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2012 (11) TMI 1280

..... hri S.N. Saporkar & Shri P.M. Mehta, A.R s. ORDER PER : D.K. TYAGI, JUDICIAL MEMBER This is Revenue's appeal against the order of ld. CIT(A)-II, Ahmedabad dated 30th October, 1998. 2. The Revenue has taken following two effective grounds of appeal:- "1. The ld. CIT(A) has erred in law and on facts in deleting the addition made by the Assessing Officer of ₹ 1,46,289/- on account of disallowance of bad debts. 2. The ld. CIT(A) has erred in law and on facts in deleting the addition of ₹ 14,14,06,326/- made by the Assessing Officer on account of suppression of sale price of Part B debentures of Arvind Mills Ltd." A.Y. 1994-95 3. Ground No.1 relates to disallowance of bad debt of ₹ 1,46,289/- written off by the assessee. The Assessing Officer, while making this disallowance has observed as under:- "From examination of Balance Sheet of Premium Brands Mktg. Pvt. Ltd. it was noticed that provision for doubtful debts had been made of ₹ 1,46,289/- the same has been debited in the P&L A/c. Vide this office letter dt. 13.1.97 the assessee was asked to furnish details regarding the same as well as the reasons for writing off the said debts. The .....

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..... unt in the accounts of the previous year and as per the amended provisions, the appellant is entitled to the allowance of bad debts. The above referred paras of the C.B.D.T. Circulars also make this clear. I also find from the details and reasons given on behalf of the appellant that the debts cannot be said to have not become bad and on this account also the bad debts claimed deserve to be allowed. Keeping both the above facts in view, I find that the claim of the appellant for bad debts of ₹ 1,46,289/- deserve to be allowed. The Assessing Officer is, therefore, directed to allow this claim. Thus this ground of appeal is allowed." 5. After hearing both the parties and perusing the record we are of the considered opinion that the matter should be decided afresh by the A.O. in the light of Hon'ble Supreme Court decision in the case of T.R.F. Ltd. vs. CIT reported in 323 ITR 327 after ascertaining whether the amount was ever offered as income or not. The ground is allowed for statistical purpose. 6. Ground No.2 relates to addition of ₹ 14,14,06,326/- on account of difference between the estimated market value and disclosed sale of Arvind Mills Ltd. showed by the .....

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..... ere 'inhouse transactions' entered into between the parties and regularized through the broker. It was clarified by the broker that whenever two parties enter into such transactions negotiated directly between themselves, they approach brokers who then regularize the same. It is noticed that the Lalbhai Group has been entering into many such inhouse transactions through the broker Chimanlal Lalbhai who has been charging brokerage on such transactions. iii. The contracts for the transaction were said to have been entered into on 24-11-1993, 25-11-1993 and 26-11-1993 i.e. nearly three months prior to the date of bills dated 14-2- 1994. Similar sale of 55963 debentures were made @ ₹ 839.75 per debenture vide bills dated 14-2-94 by the appellant's sister concern M/s Marvell Marketing Pvt. Ltd. and A.Y. 1994-95 those bills also referred to contracts dated 24-11-93 and 25- 11-93. Neither the appellant company, nor its sister concern nor the broker and not even the purchasers of the debentures could produce before the Assessing Officer, the copies of the original contracts dated 24/25/26 November, 1993. They could produce only contract notes dated 14-2-94 which were mark .....

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..... t it was because they were in the hand writing of one 'Shri Dipen Shah who was working with them upto July, 1996. The Assessing Officer summoned Shri Dipen Shah and recorded his statement u/s.131 wherein he clarified that' on majority of the pages, transactions recorded were in his hand writing, only and specifically on the pages on which such transactions "were recorded and pages prior and" subsequent to the same were in his hand writing only and the difference in the ink was because the transactions on the floor of the Stock Exchange were recorded first and the inhouse transactions were recorded later and different pens might have been used for recording the transactions. In view of this, the Assessin Officer referred that the transactions of the appellant ought to have been entered Into the Sauda Book after the transactions of the day on the floor of the Stock Exchange. But the Assessing Officer found that the transactions of 26-11-1993 on the floor of the Stock Exchange were entered from pages 372 to 379 and the appellant's transactions of 26-11-1993 in respect of 75000 debentures was entered on page 378 and not on page 379 as was to be expected. The Broke .....

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..... o earlier dealings with the purchaser and could not produce any correspondence in respect of the negotiations of the contract. The Assessing Officer disbelieved the date of contract because the appellant was unable to remember the names of the persons with whom the transactions were negotiated or the places and dates of negotiations. The appellant's explanation that it could not remember these details after a long gap of 3 years did not find favour with the Assessing Officer. c) The appellant explained that due to mistake the original contract notes of both the appellant and the purchasers were lost by the appellant requiring the parties to procure duplicate contract notes were forwarded to the purchasers by the appellant only and the bills submitted by the parties contained the dates of original contract notes. The broker had produced Sauda Book which is a primary record and in which the transactions are duly recorded and broker had not been able to produce the carbon copies of the original contract notes dated November 1993 as they were lost and as per the Stock Exchange Regulation, the assessee was not bound to retain and produce the same. The Assessing Officer has not accep .....

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..... g Officer on the facts of the case were covered by the ratio of the decisions of the Honourable Supreme Court in the following cases : a)Durga Prasad More (82 ITR 545) b)Sumati Dayal (214 ITR 801) and c) Orient Trading Co. Ltd. (224 ITR 371) and on this account the Assessing Officer held that in place of sale price of debentures as shown by the appellant the market value of the debentures in Feb. 1994 as estimated by the Assessing Officer ought to be adopted for the purposes of working out the taxable profit of appellant. 8. Against this addition, the submission of the assessee has been discussed by ld. CIT(A) in paragraph 4.4 to 4.7 of his order and after taking into consideration these submissions of the assessee ld. CIT(A) deleted this addition by observing as under:- "4.8 I have carefully considered the reasons given by the Assessing Officer and the submissions made on behalf of the appellant. My findings in regard to the three categories of claims made on behalf of the appellant are as under:- i) As regards the claim that the transactions were made in November 1993, I tend to agree with the appellant for interalia, the following reasons: a) Para 2 of the C.B.D.T.'s Ci .....

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..... ntures Part B. d) Even going by the method adopted by the Assessing Officer, and applying the multiplier of Debenture-share market values on 31.3.1994 to the share price of 14.2.94 one comes to the market value of ₹ 862 per Debenture Part B on 14.2.1994 which is very close to the average price of ₹ 860.26 realised by the appellant. A.Y. 1994-95 iii) As regards the claim of the appellant that irrespective of the date of contract which is adopted and the market value of the Debenture B on that date, no addition can be made in the case of the appellant as only the real income can be taxed under the I.T. Act, I agree with this claim for the following reasons: a) It is neither the case of the Assessing Officer nor is there anything to show that more price is received by the appellant than that is declared by the appellant and the purchasers. b) Even in respect of assessment of capital gains and for the period for which there was specific provision in the form of section 52(2) to replace sale price by market value the Supreme Court held that it cannot be done unless it was proved that more price was actually received than what was declared. c) There is no provision in the Act .....

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..... d the price on which the shares were sold by the assessee, in our opinion, was not correct. We are of the view that the Tribunal rightly upheld the finding of the Commissioner of Income-tax (Appeals). It is not a case where any understatement of value or misstatement of value of the shares sold was made by the assessee. This is a case where the assessee had sold the shares at a value admittedly lower than the market price. Yet the shares could not be assessed on the difference amount being her income because no inference can be drawn in the facts and circumstances of the case that the design of the assessee was such that she concealed certain facts and she received the difference of the value by fraudulent means. There was no evidence direct or inferential, nor was there any finding by any income-tax authority that the assessee indulged in such a practice. We are fortified in our view by a judgment of the Supreme Court in the case of CIT v. Shivakami Co. Pvt. Ltd. [1986] 159 ITR 71 (SC). We also find support in our view from a Division Bench judgment of the Bombay High Court in the case of India Finance and Construction Co. Pvt. Ltd. v. B.N. Panda, Dy. CIT [1993] 200 ITR 710." .....

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