TMI Blog2019 (6) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... e purchased and sold through recognized broker and the sale considerations were received by account payee cheques, the transactions cannot be treated as bogus and the income so disclosed was assessable as LTCG. We find that in the instant case, the addition has been made only on the basis of the suspicion. The revenue had not brought any material on record to support its finding that there has been collusion / connivance between the Purchaser and the assessee for the introduction of its unaccounted money. Sale having taken place at the price duly approved by the SEBI, no adverse inference can be drawn against the assessee company simply on assumptions and presumptions and mere suspicion.Therefore, the addition made u/s 68, as income from undisclosed source was rightly deleted by the ld CIT(A). That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid addition. His order on this addition is therefore, upheld and the grounds of appeal of the Revenue are dismissed. - ITA No.1330/Kol /2014 - - - Dated:- 4-6-2019 - Shri A.T. Varkey, JM And Dr. A.L. Saini, AM For the Assessee : Shri A. K. Nayak, CIT DR For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 142(1) of the I.T. Act were issued and served on the assessee. In the course of assessment proceedings, books of accounts along with requisite details and supporting documents were produced and examined. During the assessment year under consideration, the assessee by way of sale of shares in Dehra Dun Tea Co. Ltd. a company listed in the Calcutta Stock Exchange, reported long term capital gain of ₹ 12,89,60,745/- by entering into off market transaction through plain agreement. The assessee was holding 8240 shares of Dehra Dun Tea Co. Ltd. which was required for a total sum of ₹ 47,077/-, and which makes the cost price of share at ₹ 5.71 per share. The said shares was claimed to be sold to one Logical Buildwell Pvt. Ltd. for a total sum of ₹ 12,86,34,640/- through a plain agreement. That makes the sale price of shares at ₹ 15,611/- per share. 5. The assessing officer, in order to examine the genuineness of the transaction and capital gain declared, sent notices u/s 133(6) of the Act to Calcutta Stock Exchange, where the said shares was claimed to be listed. In response to the same the Calcutta Stock Exchange refused to accept t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the order of the Ld. CIT(A), the Revenue is in appeal before us. 8. The ld. DR for the Revenue submitted before us that assessee has sold shares one to one basis and not through the Calcutta Stock Exchange, where the said shares was claimed to be listed. The last published price in the Stock exchange was at ₹ 4.20 per share whereas assessee sold the shares at ₹ 15,611/- per share. In response to notice U/s 133(6) of the Act, the Calcutta Stock Exchange replied to assessing officer stating that for the said transaction there was no record. Further as per said Exchange, the last traded price of the said scrip was ₹ 4.20 per share purportedly around 18 months before the date of the alleged transaction. The AO noticed that the shares were therefore not traded in the Stock Exchange where it was listed and the fact that the said shares were sold in an offline transaction, not following the guidelines of reporting to the Calcutta Stock Exchange, which clearly demonstrates that there was no intention of determination of proper price between the buyer and the seller through open market conditions of demand and supply. The said shares were s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. to substantiate the fact that the shares as held by the acquirer company were averaging at ₹ 15,621/- per share only to strengthen the fact that the balance shares as were purchased from the acquirer from the balance shareholders were around the same price at which they were purchased from the assessee and its related concerns. The ld Counsel also submitted that such shares were valued based on the land held in the company whose market value was based on Registered Valuer's Report at around ₹ 137 crores and this fact was brought to the knowledge of SEBI as well. The ld Counsel also submitted that merely because the transaction was conducted off market, the addition could not be made merely on the basis of an enquiry made from Stock Exchange, and thus the Counsel submitted that the entire addition has been merely based on suspicion without there being any enquiry having been conducted from the acquirer company. The Ld Counsel also submitted that the purchaser of the share of the above named Company i.e. Dehradoon Tea Co. Ltd., namely, Logica Buildwell (P) Ltd. [now known as Loam Realtors (P) Ltd.] has purchased the shares from other persons as well @ ₹ 15611 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a net long-term capital loss and treated the balance amount towards the said consideration being₹ 12,86,00,032/- as undisclosed income u/s 68 of the Act. 11.Before us, ld Counsel for the assessee, produced the following evidences, documents and explanation to substantiate its claim that transaction done by the assessee is bona fide. These evidences and documents are as follows: (1) Copy of share Purchase Agreement dated 10.07.2006 entered into by the assessee with the acquirer (pb 1 to 11) (2) Copy of ESCROW Agreement dated 10th July, 2006( pb 102 to 178). (3) Copy of Addedum to the Escrow Agreement (pb 179 to 218). (4) Copy of Press Publication of Open Offer to other shareholders as published in Financial Express dated 13.07.2006 of Calcutta offering acquisition of balance 20% of Shares from other shareholders at ₹ 15,611/- per share (pb 219). (5) Copy of letter dated 14th Sept. 2006 issued by SEBI (pb 220 to 222). (6) Copy of Press Publication of corrigendum to Public announcement dt. 13th July, 2006, issued by Enam Financial Consultants Pvt. Ltd. in The Financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14.03.2006 of M/s Logical Buildwell Pvt. Ltd. and Certificate dated 01.09.2007 regarding change of name from M/s Logical Buildwell Pvt. Ltd. to M/s Loam Realtors Pvt. Ltd (pb292). (16) Copies of Audited Account of the acquirer / purchaser company for the years ended 31.03.2007 and 31.03.2008 together with relevant Schedules, from a perusal of which it is seen that the paid-up capital and reserve and surplus of the acquirer company amounted to ₹ 1,17,19,00,000/-. A perusal of the Balance Sheet of the acquirer / purchaser company for the year ended 31.03.2007 shows that they had made an investment of ₹ 1,16,92,81,350/- towards acquisition of shares and a look to Schedule-3 of the Audited accounts for the year ended 31.03.2007 clearly indicates that the said acquirer/purchaser company had acquired 74,850 equity shares of Dehra Dun Tea Co. Ltd. for a consideration of ₹ 1,16,92,81,350/- which works out to ₹ 15,621.66 per share and it was explained that the said sum of ₹ 15,621.66 included some other charges of ₹ 10/- per share incurred by acquirer company and thus even from the accounts of the acquirer company such shares acquired by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting doubt for alleged purchase of house property for ₹ 11,00,000/- cannot treat the same as cash credit. Suspicion cannot replace the real evidential documents. Simply by arguing it to be a case of manipulation the Revenue is not supposed to succeed in their contention without proper evidence. Mukesh R. Marolia vs. Addl. CIT (2005) 6 SOT 245 (Mumbai), Asstt. CIT vs. Claridges Investments Finances (P) Ltd. (2007) 18 SOT 390 (Mumbai), CIT vs. Vipin Batra (2007) 212 CTR(Del) 557: (2007) 293 ITR 389 (Del), CIT vs. Korlay Trading Co. Ltd. (1999) 152 CTR (Cal) and Anup Kumar Jayaswal (I.T.A. Nos. 1678 1679/Kol/2004) relied on. 12. We note that the shares of Dehra Dun Tea Co. Ltd was acquired @ 15,611/- per share by the acquirer i.e. M/s Logical Buildwell Pvt. Ltd. (now known as M/s Loam Realtors Pvt. Ltd.) vide agreement dated 10.7.2006. The entire transaction was off market transaction and was based on the intrinsic value of the shares for the assets held by the company. The whole of the consideration was deposited by the acquirer company in an Escrow Account with HSBC. Since the shares of the said company were listed on Calcutta Stock Exchange hence in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company Ltd (DTCL) was listed. Therefore, ld AO was of the view that the entire sale was done through off line transaction so as to bypass the proper mechanism for market determination of the price of shares. On this issue, it may be clarified that a transaction of shares cannot be construed to be bogus or sham just because it does not take place through a stock exchange. It is entirely between two parties to come to an understanding of sale and purchase of shares as long as the SEBI guidelines are followed. In the instant case, the acquirer had intended to purchase the entire 53.38% of equity shares (i.e. 54,450 shares) held by the promoters and naturally this will attract the provisions of SEBI (Substantial Acquisition Takeover) Regulations, 1997. As the acquisition by M/s. Logical Buildwell (P) Ltd. would result in the acquiring of 15% or more of shares or voting rights in M/s DTCL, it had to make a Public Offer for a further acquisition of 20% or more of shares at the same price as being offered to the promoters. Therefore, the purchaser separately applied for and received from the SEBI permission to acquire further 20% shares from the public through letter dated 14/09/2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter dated 29/12/2009 by stating as below : Regarding the last traded price (about 18 months previous to the date of transaction) we may state that the shares of the company were thinly and infrequently traded in the stock exchange and hence the price did not reflect the true market price or net worth of the company. The Dehra Dun Tea Company's main asset was the land which it owned in a prime urban area of Dehra Dun. The value of this property was approx ₹ 137 crores (against the book value of ₹ 0.30 crores) as per valuation report dated 07.07.2006 of an approved chartered engineer, government Registered Valuer, M/s Krishna Consultant is enclosed) as per circle rate but actual market value was higher than this. The value per share as per the Valuation Report works out to ₹ 13,431.37 per share. The total share capital of Dehra Dun Tea Co. Ltd. is ₹ 10,20,000/- and it has a surplus of ₹ 8.25 crores. In addition to above there are other assets also in Dehra Tea Co. Ltd. which has been considered for fixing the price of ₹ 15,611/-. This justifies the valuation of ₹ 15,611/- per share. We may state that we have duly informe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, it was aiming to unlock the intrinsic value of the property located in Dehradoon and which as per the registered valuer was worth ₹ 137 crores. In addition, M/s DTCL also had a surplus fund of ₹ 8.25 crores and some other assets. A seller will most naturally like to get the best value of its assets and this is what M/s DTCL did. 15. We note that the transaction which has been concluded within four corners of Law cannot be treated as colorable device unless the revenue brings any material to prove such an allegation. In the case of assessee, the transaction was conducted at the intrinsic value of the assets held in the company and for which Stock Exchange and SEBI were duly intimated/informed. Further the acquirer had acquired shares from promoter group at the same price at which the balance 20% shares had been acquired by the buyer from the open market as per SEBI rules and this fact was also substantiated from the audited accounts of the acquirer on 31.03.2007. It is pertinent to observe that it has been held in number of judgments of Apex Court that the assessee is free to structure a transaction within the four corners of Law and the only condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India. It is now well settled that a citizen is entitled to arrange his affairs as not to attract taxes imposed by the State, so far as he can do so within the law. Every man is entitled to order his affairs in such a manner that the tax planning under the appropriate Acts is less than it other wise would be. If he succeeds in ordering them so to secure the said result, his ingenuity is to be respected and he cannot be compelled to pay an increased tax. He may legitimately claim the advantages of any express terms or of any omissions that he can find in his favour in taxing statutes. His legal right so to dispose of his capital and least amount of tax is fully recognized. The legal right of tax payer to decrease the amount altogether to avoid them by means which the law permits, cannot be doubted. The basic proposition under lying this taxation law is that any taxpayer is entitled so as to order his affairs in such a manner as to see that his liability to tax is as low as possible. If the taxpayer is in a position to carry through transaction in tow alternative ways-one of which will result in liability to tax and the other of which will not resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed what had been said in the Assessment Order. In this case, as will appear from the aforesaid details and documents filed, the price at which the shares were sold had been not only intimated to the SEBI but even to Calcutta Stock Exchange both by the Acquirer and Seller. It is an accepted fact that whenever share in the Stock Exchange are sold as off market transaction, it is sold at the intrinsic value of shares and that is what has happened in this case. In Lalchand Bhagat Ambica Ram vs. CIT (1959) 37 ITR 288(SC), the Supreme Court disapproved the practice of making additions in the assessment on mere suspicion and surmise or by taking note of the notorious practices in trade circles. At Page-299 of the ITR, it was observed as follows: Adverting to the various probabilities which weighed with ITO we may observe that the notoriety for smuggling foodgrains and other commodities to Bengal by country boats acquired by Sahibganj and the notoriety achieved by Dhulian as a great receiving centre for such commodities were merely a background of suspicion and the assessee could not be tarred with the same brush as every Arhatdar and gain merchant who might have been in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lable on record. We also find that it was never the case of the lower authorities that the subject mentioned transaction was part of any scam that cropped up in Kolkata. We find that the document relied upon by the revenue in terms of MCA data which is reflected in the annual report of G.K.Consultants Ltd (being a listed company) that trading of that share had happened in BSE in Oct and Nov 2004 at ₹ 6.60 and ₹ 8.40 respectively. Apart from these two months, no trading had happened in BSE with respect to the subject mentioned scrip. Hence it could be safely concluded that this scrip was thinly traded in BSE and accordingly the assessee brought the shares from CSE where it was traded, through a registered share broker in Kolkata. We also find that the allegation of the ld AO that no other shares were held in the demat account opened with Citibank vide account no. 10398306 is factually incorrect as the assessee was holding the shares of other two reputed companies namely Reliance Industries Ltd and Organo Ltd also in the said demat account. 2.9.1. We find that the assessee had duly submitted the following documents :- a) Contract note for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icion the assessee s claim should not be denied. Similarly in another decision of the Hon ble Calcutta High Court in the case of CIT vs Emerald Commercial Ltd reported in (2002) 120 Taxman 282 dated 23.3.2001, it was held that :- Admittedly the details of purchase and sale of shares were furnished. The payment and receipt were by account payee cheque. The identity of seller and purchaser was not in dispute. The disallowance was basically made on the ground that the assessee failed to produce the brokers for verification of the transaction. Following the view on a similar issue in the case of CIT vs Carbo Industrial Holdings Ltd (2000) 244 ITR 422 (Cal) , non-production of the share broker by the assessee did not disentitle it for claim of loss in a genuine transaction of shares, thus, the Tribunal s finding was based on material and not perverse. The findings of the ITO and the Commissioner (Appeals) were based on presumption. 2.9.3. We find that the revenue had made a remark that the subject mentioned shares of G.K.Consultants Ltd were bought by the assessee in off market which is against the rules framed by SEBI and others. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts, the Coordinate Bench of ITAT Kolkata in the case of Surya Prakash Toshniwal -HUF, in ITA No.1213/Kol/2016, for A.Y.2005- 06, held as follows: 11. We have heard the rival contentions and perused the materials available on record. In the present case the assessee has shown income from long term capital gain for ₹ 14,46,529.00 which was claimed as exempted income under section 10(38) of the Act. However, the assessing officer treated the same as income from other sources by holding such income as bogus and from undisclosed sources which was routed in the disguise of long term capital gain. The addition made by the AO was also upheld by the learned CIT(A). Now the issues before us arises for our adjudication so as to whether the long term capital gain income claimed by the assessee is bogus income in the aforesaid facts and circumstances. In the case on hand admittedly the shares were sold by the assessee after paying the Security Transaction Tax (STT). Similarly the purchase price of the shares and the sale price of the shares were reflecting on the Calcutta stock exchange as evident from page number 19 and 20 of the paper book. It is also not in dispute th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove we hold that the lower authorities had not brought on record sufficient reasons for disallowing the claim of the assessee. In this connection we rely in the case of CIT versus Carbo Industrial Holdings Limited reported in 116taxman159 where the Hon ble jurisdictional High Court has held as under : If the share broker, even after issue of summons does not appear, for that reason, the claim of the assessee should not be denied, specially in the cases when the existence of broker is not in dispute, nor the payment is in dispute. Merely because some broker failed to appear, assessee should not be punished for the default of a broker and on mere suspicion the claim of assessee should not be denied. Similarly we also find guidance and support from the judgment of Hon ble jurisdictional High Court in the case of CIT Vs. Emerald Commercial Ltd. reported in 120 taxman 282 whereby it was observed as under : Business income-Business loss-Loss on sale of shares-Details of purchase and sale of shares furnished-Payment and receipts were through account payee cheque-Identity of seller and purchaser not disputed-Claim for loss could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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