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TMI Blog2003 (4) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... t par from the promoters' quota out of total capital consisting of 10,00,000 shares of ITC Agro-Tech Limited on May 13, 1988. The said shares were sold at Rs. 18.90 per share, resulting in a profit of Rs. 8,90,000 during the assessment year 1991-92. The assessee offered the whole of the profit to tax. The decision to sell was taken by the assessee as the edible oil industry was not doing well and that ITC Agro- Tech Limited had not declared dividend since 1988. Hence, the entire bulk of shares was sold on March 18, 1991. On June 10, 1991, the shares of ITC Agro-Tech, which were earlier unquoted, were listed on the Calcutta Stock Exchange. The trading in this counter commenced on June 27, 1991, and in the very first week, the shares of ITC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw, addition of Rs. 35.10 lakhs, being the difference between the sale price of the shares in question at the rate of Rs. 18.90 per share on 18th March, 1991, and the estimated realisable price of Rs. 54, after listing on the Calcutta Stock Exchange on June 27, 1991, as suppressed income, was justified?" Arguments: Ms. Aarti Vissanji, learned counsel appearing on behalf of the appellant-assessee, contended that, in this case, there is no finding that the sale dated March 18, 1991, by the assessee at the rate of Rs. 18.90 per share was a sham transaction or that the assessee had received any consideration over and above Rs. 18.90 per share and nor are there any facts which suggest that the transaction was a device for tax evasion and nor i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding of fact recorded by the Assessing Officer in this case that the transaction was between interconnected parties. She contended that, in this case, there is no finding of the Assessing Officer that no monies had passed and that the transaction was based only on book entries. That, in the absence of any such findings of understatement of price, the assessee cannot be taxed on the basis of notional value. She also relied upon the Law and Practice of Income-tax by Kanga and Palkhivala, eighth edition, volume 1, page 1177, and submitted that even in cases of sales at gross undervalue by a company to an associated company, the Department is entitled to find that it is not a transaction made in the course of trade and, therefore, disallow th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee with regard to this particular sale. Who paid the consideration for the shares has also not been disclosed. If the shares were not listed on the stock market, why were the shares sold to the broker. The contract note, however, indicates that the sale was through the broker and not to the broker. These queries were raised by the court as the impugned sale is dated March 18, 1991, which has correlation with the assets diverted by Harshad Mehta after being notified under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992. In this regard we may mention that one of us (Kapadia J.) has been presiding over the Special Court and the Special Court has instituted an enquiry in which the CBI has filed i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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