M3M INDIA HOLDINGS,GURGAON vs. DCIT, CENTRAL CIRCLE- 2, FARIDABAD

PER BHAVNESH SAINI, J.M. This appeal by assessee has been directed against the order of Learned CIT(A)-3, Gurgaon, Dated 10th March, 2018, for the assessment year 2012-2013, on the following grounds :

2 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. 1.0. “That on the facts and circumstances of the case and in law, the CIT(A) erred in upholding the validity of the assessment order dated 31.01.2014 framed under section 153B(l)(b) of the Income-tax Act, 1961 (‘the Act’), without appreciating that the same is without jurisdiction, illegal and bad in law.

1.1. That the CIT(A) erred on facts and in law in not appreciating that since no search was conducted in the case of the appellant, the assessment completed under section 153B(l)(b) of the Act, is without jurisdiction, illegal and bad in law. 1.2. That the CIT(A) erred on facts and in law in not appreciating that the assessment having been completed without issuance and service of valid notice under section 143(2) of the Act, is illegal and bad in law. 1.3. That the CIT(A) erred on facts and in law in not appreciating that since proper sanction, as required under section 153D of the Act, was not

3 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. received, the assessment order is illegal and bad in law. Without prejudice 2.0. That the CIT(A) erred on facts and in law in confirming the action of the assessing officer in making an addition of Rs.6,00,00,000 while computing taxable capital gains on transfer of shares in M/s. RS Infrastructure Pvt. Ltd., (in short “RS Infra”). 3.0. That the CIT(A) erred on facts and circumstances of the case and in law in confirming the action of the assessing officer in disallowing short-term capital loss of Rs.155,75,00.000 arising on sale of debentures of M/s. Arch Propbuild Pvt. Ltd.,, on mere surmises and conjectures. 3.1. That the CIT(A) erred on facts and in law in holding that the appellant failed to discharge its onus of establishing the genuineness of transaction of purchase and sale of debentures, resulting in short-term capital loss.

4 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. 4.0. That the CIT(A) erred on facts and in law in confirming the action of the assessing officer in levying interest under section 234B of the Act.”

5 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. 142(1) along with a questionnaire were issued to the assessee on 22nd May, 2013, again notices under section 143(2) and 142(1) along with supplementary questionnaire were issued to the assessee on 21st October, 2013. The assessee attended the assessment proceedings. On examination of the seized documents, it was found that M/s. M3M India Holdings, the assessee, had entered into an agreement with M/s. Lowe Realty Pvt. Ltd., to sell 8,00,000 shares of M/s. R.S. Infrastructure Pvt. Ltd.,, a concern of M3M Group, for a total consideration of Rs.526 crores. The assessee is a partnership firm, having Shri Basant Bansal, Shri Roop Bansal, Smt. Abha Bansal, Shri Pankaj Bansal and M/s. RSSG Builders Pvt. Ltd., as partners. The said firm was having 7,99,000 shares of another Group Company M/s. R.S. Infrastructure Pvt. Ltd., was having about 18 acres of land in Golf Course Extension Road, Gurgaon with Commercial CLU.

3.1. During the course of search and seizure action at Corporate Office of M/s. M3M India Limited at Gurgaon on 30th June, 2011, papers regarding some high value RTGS

6 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. transactions were found and seized. The papers seized from pages 75, 76, 83, 85, 86 and 87 of Annexure-A12. Page-75 show remittance of Rs.58.5 crores from assessee firm to Smt. Abha Bansal. Page-76 shows the remittance of Rs.58.5 crores from the assessee firm to Shri Pankaj Bansal. Page- 83 shows cheque of Rs.239 crore for RTGS withdrawal. Page-85 shows remittance of Rs.61 crores from assessee to Shri Basant Bansal. Page-86 shows remittance of Rs.61 crore from assessee to Shri Roop Kumar Bansal. Page-87 shows handwritten rough working relating to the above transactions. The scanned image of page-87 is reproduced in the assessment order. On the basis of the transactions recorded on pages-75, 76, 85 and 86 above, these rough notings on page-87 can be thus interpreted by the assessing officer that the above amounts paid to the partners of the assessee firm. Rs.239 crores cheque was for RTGS withdrawal, which is the sum total of the remittances to the Bansal family members as mentioned above. Rs.4,99,93,550/- and 5CR, out of consideration of Rs.244 crores received by assessee firm, Rs.239 crore was

7 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. distributed amongst Bansal family members. The difference of Rs.5 crore remained with the assessee. Shri Roop Kumar Bansal, partner of the assessee firm was confronted with these transactions, whose statement was recorded under section 132(4) of the Income Tax Act, 1961 and the relevant para of his statement is reproduced in the assessment order, asking the explanation on these seized papers, to which, he has replied that the same will be explained later on. The rough notings on page-87 of Annexure-A12 were further corroborated by transactions recorded on page-112 of Annexure-A13, which shows distribution of Rs.240 crores among Bansal family members. Scanned images are reproduced in the assessment order. The Assessing officer noted that against the amount of Rs.240 crores, “advance against shares” is mentioned. Below this phrase, there is an arrow which indicates towards “R.S. Infra” which obviously is M/s. R.S. Infrastructure Pvt. Ltd.,. The assessing officer noted that Rs.60 crore each to 4 persons is mentioned and below the table “Tax on Closure of Transaction” is mentioned. The exact decoding of this sentence is discussed

8 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. by the assessing officer in the assessment order. The assessing officer noted that while vacating the restraint place under section 132(3) of the Income Tax Act at C13, Sushant Lok, Phase-1, Gurgaon on 25th July, 2011, copies of trial balance of assessee as on 25th June, 2011 and 31st March, 2011 were found and seized as pages 3 and 4 of Annexure-AA1. The scanned images of the trial balance as above, are reproduced in the assessment order. The assessing officer further noted that the trial balance shows investment of Rs.8.32 crores in the shares of M/s. R.S. Infrastructure Pvt. Ltd.,. These two papers have been signed by Shri Suresh Chawla, V.P. Taxation of M/s. M3M Group. There is a handwritten entry in the trial balance dated 25th June, 2011 which says “out of 8 lakh shares transferred 4,88,000”. The ‘Advance Received’ column shows a figure of Rs.243.99 crores where a handwritten entry mentions the word “Lowe”. There is a further handwritten entry below the table, which says, “After advance received from Lowe Reality”. Further, during the course of search on 25th July, 2011, a copy of Bank Statement of assessee i.e., M/s. M3M

9 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. India Holdings with Kotak Mahindra Bank was found, which was seized as page-11 of Annexure-AA1. It shows deposit of Rs.243.99 crores, against which, “advance for shares transferred” is mentioned. The scanned image of this bank statement is reproduced in the assessment order.

3.2. On perusal of the financial statements of M/s. R.S. Infrastructure Pvt. Ltd.,, it was seen that the company was involved in business of land trading. A comparison of its financial particulars is reproduced in the assessment order. It was further seen that as on 31st March, 2010, there were 8 lakh issued shares, out of which, M/s. Krishna Flexi Solutions (now the assessee) had 7,99,999 shares, while Shri Roop Kumar Bansal had the ownership of one share. On the basis of these discussion, the assessing officer noted that it is apparent that assessee company on 25th June, 2011 had transferred 4,88,000 shares, out of total 8 lakh shares of M/s. R.S. Infrastructure Pvt. Ltd., to ‘Lowe Reality’, against which, it had amongst the Bansal family members as mentioned in the assessment order. This

10 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. amount of Rs. 243.99 crores had been shown as advance from M/s. Lowe Reality Pvt. Ltd., in the trial balance.

3.3. During the course of statement of Shri Roop Kumar Bansal recorded under section 132(4) on 25th July 2011 at Sushant Lok, Gurgaon, he was shown page-112 of Annexure-A13 seized from Corporate Office of M/s.M3M India Limited at Tower-B, 6th Floor, Paras Twin Tower, Golfcourse Road, Sector 54, Gurgaon, which shows rough working relating to the transactions referred to in para 3.2 of the Order. He replied that papers showed a transaction of Rs.240 crores (approx.) received as advance against shares of M/s. R.S. Infrastructure Pvt. Ltd.,. The advance was received by Assessee Firm from M/s. Lowe Realty Pvt. Ltd. This amount was distributed amongst its partners, Sri Basant Bansal, Shri Roop Kumar Bansal, Smt. Abha Bansal and Shri Pankaj Bansal. Shri Roop Kumar Bansal was further examined to give the details of the transactions. It was explained by him that these transactions took place in June, 2011 when M/s. Lowe Reality Pvt. Ltd., and the assessee Firm had entered into an agreement dated 22nd

11 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. June 2011 for sale and purchase of 8 lakh shares of M/s. R.S. Infrastructure Pvt. Ltd., for total cancellation of Rs.526 crores. It was stated by him that assessee-firm, out of 7,99,999 shares, had transferred 4,88,000 shares on 24th June 2011 through D-Mat Account to M/s. Lowe Reality Pvt. Ltd., against part consideration of Rs.243.99 crores received on 24th June 2011. Shri Bansal produced copy of the share purchase agreement, according to which, the balance shares are to be transferred to M/s. Lowe Realty Pvt. Ltd., within 90 days of the Agreement date or any other subsequent date, which can be extended by M/s. Lowe Reality Pvt. Ltd.,, at its discretion and the balance consideration will be paid by M/s. Lowe Realty Pvt. Ltd., at that subsequent date. The relevant portion of his statement is reproduced in the assessment order.

3.4. The copy of the share purchase agreement amongst Assessee (Promoters), M/s. R.S. Infrastructure Pvt. Ltd., (Company) and M/s. Lowe Realty Pvt. Ltd., (Party) furnished by the assessee, forms pages 12-32 of Annexure- AA1 seized from the O/o. M3M Group at Sushant Lok,

12 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. Gurgaon on 25th July, 2011. As on the date of agreement i.e., 22nd June, 2011, assessee was owner of 7,99,999 shares of the company M/s. R.S. Infrastructure Pvt. Ltd. As per this agreement, M/s. Lowe Realty Pvt. Ltd.,, agreed to purchase from assessee and assessee agreed to sell and transfer to M/s. Lowe Realty Pvt. Ltd., 100% of its equity shares held in M/s. R.S. Infrastructure Pvt. Ltd., on the terms and conditions as per the agreement. In consideration of the sale and transfer of 7,99,999 shares to M/s. Lowe Realty Pvt. Ltd., would pay to the Promoter i.e., assessee, an amount of Rs.6575/- per equity share, as purchase price aggregating to Rs.526 crores. Further, as per the agreement, the purchase consideration was to be paid by M/s. Lowe Realty Pvt. Ltd., to the assessee in two installments. It was stipulated that M/s. Lowe Realty Pvt. Ltd., would pay to the assessee, an amount of Rs.244 crore as part of the purchase consideration on the agreement date. Accordingly, Rs.244 crores was paid by M/s. Lowe Realty Pvt. Ltd., on 22nd June, 2011. Further, it was stipulated that vide clause 2.3.2 that on the closing date, M/s. Lowe Realty Pvt. Ltd., would

13 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. pay to the assessee, an amount of Rs.282 crores with the transfer of remaining 3,11,999 shares. The closing date was defined in the Agreement as a period of 90 days from the agreement date or any other date, as may be extended by M/s. Lowe Realty Pvt. Ltd., at its sole discretion. The assessee transferred 4,88,000 shares to M/s. Lowe Realty Pvt. Ltd., through D-Mat account on 24th June, 2011.

3.5. The assessing officer reproduced the relevant clause of the share purchase agreement in the assessment order and noted that the amount of Rs.244 crores received by the assessee-firm from M/s. Lowe Realty Pvt. Ltd., on account of transfer of shares of M/s. R.S. Infrastructure Pvt. Ltd., has been treated as advance against shares. This fact was further evident from the balance sheet as on 31st March, 2011 and 25th June, 2011 as number of shares on investment account in M/s. R.S. Infrastructure Pvt. Ltd., has been shown to be same at Rs.8,32,57,520/-. Shri Roop Kumar Bansal was also asked to explain the nature of treatment given in the books of account to the above transactions. He has explained that transaction has been

14 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. treated as “Advance against Shares”. The assessing officer, then, confronted to Shri Roop Kumar Bansal why the so- called advanced of the shares, may not be considered as transfer of shares under section 2(47) of the Income Tax Act, 1961 since 4,88,000 shares had already been transferred to M/s. Lowe Realty Pvt. Ltd., against which, part consideration of Rs.244 crores had been received by the assessee-firm. Shri Roop Kumar Bansal replied that as the assessee had received only part consideration, therefore, transaction has been shown as Advance because, the transaction will be closed on transfer of all the shares and on receipt of full consideration on the closure date. However, on being confronted with provisions of Section 2(47) of the Income Tax Act, 1961, he admitted that the amount of Rs.244 crores is in the nature of income on account of receipts against 4,88,000 shares. The relevant portion of his statement is reproduced in the assessment order. The assessing officer, therefore, noted that in this case the total sale consideration for 4,88,000 shares works to Rs.320.86 crores, out of which, Rs.244 crores has been

15 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. received. Therefore, as per the provisions of the Act, amount of Rs.320.86 crores is in the nature of full sale consideration for taxability on transfer of shares. Shri Roop Kumar Bansal was confronted on this issue, who after consulting his Financial Experts, (V.P. Finance and Head Taxation) and other Partners, admitted that capital gain on the above transaction is to be computed by taking 320.86 crores as full sale value. His statement is noted in the assessment order. The Assessing Officer also noted that as per share purchase agreement, the closing date is defined i.e., within a period of 90 days from the Agreement date or any other date, as may be extended by M/s. Lowe Realty Pvt. Ltd.,, at its sole discretion. The transfer of 3,11,999 number of remaining shares shall take place simultaneously on receiving of cheques for remaining consideration. The Assessing Officer, therefore, noted that transfer of 4,88,000 shares constitutes a complete transfer for sale, on which, capital gain arise. Shri Roop Kumar Bansal agreed for payment of tax on capital gains and voluntarily made disclosure under section 132(4) of the Income-Tax Act of

16 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. Rs.314 crores for financial year 2011-2012 on behalf of the assessee-firm, after consulting the other partners of the firm. The computation of undisclosed income of Rs.314 crores is mentioned at page 19 of the assessment order. The assessee has submitted letter dated 26th July 2011 confirming the disclosure of income of Rs.314 crores duly signed by Shri Basant Bansal and Shri Roop Kumar Bansal.

3.6. The assessing officer issued further notice to the assessee on the issue of transfer of balance shares of M/s. R.S. Infrastructure Pvt. Ltd., and it was brought to the notice of assessee that as per the Agreement, 8 lakhs shares of M/s. R.S. Infrastructure Pvt. Ltd., were to be transferred to M/s. Lowe Infra and Wellness Pvt. Ltd., [earlier known as M/s. Lowe Realty Pvt. Ltd.,] for Rs.526 crores, out of which, 4,88,000 shares were transferred. Therefore, assessee should explain whether the remaining shares have been transferred and remaining consideration has been received by assessee ? The assessee filed reply before the assessing officer which is reproduced in the assessment order, in which, the assessee briefly explained that as per the

17 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. Agreement, the total shares were to be transferred for an aggregate consideration of Rs.526 crores, but, later on, considering the market conditions, the assessee through its partners and M/s. Lowe Reality Pvt. Ltd.,, mutually agreed to amend the share price from Rs.6575 per share to Rs.6500/-. The amendment to the Agreement was accordingly made in writing and the sale consideration was changed to Rs.520 crores as against the initial consideration of Rs.526 crores. The second installment of the amount have been received. The relevant documents filed before assessing officer. The assessing officer, however, did not accept the contention of the assessee and noted that initially the sale price of the valuation of the share under transfer was Rs.526 crores, which is subsequently revised to Rs.520 crores. However, assessee cannot change the terms of the Agreement. Therefore, assessee has understated the sale consideration by Rs.6 crores. Therefore, assessing officer, made the addition of Rs.6 crores on account of sale of shares to M/s. Lowe Reality Pvt. Ltd.

18 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. 3.7. The assessing officer, thereafter, discussed the issue of short term capital loss. The Assessing Officer noted that assessee has shown short term capital loss amounting to Rs.155.75 crores [ i.e., cost of acquisition at Rs.175.25 crores (-) Sale Consideration received of Rs.19.50 crores ]. Thus, the short term capital loss was declared to Rs.155.75 crores. The Assessing Officer asked for the details on the same. However, no details were provided by the assessee. The assessing officer, therefore, issued show cause notice to the assessee as to why the short term capital loss, be not treated as non-genuine, in the absence of supporting details /evidences. The assessee filed reply before assessing officer, in which, the assessee briefly submitted that in assessment year under appeal in the month of September/October, 2011, 05 companies [referred to as Seller] approached the assessee-firm with a business proposition, whereby they were agreeable to sell Compulsory Convertible Debentures [CCDs ] of a Private Limited Company to the Assessee-Firm and the offer was to sell CCDs at the price at which they were bought these debentures during financial year

19 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. 2009-2010 without charging any premium. It was a good business proposition for the assessee firm and these CCDs were bought from the sellers and entire consideration was discharged. However, due to one of the qualification in Debenture Subscription Agreement, the assessee firm could not get CCDs transferred in its favour, further after based on legal opinion, these CCDs were sold by the firm at loss. As the assessee firm held the CCDs for a period of less than one year, the said capital asset was in the nature of short term capital asset and thus, loss arising from sale of these CCDs was in the nature of short term capital loss. The assessing officer, however, noted that reply of the assessee is evasive and general without any documentary evidence/ supporting documents. The assessee was, therefore, directed to furnish following documents to justify the short term capital loss. (1) Name and Address of the five companies who have agreed to sell CCD of a private company (2) Copies of the agreements entered into with these 05 companies referred to as sellers (3) Proof of payment made by the assessee firm, source of the payment

20 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. and copy of the accounts thereon (4) Produce copies and original of CCD issued by the Companies (5) Under what circumstances and reason that these CCDs could not be transferred in the name of assessee firm (6) Produce copies of the legal opinion received that the CCDs cannot be transferred as claimed by the assessee.

3.8. The assessee filed reply before assessing officer which is reproduced in the assessment order in which the assessee has provided names and address of the companies who had agreed to sell CCDs of a Private Company to the assessee namely (1) Social Realtors Private Limited (2) Shaan Realcon Pvt. Ltd., (3) Marconi Infratech Pvt. Ltd., (4) Royal Multiplex Pvt. Ltd., and (5) Aashrya Developers Pvt. Ltd., in a sum of Rs.175.25 crores. It was explained that the assessee firm paid sale consideration through RTGS, which is supported by the Bank statement, copy of which is filed. The assessee also filed copy of the CCDs purchased for perusal of the assessing officer. It was explained that when the seller have handed over original CCD Certificate to the assessee firm, assessee became owner of the CCDs on the

21 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. even date. To complete the procedural requirement, the assessee firm approached M/s. Arch Propbuild Pvt. Ltd., [“Arch”] for registration of CCDs in Debenture Register of M/s. Arch. However, M/s. Arch vide letter dated 16th December, 2011 refused the request of the assessee firm and stated that CCDs cannot be a transfer in the name of the firm due to non-compliance of DSA. The letter of M/s. Arch was also filed before assessing officer along with complete details. The assessing officer asked the assessee to produce books of account. The assessing officer noted that the books of account and other details were not produced before him. The assessee filed further reply before assessing officer, in which, similar facts were explained. The assessee further explained that when M/s. Arch refused to register CCDs in the name of assessee firm due to non compliance of DSA, the assessee firm took-up the matter with the Seller. However, no assistance was accorded by them on this issue. As per condition of DSA, any dispute between the parties of the said Agreement, should be decided by the Arbitrator as per Arbitration and Conciliation Act, 1996. The

22 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. assessee firm invoked the Dispute Resolution Clause of DSA and asked M/s. Arch to appoint Arbitrator to resolve the matter. The arbitration proceedings were accordingly initiated. However, the Arbitrator gave its Award against the assessee firm and held that assessee firm was aware of conditions of the DSA and thus, the assessee firm is responsible and liable for the losses, which it had suffered in the transactions. The Arbitrator also denied any claim made by the assessee firm in this regard. The Arbitration Award was pronounced in the Month of March, 2012. The assessee firm was advised by its Legal Counsel that their claim in this regard is not a strong proposition and chances of winning this case in the Court is very remote. Therefore, as per advice of the Legal Advisor, the assessee firm decided to sell the shares and suffered loss. The assessee entered into an agreement to sell with M/s. Zealous Financial Services Private Limited (“M/s. Zealous”) on 30th March, 2012 and agreed to transfer the CCDs for a consideration of Rs.19.50 crores. M/s. Zealous paid advance of Rs.1.50 crore and Rs.2.90 crore and balance consideration was paid as

23 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. agreed. The assessee firm agreed to file an appeal in the Court against the Seller and M/s. Arch, whereby, M/s. Zealous would be made as interested party in such appeal. M/s. Zealous agreed to meet all legal cost and charges in this respect. It was further decided that in case this appeal is decided in favour of M/s. Zealous then, M/s. Zealous will share 15% of compensation so received with the assessee firm. It was, therefore, explained that assessee firm in this way has suffered losses at Rs.155.75 crores. The assessee further explained that the partners of the assessee firm are Promoters of M/s. M3M India Limited which is an operating entity of M3M Group and has considerable value. It was further submitted that M/s. Arch has invested in CCDs of M/s. Popular Infracon Pvt. Ltd., [Now M/s. M3M Holding Pvt. Ltd.,] which is the holding Company of M/s. M3M India Limited. Thus, due to this chain of holding, conversion of the aforesaid CCDs will result in achieving considerable stake in the Promoter. Hence, in case, some third party acquires the CCDs and later on due to conversion of these CCD’s acquires stake of the Companies as explained above,

24 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. it will lead to dilution of stake of the Promoters in M/s. M3M India Limited. This in future might create nuisance value to the Promoters and may create inflexibility in the Group, delay in decision making or deadlock situation. Thus, to reduce this risk, the above Partners of the Firm were interested in acquiring the CCD’s in consideration.

3.9. The assessing officer noted that the explanation given by the assessee for purchase of Debentures of M/s. Prithvi Realcon Pvt. Ltd., [now M/s. Arch Propbuild Pvt. Ltd.] is that in Financial Years 2009-2010 and 2010-2011 M/s. Popular Infracon Pvt. Ltd., [Now known as M/s. M3M India Holdings Pvt. Ltd., (-) Assessee] which is a Holding Company of M/s. M3M India Limited, of which, the partners of the assessee firm are promoters, received advances against subscription of debentures of the company M/s. Arch for the above consideration. M/s. Arch received the consideration from the above 05 parties (Seller). The assessing officer on perusal of the balance sheet and ITR of M/s. Arch noticed that Company is not doing any business and does not have any income and the only asset is the

25 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. advance of Rs.175 crores received as advance for subscription of debentures as given in the chart reproduced at pages 30 and 31 of the assessment order. The assessing officer on the basis of the reply filed, has conducted enquiries in order to verify the genuineness of the transaction entered into by the assessee firm and the above 05 companies for sale of CCDs. The assessing officer noted that the facts and circumstances clearly establish that transaction between the assessee firm and the seller is not genuine transaction entered into between independent parties, but, is a sham/coloured transaction entered into between the parties. Assessing Officer noted that there are common Directors in M/s. M3M India Pvt. Ltd., assessee- firm and the Seller. The copies of the balance sheet of the assessee firm and sellers are reproduced in the assessment order in support of these findings. The assessing officer also noted on examination of the Bank statements of the seller company that their bank account are linked through Finacle CUMM to accounts@m3m india.com which is the E-mail account of M3M India. The assessing officer, therefore,

26 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. noted that bank account of the seller companies are operated by M3M Group. It was also noted that the seller companies have a common address and summons under section 131 were issued and it was discovered that it was small office in highly congested area and found the premises locked. Details of Common Directors and Addresses are noted in the assessment order. None of the persons attended the proceedings under section 131 of the Income Tax Act. The assessing officer further noted that details of sale consideration received from M/s. Zealous which have been filed, but, no evidence regarding payment of balance amount have been produced. On perusal of the Debenture Certificates of all the five sellers, it was noted that it does not contain details like common seal and details of memorandum of transfer of CCDs mentioned overleaf. The assessee was asked to produce original CCDs. However, copies are filed only. The assessing officer, therefore, noted that the above facts would prove that the entire transaction entered into between buyer and seller are non-genuine and sham transaction. The assessing officer relied upon decision

27 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. of the Supreme Court in the case of McDowell & Co., vs. C.T.O. and disallowed the short term capital loss of Rs.155. 75 crores and assessed the income at Rs.514.78 crores in assessment order under section 153B(1)(b) dated 31st January 2014. The assessing officer also noted in the assessment order that the assessment order is passed with the statutory approval of the Addl. CIT, Range, Chandigarh communicated by letter dated 31st January 2014 in accordance with section 153D of the Income Tax Act, 1961.

28 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. Ground Nos.1.0 and 1.1 :

29 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. premises of the assessee and residential premises of the partners of the assessee firm. Learned Counsel for the Assessee, in view of these evidences on record, could not contribute anything. These material on record clearly establish that assessee was subjected to search action under section 132 of the Income-Tax Act, 1961 in pursuance of valid warrant of authorisation under section 132 of the Income Tax Act and during the course of search panchanama was also drawn in respect of the premises searched of the assessee firm. The assessing officer, therefore, rightly proceeded to pass the assessment order under section 153B(1) of the Income Tax Act, having jurisdiction over the case of the assessee. Therefore, this ground of appeal of assessee has no merit. The same is accordingly dismissed. In the result, Ground Nos. 1.0 and 1.1 of the appeal of Assessee are dismissed.

Ground No.1.2 :

30 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. Income Tax Act, 1961, within the period of limitation. Therefore, assessment order is illegal and bad in Law.

31 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. section 143(2) of the Income Tax Act”. Learned Counsel for the Assessee did not dispute this legal proposition. It may also be added here that the assessee in response to notice under section 153A dated 28th December 2012, filed the return of income on 21st March 2013 and A.O. issued notice under section 143(2) and 142(1) on dated 22nd May, 2013. In response thereto, the assessee and their Counsel appeared before assessing officer. Therefore, notice under section 143(2) have been issued and served upon assessee within the period of limitation, though, it was not required as per the above Judgment. Therefore, the contention of Learned Counsel for the Assessee has no merit. The same is accordingly dismissed. In the result Ground No.1.2 of appeal of assessee is dismissed.

Ground No.1.3 :

32 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. and submitted that Addl. CIT, Central Range, Chandigarh communicated the sanction under section 153D to the A.O. on 31st January 2014 and the assessing officer on the same day i.e., 31st January 2014 passed the assessment order. He has referred to page-48 of the paper book, which is copy of Fax message dated 5th February 2014 in connection with the communication of sanction/approval of Addl. CIT. PB- 31 is the reply filed before A.O. by assessee on 29th January 2014. PB-469 is the reply to the RTI application filed by assessee dated 6th June 2018, in which no specific reply have been given by the Department as to by which mode the assessment record was forwarded by A.O. to Addl. CIT as no such record available and how the sanction/approval was communicated to the assessing officer. PB-46 is letter of the assessing officer to the Addl. CIT, Central Range, Chandigarh dated 30th January 2014 sending the draft assessment order for approval in terms of section 153D of the Income Tax Act. PB-47 is approval of the Addl. CIT, Chandigarh dated 31st January 2014 without mentioning if he has seen the assessment record. Learned

33 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. Counsel for the Assessee submitted that letter dated 23rd January 2019 was given to the assessing officer, in which it was brought to his notice that after inspection of the assessment record conducted on 25th October 2018, it was noted that while inspecting the assessment file, assessee has not found any original copy of statutory approval under section 153D of the Income Tax Act, 1961, except the copy of the approval only. The assessee, therefore, requested that original approval under section 153D may kindly be made available to him. He has submitted that till date no reply have been conveyed to the assessee. He has, therefore, submitted that in this case no approval have been conveyed to the assessing officer before passing the assessment order. He has submitted that in section 153D the word used is ‘Shall’ which indicates that this provision is mandatory which is to be complied before passing the assessment order. In the present case, no such approval have been found on record. On inspection of the record, it was found the approval was received by the assessing officer for the first time by Fax on 5th February 2014 [PB 48]. There is no

34 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. other documentary evidence available on record. It is, therefore, clear that approval/sanction of the Addl. CIT was received after passing of the assessment order. Therefore, assessment order is illegal and bad in Law. The assessing officer was not in possession of the valid sanction/approval of Competent Authority before passing the assessment order. Learned Counsel for the Assessee submitted that the Tribunal can in fact call for production of the assessment record for itself to determine whether the satisfaction was received, before passing the assessment order by the Assessing Officer ? Reliance was placed upon the Judgment of the Allahabad High Court in the case of S K Gupta and Co. vs ITO 246 ITR 560 (All.). He has submitted that to the same effect there is another Judgment of the Allahabad High Court in the case of M.D. Overseas Ltd., vs., DGIT 333 ITR 407 (All.) He has, therefore, submitted that the approval in this case though not conveyed to the Assessing officer on time, but, is also given in a mechanical manner. Learned Counsel for the Assessee relied upon Judgment of the Honorable Bombay High Court in the case of Pr. CIT vs Smt.

35 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. Shreelekha Damani in Income Tax Appeal No. 668 of 2016 dated 27th November 2018. He has submitted that the draft assessment order was sent from Faridabad to Chandigarh on 30th January 2014 and it is not clarified as to how it was sent, whether through messenger or courier or any other valid mode. Therefore, no time was left to consider the assessment record. Since last reply is filed on 29th January 2014, therefore, there was no application of mind by the assessing officer or the Addl. CIT to pass the assessment order within the time. Learned Counsel for the Assessee also relied upon order of ITAT, Jodhpur Bench in the case of Smt. Indira Bansal vs., ACIT (2018) 192 TTJ 968 (Jodh.). Learned Counsel for the Assessee, in the circumstances, submitted that since last reply was filed on 29th January 2014, which contains more than 500 pages, therefore, it is highly improbable that assessing officer who is stationed at Faridabad, would have sum-up the entire assessment file, containing voluminous submissions and drafted assessment order containing not less than 46 pages and sent it to the Addl. CIT at Chandigarh on 30th January 2014. The

36 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. Department has filed vague reply to the RTI application. It is difficult to believe that within a span of a single day, assessment record would have reached to the Addl. CIT, at Chandigarh. It is highly unbelievable that Addl. CIT would have perused the voluminous assessment record and material on record on the same day and granted approval on the same day on 31st January 2014 and transmitted back the record from Chandigarh to Faridabad on the same day on 31st January 2014 for passing of the final assessment order. It was, therefore, submitted that sanction granted by Addl. CIT to draft assessment order was devoid of any application of mind without considering material on record and without adopting prescribed procedure. It was, therefore, submitted that the said statutory function of granting sanction was exercised casually and not in a proper manner by due application of mind. Therefore, assessment order is null and void and liable to be quashed.

37 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. on 31st January 2014. She has submitted that the Addl. CIT, Chandigarh after going through the assessment record, correctly granted approval to the draft assessment order. She has submitted that Addl. CIT does not say that he has not gone through the material on record and also did not apply his mind before grant of approval in the matter. Ld. D.R, therefore, submitted that this ground of appeal of assessee may be dismissed.

38 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. in clause (b) of sub-section (1) of Section 153B except with the prior approval of Joint Commissioner.” Therefore, for passing the impugned assessment order, the assessing officer who is in the rank of DCIT shall have to obtain prior approval of JCIT. The Learned Counsel for the Assessee referred to PB- 31, which is last reply filed before assessing officer on 29th January 2014. The assessing officer written a letter to the Addl. CIT, Chandigarh on 30th January 2014 sending a draft assessment order for his consideration and approval in terms of Section 153D of the Income Tax Act, copy of which is filed at page 46 of the PB. The assessing officer is stationed at Faridabad. However, the Addl. CIT is stationed at Chandigarh. The Addl. CIT, Chandigarh granted approval under section 153D of the Income Tax Act on 31st January 2014, copy of which is, filed at page 47 of the paper book and the same reads as under :

“No.Addl.CIT/Central/Chd./2013-14/616. Office of the Addl. Commissioner of Income Tax, Range Central, Chandigarh. Dated the 31st January, 2014.

39 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. To Shri Tatung Padi Dy. Commissioner of Income Tax, Central Circle-II, Faridabad.

Sub: Approval u/s.153D of the I.T. Act, 1961, in the case of M/s. M3M India Holdings, Formerly M/s.Krishna Flexi Solution, C-13, Sushant Lok- I, Gurgaon for the A.Y. 2012-2013 – regarding.

Please refer to the Draft Assessment Order U/s. 153B(1)(b) of the I.T. Act, 1961, referred for approval u/s.153D of the I.T. Act, 1961, dated 30.01.2014.

The approval u/s. 153D of the I.T. Act, 1961, is accorded for the Assessment Year 2012-13.

Sd/-RAJEEV KUMAR, Addl.Commissioner of Income Tax, Range (Central), Chandigarh. Encl: As Above.”

13.1. The Addl. CIT, Chandigarh did not mention in the approval, if he has gone through the assessment record or whether assessment record have been produced before him before granting approval in the matter. The assessee filed RTI application to the Revenue Department, copy of reply is

40 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. filed at page 469 of the PB, in which it was explained that letter of the Assessing Officer, Faridabad dated 30th January 2014 was forwarded to the Addl. CIT, Chandigarh on 30th January 2014. No reply was given to assessee as to when the letter of the assessing officer was received by Addl. CIT, Chandigarh. It was also intimated that no such record is available in the office of Assessing Officer regarding mode by which assessment record along with the letter of the assessing officer dated 30th January 2014 were forwarded to the Addl. CIT, Chandigarh. No details/explanation were furnished as to on which date the assessment record was received by the Addl. CIT, Chandigarh. The assessee, on inspection of the record, intimated the assessing officer that no original approval under section 153D is available on record. Learned Counsel for the Assessee referred to PB 48, which is Fax message received on 5th February 2014, communicating the approval of Addl. CIT to the assessing officer. This Fax message is not legible. The Hon’ble Bombay High Court in the case of Pr. CIT vs. Smt. Shreelekha Damani (supra), held as under

41 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 668 OF 2016 The Pr. Commissioner of Income Tax ..Appellant v/s. Smt. Shreelekha Damani. ..Respondent. Mr. A.R. Malhotra a/w Mr. N.A. Kazi for the appellant Mr. Jehangir Mistri, Senior Counsel a/w Mr. Atul Jasani for the respondent CORAM : AKIL KURESHI & M.S. SANKLECHA, J.J. DATED : 27th NOVEMBER, 2018. P.C. 1. This appeal is filed by the Revenue challenging the judgment of Income Tax Appellate Tribunal ("the Tribunal" for short) dated 19th August, 2015.

"Whether on the facts and circumstances of the case and in law, the Tribunal was justified in holding that there was no 'application of mind' on the part of the Authority granting approval ?

42 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. 3. Brief facts are that the Tribunal by the impugned judgment set aside the order of the Assessing Officer passed under Section 153A of the Income Tax Act, 1961 ("the Act" for short) for Assessment Year 2007-08. This was on the ground that the mandatory statutory requirement of obtaining an approval of the concerned authority as flowing from Section 153D of the Act, before passing the order of assessment, was not complied with.

43 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. of mind and consideration of relevant factors before the same can be granted. The approval should not be an empty ritual and must be based on consideration of relevant material on record.

'To, The DCIT(OSD)-l Mumbai

44 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. Subject : Approval u/s 153D of draft order u/s 143(3) r.w.s. 153A in the case of Smt. Shreelekha Nandan Damani for A.Y. 2007-08 reg. Ref: No. DCIT (OSD)-l/CR-7/Appr/2010-ll dt. 31.12.2010

As per this office letter dated 20.12.2010, the Assessing Officers were asked to submit the draft orders for approval u/s 153D on or before 24.12.2010. However, this draft order has been submitted on 31.12.2010. Hence there is no much time left to analise the issue of draft order on merit. Therefore, the draft order is being approved as it is submitted.

Approval to the above said draft order is granted u/s 153D of the I.T. Act, 1961."

45 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. there was not enough time left to analyze the issues of draft order on merit. Therefore, the order was approved as it was submitted. Clearly, therefore, the Additional CIT for want of time could not examine the issues arising out of the draft order. His action of granting the approval was thus, a mere mechanical exercise accepting the draft order as it is without any independent application of mind on his part. The Tribunal is, therefore, perfectly justified in coming to the conclusion that the approval was invalid in eye of law. We are conscious that the statute does not provide for any format in which the approval must be granted or the approval granted must be recorded. Nevertheless, when the Additional CIT while granting the approval recorded that he did not have enough time to analyze the issues arising out of the draft order, clearly this was a case in which the higher Authority had granted the approval without consideration of relevant issues. Question of validity of the approval goes to the root of the matter and could have been raised at any time. In the result, no question

46 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. of law arises.

13.2. The ITAT, Jodhpur Branch in the case of Smt. Indira Bansal vs., ACIT (supra), held as under:

“Conclusion : Jt. CIT having granted the approval under s. 153D on the very same day on which the forwarding letter seeking approval was received in his office, and circumstances indicate that this exercise was carried out by the Jt. CIT in a mechanical manner without proper application of mind and even without going through the records as the same were in Jodhpur while the Jt. CIT was at Udaipur, therefore, the approval granted by him cannot be sustained. Impugned assessments are annulled.” 14. Considering the facts of the case in the light of above discussion, it is clear that assessee filed last reply before assessing officer at Faridabad on 29th January 2014 and according to Learned Counsel for the Assessee, it

47 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. contained more than 500 pages. Therefore, it is difficult for the Assessing Officer at Faridabad to go through these voluminous papers and prepare a draft order on 30th January 2014, so that the draft order could be transmitted to the Addl. CIT at Chandigarh on same day. In reply to RTI application, the assessing officer has reported that no record of mode of dispatch of assessment record to the Addl. CIT is available with the Assessing Officer. Similarly, no record is available as to how the draft order and assessment record have been received by Addl. CIT at Chandigarh. The Addl. CIT, Chandigarh did not mention in his approval dated 31st January 2014 (supra), if he has gone through the assessment record or that assessment record was produced before him. Since no details are available on record about the mode, through which, assessment record was transmitted by the assessing officer at Faridabad to Addl. CIT in Chandigarh and vice-versa by Addl. CIT, Chandigarh to Assessing Officer at Faridabad on the very next day would lead to suspicion, in explanation of A.O. if any, valid draft order was transmitted to the Addl. CIT within the time

48 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. or if the Addl. CIT has communicated the approval under section 153D to the Assessing Officer at Faridabad on 31st January 2014. These facts would clearly show that the action of the Addl. CIT, Chandigarh granting approval in this case was, thus, a mere mechanical exercise, accepting the draft order as it is, without any independent application of mind on his part. Nothing has been clarified during the course of hearing to the effect that if Addl. CIT has gone through the assessment record, before accepting the draft assessment order. Thus, there was no application of mind on the part of the Addl. CIT before granting approval. The Addl. CIT, Chandigarh has merely gone through the draft assessment order as per PB-47. Therefore, the contention of Learned Counsel for the Assessee is justified that the approval was granted in a most mechanical manner without application of mind and such approval was intimated to assessing officer only on 5th February 2014, after passing of the assessment order on 31st January 2014. The above decisions are clearly applicable to the facts and circumstances of the case. In view of the above discussion,

49 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. we are of the view that no valid approval/sanction have been granted by the Addl. CIT, Chandigarh before passing the assessment order in the matter. The requirement of Section 153D of I.T. Act, 1961, are not satisfied in this case. We accordingly hold that entire assessment order is vitiated and is null and void. We, accordingly, set aside the orders of the authorities below and quash the assessment order in the matter. Resultantly all additions stand deleted. In the result, Ground No.1.3 of the appeal of Assessee is allowed.

50 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. terms, covenants, representatives, warranties and conditions cannot be waived, except pursuant to an Instrument in writing signed by M/s Lowe and Promoters or in the case of a waiver by the Party, waiving compliance”. Learned Counsel for the Assessee submitted that parties can change their terms and conditions of the agreement. He has submitted that due to market conditions, the consideration of Rs.526 crores was reduced Rs.520 crores and Addendum to the Agreement in writing was executed on 20th January 2012 [PB-70]. Learned Counsel for the Assessee submitted that Section 62 of the Indian Contract Act, 1872 allows alteration in the agreements. He has referred to PB-72 which is ledger account. PB-73 Bank Statement. PB-76 summons issued under section 131 by the assessing officer to M/s Lowe. PB-77 is reply under section 131 of the Income Tax Act, confirming the consideration paid to the assessee to the tune of Rs.520 crores. PB-79 and 80 are the Bank statements. PB-81 is Certificate of a Chartered Accountant. Learned Counsel for the Assessee submitted that while applying Section 48, actual value of the

51 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. consideration received shall have to be considered at Rs.520 crores. The assessee has received this consideration only. He has submitted that the expression used in the Section “full value of consideration” cannot be construed as the market value, but, as the price bargained for by the parties to the Sale. In support of his contention, he has relied upon Judgment of the Hon’ble Supreme Court in the case of CIT vs George Henderson and Co. Ltd. 66 ITR 622 (SC), Judgment of the Delhi High Court in the case of CIT vs., Smt Nilofer I. Singh 309 ITR 233 (Del.) and Judgment of Delhi High Court in the case of CIT vs Shakuntala Devi 316 ITR 46 (Del.). Learned Counsel for the Assessee, therefore, submitted that addition is wholly unjustified.

52 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. agreed to sell the shares to M/s. Lowe Realty Pvt. Ltd., for a consideration of Rs.526 crores through the initial Agreement, but, later on its conditions were amended through Addendum to the Agreement and total consideration was reduced to Rs.520 crores. The observations of the authorities below had been that such consideration could not be changed. Section 62 of the Indian Contract Act, 1872 provides “effect of novation recession and alteration of contract – If the parties to contract - - agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.” The above Section of Contract Act approves the action of the assessee and the purchaser in altering the terms of the contract. The assessee has executed fresh agreement in the nature of Addendum to the Main Agreement, through which, the consideration was reduced from Rs.526 crores to Rs.520 crores. The contention of assessee is supported by Bank statement of the assessee and the purchaser. No evidence has been brought on record of understated price of shares or more consideration received by the assessee. No

53 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. evidence, in fact, comes on record, if assessee received Rs.6 crores from the purchaser. Change in the Terms of the Agreement is permissible in Law. Therefore, in the absence of any evidence or material and record, it is difficult to believe that assessee received Rs.6 crores from the purchaser of the shares. Thus, there was no justification for the authorities below to make the addition of Rs.6 crores in the hands of the assessee. We, accordingly, set aside the Orders of the authorities below and delete the addition of Rs.6 crores. Ground No.2 of appeal of assessee is allowed.

Ground No.3 :

54 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. were purchased without charging any premium. As per terms of the debenture subscription agreement, approval of 80% of shareholders of M/s. Arch was required for transfer of CCDs. PB-182 to 185A are the letters dated 02.11.2011, are the applications for NOC for transfer of CCDs by the Seller written to M/s. Arch. PB186-190 are the letters dated 08.11.2011 written by M/s. Arch informing the Seller that informal approval for transfer was granted. PB 191-195 are the letters dated 11.11.2011 whereby Seller informed the assessee firm that in principle approval was provided for transfer of CCDs by M/s. Arch. The assessee relying upon these representations, accepted the transfer of CCDs as genuine and agreed to purchase CCDs from the Seller. PB 201-225 is the MOU dated 15.11.2011 for purchase of CCDs. PB 226-227 are the transfer of consideration through banking channel by the assessee. PB 230-339 are the execution of the share transfer forms for transfer of the original CCD Certificates dated 03.12.2011. PB 228-229 are the letter dated 05.12.2011, whereby assessee firm approached M/s. Arch for registration of the CCDs in the

55 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. Debenture Register of M/s. Arch. PB 240 is the letter dated 16.12.2011, through which, M/s. Arch refused the request of the assessee firm for transfer of CCDs due to non- compliance of Terms of DSA. PB 241-244 are the letters for initiation of arbitration proceedings to determine whether M/s. Arch has violated any obligation for not transferring the CCDs in question and whether assessee was entitled to any compensation with respect to the same. PB 249-262 is the Arbitration Award dated 27.03.2012 whereby the Arbitrator gave the Award against the assessee firm on the basis that it was aware of the conditions of DSA and thus, it was responsible and liable for the losses which it had suffered. Learned Counsel for the Assessee, therefore, submitted that in these compelling circumstances, the assessee transferred the CCDs at the lesser price and suffered the losses. The assessee transferred the CCDs to M/s. Zealous vide Agreement to Sell Dated 30.12.2012 [PB 388-397] for a sum of Rs.19.57 crores. The consideration was received through banking channel PB 424-426. Thus, the assessee suffered the short term losses. Learned

56 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. Counsel for the Assessee submitted that the above documentary evidences on record clearly supports the explanation of assessee that assessee has suffered genuine loss out of the above transaction. The evidence produced on record have not been doubted by the authorities below. PB 426A-438 are the assessment order in the case of M/s. Arch Propbuild Pvt. Ltd., under section 153A of the I.T. Act dated 28.03.2014 for A.Ys. 2010-2011, 2011-2012 and 2012- 2013, in which, transactions have been accepted. PB 439- 450 are assessment order in the case of Seller M/s. Shaan Realcon Pvt. Ltd., for A.Ys. 2010-2011, 2011-2012 and 2012-2013, in which, transactions have been accepted. Similarly, PB-451 to 463 are the assessment orders in the case of the Seller M/s. Social Realtor Pvt. Ltd., under section 153A dated 29.03.2014 for A.Ys. 2010-2011, 2011- 2012 and 2012-2013, in which, similar transactions have been accepted. PB 464-468 are the summons issued to the Seller companies and M/s. Arch in the assessment proceedings of M/s. Popular Infracon Pvt. Ltd., and not in the assessment proceedings of the assessee. In response to

57 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. the summons, parties have filed their confirmations along with supporting documents. No Inspector Report was filed that the Offices of the Sellers of CCDs were not found. The authorities below have ignored the documentary evidences on record which clearly prove that transaction was genuine. Learned Counsel for the Assessee submitted that it is well settled Law that a transaction can be said to be a sham transaction, if the same is not completed as per norms prevalent in a particular business. Once the transaction was done as per legal norms, then the same cannot be termed as sham transaction and relied upon decisions of the Hon’ble Supreme Court in the cases of Union of India vs., Azadi Bachao Andolan 263 ITR 706 (SC) and Vodafone International Holdings BV vs., Union of India 341 ITR 1 (SC). Learned Counsel for the Assessee submitted that merely because the transaction is entered into between Group concerns, it cannot be considered to be sham transaction and relied upon decision of Delhi High Court in the case of CIT vs. Gillette Diversified Operations Pvt. Ltd., 324 ITR 226 (Del.) and decision of Gujarat High Court in the

58 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. case of CIT vs. Special Paints Ltd., 356 ITR 404 (Guj.). He has also relied upon the Order of ITAT, Delhi F-Bench, in the case of ACIT, CC-12, New Delhi vs. M/s. R.J. Corporation Ltd., New Delhi in ITA.No.3661/Del/2014, Dated 01.10.2018, in which it was held that “the Learned CIT(A) rightly came to the finding that the assessee company has genuinely entered into purchase and sale of shares and if any, loss have been suffered by the assessee company, A.O. cannot treat the same as non-genuine due to extraneous consideration or irrelevant reasons in the assessment order.”

59 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. Taxation, New Delhi, Dated 31st December, 2010, Judgment of Punjab & Haryana High Court in the case of Som Nath Maini vs. CIT 306 ITR 414 (P&H) and Order of ITAT, Chandigarh Bench in the case of ACIT, Range-VI, Ludhiana vs. Som Nath Maini (2006) 7 SOT 202 (Chd.). The Learned D.R. submitted that it was a colourable devise and A.O. has correctly applied the test of human probability for deciding whether transaction was genuine or not.

60 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. 22. We have considered the rival submissions. The facts noted above have not been disputed by the parties that the assessee company purchased CCDs of M/s. Arch from 05 parties. The Sellers were owner of the CCDs. Since the CCDs were purchased without charging any premium and that the Seller have written to M/s. Arch to provide NOC and M/s. Arch informed Sellers about the informal approval for transfer of CCDs, therefore, the assessee under the bonafide belief, purchased the CCDs. There was some condition for transfer of CCDs that approval of 80% of the shareholder was required. Therefore, assessee accepted the offer to purchase the CCDs because of assurance given by M/s. Arch through Seller for transfer of CCDs. The assessee paid sale consideration to the Sellers through Banking channel which is not in dispute. The transfer of CCDs to the assessee through the Agreement/MOU and sale consideration paid by assessee have not been doubted by the authorities below. Later on, when the assessee approached M/s. Arch for transfer of CCDs in the Debenture Register, M/s. Arch informed the assessee about

61 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. their refusal to register the CCDs in the name of assessee due to non-compliance of terms of DSA. Since, there was a dispute between the parties with regard to transfer of CCDs, therefore, assessee adopted the Arbitration Proceedings as per the MOU and the Arbitrator was appointed by the concerned parties, who has, however, passed the Arbitration Award against the assessee and held that assessee shall have to bear the loss suffered in the transaction. The assessee obtained a legal opinion and assessee was informed that there are bleak chances for getting relief from the Court. Therefore, assessee had no option, except to sale shares to M/s. Zealous Financial Services Pvt. Ltd., at a lower price. It is well settled Law that Arbitration Award is Decree of the Court and is executable as it is. Therefore, when the matter is decided by the Arbitrator against the assessee and Award is given against the assessee, it would amount to Decree of the Court, through which it is decided that assessee is not entitled for any relief. These facts clearly show that assessee entered into the bonafide genuine transaction to purchase CCDs and only because of

62 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. one of the condition was not satisfied for transfer of CCDs, therefore, assessee had to sell the shares at a lower price. Therefore, assessee suffered short term capital loss of Rs.155.75 crores in this regard. The documentary evidences on record have not been doubted by the authorities below. The parties are genuine and assessed to tax and all transactions are carried-out through the Banking channel. The assessee could not have produce the original CCDs before A.O. because the same were given to the purchaser M/s. Zealous at the time of sale of CCDs by the assessee. Merely because transaction was carried-out within the Group concerns, by itself, is no ground to reject the explanation of assessee. Considering the totality of the facts and circumstances, we are of the view that assessee has entered into genuine transaction which is supported by documentary evidences, which have not been doubted by the authorities below. Therefore, the rule of preponderance of probability would not apply to the facts and circumstances of the case. Therefore, there was no justification for the authorities below to reject the claim of

63 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon. assessee of short term capital loss. We, accordingly, set aside the orders of the authorities below and delete the entire addition. In the result, Ground No.3 of the appeal of assessee is allowed.

Ground No.4 :

Order pronounced in the open Court.

Sd/- Sd/- (L.P. SAHU) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER Delhi, Dated 15th March, 2019. VBP/-

64 ITA.No.2691/Del./2018 M3M India Holdings, Gurgaon.

Copy to 1. The appellant 2. The respondent 3. CIT(A) concerned 4. CIT concerned 5. D.R. ITAT ‘F’ Bench, Delhi 6. Guard File. // BY Order //

Assistant Registrar : ITAT Delhi Benches : Delhi.