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2015 (5) TMI 44 - ITAT LUCKNOW

2015 (5) TMI 44 - ITAT LUCKNOW - TMI - Application for rectification or order u/s 254(2) - Disallowance of short term capital loss on account of sale / purchase of shares - AO treated the transaction as Sham - it was held by the Tribunal in these cases that it cannot be accepted that any loss was incurred during this period from 07/12/2007 to 15/12/2007 and therefore, the claim of the assessee regarding short term capital loss is not allowable. However, it was held by the Tribunal as per Para 6 .....

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regard is beyond the authority of the Tribunal.

Held that:- As per above discussion, we have seen that none of the objections raised by the assessee in the Misc. Application is having any merit and therefore, this Misc. Application is liable to be dismissed. - Decided against the appellants. - M.A. No.106/LKW/2014, Arising out of I.T.A.No.217/Lkw/2012, M.A. No.107/LKW/2014, Arising out of I.T.A.No.218/Lkw/2012, M.A. No.108/LKW/2014, Arising out of I.T.A.No.219/Lkw/2012, M.A. No.109/LK .....

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e of convenience. 2. All these Misc. Applications are identical and therefore, we reproduce the contents of Misc. Application no. 106/Lkw/2014, which are as under: May it please your honours; The above mentioned assessee / respondent begs for leave to submit herewith the Misc. Application captioned as above, for favour of consideration by your honours. 2. The above referred order is a consolidated one passed by the Hon ble ITAT in six appeals being - Sl.No. ITA Nos. Names of the parties (i) 217/ .....

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aking the case of Sri Sanjay Gupta, the leading case, the grounds of appeal taken by the Revenue in his case are reproduced hereunder :- 1. Whether on the facts and in the circumstances of the case, Ld. CIT(A) was right in deleting the addition made by A.O. in spite of the fact that these shares were purchased by the assessee on an extraneous consideration for the benefit of preference share holders being assessee himself of the company which is in violation of section 40A(2A)(b) of the I.T. Act .....

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he fact of the case is squarely covered by the decision in the case of Bharat Hari Singhania vs. ACIT, ITAT (CAL) 58 ITD 189 an M/s Kerala Small Industrial Development Corporation Ltd. vs. CIT (Kerala) 270 ITR 452 where the capital loss arising out of sales of shares under the same facts and circumstances were disallowed by the Hon ble Court. 4. That the order of Ld. Commissioner of Income Tax (A)-I, Kanpur being erroneous in law and on the facts deserves to be vacated and that the order of Asse .....

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Officer had denied the claim by holding that the assessee was prompted to acquire the shares of said SSAIL only a few days before the same were sold for extraneous consideration of benefitting the preferential share holders of the company as also to ensure the payment of lenders of unsecured loans (Para 4.5 of the assessment order). A brief resume of the overall facts of the case with cross-reference to the material and information that had been placed before the Hon ble ITAT, have been given in .....

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der dated 16.12.2010, as has been referred to in the Facts of the case (Annexure-I), the assessee (respondent before the Hon ble Tribunal) had filed an appeal under section 246A before the learned Commissioner of Income-tax (Appeals) -I, Kanpur on the grounds reproduced hereunder:- (i) Because the learned Deputy Commissioner of Income Tax, Circle-4, Kanpur has wrongly, illegally and arbitrarily disallowed the short term capital loss amounting to ₹ 1,30,10,881/-. (ii) Because the learned De .....

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os while not appreciating the basic premise that the company SSAIL, and the continuation of business would have resulted in absolute financial ruination. (iv) Because the learned Deputy Commissioner of Income Tax, Circle-4, Kanpur has wrongly, illegally, arbitrarily and presumptuously disregarded a genuine business transaction done at arm s length between two unrelated independent genuine business entities as a colourable and sham transaction. 7. The ld. CIT(A) decided the issue of admissibility .....

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s enclosed and the same has been marked as ANNEXURE-II (pages 17 to 19) hereto. 8. Full text of such case laws relied upon by the CIT(A) and also other case laws (on which the assessee sought to rely in the proceedings before the Hon ble ITAT also) are appearing in the compilation running into 139 pages filed before the Hon ble ITAT. A bare perusal of the said case laws goes to show that the same were fully applicable to the facts of the present case as have been summarized in the Facts of the C .....

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ineness of short term capital loss and directed the Assessing Officer to allow the short term capital loss as computed, as per discussions appearing in Para 4, 4.1, 4.2, 4.3, 4.4, 4.5 and 5 of his order. 10. It is emphasized that at none of the stages below, there arose any issue with regard to the working of long term capital gain (arising on sale of shares) which took place on the same date on which the sale of shares held as short term capital asset took place, nor there was any controversy a .....

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ITA No.217/LKW/2012, has been decided by the Hon ble ITAT vide order dated 13.06.2014, which gives rise to this Miscellaneous Application. A copy of the said order, which is subject matter of this Misc. Application, is enclosed and the same has been marked as ANNEXURE - III (pages 20 to 28) hereto. 12. During the course of hearing of the said appeal, the assessee/respondent had relied upon a very comprehensive compilation running into 138 pages, which included all such material as was relevant f .....

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bstantive grounds and interlinked with each other, the revenue has raised the issue of applicability of section 40A(2)(a) and (b) of the Act [wrongly typed as section 40A(2A)(b)] (b) in the ground No.3, it has referred to certain cases laws, which are not applicable on the facts of the present case narrated in brief in Annexure - I hereto, as is evident from head notes of the said case laws as reproduced hereunder:- (i) Bharat Hari Singhania (HUF) vs. ACIT, ITAT Cal, 58 ITD 819 capital loss -Cha .....

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ss and until High Court passes dissolution under s.481 of the Companies Act, it is not possible to say that right of shareholder comes to an end-Also s.46(2) comes into operation on when the assessee receives any money or other assets from the company under liquidation- Hence there is no transfer of shares or extinguishment of assessee s right-No capital loss, therefore, can be computed. (ii) Kerala Small Industries Development Corpn. Ltd. vs. CIT 270 ITR 452 Business Expenditure - Business Loss .....

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nsidered by the ld.CIT(A) vide paras 4, 4.1,4.2,4.3,4.4,4.5 & 5 (reproduced in Annexure-II) while deciding the issue that had arisen from the assessment order, have not been disputed. 14. It is stated that - (a) the grounds taken by the Revenue, particularly the grounds no.1 & 2 (which are the substantive grounds) did not arise from the order dated 31.01.2012 passed by the ld. First Appellate Authority; (b) the provisions of section 40A(2a)/(b) had never been in the reckoning either at t .....

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o be held as non-maintainable and non-adjudicable by the Hon ble ITAT. 15. As stated in Para 12 hereinfore, the assessee/respondent had submitted a comprehensive compilation which included case laws also (as have been referred to in the order of the ld. First Appellate Authority and otherwise) running into 138 pages. On the facts of the case (Annexure - I hereto) it has been demonstrated that all such material and information as was needed to decide the real controversy (that had arisen from the .....

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f old shares held by the assessee and whether the same was allowed by the Assessing Officer or not. The order of learned CIT(A) is without throwing any light on these aspects. Hence, in our considered opinion, the matter has to go back to the file of the learned CIT(A) for fresh decision after examining all these facts but such decision should be as per these guidelines. (page 6) and remanded the matter back to the file of learned CIT(A) for fresh adjudication. It is submitted that the above ref .....

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pronouncements which are fully applicable on the facts of the case (as have been summarized in Annexure - I hereto). Omission to consider the said compilation, facts of the case in their entirety and holding that the case laws, on which reliance was placed are not relevant, give rise to mistake rectifiable under section 254(2) and the principle of law in this respect, as has been referred to above, is fully applicable. 17. The facts of the case and the findings to the effect that case laws refer .....

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misreading or relying upon a principle, which was never laid down in such judgment, the reasoning would be the same as if the Tribunal had not noticed the judgment. A copy of the said judgment is enclosed and the same has been marked as ANNEXURE - V (pages 31 to 37) hereto. 18. Further, while deciding the Revenue s appeal vide order dated 13.06.2014 under reference here, the Hon ble ITAT has directed for a review of the market price of the entire share holding (including the share held as long .....

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ould be worked out on the basis of net assets value of the company SSAIL on 07.12.2007 by dividing total net assets value on that date by total number of shares of that company before further issues of shares of that company. The fresh shares should be considered as issued and thereafter sold on such market value per share of the old shares for raising same amount resulting in increase in number of shares issued because whatever loss is incurred by the company and consequently the shareholders, .....

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crease in share capital will result into decrease of liability i.e. preference shares, accumulated dividend and other bank loans etc. by same amount and as a consequence thereof, the new shares to be acquired by the assessee on 07.12.2007 will be sold at the same price and it will not result into any short term capital loss but the long term capital loss in respect of sale of old shares will go up. 7. ………..So far the issue of new shares at a price below than the face value i .....

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value of assets on 07.12.2007 divided by no. of old shares and quantity of new shares to be issued should be worked out by dividing the amount required for repayment of liability by such market value of shares as on 07.12.2007. The sale price of the shares as on 15.12.2007 should be the same price as determined by market value on 07.12.2007 and this will result into no profit no loss in respect of new shares to be acquired on 07.12.2007 but the long term capital loss in respect of sale of old sh .....

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with the working of loss on the on long term capital asset which had attained finality at the stage of the Assessing Officer himself and which has never been the issue at any of the stages below. With great respect, it is submitted that the guidelines (which were in the nature of directions, were beyond the scope of appeal (with which the Hon ble Tribunal was seized) as also the authority of the Tribunal. 21. Moreover, for re-decision, as per guidelines/directions contained in the Tribunal s or .....

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as ANNEXURE - VI (pages 38 to 41) hereto. PRATER 22. It is respectfully prayed that the Hon ble Bench be pleased; (a) to deal with and decide the issues that have been raised in this Misc. Application; and (b) pass an appropriate order, either modifying or recalling the order dated 13.06.2014, which is the subject matter of this Misc. Application. 3. In the course of hearing before us, Learned A.R. of the assessee reiterated the contentions raised in the Misc. Application, as reproduced above. .....

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1 (Mad) (vi) Lalchand Bhagat Ambica Ram vs. CIT [1959] 37 ITR 288 (SC) (vii) CIT vs. Durga Prasad More [1971] 82 ITR 540 (SC) 4. Learned D.R. of the Revenue submitted that there is no mistake in the Tribunal order, therefore, this Misc. Application should be dismissed. 5. We have considered the rival submissions. We would like to observe that in all these cases, the issue in dispute was allowability of short term capital loss claimed by the assessee in respect of shares purchased in M/s Shakumba .....

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Revenue, it was held by the Tribunal in these cases that it cannot be accepted that any loss was incurred during this period from 07/12/2007 to 15/12/2007 and therefore, the claim of the assessee regarding short term capital loss is not allowable. However, it was held by the Tribunal as per Para 6 of the impugned Tribunal order that since the assessee was also holding old shares on 07/12/2007, the loss incurred by the assessee should be held to be allowable as long term capital loss having been .....

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Petition No. 6864 (B) of 2008. In our considered opinion, this judgment of Hon'ble Allahabad High Court is not relevant in the present case because in that case, appeal was earlier decided by the Tribunal and against the said Tribunal decision, appeal was filed before Hon'ble Allahabad High Court and the matter was restored back by the Hon'ble High Court to the Tribunal for fresh adjudication on the basis of material on record. In course of fresh hearing of such appeal, as per the d .....

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'ble High Court that it was not permissible for the Tribunal to direct to admit fresh evidence in the matter. Under these facts, it was held by Hon'ble High Court that it was not open for the Tribunal to take fresh material on record because Hon'ble High Court has directed the Tribunal to adjudicate the matter afresh on the basis of material on record. It was also held that the direction issued to an authority or Tribunal to do a certain thing in a certain manner, the thing must be d .....

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ion raised that the direction of the tribunal to allow extra Long Term Capital Loss is a mistake on the basis that the issue regarding long term capital loss was not before the Tribunal and therefore, the direction of the Tribunal in this regard is beyond the authority of the Tribunal. In this regard, we would like to observe that this direction is consequential direction in course of deciding the issue raised before the tribunal regarding allowability of Short Term Capital Loss on sale of share .....

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to India Glycol Ltd. in respect of purchase of those shares on 07.12.2007 and sale on 15.12.2007, the assessee deserved allowing of extra long term capital loss on sale of old shares of SSAIL to India Glycol Ltd., it cannot be termed as exceeding the power of the tribunal and hence a mistake in tribunal order. 6. One more contention has been raised by the assessee in Para 15 of the Misc. Application that the assessee had submitted a comprehensive compilation which included case laws also running .....

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de to any of these contents of this compilation in course of hearing of these appeals and therefore, as per this Rule 18(6), it is not forming part of the Tribunal record and Tribunal was not supposed to advert to the said compilation and therefore, there is no mistake in the Tribunal order. Moreover, reference was made by the tribunal to two judgments in Para 4 of the tribunal order and thereafter in Para 7, it is observed by the tribunal that these judgments are not applicable because the same .....

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in the Act w.e.f. A.Y. 2002 - 03. It was held that the provisions of section 94 (7) are prospective and not retrospective. In the present case, this is not the dispute that any section is invoked by the A.O. which is not in the statute book in the relevant year. Hence, this judgment is not applicable. 7.1 The second judgment is Union of India vs. Azadi Bachao Andolan, 263 ITR 706. This was already considered in the impugned tribunal order. 7.2 The third judgment is of Hon ble apex court in the .....

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dgment is also not applicable. 7.3 The next judgment is of Hon ble apex Court in the case of CIT vs. Shivakami Co. (P) Ltd., 159 ITR 71. In this case, the issue in dispute was regarding increasing the capital gain by invoking the provisions of section 12B of 1922 Act without bringing any evidence on record to show that extra consideration over and above the stated consideration was received. It was held that the provisions of section 12B cannot be invoked in the absence of such evidence. In the .....

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on conjecture, surmises or mere suspicion, it can be interfered with by the High Court. In the present case, the finding of fact by the tribunal that no loss was incurred in the sale of shares purchased on 07.12.2007 at ₹ 10 per share and sold on 15.12.2007 at ₹ 3.15 per share is not on the basis of conjecture, surmises or mere suspicion because it is seen that as per Balance Sheet as on 31.10.2007 available on record, the net worth per share on that day was as under:- Share Capital .....

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bunal that there is no loss during this period of 07.12.2007 to 15.12.2007, which cannot be said to be a finding of fact on the basis of conjecture, surmises or mere suspicion and hence this judgment is also not applicable in the present case. 7.5 The next judgment is of Hon ble Apex Court in the case of CIT vs. Durga Prasad More 82 ITR 540. This judgment is in fact supporting the case of revenue and not of the assessee. In this case, it was held by Hon ble Apex Court that The Tribunal is the fi .....

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question. This conclusion of the High Court appears to be an erroneous one. The Tribunal did not interpret those documents. It merely found itself unable to accept the correctness of some of the recitals in those documents. That does not mean that the Tribunal interpreted those documents. Whether to accept those recitals or not was within the province of the Tribunal. Unless its conclusion is held to be perverse or is not supported by any evidence or is based on irrelevant evidence, the High Co .....

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not on the basis of appreciation of facts of the present case which shows that as against Book Value of the share at ₹ 1.086 per share on 07.12.2007, the assessee has agreed to buy new shares at ₹ 10 per share and sold the same for ₹ 3.15 per share within 8 days. Hence, as per this judgment of Hon ble Apex Court, it is a finding of fact. Since it could not be shown that the facts noted are incorrect, it cannot be said that there is any apparent mistake in the tribunal order. H .....

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