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2019 (7) TMI 293

HELD THAT:- Nothing on record would demonstrate any exchange / flow of funds, out of books, between the assessee and the sellers. It is trite law that no additions could be made merely on the basis of assumptions, conjectures or surmises. We find that the primary onus to substantiate the transactions was duly fulfilled by the assessee and the same had shifted to revenue to dislodge assessee’s claim. In our opinion, nothing has been brought on record by Ld. AO to prove that any excess price was paid by the assessee to the sellers. Therefore, in the absence of any evidences establishing receipts & payments outside regular books of accounts, the provisions of Section 69B could not be invoked. So far as the submissions made by Ld. CIT-DR is concerned, we find that, firstly the aforesaid provisions of Section 56(2)(viia) has not been invoked by Ld.AO and secondly, these provisions do not apply in case of receipts of shares for inadequate consideration by the assessee, of a company not being a company in which the public are substantially interested [as defined in Section 2(18)]. However, we find that shares being transacted by the assessee are not of a private company but of a .....

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from other sources against business income. The assessee’s appeal stands allowed - I.T.A. No.6091/Mum/2017, I.T.A. No.6117/Mum/2017 - 3-7-2019 - Shri C.N. Prasad, JM And Shri Manoj Kumar Aggarwal, AM For the Assessee : Shri Vijay Mehta & Shri Mahesh Rajora-Ld. ARs For the Revenue : Shri Anadi Varma - Ld. CIT-DR ORDER PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. Aforesaid cross-appeals for Assessment Year [AY] 2013-14 contest the order Ld. Commissioner of Income-Tax (Appeals)-2, Mumbai [CIT(A)], Appeal No. CIT(A)-2/IT/247/2016-17 dated 14/07/2017. The grounds raised by the assessee reads as under: - The Commissioner of Income Tax (Appeals) -3, Mumbai [hereinafter referred to as CIT(A)] erred in directing the AO to not allow set off of losses under the head Income from Other Source against the income under the head Income from business & profession . The appellant submits that the Ld. CIT(A) once having accepted the claim of the appellant for deduction u/s 57(iii), the resultant losses under the head Income from Other Sources are eligible for set off against the Income from business & profession ; hence the AO shall be directed to allow the set off of losses unde .....

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months. 2.3 In the above background, Ld. AO show-caused the assessee as to why the investment made in 82,78,180 shares stated to be made @₹ 5/- per shares, was not to be considered @₹ 30/- per share and the differential amount of ₹ 25/- be brought to tax in assessee s hand as undisclosed investments. In defense, the assessee submitted that all the investments were recorded in books of account and the provisions of Section 69 were not applicable. The assessee also filed declaration from the sellers that the shares were sold at ₹ 5/- per share. However, rejecting the same, Ld. AO opined that investments were under-valued since the market price of the share on the date of transfer was much higher and therefore, an amount of ₹ 28/- per share [being the difference between market price per share i.e. ₹ 33/- & price at which the shares were acquired i.e. ₹ 5/- per share] was to be added as undisclosed income u/s 69B. The same worked out to be ₹ 23.17 Crores. 2.4 The second addition i.e. disallowance u/s 14A stem from the fact that it was noted that the assessee debited ROC fees of ₹ 25,000/- each on 14/09/2012 & 06/11/2012. The .....

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ith the same and deleted the additions u/s 69B by making following observations: - From the above discussion, the following inferences are drawn: a) The Ld. AO has estimated the investment made in purchase of shares i.e. 82,78,180 shares by relying on the market rate at ₹ 33/- of the M/s. Network 18 Media 85 Investment Ltd. b) The transferor and transferee effectively is Mr. Raghav Bahl and Ms. Ritu Kapoor and not a third party is involved. c) Hon ble Bombay High Court decision in the case of CIT-7 vs M/s. Rupee Finance 85 Management (P) Ltd. IT Appeal No. 1208 of 2008 dated 20.10.2008 wherein it is held that mere purchase of shares, as an investment, with the lock in period of holding, for a consideration which is less than the market value, cannot be brought to tax, as a benefit or perquisite under Section 28 (iv) of the Act. d) Hon ble Supreme Court decision in the case of Dhakeswari Cotton Mills Ltd vs. Commissioner of Income tax [26 1TR 775 SC] wherein it is held the ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all-There must be something more than bare suspicion to support the assessment under s. 23 .....

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ment anything over and above what was recorded in the books of accounts. These transactions were within the group entities and the confirmations of sellers have been placed on record. The assessee has placed on record assessment order u/s 143(3) in case of one of the sellers namely M/s RB Holdings Pvt. Ltd., the perusal of which reveal that the returned income of the said entity has been accepted by the revenue. Nothing on record would demonstrate any exchange / flow of funds, out of books, between the assessee and the sellers. It is trite law that no additions could be made merely on the basis of assumptions, conjectures or surmises. We find that the primary onus to substantiate the transactions was duly fulfilled by the assessee and the same had shifted to revenue to dislodge assessee s claim. In our opinion, nothing has been brought on record by Ld. AO to prove that any excess price was paid by the assessee to the sellers. Therefore, in the absence of any evidences establishing receipts & payments outside regular books of accounts, the provisions of Section 69B could not be invoked. 5.3 The said proposition is squarely covered by the decision of Hon ble Bombay High Court ren .....

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arpur Industries Ltd. [ITA No.51 of 2016], Pr.CIT V/s M/s Rivian International Pvt. Ltd. [ITA No.693 of 2015] & Hon ble Delhi High Court rendered in PCIT Vs. Mcdonald s India (P) Ltd. [101 Taxmann.com 86]. 6.2 So far as the disallowance u/r 8D(2)(i) is concerned, we find that the aforesaid payment of ₹ 0.50 Lacs has been paid by the assessee to SEBI for certain statutory compliances. These payments, being more in the nature of statutory & mandatory payments, could not be said to be incurred in relations to making-off of investments. 6.3 Keeping in view the same, no infirmity could be found in the impugned order qua this issue. This ground of revenue s appeal stands dismissed. Resultantly, the revenue s appeal stands dismissed. Assessee s Appeal, ITA No. 6117/Mum/2017 7.1 The grievance of the assessee stem from the fact that the assessee suffered interest disallowance of ₹ 160.11 Lacs u/s 36(1)(iii). Before Ld. first appellate authority, it was alternatively submitted that borrowed funds had direct nexus with investment in debenture since the moneys were borrowed and invested on same date i.e. 13/07/2011. The moneys were borrowed @15% whereas interest on debentur .....

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