techpro Systems Ltd. (TSL) and Blossom Automotive Pvt. Ltd. (BAPL) represented by Smt. Shika Singhal. As per this MoU, the entire share holding of M/s BAPL was to be transferred to M/s TSL for a total amount of Rs. 12.72 crores which amounted to Rs. 318 per share(for the 4,00,000 shares of this company). As against this MoU, the assessee group, on paper, showed that out of 4,00,000 shares of BAPL, majority of shares were sold to nine Kolkata based companies at a rate of Rs. 100/- per share. The A.O was of the view that the sale of shares by this group to the Kolkata based companies was a 'make believe arrangement' or a 'colourable device' to avoid payment of taxes. The A.O found that the 100% share holding of M/s Blossom Automotives Pvt. Ltd. was transferred from Sh. S.K. Singhal and his associates to M/s Techpro Systems Ltd. within a span of less than one year. The transaction would have resulted into a short term capital gain of Rs. 8.72 crores in the hands of Sh. S.K. Singhal and his associates and the same would have been taxable @ 30% because the transaction was not through stock exchange and no STT was paid on it. However, to save the short term capital gain a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to Techpro Systems Ltd. at Rs. 318/- per share. The A.O did not accept this contention of the assessee and held that these assesses actually sold these shares directly to M/s Techpro Systems Ltd. at Rs. 318/- per share and the transactions of sale of the shares of BAPL to the Kolkata companies and then sale by the Kolkata companies to Techpro Systems are sham transactions and make believe arrangement made to avoid payment of tax by share holders of BAPL on the transactions of transfer of their shares directly to M/s Techpro Systems Ltd. The A.O has gone one step further and has observed that the company Blossom Automotive Pvt. Ltd.(BAPL) was not carrying out any activities and owned only one asset- a piece of land at Industrial Area, Bhiwadi. The A.O has alleged that actually the shareholders of BAPL wanted to transfer this land to M/s Techpro Systems Ltd. Instead of directly transferring the land the shareholders transferred 100% share holding of BAPL to TSL. Even the share holding was transferred through the circuitous route of Kolkata based companies as discussed above. According to the A.O, the total consideration for sale of this land was Rs. 12,72,00,000/- and the cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of two witnesses as required by law and a valid panchnama has been prepared. ( ii ) Second, it is contended that a common panchnama has been prepared and there is no specific finding of seizure in the case of the assessee. Third, it is claimed that the common panchnama included the name of M/s Blossom Automotive Pvt. Ltd. (BAPL) also which did not have office at the premises E-127, Industrial Area, Bhiwadi. These two arguments have been considered and rejected by Ld. CIT(A) in para 2.2 of his order on page. 3. These findings of Ld. CIT(A) are relied on and are not reproduced here for the sake of brevity. ( iii ) In the written submissions, the assessee has relied on the decisions of S.M Trading Corporation v. ACIT 20 SOT 489- ITAT Mumbai 'J' Bench and Dr. Mansukh Kanjibhai Shah v. ACIT [2011] 129 ITD 376. These decisions are not applicable in the case of the assessee as the facts in these are totally different. In the case of S.M. Trading Corporation, the search was conducted at a premises which was owned by the assessee but rented to another concern. In the case of Dr. Mansukh K. Shah though warrant of authorization was issued in the name of the assessee, being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are transfer' was not available as part of the seized records. The assessee vide its letter dated 18.05.2011 had requested photocopies of correspondence relating to 133(6)/131 of the I.T. Act in respect of which the assessee was informed that the documents had been gathered by the Department from third parties and if the same were required by the Ld. CIT(A) in appellate proceedings then the same shall be provided on demand to the Ld. CIT(A) in due course. No where in the letter of the A.O, it had been stated that the documents on the basis of which addition was made particularly 'register of share transfer' was not available with him. Apparently the assessee is trying to misconstrue the facts and misinform the appellate authorities to derive undue benefits for itself. This document is actually one single page and it is page no. 22 of Exhibit 5 of Annexure "AA' seized from the residence of Sh. Surendra Kumar Singhal at E-127, RIICO Industrial Area, Bhiwadi, Alwar. A copy of this page has been enclosed by the AO as Annexure 'A' to the assessment order. Thus claim of the assessee about the non- availability of this register is wrong. ( ii ) The assessee has claimed that the MoU dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay of transfer of shares is recognized legally and does not fall under transfer of immovable property. The assessee has contended that the land for which the A.O has calculated the capital gain was owned by BAPL and not by the assessee. It is also claimed that the value of the land has been taken as the total consideration for shares of BAPL paid by Techpro Systems Ltd. which is neither supported with any valuation of land nor prevailing DLC rates. In this respect, it is submitted that the company M/s BAPL actually owned only one asset which was the land plot no. SP-496-497, Industrial area, Bhiwari Alwar. The 100% share holding of this company was acquired by M/s Techpro Systems Ltd and subsequently M/s BAPL was merged in M/s TSL. From these facts, it is clear that the ultimate aim for undertaking all these transactions was to transfer the land from M/s BAPL to M/s TSL. For doing so the share holders of M/s BAPL who jointly owned this land resorted to the circuitous method of transfer of 100% shareholding to TSL. In this respect, in point no. (vii) on page 12, the A.O has cited the decision of Hon'ble Bombay High Court in the case of Vodafone International Holding B.V v. Unio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct notes only. Further, the assessees have wrongly claimed that the transfer deed with Kolkata based company were executed on 12.07.2006. The transfer deed is placed on page 70 of the APB in the case of Singhal Securities Pvt. Ltd.. It may be noted that at the top of this form there is a stamp dated 12.07.2006. This is a date on which the share transfer form has been issued by the Registrar of Companies. The date, on which this form has been executed by the transferor and the transferee, is 31.07.2006 which is mentioned just above the box "for office use only". Thus, it is clear that the transfer deed is not executed on 12.07.2006 but on 31.07.2006 which is after the date of MoU i.e. 17.07.2006. Further, the 'share transfer register of BAPL' seized from the residence of Sh. S.K. Singhal, the shares are shown to be transferred to the Kolkata companies on 31.07.2006 only. ( viii ) The assessee has also claimed that the Kolkata based companies have accounted the transaction of purchase of shares and payment thereof to the assessees in their books of account and therefore, it cannot be called a make believe arrangement. In this respect, it is submitted that all these transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 per share between 5.08.2006 and 9.10.2006. The names of such shareholders and the number of shares sold by them in this manner are given in List No. A made by the A.O in his assessment order. It is surprising as to how can the share price of a Pvt. Ltd. Company which is not functioning can vary so much from Rs. 100 to Rs. 318 within 3-4 months and why would any shareholder agree to sell at such different rates within such a short period. The shareholders belonged to the promoter group only and very well knew the worth of the company BAPL and the asset (land) owned by it. ( ii ) The three companies being considered here are the group concerns of the promoters. The promoters very well knew the worth of their company. There are no reasons why they will sell their shares to outsiders at consideration equivalent to the cost of their shares. It may be noted that by selling their shares to Kolkata companies @ Rs. 100 per share, these assessees had foregone their profit to the extent of Rs. 218 per share. ( iii ) Sh. Prem Kumar Garg was a major shareholder of M/s BAPL. He has himself shown to have sold a substantial portion of his shares( 77,000 shares) to a Kolkata based company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Shri Rakesh Kumar Agarwal. and Shri Prem Kumar Garg. Out of total shares of 4.00 lacs, the shares of 1.46 lacs were held by the assessee company and family members of Shri S.K. Singhal. The holding of the group of Shri Singhal was to the extent of 36.5%. The assessee company was having 35,000 shares. These 35,000 shares have been sold. From the sale of 35,000 shares, the assessee company showed nil capital gain. 10,000 shares were sold at Rs. 100/- per share and these shares were also allotted at Rs. 100/- per share. The face value of the share was Rs. 10/- per share and at the allotment, the premium of Rs. 90/- per share was paid for shares of M/s. Blossom Automotives Pvt. Ltd. There is no dispute between the assessee and the revenue so far as sale of 10,000 shares are concerned. The revenue is of the view that assessee has earned Short term capital gain of Rs. 54,53,750/- on 25,000 shares. According to the AO, the entire shares of M/s. Blossom Automotives Pvt. Ltd. have been purchased by M/s. Techpro System Ltd. at Rs. 318/- per share. The total consideration for 4.00 lacs shares will be Rs. 12.72 crores. M/s. Blossom Automotives Pvt. Ltd. purchased a plot for a sum of Rs. 4.01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the paper book filed by the assessee company. The Annexure to the MOU was not available with the revenue and the same was obtained from M/s. Techpro System Ltd. u/s 133(6) of I.T. Act. This is clear from page 77 of the paper book filed by the assessee company. In the Annexure A to the MOU, the name of the company is not appearing. However, the name of M/s. Yuthika Commercial Pvt Ltd. is available in this Annexure and share holding of this concern in Annexure A was shown at 55,000 shares. This shows that as on 17-07-2006, the assessee company has already sold the shares to M/s. Yuthika Commercial Pvt Ltd. The revenue has relied the date of transfer as from the date as appearing in the transfer form. In this form, the date is mentioned as 31-07-2006. The revenue is of the opinion that shares were transferred subsequently and in order to avoid the payment of tax, such shares have been shown to have been sold on 28-04-2006. 2.13 Before us, the ld. AR of the assessee company drew our attention to the confirmations of the transfer forms issued by M/s. Yuthika Commercial Pvt Ltd.. In this, it is mentioned that 25,000 shares were purchased by M/s. Yuthika Commercial Pvt Ltd. vide in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC) available on ITAT online has held that there is no conflict between Mc Dowell Co. Ltd. and Azadi Bachao Andolan ( supra ) or between Mathuram Agarwal. It will be useful to reproduce the following paragraph from the judgment of Hon'ble Apex Court in the case of Vodafone International Holdings B.V. ( supra ). "57. Before us, it was contended on behalf of the Revenue that Union of India v. Azadi Bachao Andolan [2004] 10 SCC 1 needs to be overruled insofar as it departs from McDowell and Co. Ltd. v. CTO [1985] 3 SCC 230 principle for the following:- i) Para 46 of McDowell judgment has been missed which reads as under: "On this aspect Chinnappa Reddy, J. has proposed a separate opinion with which we agree". [ i.e. Westminster principle is dead]. ii) That, Azadi Bachao failed to read paras 41-45 and 46 of Mc Dowell in entirety. If so read, the only conclusion one could draw is that four learned judges speaking through Misra, J. Agreed with the observations of Chinnappa Reddy, J. as to how in certain circumstances tax avoidance should be brought within the tax net. iii) That, subsequent to McDowell, another matter came before the Constitution Bench of five Judges i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory interpretation rather than an over-arching anti-avoidance doctrine imposed upon tax laws. 62. Furniss (Inspector of Taxes) v. Dawson [1984] 1 All E.R. 530 dealt with the case of inter-positioning of a company to evade tax. On facts, it was held that the inserted step had no business purpose, except deferment of tax although it had a business effect. Dawson went beyond Ramsay. It reconstructed the transaction not on some fancied principle that anything done to defer the tax be ignored but on the premise that the inserted transaction did not constitute "disposal" under the relevant Finance Act. Thus, Dawson is an extension of Ramsay principle. 63. After Dawson, which empowered the Revenue to restructure the transaction in certain circumstances, the Revenue started rejecting every case of strategic investment/tax planning undertaken years before the event saying that the insertion of the entity was effected with the sole intention of tax avoidance. In Craven (Inspector of Taxes) v. White (Stephen) [1983] 3 All. E.R. 495 it was held that the Revenue cannot start with the question as to whether the transaction was a tax deferment/saving device but that the Revenue shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case the consideration is less than the fair market value. Such gift was treated as deemed gift. Even after abolition of Gift Tax Act, the provisions of Income Tax Act of computing the capital gain were not changed. Thus it clearly suggests that one has to consider the sale consideration for the purpose of computing the capital gain. Section 56(2)(vii) has been introduced to treat the difference fair market value of the property and the consideration. This provision has been inserted w.e.f. 01-10-2009. In respect of transfer of share of private limited company, it is mentioned that fair market value is to be determined as per Rule 11UA(c)(b). As per this rule, the fair market value of unquoted equity share is to be determined as under:- (A-L) PV (PE) A: means the book value of the assets in the balance sheet L: means the book value of liabilities PE: means the total amount paid for share capital PU: means the paid up value of equity shares Even after 1-10-2009, the fair market value of the unquoted equity shares is to be determined on the basis of book value of the assets for computing income u/s 56 of the Act. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come which has been taxed in the hands of M/s. Blossom Automotives Pvt. Ltd. is income from house property and it represented the rental value of the plot owned by the company. In the instant case, the AO has computed the Short term capital gain by considering the profit arising on account of sale of land. The same AO has made the assessment in the case of Shikha Singhal and Shri Rajat Singhal in which profit has been considered Long term capital gain on sale of shares. In their case, the sale has not been considered as a sale of assets but has been considered sale of shares. In case transfer of the shares is then Long term capital gain arises if holding period of is one year or more while in the case of immovable property the capital gain is long term in case the period for holding is more than three years. The AO cannot blow hot and cold. Thus the sale of shares in the case of other shareholders has been considered as sale of shares and not sale of the assets. Therefore, there was no case of increasing the capital gain when there is no iota of evidence to suggest that the assessee has received consideration over and above the consideration received. The AO has neither examined Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Once search warrant has been issued then the AO is required to pass the assessment order u/s 153A read with Section 143(3) of the Act. Hence, the Ground No. 1 of the assessee is dismissed. 2.19 The second ground of appeal of the assessee is against confirmation of addition of Rs. 55,34,750/-. We had already discussed this issue in earlier paras. There is nothing on record that the assessee has received consideration over and above consideration shown in the transfer deed for the sale of shares. We therefore, feel that the AO was not justified in making the addition of Rs. 55,43,750/-. 2.20 The third ground of appeal of the assessee is that the ld. CIT(A) has erred in holding the transfer of shares of M/s. Techpro System Ltd. instead of M/s. Yuthika Commercial Pvt Ltd. and worked out the Short term capital gain on sale of land. 2.21 Looking to the discussions contained in this order, we hold that there is no evidence to suggest that the assessee company has sold the shares to M/s. Techpro System Ltd. The assessee company has sold shares to M/s. Yuthika Commercial Pvt Ltd. There is a case of sale of shares and not sale of assets. Thus the third ground of appeal of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irming the addition of Rs. 1,11,05,250/- made by the AO, without discharging onus, worked out on surmises and conjectures perverse to facts and provisions of law. 3. The ld AO as well as the ld. CIT(A) has erred in law and facts of the case in holding the transfer of shares to M/s. Techpro System Ltd. instead to M/s. Nandan Mercantile Pvt Ltd. as well as working out Short term capital gain on sale of land 4. The ld. AO has erred in law in charging interest u/s 234B(3) of I.T. Act as well as ld. CIT(A) erred in ignoring legal position of Section 234B of Income Tax Act, 1961" 4.2 In this case the facts are similar to the fact opening stock the M/s. Singhal Credit Management Ltd. ( supra ) except that this company has transferred the shares to M/s. Nandan Mercantile (P) Ltd. as against M/s. Yuthika Commercial Pvt Ltd. Looking to our findings in the case of M/s. Singhal Credit Management Ltd. ( supra ), we hold as under:- 1. Ground No. 1 of the assessee is dismissed. 2. Ground No. 2 and 3 of the assessee are allowed. 4. Ground No. 4 of the assessee is consequential in nature 5. In the result, the appeals of the assessee are partly allowed. - - TaxTMI - T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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