TMI Blog2023 (4) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... y dispute to the said limited extent. Faced with this situation, we deem it appropriate that the CIT(A) needs to re-examine this sole issue independently vis- -vis genuineness of the assessee's claim in the given facts and circumstances afresh - Revenue's sole substantive ground succeeds for statistical purposes. - ITA No. 1559/PUN./2019 - - - Dated:- 23-1-2023 - SHRI SATBEER SINGH GODARA , JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE , ACCOUNTANT MEMBER For the Revenue : Shri B. Koteswara Rao For the Assessee : Shri Girish Ladda ORDER Per Satbeer Singh Godara , JM This Revenue's appeal for assessment year 2013-2014, arises against the CIT(A)-2, Aurangabad's order dated 02.07.2019, passed in case No. ABD/CIT(A)-2/177/2018-19 dated 08.01.2019, involving proceedings under Section 143(3) r.w.s. 263 of the Income Tax Act, 1961 (in short the Act ). Heard both the parties. Case file perused. 2. The Revenue raises the following substantive grounds in the instant appeal: 1. The Ld. CIT(A) erred in both on facts and in law in passing the order. 2. The Ld. CIT(A) erred in directing the AO to delete the addition of Rs. 7,84,00,000/made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said transaction owing to management issues at his own level, he had transferred the very stake to M/s. KSL Holdings Pvt. Ltd., for Rs. 21,87,50,000/- and thereafter, he chose to pay the impugned sum as agreed compensation to the foregoing twin entities. The Assessing Officer rejected the assessee's case on various counts and disallowed his claim of Rs. 7.84 crores during the course of assessment which stands reversed in the CIT(A)'s order under challenge. 4. Learned CIT-DR vehemently argued during the course of hearing that the CIT(A)'s herein has erred in law and on facts in deleting the impugned addition despite the fact that it is a clearcut instance of the assessee having availed/given accommodation entries of bogus compensation to the foregoing twin entities. Mr. Koteswara Rao sought to invoke Sumati Dayal vs. CIT [1995] 214 ITR 801 (SC) and CIT vs. Durga Prasad More [1971] 82 ITR 540 (SC) that this tribunal ought to examine facts of the instant case in light of the human probabilities after removing all blinkers. He further stressed the point that assessee had derived his so-called higher consideration of Rs. 21,87,50,000/- followed by his compensation cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement to sale that in any case, the appellant shall execute final share transfer deed of freehold shares with all required approvals within three months from date of these agreements. Later on, the appellant could not get consent of other shareholders for granting mining rights of iron-ore at Sundur Hospet, Karnataka to Nilesh Steel Alloys Pvt. Ltd. and M/s. Dhanlaxmi TMT bars Pvt. Ltd. Meanwhile there was also change in the government policies and there were restraints on transfer of iron-ore mining leases. In view of above facts the appellant vide letter dated 09.06.2012 expressed his inability to sell the share to Nilesh Steel Alloys Pvt. Ltd. and M/s. Dhanlaxmi TMT bars Pvt. Ltd. Consequently both the purchasers sought damages as per clause-12 of the agreements to sale pertaining to breach of contract. The clause-12 of the agreements to sale dated 09.04.2012 07.05.2012 categorically provided that as the vendor had assured to get all approvals, no objections from other shareholders and physical share certificates within one month from date of this contract and purchasers had also assured for immediate payment on compliance of same, therefore in the event of vendor fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t purchaser. It is agreed that by executing this agreement, purchaser has become legally entitled to claim his share of 70% of escalated price and he can initiate all available civil as well as criminal legal proceedings against vendor in the event of vendor selling shares without purchaser's written consent or vendor refusing to pay 70% of escalated price over and above price fixed in this agreement . Subsequently the appellant entered into cancellation agreements dated 02.07.2012 with both the purchasers namely Mesh Steel Alloys Pvt. Ltd. and M/s. Dhanlaxmi TMT bars Pvt. Ltd. as he got another proposal in consultation with the other shareholders of Lord Ganesha Minerals Pvt. Ltd. for sale of shares to KSL Holding Pvt. Ltd. The appellant accordingly sold his 3,50,000 shares to KSL Holding Pvt. Ltd. @ Rs. 625/- per share for a sale consideration of Rs. 21,87,50,000/- resulting into capital gains liability in his hands. The appellant thereafter paid an amount of Rs. 7,84,00,000/- to both the purchasers namely Nilesh Steel Alloys Pvt. Ltd. and M/s. Dhanlaxmi TMT bars Pvt. Ltd. considering the clauses-12, 13 14 of agreements to sale and cancellation agreement dated 02.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing U/s 271(1)(c) of the Act is initiated separately for furnishing inaccurate particulars of income . During the course of appellant proceedings, the counsel of appellant has argued that the AO had made the addition of Rs. 7,84,00,000/- alleging that it was colorable device but it was based on mere suspicion and surmises. There was not even an iota of evidence or justification for the AO to conclude that the cancellation agreement was a colorable device. It was argued that the AO had not brought on record any evidence even remotely justifying his said conclusion. The grievance of the AO that agreements for sale of shares/cancellation were made on stamp paper of Rs. 100 and these were not registered, was totally unfounded. It was argued that these were agreements to sell shares i.e. not final transfer of shares. As per section 17 of Indian Registration Act, 1908, registration was required only for documents having subject matter of immovable property having consideration above Rs. 100/-. In the appellant's case, it was agreement to sell shares, being of moveable property. Therefore it did not require any registration under section 17 of Indian Registration Act, 1908. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been duly credited to the profit and loss accounts of both the recipients and stood offered to tax. Subsequently the ACIT, Central Circle-1, Aurangabad has finalized the assessments of both the recipients U/s 143(3) r.w.s. 153A for AY 2013-14 on 23.03.2016 in the case of M/s. Dhanlaxmi TMT Bars Pvt. Ltd. and on 28.03.2016 in the case of Nilesh Steel Alloys Pvt. Ltd. and no adverse inference has been drawn in respect of said transactions entered into by them with the appellant as regards the proposed sale of shares and subsequent cancellation agreement. Thus there is nothing on record to suggest any collusion between the appellant and both the purchasers The inference of the AO that cancellation agreement entered into by the appellant is a make-belief transaction has remained unsubstantiated. In view of above facts, there is nothing on record to justify the addition made by the AO. In the case of CIT Vs. Pivete Finance Ltd. (192 taxman 21), the assessee had continuously resorted to sale of shares to another group company to reduce the tax burden and the Revenue disallowed the resultant losses claimed by the assessee by treating the relevant transactions as a colourable device ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciation made in McDowell's case [1985] 154 ITR 148 (SC). The ratio of any decision has to be understood in the context it has been made. The facts and circumstances which lead to McDowell's decision leave us in no doubt that the principle enunciated in the above case has not affected the freedom of the citizen to act in a manner according to his requirements, his wishes in the manner of doing any trade, activity or planning his affairs with circumspection, within the framework of law, unless the same fall in the category of colourable device which may properly be called a device or a dubious method or a subterfuge clothed with apparent dignity. 18. The aforesaid discussion would show that once the transaction is genuine merely because it has been entered into with a motive to avoid tax, it would not become a colourable device and consequently, earn any disqualification . In Consolidated Finvest Holdings Limited Vs. ACIT in ITA No. 494/Del/2011, the Hon'ble Delhi Tribunal examined a series of transactions between two related entities which resulted in capital loss in the hands of one entity. The assessee gave several advances to a related entity i.e. Jindal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h enquiries and assessment in their respective cases to observe that the same had not yielded any incriminating material so far as the impugned claim of Rs. 7,84,00,000/- is concerned. All this constrains us to observe that the CIT(A) ought to have independently examined the genuineness of the assessee's impugned claim in light of the above prima facie suspicious circumstances rather than discussing the search action in case of the twin recipient companies wherein the instant issue neither emanated from the alleged incriminating material nor there was any dispute to the said limited extent. Faced with this situation, we deem it appropriate that the CIT(A) needs to re-examine this sole issue independently vis- -vis genuineness of the assessee's claim in the given facts and circumstances afresh, preferably within three effective opportunities of hearing, as per law. The Revenue's sole substantive ground succeeds for statistical purposes in very terms. We order accordingly. 7. No other ground or argument has been raised before us. 8. This Revenue's appeal is allowed for statistical purposes in the above terms. Order pronounced in the open Court on 23.01.2023. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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