Loading judgment…
Facts
The assessee claimed a loss on the sale of shares of a group concern, M/s Alom Extrusion Ltd., which was formerly known as Om Development Limited. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) disallowed this claim.
Held
The Tribunal held that the assessee failed to produce sufficient evidence regarding the purchase price and consideration of the shares of M/s Alom Extrusion Ltd., a sister concern. Despite opportunities, the assessee could not substantiate the claim of loss.
Key Issues
Whether the assessee has provided adequate evidence to support the claim of loss on sale of shares, particularly when the shares were of a sister concern and purchase details were not furnished.
Sections Cited
147, 148, 143(3), 227(2), 227(3), 209
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH KOLKATA
Before: SHRI GEORGE MATHAN
आदेश / O R D E R This is an appeal filed by the assessee against the order of the ld CIT(A), Kolkata-27, dated 18.11.2024, passed for the assessment year 2016-2017.
Shri A.K.Tibrewal, ld. AR appeared on behalf of the assessee and Shri S.B.Chakraborthy, ld.Sr. DR appeared on behalf of the revenue.
It was submitted by the ld.AR that the assessee when filing his return of income had claimed a loss of Rs.34,93,533/- on the sale of shares of a group concern company namely M/s Alom Extrusion Ltd. It was the submission that the assessee had sold 222000 shares during the impugned assessment year. It was the submission that M/s Alom Extrusion Ltd. was originally known as Om Development Limited. It was the submission that vide a fresh certification of incorporation consequent of change of name, the said Om Development Ltd. was renamed as Alom Extrusions Ltd. vide a certificate dated 02.12.2003. It was the submission that in the course of assessment the AO had asked the assessee to produce details of the sale of shares to prove of sale consideration and it was also asked to furnish the details of the purchase, copy of bank statement, D-mat account and whether the shares were held in D-mat form or other form. It was the submission that admittedly the assessee was failed to provide the information before the AO. It was the submission that in the appeal, the ld. CIT(A) had called for remand report and the AO in his remand report had mentioned that the assessee has furnished documents like D-mat statement reflecting the statement from 2008 onwards, balance sheet of 2006-2007, however, the assessee could not furnish the documents relating to the purchase of said shares and the bank statement evidencing the purchase transaction. It was the submission that consequently the AO and ld. CIT(A) had disallowed assessee's claim of loss on the sale of shares of Alom Extrusion Ltd. and the ld. CIT(A) had also confirmed the same. The ld. AR drew my attention to the paper book filed by the assessee at page 24 which is the schedule of the balance sheet as on 31.03.1998 and 31.03.1999. The same reads as under :-
4. It was the submission that the assessee had shown investment in 1,10,000 shares of Om Development at Rs.7.5/- per share totalling to Rs.8,75,000/-. Further the ld. AR drew my attention to page 35 of the paper book which is a copy of schedule forming part of the account as on 31.03.2000 wherein it reads as under :-
5. There is an increase of 10000 shares and the investment value shown at Rs.9 lakhs. The ld. AR also drew my attention to page 44 of the paper book which is a copy of schedules forming part of the accounts as on 31.03.2001 which reads as under :-
6. The same shows investments at 1,77,500 shares in Om Development Ltd valued at Rs.11,30,000/-. The ld. AR drew my attention to page 53 of the paper book which is the schedule forming part of the accounts in Schedule-2 investments of 1,77,500 equity shares of M/s Alom Extrusions Ltd. (Formerly M/s Om Development Ltd.) is shown at Rs.11,30,000/-. The same reads as follows :-
8. In the said schedule M/s Alom Extrusions Ltd. is shown at 2,23,333 shares and the investment value of Rs.37,30,000/-. It was the submission that these were the shares which were sold by the assessee during the impugned assessment year and loss of Rs.34,93,533/- claimed. The ld. AR further placed reliance on the decision of the Hon’ble Delhi High Court in the case of Jay Engineering Works Ltd., reported in [1978] 113 ITR 389 (Delhi), wherein the Hon’ble High Court has held as follows :- 6. In the present case, the relevant books of account in which detailed information as to the expenses which were claimed as deductions for the assessment years 1962-63 and 1963-64 are destroyed by fire in November, 1962. Under the Indian Evidence Act secondary evidence of the contents of these account books would have to be adduced if they were to be used to prove any fact. The external auditors of the assessed-companies had, however, made their annual reports under Section 227(2) of the Companies Act, 1956, to the members of the company on the accounts examined by them and on the balance-sheets and profit and loss accounts for these two years. These reports do not doubt the correctness of the expenses, deductions of which were claimed by the assesseds. Under Section 227(3)(b) and (c) the auditor's report had to state whether in their opinion proper books of account as required by law have been kept by the company and whether the company's balance-sheets and profit and loss accounts were in agreement with the books of account and returns. Under Section 209 of the Companies Act, the assessed- company was required to maintain proper books of account with reference to the receipts and expenditure taking place in the business of the assesseds. The account books maintained by them must be such as to give a true and fair view of the state of affairs of the companies.
The question arises, therefore, whether the reports of the auditors could be said to be "material" on which reliance could be placed by the income-tax authorities. Unlike the proof required of such reports as also of the account books under the Indian Evidence Act, it is quite competent for the income-tax authorities not only to accept the auditors' report, but also to draw the proper inference from the same. The income-tax authorities could, therefore, come to the conclusion that since the auditors were required by the statute to find out if the deductions claimed by the assesseds in their balance-sheets and profit and loss accounts were supported by the relevant entries in their account books, the auditors must have done so and must have found that the account books supported the claims for deductions, when the deductions were disallowed, by the Income-tax Officer on the ground that detailed information regarding them was not available, justice was not done to the assesseds. It was not possible for the assesseds to produce the original account books, which were destroyed in fire. There was, however, other material mainly consisting of the auditors' reports from which it could be inferred that the deductions were properly supported by the relevant entries in the account books. In a sense it may be a question of law as to what the meaning of "material" is and whether the auditors' reports were material. But the question of law is well settled and is not capable of being disputed and does not, therefore, call for reference.
It was the submission that the assessee was unable to produce the bank statements, insofar as the purchases had been made more than 20- 25 years ago, the supporting secondary evidence in the form of balance sheet is to be considered. It was the submission that the loss as claimed by the assessee is liable to be allowed.
In reply, ld.Sr. DR vehemently supported the orders of the ld. AO and ld. CIT(A). It was the submission that the assessee failed to produce the details in respect of the purchase of shares. It was the submission that the order of the ld. AO and the ld. CIT(A) is liable to be upheld.
I have considered the rival submissions. A perusal of the schedule of investments as on 31.03.1999 as extracted above clearly shows that 1,10,000 equity shares have been purchased for Rs.7.50 per share and the same is shown at Rs.8,25,000/-. In the schedule of investments for the year ending 31.03.2000, 1,20,000 equity shares has been shown. In the said statements it is specifically mentioned that previous year’s 1,10,000 equity shares of Rs.10/-. Thus, in the year ending 31.03.2000 another 10000 shares to have been purchased for Rs.7.5/- and the face value marked at Rs.10/-. As on 21.03.2001, the investment went from Rs.9,00,000/- to Rs.11,30,000/- being an increase of Rs.2,30,000/- and the number of shares went from 1,20,000 to 1,77,500. This increase of Rs.2,30,000/- in the value of investment for 57,500 shares, is at Rs.4/- per share. This continued till 31.03.2009 when 1,77,500 shares increased to 2,23,000 shares which is an increase of 45,833 shares against the value increase of Rs.26 lakhs, that means these shares have been purchased at a price of Rs.56.72/- per share. Now, what is to be understood is that M/s Allom Extrusion Ltd. is shown as a sister concern of the assessee. It is not as if there would be no evidence available to show the details of the purchase and how the value of shares have been done for the purpose of acquisition. Shares would have been either purchased by the journal entries because it is a sister concern or by cheque payment/bank entries, no evidence in regard to the purchase consideration in respect of the said shares produced by the assessee before the authorities below, though opportunities have been given. In the decision of the Hon’ble Delhi High Court in the case of Jay Engineering Works (supra), relied on by the ld.AR, it was a case in respect of documents which were destroyed by fire and the question was in regard to the books of accounts. Here, the books of accounts are not under challenge. The assessee has been asked to prove the purchase price of the shares of M/s Allom Extrusion Ltd. which is a sister concern of the assessee. The balance sheet of the assessee only shows the face value and consideration which is mentioned. How the consideration has flown. How the value was determined. Nothing is being explained. This being so, as the evidence in respect of purchase of shares having not been produced by the assessee, I have no reason to interfere in the orders of the