TMI Blog1994 (12) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... tal loss should have been allowed in the hands of the assessee. " 2. The facts of these cases are somewhat extraordinary. All seven assessees are partners of either of the two firms, viz., Meghna Enterprise and Amrut Trading Co. On 23-6-1985, the assessees purchased shares of Meghdeep Chemicals Pvt. Ltd. at the rate of Rs. 100 per share and after a short lapse of time on 1-8-1985 sold the same at the rate of Re. 1 per share to : (1) Smt. Ranidevi Gautamchand Chowdhary (2) Shri Gautamchand Sohanlal Chowdhary (3) Shri Mahavirchand Sohanlal Chowdhary (4) Shri Gautamchand Sohanlal Chowdhary (5) Smt. Manjudevi Mahavirchand Chowdhary In the process, the assessees suffered huge losses. 3. The assessees claimed the losses as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) That there was no commercial expediency to buy shares in exchange of deposit. (b) No prudent businessman would buy shares for full consideration. (c) That the decision in the case of South Asia Industries (P.) Ltd. v. CIT [1985] 155 ITR 392 (Delhi) was applicable. 4. The assessees challenged the action of the Assessing Officer before the CIT (Appeals) and filed a " voluminous paper book " running into 107 pages. The CIT (Appeals) forwarded this paper book to the learned Assessing Officer for remand report. The Asstt. CIT submitted his remand report on 9-4-1990. The learned CIT (Appeals) after reproducing the remand report in para 3 of his order held as under : " In view of all these and the assessments of the company, viz., S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-6-1985 of Rs. 59.38 lacs and huge debts of over Rs. 82 lacs as against the paid-up capital of Rs. 88 lacs. the learned counsel for the assessees therefore submitted that the deal was with a party not in any way related or connected with the assessees. The learned counsel for the assessees further submitted as follows : " (a) The loss arose when the shares - capital asset-purchased earlier were sold. (b) The fact that there is loss - dead or otherwise - is not in dispute. (c) There is no dispute about the sale-price of the shares. (c) The purchase price of the shares is actually the subscription of price of shares on allotment at par. The assessee had no option, having found it to be a desirable bargain, to negotiate on price. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er book. It is now filed. The question is whether the finding of ' Sham loss ' is still good in spite of new evidence ". Thereafter the learned Assessing Officer has reproduced the factual position in the succeeding paragraphs and ultimately left the matter to the learned CIT (Appeals) with the remarks : " In view of the above facts of the case, suitable decision as deemed fit may kindly be taken after considering assessee's submission ". After considering the contents of the remand report and the submissions, we hold that the learned CIT (Appeals) is not justified in giving impugned relief on the basis of the remand report as he has misconstrued the contents of the remand report. 8. Coming to the facts of the case, it is noted that the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares at the face value, i.e., Rs. 100 per share. It was also in the knowledge of the assessees that the company had accumulated loss of Rs. 23,24,223 as on 30-6-1984 which accumulated to Rs. 59,27,798 as on 30-6-1985. During the course of hearing we asked the learned counsel for the assessees whether the partners of the two firms were related to the Directors of the company, he could not give any clarification. We however find that all above noted seven assessees belonged to Patel Community and from the balance sheet of the company filed before us it is noted that all the Directors of the company also belong to Patel Community. Thus, the assessees before us were not strangers to the affairs of the company. Under such circumstances nobody ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court held that the transaction was neither an investment nor a case of dealing in shares ; it was more akin to a gift. The learned counsel for the assessee has distinguished the above judgment of the High Court from the assessee's case on the sole ground that the High Court decision dealt with a case where all the concerned parties belonged to the same Dalmia Group which is not the case here as the shares were sold to strangers. This thin line of distinction, in our opinion, makes hardly any difference because the assessees and the Directors of Meghdeep Chemicals (P.) Ltd. were known to each other and the sale of shares at the rate of Re. 1 per share as against the price of Rs. 100 per share paid only one month and one week ago, was more ..... X X X X Extracts X X X X X X X X Extracts X X X X
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