The Principal Commissioner Of Income Tax (Central), Ahmedabad v. Ganesh Plantation Ltd

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 258 of 2021 =============================================THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL),AHMEDABAD VersusGANESH PLANTATION LTD. ============================================= Appearance: M R BHATT & CO.(5953) for the Appellant(s) No. 1 for the Opponent(s) No. 1 MS NUPUR D SHAH(10233) for the Opponent(s) No. 1============================================= CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALAandHONOURABLE MS. JUSTICE NISHA M. THAKOREDate : 24/01/2022 ORAL ORDER (PER : HONOURABLE MS. JUSTICE NISHA M. THAKORE) 1.This Appeal filed by the Revenue is directed against theorder dated 11.12.2020 passed by the Income Tax AppellateTribunal, “B” Bench, Ahmedabad, in ITA No.472/AHD /2016 forthe Assessment Year 2009-10 ( for short, “year underconsideration”), under Section 260A of the Income Tax Act,1961 (hereinafter referred to in short as “the Act”). 2.The brief facts giving rise to this appeal are summarizedas under: 2.1The respondent Company - the original assessee had filedreturn of income for the year under consideration on30.09.2009 thereby claiming total income of an amount ofRs.7,40,330/-. Subsequently, the case was selected for scrutiny assessment under Section 143(3) of the Act, whereby the totalincome of an amount of Rs.25,92,480/- was determinedpursuant to the order dated 27.12.2011 passed by theAssessing Officer. 2.2Thereafter, the case was reopened and notice underSection 148 of the Act was served upon the respondentassessee on 26.03.2014. In response to the notice, therespondent Company assessee had submitted its reply. On31.05.2014, the Assessing Officer had issued notice underSection 142(1) of the Act thereby calling upon the respondentCompany assessee to explain and furnish the details regardingloss of sale and purchase of shares. The respondent Companyassessee had submitted its objections thereby drawingattention of the Assessing Officer that in the scrutinyassessment, the aforesaid aspect has been examined indetailed by the Assessing Officer and it is case of mere ‘changeof opinion’. It was further contended by the assessee that nonew tangible material is brought on record which conferjurisdiction on AO to proceed for re-asessment. Thus, theassessee had requested the AO to drop the proceedings byclaiming that the sale and purchase of shares are in factgenuine transactions and having incurred business loss maykindly be considered accordingly. The loss of purchase and saleof shares for following Companies have resulted to the extentof Rs.10,81,15,500/- (i)Winter Fresh Foods Pvt. Ltd. Rs.2,20,87,500/- (ii)Security Analysis India Pvt. Ltd. Rs.5,49,08,000/- (iii)TPL Finance Ltd. RS.1,24,20,000/- (iv)Suraj Ltd. Rs.95,00,000/- (v)Khandelwal Infrastructure P. Ltd. RS.92,00,000/- 2.3However, the Assessing Officer has not considered theaforesaid objections noticing that the assessee company hadmade huge investment in shares, the income from which isexempt from tax. Further, from the profit and loss account, theAO noticed that the assessee company has incurred interestexpenditure on unsecured loans. In absence of anydocumentary evidences produced by the assessee company,the Assessing Officer doubted the aforesaid transactions ofsale and purchase of shares and ultimately vide order dated20.01.2015, disallowed the loss of shares transaction in case ofthe assessee to the extent of an amount of Rs.10,81,15,500/-. (iii)TPL Finance Ltd. RS.1,24,20,000/- (iv)Suraj Ltd. Rs.95,00,000/- (v)Khandelwal Infrastructure P. Ltd. RS.92,00,000/- 2.3However, the Assessing Officer has not considered theaforesaid objections noticing that the assessee company hadmade huge investment in shares, the income from which isexempt from tax. Further, from the profit and loss account, theAO noticed that the assessee company has incurred interestexpenditure on unsecured loans. In absence of anydocumentary evidences produced by the assessee company,the Assessing Officer doubted the aforesaid transactions ofsale and purchase of shares and ultimately vide order dated20.01.2015, disallowed the loss of shares transaction in case ofthe assessee to the extent of an amount of Rs.10,81,15,500/-. 2.4Being aggrieved with the aforesaid order dated20.01.2015, the assessee company preferred an appeal undersection 246 of the act, before the Commissioner of Income Tax(Appeals), Ahmedabad (In short , “CIT (A)”) principally on fivegrounds. The CIT (A), Ahmedabad, upon re-appreciation of thematerials placed on record by the assessee as well as afterconsidering the re-assessment order, original assessmentorder and upon hearing the respective parties, andexhaustively dealt with all the five issues by relying upon hebinding legal principles of law. The tribunal held that thereasons for reopening had already been examined duringoriginal assessment proceedings and therefore this was a caseof change of opinion, there was absence of new tangiblematerial. Thus, the CIT(A) partly allowed the appeal of theassessee and directed deletion of addition of Rs.10,81,000/- bytreating order of reassessment under Section 143(3) read withSection 147 of the Act as invalid. 2.5Being aggrieved and dissatisfied with the aforesaiddecision of the CIT (A) dated 18.12.2015, the appellant –Revenue Department preferred an appeal before the AppellateTribunal thereby raising various ground. The Appellate Tribunalby impugned order dated 11.12.2020 dismissed the appeal ofthe Revenue thereby holding that the original assessmentproceedings cannot be altered for initiating the proceedingsunder Section 147 of the Act. The Appellate Tribunal also re-appreciated the issue of deleting the disallowance of lossclaimed by the assessee on the sale and purchase of theshares and held that considering the various documents placedby the assessee on record, the transactions cannot be termedas sham transactions. 2.6Being aggrieved and dissatisfied with the aforesaiddecision of the Appellate Tribunal, the Revenue has preferredthis present appeal. 3.The Revenue Department has raised following substantialquestions of law for determination of this Court: [A] "Whether the Appellate Tribunal has erred in law and onfacts in confirming the order of CIT(A) quashing thenotice issued under section 148 of the Act and treatingthe order passed u/s. 143(3) r.w.s. 147 of the Act asinvalid, without taking cognizance of the decision ofHon'ble Supreme Court in the case of CIT vs. PVSBeedies Pvt. Ltd. reported in (1999) 237 ITR 13 (SC)wherein it is held that when apparently legal mistake isfound to have been committed by the Assessing Officer,reopening of assessment is legally permissible?"facts in confirming the order of CIT(A) quashing thenotice issued under section 148 of the Act and treatingthe order passed u/s. 143(3) r.w.s. 147 of the Act asinvalid, without taking cognizance of the decision ofHon'ble Supreme Court in the case of CIT vs. PVSBeedies Pvt. Ltd. reported in (1999) 237 ITR 13 (SC)wherein it is held that when apparently legal mistake isfound to have been committed by the Assessing Officer,reopening of assessment is legally permissible?" [B] "Whether the Appellate Tribunal has erred in law and onfacts in confirming the order of CIT(A) deleting the disal-lowance of loss claimed of Rs.10,81,15,500/- on saleand purchase of shares without appreciating the severalfacts in confirming the order of CIT(A) deleting the disal-lowance of loss claimed of Rs.10,81,15,500/- on saleand purchase of shares without appreciating the several findings of the Assessing Officer which shows that thetransactions were not genuine transactions?" 4. We have extensively heard Mr. M.R. Bhatt, the learnedsenior counsel appearing with Mr. Karan Sanghani, the learnedcounsel appearing on record for the appellate RevenueDepartment and Ms. Noopur D. Shah, the learned counselappearing for the respondent Company – assessee. So far asthe scope of this Court under Section 260A of the Act isconcerned, it is settled legal position of law that this Court canalways re-appreciate and re-examine the issue in light ofdocumentary evidence placed on record, more particularly, tofind out any perversity in findings recorded by the Tribunal. Wehave carefully examined the record including the orderimpugned as well as have also considered the submissionsmade by the learned advocates appearing for the respectiveparties. 5.Mr. Bhatt, the learned senior counsel has drawn attentionof this Court to the observations and findings as well asreasons assigned by the Tribunal and has submitted that theimpugned order of the Appellate Tribunal is erroneous andperverse. In support of his submission, Mr. Bhatt contendedthat the Assessing Officer had reason to believe that theincome had escaped the assessment, more particularly, underthe head of loss claimed by the assessee on the sale andpurchase of the shares to the tune of amount ofRs.10,18,15,500/-. He further submitted that the assessee hadshown the income from the sale of land rise of amount ofRs.8,84,79,010/- and on the other hand, had claimed expenseson account of administrative expenses to the tune of Rs.11,81,15,500/- which also include the aforesaid loss of saleof shares. He further emphasized that the addition on theground of disallowances of loss said share transaction ofPrivate Limited Companies which were settled off market wasbased on the findings made during the course of re-assessment proceedings as the said transactions were notproved to be genuine. He further submitted that by showingloss the assessee had tried to set off against the incomereceived from the sale of land price. He, therefore, submittedthat in this peculiar facts, the Appellate Tribunal as well as CIT(A) have committed gross error by examining it from the pointof ‘change of opinion’ of revenue. 6.Mr. Bhatt, has further submitted that if apparent legalmistake is noticed by the Assessing Officer, it can bereopened as held by the Supreme Court in the case CIT(A) Vs.EVs Bidies Private Limited reported in (1997) 237 ITR (SC). Mr.Bhatt further tried to defend the original order of reassessmentpassed by the Assessing Officer by contending that disclosureof facts by the assessee during the assessment proceedingscannot be said fully and truly and therefore, the AssessingOfficer was within its power to initiate proceedings forreassessment. Mr. Bhatt further submitted that during thecourse of reassessment proceedings before the AssessingOfficer, the assessee had failed to produce the relevantdocuments to establish share transactions to be genuine. Insuch circumstances, both the Appellate Tribunal as well as CIT(A) have grossly erred and have failed to appreciate the natureof transactions in absence of evidence being treated by the Assessing Officer as colourable device with an intent to reducethe tax liability. Assessing Officer as colourable device with an intent to reducethe tax liability. 7.On the other hand, Ms. Noopur Shah, the learned counselappearing for the respondent Company – original assessee hassupported the impugned order passed by the CIT (A) as well asthe Appellate Tribunal. She submitted that various supportingevidences having been found were placed for considerationbefore the CIT (A). She further submitted that both CIT (A) aswell as Appellate Tribunal have given cogent reasons andfindings to hold that the share transactions of the respondentCompany cannot be termed as sham transactions. She furtheremphasized that in fact, the Assessing Officer had no validreasons which confers jurisdiction to initiate the proceedingsfor reassessment, more particularly, when no new tangiblematerial had come on record and the material before theAssessing Officer was very much available even at the time oforiginal assessment. Thus, she submitted that the AssessingOfficer have not examined the aforesaid aspect at the time ofscrutiny assessment. She therefore submitted that both theappellate authority can be termed as change of opinion. Shefurther submitted that CIT (A) as well as the Appellate Tribunalhave elaborately discussed the supporting evidence placed bythe assessee and have given cogent reasons. Thus, she prayedto this Court not to entertain the appeal as no error of fact orlaw is committed by the Appellate Tribunal and in absence ofany substantial questions of law, this Court may not entertainpresent appeal. 8.Having gone through the impugned orders passed by theCIT (A) as well as the Appellate Tribunal, we find that duringthe course of scrutiny assessment, the AO by a notice dated31.05.2011 had called upon the assessee to explain andfurnish the details as regards set off of loss claimed on saleand purchase of shares during the year under consideration.The said notice was responded by the assessee vide letterdated 23.07.2011 wherein the reference was made to earliersubmissions. Thus, the Assessing Officer having satisfiedhimself after examining the record, had accepted the loss ofsale of shares as genuine and allowed set off against theincome generated by the assessee on the sale of land, withouttaking any adverse view on the same. Apart from the aforesaidfact, it also appears from the record that no new tangiblematerial had come on record at the stage of initiation ofreassessment proceedings. In fact the order passed by the CIT(A) has noticed that the details of transactions of loss incurredon purchase and sale of shares were compiled and furthersupporting documents in nature of various letters forming partof the record of the original assessment proceedings and othermaterials seems to have been re-looked at the stage ofinitiation of reassessment proceedings. Thus, the CIT (A) hasarrived at finding that the same cannot be said to be newtangible material, which has come on record to consider thecase for reopening. Similarly, the Appellate Tribunal at theoutset has considered the aforesaid issue of jurisdiction of theAssessing Officer for reopening. Ultimately, the Tribunal uponappreciation of the reasons recorded by the respectiveauthorities as well as upon re-appreciation of the supportingdocuments placed on record has arrived at finding that thematerial available at the stage of initiation of reassessment proceedings was very much available on record of the originalassessment proceedings and therefore, held that no newtangible material had come on record giving jurisdiction to theAssessing Officer for initiation of reassessment proceedings. proceedings was very much available on record of the originalassessment proceedings and therefore, held that no newtangible material had come on record giving jurisdiction to theAssessing Officer for initiation of reassessment proceedings. 9.So far as merits of the matter are concerned, theDepartment had contended before the Appellate Tribunal thatthe assessee had not furnished necessary details before theAssessing Officer at the stage of reopening proceedings.Therefore, the Assessing Officer had rightly arrived at findingsabout the sale and purchase transactions as not genuinetransactions. In these peculiar facts, the Assessing Officer hadrightly disallowed the loss claimed by the assessee under thehead of loss or sale and purchase of shares. The aforesaidsubmission of the Revenue Department has been closelyexamined by the Tribunal. We find that the Appellate Tribunalhas committed no error of fact to arrive at finding that thesupporting evidence in the form of application for shares of theCompanies, copies of share certificate Form No.2 filed by theCompanies to the ROC wherein the name of assesseeCompanies appears as share holder, PAN card copies ofrespective Companies, confirmation letters and payment /receipt through banking channel clearly establishes that saleand purchase transactions entered upon by the assesseeduring the year under consideration are genuine transactions.We are in complete agreement with the reasons given by theAppellate Tribunal that apart from the aforesaid documentaryevidence no contrary evidence has been led by the RevenueDepartment to discard the aforesaid documentary evidence. Itis true that the prima facie onus lies on the assessee to prove the correctness of the transactions, however, in facts of thecase on hand, sufficient documentary evidence has come onrecord to accept the transactions of the assessee as genuinetransactions. We find that both CIT (A) as well as AppellateTribunal have elaborately discussed said transactions of theassessee in the case of five Companies by assigning cogentreasons. 10.We could notice that the Revenue Department has alsoquestioned the transactions of sale and purchase of shares bythe assessee by raising issue of non-compliance of Section133(6) of the Act. We have carefully examined the aforesaidissue and we are in complete agreement of the findingsassigned by the Tribunal inasmuch as that the assessee hasdischarged its onus to justify the loss claimed by it on purchaseand sale of shares. Thus, the \tribunal is right in observing thatthe onus has shifted on the Revenue Department to disprovethe same by placing on record contrary evidence. Merely sincethe Companies and few purchasers have not responded to thenotice issued by the Assessing Officer at the stage ofreassessment cannot be a reason to discard the evidencesplaced by the assessee. Even otherwise we could notice thatthe aforesaid transactions were looked into by the AssessingOfficer during the original assessment and upon duecompliance of the procedure envisaged under the Act. TheAssessing Officer at the stage of original assessment wassatisfied about the genuineness of such share transactions andhad thereafter permitted the loss claimed by the assesseetowards the share transactions. 11.We are in complete agreement with the findingsrecorded by the Tribunal that even otherwise the assesseebeing transferor of shares cannot be subjected to tax in theinstant case, more particularly, considering the amendmentbrought by the Legislation on the statute book in the form ofSections 50CA and 56(2)(x)of the Act, which is applicable witheffect from 01.04.2018 and 01.04.2017 respectively. Theconjoint reading of both sections, clearly provides that the taxliability if any, arise in such kind of transactions will beapplicable in the hands of recipients and no liability can beimposed on the transferor of shares. 11.We are in complete agreement with the findingsrecorded by the Tribunal that even otherwise the assesseebeing transferor of shares cannot be subjected to tax in theinstant case, more particularly, considering the amendmentbrought by the Legislation on the statute book in the form ofSections 50CA and 56(2)(x)of the Act, which is applicable witheffect from 01.04.2018 and 01.04.2017 respectively. Theconjoint reading of both sections, clearly provides that the taxliability if any, arise in such kind of transactions will beapplicable in the hands of recipients and no liability can beimposed on the transferor of shares. 12.In light of the aforesaid facts, we cannot accept thesubmissions of the Revenue to treat the present case as a caseof ‘escapement of income’ conferring jurisdiction on theAssessing Officer for reopening the assessment. In fact for thereasons recorded, the Assessing Officer had no jurisdiction toinitiate the reassessment under Section 147 read with Section148 of the Act, more particularly, in absence of any newtangible material found on record. So far the issue of deletingthe addition of disallowance of loss claimed on sale andpurchase of shares in case of assessee is concerned, as notedabove, both the CIT (A) as well as Appellate Tribunal haveelaborately discussed the supporting evidence and hasindividually examined the transactions of each five Companies.No contrary evidence has been placed before us by theRevenue Department to nullify the aforesaid evidence of theassessee. In such circumstances, we find no error of law or factcommitted by the CIT (A) or the Appellate Tribunal in passingthe impugned orders. 13.In the result, both the question of law raised by therevenue are answered in negative and the Appeal fails and ishereby dismissed. No order as to costs. (J. B. PARDIWALA, J) (NISHA M. THAKORE,J) Y.N. VYAS