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OPEL SECURITIES PRIVATE LIMITED Versus INCOME TAX OFFICER, WARD 3 (1) (4)

2016 (7) TMI 66 - GUJARAT HIGH COURT

Reopening of assessment - claim of capital loss - Held that:- Entire issue was thoroughly examined by the Assessing Officer during the original assessment proceedings. He had serious doubt about the assessee's claim of capital loss upon which he raised multiple queries. All these queries were explained by the assessee including pointing out the reasons for not exercising warrants. He placed heavy reliance on decision of Karnataka High Court in Dy. CIT v. BPL Sanyo Finance Ltd. [2008 (2) TMI 386 .....

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ecorded that the assessee failed to disclose truly and fully all materials. Even on this ground, notice must fail.- Decided in favour of assessee - SPECIAL CIVIL APPLICATION NO. 3323 of 2016 - Dated:- 27-6-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ. FOR THE PETITIONER : MR B S SOPARKAR, ADVOCATE FOR THE RESPONDENT : MR NITIN K MEHTA, ADVOCATE ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. The petitioner has challenged notice dated 7.4.2015 for reopening the petitioner's asses .....

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onsideration before the Assessing Officer was of capital loss of ₹ 20.89 crores(rounded off). The Assessing Officer however, made no additions on this count. To reopen such scrutiny assessment, he issued impugned notice which was done beyond a period of four years from the end of relevant assessment year. To issue such notice, he had recorded the following reasons : The assessment in this case has been finalized u/s.143(3) of the Act 20/12/2011 by determining the assessee's income at R .....

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809. The company has shown dividend income of ₹ 29,97,525/- in its profit and loss account and its expenditure side comprises mainly of Short term capital loss of ₹ 23,89,90,320/- being application money written off (forfeiture). After debiting legal & professional charges and General Charges of ₹ 23535 and ₹ 5110/- respectively. the company has worked out loss of ₹ 23,60,21,440/- . 4. As regards to the short term capital loss of ₹ 23,89,90,320/- , during .....

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paid for Warrants through QlB offer and the offer among promoter companies and not meant for general public as in the cited case. 5. In the case law relied upon by the assesses company, the very application for shares has been treated as having gained a right for allotment and the date of shareholding reckons from application itself. The decision also mentions that as per TableA of the company s Act, 1956, the applicant becomes a member of the company on the basis of application itself. In the c .....

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to convert the Warrants into equity shares and allotment of the co, responding equity shares, the Warrant holder shall not be entitled to any rights as shareholder of the company with respect to the equity shares into which the Warrants are exercisable including the right to vote, to receive dividends etc. Since the assesses had not exercised the option for conversion of the remaining warrants. it gets hit by the above condition to the offer. The assesses company had not gained any right by virt .....

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raised objections to the notice for reopening under a communication dated 5.6.2015. Such objections were however, rejected by the Assessing Officer by an order dated 2.11.2015. 4. Learned counsel for the petitioner raised two contentions. Firstly, that the issue of capital loss of ₹ 20.89 crores was minutely scrutinised by the Assessing Officer for original assessment proceedings and second, that there was no failure on part of the assessee to disclose truly and fully all material facts. .....

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upply various details as can be seen from the letter dated 28.9.2011 contending interalia that : 3. Reason for not exercising the warrants In this regard we would like to submit that balance 52,56,000 warrants had to convert in equity shares @ 454.74 per equity shares as per term & conditions of allotment and as per SEBI guidelines. The market price of equity shares of Sintex Industries Limited was stood at ₹ 70.20 (Approx.) per equity shares in the Month of March, 2009. Therefore, the .....

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ting to ₹ 23,89,90,320/- in books of account and the same was given in respect of investment in equity share in M/s Sintex Industries Limited in term of warrant. Accordingly the Assessee Company has claimed aforesaid amount as short term capital loss in return of income filed for the year under review. Sir please note that said amount was paid for investment purpose and hence it was in nature of capital nature and same should be allowed to us. We would like to draw your kind attention to t .....

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