Zambad Infrastructure Ltd.,, Pune v. Assistant Commissioner of Income-tax,,

ITA 2031/PUN/2014 | 2010-2011
Pronouncement Date: 28-09-2016 | Result: Partly Allowed

Appeal Details

RSA Number 203124514 RSA 2014
Assessee PAN AAACZ0651M
Bench Pune
Appeal Number ITA 2031/PUN/2014
Duration Of Justice 1 year(s) 10 month(s) 14 day(s)
Appellant Zambad Infrastructure Ltd.,, Pune
Respondent Assistant Commissioner of Income-tax,,
Appeal Type Income Tax Appeal
Pronouncement Date 28-09-2016
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 28-09-2016
Assessment Year 2010-2011
Appeal Filed On 14-11-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE . . ! # $ BEFORE SHRI R.K. PANDA AM AND SHRI VIKAS AWASTHY JM . / ITA NO.2031/PN/2014 #& & / ASSESSMENT YEAR : 2010-11 ZAMBAD INFRASTRUCTURE LIMITED MZSK & ASSOCIATES LEVEL 3 BUSINESS BAY PLOT NO.84 WELLESLEY ROAD PUNE 411001 PAN : AAACZ0651M . / APPELLANT V/S ACIT (HQ) ADMN. AURANGABAD . /RESPONDENT / ASSESSEE BY : SHRI J.P. BAIRAGRA / RESPONDENT BY : SHRI P.L. KUREEL / ORDER PER R.K.PANDA AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 31-10-2014 OF THE CIT(A) AURANGABAD RELATING TO A SSESSMENT YEAR 2010-11. 2. GROUND OF APPEAL NO.1 BY THE ASSESSEE READS AS UNDER : 1. THE LEARNED TAXING AUTHORITIES BELOW HAD ERRED I N DISALLOWING LOSS ON SHARE TRANSACTION OF RS.3 28 00 000/-. JUST AND PRO PER RELIEF MAY BE GRANTED TO THE APPELLANT. / DATE OF HEARING :29.08.2016 / DATE OF PRONOUNCEMENT:28.09.2016 2 ITA NO.2031/PN/2014 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. IT FILED ITS R ETURN OF INCOME ON 15-10-2010 DECLARING INCOME OF RS.7 19 07 807/-. T HE SAID RETURN WAS REVISED ON 25-04-2011 DECLARING INCOME O F RS.7 19 49 505/- DUE TO CHANGE IN CLAIM OF DEPRECIATION. DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT SA LES OF RS.16 11 75 432/- HAS BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT. FROM THE DETAILS FURNISHED BY THE ASSESSEE THE AO NOTED THAT THE SAME INCLUDES A SUM OF RS.82 00 000/- RECEIVED ON SALE OF S HARES OF WESTERN MEDICAL SOLUTIONS PVT. LTD. FURTHER THE AO NOTED THAT A SUM OF RS.4 10 00 000/- HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT WITH THE NARRATION PURCHASE OF SHARES. HE TH EREFORE ASKED THE ASSESSEE TO FURNISH DETAILS OF SAID PURCHASE AND SALE OF SHARES DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR 2010- 11. IN RESPONSE TO THE SAID QUERY IT WAS REPLIED BY THE ASSESSEE AS UND ER WHICH HAS BEEN REPRODUCED BY THE AO IN THE BODY OF THE ASSESSMENT ORDER : 6.1 DURING F.Y. 2008-09 RELEVANT TO A.Y. 2009-10 T HE ASSESSEE COMPANY HAD INVESTED RS.4.10 CRORES IN EQUITY SHARES OF WESTERN MEDICAL SOLUTIONS PVT. LTD. MUMBAI WITH THE OBJECTIVE TO RE ALIZE BETTER PRICE IN DUE COURSE AND GAIN REASONABLE AMOUNT AS PROFIT ON FUN DS INVESTED. 6.2 AFTER MAKING THE INVESTMENT THE ASSESSEE COMPANY F OUND THAT THE COMPANY WHERE THE MONEY WAS INVESTED I.E. WESTERN MED ICAL SOLUTIONS PVT. LTD. MUMBAI IS NOT PERFORMING WELL AND THE PRO JECTIONS AND PROPOSAL GIVEN IN 2007 COULD NOT BE ACHIEVED TO A LARGE EXTE NT. THE ASSESSEE COMPANY FOUND THAT THE INVESTMENT HAS BECOME DEAD. C ONSIDERING THESE NEGATIVE DEVELOPMENTS THE BOARD OF DIRECTORS OF THE ASSESSEE COMPANY HAS DECIDED TO SALE THESE SHARES AND ACCORDINGLY PASSED A RESOLUTION ON 05-01-2010. COPY ENCLOSED. 6.3 DURING F.Y.2009-10 RELEVANT TO A.Y. 2010-11 TH E ASSESSEE COMPANY HAD SOLD THESE SHARED TO DEV CONSTRUCTION PVT. LTD. AT NEGOTIATED PRICE OF RS.82 00 000/- I.E. RS.2/- PER SHARE. THE AMOUNT CREDITED TO SALE OF SHARES A/C. 3 ITA NO.2031/PN/2014 4. THE ASSESSEE ALSO ENCLOSED A COPY OF THE RESOLUTION P ASSED BY THE BOARD OF DIRECTORS OF THE ASSESSEE COMPANY FOR BUYB ACK OF SHARES ALLOTTED TO THE COMPANY. 5. HOWEVER THE AO WAS NOT SATISFIED WITH THE ABOVE EXPLA NATION GIVEN BY THE ASSESSEE. IN ORDER TO VERIFY THE GENUINE NESS OF THE LOSS CLAIMED BY THE ASSESSEE AT RS.3 28 00 000/- ON ACCOUNT OF SALE OF SHARES THE AO OBTAINED A SEARCH REPORT FROM THE MINIS TRY OF CORPORATE AFFAIRS IN RESPECT OF WESTERN MEDICAL SOLUTIONS PVT. LTD. FRO M THE SAID SEARCH REPORT HE NOTED THAT ASSESSEE HAD PURCHA SED 41 00 000 EQUITY SHARES OF RS.10/- EACH OF WESTERN MEDICAL SOLUTIONS PVT. LTD. ON 20-11-2008 FOR A CONSIDERATION OF RS.4 10 00 000/-. THE SE SHARES HAVE BEEN SOLD BY THE ASSESSEE TO M/S. DEV CONSTRUCTIO N PVT. LTD. ON 06-01-2010 DURING THE PREVIOUS YEAR RELEVANT TO THE AS SESSMENT YEAR 2010-2011 FOR A CONSIDERATION OF RS.82 00 000/- THEREBY INC URRING A LOSS OF RS.3 28 00 000/-. THE ASSESSEE IS IN THE BUSINESS OF BUYING AND SELLING OF LAND & DEVELOPMENT OF LAND AND THE PURCHASE OF THE SHARES OF WESTERN MEDICAL SOLUTIONS PVT. LTD. IS IN NO WAY C ONNECTED WITH ITS BUSINESS ACTIVITIES. 6. THE AO NOTED THAT THE ASSESSEE HAS NOT GIVEN ANY JUSTIFICATION FOR THE INVESTMENT OF RS.4 10 00 000/- MADE IN AN UNLISTED C OMPANY IN THE F.Y. 2008-09 AND HAS ALSO NOT FURNISHED ANY EVIDENC E TO SHOW HOW IT EXPECTED TO REALIZE BETTER PRICE IN DUE COURSE OF TIME AND GAIN REASONABLE AMOUNTS OF PROFIT ON FUNDS INVESTED IN THE SHAR ES OF AN UNLISTED COMPANY. FROM THE COPY OF BALANCE SHEET FILED OF WESTERN MEDICAL SOLUTIONS PVT. LTD. FOR A.Y. 2009-10 AND 2010-11 HE OBSERVED THAT THE COMPANY DOES NOT HAVE ANY ASSETS OTHER THA N THE CAPITAL. FURTHER IN THE SHORT SPAN OF 14 MONTHS THE ASSESSEE H AS REALIZED 4 ITA NO.2031/PN/2014 THAT THE COMPANY IT HAD INVESTED WAS NOT PERFORMING WELL AND THEREFORE IT DECIDED TO SELL ITS SHARES AT A NEGOTIATED PR ICE OF RS.2/- PER SHARE AS AGAINST ITS PURCHASE PRICE OF RS.10/- PER S HARE. HE OBSERVED FROM THE RECORDS THAT THE PURCHASE PRICE OF T HE 41 00 000 SHARE FOR RS.4 10 00 000/- HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT OF THE PREVIOUS YEAR 2009-10 WHEREAS THE SHAR ES HAD BEEN ACQUIRED ON 20-11-2008 WHICH FALLS IN THE PREVIOUS YEAR 20 08-09. ACCORDING TO THE AO THE PURCHASE PRICE OF THE SHARES SHOULD HAVE BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT OF THE EARLIER YEAR WHEREAS THE PURCHASE PRICE OF RS.4 10 00 000/- HAS BEEN SHOWN IN THE BALANCE SHEET OF THE EARLIER ASSESSMENT YEAR I.E. 2009-10 AS ADVANCE TOWARDS PURCHASE OF SHARES. 7. REFERRING TO THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF BOMBAY OIL INDUSTRIES LTD. VS. DCIT REPORTE D IN 82 ITD 626 WHERE IT HAS BEEN HELD THAT TAX PLANNING CAN BE TOLE RATED HOWEVER TAX EVASION BY DUBIOUS MODES CANNOT BE COUNTE NANCED THE AO DISALLOWED AMOUNT OF RS.3 28 00 000/- CLAIMED BY THE ASSES SEE ON ACCOUNT OF SALE OF SHARES OF WESTERN MEDICAL SOLUTIONS L TD. DURING THE YEAR BY HOLDING THAT THE SAME IS NOT A GENUINE BUSIN ESS LOSS. HE HELD THAT BOTH THE PURCHASE AND SALE OF TRANSACTION OF S HARES OF WESTERN MEDICAL SOLUTIONS LTD. HAVE BEEN GIVEN IN THE PROFIT AND LOSS ACCOUNT FOR THE A.Y. 2010-11 TO REDUCE THE TAXABLE INCOM E OF THE ASSESSEE COMPANY AND TO EVADE PAYMENT OF TAX. WITHOUT PREJUDICE TO THE ABOVE THE AO FURTHER NOTED THAT IF THE LOSS OF RS.3 28 00 000/- ON THE PURCHASE AND SALE OF SHARES OF WESTERN MEDICAL SOLUTIO NS LTD. IS TO BE ALLOWED IT WILL HAVE TO BE TREATED AS A CAPITAL LOSS S INCE BUYING AND SELLING OF SHARES IS NOT BUSINESS OF THE ASSESSEE COM PANY. HE NOTED THAT THE ASSESSEE HAS ALSO STATED THAT THE INVE STMENT WAS MADE 5 ITA NO.2031/PN/2014 WITH THE OBJECTIVE TO REALIZE BETTER PRICE IN THE COURSE OF TIME AND GAIN REASONABLE AMOUNT AS PROFIT ON FUNDS INVESTED. HE THERE FORE HELD WITHOUT PREJUDICE THAT THE LOSS OF RS.3 28 00 000/- WILL HAV E TO BE ASSESSED AS LONG TERM CAPITAL LOSS AS THE SHARES OF WEST ERN MEDICAL SOLUTIONS LTD. HAVE BEEN HELD FOR A PERIOD OF MORE THAN 12 MONTHS AND THE LONG TERM CAPITAL LOSS CAN ONLY BE CARRIED FORWAR D AND SET OFF AGAINST LONG TERM CAPITAL GAINS IN THE FOLLOWING ASSESSMENT Y EARS AS PER THE PROVISIONS OF SECTION 74 OF THE I.T. ACT. 8. BEFORE CIT(A) THE ASSESSEE MORE OR LESS REITERATED SA ME SUBMISSIONS. IT WAS SUBMITTED THAT T HE CONCLUSION ARRIVED AT BY THE AO IS NOT CORRECT . FIRST OF ALL THESE SHARES WERE HELD AS STOCK IN TRADE AND NOT AS INVESTMENT . SECONDLY THESE SHARES WERE ALLOTTED BY WESTERN MEDICAL SOLUTIONS PVT LTD MUMBAI TO THE ASSESSEE COMPANY ON 20-11-2008. THESE SHARES WERE SOLD TO M/S. DEV CONS TRUCTION PVT . LTD ON 6-01-2010. HOLDING PERIOD IS 412 DAYS. TO QUALIFY TO BECOME LONG TERM ASSET AS PER DEFINITION U/S 2(42A) THE HOLDING PER IOD SHOULD BE MORE THAN 36 MONTHS. AS STATED BY THE AO THE HOLDING PERIOD OF 12 MONTHS IS APPLICABLE TO LISTED SHARES DEALT WITH ON RECOGNIZ ED STOCK EXCHANGE AND ON WHICH SECURITIES TRANSACTION TAX HAS BEEN PAID. HERE BOTH THESE CONDITIONS ARE MISSING. THESE SHARES WERE NOT LISTED SHARES ON ANY RECOGNIZED STOCK EXCHANGE. HENCE T HESE SHARES ARE NOT DEALT WITH ON RECOGNIZED STOCK EXCHANGE AND NO SECURITIES TRANSACTION TAX HAS BEEN PAID ON THE SALE OF TRANSACTION OF THESE SHARES. 9. IT WAS SUBMITTED THAT DURING THE F.Y. 2009-10 RELEVAN T TO A.Y. 2010-11 THE ASSESSEE COMPANY HAD SOLD THE LAND AT GUT NO. 78 KATVI AND LAND AT GUT NO. 138 PISADEVI AND THE ABOVE R EFERRED EQUITY 6 ITA NO.2031/PN/2014 SHARES. ALL THESE ASSETS WERE SOLD AND ACCORDINGLY THESE HAVE BEEN CONSIDERED IN SALES ACCOUNT . THE AO HAD GIVEN DIFFERENT TREATMENT TO THESE SALES. NATURE OF BOTH THESE ASSETS IS CAPITAL ASSET S. THE ASSESSEE COMPANY HAS TREATED BOTH SHARES AND LANDS A S STOCK IN TRADE AND PROFIT/LOSS FROM SALE HAS BEEN TREATED AS BUSIN ESS INCOME/LOSS. THE AO HAD APPLIED DIFFERENT PRINCIPLES TO TWO TRANSACTIONS HAVING SAME NATURE . THE SALE OF SHARES OF WESTERN MEDICAL SOLUTIONS PVT . LTD HAS BEEN TREATED AS INVESTMENT AND LOSS HAS BEEN COMPUTED AS LONG TERM CAPITAL LOSS. SALE OF LAND HAS BEEN TREATED AS BUSINESS TRANSACTION AND PROFIT HAS BEEN TR EATED AS BUSINESS INCOME. IT WAS FURTHER SUBMITTED THAT IF AT ALL TH E TREATMENT OF STOCK IN TRADE IS NOT POSSIBLE THEN SAME TREATMENT B E GIVEN TO BOTH ASSETS. CONSIDERING THE FACTS OF THE CASE AND PROVISIONS OF LAW IT WAS REQUESTED TO ALLOW BUSINESS LOSS OF RS. 3 38 00 000/- ON SALE OF SHARES. 10. HOWEVER THE CIT(A) WAS ALSO NOT SATISFIED WITH THE AR GUMENTS ADVANCED BY THE ASSESSEE AND UPHELD THE ACTION OF THE AO BY OBSERVING AS UNDER : 6.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOTI CED THAT THE APPELLANT COMPANY HAS PURCHASED 41 LAKH SHARES OF M/S. WESTERN MEDICAL SOLUTIONS PVT. LTD. ON 20/11/2008 FOR CONSI DERATION OF RS.4 10 00 000/- OUT OF TOTAL SHARES ISSUED AND SUBSCRIBE D RS.4 12 00 000/-. THEREFORE ABOUT ALL THE SHARES I . E. 99.51% SHARES WERE HELD BY THE APPELLANT COMPANY. THEREFORE THE APPEL LANT COMPANY HAS GOT FULL CONTROL OVER THE COMPANY M/S. WESTERN MEDIC AL SOLUTIONS PVT . LTD. FROM THE AUDITED BALANCE SHEET OF THE COMPANY A S AT 31/03/2009 31/03/2010 & 31/03/2011 AVAILABLE IN THE ASSESSMENT REC ORD IT HAS BEEN NOTICED THAT THE AMOUNT OF SHARE CAPITAL OF RS. 4 12 00 000/- AND SHARE APPLICATION MONEY OF RS.1 00 00 000/ - TOTALING TO RS.5 12 00 000/- HAVE BEEN MAINLY INVESTED IN THE FOLLOWING ASSETS 7 ITA NO.2031/PN/2014 PARTICULARS OF MAIN ASSETS AS ON AS ON AS ON 31/03/2009 31/03/2010 31/03/2011 INVESTMENT IN JUPITER LIFELINE HOSPITALS 3 67 00 000 3 60 00 000 4 34 10 575 LOANS AND ADVANCES 1 42 42 840 1 42 00 000 60 00 000 TOTAL 5 09 42.840 5 02 00 000 4 94 10 575 FROM THE AUDIT REPORTS AND DIRECTOR'S REPORTS IT HAS B EEN NOTICED THAT THE DIRECTORS AND THE CHARTERED ACCOUNTANT OF M /S. WESTERN MEDICAL SOLUTIONS PVT. LTD. HAVE CERTIFIED THAT THE LOANS AND ADVANCES AND CURRENT ASSETS HAVE REALIZABLE VALUE AS APPEARING I N THE BALANCE SHEET . THE AUDITORS OF THE COMPANY HAVE ALSO CERTIFIED THAT THE BALANCE SHEET OF THE COMPANY REFLECTS TRUE AND FAIR VIEW OF I TS FINANCIAL POSITION. THE AUDITORS/DIRECTORS HAVE NOT POINTED OUT THAT EITH ER THE LOANS AND ADVANCES OR THE INVESTMENT IN JUPITER LIFELINE HOSPITA LS HAVE MEAGER REALIZABLE VALUE. FURTHER FROM THE BALANCE SHEET A S AT 31/03/2011 I . E. AFTER SALE OF SHARES OF THE ABOVE MENTIONED COMPANY BY THE APPELLANT THE SAID COMPANY HAS RECOVERED SUBSTANTIAL LOANS AND ADV ANCES AND HAS INVESTED THE SAME IN JUPITER LIFELINE HOSPITALS . THEREFORE IT IS EVIDENT THAT THE SAID LOANS AND ADVANCES AND INVESTMENT IN JUP ITER LIFELINE HOSPITALS HAS NOT BECOME VALUE LESS. AS MENTIONED ABOVE THE APPELLANT COMPANY HAVING SHAR E HOLDING OF 99.51% IN M/S. WESTERN MEDICAL SOLUTIONS PVT. LTD. HAS FULL CONTROL OVER THE COMPANY INCLUDING THE ASSETS OF THE COMPANY. THEREFORE THERE IS NO JUSTIFICATION FOR THE APPELLANT COMPANY TO SELL THE 41 LAKH SHARES OF M/S. WESTERN MEDICAL SOLUTIONS PVT. LTD. FOR RS.82 00 0 00/- I.E. @RS.2/- PER SHARE ON 06/01/2010 TO M/S DEV CONSTRUCTION PVT. L TD. IN VIEW OF THE ABOVE FACTS AND DISCUSSION I AM OF THE CONSIDERED VIEW THAT THE LOSS OF RS.3 28 00 000/- CLAIMED BY THE APPELLANT ON SALE OF SHARES IS NON-GENUINE LOSS AND THE TRANSACTION IS SHAM TRAN SACTION. THE A.O. IS JUSTIFIED IN DISALLOWING THE SAID LOSS OF RS.3 28 00 000/- AS BUSINESS LOSS. THE ADDITION OF RS.3 28 00 000/- MADE BY T HE AD. IS CONFIRMED. GROUND NO.2 IS DISMISSED. 11. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPE AL BEFORE US. 12. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY OPPOSED THE ORDER OF THE CIT(A). HE SUBMITTED THAT WHENEVER A PROFIT IS SHOWN ON THE PURCHASE AND SALE OF SHARES THE DEPARTMENT NORMALLY TR EATS THE SAME AS BUSINESS INCOME WHILE THE ASSESSEES CONTEND THAT IT IS A CAPITAL GAIN. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GOPAL PUROHIT REPORTED IN 336 ITR 287 HE 8 ITA NO.2031/PN/2014 SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT ASSESSEE CAN DO BOTH TRADING IN SHARES AS WELL AS INVESTMENT IN THE SHARES. THE DIFFERENCE BETWEEN BOTH IS DEPENDING ON THE INTENT ION OF THE ASSESSEE AT THE TIME OF PURCHASE OF THE SHARES A ND ENTRIES PASSED IN THE BOOKS OF ACCOUNT. HE SUBMITTED THAT THE SLP FILED BY THE DEPARTMENT HAS BEEN REJECTED BY THE HONBLE SUPR EME COURT AS REPORTED IN 333 ITR (STATUTE) 308. REFERRING TO THE CIRC ULAR NO.4/2007 DATED 15-06-2007 ISSUED BY THE CBDT HE SUBM ITTED THAT THE CBDT IN THE SAID CIRCULAR HAS GIVEN OR ISSUED GUIDELINES TO THE ASSESSING OFFICERS THAT THERE IS A DISTINCTION BETWEEN SHAR ES HELD AS INVESTMENT AND SHARES HELD AS STOCK IN TRADE. WHETHER A PARTICULAR HOLDING OF SHARES IS BY WAY OF INVESTMENT OR FORMS PART OF THE STOCK IN TRADE IS A MATTER WHICH IS WITHIN THE KNOWLEDGE OF THE ASS ESSEE WHO HOLDS THE SHARES AND IT SHOULD IN NORMAL CIRCUMSTANCES BE IN A POSITION TO PRODUCE EVIDENCE FROM ITS RECORDS AS TO WHET HER IT HAS MAINTAINED ANY DISTINCTION BETWEEN THOSE SHARES WHICH ARE ITS STOCK IN TRADE AND THOSE WHICH ARE HELD BY WAY OF INVESTMENT. 13. REFERRING TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SUTLEJ COTTON MILLS SUPPLY AGENCY LTD. REPORTED IN 100 ITR 706 HE SUBMITTED THAT THE HONBLE SUPREME COURT IN THE SAID DECISION HAS HELD THAT A SINGLE TRANSACTION CAN CONSTITUTE ADVENT URE IN THE NATURE OF TRADE. REFERRING TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF G. VENKATASWAMI NAIDU & CO. VS. CIT REPORTED IN 35 ITR 594 HE SUBMITTED THAT THE HONBLE SUPREME COURT IN THE SAID DECISION HAS HELD THAT EVEN AN ISOLATED SINGLE TRANSACTION MAY BE AN ADVENTURE IN THE NATURE OF TRADE IF SOME OF THE ESSENTIAL FEATURES OF TRADE ARE PRESENT IN SUCH A TRANSACTION. HE SUBMITTED THAT IN THE INSTANT CASE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF INFRASTRUCTURE I.E 9 ITA NO.2031/PN/2014 CONSTRUCTION OF BUILDINGS ETC. AND DECIDED TO INVEST IN THE BUSINESS OF HOSPITAL AND HOTEL. SINCE FOR RUNNING OF THESE BUSINESSES B IG CHUNK OF FUNDS ARE REQUIRED THEREFORE THE ASSESSEE DECIDED TO PURCHASE THE SHARES OF WESTERN MEDICAL SOLUTIONS PVT. LTD. WHO INTURN HO LDS SHARES OF JUPITER LIFELINE HOSPITAL WHICH IS ENGAGED IN THE BU SINESS OF RUNNING OF HOSPITALS AND HOTELS. 14. REFERRING TO PAGES 45 TO 50 OF THE PAPER BOOK HE S UBMITTED THAT THE COMPANY HAD RECEIVED A PROPOSAL VIDE LETTER DATED 1 0-07-2007 FROM WESTERN MEDICAL SOLUTIONS PVT. LTD FOR INVESTMENT OF FUN DS. AS PER THE SAID PROPOSAL WESTERN MEDICAL SOLUTIONS PVT. LTD H AD IDENTIFIED JUPITER GROUP AS LEADING GROUP IN HEALTHCARE AND H OTEL INDUSTRY AND WHICH HAD THE PROPOSAL FOR CONSTRUCTING 20 0 BEDDED TERTIARY CARE HOSPITAL ALONG WITH 55 STUDIO APARTMENT HOT EL AT THANE. HE SUBMITTED THAT AS PER THE SAID LETTER JUPITER LIFELINE HO SPITAL PROPOSED TO EXTEND ITS ACTIVITIES BY BUILDING MORE AND MO RE HOSPITALS TOGETHER WITH HOTELS AND THEREFORE THE ASSESSEE SAW A GOOD OPPORTUNITY OF BUYING THE SHARES OF WESTERN MEDICAL SOLU TIONS PVT. LTD WHICH INTURN WAS HOLDING SHARES OF JUPITER LIFELINE HOSPIT ALS WHICH COULD BE DISPOSED OFF IN A SHORT SPAN AND EARN PRO FIT. HE SUBMITTED THAT THE ASSESSEE COMPANY FOUND THE PROPOSA L TO BE WORTHWHILE AND THEREFORE IT PASSED A RESOLUTION DURING THE BOARD MEETING HELD ON 26-07-2007 A COPY OF WHICH IS PLACED AT P AGE 51 OF THE PAPER BOOK. IN THE SAID RESOLUTION IT WAS RESOLVED T O INVEST IN UPCOMING HOSPITAL PROJECT OF JUPITER GROUP THROUGH PURCHA SE OF SHARES OF WESTERN MEDICAL SOLUTIONS PVT. LTD. HE SUBMITTED THAT THE PROPOSAL OF THE ASSESSEE COMPANY WAS ACCEPTED AND WES TERN MEDICAL SOLUTIONS PVT. LTD. PASSED A RESOLUTION IN THE BOARD MEETIN G HELD ON 20-11-2008 FOR ISSUE OF 41 00 000 SHARES OF RS.10/- EACH A T PAR TO 10 ITA NO.2031/PN/2014 THE ASSESSEE. HE SUBMITTED THAT IN THE IMPUGNED ASSESS MENT YEAR THE ASSESSEE WAS IN NEED OF FUNDS FOR ITS OWN CONSTRUCT ION PROJECTS AND ALSO RECEIVED INFORMATION THAT JUPITER HOSPITAL IS NOT ABLE TO BUILD MORE HOSPITALS AND HOTELS AS PLANNED DUE TO NON-AVAILABILIT Y OF THE FUNDS AND HENCE THE ASSESSEE DECIDED TO DISPOSE OFF THES E SHARES AT LOSS. HE SUBMITTED THAT THE SHAREHOLDERS AND DIRECTORS OF THE ASSESSEE COMPANY ARE NOT RELATIVES OF EITHER WESTERN ME DICAL SOLUTIONS PVT. LTD OR JUPITER LIFELINE HOSPITALS AND THEREFORE THESE 2 COMPANIES ARE NOT THE ASSOCIATE CONCERNS OF THE ASSES SEE. REFERRING TO PAGES 342 TO 344 OF THE PAPER BOOK HE DREW THE AT TENTION OF THE BENCH TO THE DETAILS OF THE SHAREHOLDING AND LIST OF DIRECT ORS OF THE 3 COMPANIES NAMELY THE ASSESSEE WESTERN MEDICAL SOLUTIONS PVT. LTD AND DEV CONSTRUCTIONS PVT. LTD. 15. REFERRING TO THE PAGES 63 AND 66 TO 74 OF THE PAPE R BOOK HE SUBMITTED THAT WHEN THE ASSESSEE PURCHASED SHARES O F WESTERN MEDICAL SOLUTIONS PVT. LTD THE SAME HAS BEEN SHOWN IN THE BOOKS UNDER THE HEAD LOANS AND ADVANCES WHICH IS CLEAR FROM TH E SCHEDULE NO.7(E) OF THE BALANCE SHEET FOR THE YEAR ENDING 31-03-200 9. HE SUBMITTED THAT DURING THE IMPUGNED ASSESSMENT YEAR THE ASSESSEE HAS SHOWN PURCHASE OF SHARES AND SALE OF SHARES IN ITS P ROFIT AND LOSS ACCOUNT. THE PURCHASE OF SHARES WERE NOT SHOWN UNDER THE HEAD INVESTMENT AS IT WAS THE INTENTION OF THE ASSESSEE T O RE-SELL THE SHARES WITHIN A SHORT SPAN OF PERIOD. FURTHER NO DIVIDEND OR INCOME WAS RECEIVED BY THE ASSESSEE FROM THE WESTERN MEDICAL S OLUTIONS PVT. LTD. IN VIEW OF THESE FACTS THE AO AS WELL AS THE CIT(A) A RE WRONG IN NOT ALLOWING THE BUSINESS LOSS AND IN TREATING THE SAME AS LOSS UNDER THE HEAD CAPITAL GAIN. 11 ITA NO.2031/PN/2014 16. REFERRING TO PAGES 43 AND 44 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO TH E COPIES OF THE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE COMPANY AND S UBMITTED THAT THE SAME CLEARLY MENTIONS THE MAIN OBJECTIVES OF TH E ASSESSEE COMPANY AS DEVELOPMENT AND CONSTRUCTION OF LAND. AS PER CLAUSE 19 PAGE 44 OF THE PAPER BOOK THE COMPANY IS ALSO AUTHORIZ ED TO ACQUIRE/TAKE UP AND HOLD SHARES/DEBENTURES STOCK BOND S SECURITIES ETC. THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE WAS NOT IN THE BUSINESS OF PURCHASE AND SALE OF SHARES. MOREOVER THE A SSESSEE HAD PURCHASED AND SOLD FUTURES AND OPTIONS OF SHARES IN THE P REVIOUS YEAR AND THE LOSS INCURRED OF RS.7 79 122/- IN THAT YEAR WAS D ISCLOSED AS BUSINESS LOSS WHICH WAS ACCEPTED IN THE ORDER PASSED U/ S.143(3) OF THE I.T. ACT. FOR THE ABOVE PROPOSITION HE REFERRED TO THE PROFIT AND LOSS ACCOUNT ENCLOSED AS PAGE 63 COMPUTATION OF INCOME AT PAGES 60 TO 62 AND THE ASSESSMENT ORDER FOR A.Y. 2009-10 AT PA GES 77 AND 78. HE SUBMITTED THAT DURING A.Y. 2010-11 THE ASSESSEE WAS IN NEED OF FUNDS FOR ITS OWN CONSTRUCTION PROJECTS. SINCE JUPITER LIFELIN E HOSPITAL WAS NOT ABLE TO BUILD MORE HOSPITALS AND HOTELS AS PLANNED DUE TO NON-AVAILABILITY OF FUNDS THE ASSESSEE DECIDED TO DIS POSE OF THE SHARES. THEREFORE THE COMPANY FIRST REQUESTED WESTERN MEDICAL SOLUTIONS PVT. LTD. FOR BUYBACK OF SHARES ALLOTTED. SINCE WE STERN MEDICAL SOLUTIONS PVT. LTD. EXPRESSED ITS INABILITY TO BUYBACK OF SHARES THE ASSESSEE RESOLVED TO SELL THE SHARE CAPITAL OF WESTERN MEDICAL SOLUTIONS PVT. LTD. TO A PROSPECTIVE BUYER. IN THE BOARD MEETING HELD ON 05-01-2010 IT WAS DECIDED TO SELL THE SHA RES AT A VALUE OF RS.82 00 000/- TO THE WILLING BUYER BEING DEV CONSTR UCTION PVT. LTD. THE MINUTES OF THE MEETING IS PLACED AT PAGE 53 OF THE PAPER BOOK. HE SUBMITTED THAT THE PROJECTS PROPOSED IN 2007 BY WESTERN 12 ITA NO.2031/PN/2014 MEDICAL SOLUTIONS PVT. LTD. TAKEN UP BY JUPITER LIFELINE WERE S TILL NOT TAKEN UP AND THERE WAS HUGE GESTATION PERIOD FOR THAT COMPANY TO MAKE PROFITS. ONLY ASSETS HELD BY WESTERN MEDICAL SOLUTION S PVT. LTD. WERE SHARES IN JUPITER LIFELINE HOSPITALS AND ADVANCES GIVEN . PROFITS OF THE COMPANY WERE NEGLIGIBLE. MOREOVER THE HOTEL PROJEC T OF THE INVESTEE I.E. JUPITER LIFELINE HOSPITAL DID NOT TAKE OFF. IN SU CH CIRCUMSTANCES IT WAS DIFFICULT FOR THE COMPANY TO FIND A SUITA BLE BUYER AS IT WAS UNKNOWN WHETHER THE COMPANY WOULD MAKE PROFI TS AND THE DURATION OF GESTATION PERIOD INVOLVED. 17. REFERRING TO THE FOLLOWING DECISIONS HE SUBMITTED THAT THE AO CANNOT ENTER INTO THE SHOES OF THE ASSESSEE AND IT IS T HE BUSINESSMAN WHO KNOWS BETTER ABOUT THE BUSINESS DECISION : 1. CIT VS. DALMIA CEMENT PVT. LTD. REPORTED IN 121 TAXM ANN 706 2. ADITYA MEDISALES LTD. VS. DEPARTMENT OF INCOME TAX VID E ITA NO.3974/AHD/2007 ORDER DATED 02-02-2011. 3. CIT VS. SALITHO ORES LTD. REPORTED IN 194 TAXMANN 410 BOMBAY HIGH COURT HE SUBMITTED THAT THE AO IN THE INSTANT CASE HAS FAILED T O APPRECIATE THE REAL BUSINESS FACTS THAT NOBODY CAN PREDICT THAT EV ERY BUSINESS DECISION WILL INVARIABLY RESULT INTO THE PROFITABLE SUCCESS. 18. SO FAR AS THE OBSERVATION OF THE AO AND THE CIT(A) T HAT THE LOSS INCURRED BY THE ASSESSEE ON SALE OF SHARES AS NON-GEN UINE LOSS HE SUBMITTED THAT THE ASSESSEE HAS FULLY SUBMITTED ALL DETAILS REGARDING PURCHASE AND SALE OF SHARES OF WESTERN MEDICAL SOLUTIONS P VT. LTD BEING COPY OF BOARD RESOLUTIONS PASSED FOR PURCHASE ALLOTM ENT AND FOR SUBSEQUENT SALE OF SHARES. THE ASSESSEE HAS ALSO SU BMITTED DETAILS OF PAYMENTS MADE FOR SHARES ALLOTTED BY WESTERN M EDICAL SOLUTIONS PVT. LTD. ACCOUNTING TREATMENT IN THE AUDITED B OOKS AND PAYMENTS RECEIVED FROM DEV CONSTRUCTION ON SALE OF SHARE S. FURTHER 13 ITA NO.2031/PN/2014 THE ASSESSEE AND THE PARTY TO WHOM THE SHARES WERE SOLD ARE UNRELATED PARTIES. 19. REFERRING TO THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SPENCERS AND CO. LTD. REPORTED IN 359 IT R 644 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD WHERE THE ASSESSEE HAS PRODUCED ALL REQUIRED PRIMARY E VIDENCE RELATING TO SALE OF SHARES LOSS SUFFERED BY ASSESSEE IN S UCH TRANSACTION HAS TO BE ALLOWED. HE SUBMITTED THAT IN THA T CASE THE AO HAD DISALLOWED THE ASSESSEES CLAIM AS CAPITAL LOSS ON SALE OF SHARES OF THE GROUP COMPANIES TREATING IT AS MANIPULATED OR BOGUS LOSS. THE TRIBUNAL FOUND THAT THE ASSESSEE HAD PRODUCED ALL THE RE QUIRED PRIMARY EVIDENCE SUCH AS COPIES OF BILLS CONTRACT NOTES R ECEIPTS FOR SALE CONSIDERATION SHARE PARTICULARS ETC. THE APPELLATE A UTHORITY ALSO FOUND THAT THE AO DID NOT PROVE THESE DOCUMENTS OR EV IDENCES TO BE FALSE OR BOGUS. ACCORDINGLY THE CLAIM OF LOSS MADE BY THE ASSESSEE WAS ALLOWED. HE SUBMITTED THAT THE PRINCIPLES LAID DOWN IN THE ABOVE DECISION ARE SQUARELY APPLICABLE TO THE FACTS OF THE PRES ENT CASE SINCE IN THE INSTANT CASE ALSO THE AO HAS NOT PROVED THAT TH E DETAILS SUBMITTED BY THE ASSESSEE ARE FALSE OR BOGUS. 20. SO FAR AS THE DECISION RELIED ON BY THE AO AND THE C IT(A) IN THE CASE OF BOMBAY OIL INDUSTRIES (SUPRA) IS CONCERNED HE SUB MITTED THAT THE SAID DECISION IS NOT APPLICABLE TO THE FACTS OF THE PRES ENT CASE AND IS DISTINGUISHABLE. IN THAT CASE THE ASSESSEE HAD RESORT ED TO DEVICE OF MANIPULATED TRANSACTION BY PREPARING CERTAIN DOCUMENTS AND AGREEMENT SO THAT IT CAN BOOK SUBSTANTIAL CAPITAL LOSS IN ORDER TO SET OFF CAPITAL GAINS THAT AROSE FROM LIQUIDATION OF ONE OF ITS FULL Y OWNED SUBSIDIARY COMPANY. FURTHER THE SALE WAS MADE TO THE R ELATED PARTY 14 ITA NO.2031/PN/2014 WHO WAS UNDER THE CONTROL AND INFLUENCE OF THE ASSESSEE COMPANY BECAUSE OF THE BUSINESS CONNECTION AND WAS THE MAIN DIS TRIBUTOR OF THE PRODUCTS OF M COMPANY IN WHICH THE DIRECTORS OF THE ASSESSEE HAD MAJORITY STAKE. FURTHER THE AO HAD ALSO POINTED OUT IRR EGULARITIES IN THE DOCUMENTATION AND FLOW OF FUNDS BETWEEN THE PARTIES. HOWEVER IN THE INSTANT CASE NO SUCH FACTS WERE NOTED. THE ASS ESSEE THE INVESTEE AND THE PURCHASE COMPANY ARE UNRELATED AND H ENCE THERE WAS NO MOTIVE BEHIND THE TRANSACTION OF SALE OF SHARES AT LOWER PRICE. 21. EVEN THE SEARCH REPORT OF WESTERN MEDICAL SOLUTIONS PVT. LTD. OBTAINED BY THE AO FROM THE MINISTRY OF CORPORATE AFFAIRS ALSO CONFIRMED THAT SHAREHOLDERS AND DIRECTORS OF THE COMPANY ARE NOT RELATED TO SHAREHOLDERS AND DIRECTORS OF M/S. WESTERN ME DICAL SOLUTIONS PVT. LTD. AND DEV CONSTRUCTION. 22. AS REGARDS THE ARGUMENT OF THE AO WITHOUT PREJUDIC E THAT EVEN IF LOSS OF RS.3 28 00 000/- IS TO BE ALLOWED TO THE ASSESSEE IT SHOULD BE TREATED AS LONG TERM CAPITAL LOSS SINCE BUYING AND SELLING O F SHARES IS NOT THE BUSINESS OF THE ASSESSEE COMPANY THE LD. COUN SEL FOR THE ASSESSEE REFERRING TO CLAUSE NO.19 AT PAGE 44 OF THE PAP ER BOOK DREW THE ATTENTION OF THE BENCH TO THE MEMORANDUM OF ASSOCIA TION OF THE ASSESSEE COMPANY WHICH AUTHORISES PURCHASE HOLDING AND SALE OF SHARES AND SECURITIES THEREFORE THE CONTENTION OF THE A O ON THIS ISSUE IS WRONG. FURTHER WHETHER THE LOSS IS BUSINESS LOSS OR CAPITAL GAIN DEPENDS ON THE INTENTION OF THE ASSESSEE WHEN ACQU IRED AND ITS TREATMENT IN THE BOOKS OF ACCOUNT. HE SUBMITTED THAT IN THE INSTANT CASE THE INTENTION OF THE ASSESSEE COMPANY WAS ALWAYS TO RESELL. FOR THE ABOVE PROPOSITION HE RELIED ON THE FOLLOWING DECISIONS A ND 15 ITA NO.2031/PN/2014 SUBMITTED THAT THE BUSINESS LOSS OF RS.3 28 00 000/- ARISING ON ACCOUNT OF SALE OF SHARES SHOULD BE ALLOWED. 1. NEW PRAHLAD MILLS PVT. LTD. VS. CIT REPORTED IN 85 IT D 480 2. ITO VS. BUNTY HOLDINGS PVT. LTD. REPORTED IN 60 SOT 7 0 23. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE LD.CIT(A) HAS GIVEN JUSTIFIABLE REASONS FOR REJECTING THE CLAIM OF BUSINESS LOSS AT RS.3 28 00 000/- AS NON GENUINE LOSS AND THE TRANSACTION A S SHAM TRANSACTION. THEREFORE THE ORDER OF THE CIT(A) ON THIS ISS UE BE UPHELD AND THE GROUND RAISED BY THE ASSESSEE SHOULD BE DISMISSED. 24. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE IN THE INS TANT CASE HAS SHOWN LOSS OF RS.3 28 00 000/- ON ACCOUNT OF SALE OF SH ARES OF WESTERN MEDICAL SOLUTIONS PVT. LTD. WHICH WERE PURCHASED FOR RS.4 10 00 000/- ON 20-11-2008 AND SOLD ON 06-01-2010 AT RS.82 00 000/-. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE SAME IS NOT A GENUINE BUSINESS LOSS AND BOTH THE PURCHASE AND SALE TRANSACTIONS OF SHARES OF WESTERN MED ICAL SOLUTIONS PVT. LTD. HAVE BEEN GIVEN IN THE PROFIT AND LOSS A CCOUNT TO REDUCE THE TAXABLE INCOME OF THE ASSESSEE COMPANY AND TO EVADE PAYMENT OF TAX. FOR THE ABOVE PROPOSITION THE AO RELIED ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF BOMBAY OIL INDUSTRIES LTD. (SUPRA). FURTHER WITHOUT PREJUDICE TO THE ABOVE THE AO HELD THAT THE LOSS OF RS.3 28 00 000/- WILL HAVE TO BE ASSESSED AS LONG TERM CAPITAL LOSS AS THE SHARES OF WESTERN MEDIC AL SOLUTIONS 16 ITA NO.2031/PN/2014 PVT. LTD. HAVE BEEN HELD FOR A PERIOD OF MORE THAN 12 MON THS AND THE LONG TERM CAPITAL LOSS CAN ONLY BE CARRIED FORWARD AND SE T OFF AGAINST THE LONG TERM CAPITAL GAIN IN THE SUBSEQUENT ASSESSMENT YEARS AS PER PROVISIONS OF SECTION 74. WE FIND THE LD.CIT(A) UPHELD THE AC TION OF THE AO BY HOLDING THAT THE CLAIM OF LOSS OF RS.3 28 00 000/- MADE BY THE ASSESSEE ON SALE OF SHARES IS A NON-GENUINE LOSS AN D THE TRANSACTION IS SHAM TRANSACTION. THE RELEVANT OBSERVATI ON OF THE CIT(A) HAS ALREADY BEEN REPRODUCED IN THE PRECEDING PARAGRAPHS. 25. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESS EE THAT THE SHARE TRANSACTION EFFECTED BY THE ASSESSEE IS A GENUINE TRANSACTION. ACCORDING TO HIM AN ASSESSEE CAN HOLD THE SHARES EITHE R AS INVESTMENT OR AS STOCK IN TRADE. FURTHER IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SUTLEJ COTTON MILLS SUPPLY AGENCY LTD. (SUPRA) A SINGLE TRANSACTION CAN CONSTITUTE A N ADVENTURE IN THE NATURE OF TRADE. IT IS ALSO THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT FULL DETAILS WERE GIVEN BEFORE THE AO AS WELL AS THE CIT(A) SUBSTANTIATING PURCHASE AND SALE OF SHARES AND THE JUSTIFICATION FOR SALE OF SHARES AT A LOSS. IT IS ALSO THE S UBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AO CANNOT EN TER INTO THE SHOES OF THE ASSESSEE AND IT IS THE BUSINESSMAN WHO KNO WS BETTER HOW TO CONDUCT THE BUSINESS. IT IS ALSO THE SUBMISSION O F THE LD. COUNSEL FOR THE ASSESSEE THAT EVERY BUSINESS DECISION MA Y NOT INVARIABLY RESULT INTO PROFIT. 26. WE FIND SOME FORCE IN THE ABOVE ARGUMENTS OF THE LD . COUNSEL FOR THE ASSESSEE. WE FIND THE ASSESSEE BEFORE THE AO HA D SUBMITTED THAT THE COMPANY HAD RECEIVED A PROPOSAL VIDE LETTER DA TED 10-07-2007 FROM WESTERN MEDICAL SOLUTIONS PVT. LTD. FOR INV ESTMENT 17 ITA NO.2031/PN/2014 OF FUNDS. AS PER THE SAID PROPOSAL WESTERN MEDICAL SOLUTION S PVT. LTD. HAD IDENTIFIED JUPITER GROUP AS LEADING GROUP IN HEALTHC ARE AND HOTEL INDUSTRY WHICH HAD THE PROPOSAL FOR CONSTRUCTING 20 0 BEDDED TERTIARY CARE HOSPITAL ALONG WITH 55 STUDIO APARTMENT HOT EL AT THANE. THE ASSESSEE SAW A GOOD OPPORTUNITY TO BUY THE SHARE S OF WESTERN MEDICAL SOLUTIONS PVT. LTD. WHICH INTURN WAS HOLDING SHARES OF JUPITER LIFELINE HOSPITALS. NECESSARY RESOLUTION WAS PASSED B Y THE BOARD MEETING HELD ON 26-07-2007 A COPY OF WHICH IS PLACE D AT PAGE 51 OF THE PAPER BOOK. THE BOARD OF DIRECTORS OF WESTERN MEDICAL SOLUTIONS PVT. LTD. HAD PASSED A RESOLUTION IN THE BOARD MEETING HELD ON 20-11-2008 FOR ISSUE OF 41 00 000 SHARES OF RS.10/- EA CH AT PAR TO THE ASSESSEE. SINCE SUBSEQUENTLY THE ASSESSEE HAD INFORMATION THAT JUPITER LIFELINE HOSPITALS IS NOT ABLE TO BUILD MORE HOSPIT ALS AND HOTELS AS PLANNED AND SINCE THE ASSESSEE WAS IN NEED OF FUNDS IT DECIDED TO DISPOSE OF THE SHARES AT LOSS. SINCE WESTERN MEDICAL SOLUTIONS PVT. LTD. EXPRESSED ITS INABILITY TO BUYBACK THE SHARES THE ASSESSEE SOLD THE SHARES TO THE PROSPECTIVE BUYER M/S . DEV CONSTRUCTIONS PVT. LTD. UNDER THESE CIRCUMSTANCES WE HAVE TO SEE AS TO WHETHER THE CLAIM OF LOSS BY THE ASSESSEE HAS TO BE ALLOWED AS A GENUINE BUSINESS LOSS OR THE LOSS TO BE DISALLOWED AS NONE -GENUINE AND SHAM TRANSACTION. 27. FROM THE DETAILS FURNISHED BY THE ASSESSEE IN THE PA PER BOOK WE FIND THE SHARES OF WESTERN MEDICAL SOLUTIONS PVT. LTD. W ERE SHOWN IN THE BOOKS UNDER THE HEAD LOANS AND ADVANCES AS O N 31-03-2009 WHICH IS EVIDENT FROM PAGES 63 AND 66 TO 74 OF THE PAPER BOOK. ON BEING QUESTIONED BY THE BENCH AS TO WHY THE SHARES AR E SHOWN UNDER THE HEAD CURRENT ASSETS LOANS AND ADVANCES THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SHARES WERE ALLOTTED TO THE AS SESSEE ON 18 ITA NO.2031/PN/2014 12-12-2009 WITH DISTINCT NUMBERS 2000 TO 41 20 000 VIDE R EGISTERED FOLIO NO.5 CERTIFICATE NO.22. WE FIND CLAUSE 19 OF THE MEMOR ANDUM OF ASSOCIATION OF THE COMPANY AUTHORIZES THE ASSESSEE TO ACQUIRE TAKE UP AND HOLD SHARES STOCKS DEBENTURE STOCK BONDS OBLIGATIONS AND SECURITIES ISSUED OR GUARANTEED BY ANY COMPANY CON STITUTED OR CARRYING ON BUSINESS IN INDIA ETC. ETC. WE FIND DURING THE IMPUGNED ASSESSMENT YEAR THE ASSESSEE HAS SHOWN THE PURCHASE OF SHARE AND SALE OF SHARES IN THE PROFIT AND LOSS ACCOUNT. AS MENTIONE D EARLIER IN THE PRECEDING YEAR THE SHARES WERE SHOWN UNDER THE H EAD LOANS AND ADVANCES AND NOT UNDER THE HEAD INVESTMENT. NO DIV IDEND OR OTHER INCOME WAS RECEIVED BY THE ASSESSEE FROM WESTERN MEDICAL SOLUTIONS PVT. LTD. IT IS ALSO AN ADMITTED FACT THAT NONE OF THE DIRECTORS OF THE ASSESSEE COMPANY ARE IN NO WAY RELATE D TO THE DIRECTORS OF WESTERN MEDICAL SOLUTIONS PVT. LTD. OR M/S. DE V CONSTRUCTIONS PVT. LTD. IT IS ALSO NOTICED FROM THE SUBMIS SIONS MADE BY THE ASSESSEE THAT DURING A.Y. 2009-10 THE ASSESSEE HAD CLAIMED LOSS IN FUTURES AND OPTIONS SHARE TRADING AT RS.7 79 122/- AS PER PAGE 64 OF THE PAPER BOOK WHICH IS THE PROFIT AND LOSS AC COUNT FOR THE YEAR ENDED 31-03-2009. WE FIND THE AO IN THE ORDER PAS SED U/S.143(3) DATED 15-12-2011 HAS ACCEPTED SUCH LOSS AS BUSINESS LOS S AND NOTHING WAS BROUGHT ON RECORD THAT ANY ACTION EITH ER U/S.147 OR 263 HAS BEEN TAKEN. THEREFORE WE FIND MERIT IN THE ARGU MENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE LOSS INCURRED BY T HE ASSESSEE ON SALE OF SHARES CANNOT BE TREATED AS NON-GENUINE LOSS. 28. IT HAS BEEN HELD IN VARIOUS DECISIONS THAT AO CANNOT ENTER INTO THE SHOES OF THE ASSESSEE AND IT IS THE BUSINESSMAN WHO KNOWS BETTER HOW TO CONDUCT ITS BUSINESS. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SALITHO ORES LTD. (SUPRA) HAS HELD THAT AN 19 ITA NO.2031/PN/2014 EXPENDITURE INCURRED FOR PURPOSE OF BUSINESS CANNOT BE R EFUSED ON THE GROUND THAT THE EXPENDITURE WAS IMPRUDENT. THE H ONBLE HIGH COURT HELD THAT WHEN IT WAS NOT THE CASE OF THE REVENU E THAT THE EXPENDITURE WAS NOT BONAFIDE OR THAT IT WAS INCURRED BY WAY OF DIVERSION OF PROFITS TO A RELATED PERSON OR A SISTER CONCE RN OF THE ASSESSEE THE REVENUE COULD NOT HAVE GONE INTO THE QUE STION OF EXPEDIENCY OF EXPENDITURE INCURRED AND/OR EXPEDIENCY OF HIRING OF 4 DOZERS THAT WAS A MATTER OF COMMERCIAL EXPEDIENCY AND T HE ASSESSEE WAS THE BEST JUDGE OF IT. IT WAS ACCORDINGLY HELD THAT THE EXPENDITURE WAS AN ALLOWABLE EXPENDITURE. 29. WE FIND IN THE CASE OF CIT VS. SPENCERS AND CO. LTD. (N O.3) (SUPRA) THE AO HAD DISALLOWED THE ASSESSEES CLAIM AS CAPIT AL LOSS ON SALE OF SHARES OF THE GROUP COMPANIES TREATING IT AS A M ANIPULATED OR BOGUS LOSS. THE TRIBUNAL FOUND THAT THE ASSESSEE HAD PR ODUCED ALL THE REQUIRED PRIMARY EVIDENCE SUCH AS COPIES OF BILLS CONTR ACT NOTES RECEIPTS FOR SALE CONSIDERATION SHARE PRICE ETC. RELATING T O THE SALE OF SHARES. THE APPELLATE AUTHORITIES ALSO FOUND THAT THE AO DID NOT PROVE THESE DOCUMENTS OR EVIDENCE TO BE FALSE OR BOGUS . ACCORDINGLY THE CLAIM OF LOSS MADE BY THE ASSESSEE WAS ALLOWED. ON FUR THER APPEAL BY THE REVENUE THE HONBLE HIGH COURT HAS HELD AS UNDER : 21. WE HAVE GIVEN OUR ANXIOUS CONSIDERATION TO THE R EASONS GIVEN AND FINDINGS ARRIVED AT BY THE APPELLATE AUTHORITY AND T HE TRIBUNAL. WE FIND FROM THE ORDER OF THE APPELLATE AUTHORITY THAT WITH THE MATERIAL AVAILABLE ON RECORD HE HAD PROCEEDED TO ADJUDICATE THE CLAIM OF THE ASSESSEE. THE APPELLATE AUTHORITY ON SCRUTINY OF THE MATERIAL AVAI LABLE ON RECORD FOUND THAT THE ASSESSEE HAD PRODUCED ALL THE REQUIRED PRIMAR Y EVIDENCE SUCH AS COPIES OF BILLS CONTRACT NOTES RECEIPTS FOR SALE CONSID ERATION SHARE PARTICULARS ETC. RELATING TO THE SALE OF SHARES. THE APPELLATE AUTHORITY ALSO FOUND THAT THE ASSESSING AUTHORITY DID NOT PROVE THESE D OCUMENTS OR EVIDENCE TO BE FALSE OR BOGUS. ON APPRECIATION OF THE FACTUAL ASPECTS OF THE MATTER THE APPELLATE AUTHORITY HELD THAT THE ASSESSING AUTHORITY WAS NOT JUSTIFIED IN HOLDING THE SALE OF SHARES AS BOGUS AND THE CLAIM WAS MADE WITH A MOTIVE TO AVOID PAYMENT OF TAX. THE APPELLAT E AUTHORITY WAS FOUND TO BE SATISFIED WITH THE MATERIALS AVAILABLE ON RECORD THAT THE LOSS 20 ITA NO.2031/PN/2014 SUFFERED BY THE ASSESSEE IN SALE OF SHARES WAS A GENUINE LOS S AND THEREFORE ENTITLED TO CLAIM THE LOSS UNDER 'CAPITAL GAINS'. THE FINDING OF THE APPELLATE AUTHORITY WAS BASED ON THE MATERIALS AVA ILABLE ON RECORD AND THEREFORE IS A FINDING OF FACT. THE TRIBUNAL CONCURRING WITH THE SAID FINDING HELD THAT THERE WAS NO CONVINCING MATERIAL PUT FORTH BY THE REVENUE TO ESTABLISH THAT THE ASSESSEE WAS CLAIMING LOSS ON OSTENSIBLE SALE OF SHARES BELONGING TO THE GROUP COMPANIES WITH T HE MOTIVE OF TAX AVOIDANCE. THE TRIBUNAL ALSO CONFIRMED THE FINDING O F THE APPELLATE AUTHORITY THAT ALL THE REQUIRED PRIMARY EVIDENCE RE LATING TO SALE OF SHARES WERE PRODUCED BEFORE THE ASSESSING AUTHORITY AND THAT T HE ASSESSING AUTHORITY DID NOT POINT OUT ANY INFIRMITY IN THOSE E VIDENCE. THE TRIBUNAL ALSO FOUND THAT THE ASSESSING AUTHORITY COULD NOT ACCEP T A TRANSACTION IN PART AND REJECT OR DISBELIEVE THE REST ONLY FOR THE P URPOSE OF ASSESSMENT OF LOSS. ON A CAREFUL ANALYSIS OF THE ORDERS OF THE APPE LLATE AUTHORITY AND THE TRIBUNAL IN THE LIGHT OF THE MATERIAL AVAILABLE ON RECORD AND THE ARGUMENTS MADE WE SEE NO REASON TO INTERFERE WITH THE CONCURRENT FINDINGS OF FACT RECORDED BY THE AUTHORITIES BELOW. - THERE IS NO INFIRMITY IN THE ORDER PASSED BY THE TRIBUNAL CONFIRMING THE O RDER OF THE APPELLATE AUTHORITY DIRECTING THE ASSESSING AUTHORITY TO ASSESS THE L OSS ON SALE OF SHARES UNDER THE HEAD 'LONG-TERM CAPITAL GAINS'. WE AR E ALSO NOT CONVINCED THAT THE DECISION CITED BY THE REVENUE IN THE CASE OF MCDOWELL CO. CITED SUPRA IN ANY WAY SUPPORT THE CASE OF THE REVENU E AND THE CLAIM OF LOSS ON ACCOUNT OF SALE OF SHARES IN OUR VIEW DOES N OT APPEAR TO BE ANY 'COLOURABLE DEVICE' AS AN INSTRUMENT FOR AVOIDANCE O F TAX AS WRONGLY ARGUED ON THE PART OF THE REVENUE. ON THE CONTRARY THE DECISION RELIED UPON BY THE ASSESSEE IN AZADI BACHAO ANDOLANS CASE CITE D SUPRA WOULD SHOW THAT THE TEST TO DETERMINE WHETHER THE CLAIM IS A COLOURABLE DEVICE OR NOT IS TO DETERMINE WHETHER THE TRANSACTION IS A DE VICE TO AVOID TAX AND WHETHER THE TRANSACTION IS SUCH THAT THE JUDICIAL PROC ESS MAY ACCORD ITS APPROVAL TO IT. THE TRIBUNAL HAS ANALYSED THE MATERIA LS ON RECORD TO COME TO A CONCLUSION THAT THE LOSS ON ACCOUNT OF SALE OF SHAR ES WAS A GENUINE AND THAT THE SAID LOSS HAS OCCURRED IN THE COURSE OF BUSI NESS AND CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE IN ANY MANNER. F URTHERMORE THE REVENUE HAS FAILED TO DEMONSTRATE AS TO HOW THE LOSS ON ACCOUNT OF SALE OF SHARES IS NOT GENUINE BUT A COLOURABLE DEVICE. WE TH EREFORE ANSWER THE SUBSTANTIAL QUESTION OF LAW NO.4 RAISED BY THE REVENUE AGAINST THEM AND IN FAVOUR OF THE ASSESSEE. 30. SINCE IN THE INSTANT CASE THE ASSESSEE HAS SUBMITTE D ALL THE DETAILS AND THE REVENUE AUTHORITIES HAVE NOT PROVED THE SE DOCUMENTS AS FALSE OR UNTRUE THEREFORE WE DO NOT FIND ANY REASON AS TO WHY THE LOSS OF SHARES SHOULD NOT BE ALLOWED AS BUSINESS LOSS. 31. WE FIND THE HONBLE SUPREME COURT IN THE CASE OF SUT LEJ COTTON MILLS SUPPLY AGENCY LTD. (SUPRA) HAS HELD THAT A SINGLE TRA NSACTION OF PURCHASE AND SALE OUTSIDE THE ASSESSEES LINE OF BUSINESS MAY CONSTITUTE AN ADVENTURE IN THE NATURE OF TRADE. IT IS NOT NECESSARY TO 21 ITA NO.2031/PN/2014 CONSTITUTE TRADE THAT THERE SHOULD BE A SERIES OF TRAN SACTIONS OF PURCHASE AND SALE. SIMILAR VIEW HAS BEEN TAKEN BY THE HO NBLE SUPREME COURT IN THE CASE OF G. VENKATASWAMI NAIDU AND C OMPANY (SUPRA). IT HAS FURTHER BEEN HELD THAT QUESTION AS TO WH ETHER A TRANSACTION IS ADVENTURE IN NATURE OF TRADE IS A QUESTION OF MIXED LAW AND FACT. EVEN AN ISOLATED SINGLE TRANSACTION MAY BE ADVE NTURE IN NATURE OF TRADE IF SOME OF ESSENTIAL FUTURE OR TRADE ARE P RESENT IN SUCH A TRANSACTION. IT HAS BEEN HELD THAT DECISION ABOU T CHARACTER OF A TRANSACTION AS TO WHETHER IT IS IN THE NATURE OF TRADE CANNOT BE BASED SOLELY ON APPLICATION OF ANY ABSTRACT RULE PRINCIPLE OR TEST AND MUST IN EVERY CASE DEPEND UPON ALL RELEVANT FACTS AND CIRCUMSTANCES . 32. WE FIND THE HONBLE BOMBAY HIGH COURT IN THE CASE O F NEW PRAHLAD MILLS PVT. LTD. VS. CIT REPORTED IN 85 ITR 480 HAS HELD AS UNDER (SHORT NOTES) : HELD THAT THE LOSS OF RS.5 44 580/- SUFFERED BY THE A SSESSEE ON THE SALE OF SHARES WAS A TRADING OR REVENUE LOSS WHICH WAS ALLOWA BLE IN COMPUTING ITS BUSINESS INCOME. THE THREE RELEVANT ANN UAL GENERAL MEETINGS OF JUPITER WERE ON JULY 17 1947 JUNE 7 1 948 AND SEPTEMBER 15 1949. ON NONE OF THOSE DATES DID THE ASSESSEE HAVE C ONTROL OVER MORE THAN 50 PER CENT OF THE VOTING RIGHTS IN JUPITE R EVEN IF THE HOLDING OF EAST AND WEST IN JUPITER WAS TAKEN INTO ACCOUNT TH E TRIBUNAL HAVING FOUND THAT THE ASSESSEE HAD COMPLETE CONTROL OVER EAST AND WEST. WHAT WAS EVEN MORE SIGNIFICANT WAS THAT THOUGH THE ASSESSEE TH ROUGH ITS OWN HOLDING AND THE HOLDING OF EAST AND WEST IN JUPITER HAD TO CONTROL MORE THAN 50 PER CENT VOTING RIGHTS IN JUPITER IN FEBRUAR Y 1948 IT SOLD 70 000 SHARES OF EAST AND WEST IN APRIL 1948 AND IT ALSO SOLD 63 000 ORDINARY SHARES AND 25 000 PREFERENCE SHARES OF JUPITER IN JANUA RY 1949. THOSE SALES FALSIFIED THE THEORY THAT THE ASSESSEE HAD PURCHASED THE SHARES FOR ACQUIRING CONTROL OVER THE AFFAIRS OF JUPITER PURCHA SED THE SHARES WITH A VIEW TO BOOSTING UP THEIR PRICES AND SELLING THEM AT A N INFLATED PRICE. THE ASSESSEE SUCCEEDED IN SELLING THE SHARES AT AN INFLATED PRICE BUT IT HAD MADE ITS OWN PURCHASES AT SUCH A HIGH PRICE THAT TH E ADVENTURE LANDED IT IN A LOSS OF RS.5 44 580/-. WHETHER AN ASSESSEES TRANSACTION AMOUNT TO DEALING IN SH ARES OR TO INVESTMENT IS A MIXED QUESTION OF FACT AND LAW AND THE LEGAL EFFECT OF THE FACTS FOUND BY THE TRIBUNAL ON WHICH THE ASSESSEE COULD BE TREATED AS A DEALER OR AN INVESTOR IS A QUESTION OF LAW.. 22 ITA NO.2031/PN/2014 IT WAS ACCORDINGLY HELD THAT THE LOSS OF RS.5 44 580/- SUFFE RED BY THE ASSESSEE ON THE SALE OF JUPITER SHARES AND EAST AND WES T SHARES IS A TRADING OR REVENUE LOSS WHICH IS ALLOWABLE IN COMPUTING ITS B USINESS INCOME (PAGE 488 AND 489) 33. IT HAS BEEN HELD IN VARIOUS DECISIONS THAT EVERY BU SINESS DECISION BY AN ASSESSEE MAY NOT RESULT INTO PROFIT. SOMET IMES THE ASSESSEE MAY HAVE TO INCUR LOSS ALSO. THEREFORE MERELY B ECAUSE THE ASSESSEE HAS INCURRED LOSS ON ACCOUNT OF PURCHASE AND SALE OF SHARES THE SAME CANNOT BE TREATED AS NON-GENUINE AND SHAM E SPECIALLY WHEN THE VARIOUS OTHER DOCUMENTS FURNISHED BY THE ASSE SSEE HAVE NOT BEEN PROVED TO BE FALSE OF BOGUS. 34. SO FAR AS THE DECISION OF THE MUMBAI BENCH OF THE TR IBUNAL IN THE CASE OF BOMBAY OIL INDUSTRIES LTD. (SUPRA) WHICH HAS BE EN RELIED ON BY THE AO AND CIT(A) IS CONCERNED WE FIND THE SAID DEC ISION IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AND IS DISTINGU ISHABLE. THE TRIBUNAL HAS GIVEN A FINDING THAT IN THAT CASE THE ASSESSE E HAD RESORTED TO DEVICE OF MANIPULATED TRANSACTION BY PREPARIN G CERTAIN DOCUMENTS AND AGREEMENT SO THAT IT CAN BOOK SUBSTANT IAL CAPITAL LOSS IN ORDER TO SET OFF CAPITAL GAIN THAT AROSE FROM LIQUIDATION OF ONE OF ITS OWN COMPANY. FURTHER THE SALE WAS MADE TO A RELATED P ARTY WHO WAS UNDER THE CONTROL AND INFLUENCE OF THE ASSESSEE COMP ANY BECAUSE OF THE BUSINESS CONNECTION AND WAS THE MAIN DIS TRIBUTOR OF THE PRODUCTS OF THE COMPANY IN WHICH THE DIRECTORS OF TH E ASSESSEE HAD A MAJORITY STAKE. THE IRREGULARITIES IN THE DOCUMENTA TION AND FLOW OF FUNDS BETWEEN THE PARTIES WAS ALSO POINTED OUT BY THE AO. HOWEVER IN THE INSTANT CASE NEITHER THE TRANSACTIONS AR E BETWEEN RELATED PARTIES NOR THE REVENUE HAS POINTED OUT THAT T HE ASSESSEE HAS 23 ITA NO.2031/PN/2014 RESORTED TO DEVICE OF MANIPULATED TRANSACTION BY PREPARIN G MANIPULATED DOCUMENTS. AS MENTIONED EARLIER NEITHER THE A SSESSEE NOR THE INVESTEE NOR THE PURCHASER COMPANY ARE RELATE D TO EACH OTHER. THEREFORE THE DECISION RELIED ON BY THE AO AND TH E CIT(A) IN OUR OPINION ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 35. SO FAR AS THE ARGUMENT OF THE AO WITHOUT PREJUDICE THAT THE LOSS CAN BE ALLOWED AS A LONG TERM CAPITAL LOSS SINCE BUYING AND SELLING OF SHARES IS NOT THE BUSINESS OF THE ASSESSEE COMP ANY IS CONCERNED WE HAVE ALREADY NOTED FROM CLAUSE 19 OF THE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE COMPANY (COPY OF WHICH IS PLACED AT PAGE 44 OF THE PAPER BOOK) THAT THE ASSESS EE CAN ACQUIRE TAKE UP AND HOLD SHARES STOCKS DEBENTURE STOCK BONDS OBLIGATIONS AND SECURITIES OR GUARANTEED BY ANY COMPANY CONSTITUTE D OR CARRYING ON BUSINESS IN INDIA ETC. ETC. SINCE THE SHARES ARE OF U NLISTED COMPANY AND HAVE BEEN HELD FOR LESS THAN 36 MONTHS THE REFORE IT IS NOT A CAPITAL ASSET. IN VIEW OF THE ABOVE DISCUSSION WE A RE OF THE CONSIDERED OPINION THAT THE CIT(A) WAS NOT JUSTIFIED IN DIS ALLOWING THE CLAIM OF BUSINESS LOSS OF RS.3 28 00 000/-. WE THEREFORE S ET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ALLOW T HE CLAIM OF BUSINESS LOSS. THE GROUND RAISED BY THE ASSESSEE IS ACC ORDINGLY ALLOWED. 36. GROUND OF APPEAL NO.2 BY THE ASSESSEE READS AS UNDER : 1. THE LEARNED TAXING AUTHORITIES BELOW HAD ERRED I N REJECTING THE REVALUATION OF STOCK OF LAND AT HYDERABAD AT NET REA LIZABLE VALUE AND MAKING AN ADDITION OF RS.90 62 325/-. JUST AND PROPE R RELIEF MAY BE GRANTED TO THE APPELLANT. 24 ITA NO.2031/PN/2014 37. FACTS OF THE CASE IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESS EE HAS CLAIMED OPENING STOCK OF LAND AT HYDERABAD AS ON 01-04-2 009 AT RS.90 63 325/- WHEREAS THE CLOSING STOCK OF THE SAID LAND A S ON 31-03-2010 HAS BEEN SHOWN AT RS.1 000/- ONLY . THE AO THEREFORE ASKED THE ASSESSEE TO JUSTIFY THE ABOVE CLAIM WHICH HAS RESULT ED INTO CLAIM OF BUSINESS LOSS OF RS.90 62 325/-. THE ASSESSEE CONTENDED THA T IT HAS PURCHASED LAND FROM VARIOUS AGRICULTURISTS AT HYDER ABAD AFTER OBTAINING OPINION FROM RETIRED HIGH COURT JUDGE WITH THE OBJ ECT TO DEVELOP THE SAID LANDS BY WAY OF FUTURE PROJECTS. HOWEVE R ON A LATER DATE IT WAS FOUND THAT THE TITLE OF THE SAID LAND IS NOT CLE AR AND VARIOUS LITIGATIONS WERE PENDING IN RESPECT OF THE SAID LANDS . CONSIDERING THESE FACTS THE LAND HAS BEEN VALUED AT TOKE N AMOUNT OF RS.1 000/-. 38. HOWEVER THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND DISALLOWED THE CLAIM OF LOSS OF RS.90 62 325/ - BY OBSERVING AS UNDER : 'I AM UNABLE TO ACCEPT THE FACT THAT THE ASSESSEE WHO H AS BEEN IN THE REALITY BUSINESS WOULD HAVE MADE AN INVESTMENT OF RS . 90 63 325/- IN THE LAND AT HYDERABAD WITHOUT ASCERTAINING WHETHER IT WA S GETTING A CLEAR TITLE. NO DOCUMENTARY EVIDENCE HAS BEEN FILED BY THE ASSESSEE TO ESTABLISH THAT IT DOES NOT HAVE A CLEAR TITLE TO THE LAND PURC HASED IN HYDERABAD AND THE RECOURSE IT HAD TAKEN TO RECOVER ITS MONEY OR OBT AIN A CLEAR TITLE TO THE LAND. AS IN THE CASE OF PURCHASE AND SALE OF SHARE OF WE STERN MEDICAL SOLUTIONS PVT. LTD THE DOWNWARD REVISION OF THE VALU E OF THE LAND AT HYDERABAD TO A TOKEN VALUE OF RS. 1 000/- APPEARS TO HAVE BEEN DONE PRIMARILY TO REDUCE THE TAXABLE INCOME OF THE ASSESSEE AND EVADE PAYMENT OF TAX.' IN SUPPORT OF THE ABOVE DECISION OF HOLDING THE CLAI M OF LOSS OF RS.90 62 325/- AS NON-GENUINE THE A.O. HAS RELIED ON THE RATIO LAID DOWN IN THE CASE OF HELA HOLDINGS PVT. LTD VS. CIT [2003] 263 ITR 129 (CALCUTTA) AND ALSO ON THE RATIO LAID DOWN BY HON'BL E SUPREME COURT IN THE CASE OF UOI VS. AZADI BACHAV ANDOLAN [2003] 263 I TR 706 (SC). 25 ITA NO.2031/PN/2014 39. BEFORE CIT(A) IT WAS SUBMITTED THAT THE ASSESSEE COMPANY HAD VALUED STOCK-IN-TRADE I.E. WORK-IN-PROGRESS ON ACCOUNT OF HYDERABAD LAND PROJECT SHOWN IN STATEMENT OF WIP AS PER CONSISTEN T METHOD OF STOCK VALUATION I.E. AT COST OR MARKET PRICE WHICHEVER IS LOWER AS STATED IN FORM NO. 3CD SR. NO . 12(A). BEFORE PURCHASE OF THESE LANDS THE ASSESSEE COMPANY HAD OBTAINED AN OPINION FROM RETIRE D HIGH COURT JUSTICE. AS PER THIS OPINION THE ASSESSEE COMPANY H AD INVESTED THE FUNDS IN THESE LANDS WITH THE OBJECTIVE TO DEVELOP T HESE LANDS FOR FUTURE PROJECTS. AFTER PURCHASE OF THESE LANDS AND FILING OF APPLICATION FOR MUTATION ENTRY IN LAND RECORDS WITH LOCAL LAND REVENU E AUTHORITIES IT HAS BEEN REVEALED THAT THE TITLES FOR THE LAND PRODUCED B Y THE SELLERS WERE DEFECTIVE AND THERE WERE PROBLEMS OF OWNERSHIP. THE ASSESSEE COMPANY HAD FILED PETITION WITH HIGH COURT AURANGABAD. 40. AFTER GOING THROUGH THE BACK HISTORY OF THE LAND IT H AS BEEN REVEALED THAT THERE IS NO POSSIBILITY OF GETTING THE TITLES RECTIFIED AND THERE IS REMOTE POSSIBILITY OF GETTING THE LANDS REGISTERED IN THE NAME OF THE ASSESSEE COMPANY IN THE RECORDS OF LAND REVENUE AUTHORITIES. CONSIDERING THE LEGAL AND FACTUAL POSITION THE ASSESSEE COM PANY HAD TAKEN A DECISION TO VALUE THE LAND AS STOCK IN TRADE AT A NOMINAL VALUE OF RS. 1000/-. ACCORDINGLY THE VALUE HAS BEEN REFLECTED IN WORK-IN- PROGRESS. IT WAS ACCORDINGLY REQUESTED TO ALLOW THE RE DUCED VALUE OF STOCK OF HYDERABAD LAND PROJECT AT RS. 1000/- AND DE LETE THE ADDITION OF RS. 90 62 325/- MADE BY THE AO. 41. HOWEVER THE CIT(A) ALSO WAS NOT SATISFIED WITH THE ARGU MENTS ADVANCED BY THE ASSESSEE AND UPHELD THE ORDER OF THE AO BY OBSERVING AS UNDER : 26 ITA NO.2031/PN/2014 7.3 I H AVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND RIV AL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOTIC ED THAT THE APPELLANT HAS CLAIMED TO HAVE PURCHASED LAND AT HYDE RABAD FOR CONSIDERATION OF RS.90 63 325/-. THE APPELLANT HAS CLA IMED THAT THE SAID LAND WHICH IS UNDER LITIGATION AND TITLE OF WHIC H IS NOT CLEAR HAS BEEN PURCHASED ON THE BASIS OF OPINION OF RETIRED HIGH COURT JUDGE. THE APPELLANT HAS FURTHER CLAIMED THAT IN THE YEAR U NDER APPEAL IT HAS BEEN NOTICED THAT THE SAID LAND IS NOT HAVING CLEA R TITLE AND IS UNDER LITIGATION AND HENCE THE VALUE OF THE SAID LAN D HAS BEEN CLAIMED BY THE APPELLANT AS CLOSING STOCK AT RS.1 000/- AS TOKEN AMOUNT. THE ABOVE CONTENTIONS OF THE APPELLANT ARE N OT SUPPORTED BY ANY EVIDENCE AS NO EVIDENCE IN SUPPORT OF THE ABOV E CLAIMS HAS BEEN FILED EITHER BEFORE THE A . O. OR BEFORE THE UNDERSIGNED . IT IS SETTLED POSITION OF LAW THAT THE CLAIMS OF EXPENDITURE BUSINESS LOSS DEDUCTIONS ARE TO BE SUPPORTED BY EVIDENCE AND THE ASSE SSEE IS DUTY BOUND TO PROVE THE SAID CLAIMS WITH EVIDENCE. THEREFO RE IN THE ABSENCE OF ANY EVIDENCE IN SUPPORT OF THE ABOVE MENTI ONED REVALUATION OF CLOSING STOCK OF LAND WHICH HAS RESULTED INTO BUSINESS LOSS OF RS.90 62 325/ - THE CLAIM OF THE APPELLANT IS REJECTED. THE ADDITION OF RS.90 62 325/ - IS ACCORDINGLY CONFIRMED. GROUND NO.3 IS DISMISSED. 42. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT OF LANDS. ACCORDINGLY THE ASSESSEE HOLDS LANDS AT VARIOUS PLACES W HICH WERE PURCHASED FROM TIME TO TIME FOR THE PURPOSE OF DEVELOPMEN T THE ASSESSEE HAD PURCHASED PLOTS OF LAND FROM 8 PARTIES IN T OTAL. THE DETAILS OF WHICH ARE ENCLOSED AT PAGES 80 TO 233 OF THE PAPER BOOK. HE SUBMITTED THAT THESE LANDS WERE PURCHASED ON VARIOUS DATES IN THE YEAR 2007 AND WERE HELD AS STOCK IN TRADE IN THE BOOKS OF THE ASSESSEE WHICH IS CLEAR FROM SCHEDULE 10 AND 11 COPY OF WHICH IS PLACED AT PAGE 21 OF THE PAPER BOOK AND THE DETAILS OF CLOSING STOCK ARE AS PER PAGE 34 OF THE PAPER BOOK. HE SUBMITTED TH AT AFTER PURCHASE OF THE LANDS THESE LANDS WERE REGISTERED IN THE LAND RECORDS IN THE NAME OF THE ASSESSEE. THEREAFTER THE ASSESSEE RECEIVED NOTICES OF CAVEAT APPLICATION FILED BY SMT. K. RAJITHA WIFE OF K. VENTAIAH REDDY AND OTHERS AGAINST THE ASSESSEE AND VARIOUS OTH ER PERSONS FOR CANCELLATION OF SALE DEEDS UNDER WHICH LAND WAS PURCHASED BY THE ASSESSEE COMPANY BY CONTENDING THAT THE TILES FOR LAND P RODUCED BY 27 ITA NO.2031/PN/2014 THE SELLERS WERE DEFECTIVE AND THERE WERE PROBLEMS WITH T HE OWNERSHIP OF LAND. 43. REFERRING TO PAGES 321 TO 341 OF THE PAPER BOOK TH E LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE GOVT. OF AND HRA PRADESH REGISTRATION AND STAMP DEPARTMENT PASSED ITS ORDER DAT ED 12-08-2008 WHEREIN THE REGISTRATION OF LAND IN THE NAME O F THE ASSESSEE AND VARIOUS OTHER PERSONS WERE CANCELLED. HE S UBMITTED THAT THE CANCELLATION OF THE LAND IN THE NAME OF THE ASSESSEE COMPANY ARE MENTIONED ON PAGE NO 329 AND 330 OF THE PAPER BOOK. I N THE SAID ORDER THE LD AUTHORITY HAS OBSERVED ON PAGE 2 (PAGE 322 OF THE PAPER BOOK) THAT THE ALLEGED LAND GRABBERS (BEING THE PARTIES W HO HAVE SOLD PLOTS OF THE LAND TO THE ASSESSEE) WITHOUT ANY INTEREST R IGHT TITLE AND IN COLLUSION WITH THE CONCERNED REGISTRATION AUTHORITY AND IN CONSPIRACY FOR EXTRANEOUS CONSIDERATION TO GRAB THE PRO PERTIES HAVE BROUGHT INTO EXISTENCE THE REGISTERED SALE DEEDS IN RESP ECT OF PROPERTIES MENTIONED IN ANNEXURE II (WHICH IS INCLUSIVE OF THE ASSESSEE'S PROPERTY) AND THAT THE CONCERNED REGISTERING AUTHORITY WITHOUT STRICTLY FOLLOWING THE MANDATORY PROVISIONS OF THE R EGISTRATION ACT 1908 AND INSTRUCTION OF THE GOVERNMENTS FROM TIME TO TIME TO BE FOLLOWED FOR REGISTRATION OF DOCUMENTS AND MUCH LESS WITHOU T FOLLOWING THE MANDATORY PROVISIONS UNDER SECTION 6D OF THE A.P. RIGHTS IN PATTEDARI PASS BOOKS ACT 1971 PROCEEDED WITH REGISTRATION OF SUCH DOCUMENTS EVEN WITHOUT VERIFYING THE TITLE DOCUME NTS AND LINK DOCUMENTS OF THE EXECUTANTS IN THE DOCUMENT IN ANNE XURE II IN QUESTION. 28 ITA NO.2031/PN/2014 44. THE AUTHORITY FURTHER OBSERVED IN PAGE 7 OF THE ORDE R (PAGE 327 OF THE PAPER BOOK) THAT IT IS ALLEGED IN ALL THE DOCUMENTS IN ANNEXURE II REPRESENTED VENDEES WHO WERE RECENTLY ARRESTED IN VIKARABAD TOWN BY POLICE FOR CREATING FALSE AND FAKE DOCUMENTS OF ORIGINAL LAND OWNERS AND OTHERS VIDE LIST IN ANNEXURE II. THE PARTIES THEREFORE REQUESTE D THE AUTHORITIES TO CANCEL ALL THE DOCUMENTS REGISTERED WITHOUT TITLES ILLEGALLY. THEREAFTER THE AUTHORITY HAS EXAMINED THE CASE IN DETAIL INCLUDING THE DOCUMENTS OBTAINED FROM SUB REGISTRAR. 45. FROM THE RECORDS IT WAS NOTICED THAT THE 38E CERTIFIC ATE HOLDER OWNERSHIP HAS NOT BEEN UPDATED IN REVENUE RECORDS IN M RO SHAMIRPET (PAGE 334 OF THE PAPER BOOK). FURTHER THE AUTH ORITY HAS ALSO OBSERVED THAT CERTAIN PARTIES WERE MISLED BY BROKER GURU SWAMI WHO TOOK THEM TO THE REGISTRATION OFFICE AND OBTAINED THE IR SIGNATURES AND TOLD THEM THAT THEY HAVE TITLE AND THAT THEY HAVE RECEIVED CONSIDERATION. (PAGE 336 OF THE PAPER BOOK) 46. IT IS F U RTHER NOTED THAT FEW PURCHASERS AS PER DEPOSITION NO (8 ) PURCHASED PROPERTIES WITHOUT VERIFYING TITLE AND MADE THEIR DEC ISI O N TO PU RCHASE PROPERTIES PURELY ON T H E STRE N GT H AND RE P UTATION OF T H E I N D IVIDUAL. (PAGE 337 OF THE PAPER BOOK). THE A U THORITY HAS CONC L U D ED THAT THE ABOVE P ARTIES HAVE CAS H E D ON THE LACUNAS IN P AHANI UPDATING AN D THE LACK OF P ROPER SCRUTINY BEFORE REGISTRATION BY THE SUB- REGISTRAR AND REGISTERING AUTHORITY WHICH P RECIPITATED THE ISSUE.( PAGE 338 OF THE PAPER BOOK). TH U S F R O M THE AB O VE ORDER IT IS EVI D ENT T H AT THE ASSESSEE AN D MANY OT H ER PURC H ASERS WERE FOO L ED INTO P U R CHASING L AND FRO M CERTAIN IMPOSTERS W H O HA D C L AIMED TO HAVE COMP L ETE OWNERSHIP / TITLE TO THE PROPERTY. FURTHER SINCE THERE WAS LACK OF UPDATING OF RECORDS OF REGISTRATION BY THE SUB-REGISTRAR THE ASSESSEE 29 ITA NO.2031/PN/2014 EVEN THOUGH TRIED HIS BEST COULD NOT HAVE FORESEEN THE LEVEL OF SCHEMING INVOLVED. 47. ON RECE I PT OF THE AB O VE OR D ER T H E ASSESSEE REA L ISE D THAT THE R E WAS NO POSS IB I L ITY OF GETTING T H E T I T L ES RECT I FIE D A ND T H ERE WAS RE MO TE POSSI B I L ITY OF GETT I NG THE LAN D REGISTERED IN ITS NA M E. HENCE T H E ASSESSEE DECIDE D TO REVALUE THE LAND AT TOKEN VALUE OF RS 1000/- AFTER TAKING THE FACTS AN D LEGAL ISSUES INTO CONSIDERATION . 48. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT T H E ASSESSEE IS A DEVELOPER CUM B U ILDER AND THE P L O TS OF LAND ARE STOCK-IN-TRADE FOR THE ASSESSEE W H ICH HAS A L SO BEEN N OTED BY T H E AO IN T H E ASSESS M E N T OR D ER. T HU S THE LOSS INCURRED ON ACCO U NT OF DEFECT IN TIT L E OF T H E OWNERS HIP OF THE LAND AND SUBSE Q UENT CANCELLATION OF OWNERSHIP OF LAND IN ASSESSEES NA M E BY THE REGISTERING AUTHORITY IS CLEARLY A B USINESS LOSS WHICH IS CORRECTLY REFLECTED IN THE OPENING AN D CLOSING STOCK OF THE LAND. THE DECISION RELIED BY THE AO HAS NO AP PLICABILITY TO FACTS IN ASSESSEE'S CASE. TO SUBSTANTIATE HIS CASE THE L D. COUNSEL FOR THE ASSESSEE FILED CERTAIN ADDITIONAL EVIDENCES AND REQUEST ED THE BENCH TO ADMIT THE SAME AS THEY GO TO THE ROOT OF THE MATTER AND CLARIFY ALL DOUBTS RAISED BY THE AO AND CIT(A). 49. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEA L BEFORE US. 50. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE IN THE INST ANT CASE HAS SHOWN THE OPENING STOCK OF LAND AT HYDERABAD AS O N 01-04-2009 30 ITA NO.2031/PN/2014 AT RS.90 63 325/- WHEREAS THE CLOSING STOCK OF THE SAID LAN D AS ON 31-03-2010 WAS SHOWN AT RS.1000/-THEREBY CLAIMING BUSINE SS LOSS OF RS.90 63 325/-. WE FIND THE AO DISALLOWED THE CLAIM OF THE ASSESSEE TREATING THE LOSS AS NON-GENUINE ON THE GROUN D THAT ASSESSEE COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCE T O ESTABLISH THAT IT DOES NOT HAVE A CLEAR TITLE OF THE LAND PURCHAS ED IN HYDERABAD AND THE RECOURSE WHICH IT HAD TAKEN TO RECOVER ITS MON EY OR OBTAIN A CLEAR TITLE OF THE LAND. WE FIND THE LD.CIT(A) UPHELD THE ACT ION OF THE AO ON THE GROUND THAT THE ASSESSEE COULD NOT SUBSTAN TIATE WITH ANY DOCUMENTARY EVIDENCE TO SUPPORT ITS CLAIM THAT THE SAID LAND IS NOT HAVING CLEAR TITLE AND IS IN LITIGATION FOR WHICH THE VALUE OF T HE SAID LAND WAS SHOWN AT RS.1000/- AS AGAINST RS.90 63 325/- SHO WN AS THE OPENING VALUE. IT IS THE SUBMISSION OF THE LD. COUNSEL FO R THE ASSESSEE THAT THE GOVERNMENT OF ANDHRA PRADESH REGIST RATION AND STAMP DEPARTMENT HAS PASSED AN ORDER DATED 12-08-20 08 WHEREIN THE REGISTRATION OF THE LAND IN THE NAME OF THE ASSESSEE AND VARIOUS OTHER PERSONS WERE CANCELLED. WE FIND THE ASSESSEE DURING THE COUR SE OF HEARING BEFORE THE TRIBUNAL HAS ALSO FILED THE FOLLOWING DOCU MENTS AS ADDITIONAL EVIDENCE : 1. COPY OF CAVEAT FILED BY SMT. K. RAJITHA & OTHER S FOR CANCELLATION OF THE SALE DEEDS UNDER WHICH THE LAND WAS PURCHASED BY T HE ASSESSEE COMPANY (PAGE 234 TO 313 OF PAPER BOOK). 2. COPY OF NOTICES AND ORDER PASSED BY THE COMMISSIONER AND INSPECTOR GENERAL OF REGISTRATION AND STAMPS DEPARTME NT HYDERABAD FOR CANCELLATION OF REGISTRATION OF LAND IN FAVOUR O F ASSESSEE COMPANY AS VENDOR HAD NO TITLE FOR THE LAND SOLE TO ASSESSEE COMPAN Y (PAGE 314 TO 341 OF PAPER BOOK). 51. SINCE THESE ADDITIONAL DOCUMENTS WERE NOT PRODUCED B EFORE THE AO AND THE CIT(A) AND SINCE THESE DOCUMENTS GO TO THE ROOT OF THE MATTER WE ADMIT THE SAME. CONSIDERING THE TOTALITY OF THE FACTS OF THE 31 ITA NO.2031/PN/2014 CASE WE ARE OF THE CONSIDERED OPINION THAT THE MATTER R EQUIRES A RE- VISIT TO THE FILE OF THE AO IN VIEW OF THE ABOVE ADDITIONAL EVID ENCES. THE AO SHALL DECIDE THE ISSUE AFRESH AND IN ACCORDANCE W ITH LAW AFTER GIVING DUE OPPORTUNITY OF BEARING HEARD TO THE ASSE SSEE. WE HOLD AND DIRECT ACCORDINGLY. GROUND OF APPEAL NO.2 BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 52. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28-09-2016. SD/- SD/- (VIKAS AWASTHY) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE; ' DATED : 28 TH SEPTEMBER 2016. ) *# ! -!/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . 4. THE CIT(A) AURANGABAD THE CIT AURANGABAD 5. $ ''( ( / DR ITAT B PUNE; 5 . + / GUARD FILE. / BY ORDER // TRUE COPY // // $ ' //TRUE -. ' ( / SR. PRIVATE SECRETARY ( / ITAT PUNE