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Income Tax Appellate Tribunal - Delhi

Cea Consultants (P) Ltd. vs Ito on 19 December, 2003

Equivalent citations: (2004)87TTJ(DELHI)1146

ORDER

(Piva Singh, JM) This is an appeal filed by the assessee against the order dated 15/10/ 97 of Commissioner (Appeal)-X, New Delhi pertaining to 1995-96 assessment year.

2. The sole ground raised by the assessee reads as under:-

1. That on the facts and circumstances Of the case and in law the Commissioner (Appeal) erred in cafirming the action of the assessing officer in treating the long capital gain of Rs. 21,67,506 as taxable income of the appellant and not accepting the appellant's contention that the same was not chargeable to tax as per the provisions of section 47(iv) of the Income Tax Act, 1961.

2. That the order passed by the assessing officer and Commissioner (Appeal) are bad in law and void ab-initio."

3. The relevant facts of the case are that in the course of the assessment proceedings, the assessing officer observed that the assessee had made certain deduction from, the gross income profit on sale of investment. In view of the fact that no reason was given by the assessee for making the said deduction from sale of investments, the assessee was asked to submit the details of sales of investments. In response to this, it was stated on behalf of the assessee vide letter dated 20-12-1996 explaining that the shares were sold to M/s. S.W. Consultants (P) Ltd., wholly owned subsidiary company of the assessee company and, as such, the assessee was covered by exemption under section 47(iv) of the Act. The assessing officer observed from the details submitted by the assessee that M/s. S.W. Consultants (P) Ltd. had been claimed as a wholly owned subsidiary company of the assessee as on 21-3-1995 and on the very next day the shares amounting to Rs. 22,14,000 of M/s. Samtel Electronics Devices Ltd. were sold to M/s. S.W. Consultants (P) Ltd. Exemption under section 47(iv) of the Act was claimed on the profit from the sale of these shares of Rs. 21,67,406. The explanation of the assessee was not accepted and a show cause notice was issued. On the next date, the assessee sought an adjournment. In the circumstances, the assessing officer being of the view that undue delay was being caused by the assessee in producing the books of accounts and documentary evidence as asked for, therefore, issued an authorization under section 133A on 15-1-1997 to the assessee to identify the books of accounts. Despite the same, the books of accounts were not produced. Ultimately, summons under section 131 were issued to produce the same. The books accordingly were produced thereafter. From a perusal of the books of accounts, the assessing officer observed that the assessee company had claimed the purchase of shares of M/s. S.W. Consultants (which is claimed to be the subsidiary company of the assessee) from the following companies/individuals as on 21-3-1995, the details of which are as under:-

S.No. Name of the Company/Indv. from whom Shares were purchased No. of shares purchased Amount of purchase consideration

1.

2.

3.

4.

1.

Lenient Consultant (P) Ltd.

2400

2,40,000

2. Kaura Properties (P) Ltd.

1800

1,80,000

3. Satish Consultants (P) Ltd.

1410

1,41,000

4. Roxy Investments(P) Ltd.

1430

1,43,000

5. Tish Kaura (HUF) 1 100

6. Alka Kaura 10 1,000

7. Satish Kaura 10 1,000

4. The assessing officer observed that from the books, it could be seen that the share's from M/s. Lenient Consultants (P) Ltd. (hereinafter referred to as LCPC) were purchased on 27-3-1995 after passing the entry in the account of M/s. LCPL maintained by the assessee at page No. 6. He observed that it has been made after 27-3-1995 by putting the date as 21-3-1995 and crediting its account by an investment of Rs. 2,40,000. He further observed from a perusal of the cash book that on page 12, cheque dated 22-3-1995, for Rs. 35 lakhs has been entered in the cash book on 21-3-1995 by over-writing the originally recorded date of 23-3-1995. While in the copy of account of Oriental Bank of Commerce maintained by the assessee company in its books, this cheque has been debited to bank account on 23-3-1995 and the, same is the position of the other cheque No. 559.1231 for Rs. 1,50,000 issued or 23-3-1995-and cheque No. 559230 dated 23-3-1995 for Rs. 98,50,000 (for FDepartmental Representatives) were issued. he observed that the cash book also has been over written from 23-3-1995 to 26-03-1995.

5. From the same page 12 of the ledger, the assessing officer was of the view that it revealed that the purchase of investments of 7040 plus 21 shares of M/s. S.W. Consultants (P) Ltd. have been show as, investment purchased. He was of the view that the overwriting of the date in the cash book at page 13-further proved that the writing of books has been started by putting the date 24-3-1995 by crediting/debiting the cheque Nos. 341, 143, and 345 of Oriental Bank of Commerce, who are the assessee's bankers, and after 24-3-1995 it has been again started by putting the date 22-3-1995, by sale of investment of Rs. 22,14,000 which is the sale price of the shares sold to M/s. S.W. Consultants (P) Ltd. against which the exemption, under section 47(iv) has been claimed. Further, on 23-3-1995, he observed the assessee has shown by passing the entry of Rs. 22,14,000 in the name of M/s. S.W. Consultants (P) Ltd. the purchase of 22140 shares of Rs. 100 each and thereafter only on 26-3-1995, a cheque No. 342 has been issued for Rs. 15 lakhs on account of purchase from M/s of shares of M/s Samiel India Ltd. from Frontline Securities Ltd.

Thus, he was of the view that the cheque No. 347 which has been claimed to be paid to M/s. LCPL has been issued only after 26-3-1995 and not on 21-3-1995, as was evident from cheque No. 342 entered in the cash book on 26-3-1995.

6. Similarly, he observed, from that the account of Shri S.K. Kaura from whom 10 shares have been shown as purchased on 21-3-1995 and cheque No. 228 has been issued against the purchase of the same also substantiated the same facts as mentioned in the earlier case. In the account of Shri S.K. Kaura, he noted the over-writing has been made to put 21-3-1995 on the date 23-3-1995 which had already recorded.

7. He further took cogent note of the fact that right from the beginning with effect from 1-4-1994 upto 31-3-1995, no balances, have been drawn in the books of accounts. On account of these circumstances, he rejected the books of accounts of the assessee invoking the provisions of section 145(2) holding as under:

"6. Since the assessee has not maintained its accounts regularly, therefore, the assessee vide this office letter dt. 20-2-1997 was asked to explain its reasons with regard to the discrepancies pointed out and to give its jurisdiction and was required to explain as to why the books of accounts maintained for the assessment year 1995-96 should not be rejected in view of the provisions of section 145(2) of the Act and the investments made through the above transactions should not be considered as an after thought to avoid tax liability accrued on the same transactions of shares of M/s. S.W. Consultants (P) Ltd. for which the exemption under section 47(iv) of the Act has been claimed."

8. The rejection of the assessee's books of accounts under section 145(2) was objected by the assessee which has been brought out in paragraph 7 of the assessment order. It was further stated on behalf of the assessee referring to the Sale of Goods Act, 1930 that a sale contemplates.

"(i) a seller and a purchaser, i.e., parties competent to contract,

(ii) mutual assent,

(iii) passing of property and

(iv) price to be paid.

Section 2(2) defines 'delivery' to mean 'voluntary transfer of possession, from one person to another'. Thus, in this background, it was argued. that the delivery of goods sold may be, made by doing anything which the parties is accruing, which it was argued should be treated as delivery or which has the effect of putting the goods in the possession of buyer or any person authorized to hold them on his behalf. In support of its claim, the assessee enclosed photocopies of share transfer forms, share certificates to show the application of shares to transfer in the name of the assessee company signed on 21-3-1995 and, accordingly, it was this date which is the date of recognition mentioned on the back side of share rertificates.

9. Perusing the same, the assessing officer observed that the assessee has tried to explain as under:

"Thus the assessee has tried to explain that the transactions of the shares were completed on 21-3-1995. The contention of the assessee that application to transfer the shares in the name of the assessee company from shareholders was made on 21-3-1995. and was also transferred in the name of the company on the same date is not reliable because it is very strange to, believe that a person who is not maintaining its accounts regularly, how can he put the application on the same day to transfer the shares. It will not be out of place to mention here that the Managing Director of the assessee company is also the director of the company transferring the shares to assessee company, i.e., Mrs. Dolly Sethi who has signed both the documents i.e., share transfer forms as well as the share certificate and both the companies are maintaining their offices in the same premises and under the same roof.

Further it is also clarified that share certificates are not the goods which could be treated under the Sale of Goods Act. It is simply a document and sale of document can only be considered or the sale transaction can be completed when it is actually received by the purchaser and handed over by the assessee. In this case a certificate from M/s. LCPL, which is a sister concern of the assessee company in which Mrs. Dolly Sethi is a common director, has delivered the shares only after 27-3-1995 as it is evident from the copy of account of M/s. Lenient Consultants (P) Ltd. that investment has been handed over after 27-3-1995. However date has been put up as 21-3-1995."

10. The assessing officer, further taking various other discrepancies which have been discussed in paragraph 8 of the assessment order came to the conclusion that the books of accounts of the assessee are not reliable and, as such, deserve to be rejected under section 145(2). Ultimately, after discussing the peculiar facts and circumstances of the assessee's case and taking note of the fact that the assessee has not maintained its books of accounts in a methodical manner and they are not in accordance of , the accounting principles. Thus, in view of these facts and lack of chronological order in the recording, he concluded that on the date of sale, the assessee company did not have 100% shares of the company M/s. S.W. Consultants (P) Ltd. on the date of transaction, i.e., 22-3-1995, Paragraphs 9, 10 & 11 read as under:-

"9. Further it is also concluded that the assessee has purchased the shares of M/s. S.W. Consultants (P) Ltd. after the date of transaction of sales of shares of M/s. Samtel Electronics Devices Ltd. for an amount of Rs. 22,14,000 to M/s. S.W. Consultants on 22-2-1995. Since the assessee company does not have 100% shares of the company M/s. S.W. Consultants (P) Ltd., alleged to be wholly owned subsidiary company, on the date of transactions, i.e., as on 21-3-1995, therefore, the transactions made for the sales of shares to M/s. S.W. Consultants attract the provisions of gection 145, and it does not qualify for exemption under section 47(iv) of the Act. The assessee has tried to give a colourable device to the whole show to avoid the incidence of taxation of capital gains by following such tactics. My this view has been fully supported by the decision of the Hon'ble Supreme court in the case of Macdowell Co. (P) Ltd. v. Commercial Tax Officer, () 154 ITR 148 wherein it has been held that tax planning may be legitimate provided it is within the framework of the law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges. The proper way to construe taxing statute, whole considering a device to avoid tax, is not to ask whether the provisions should be construed literally or liberally nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax and whether the transactions is such that the judicial process may accord its approval to.

10. The aforesaid discussion clearly establishes that the assessee has not maintained its account books in a methodical manner and also not in accordance with the accounting principles. The assessee also failed to explain properly and satisfactorily the discrepancies pointed out to it through show cause notice dated 20-12-1996.

11. From the above facts it is concluded that M/s. S.W. Consultants (P) Ltd. was not wholly owned and the subsidiary company on the date of transaction, i.e., 22-3-1995 of the assessee company. Therefore, exemption under section 47(iv) is not allowable. Hence the income from the sale of shares to M/s. Samtal Electronics Ltd. is assessed as the income of the assessee company for the year under consideration. "

11. Aggrieved by this, the assessee went in appeal before the first appellate authority. A perusal of the impugned order shows that the Commissioner (Appeal) reproduced the letter of the assessing officer dated 20-2-1997 at page 2. An extract from the same for ready reference is being reproduced here for ready reference to show the notice to which the assessee was put to by the assessing officer:.

"From a perusal of cash book maintained for the financial year 1994-95 relevant to the assessment year 1995-96 at page No. 12 & 13 it is seen that the date mentioned 21-3-1995 has been overwritten to date 23-3-1995 and the cheque payment of Rs. 35 lakhs vide Ch.No. 228509 dated 22-3-1995 has been shown on 21-3-1995 wherein in bank account it has been entered on 23-3-1995. On page No. 13 of cash book; the writing of books was started on 24-3-1995 after making the entries of Ch.No.341, 343, 344 and 345 but after the date on 24th again entry has been passed mentioning the date 22-3-1995 and thereafter 23-3-1995, then started from 26-3-1995. On Page No. 37 of ledger in the account of Oriental Bank of Commerce. Cheque No.341, 343 to 345 issued on 24-3-1995 and Ch.No. 342 on 26-3-1995 while Ch. No. 346 to 349 on 21-3-1995. Out of these four, Cheque No.347, 348 and 349 were issued to purchase the share of M/s. S.W. Consultants. These clearly reflect that the books of accounts have not been maintained on day-to-day basis. The investment of purchases has been shown when it came to the notice of the assessee that the transfer of shares of Rs. 22,14,000 of Samtel Electronics Device Ltd. to M/s. Consultants (P) Ltd. will attract the capital gains as per provision of section 45 of the Income Tax Act. The transaction of investment made by the assessee seems to be made after thought and after making the company as subsidiary company, it has tried to claim the capital gain exemption under section 47(iv) of the Income Tax Act 1961. Since the assessee has not maintained the books of accounts on day-to-day basis and transactions have been made after thought, the books of accounts need to be rejected as per the provisions of section 145(2) of the Income Tax Act 1961. Therefore, the assessee is provided an opportunity to explain as to why the books of accounts maintained for the assessment year 1995-96 should not be rejected and the exemption claimed under section 41(iv) should not be disallowed."

12. Before the Commissioner (Appeal), it was contended on behalf of the assessee that none of the reasons given by the assessing officer justified the denial of claim under section 47(iv) of the Act. Similarly, the assessing officer's action in invoking the provisions of section 145(2) was also assailed. It was further contended that there may be certain irregularities in posting certain transaction in the books of accounts and the observation that the assessing officer has failed to point out any single transaction which has either been omitted. or suppressed or inflated and the objection of the assessing officer did not have any ramification on the assessee's claim of exemption under-section 47(iv). The argument was put forth that the cash book was more in the nature of a journal. So, even if some transactions were recorded not directly chronologically, there is no vital effect unless and until the assessee has omitted or suppressed or inflated. An attempt was made to distinguish the facts of the present case from the principle laid down in the Mcdowell's case. The Commissioner (Appeal) forwarded the written submissions to the assessing officer who sent his comments by letter dated 9-9-1997:-

"3.d) The assessing officer in his comment has stated at para 8 of his letter that the accounts of M/s. Lenient Consultant (P) Ltd. maintained by the assessee company. demonstrated that the purchase of shares of Rs. 2,40,000 have been made after 27-3-1995 while the date of purchase has been shown as 21-3-1995 as this entry has been made after 27-3-1995. It is further mentioned by the assessing officer that the contention of the assessee that since the contract of purchase & sale of share has been made on 21-3-1995, therefore, the transactions of sale and purchase of shares is also on the same date, is not correct because since the seller had purchased the same; he can only rely upon the books of accounts of the assessee and the same demonstrates that the purchase of shares have been made after 7-3-1995. The assessing officer has further observed that by merely putting the date on cheque does not demonstrate the actual date of cheque issuing."

13. The Commissioner (Appeal) forwarded the comments of the assessing officer to the assessee. response to which, the counsel on behalf of the assessee reiterated his earlier submissions made either before the assessing officer or in his written submissions filed the course of the hearing, before the CIT assessment year Considering the same, the Commissioner (Appeal) dismissed the ground of the assessee holding as under:-

"3.e) I have considered the facts of the case and submission, of the assessee. The assessment officerhas examine thoroughly whether M/s. S.W. Consultant (P) Ltd. is wholly owned subsidiary company of the assessee company. In the course of assessment proceedings, the assessing officer required the assessee to produce the books of accounts which were not produced immediately. Therefore, the assessing officer took action under section 133A but in the course of survey under section 133A, the books of accounts were not produced. Subsequently, summon under section 131 was issued to produce the books of accounts. In response to which the books of accounts were produced which were examined by the assessing officer and in the course of examination of various account relating to purchase of shares. of M/s. S.W. Consultant (P) Ltd. The assessing officer observed that these books of accounts cannot be relied due to various defects noticed which has been mentioned in detail in his assessment order. The assessee in the course of assessment proceedings tried to explain the discripency notice by the assessing officer but the facts remains that there have been lot of erasing, cuttings, interpolating of dates of transactions relating to purchase of shares of M/s. S.W. Consultant (P) Ltd, Therefore, the assessing officer has come to the correct conclusion that the books cannot be reified upon. What the assessing officer intended to say is that the assessee cannot justify its claim that shares of M/s. S.W. Consultant (P) Ltd., were purchase on 21-3-1995 with the help of various entries in the books of accounts and this is correct decision of the assessing officer In view, of the various defects pointed out by the assessing officer in his assessment order. The learned Counsel has argued that books of accounts are not very much relevant so 'far' as computation of income from capital gain is concerned but at the same time he tried to justify the claim that M/s. S.W. Consultant (P) Ltd., was 100% wholly owned subsidiary company of the assessee company with the help of various entries in the books of accounts. So there is apparent contradiction in the approach of the learned Counsel in defending his case, I have, examined the various submissions of the learned Counsel made before me in support of the claim that the 2400 shares of M/s. Lenient Consultant (P) Ltd. was actually purchase on 21-3-1995 and it is noticed, that whatever documents have been filed ln support of the claim are such which cannot be regarded as an independent evidence and there is lot of possibility of adjustment and accommodation between the 2 parties concerned as they are very much closely related. The only, independent evidence which can be helpful in deciding the issue, is the payment of consideration, from the examination of details it is seen that though the assessee had issued cheque of Rs. 2,40,000 by giving date of 21-3-1995, the amount was actually debited in the account of the assessee on 31-3-1994 as it is evident from the bank statement of the appellant company. Therefore, it is clear that the company M/s. S.W. Consultant (P) Ltd. has become 100% wholly owned subsidiary company only after 21-3-1995. Therefore, the assessing officer has rightly come to the conclusion that the assessee is not entitled for examination under section 47(iv) of the LT. Act 1561. The decision of the assessing officer is upheld."

14. Learned authorised representative of the assessee reiterated the submissions made at length before both the tax authorities. It was vehemently contended by him that how the entries in the books of accounts are made is not relevant for the purpose of capital gain and looking at the documents upon which the assessee has placed reliance, the credibility of the documents for establishing the dates, it was stated cannot be doubted. Referring to section 47(iv) of the Act, it was contended that exemption available under the Act operates in favour of the assessee. Our attention was invited to paper book pages 102, 105 and 68. The dates mentioned therein, it was contend supports the case of the assessee. It was further contended that what the tax authorities were treating as a cash book is actually a journal and the chronology of dates is not relevant therein. It was further contended that there is no dispute over the fact that the shares of M/s. S.W. Consultants (P) Ltd. have ultimately been transferred. It was also contended that simply because as per the bank pass book, the cheques have been cleared on 31st March it does not militate against the claim of the assessee. Referring to pages on which the assessee had placed reliance in the paper book and the observations of the tax authorities, it was put by the Bench to the learned authorised representative that most of the entries are over-written (pages 3 & 6). Referring to page 69, it was contended that the cheque of Rs. 2,40,000 was cleared on 23rd March Relying upon CIT v. Moon Mills Ltd. () 59 ITR 574 (SC), it was contended that section 145(2) has no application for computation of capital gain. (page 106) It was contended that section 13 of the old Act corresponding to section 145 pages 77 to 89 was highlighted by the assessee before the assessing officer. Attention was also invited to page 49 which is the Board of Directors' Resolution. Page 18 showing the share transfer for a valid agreement was also highlighted. The date mentioned therein, i.e., 21st March was emphasized. The paying slips copy of which is appended at pages 71 to 74 so as to highlight the dates on which the cheques were deposited. It was stated that the crucial question of transfer is the issue and when does it take place for which purpose pages 90 to 91 extract front Ramaiya's Commentary on the Companies Act, 8th Edition was also. pressed-It was contended that the assessing officer has not appreciated the significant difference between a cash book and a day book. Pages 75 and 76 of the paper book were also relied upon. Reliance was further placed upon 151 ITR 122 and 99 ITR 101. It was stated that like in a trial balance, some entries are at times missed out and thus while balancing an accountant cannot insert an entry anywhere so he has to put it afterwards and it is an accepted accounting practice. It was further stated that the quest ion of common directors is not relevant as entities are separate. Thus, heavily relying upon the fact that the assessing officer has erred in treating the day book as a cash book and treating the bank and journal/transfer entries as cash transactions, it was contended that in the circumstances, paying undue importance to over-writing in cash/day book pages 13 and 12, the assessing officer has erred in invoking section 145. It was further contended that the assessment has been framed under section 143(3) and not under section 144. In fact, referring to pages 9 to 15 and 16 to 48, it was contended that the assessing officer has admitted that issuing of cheques does not demonstrate that the assessee has purchased the shares on the same date which would amount to stating that it is further necessary that delivery and subsequent registration must also be made so as to suggest that the transaction is made from a particular date. However, despite this, the assessing officer has altogether ignored reference to any such documentation and chose to base his decision on mere book entries. Despite noting the fact that the transaction is made between two associate concerns, it was argued where the signatories are common, the assessing officers are skeptical to the fact that both delivery and registration are completed on the same date. It was further contended that common directors and common place of business are not prevented under the law. In fact, section 275 of the Companies Law allows a person to be a director in twenty companies. It was further contended that the assessing officer is mistaken in stating that shares in the case of M/s. Lenient Consultants are handed over on 25-5-1995 merely on the basis of his reference to the account books ignoring the handing over letters on 21-3-1995.

15. Learned Departmental Representative on the other hand, placed reliance on the orders of the tax authorities. It was contended by him that the shares of Samtel Electron Devices have been sold to, M/s. S.W. Consultants and subsequently, the assessee has attempted to create devices so as to get the benefit of section 47(iv) on the sale of these shares on which capital gains is attracted. Thus, the issue which boils down is whether on 22-3-1995 the date on which the shares stood transferred was the company a wholly owned company or not for the purposes of section 47(iv). Referring to the orders of the tax authorities, it was contended that the department's case is very clear and despite the assessee's hesitancy in producing its books of accounts initially when subsequently they were caused to be produced. The assessing officer has made an attempt to point out and give cogent reasons that the assessee has resorted to a strategy and attempted to stage manage the dates to show that the sale was made subsequently to M/s. S.W. Consultants when it became a 100% subsidiary. Referring to the speaking observations of the tax authorities, it was pointed out that the assessee has tried to variously contend that section 145(2) is not relevant or that the dates and sequence of events has no relevance and ultimately to argue that as a result of the arrangement of events sale of shares to subsidiary company is not a taxable event for section 47. However, the assessee his not been able to substantiate its claim despite the fact that the assessing officer gave him sufficient and specific opportunity to do the same and even today, the assessee has largely, argued on various issues without meeting the specific requirement which would make its case. Referring to pages 11 and 12 paragraphs 8 and 10 of the assessment order, it was contended that the assessing officer leas specifically met the objections of the assessee and rejected them by way of a speaking order. The cuttings in the account which the assessee is contending is not relevant and deserve to be ignored is borne out from page 68 of the paper book which clearly supports the observations of the assessing officer and canvasses against the arguments advanced by the assessee. It was vehemently contended that this page of the paper book which militates against the assessee is from assessees own paper book and when the assessing officer has used the words that the assessee has not maintained its account in a methodical manner, he is aware of what he is doing it was contended that the transactions have to be recorded in a chronological, order. Referring to the said page and other, copies in the books, it was contended that apart from the fact that there was no sequence or chronology, it was also a fact that the cuttings, i.e., without any initials which shows that the person making the cuttings has not even bothered to Initial the correctness of the accounts.

Referring to the show cause notice issued by the assessing officer which has been' reproduced by the Commissioner (Appeal) in his order, it was contended that the assessee was put to notice that he was not showing his taxable income properly. CIT v. McMillan & Co. () 33 ITR 182 (SC) was also relied upon. Referring, to pages 75 & 76, it was contended that the CBDT Circular No. 704 dated 28-4-95 pertain to the transactions taking place in stock exchange for the purpose of working out long term and short term capital gain so as to work out what is the holding period which would be the determining factor in coming to the conclusion that the capital gains is Short terns or long term capital gain. Thus, it was contended that the Circular is relevant when the date of transfer is not in doubt and will not help the assessee in. establishing that the transfer took place subsequent to, the company becoming a 100%.subsidiary company. It was contended that the specific case of the revenue has not been met by the, assessee even today, i.e., the transfer took plate prior to becoming a 100% subsidiary. The fact that subsequently it became a 100% subsidiary is not in doubt.

The case of the revenue, it was argued, is that on the date of transfer it was not a 100% subsidiary company. However, it was reiterated, the revenue's case is borne out by the evidence on record which is that the transfer is subsequent to the date from which the assessee presents to the department and on the date, the shares were sold, the, alleged company is not a 100% subsidiary company. The fact that it became 100% subsidiary company ultimately is, not in dispute or not an issue in the present proceedings.

16. It was further. contended. that the pers6ns concerned were related. It was further stated that M/s. S.W. Consultants was held by seven entities all related to the assessee. The directors and holders of the assessee company and M/s. S.W. Consulates were largely common. The documents were signed by these signatory parties who were common in all the, entities and the addresses are also common. In these circumstances, the documents by which the assessee is trying to advance its case are all internal. It was argued, however cleverly the assessee on subsequently waking up decided to straighten its case so as to bring it within the ambit of the section but as a result of the frequent cuttings without initials, lack of chronology, etc., and other defects pointed out in the orders it was emphasized the assessee could not despite its best effort wipe out the evidence against itself. Reliance was placed upon CIT v. Durga Prasad More () 82 ITR 540 (SC) and Sumati Dayal v. CIT () 214 ITR 801. Referring to page 3, it was contended that the documents are self-serving documents. The fact that they are genuinely of the date which the assessee wants to contend has strongly been doubted by the revenue by giving speaking and cogent reasons. It was contended that the assessee was very certain, that it can manage its affairs in such a manner so as to avail of the exemption under the Act. However, it has not been able to cover its case very carefully and has left huge glaring defects while trying in a hurried manner to present to the department a different date than the actual date when the transaction took place. Thus, the signing of documents presenting these to various parties related to the assessee and, in fact, from the same premises was something which was very much in the hands of the assessee and thus, it could easily be managed and, hence, managed. However, as far as the recording of events in a chronological manner, etc., was concerned, there the assessee had to resort to cutting and striking and overwriting its own documents and books without initialing. Similarly, it was argued, the transactions with the bank the assessee could not manage to record a sequence to fit itself. These are the touchstones on which the assessee could not lay its hands to manipulate where its case fails. The assessee, it was argued, lost sight of the fact that the document inter-se parties could easily be arranged but payments have to be made so as to substantiate the claim of genuineness for which the bank pass book is the only evidence. The fact that payments have ultimately been made is not in dispute. The point is that on the date the payments were made, the transactions prior to that are not covered by the umbrella of 100% subsidiary company. Here again, even in the cheque book, the assessee's version fails by the defect of chronological events. The consistent refrain of the assessee that chronology is not a necessary requirement by itself is not a sufficient argument because the fact remains that the transactions as advanced by the assessee did not inspire confidence. Accordingly, it was argued that the assessee has not been able to establish its case. It was further contended that the remand report of the assessing officer has also been considered which has been confronted to the assessee. With regard to the reply of the assessee that the bank did not honour the cheque in view of the fact that the assessee did not have funds referring to pages in the paper book, it was contended that the assessee had made a FDepartmental Representative of Rs. 1 crore on 23rd March. which is the reason that the assessee did not have funds. It was contended that this FDepartmental Representative was made by the assessee on 23rd March which cannot be lost sight of and the cheques. were issued subsequently although the assessee has tried to argue that the cheques were issued on 21st March. Thus, it was contended that the cheque which the assessee is alleging had been issued on 21st March has been actually issued on 23rd March and presented. on the same day and in view of the fact that the assessee on the said date made a FDepartmental Representative as a result of which it was not honoured by the bank Reiterating and relying upon the Nations of the assessing officer that the assessee has stage managed, it was contended that the case of the assessee does not inspire confidence in any manner at any stage. Referring to the conduct of the assessee before the assessing officer relying upon the observations made in the assessing officer it was pointed that the assessee was reluctant in producing its books despite a specific direction The assessing officer ultimately issued an authorization, without result under section 133A and, thereafter, only after summons were issued did the assessee produce the books. It was pointed that the assessee has claimed that his books are up to date. Thus, in the circumstances, as discussed by the assessing officer, it was questioned does the assessee not know the books have to be presented in the head office and produced before the tax authorities for examination of the same. Reiterating his submissions and referring to page 68, it was contended that the surrounding circumstances, clearly operate against the assessee. Various pages in the paper book of the assessee were referred to so as to contend that the internal documentation which the assessee could manage at its own and itself has many defects.

17. In reply, learned authorised representative contended that simply because the directors are common, this fact itself is not a sufficient ground for the department to doubt the genuineness of the assessee's claim. Referring to pages 24 and 25 to which learned Departmental Representative invited attention, it was contended that the learned Departmental Representative had not taken into consideration page 26 of the paper book which specifically mentions the amount. With regard to the fact that the shares of M/s. Samtel Electronics Devices have not been sold in the Outside market, it was argued that the idea was not profit.

18. We have heard the rival submissions and perused the material placed on our files and taken ourselves at length through the orders of the tax authorities. After a careful perusal of the entire facts and circumstances and material on record as well as the position of law, we are of the view that in the peculiar facts and circumstances of the case, there is no reason or basis to interfere with the orders of the tax authorities. After a careful analysis of the arguments advanced on behalf of either side vis-a-vis the evidences in support of the assessee's claim, we find ourselves unconvinced and unable to accept the version of the assessee. We have taken note of the fact that the assessee despite being put to specific notice by the assessing officer to the view taken by him of the deduction claimed by the assessee has been reluctant to show its books of accounts and when ultimately it has been made to produce the same, generalistic arguments have been advanced so as to argue that the chronology of events is not a requisite criteria on the basis of which, the assessee's claim can be disregarded. Even for a moment the assessee's version is accepted and one goes alongwith the arguments advanced that merely because certain entries are not recorded in a chronological manner, even then, the frequent cuttings not initialed, the entries in the cheque books as well as entries as per the bank documents takes away the credibility of the assessee's version. At every step, the, assessee's version does not hold water and shows the claim to be unsupported and, as such, unacceptable. The case law relied upon by the assessee also does not advance its case in view of the fact that the revenue is not doubting the facturn of the transaction. The case of the revenue is that the transaction took place prior to the time when the company was not a 100% subsidiary. The case of the revenue is not that the company is not a 100% subsidiary company but the fact that when the transaction took place, the company was not a 100% subsidiary company. As such, the exemption granted by section 47(iv) would not be available to the said transaction. After a careful perusal of the orders of the tax authorities and the evidence and document relied upon by the assessee, it cannot be said that the revenue has proceeded whimsically on conjectures and surmises or carelessly in evaluating the evidences filed by the assessee in support of the same. It is seen that each and every evidence has been evaluated, cross-checked and confronted to the assessee and apart from advancing generalistic arguments and relying upon decisions which are not relevant to the issue at hand or the Circular of the Board which is entirely in a different context and is, in fact, for the purposes of working out whether a particular transaction would qualify for a long term or short term capital gain does not advance the case of the assessee in any manner. The speaking observations in the assessment order qua the evidences relied upon by the assessee have not been successfully rebutted. The generalistic arguments against the action of the tax authorities do not help. the case of the assessee. Again, even if for a moment the arguments of the assessee a re accepted to the extent that simply because the parties with whom the transactions had taken place are related parties which by itself does not erode the credibility of the evidence but when the only documents which the assessee can rely upon to canvass its version is the various internal documents, transfer certificates, the Resolution of the Board, etc., then the cuttings/striking out without initialing, the lack of recording in a methodical manner in recording the transactions not only in the cash book/journal but even in the cheque books and the only evidence of an outside authority, i.e., the banks all of it put together speaks volumes against the assessee's version. Resorting to the Ramaiaya's Commentary to which our attention has been invited, it is seen also is of no help because the principle of the judgment relied upon therein is entirely in a different, context. In fact, on the touchstones of the principles as laid down by the Apex Court in the oft cited judgment of the Supreme Court in the case of CIT v. Durga Prasad More cited supra and the principles enunciated in the case of Sumati Dayal again of the Supreme Court, supports the case of the revenue.

19. We have also taken into consideration the decision of the Madras High Court in the case of CIT v. M. Ramaswamy and the Apex Court in the case of CIT v. McMillan & Co. relied upon by the assessee. Whereas the former is rendered in a different context, the latter in fact operates against the assessee and is on the aspect whether the first appellate authority can review the view taken by the Income Tax Officer with regard to the method of accounting.

20. Thus, after a careful analysis and consideration of the entire material available on record as well as the judgments relied upon, we are of the view that in the facts and circumstances of the case, the assessee fails miserably. The grounds raised by the assessee, as such, for the reasons recorded in the orders of the tax authorities and discussed hereinabove at length, are rejected.

21. In the result, the appeal filed by the assessee is dismissed.