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Tornado Investments AND Finance (P) Ltd. Versus ACIT, Circle-4, Baroda

2015 (8) TMI 878 - ITAT AHMEDABAD

Penalty u/s. 271(1)(c) - disallowance of claim of loss on sale of shares - Held that:- In the case of Omni Finstock Pvt. Ltd. (2015 (8) TMI 861 - ITAT AHMEDABAD) identical issue was involved wherein held that for the computation of capital gain in the present case, the A. O. shall work out the capital gain/capital loss on the basis of consideration received by the assessee and not on the basis of alleged market value of the shares sold by the assessee.

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dingly, we set aside the order of the ld. CIT(A) and delete the penalty. - Decided in favour of assessee. - I.T. A. No. 258/AHD/2012 - Dated:- 13-8-2015 - SHRI RAJPAL YADAV AND SHRI ANIL CHATURVEDI, JJ. For The Appellant : Ms. Urvashi Shodhan, A.R. For The Respondent : Shri D.C. Mishra, Sr. D.R. PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. This appeal filed by the Assessee is against the order of CIT(A)-III, Baroda dated 19.12.2011 for A. Y. 2004-05. 2. The relevant facts as culled out from the mat .....

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rket Creators Ltd. . Aggrieved by the order of A. O., Assessee carried the matter before ld. CIT(A) who upheld the order of A. O. On the aforesaid disallowance that was confirmed by ld. CIT(A) A. O vide order dated 30.03.2010 was of the view that Assessee had willfully knowingly and without reasonable cause furnished inaccurate particulars of income and had tried to conceal income so as to evade payment of taxes and has furnished inaccurate particulars of income and was therefore liable for pena .....

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tock Exchange. Shares were sold at the price of 26 paisa per share despite the fact that book value of shares worked out to ₹ 9.94. Further, one day before the date of sale, these shares were sold at Stock Exchange @ 1.52 per share. Hence the sale of shares @ 26 paise per share was totally unjustified. The appellant has not submitted any evidence to show that the price of 26 paise per share was the market rate of shares on the date of their sale. In such circumstances, it is to be held tha .....

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ble explanation either at the stage of levy of penalty or during the course of appellate proceedings to show that the price of shares taken by it was a bonafide price and also the claim that the loss was a business loss was bonafide. The decision in the case of Reliance Petroproducts (P) Ltd. (supra) relied upon by the appellant are applicable only to a situation where the claims made by an assessee are legally justifiable or some debatable issue is involved or the assessee files an explanation .....

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lower rate than the market rate to related persons to create an artificial loss, whose details came to notice only after the case was selected for scrutiny and investigations were made by the assessing officer. The appellant has failed to offer any explanation for treating the capital loss as business loss in its computation of income and also for sale of shares to related parties at a much lower rate than the market rate. The issues are not debatable at all. Thus, the appellant has made wholly .....

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that the appellant has filed inaccurate particulars of income. Then he has invoked Explanation 1 to section 271 of IT. Act, 1961 by virtue of which the additions made are deemed to be amount in respect of which particulars have been concealed. 4. Aggrieved by the aforesaid order of ld. CIT(A), Assessee is now in appeal before us and has raised the following ground:- 1. Ld. CIT (A) erred in law and on facts in confirming penalty levied u/s 271(l)(c) of ₹ 83, 914- on conversion of business l .....

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and further submitted that in an identical case, where in case of another Assessee (Omni Finstock Pvt. Ltd.) the similar issue, sale of similar scrips were involved and where the ld. CIT(A) in exactly similar words had upheld the levy of penalty and in appeal before Tribunal the penalty was deleted. She placed on record the copy of the decision of Tribunal and pointed to the findings of the Hon ble Tribunal. She therefore submitted that since the issue in the present case is covered in favour of .....

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case of Omni Finstock Pvt. Ltd. (supra) identical issue was involved. We find that the penalty levied u/s. 271(1)(c) in the case of Omni Finstock Pvt. Ltd. (supra) was deleted, the issue was decided in favour of the Assessee by the Co-ordinate Bench of Tribunal by holding as under:- 8. We have heard the rival submissions and perused the material on record. As referred to by the learned AR, ITAT Ahmedabad "B" Bench in ITA No.3432/Ahd/2010 for AY 2004- 05 in the case of Ergon Investments .....

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material on record and have gone through the orders of the authorities below as well as the judgments cited by both the sides. We find that as per section 48, capital gain has to be worked out after reducing the cost of acquisition of capital asset along with cost of improvement thereto and the expenses incurred on transfer of a capital asset from full value of the consideration received or accruing as a result of the transfer of the capital asset. There is no reference to the market value of t .....

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e but only to the consideration referred to in the sale deed, there is no error in the ultimate conclusion arrived at by the C1T(A) as well as by the Tribunal in that case. Hence, ratio of this decision of Hon'ble Gujarat High Court is this that for the purpose of working out capital gain, the sale consideration received by the assessee or accrued sale consideration has to be adopted because there is no reference in section 48 to the value of the asset for the purpose of computing the capita .....

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dgment of Hon'ble Gujarat High Court is not able in this case because assets in that was landed property whereas in present case, it is quoted share. As per the ratio laid down by Hon'ble Gujarat High Court, capital gain has to be computed on the basis of consideration accruing or received for transfer of capital asset and for that purpose, no reference is required to be made to the market value of the asset in question because there is no provision in section 48 of the Act. In that judg .....

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nue was unable to point out any other provision in which in a situation like the present case, the Assessing Officer could have made a reference to a valuer for ascertaining the fair market value of the assets in question as on the date of its transfer In the present case also, no provision in the Income tax Act has been brought to our notice as per which, market value can be considered for the purpose of computation of capital gain. Regarding the reliance placed by Ld. D. R. of the Revenue on t .....

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the judgment of Hon'ble apex court rendered in the case of Mcdowell & Co. Ltd. vs. C. T. O. (supra) has no relevance in the present case because we find that in the present case, the reasons are also given for adopting lower price of ₹ 0.26 per share as against the quotation at Bombay Stock Exchange of ₹ 1.52 per share. It is submitted that the assessee company has sold the shares in physical form to the related party whereas the shares traded at Bombay Stock Exchange were de .....

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e is 3,32,940 shares. It was submitted that it cannot be said that the price charged by the assessee was unreasonably he facts of the present case. 8. Considering the facts of the present case in its entirety as discussed above by respectfully following the judgment of the Hon'ble Gujarat High Court rendered in the case of CIT vs. Girish Damjibhai Patel (supra), we are of the considered opinion that for the computation of capital gain in the present case, the A. O. shall work out the capital .....

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