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 No. of shares	      Transferee	         Date of Transfer
76,000      	Glad Investments (P) Ltd,	     30-9-1998
24,000	              -do-	                     30-9-1998

The above transactions were reported by M/s NIIT Ltd. in response to summons under Section 131 of the IT Act. On examination, the AO noticed that the NIIT records clearly indicate that shares in question were transferred by the assessee to M/s Deutsche Bank and not to Glad Investments in August, 1997.

4. In response to summons under Section 131 the Deutsche Bank vide letter dt. 17th March, 2001, has informed the AO that the shares were pledged by Shri Arjun Malhotra, the assessee, as security for a loan of Rs. 2 crore extended by the bank to M/s Glad Investments (P) Ltd. on 10th Sept., 1997. As value of shares was more than Rs. 5 lakh, the bank got the shares physically transferred to its name, which is a mandatory requirement as per the instructions of the RBI. The AO further noticed that these transactions were not made through any share brokers nor the same were recorded in the books of M/s Glad Investments (P) Ltd. as no balance sheet as on 31st March, 1998, was filed with the Registrar of Companies by Glad Investments. In the light of these facts, the AO worked out the capital gains at Rs. 14.93 crores and held it to be taxable in asst. yr. 1999-2000 and not in asst. yr. 1998-99. Accordingly, the proceedings under Section 147 for asst. yr. 1999-2000 for taxing these capital gains were initiated. Relevant observations of the AO for the sake of brevity are extracted hereunder:

"In view of all the circumstantial evidence gathered, it is a reasonable inference that the agreement to sell could not have been executed on 14th Aug., 1997 and the consideration mentioned in it is not the actual sale proceeds. The agreement to sell, as it is cannot form the basis of computation/assessment of capital gains for 1,00,000 NIIT shares transferred by assessee to Glad Investments, In case of a movable property, title to it passes with delivery in pursuance of an agreement to sell [CIT v. Bhurangya Coal Co. (1958) 34 ITR 802, 805 (SC)]. It may be remembered that the date of accrual of capital gains is the date when transfer takes place and the entries in the account books are irrelevant for the purpose of determining such date [Alpati Venkataramiah v. CIT (1965) 57 ITR 185 (SC)]. That a sale/transfer of 1,00,000 NIIT shares has taken place from assessee to Glad Investments is beyond doubt (as evidenced by change of ownership in NIIT records on 30th Sept., 1998). The date of 'sale' for the purpose of assessing capital gains is taken as 5th May, 1998, being the delivery date when the shares were released by M/s Deutsche Bank to Glad Investments (P) Ltd., as per instructions of Mr. Arjun Malhotra, being the earliest date of delivery, consideration and title transfer. As for the "full value of consideration" received/accrued to the assessee as a result of this transfer, the same is not known. The transaction is not a bona fide one as evident from the facts and circumstances discussed above in this order. What has actually been bargained as the price, in Kind or in cash between assessee and Glad Investments is not known. Glad Investments being a company under assessee's family control, there is no problem in receiving the consideration in future outside the books of accounts, in cash or in kind and thus evade the capital gains tax, As can be seen from para 5 of this order, Glad Investments has financed assessee's foreign trips without any apparent reason. There may be similar ways, in which Glad Investments has compensated the assessee for the shares of NIIT. There is no alternative but to estimate the consideration, as it is not possible to know as to how the consideration has actually passed or is yet to pass, in cash or in kind. The redemption amount of Rs. 5 crores cannot be the full value of consideration received, as this figure is part of the design of backdating the transaction. In a case like this, market price on the stock exchange would be the only option available to be adopted as 'full value of consideration received, being the realizable price by any prudent person by selling the shares on the stock exchange. As on 5th May, 1998, the market price of NIIT shares on NSE was Rs. 1,493 (as per letter dt. 19th March, 2001 of NIIT under Section 131). The capital gains, therefore, work out to Rs. 14,93 crores and are taxable in asst. yr, 1999-2000 and not asst. yr. 1998-99. Proceedings under Section 147 are underway for asst. yr. 1999-2000 for taxing these capital gain."

15. We have also carefully examined the letter dt. 14th Aug., 1997, written by the assessee to the bankers and we find through this letter, the assessee has informed the bankers that he had provided 1 lakh shares of NIIT as collateral security for grant of loan to Glad Investments (P) Ltd. and the shares are currently registered in their name. He further requested the bankers to transfer these shares directly in favour of Glad Investments once the loan secured against the pledge of these shares is settled by Glad Investments, From reading this letter, an impression comes to our mind that as on 14th Aug., 1997, the assessee has already delivered the NIIT shares to the bankers as collateral security for grant of loan to Glad Investments and shares are registered in their name. But the facts borne out from the record tell a different story. On the one hand, the assessee informed the bankers that he has pledged the shares with them as collateral security and transferred in their name and, on the other hand, he entered into an agreement with Glad Investments (P) Ltd. to sell these shares on the same day and agreed to deliver the shares along with the duly executed document to facilitate the purchaser to get these shares transferred in their favour and also to become an absolute owner of the same. It is beyond our comprehension as to why the assessee has prepared two documents, one, a letter and the other agreement on the same day with a different statement of facts. The other important factor that the agreement is not attested by any marginal witness is also missing. It was executed on a plain paper and signed by the assessee and his father who is director of M/s Glad Investments (P) Ltd. From a careful examination of this letter and the agreement along with the guarantee and memorandum of pledge and the letter of Deutsche Bank written to the AO appearing at page No. 9 of the assessee's compilation, we failed to understand when these shares were delivered to the bank on 20th Aug., 1997, for its pledge and were transferred in the name of the bank on 10th Sept., 1997 how the assessee can write a letter to the bankers on 14th Aug., 1997 that it had provided 1 lakh shares of NIIT as collateral security for grant of loan to Glad Investments and the shares are currently transferred in the name of bank. During the course of assessment proceedings, the AO has examined Mr. R.P. Verma, head of loan administration, Deutsche Bank, to ascertain when this letter was filed with the bank but he could not tell specifically about the exact date, He simply admitted that it was filed before 5th May, 1998 when these shares were finally released and transferred in the name of M/s Glad Investments (P) Ltd.

18. Once it is held that the shares were transferred in the asst. yr. 1999-2000, the next question comes, "what would be its sale consideration?" Having given a thoughtful consideration to the rival submissions on this issue, we are of the view that to determine the sale consideration of the NIIT shares, we have to revert back to the sale agreement of the shares dt. 14th Aug., 1997, according to which the assesse had agreed to sell 1,00,000 NIIT shares to M/s Glad Investments (P) Ltd. for a sum of Rs. 5 crores and the same was paid to the assessee in the form of allotment of preferential shares to the assessee, which would be, redeemed at par at the discretion of the board. This sale agreement has already been examined by us along with the other documents executed by the assessee in the foregoing paras and we finally held that these shares were not sold by the assessee through the aforesaid agreement dt. 14th Aug., 1997 and all these documents were prepared by the assessee with the intention to bring this sale transaction within the financial year 1997-98 relevant to the asst. yr. 1998-99, Once it has been held that this agreement is not a valid agreement, sale consideration of the shares cannot be determined on the basis of this agreement. In these circumstances, the sale consideration can only be determined on the basis of its market value when these shares were in fact sold and transferred in favour of Glad Investments (P) Ltd. It has already been held in the foregoing paras that the actual transfer of shares in favour of Glad Investments (P) Ltd. was effected only on 5th May, 1998, when the shares were transferred by the bankers in favour of Glad Investments (P) Ltd. As such, we have to determine the value of the sale consideration of 1,00,000 NIIT shares as on 5th May, 1998, Since the shares are quoted at the stock exchange, the rates of shares as on 5th May, 1998, should be adopted to work out the value of shares and its sale consideration. On perusal of the orders of the lower authorities, we find that the AO has adopted the rates of NIIT shares as on 5th May, 1998, as quoted on stock exchange.