9911796707
TMI Blog2019 (3) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 153B(l)(b) of the Act, is without jurisdiction, illegal and bad in law. 1.2. That the CIT(A) erred on facts and in law in not appreciating that the assessment having been completed without issuance and service of valid notice under section 143(2) of the Act, is illegal and bad in law. 1.3. That the CIT(A) erred on facts and in law in not appreciating that since proper sanction, as required under section 153D of the Act, was not received, the assessment order is illegal and bad in law. Without prejudice 2.0. That the CIT(A) erred on facts and in law in confirming the action of the assessing officer in making an addition of Rs. 6,00,00,000 while computing taxable capital gains on transfer of shares in M/s. RS Infrastructure Pvt. Ltd., (in short "RS Infra"). 3.0. That the CIT(A) erred on facts and circumstances of the case and in law in confirming the action of the assessing officer in disallowing short-term capital loss of Rs. 155,75,00.000 arising on sale of debentures of M/s. Arch Propbuild Pvt. Ltd.,, on mere surmises and conjectures. 3.1. That the CIT(A) erred on facts and in law in holding that the appellant failed to discharge its onus of establishing the genuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emittance of Rs. 58.5 crores from the assessee firm to Shri Pankaj Bansal. Page- 83 shows cheque of Rs. 239 crore for RTGS withdrawal. Page-85 shows remittance of Rs. 61 crores from assessee to Shri Basant Bansal. Page-86 shows remittance of Rs. 61 crore from assessee to Shri Roop Kumar Bansal. Page-87 shows handwritten rough working relating to the above transactions. The scanned image of page-87 is reproduced in the assessment order. On the basis of the transactions recorded on pages-75, 76, 85 and 86 above, these rough notings on page-87 can be thus interpreted by the assessing officer that the above amounts paid to the partners of the assessee firm. Rs. 239 crores cheque was for RTGS withdrawal, which is the sum total of the remittances to the Bansal family members as mentioned above. Rs. 4,99,93,550/- and 5CR, out of consideration of Rs. 244 crores received by assessee firm, Rs. 239 crore was distributed amongst Bansal family members. The difference of Rs. 5 crore remained with the assessee. Shri Roop Kumar Bansal, partner of the assessee firm was confronted with these transactions, whose statement was recorded under section 132(4) of the Income Tax Act, 1961 and the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved in business of land trading. A comparison of its financial particulars is reproduced in the assessment order. It was further seen that as on 31st March, 2010, there were 8 lakh issued shares, out of which, M/s. Krishna Flexi Solutions (now the assessee) had 7,99,999 shares, while Shri Roop Kumar Bansal had the ownership of one share. On the basis of these discussion, the assessing officer noted that it is apparent that assessee company on 25th June, 2011 had transferred 4,88,000 shares, out of total 8 lakh shares of M/s. R.S. Infrastructure Pvt. Ltd., to 'Lowe Reality', against which, it had amongst the Bansal family members as mentioned in the assessment order. This amount of Rs. 243.99 crores had been shown as advance from M/s. Lowe Reality Pvt. Ltd., in the trial balance. 3.3. During the course of statement of Shri Roop Kumar Bansal recorded under section 132(4) on 25th July 2011 at Sushant Lok, Gurgaon, he was shown page-112 of Annexure-A13 seized from Corporate Office of M/s.M3M India Limited at Tower-B, 6th Floor, Paras Twin Tower, Golfcourse Road, Sector 54, Gurgaon, which shows rough working relating to the transactions referred to in para 3.2 of the Order. He re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the agreement, the purchase consideration was to be paid by M/s. Lowe Realty Pvt. Ltd., to the assessee in two installments. It was stipulated that M/s. Lowe Realty Pvt. Ltd., would pay to the assessee, an amount of Rs. 244 crore as part of the purchase consideration on the agreement date. Accordingly, Rs. 244 crores was paid by M/s. Lowe Realty Pvt. Ltd., on 22nd June, 2011. Further, it was stipulated that vide clause 2.3.2 that on the closing date, M/s. Lowe Realty Pvt. Ltd., would pay to the assessee, an amount of Rs. 282 crores with the transfer of remaining 3,11,999 shares. The closing date was defined in the Agreement as a period of 90 days from the agreement date or any other date, as may be extended by M/s. Lowe Realty Pvt. Ltd., at its sole discretion. The assessee transferred 4,88,000 shares to M/s. Lowe Realty Pvt. Ltd., through D-Mat account on 24th June, 2011. 3.5. The assessing officer reproduced the relevant clause of the share purchase agreement in the assessment order and noted that the amount of Rs. 244 crores received by the assessee-firm from M/s. Lowe Realty Pvt. Ltd., on account of transfer of shares of M/s. R.S. Infrastructure Pvt. Ltd., has been treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for remaining consideration. The Assessing Officer, therefore, noted that transfer of 4,88,000 shares constitutes a complete transfer for sale, on which, capital gain arise. Shri Roop Kumar Bansal agreed for payment of tax on capital gains and voluntarily made disclosure under section 132(4) of the Income-Tax Act of Rs. 314 crores for financial year 2011-2012 on behalf of the assessee-firm, after consulting the other partners of the firm. The computation of undisclosed income of Rs. 314 crores is mentioned at page 19 of the assessment order. The assessee has submitted letter dated 26th July 2011 confirming the disclosure of income of Rs. 314 crores duly signed by Shri Basant Bansal and Shri Roop Kumar Bansal. 3.6. The assessing officer issued further notice to the assessee on the issue of transfer of balance shares of M/s. R.S. Infrastructure Pvt. Ltd., and it was brought to the notice of assessee that as per the Agreement, 8 lakhs shares of M/s. R.S. Infrastructure Pvt. Ltd., were to be transferred to M/s. Lowe Infra and Wellness Pvt. Ltd., [earlier known as M/s. Lowe Realty Pvt. Ltd.,] for Rs. 526 crores, out of which, 4,88,000 shares were transferred. Therefore, assessee should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessee-Firm and the offer was to sell CCDs at the price at which they were bought these debentures during financial year 2009-2010 without charging any premium. It was a good business proposition for the assessee firm and these CCDs were bought from the sellers and entire consideration was discharged. However, due to one of the qualification in Debenture Subscription Agreement, the assessee firm could not get CCDs transferred in its favour, further after based on legal opinion, these CCDs were sold by the firm at loss. As the assessee firm held the CCDs for a period of less than one year, the said capital asset was in the nature of short term capital asset and thus, loss arising from sale of these CCDs was in the nature of short term capital loss. The assessing officer, however, noted that reply of the assessee is evasive and general without any documentary evidence/ supporting documents. The assessee was, therefore, directed to furnish following documents to justify the short term capital loss. (1) Name and Address of the five companies who have agreed to sell CCD of a private company (2) Copies of the agreements entered into with these 05 companies referred to as sellers ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Clause of DSA and asked M/s. Arch to appoint Arbitrator to resolve the matter. The arbitration proceedings were accordingly initiated. However, the Arbitrator gave its Award against the assessee firm and held that assessee firm was aware of conditions of the DSA and thus, the assessee firm is responsible and liable for the losses, which it had suffered in the transactions. The Arbitrator also denied any claim made by the assessee firm in this regard. The Arbitration Award was pronounced in the Month of March, 2012. The assessee firm was advised by its Legal Counsel that their claim in this regard is not a strong proposition and chances of winning this case in the Court is very remote. Therefore, as per advice of the Legal Advisor, the assessee firm decided to sell the shares and suffered loss. The assessee entered into an agreement to sell with M/s. Zealous Financial Services Private Limited ("M/s. Zealous") on 30th March, 2012 and agreed to transfer the CCDs for a consideration of Rs. 19.50 crores. M/s. Zealous paid advance of Rs. 1.50 crore and Rs. 2.90 crore and balance consideration was paid as agreed. The assessee firm agreed to file an appeal in the Court against the Selle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of the reply filed, has conducted enquiries in order to verify the genuineness of the transaction entered into by the assessee firm and the above 05 companies for sale of CCDs. The assessing officer noted that the facts and circumstances clearly establish that transaction between the assessee firm and the seller is not genuine transaction entered into between independent parties, but, is a sham/coloured transaction entered into between the parties. Assessing Officer noted that there are common Directors in M/s. M3M India Pvt. Ltd., assesseefirm and the Seller. The copies of the balance sheet of the assessee firm and sellers are reproduced in the assessment order in support of these findings. The assessing officer also noted on examination of the Bank statements of the seller company that their bank account are linked through Finacle CUMM to accounts@m3m india.com which is the E-mail account of M3M India. The assessing officer, therefore, noted that bank account of the seller companies are operated by M3M Group. It was also noted that the seller companies have a common address and summons under section 131 were issued and it was discovered that it was small office in highly con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 13th September 2018. The Ld. D.R. in pursuance of directions above, filed a written reply and produced the warrant of authorisation under section 132(1) and panchanama in the name of the assessee firm to search the premises of the assessee at C13 Sushant Lok, Phase-1, Gurgaon. Copy of the reply of the Ld. D.R. along with a warrant of authorisation and panchanama have been provided to the Learned Counsel for the Assessee. Ld. D.R, therefore, contended that search action under section 132 of the Income-Tax Act was carried-out in the business premises of the assessee and residential premises of the partners of the assessee firm. Learned Counsel for the Assessee, in view of these evidences on record, could not contribute anything. These material on record clearly establish that assessee was subjected to search action under section 132 of the Income-Tax Act, 1961 in pursuance of valid warrant of authorisation under section 132 of the Income Tax Act and during the course of search panchanama was also drawn in respect of the premises searched of the assessee firm. The assessing officer, therefore, rightly proceeded to pass the assessment order under section 153B(1) of the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sanction as required under section 153D have been received, therefore, assessment order is illegal and bad in Law. Learned Counsel for the Assessee referred to page 46 of the assessment order and submitted that Addl. CIT, Central Range, Chandigarh communicated the sanction under section 153D to the A.O. on 31st January 2014 and the assessing officer on the same day i.e., 31st January 2014 passed the assessment order. He has referred to page-48 of the paper book, which is copy of Fax message dated 5th February 2014 in connection with the communication of sanction/approval of Addl. CIT. PB- 31 is the reply filed before A.O. by assessee on 29th January 2014. PB-469 is the reply to the RTI application filed by assessee dated 6th June 2018, in which no specific reply have been given by the Department as to by which mode the assessment record was forwarded by A.O. to Addl. CIT as no such record available and how the sanction/approval was communicated to the assessing officer. PB-46 is letter of the assessing officer to the Addl. CIT, Central Range, Chandigarh dated 30th January 2014 sending the draft assessment order for approval in terms of section 153D of the Income Tax Act. PB-47 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbay High Court in the case of Pr. CIT vs Smt. Shreelekha Damani in Income Tax Appeal No. 668 of 2016 dated 27th November 2018. He has submitted that the draft assessment order was sent from Faridabad to Chandigarh on 30th January 2014 and it is not clarified as to how it was sent, whether through messenger or courier or any other valid mode. Therefore, no time was left to consider the assessment record. Since last reply is filed on 29th January 2014, therefore, there was no application of mind by the assessing officer or the Addl. CIT to pass the assessment order within the time. Learned Counsel for the Assessee also relied upon order of ITAT, Jodhpur Bench in the case of Smt. Indira Bansal vs., ACIT (2018) 192 TTJ 968 (Jodh.). Learned Counsel for the Assessee, in the circumstances, submitted that since last reply was filed on 29th January 2014, which contains more than 500 pages, therefore, it is highly improbable that assessing officer who is stationed at Faridabad, would have sum-up the entire assessment file, containing voluminous submissions and drafted assessment order containing not less than 46 pages and sent it to the Addl. CIT at Chandigarh on 30th January 2014. The Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder, the assessing officer who is in the rank of DCIT shall have to obtain prior approval of JCIT. The Learned Counsel for the Assessee referred to PB- 31, which is last reply filed before assessing officer on 29th January 2014. The assessing officer written a letter to the Addl. CIT, Chandigarh on 30th January 2014 sending a draft assessment order for his consideration and approval in terms of Section 153D of the Income Tax Act, copy of which is filed at page 46 of the PB. The assessing officer is stationed at Faridabad. However, the Addl. CIT is stationed at Chandigarh. The Addl. CIT, Chandigarh granted approval under section 153D of the Income Tax Act on 31st January 2014, copy of which is, filed at page 47 of the paper book and the same reads as under : "No. Addl. CIT/Central/Chd./2013-14/616. Office of the Addl. Commissioner of Income Tax, Range Central, Chandigarh. Dated the 31st January, 2014. To Shri Tatung Padi Dy. Commissioner of Income Tax, Central Circle-II, Faridabad. Sub: Approval u/s.153D of the I.T. Act, 1961, in the case of M/s. M3M India Holdings, Formerly M/s.Krishna Flexi Solution, C-13, Sushant Lok- I, Gurgaon for the A.Y. 2012-2013 - reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for our consideration "Whether on the facts and circumstances of the case and in law, the Tribunal was justified in holding that there was no 'application of mind' on the part of the Authority granting approval? 3. Brief facts are that the Tribunal by the impugned judgment set aside the order of the Assessing Officer passed under Section 153A of the Income Tax Act, 1961 ("the Act" for short) for Assessment Year 2007-08. This was on the ground that the mandatory statutory requirement of obtaining an approval of the concerned authority as flowing from Section 153D of the Act, before passing the order of assessment, was not complied with. 4. This was not a case where no approval was granted at all. However, the Tribunal was of the opinion that the approval granted by the Additional Commissioner of Income Tax was without application of mind and, therefore, not a valid approval in the eye of law. The Tribunal reproduced the observations made by the Additional CIT while granting approval and came to the conclusion that the same suffered from lack of application of mind. The Tribunal referred to various judgments of the Supreme Court and the High Courts in support of its c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional CIT while granting the approval recorded that he did not have enough time to analyze the issues arising out of the draft order, clearly this was a case in which the higher Authority had granted the approval without consideration of relevant issues. Question of validity of the approval goes to the root of the matter and could have been raised at any time. In the result, no question of law arises. 8. Accordingly, the Tax Appeal is dismissed." 13.2. The ITAT, Jodhpur Branch in the case of Smt. Indira Bansal vs., ACIT (supra), held as under: "Conclusion : Jt. CIT having granted the approval under s. 153D on the very same day on which the forwarding letter seeking approval was received in his office, and circumstances indicate that this exercise was carried out by the Jt. CIT in a mechanical manner without proper application of mind and even without going through the records as the same were in Jodhpur while the Jt. CIT was at Udaipur, therefore, the approval granted by him cannot be sustained. Impugned assessments are annulled." 14. Considering the facts of the case in the light of above discussion, it is clear that assessee filed last reply before assessing officer at Far ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew that no valid approval/sanction have been granted by the Addl. CIT, Chandigarh before passing the assessment order in the matter. The requirement of Section 153D of I.T. Act, 1961, are not satisfied in this case. We accordingly hold that entire assessment order is vitiated and is null and void. We, accordingly, set aside the orders of the authorities below and quash the assessment order in the matter. Resultantly all additions stand deleted. In the result, Ground No.1.3 of the appeal of Assessee is allowed. 15. The Other grounds are left with academic discussion. However, the same are decided in brief as under. Ground No.2 : 16. On Ground No.2, the assessee challenged the addition of Rs. 6 crores. Learned Counsel for the Assessee referred to PB-49 which is Share Purchase Agreement dated 22nd June 2011, which refers to [PB-59] regarding closing period of 90 days from the date of Agreement. PB-66 provides clause19 regarding Amendment and clause 19.1 reads "This agreement may not be changed, and any of the terms, covenants, representatives, warranties and conditions cannot be waived, except pursuant to an Instrument in writing signed by M/s Lowe and Promoters or in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 62 of the Indian Contract Act, 1872 provides "effect of novation recession and alteration of contract - If the parties to contract - - agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed." The above Section of Contract Act approves the action of the assessee and the purchaser in altering the terms of the contract. The assessee has executed fresh agreement in the nature of Addendum to the Main Agreement, through which, the consideration was reduced from Rs. 526 crores to Rs. 520 crores. The contention of assessee is supported by Bank statement of the assessee and the purchaser. No evidence has been brought on record of understated price of shares or more consideration received by the assessee. No evidence, in fact, comes on record, if assessee received Rs. 6 crores from the purchaser. Change in the Terms of the Agreement is permissible in Law. Therefore, in the absence of any evidence or material and record, it is difficult to believe that assessee received Rs. 6 crores from the purchaser of the shares. Thus, there was no justification for the authorities below to make the addition of Rs. 6 crores in the hands of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the conditions of DSA and thus, it was responsible and liable for the losses which it had suffered. Learned Counsel for the Assessee, therefore, submitted that in these compelling circumstances, the assessee transferred the CCDs at the lesser price and suffered the losses. The assessee transferred the CCDs to M/s. Zealous vide Agreement to Sell Dated 30.12.2012 [PB 388-397] for a sum of Rs. 19.57 crores. The consideration was received through banking channel PB 424-426. Thus, the assessee suffered the short term losses. Learned Counsel for the Assessee submitted that the above documentary evidences on record clearly supports the explanation of assessee that assessee has suffered genuine loss out of the above transaction. The evidence produced on record have not been doubted by the authorities below. PB 426A-438 are the assessment order in the case of M/s. Arch Propbuild Pvt. Ltd., under section 153A of the I.T. Act dated 28.03.2014 for A.Ys. 2010-2011, 2011-2012 and 2012- 2013, in which, transactions have been accepted. PB 439- 450 are assessment order in the case of Seller M/s. Shaan Realcon Pvt. Ltd., for A.Ys. 2010-2011, 2011-2012 and 2012-2013, in which, transactions have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of holding of shares and the fact that CCDs cannot be transferred without the approval of 80% of the shareholders. Therefore, the burden of proof was upon the assessee to prove that it was a genuine transaction. The Learned D.R. relied upon the Order of ITAT, Delhi Bench in the case of Shri Hersh W. Chadha, New Delhi vs. DDIT, Circle-1(1), International Taxation, New Delhi, Dated 31st December, 2010, Judgment of Punjab & Haryana High Court in the case of Som Nath Maini vs. CIT 306 ITR 414 (P&H) and Order of ITAT, Chandigarh Bench in the case of ACIT, Range-VI, Ludhiana vs. Som Nath Maini (2006) 7 SOT 202 (Chd.). The Learned D.R. submitted that it was a colourable devise and A.O. has correctly applied the test of human probability for deciding whether transaction was genuine or not. 21. Learned Counsel for the Assessee in the rejoinder submitted that this issue was raised by the A.O. on 29.01.2014 [PB-32 reply] in which the assessee requested to the A.O. that in case he is not satisfied with the evidences on record, he can made enquiries directly from the parties. However, A.O. has not made any enquiry. He has submitted that since CCDs were already sold and originals were handedove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly because of one of the condition was not satisfied for transfer of CCDs, therefore, assessee had to sell the shares at a lower price. Therefore, assessee suffered short term capital loss of Rs. 155.75 crores in this regard. The documentary evidences on record have not been doubted by the authorities below. The parties are genuine and assessed to tax and all transactions are carried-out through the Banking channel. The assessee could not have produce the original CCDs before A.O. because the same were given to the purchaser M/s. Zealous at the time of sale of CCDs by the assessee. Merely because transaction was carried-out within the Group concerns, by itself, is no ground to reject the explanation of assessee. Considering the totality of the facts and circumstances, we are of the view that assessee has entered into genuine transaction which is supported by documentary evidences, which have not been doubted by the authorities below. Therefore, the rule of preponderance of probability would not apply to the facts and circumstances of the case. Therefore, there was no justification for the authorities below to reject the claim of assessee of short term capital loss. We, accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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