Income Tax Appellate Tribunal - Chandigarh
Sh. Avtar Singh, Sirsa vs Department Of Income Tax on 8 November, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH 'A' CHANDIGARH
BEFORE Ms.SUSHMA CHOWLA, JUDICIAL MEMBER
AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER
ITA No. 948/CHD/2011
Assessment Year: 2008-09
ACIT, V Shri Avtar Singh,
Sirsa. S/o Shri Gurdial Singh,
13/526, Near Govt.School,
Khairpur, Sirsa.
PAN: ASZPS-7135B
&
ITA No. 949/CHD/2011
Assessment Year: 2008-09
ACIT, V Smt.Harjit Kaur,
Sirsa. M/s Punjab Palace &
Guest House, Hissar Road,
Sirsa.
PAN: AKBPK-3415G
&
ITA No. 950/CHD/2011
Assessment Year: 2008-09
ACIT, V Smt.Surinder Kaur,
Sirsa. W/o Shri Mukhtiar Singh,
622, Street No.2,
Gobind Nagar, Hissar Road,
Sirsa.
PAN: AOQPK-8694G
&
ITA No. 951/CHD/2011
Assessment Year: 2008-09
ACIT, V Smt.Gurdeep Kaur,
Sirsa. W/o Shri Kaka Singh,
622, Street No. 7,
Gobind Nagar, Hissar Road,
Sirsa.
PAN: AUXPK-7283J
(Appellant) (Respondent)
Appellant by : Shri N.K.Saini
Respondent by : Shri D.K.Goyal
Date of Hearing : 08.11.2012
Date of Pronouncement : 29.11.2012
2
ORDER
PER MEHAR SINGH, AM
These above captioned four appeals filed by the Revenue, were considered and adjudicated by the CIT(Appeals), by way of a common order dated 28.07.2011, passed u/s 250(6) of the Act (hereinafter referred to in short as 'the Act'). The issue involved in these four appeals is identical one and pertains to the claim of short term capital loss, made by the assessee appellants, in respect of share transactions, entered into with a Hissar based unlisted company, namely M/s ARCEE Ispat Udyog Ltd.
2. As the grounds of appeal, in these four appeals are identical, except a variation of quantum of short term capital loss claimed by each assessee appellant, the grounds of appeal raised in ITA No. 948/Chd/2011 in the case of Shri Avtar Singh S/o Shri Gurdial Singh, are reproduced hereunder as an illustrative case :
"1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in allowing the assessee' s claim of short term capital loss on sale of shares without appreciating the facts of the case.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in allowing short term capital loss on sale of shares without appreciating the fact that the transactions of purchase and sale of shares was nothing but a colourable device to reduce the incidence of tax & the case of the assessee is fully covered by the judgment of the Hon'ble Supreme Court in the case of Mcdowell & Co. Ltd. Vs CTO 154 ITR 148 (SC)
3. The Appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed off."3
3. In the course of present appellate proceedings, ld. 'DR' made a combined submission, in respect of all these appeals and stated that the transactions of purchase and sales of shares are merely make-believe version, with a view to procuring artificial and non-genuine short term capital loss, for the sole premeditated purpose of reducing the tax, on capital gains, arose out of sale of land by the assessee appellants. Ld. 'DR' vehemently contended that the transactions of purchase and sales of shares, needs to be examined, in the light of date and rate of purchase and sale of such shares. The shares were allotted by the company to such persons who are basically farmers. The transactions were not routed through Stock Exchange or recognized share broker. He, also pointed out, to the factum that the assessee appellants offered to surrender, before the AO, short term capital loss, in respect of claim made in their respective return of income, with a view to buy peace of mind and subject to no-penal action against them. In view of this, ld. 'DR' vehemently contended that it is a case of self-admission of sham transactions entered into by the assessee, without there being any commercial contents therein. Ld. 'DR' placed reliance on the two direct decisions of the jurisdictional High Court, in the case of Balbir Chand Maini V CIT and another 340 ITR 161 (P&H) and Somnath Maini V CI T 306 ITR 414 (P&H). In the ultimate analysis, ld. 'DR' contended that CIT (Appeals) has completely disregarded the entirety of the surrounding facts and circumstances of the 4 case and allowed the appeals of the appellants, without bringing cogent and corroborative evidence on record, to support the genuineness of such transactions. Ld. 'DR' placed reliance on the order passed by the AO and findings contained therein and prayed for restoration of the findings of the AO.
4. Ld. 'AR' , on the other hand, contended that AO failed to make requisite enquiries as highlighted by the CIT(Appeals), in his findings and consequently, findings of the CI T(Appeals) be upheld. Ld. 'AR', further, contended that the order passed by the CIT(Appeals) doesn't suffer from any infirmity, hence, the same deserves to be upheld.
5. We have carefully perused and considered the rival submissions, facts of the case and the relevant available records, Paper Book and relevant orders passed by lower authorities, including the judicial precedents, relied upon by the parties. The neat and undisputed facts of the case are that the assessee appellants sold land which resulted in short capital gains. Subsequently, the assessee appellants purchased shares on 8.11.2007, @ Rs.100/-, per share, from M/s Arcee Ispat Udyog Ltd., Hissar, a company which is not listed, in any Stock Exchange, in India. The said company allotted shares to the appellant. The appellants, within a short span of time, chose to dislodge the shares to M/s TCG Stock Broking Ltd., New Delhi and consequently sold the same, on 31.3.2008, @ Rs.10/-, per share. The shares were allotted by the unlisted company M/s Arcee Ispat Udyog Ltd., On 8.11.2007, @ Rs.100/-, per 5 share and the same were sold (transferred) by the appellants, on 31.3.2008, to share broker M/s TCG Stock Broking Ltd., Rs.10/- per share. It is very interesting and abnormal feature of such share transactions that M/s TCT Stock Broking Ltd. sold (transferred) these shares, on 12.8.2008, @ Rs.100/- per share, to Mrs. Krishna Gupta, wife of Shri R.C.Gupta, MD and also one of the Directors in her own capacity M/s Arcee Ispat Udyog Ltd. Such is the circular route of share transactions, resorted to by all the assessee appellants. However, the brief facts, in tabular form, of the case of the appellants as recorded by CI T(Appeals), in para 2 of the impugned appellate order, demonstrating such transactions, are reproduced hereunder :
Sr. Particulars Smt. Harjit Smt. Surinder Smt. Gurdeep Shri Avtar No. Kaur Kaur Kaur Singh
i) Returns of income
(a)Date of filing 30.05.2008 31.07.2008 31.07.2008 30.05.2008
(b) Income 2,39,91,210/- 2,27,98,710/- 41,00,420/-(pages 59,21,770/-
declared (pages 1 to 3 of (pages 16 to 18 of 31 to 32 of the (pages 44 to 45 the Paper Book) the Paper Book) Paper Book) of the Paper Book)
ii) Sources of Running Guest Salary, House Interest income Interest Income other House and Property and income than capital interest income interest income gain
iii) Short Ter m Capital Gain
i) Gain on Land 3,82,78,693/- 3,82,78,693/- 1,36,84,500/- 1,36,84,500/-
ii) Loss on Shares
a) M/s Arcee 22,50,000/- 18,00,000/- 45,00,000/- 22,50,000/- Ispat Udyog Ltd.
b) GEEFCEE 1,25,71,248/- 1,40,22,562/- 51,58,864/- 54,89,821/- FINA/ other shares
iii) Sub-total 1,48,21,248/- 1,58,22,562/- 96,58,864/- 77,39,821/-
iv) Short Term 2,34,57,445/- 2,24,56,131/- 40,25,636/- 59,44,679/-
Capital Gain 6 5(i) The AO disallowed such short term capital loss as claimed by the appellants, by way of recording detailed findings, in the respective assessment order, each dated 22.12.2010, passed u/s 143(3) of the Act. It would be pertinent and appropriate, to reproduce the findings of CIT(Appeals), with a view to appreciating the same and analyzing the grounds and material, which inspired the CIT(Appeals), to reverse the findings of the AO. The relevant findings of the CIT(Appeals) are reproduced hereunder:
"5. I have carefully considered the issue and the submissions made by the AR. The AO made independent third party enquiries from M/s Arcee Ispat Udyog Ltd. regarding the purchase & sale of shares resulting in short term capital loss, the subject matter of adjudication. M/s Arcee Ispat Udyog Ltd. furnished the details of allotment advise, ledger folios etc. to the AO. The AO has not disputed that the company allotted shares to the appellant and further the said shares have been sold to M/s TCG Stock Broking Ltd., as evident from the show cause notice issued by the AO dated 1.12 .2010 (Further, the appellant furnished the purchase & sale bills, details of purchase & sale considerations through bank etc. Once there is an independent confirmation, disallowing the claim of loss by rejecting the documentary evidence furnished by the appellants is not justified. Before embarking upon the action of disallowing the claim, the AO should have conducted necessary enquiries and come to appropriate conclusion as per the evidence collected after giving due opportunity to the appellant. The AO failed to discharge the burden on him to establish that the appellant did not purchase or sell the shares. If the AO was of the opinion that requisite evidence needs to be collected, it is his duty to summon the relevant parties and examine them as held in a number of case laws including that cited by the AR.. The AO however has not undertaken the above course of action. The AO concluded that the entire set of transactions are sham and bogus based on the details furnished by the appellant and M/s Arcee Ispat Udyog Ltd. and the offer letter of the appellant withdrawing the loss claimed subject to no penal action, without conducting necessary enquiries.
5.1 The fact that the appellant admittedly acted imprudently by either purchasing shares at higher than the book value or selling at 10% of the purchase can not be valid ground to deny the loss incurred on purchase 85 sale of shares. There is no provision in the Act for substitution of actual sale consideration except u/s 50C, which is not applicable to the facts of the case. Mere fact that the rates are not acceptable to the AO as they are either low or high can not be ground to reject the claim of the appellant as held by Hon'ble Apex Court to the 7 case of CIT Vs Karam Chand Thapar 85 Bros. (P) Ltd. (supra). While dismissing the appeal of revenue, their lordships held as under:-
It is necessary to set out a few facts for an appreciation of the controversy in this appeal. In its assessment for the assessment year 1959-60, the respondent-assessee claimed deductions, inter alia, in respect of the loss on the sale of certain shares of Bharat and Chemicals Ltd. and Greaves Cotton and Co. Ltd. for the relevant previous year. The respondent-assessee had sold in the relevant previous year 25,000 shares of Bharat Starch and Chemicals Ltd. to K.C. Thapar and Sons Ltd., a company belonging to the same group. These shares were purchased on February 22, 1958, and were sold on March 31, 1959. The loss claimed was o/C 26,465. The Income-tax Officer concerned disallowed this loss on the ground that the sale price was shown at C 2.50 per share whereas the market quotation on March 31, 1959, was C 8.06 per share. The Income-tax Officer also relied upon the circumstance that the shares had been sold to a company which was an allied concern of the assessee, that is, belonging to the Thapar group. The Income-tax Officer took the view that the sale had been effected only to enable the assessee to claim the loss and could not be allowed as genuine. The respondent-assessee had also sold 3,000 shares of Greaves Cotton and Co. Ltd. on February 4, 1959, to K.C. Thapar and Sons Ltd. and claimed a loss o/C 47,878.55 on this transaction. The Income-tax Officer held that these shares had also been sold to a company belonging to the Thapar group and under the control of that group. The Income-tax Officer took the view that the motive for selling the aforesaid shares and some other share was to make losses and set them off against the profits and these transactions could not be considered to be in the normal course of business. He held that this type of transaction could not be regarded as genuine and disallowed the claim.
The Tribunal also pointed out that the circumstance that the were between companies in which the Thaper group had a controlling interest and also in respect of shares of companies belonging to the same group by themselves would not support the conclusion that the transactions were stage- managed, although it might arouse suspicion and call for closer scrutiny. In respect of both the said lots of shares, the Tribunal pointed out that there was nothing to show that the purchase of these shares had anything to do with the control of the companies concerned. The Tribunal relied upon the circumstance the sales were at the market rates or going rates and hence there was no question of making bogus loss. On the basis of these conclusion, the Tribunal held that the losses in respect of the sales of shares of Bharat Starch and Chemicals Ltd. as well as Greaves Cotton and Co. Ltd. were liable to be allowed as business losses".
5.2 Further, Hon'ble Calcutta High Court in the case of Britannia Industries Ltd. Vs DCIT & Ors. 238 ITR 57 after considering the basic judgment of Hon'ble Apex Court in the case of K.P. Verghese 131 ITR 597 (SC) held that no capital gain be taxed unless it is proved that there is an underhand dealing and consideration has passed more than that shown in the deed.
5.3 The AO, relying upon the case laws of JiyaJeerao Cotton Mills Ltd. Vs CIT 85 EFT (supra) and McDowell and Co. Ltd. Vs CTO (supra) , held that the appellant employed colorful device to evade tax. He has however not brought any material on record to come to the said conclusion. The Hon'ble Apex Court had an occasion to examine the ratio of the above 8 mentioned judgments in the case of Azad Bachao Andolan Vs UOI (supra) wherein their lordships have held as under:-
If the Court finds that notwithstanding a series of legal steps taken by an assessee, the intended legal result has not been achieved, the Court might be justified in overlooking the intermediate steps, but it would not be permissible for the Court to treat the intervening legal steps as non-est based upon some hypothetical assessment of the 'real motive' of the assessee-Court must deal with what is tangible in an objective manner and cannot afford to chase a will-o'-the-wisp-There is no change in the fiscal jurisprudence in India-Not only is the principle in Duke of Westminster alive and kicking in England, but it also seems to have acquired benediction of the Constitutional Bench in India, notwithstanding the temporary turbulence created in the wake of McDowell.
From the above legal position laid down by the Hon'ble Apex Court it is pertinent that it would not be permissible to come to adverse conclusion based upon some hypothetical assessment of the real motive of the appellant.
5.4 Coming to the issue of offer of surrender by the appellant, it is seen that this offer subject to no penal action, has been declined by the AO. Even otherwise, an admission can not be foundation for assessment as held in the case of Abdul Quayum Vs CIT (supra). It has been held in the case of Pullangode Rubber Produce Co. Ltd. Vs Swift of Kerala 91 ITR 18 (SC) by the Apex Court that it is open to the assessee who made the admission to show that it is incorrect.
5.5 In the case of CIT Vs B.M. Kharwar (supra) it was held that legal relation alone can determine the taxability of receipts arising from the transactions. In this case their lordship held as under:-
Taxing authorities are not entitled, in determining whether a receipt is liable to be taxed, to ignore the legal character of the transaction which is the source of the receipt and to proceed on what they regard as "the substance of the matter"-Revenue authorities are entitled and bound to determine the true legal relation resulting from a transaction and unravel any device to conceal such relation.
If the said principle is applied to the facts of the appellant, all the elements of a transaction i.e. purchase & sale of shares along with requisite documentary evidence is available and therefore the addition made by the AO would be unsustainable and untenable.
5.6 On similar facts, the jurisdictional High Court in the case of CIT Vs Anupam Kapoor 299 ITR 179 (P&H) held as under :-
The Tribunal on the basis of material on record, held that purchase contract note, contract note for sales, distinctive number of shares purchased and sold, copy of share certificates and the quotation of shares on the date of purchase and sale were sufficient material to show that the transaction was not bogus but a genuine transaction. The purchase of shares was made on 28th April, 1993 i.e., asst. yr. 1993-94 and that assessment was accepted by the Department and there was no challenge to the purchase of shares in that year. The shares were sold through a broker, who was a registered broker of the stock exchange on 9 the relevant date. It was also placed before the relevant AO as well as before the Tribunal that the sale proceeds have been accounted for in the account of the assessee and were received through account payee cheque. The Tribunal took into consideration that the AO had not dealt with all the documents placed before him and had simply presumed that transaction was bogus.
The Tribunal was right in rejecting the appeal of the Revenue by holding that the assessee was simply a shareholder of the company. He had made investment in a company in which he was neither a director nor was he in control of the company. The assessee had taken shares from the market, the shares were listed and the transaction took place through a registered broker of the stock exchange There was no material before the AO, which could have lead to a concision that the transaction was simplicitier a device to camouflage activities, to defraud the Revenue. No such presumption could be drawn by the AO, merely on surmises and conjectures. The Tribunal rightly relied on C.Vasantlal and Co. vs. CIT [1962] 45 ITR 206 (SC), M.O. Thomakutty vs. CIT [1958] 34 ITR 501 (Ker) and Mukand Singh vs. Sales Tax Tribunal [1998] 107 STC 300 (Punjab). It was for the AO, who has reopened the assessment to have sought some evidence on record, to substantiate his formulation of consideration that the assessee has not filed a return bona Me. The Tribunal also took into consideration that it was only on the basis of a presumption that the AO concluded that the assessee had paid cash and purchased the cheque. In the absence of any cogent material in this regard, having been placed on record, the AO could not have reopened the assessment. The assessee had made an investment in a company, evidence whereof was with the AO. Therefore, the AO could not have added income, which was rightly deleted by the CIT (A) as well as the Tribunal. It is settled law that suspicion, however strong cannot take the place of legal proof, as has been held by Hon'ble Supreme Court in the case of Umacharan Shaw and Bros. CIT 11959] 37 FTR 271 (S.C)."
5.7 In view of the above, the disallowance made by the AO of the claim of Short Term Capital Loss is deleted and the ground of appeal is allowed."
5(ii) Similarly, it is essential to reproduce the findings of the AO, in the matter, for the purpose of properly appreciating the same :
"The reply filed by the assessee has duly been considered and is found to be devoid of any merits. The assessee has admittedly never before entered into any transaction in shares before he earned huge amounts of short-term capital gains on the sale of some lands attracting substantial liability of tax payments. The contention of the assessee that in a frenzy to swiftly multiply its capital he was misguided by brokers / fixers to invest in the shares of M/s. Arcee Ispat Udyog Ltd., Hisar; is a subjective statement which is not amenable to any verification. There is no reason that friends etc. should ill-advise the assessee for no gain of theirs. Thus, in the absence of any piece of material evidence; the simple statement of the 10 assessee that he incurred loss in the shares of M/s. Arcee Ispat Udyog Ltd., Hisar due to misguidance is nothing but a routine contention which is unworthy of any credence. Besides, the plea of the assessee that loss was incurred due to sudden global economy melt down which crashed the share market is also devoid any merits in so far as the company under reference is a very small company whose shares are not listed with stock exchange to have any impact of the so called melt down more so there was no such trend in the share market as claimed; when the assessee allegedly entered into the share transactions of the company; as early as in Nov, 2007. Although investment in purchase of shares and sale proceeds of shares were made/ received by cheques but the claim of the assessee that the security transactions were as per SEBI rules is not acceptable as I neither the company was listed with any stock-exchange nor the transactions have been carried out through 'D-Mat' A/c. The argument of the assessee that the proposed disallowance of loss from the said company is in vagary and this outlawry is not maintainable. The taxing authority is not only entitled but bound to determine the genuineness of the transactions if the parties have chosen to conceal by a device; the true character of the transaction and thereby reduced the incidence of tax. The assessee had earned huge amounts of short term capital gains which obviously attracted heavy amounts of tax liability. It is not disputed that the assessee is not entitled to so arrange his / her affairs as to avoid the burnt of taxation but the arrangement must be real and genuine.
The Hon'ble Apex Court of India in Jiya Jeerao Cotton Mills Ltd. Vs. CIT & EPT 1958] 34 ITR 888 has observed.
"Every person is entitled to so arrange his affairs as to avoid taxation but the arrangement must be real and genuine and not a sham or make believe "
Further; the argument of the assessee that allotted shares of M/s. Arcee Ispat Udyog Ltd., Hisar were sold by him to M/s.TCG Stock Broking Ltd., New Delhi and if the impugned shares were further sold by the latter party to the former is not the assessee's concern and has got no bearing on his taxing matters; is not acceptable. It is a fact that the shares of face value of Rs.10/- each which were allotted to the assessee @ Rs. 1007- per share were ultimately and after the lapse of a small period of time; purchased by the company (its director) @ Rs.10/- per share through a broker to give colour of genuineness to the transactions. The assessee has not been able to give any convincing reply as to why he opted for making such a huge amount of investment in the purchase of shares of a company which admittedly did not have any popular brand name and whose shares are not quoted and then sold at such a low price without there being any business expediency. The genuineness of the rate of allotment (purchase) thus remains to be proved w.r.t. any market rate comparison or any other basis to justify the same. In fact, it is nothing but an attempt made by the assessee to purchase short-term capital loss by way of the above said transactions and thereby to reduce the incidence of tax. 11
However, it is also pertinent to mention that despite arguing the case on different aspects of the issue regarding claim of loss on the sale of impugned shares; the assessee has deemed it desirable under the given facts and circumstances of the case; to withdraw his claim of loss on these shares though in the name of routine excuse of 'buying peace1 and to come out of the trauma of litigation. Actually, it is as a result of the exposure of the colourable device adopted by the assessee to dodge the revenue and also to control the damage involved in the consequential penal action likely to be taken against him that the assessee is constrained to resort to make such offer.
The assessee's offer to withdraw his claim of impugned loss subject to no penal action; cannot therefore be accepted as it is a clear cut case where the assessee has failed to prove the genuineness of impugned transactions of shares shown to be resulting in loss. In fact, the colourable device adopted by the assessee to reduce the incidence of tax has been unveiled and finding no way out; the assessee has opted to save whatever could be possible under the given facts and circumstances of the case. Reliance in this regard is placed on the judgement of the Hon'ble Apex Court of India in the case of McDowell and Co. Limited Vs. Commercial Tax office 154 ITR 148 (S.C.) wherein it has been observed by the Hon'ble Court that :-
"Tax planning may be legitimate provided it is within the framework of 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 resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges.
Having regard to the above, it is held that the genuineness of the transaction of shares of M/s. Arcee Ispat Udyog Ltd., Hisar is not proved and thus the loss claimed by the assessee therein cannot be allowed. Accordingly, short term capital loss of Rs.22,50,000/- as claimed by the assessee in the sale of shares of Ms. Arcee Ispat Udyog Ltd., Hisar is hereby disallowed and added back towards the taxable gains / income of the assessee. Penalty proceedings u/s 271(l)(c) of the Act for furnishing inaccurate particulars of income are also initiated, separately."
6. A bare reading of the findings recorded in the impugned assessment order revealed that the Ld. AO placed reliance, to support his contention, in the matter, on the decision of the Hon'ble Supreme Court, in the case of Jiyajeerao Cotton Mills Ltd. V CIT & EPT (1958) 34 ITR 888 (S.C), wherein Hon'ble Supreme Court at page 897 observed as, "Every person is entitled to so arrange his affairs 12 as to avoid taxation but the arrangement must be real and genuine and not a sham or make believe."
6(i) Ld. AO, further, placed reliance on the decision of the Hon'ble Supreme Court in the case of McDowell & Co. Ltd.(1985) 154 I TR 148 (S.C), wherein the Hon'ble Supreme Court denounced tax avoidance, if not bonafide. The relevant part of the observation of the Hon'ble Supreme Court is reproduced hereunder :
"Tax planning may be legitimate provided it is within the framework of 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 resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges."
7. A bare perusal of the relevant records, findings of the lower authorities, as contained in their respective orders clearly reveals that the assessee appellants sold land which resulted in short capital gain, as is evident from the chart reproduced above. The assessee appellants namely Smt.Harjit Kaur, Smt.Surinder Kaur, Smt.Gurdeep Kaur & Shri Avtar Singh claimed short term capital loss at Rs.22.50 lacs, Rs.18.00 lacs, Rs. 45.00 lacs & Rs.22.50 lacs respectively emanating from sale of shares, allotted by the said unlisted Hissar based company namely M/s Arcee Ispat Udyog Ltd. The AO disallowed the impugned loss, in respect of each appellant assessee and accordingly recomputed the taxable income. Ld. CI T(Appeals) reversed the findings of the AO. It is imperative to highlight the factual details and the sequence of events/steps, which led to creation of the so called short 13 term capital loss and consequent claim made by the appellants :
i) Short term capital gains emanating as a result of sale of land by the assessee appellants.
ii) The assessee appellants purchased shares from unlisted company M/s Arcee Ispat Udyog Ltd.
Hissar. Each of the assessee appellant
purchased shares, as mentioned in the chart
above, on the same date i.e. 08.11.2007 @
Rs.100/- per share.
iii) All the assessee appellants sold shares to same
Delhi based broker namely TCG Stock Brokers
Ltd., on the same date i.e. 31.3.2008 @
Rs.10/- per share.
iv) As per the relevant record, the book value of
such share, as on 31.3.2008, stood at Rs.56/-
and the appellant sold such shares @ Rs.10/-
per share, on the same date i.e. 31.3.2008.
v) The share broker sold back the same shares,
on 12.08.2008, @ Rs.100/- per share, to
Smt.Krishna Gupta, Director in the said
company and wife of Shri R.C.Gupta, who is
Managing Director in the same company, thus
showing circular transactions, in the matter.
vi) The shares were allotted directly by the
unlisted company to the appellants and the
transactions were not routed through any
stock exchange.
8. The ld. CI T(Appeals) completely disregarded the above-
indicated series of transactions, eloquently demonstrating the true nature of such transactions. The CIT(Appeals), merely dissected such integrated transactions and focused on individual step of such transactions independently and 14 consequently, observed that purchase and sales of such shares has not been denied by the AO. The CI T(Appeals) mainly concentrated and focused on the vouchers of purchase and sale of such shares, procured by the assessee appellants with the preconceived understanding of the said unlisted company and the said broker. Further, the CIT(Appeals), ignored the surrounding facts and circumstances of the case and failed to properly appreciate the series of steps taken by the assessee appellants, as a whole and in an integrated manner, for the object of creating artificial loss. Such transactions involve the series of preconceived steps, the performance of each of which is depending on the others being carried out, in accordance with the common intention of the assessee appellants and the said company who allotted the shares to the appellants, the nature and effect of the whole scheme has to be taken into consideration, in determining the true intent and nature of such share transactions. However, ld. CIT(Appeals) disregarded such integrity of the said transactions. The ld. CIT(Appeals), completely ignored the factum that the true-nature of such share transactions lacked commercial contents, being structured transactions, entered into with the sole intent, to reduce the tax liability. The facts and circumstances of the case, as recorded above, clearly suggest that the revenue cannot take or accept such make-believe transactions, as presented by the appellants. Truth or genuineness of such transactions must prevail over the smoke screen, created by way of pre-meditated series of 15 steps taken by the appellants, with a view to imparting a colour of genuineness and character of commercial nature, to such share transactions. Needless to say that one has to look at the whole transactions and a series of steps taken, to accomplish such share transactions, in an integrated manner, with a view to ascertaining the true nature and character of such purchase and sale of shares. The shares were purchased and sold in these cases, can not be treated as regular business transactions as the assessee appellants purchased shares, on 8.11.2007, @ Rs.100/- per share and sold the same, on 31.3.2008 @ Rs.10/- per share, in the face of book value of such shares sold at Rs.56/- as on 31.3.2008. Such approach of the appellants, runs contrary to the very nature of human conduct. The Hon'ble Supreme Court, in the case of CIT V Durga Prasad More (1971) 82 ITR 540 (S.C) has categorically held that the revenue is entitled to look into the surrounding circumstances, to find out the reality of the recitals made in the documents. The relevant observations and findings of Hon'ble Supreme Court, in the matter of discharge of 'onus of proof' and the relevance of surrounding circumstances of the case are; "that though an appellant's statement must be considered real until it was shown that there were reasons to believe that the appellant was not the real, in a case where the party relied on self-serving recitals in the documents, it was for the party to establish the transfer of those recitals, the taxing authorities were entitled to look into the 16 surrounding circumstances to find out the reality of such recitals. Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and the Tribunals have to judge the evidence before them by applying the test of human probability. Human minds may differ as to the reliability of piece of evidence, but, in the sphere, the decision of the final fact finding authority is made conclusive by law."
8(i) The above ratio laid down by the Hon'ble Supreme Court has been reiterated and applied by the Hon'ble Apex Court in the case of Sumati Dayal V CI T 214 I TR 801 (S.C). Incidentally, it is mentioned that all the appellants are agriculturists, as mentioned in the relevant available records. The date and rate of purchase of such shares, from the unlisted company, directly, and not through any Stock Exchange and, subsequently, the date and rate of sale of such shares speaks volume of true nature of such transactions, as the same had not been entered into, in the natural and regular course of trading activities. Having regard to the above narrated facts, it is evident that such transactions were entered into, with a view to procuring artificial short term capital loss, for the purpose of subsequently setting off the same against short term capital gains. This factum is evident from the offer of surrender made by the appellants before the AO, for surrender of short term capital loss, subject to the condition of no penal action against them. Under such peculiar facts and 17 circumstances of the case, which are crystal clear, the taxing authorities are not required to put on blinker, while looking at the documents of purchase (allotment of shares by the unlisted company) sale of such shares, within a short span of time, particularly by the end of financial year as on 31.3.2008. The entirety of the sequence of events of such sale and purchase of such shares has to be discerned in an integrated manner. However, CIT(Appeals) opted to disintegrate the entire gamut of transactions and looked at each step, as an independent evidence, in favour of the assessee. In the present case, the appellants created artificial short term capital loss, and having regard to the material and relevant facts of the case, such make-believe transactions, cannot be taken as genuine trading, in the sale and purchase of shares. Such transactions as are purely preconceived exercise, to evade tax. It is interesting to trace and track down the chain of events, in such share transactions, which lead to inescapable conclusion that the appellants were involved in circular transactions. Originally, the shares were allotted to the appellants by the said company, who in turn, sold the same, to the Broker and the said company purchased the same shares, from the said Brokers. In view of this, it is evident that the facts of the case and the conduct of the parties to such transactions speak for themselves. In tax matters, it is imperative that reality of the transactions are required to be gone into, with 18 view to finding out the true nature of such transactions. Entirety of facts and circumstances of the present case clearly demonstrates, in a terse and telling manner that the whole transactions are not true commercial share transactions but fabricated transactions. Such transactions were mutually self-serving. The purchase and sale vouchers of such transaction of shares are not unimpeachable documents. However, ld. CIT(Appeals), wholly placed reliance on such impeachable documents and make-believe version of transactions. The CI T(Appeals), treated such unreal transactions, involving colourable device, as genuine transactions, by ignoring the reality of such transactions. One cannot be so gullible as to accept the genuineness of such smoke screen transactions. Now can we refuse to look into the real nature of such transactions. In fact, persuading us not to undertake such exercise and to accept such transactions on face value, would result in miscarriage of justice.
9. A perusal of the Paper Book reveals that the ld. 'AR' has listed certain case-laws, to support his contentions, which are listed as under :
i) Smt. Alka Jain V ACIT (I TA No. 2637/D/2000
A.Y. 1996-97 (ITAT Delhi Bench).
ii) Inder Kumar Bachani (HUF) V I TO 101 TTJ (450)
(Luck)
19
iii) Baijnath Agarwal V ACI T 43 DTR 149 (Agra)
9(i) We have perused and considered the fact-situation
of such decisions and ratio laid down therein and found that the same are not applicable to the fact-situation of the present case, being factually different and distinguishable. The decisions of the Hon'ble Supreme Court and the jurisdictional High Court, as discussed in this order, are relevant in the matter.
10. Ld. CIT(Appeals), is of the opinion that the AO has not conducted requisite enquiries and the material available on record, is not sufficient to arrive at such conclusions. He, further, stated that AO failed to discharge the burden cast on him, to establish that the appellants did not purchase or sell the shares. In this specific context, it is imperative to state that it is a well settled legal proposition that 'burden of proof' is on the appellants as the claim of short term capital loss had been made by them. The assessee appellants, except giving details of such purchase and sale of shares, failed to prove and establish the genuineness of such share transactions, with an unlisted company, which ultimately purchased such shares, at the rates as convenient to them, having no regard to the real market factors. In such a fact-situation, the 'onus of proof' remains undischarged, on the part of the assessee appellants. In view of this, the observation of the CIT(Appeals), that onus of proof is on the AO, is contrary to the legally settled proposition, in the matter. The general 20 rule is that 'onus of proof' is always on the party who asserts a proposition or fact which is not self-evident. In the present case, assessee appellants are asserting the genuineness of the claim of short term capital loss by making such claim in their respective return of income, and, hence, the 'burden of proof' squarely lies on them. The assessee appellant has furnished merely the detail of such make-belief transactions and, hence, genuineness of the transactions remains to be established. In view of such a fact-situation of the case, CI T(Appeals), is not justified, in making the observation that 'onus of proof' lies on the AO, ignoring the factum that the assessee appellants have failed to discharge the primary onus cast on them.
10(i) It is interesting to note that CI T(Appeals), observed that the AO has failed to discharge the burden, cast on him to establish that the appellant did not purchase or sell the shares. Thus, the CI T(Appeals) has sought to shift the 'burden of proof' on the AO, which is not legally tenable. The assessee is statutorily obliged, to support the contents and contentions made in his return of income, as contemplated u/s 143(3) sub- section (ii) of the Act. It is, further, added that CIT(Appeals), has plenary statutory powers, though not unbridled powers, in disposing of an appeal, before him. Scope of his power is co-terminus with that of the AO. He can do what I TO can do and also direct him to do what he has failed to do. The CI T(Appeals), is competent to make, further enquiries while disposing appeal, within the meaning of section 250(4) of the Act. In 21 the present case, AO has made necessary enquiries, and confronted the result of said enquiries to the assessee appellants. Consequently, on the basis of proper appreciation of the entirety of the facts and surrounding circumstances of the case and following the decision of the Hon'ble Supreme Court, in the case of Jiya Jeerao Cotton Mills Ltd. V CI T and EPT (1958) 34 ITR 888 (S.C) and decision of the Constitution Bench of Hon'ble Supreme Court, in the case of McDowell Co. Ltd. V Commercial Tax Officer 154 I TR 140 (S.C), the AO, validly disallowed the impugned claim of short term capital loss made by the appellants.
10(ii) Ld. CIT(Appeals), has placed reliance, on the decision of the Hon'ble Supreme Court, in CIT V Karam Chand Thapar & Bros., 176 ITR 535 (S.C). We have considered the fact-situation of the case relied upon by the CIT(Appeals) and found that the same is not applicable to the facts of the present case, being factually different and distinguishable. The Hon'ble Supreme Court, in that case held that Tribunal is the final fact finding Body. The question, whether a particular loss is a trading or a capital loss and whether the loss is genuine or bogus are primary questions to be determined, on appreciation of the facts. The Hon'ble Supreme Court has adjudicated the issue in question, on the basis of factual finding, arrived at by the Tribunal in that case. Therefore, the judicial precedent is applicable where the fact situations are similar in nature. In the present case, fact-situations as highlighted above, 22 are patently different and distinguishable vis-à-vis the fact- situation of the case relied upon by the CIT(Appeals). Needless to say that the judicial precedent is applicable only in the context of similarity of factual-matrix of the case. In the present case, the fact-situation does not bear even the semblance or resemblance, to the fact-situation of the case relied upon by the CIT(Appeals).
10(iii) Ld. CIT(Appeals), further, placed reliance on the decision of Hon'ble Supreme Court, in the case of K.P.Verghese 131 ITR 597 (S.C). Ld. CI T(Appeals) has misread and misapplied the ratio laid down by the Hon'ble Supreme Court, in the case of K.P.Verghese (supra). In the present case, details of transactions are plain and clear and, hence, there is no need, to prove such transactions, within the contemplation of the ratio laid down by the Hon'ble Supreme Court, in the context of facts of the decision in the case of K.P.Verghese (supra). In the present case, integrity of the transactions of purchase and sale of shares and surrounding circumstances of the case, as relied upon by the AO, clearly proves that such transactions were make belief transactions and, hence, resultant short term capital loss was rightly disallowed by the AO. 10(iv) Ld. CIT(Appeals) placed reliance on the decision of the Hon'ble Supreme Court in the case of Union of India V Azadi Bachao Andolan 263 I TR 706 (S.C). Ld. CI T(Appeals), and consequently, extracted observations from the decision of the Hon'ble Supreme Court and sought to apply the 23 same, to the fact-situation of the present case. The decision of the Hon'ble Supreme Court, in the case of UOI VAzadi Bachao Andolan (supra) pertains to interpretation of Double Taxation Avoidation Treaty and CBDT circular, in the light of section 90 of the Act. In view of this, the observations of the Hon'ble Supreme Court, in the said decision, cannot be quoted and relied upon out of context, as held by the Hon'ble jurisdictional High Court in the case of CI T V Sun Engineering Works P.Ltd. 198 ITR 297 (S.C), "It is neither desirable nor permissible to pick out a word or sentence f rom the judgement of the Hon'ble Supreme Court diversed f rom the context of the question under consideration and treat it to be the complete law declared by the Court. The judgement must be read as a whole and the observation from the judgement have to be considered in the l ight of the questions which were bef ore the Court. The decision of the Supreme Court takes its colour f rom the question involved in the case in which it is rendered and, while applying the decision to a later case, Courts must caref ully try to ascertain the true principle laid do wn by the decision." In the present case, detail of series of steps taken by the assessee appellants, to give effect to a make-believe transactions of purchase and sale of shares, as highlighted above, clearly involves no interpretation of treaty or statutory provisions or C.B.D.T. circular. The issue in the present case is to be considered having regard to the entirety of the facts and surrounding circumstances of the case and conduct of human probability. The Hon'ble 24 Supreme Court, in that case held that indiscriminate application of the ratio decidendi of the decision, in the case of Mc Dowell & Company V Commercial Tax Officer (supra), without having any regard to the facts of each case, is not permissible. Therefore, the decision of the Hon'ble Supreme Court, relied upon by the CI T(Appeals), is not applicable to the fact-situation of the present case. 10(v) Ld. CI T(Appeals) also referred to the decision of Hon'ble Supreme Court in the case of Union of India V Azadi Bachao Andolan (2003) 263 ITR 706 (S.C). The core ratio decidendi laid down, in the judgement of the Constitution Bench of Hon'ble Supreme Court, comprising of five judges, in McDowell & Co. Ltd. V Commercial Tax Officer (1985) 154 ITR 148 (S.C), still holds the field, having regard to the fact-situation of a particular case, as it has not been reversed or overruled by the decision of the Divisional Bench of the Hon'ble Supreme Court, in the case of Needless to state here that the ratio of any decision has to be understood in the context, it has been rendered. It is settled proposition that judicial precedents cannot be applied in a perfunctory manner, as has been done by the ld. CI T(Appeals), in the present case. The fact-situation of the present case, as discussed above, with circuit share transaction, having no regard to the market factors, determining rate of purchase & sale of such shares, clearly point to a case of non-genuine nature of such transactions. Thus, the findings of the AO, vividly unmasking the true nature of such transactions, remains un-rebutted, at the 25 level of CI T(Appeals), by way of findings based upon credible and cogent evidences, brought on record. 10(vi) Ld. CIT(Appeals), further, placed reliance on the decision of the Hon'ble jurisdictional High Court, in the case of CIT V Anupam Kapoor 299 ITR 179 (P&H). We have perused and considered the decision of the Hon'ble jurisdictional High Court and found that the same is factually different and distinguishable and, hence, same is not applicable to the facts of the present case. In the decision relied upon by the CIT(Appeals), the Tribunal found that purchase contract note, contract note for sales, distinctive number of shares, purchased and sold, copy of share certificates and the quotation of shares on the date of purchase and sales and such evidences were accepted by the department in the assessment year 1993-94 and no challenge was made to the purchase of such shares in that year. Shares were sold through broker, who was a registered broker of the Stock Exchange on the relevant date. The sale profits were received through account payee cheque. The assessee had taken shares from the market. Shares were allotted and transactions took place through registered broker of stock exchange. In view of such evidences, it was held that AO had no material to arrive at a conclusion that such transactions were simplicitier a device to defraud the revenue. The Hon'ble jurisdictional High Court also referred to several other decisions while adjudicating the issue. Such decisions have been relied upon by the assessee. Thus, the issue was decided by 26 Hon'ble jurisdictional High Court, in the light of fact- situation of that case. In the present case, facts are entirely different. The shares were allotted by an unlisted company. Such share transactions were not accepted as genuine by the revenue, in any of the assessment year. No share quotations were filed by the assessee appellant. It has not been brought on record that such share transactions were routed through registered stock broker. Similarly, the origin of the sale of such shares, ultimately resulted into purchase of such shares by the seller company i.e. M/s Arcee Ispat Udyog Ltd. Therefore, in the light of such factual background, case law relied upon by the CI T(A) is not applicable to the facts of the present case. 10(vii) Ld. CIT(Appeals) placed reliance, on the decision of the Supreme Court in the case of CIT V B.M.Kharwar. This decision has been founded on the observation of the Duke of Westminster V Commissioner of Inland Revenue (1935) 19TC 490 HL. The decision was rendered, on 13.8.1968, and since then, there are plethora of decisions rendered by the Hon'ble Supreme Court, whereby substance of the matter has been recognized as a valid material, to find out the truth and true nature of any transaction. The decisions of the Hon'ble Supreme Court relied upon by the AO, as discussed earlier, supports this view. Therefore, having regard to the fact-situation of the present case and the entirety of the facts and circumstances of the case, including the nature of evidences filed by the assessee appellants, in the matter of such share transactions, it 27 cannot be said that facts of the case, relied upon by the CIT(Appeals), are similar to the facts of the present case. Therefore, decision relied upon by the CIT(Appeals) is not applicable to the facts of the present case.
11. Ld. CIT(Appeals) referred to the decision of the Hon'ble Supreme Court, in Pullangode Rubber Produce Co.Ltd. V State of Kerala 91 ITR 18 (S.C). Ld. CIT(Appeals), in para 5.4 of the impugned order, and also referred to the decision in Quayum V CIT 184 ITR 404 (All), to highlight the point that admission cannot be the foundation of assessment. 11(i) We have perused and considered the decisions relied upon by the CI T(Appeals). In the present case, the assessee appellants in the course of assessment proceedings, voluntarily made an offer before the AO, to surrender the impugned short term capital loss, subject to no penal action. Such offer of the assessee appellants, was not accepted by the AO and he disallowed the impugned claim of short term capital loss, by recording a detailed findings in the impugned assessment order.
11(ii) Thus, having regard to the findings of the AO and fact-situation of the present case, it is evident that the assessment has not been framed on the basis of voluntary admission made by the assessee appellants. Therefore, reliance placed by the CIT(Appeals), on such case laws is misplaced. It is, further, added that Hon'ble Supreme Court in Phullangode Rubber Produce Co. (supra) held that confession is a significant evidence but not a conclusive 28 one. In view of this, self-admission and consequent offer of surrender made by assessee appellants, in respect of impugned short term capital loss, further, supports the findings recorded by the AO, in the matter.
12. Ld. CI T(Appeals) has referred to the provisions of section 50C of the Act. We do not find any relevance and substance, in making such a reference to the provisions of section 50C of the Act, as neither the AO invoked such provisions nor the same are applicable, to the facts of the present case.
13. It is the duty of the Court in every case, where ingenuinity is expended, to avoid taxing and welfare legislation, to get behind the smoke screen and discover the true state of affairs. The Court is not to be satisfied with form and leave alone the substance of the transaction. This view has been upheld by the Hon'ble Supreme Court, in Workman of Associated Rubber Industries Ltd. (1986) 157 ITR 77 (S.C) and in Ess Ess Kay Engg. Co.(P) Ltd. V CIT (1985) 15 ITR 636 (P&H). The Hon'ble Kerala High Court in Onam Agarbati Co. V Dy.CI T (2009) 310 ITR 56 (Ker) has held that though a tax payer may resort to a device to divert the income before it accrues to him, the effectiveness of advice depends upon its genuineness. The substance of the transaction has to be assessed by applying the taxing Statute so as to ascertain whether it is a sham or make-believe transaction or one which is genuine.
29
14. Ld. 'DR' placed reliance on the decision of the jurisdictional High Court in the case of Somnath Maini V CIT (2008) 306 ITR 414 (P&H) and Balbir Chand Maini V CIT & another (2012) 340 ITR 161 (P&H) and contended that the issue in question is covered by these decisions. We have carefully perused and considered the facts and the ratio of the decisions of the jurisdictional High Court, in the case of Balbir Chand Maini (supra) and Somnath Maini V CIT (supra) and found that the facts of the present case are squarely covered by this decision. The relevant and operative part of the decision in the case of Balbir Chand Maini (supra) is reproduced hereunder :
"The return for the assessment year 1998-99, filed by the assessee at an income of Rs. 7,93,140 was processed under section 143(1) of the Income-tax Act, 1961. Subsequently, in response to a notice under section 148, the asses-see again filed a return declaring the same income as shown in the return filed earlier. During the reassessment proceedings, the Assessing Officer found that the assessee had purchased 30000 shares of A at the rate between Rs. 2.50 and Rs 3.40 per share, in the month of April, 1997, and out of those shares, he sold 24000 shares through a broker. The Assessing Officer came to the opinion that the value of the shares could not be as high as Rs. 55 per share and accordingly made an addition of Rs.12,47,500 to the income of the assessee as income from undisclosed sources. However, he determined a sum of Rs. 2,85,620 as long-term capital loss, while computing the income. The Commissioner (Appeals) deleted the additions whereas the Tribunal reversed the order of the Commissioner (Appeals) and upheld the additions made by the Assessing Officer. On appeal :
Held, dismissing the appeal, (i) that the Tribunal recorded a finding of fact that the transaction of sale and purchase of shares of A was not a genuine transaction. The Assessing Officer had found that the sale of shares had not taken place through any- stock exchange. On scrutiny of the books of account if the broker the Assessing Officer found that there were cash deposits in its bank account preceding the issue of cheques in the name of the assessee for purchase of shares claimed to be the sale proceeds of the same shares received in advance. The broker could not give the details of the purchaser of the shares. The AO found that it was a close circuit transaction and clearly a structured one. The AO had also determined the value of shares of A on the basis of the financial data collected by him and worked out the value of shares to be not more than Rs.9.37 per share by adopting two methods for calculation of net asset value. There was no perversity or error of law in the order of the Tribunal."
15. It is essential on the part of the revenue authority, to look into the real nature of transaction and what happens in the real word and contextualize the same to such 30 transactions in the real market situation. It is pertinent to state here, the judicial wisdom of Hon'ble Supreme Court in CIT V Arvinda Raju (TN) (1979) 120 ITR 46 (S.C) wherein it was held that "one day, in our welfare state geared to social justice, this clever concept of 'avoidance' as against 'evasion' may have to be exposed." In the present case, there is an obvious and plain transaction of tax evasion which has been clothed with the smoke-screen of subterfuges, by the assessee appellants. The facts of the present case clearly reveals that such trading transactions of purchase and sale of shares, had not been effected, for commercial purpose but to create artificial loss, with a view to reducing tax liability. The appellant resorted to readymade scheme for purchase and sale of shares which ultimately found their last destination, to the original seller i.e. the said unlisted company. Such transactions are not genuine and natural transactions but preconceived transactions, demonstrating creation of such short term capital loss. Such transactions are mutually self-serving. It is mentioned that earning profit is a natural instinct ingrained in human beings, particularly in the businessman, unless, of course, earning of loss is also a profitable proposition, as is discernible from the fact- situation of the present appeals. The appellants restored to a preconceived scheme, to procure short term capital loss, for the purpose of neutralizing the short term capital gains, by way of price-differential, in the said share transactions, not supported by market factors. Cumulative events in 31 such transactions of shares reveals that the same are devoid of any commercial nature and fall in the realm of not being bonafide, in contents. In view of the above legal and factual discussions and judicial precedents discussed above, we are of the opinion that the findings of the CIT(Appeals) are not based on relevant, cogent and credible material or evidence. Such share transactions were not quoted and consequently, were not traded through stock exchange. When all the facts and circumstances of the case are viewed, in totality, it is evident that the assessee appellants failed to discharge the onus, to prove the genuineness of the transactions of purchase and sales of such shares. The impugned transactions of shares are pre- ordained one, not for legitimate commercial purpose in view but for the purpose of creating non-genuine and artificial short term capital loss, with a view to reducing valid tax- liability. These transactions of shares were not governed by market factors prevalent at that relevant time, in such trade, but the same are product of the design and mutual understanding on the part of the appellants and the said Hissar based unlisted company. Ld. CIT(Appeals) has failed to bring any cogent and credible evidence, to dislodge such finding. Having regard to the peculiar fact-situation of the present case, it is evident that such share transactions were close circuit transactions and clearly structured one. Therefore, in the light of judicial precedents of jurisdictional High Court and Hon'ble Supreme Court, as 32 discussed above, we do not find any merit in the findings of the CIT(Appeals).
16. Having regard to the above legal and factual discussions, including judicial precedents discussed above, of the Hon'ble Supreme Court and jurisdictional High Court, the findings of the CIT(Appeals) cannot be sustained and, hence, the same are reversed. Further, an offer to surrender the impugned loss, subject to no penal action, made by the appellants before the AO, in the course of assessment proceedings, is an important piece of evidence, hence, cannot be ignored lightly. Consequently, the findings of the AO, as recorded in the impugned assessment order, are restored.
17. In the result, all the appeals of the revenue are allowed.
Order pronounced in the Open Court on 29 t h
Nov.,2012.
Sd/- Sd/-
(SUSHMA CHOWLA) (MEHAR SINGH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
D at e d: 2 9 t h N ov . , 2 0 1 2.
' P o on am '
C o py t o:
Th e A p p ell ant , T he R es p o n de nt , Th e CI T ( A), T he CI T, DR A ss ist ant Re gi st r ar , I T A T Ch an d ig ar h