ACIT, CC-44, MUMBAI vs. SHILPA SUNIL MAJITHIA, MUMBAI

सुनवाई क� तार�ख / : 15.7.2016 Date of Hearing घोषणा क� तार�ख / : 24.10.2016 Date of Pronouncement आदेश / O R D E R Per Sanjay Arora, A. M.: This is a set of four appeals by the Revenue and corresponding Cross Objections (COs) by the Assessees in respect of their assessments for assessment

3 to 5141/Mum/2009 & CO Nos. 69 to 72/Mum/2010 (A.Ys. 2001-02, 2003-04 & 2006-07) years (A.Ys.) 2001-02, 2003-04 and 2006-07. At the very outset, it was pointed out by the ld. Authorized Representative (AR), the assessee’s counsel, Shri F. V. Irani, Advocate, adducing a working of the tax effect of the Revenue’s appeals in the case of Shilpa S. Majithia (in ITA Nos. 5138 and 5139/Mum/2009 for A.Ys. 2003-04 and 2006-07 respectively) at Rs.9,75,370/- (i.e., at 20% of the allowing term capital loss of Rs.48,76,852/-), is below Rs.10 lacs, so that the same are not maintainable. It was further explained by him that the assessee returned long-term capital loss (LTCL) at the impugned amount of Rs.48.77 lacs, which was denied in the assessment by the Assessing Officer (A.O.). The assessee was successful in first appeal, and the loss at the returned sum was directed to be carry forward. The same came to be set off in A.Y. 2006-07, the appeal by the Revenue for which year is therefore consequential. On enquiry by the Bench, if any surcharge is applicable for the relevant years, it was pointed out by him that the surcharge and cess of 5% and 2% (on the amount of tax) is applicable for A.Ys. 2003-04 and 2006-07 respectively, so that the tax effect for the later year (A.Y. 2006-07) would only be below Rs.10 lacs.

4 to 5141/Mum/2009 & CO Nos. 69 to 72/Mum/2010 (A.Ys. 2001-02, 2003-04 & 2006-07) be said to be not maintainable and, therefore, is not hit by section 268A of the Act read with the extant circular dated 10.12.2015. The ld. AR would next contend that though the issue on merits has been decided for each of the three surviving appeals, i.e., for A.Ys. 2001-02 and 2003-04 (supra), by the Commissioner of Income Tax (Appeals) Central-II, Mumbai (‘CIT(A)’ for short) in the favour of the assessee-respondents, they have preferred cross objections in-as-much as the assessments are without jurisdiction and, thus, bad in law. This is as no incriminating material whatsoever was found during the search; each of the three assessment being u/s. 143(3) r/w s. 153A of the Income Tax Act, 1961 (‘the Act’ hereinafter). Toward this he would take us to the relevant part of the assessment order/s as well as the impugned order/s by the first appellate authority, before whom also the assessee raised this contention, to be negatived by the ld. CIT(A), holding that the assessment u/s. 153A is a special procedure, akin to section 147, and does not require for initiation of the proceedings there-under any incriminating material to be found in the course of search, consequent to which the said proceedings stand initiated. The matter, he would add, is since settled by the Hon'ble jurisdictional High Court in the case of CIT vs. Continental Warehousing Corporation [2015] 374 ITR 645 (Bom). This then is the issue raised per the respective cross objections by the assessee-respondents. The ld. DR did not controvert the said contentions by the ld. AR.

6 to 5141/Mum/2009 & CO Nos. 69 to 72/Mum/2010 (A.Ys. 2001-02, 2003-04 & 2006-07) of the forfeiture of the advance received by the assessee-respondents from M/s. Crest Hotels Ltd. (for the purchase of salt pan lands). The Revenue has not regarded the same as genuine, and brought the same to tax as dividend u/s. 56 of the Act. The same being received in pursuant to an Agreement dated 12.9.1998, were received in the main during f.y. 1998-99, and to some extent in f.y.1999-2000. There is no mention or reference to any material, much less incriminating, found during search in the assessment order or the impugned order with reference to the said transaction. Similarly, for A.Y. 2003-04 (in the case of Shilpa Sunil Majithia), as afore-stated, the issue arising is with regard to the LTCL on sale of shares (to a known person) held by her in Crest Hotels Ltd., which again has been considered as a bogus and collusive transaction. There is further again no reference to any material toward the same, either in the assessment or the impugned order. The next relevant aspect that would need to be considered is if the assessment is pending in the case of relevant search (i.e., in the case of Rohan Group, including different directors or different associated and sister concerns and related parties), which is on 10.8.2006. No assessments have been framed in case of any of the assessees, even as returns have been filed by them, so that the same would only be presumably processed u/s. 143(1), which precludes any adjustment to the returned income and, further, in the absence of any change in the tax liability or refund, the acknowledgment (of the return) itself is deemed by law to be the Intimation u/s. 143(1), which stands placed on record in the case of Shantikumar D. Majithia for AY 2001-02 (No. 026857, dated 30/3/2002, issued by the office of Jt. CIT, Ward 25(1), Mumbai). The same cannot be, as explained in by the Hon’ble Apex Court in Asst. CIT vs. Rajesh Jhaveri Stock Brokers (P) Ltd. [2007] 291 ITR 500 (SC), regarded as an assessment. The contention that there is no pending assessment, that would stand to abate, in these cases, thus, shall not hold.

7 to 5141/Mum/2009 & CO Nos. 69 to 72/Mum/2010 (A.Ys. 2001-02, 2003-04 & 2006-07) The assessee has before us relied on the decision in CIT vs. Thakkar Popatlal Velji Sales Ltd. (Income Tax Appeal No. 2266 of 2013 dated 29/3/2016) by the Hon’ble High Court. In that case, the AO extrapolated the material found in search (covering the period August, 2005 to September, 2005), applying the average sale so found for the entire year, being the previous year relevant to AY 2006-07. The hon’ble court found that as not tenable, so that the AO had to restrict himself to the material found in search, even if the argument of the Revenue that it was (not) a case of a completed assessment as no notice under section 143(2) had been issued. The reliance on the decision by the Apex Court in the case of CIT v. HM Esufali HM Abdulali was found inappropriate. The decision was rendered in the peculiar facts of the case and, read as a whole, rests on answering as to whether the Tribunal was justified in law in directing the AO to take the figure of the turnover at the undisclosed sum for the period August to September 2005, and which the Honourable Court found as so. The issue settled by the Honourable Court, in our humble view, is thus whether inferential findings are available in respect of incriminating material found in search in a section 153A assessment, and not whether what constitutes a pending assessment or a completed assessment. A precedent is an authority only for what it actually decides and not what may remotely or even logically follow from it (Goodyear India Ltd. vs. State of Haryana and Another [1991] 188 ITR 402 (SC); Blue Star Ltd. v. CIT [1996] 217 ITR 514 (Bom.); and Lachman Dass Bhatia Hingwala (P.) Ltd. vs. Asstt. CIT [2011] 330 ITR 243 (Del.) (FB)). The said decision cannot be in any case be read as not consistent with what stands stated explicitly or explained in Continental Warehousing Corporation (supra). The said, latter decision stands also discussed at length in Kashinath Tapuria (supra), to which we may profitably advert to, also reproducing from the decision in the case of Continental Warehousing Corporation (supra); the tribunal in that case endeavoring to explain the said decision w.r.t the hon’ble court’s mandate for the requirement of incriminating material in case of a completed/concluded assessment:

8 to 5141/Mum/2009 & CO Nos. 69 to 72/Mum/2010 (A.Ys. 2001-02, 2003-04 & 2006-07) ‘We have, however, two observations to make in this regard. Firstly, if and where a loss under the head ‘capital gains’ obtains consequent to the A.O.’s findings, issued having regard to the provision of section 71 of the Act, i.e., which allows the set off of loss from one head of income against income from another for the same year; the return having been filed only on 29.7.2006, i.e., much after the time allowed for furnishing the return u/s. 139(1), the same shall not be, in terms of sections 80 and 139(3), stand to be carry forward. Two, there is no indication if the assessment for the current year (A.Y. 2005-06) was framed at any time, i.e., prior to the impugned assessment. True, one could argue, as indeed it was before us, that where no assessment for the year is pending, in-as-much as the time provided for the service of notice u/s. 143(2) under the Act had expired, it did not abate, and it was by implication a concluded assessment, which cannot be interfered with in section 153A proceedings. Both the parties before us relied, in support of their cases, on the decision in the case of Continental Warehousing Corporation (supra). There is, firstly, admittedly no intimation u/s. 143(1) or order u/s. 143(3), so that the stated issue does not arise for consideration, save for A.Y. 2002-03, for which, as afore- discussed, concluded assessment u/s. 143(3) stands made. Further, this issue will also not arise for A.Y. 2007-08 for which no return has admittedly been filed u/s. 139 and the impugned assessment (u/s. 144) for which year is the original assessment. As, however, processing of each return, validly furnished, is an established procedure, we consider this issue, without prejudice, moving on the premise that the same may have been subject to processing u/s. 143(1), and which issue would therefore survive for A.Ys. 2001-02, 2003-04 to 2005-06. This is as for A.Y. 2006- 07, the return filed prior to the date of search is on 28.5.2008, i.e., beyond the time prescribed therefor u/s. 139(1) or for a belated return u/s. 139(4) and, thus, non-est in the eyes of law. On merits, the gist of the afore-said decision, even otherwise binding on us, stands stated at para 18.2 of this order, making reference to different paragraphs thereof. The same, carefully perused, in our view, makes it abundantly clear that when the Hon’ble Court speaks of a completed assessment, it adverts and refers to just that, i.e., an assessment completed observing the due process of law, for which there is an order of assessment (or reassessment) in force as on the date of search or requisition. It, in so doing, reiterates its earlier decision in CIT vs. Murli Agro Products Ltd. (in ITA No. 36 of 2009 dated 29.10.2010), which it in fact follows, reproducing the relevant part (paras 8-13) at para 28 of its Judgment (reported at pgs. 658 – 660 of the 9 to 5141/Mum/2009 & CO Nos. 69 to 72/Mum/2010 (A.Ys. 2001-02, 2003-04 & 2006-07) Reports). Vide para 10 (reproduced) the Hon’ble Court speaks of assessment/reassessment which stands finalized as not abating, so that the appeal or revision proceedings pending against such finalized assessment would not abate. This is also what stands clarified by the Board per its Circulars. Then, at para 12 (reproduced), it clarifies that in passing an assessment u/s. 153A r/w s. 143(3), the A.O. cannot disturb the finality of an (re)assessment order, unless of-course the relief granted under a finalised assessment is contrary to the facts unearthed during the course of section 153A proceedings. It further expresses itself unequivocally at para 29 (of its’ later decision), at pg. 660 of the Reports, as under: ‘If they were pending on the date of initiation of the search u/s. 132 or making of requisition u/s. 132A, as the case may be, they abate. It is only the pending proceedings that would abate and not where there are orders made of assessment or reassessment are in force on the date of initiation of the search or making of a requisition.’ What, one may ask, could be more explicit than this? A finalised assessment, it continues to explain (at pg. 661), cannot be touched by resorting to the provision (section 153A). Whether the processing of the return u/s. 143(1) could be said to be an assessment is a matter dealt with, and can be said to be concluded by the decision by the Hon’ble Apex Court in CIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. [2007] 291 ITR 500 (SC). Tracing the legislative history of the provision, for which it makes reference to its earlier decision in Apogee International Ltd. vs. Union of India [1996] 220 ITR 248 (SC), it explained that the legislative intent is very clear from the use of the word ‘intimation’ as substituted for ‘assessment’, which denote different concepts. While in assessment, the A.O. is free to make any addition after grant of opportunity to the assessee, no such addition/adjustment is permissible u/s. 143(1), where-under he cannot go beyond the return, accounts or documents accompanying the return, and for the reason that no opportunity is granted to the assessee. Substantial changes, it notes, have been further made w.e.f. 01.6.1999, restricting the power to make adjustment to removal of arithmetic errors or that otherwise apparent on the basis of the return itself or the documents accompanying the same. The processing of the return, leading to an Intimation u/s. 143(1), may not be done by the AO himself and, further, is without prejudice to the provision of section 143(2) (refer pgs. 507 to 510 of the reports). The intimation u/s. 143(1), it further explains, is not an assessment and cannot be treated as an assessment order, also explaining the purpose for which it is deemed as a notice of demand u/s. 156, i.e., to 10 to 5141/Mum/2009 & CO Nos. 69 to 72/Mum/2010 (A.Ys. 2001-02, 2003-04 & 2006-07) enable recovery thereof, where it reflects ‘tax payable’. Continuing further, it explains that the word ‘assessment’ is used in the Act for conveying different meanings. It may be used to mean ‘the computation of income’, sometimes ‘the determination of the amount of tax payable’ and sometimes ‘the whole procedure laid down in the Act for imposing liability upon the tax payer’ (pgs. 507-510). We having set out the said decision in brief, may as well reproduce a part thereof (pgs. 509-510), as under: ‘In the scheme of things, as noted above, the intimation under section 143(1)(a) cannot be treated to be an order of assessment. The distinction is also well brought out by the statutory provisions as they stood at different points of time. Under section 143(l)(a) as it stood prior to April 1, 1989, the Assessing Officer had to pass an assessment order if he decided to accept the return, but under the amended provision, the requirement of passing of an assessment order has been dispensed with and instead an intimation is required to be sent. Various circulars sent by the Central Board of Direct Taxes spell out the intent of the Legislature, i.e., to minimize the departmental work to scrutinize each and every return and to concentrate on selective scrutiny of returns. These aspects were highlighted by one of us (D. K. Jain J) in Apogee International Limited v. Union of India [(1996) 220 ITR 248]. It may be noted above that under the first proviso to the newly substituted section 143(1), with effect from June 1, 1999, except as provided in the provision itself, the acknowledgment of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgment is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any ‘assessment’ is done by them? The reply is an emphatic ‘no’. The intimation undersection 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion, as contended, does not arise.’ Finally, we may, for the sake of completeness of the discussion in the matter, which we have though found as completely covered by the 11 to 5141/Mum/2009 & CO Nos. 69 to 72/Mum/2010 (A.Ys. 2001-02, 2003-04 & 2006-07) decisions by the Hon’ble jurisdictional and the Hon’ble Apex court cited supra, consider the argument of the processing of a return u/s. 143(1) as leading to an assessment, i.e., after the expiry of the time prescribed for the service of notice u/s. 143(2), in the context of section 153A proceedings or a s. 153A assessment. There is no concept of deemed assessment, i.e., by lapse of time, under the Act, which is a positive act of determination of income by the assessing authority. The law does not contemplate two assessments, i.e., one by issue of notice u/s. 143(2) and the other, otherwise, i.e., without the issue of the said notice. As explained by the Hon’ble Court per its afore-referred decisions, what section 153A contemplates, quite simply, is that the return (for a year) that has undergone the process of verification, resulting in an order of assessment (or reassessment), becomes finalized and cannot be visited again. That is, what s. 153A contemplates is an assessment of total income on a scrutiny of the assessee’s claims, i.e., following the verification procedure under the Act, and due application of mind by the A.O. And it is precisely for this reason that where the assessment stands so framed, passing an assessment order, the same is held as not liable to be visited again. This is subject to the caveat that no adverse material, incriminating the return, is found in search or requisition (of books of account or other assets). It is notable that even income recorded in the books of account would stand to be included in a section 153A assessment, where not produced but found during search or requisition. There is no question of calling for the books of account, much less examining them, under the processing of the return. As explained by the Apex Court in Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra), the question of the A.O. expressing his opinion u/s. 143(1) does not arise. There is no determination of income in such a case by the A.O., who is precluded for making enquiries, nay, even affecting prima facie adjustments to the return (w.e.f. 01.6.1999). The income so accepted, being not determined by the A.O. and sans any assessment order, can only be said to be returned or processed income, and not assessed income.

The assessee’s argument, to our mind, constricts the scope of the proviso to section 153A beyond its mandate, which is limited to abatement of assessments pending on the date of initiation of search or, as the case may be, making the requisition. As afore-discussed, the limitation on the scope of inquiry or examination only to the findings of search or requisition while making a s. 153A assessment would extend only to concluded assessments, signified by orders of assessment or reassessment. This, we find to be the unequivocal view expressed by the Hon’ble Court in Continental Warehousing Corporation 12 to 5141/Mum/2009 & CO Nos. 69 to 72/Mum/2010 (A.Ys. 2001-02, 2003-04 & 2006-07) (supra) and Murli Agro Products Ltd. (supra), judicially binding on us, and which we further find as consistent with the decisions in Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra) and Kelvinator of India Ltd. (supra), as also the scope and purport of a s. 153A assessment as explained by the Hon’ble Courts of law. [emphasis, by italics, ours] The reliance on the decision in Thakkar Popatlal Velji Sales Ltd. (supra) would thus be of little assistance to the assessee. We may, therefore address the instant appeals on merits.

The background facts 4. The background facts, which are principally common, in brief, are that the company by the name Crest Hotels Ltd. (CHL for short) entered into an Agreement on 21/9/1998 for purchase of 178 acres of salt pan lands at Tromboy for a total consideration of Rs. 19.58 cr., paying Rs. 786.325 lacs, as advance to the Vendors. As the said company was unable to fulfill the terms of the said contract, the advances were forfeited by them in March, 2000. The matter was referred to arbitration, which was, vide order dated 5/6/2000, awarded in favour of the forfeiture. The vendors being the persons having controlling interest in and managing the company CHL, and their family members, the transaction was doubted by the AO as not genuine, bringing the amount/s forfeited to tax in the hands of two assessees, i.e., Shantikumar Majithia and his wife, Shobana Majithia for AY 2001-02. Shilpa Majithia, the third assessee, held 10,000 shares (of the face value of Rs. 1 00 each) in CHL, acquired at a cost of Rs. 136/- each in the year 1985. The same were sold to one, Kishore Rughani, on 26/03/ 2003 for a consideration of Rs. 10,000/-, i.e., at Re. 1 per share, incurring long-term capital loss (LTCL) at Rs. 48,76,852/-, which was claimed for carry forward and set off against long term capital gain (LTCG) arising to her for AY 2006-07. The book value of the shares in CHL as at 31/3/2001 and 31/3/2002 was at Rs. 851/- and 852/- respectively. Kishore Rughani, to whom the shares were sold, was only a lowly paid 13 to 5141/Mum/2009 & CO Nos. 69 to 72/Mum/2010 (A.Ys. 2001-02, 2003-04 & 2006-07) employee in the family owned company (CHL), who had been in fact financially assisted by the assessee by granting an interest-free loan/advance of Rs. 5 lacs (on 18/11/205) (returned on 1/3/2006). The sale transaction was thus considered as a ploy to evade tax by claiming a contrived LTCL, which was accordingly denied for being carry forward.

The respective cases 5. In the view of the first appellate authority, the matter stood squarely covered by the decision by the tribunal in the case of Shantikumar Majithia (in (J)/2004 dated 19/1/2005 for AY 1999-00), since followed in the case of other owners of the same plot, i.e., Pankaj Majithia (in ITA No.3335/Mum(C)/2007 dated 13/1/2009 for AY 2000-01) and Sunil S. Majithia (ITA No. 6959/Mum(D) 2005 dated 4/4.4.2008 for AY 2000-01), also reproducing there-from (refer para 3.5 of the order in Shantikumar Majithia and Shobana Majithia). The tribunal had considered the issue in all its aspects per a speaking order, concluding it. It was, therefore, not open for the Revenue to revisit the issues, particularly in the absence of any incriminating material found in search, much less qua the sum or the transactions under reference. There was another aspect of the matter, i.e., the amount, even as observed by the tribunal, could be brought to tax only in the year of forfeiture – the amount being received only in the previous years relevant to AYs 1999-00 and 2000-01 (para 3.5.7). In the case of Shilpa S. Majithia, what was under the challenge is the genuineness of the sale transaction of shares in CHL. The same stood impugned on the basis of book value of the relevant shares, stated to be at Rs. 850+ during fy 2000-01 and 2001-02, i.e., immediately prior to the sale. The same has been explained as not reflecting the correct value inasmuch as the AO had not deducted the accumulated debit balance in its P&L account (Rs. 5.04 cr.) as well as the doubtful advances carried in the balance sheet(at Rs. 7.86 cr.), reducing which the book value of its shares became negative.

14 to 5141/Mum/2009 & CO Nos. 69 to 72/Mum/2010 (A.Ys. 2001-02, 2003-04 & 2006-07) Likewise, removing non-recurring income from its income statement yielded loss. As such, both the book value as well as earning per share were negative, justifying the sale consideration of the shares therein at Re. 1/- per share. It is this that found favour with the ld.CIT(A).

Findings - Shantikumar Majithia and Shobana Majithia 6.1 Clearly, therefore, the first appellate authority has allowed relief to the assessees, being husband and wife, on the basis of doctrine of merger of the order of the Tribunal for AY 1999-00 (in the case of Shanitkumar Majithia), as the final fact- finding authority, and which had in fact been followed by the other benches of the tribunal as well, i.e., for AYs 1999-00 and 2000-01, whereat the amount/s was received. The decision, being by a superior appellate forum, was binding on him. The tribunal regarded the receipt as capital in nature, holding so by relying on the decision in the case of Travancore Rubber and Tea Co. Ltd. vs. CIT [2000] 243 ITR 158 (SC), also referring to section 51 of the Act, which would operate in case of any subsequent sale of their lands by the co-owners. The said order is not on record nor are any of the others referred to by the ld. CIT(A) in his order. There is no reference to the genuineness aspect of the transaction by the tribunal. Its only observation qua genuineness that we find is in the reproduction of its said order (at para 3.5 of the impugned order), as follows:

The ratio of the Apex Court is that the forfeiture of earnest money and advance by vendor was a capital receipt and the facts are similar in the case on hand also, according to an understanding. There is also force…….. . As regards the dubious tax planning, the contention of the learned counsel for the assessee that the very same transactions have been considered by the two authorities, i.e., the arbitrator and the single judge of the Bombay High Court and they have not doubted the genuineness of the agreement is to be accepted. Thus, whatever was done by the assessee within the four corners of law cannot fall under the dubious tax planning. In this view of the matter, ….

15 to 5141/Mum/2009 & CO Nos. 69 to 72/Mum/2010 (A.Ys. 2001-02, 2003-04 & 2006-07) The decision by the Honorable High Court (No.370 of 2000 dated 23/1/20001), before which the arbitration award dated 5/6/2000 supra was unsuccessfully challenged, is also not before us. It does not appear to be so before the tribunal as well, whose observation is guided by the fact that the arbitration award could not have been approved by the Honorable Court otherwise. The question, however, is whether the aspect of genuineness was raised before the Honorable Court, which is constrained, except under original jurisdiction, to confine itself to matters of substantial law arising out of the orders challenged before it. Genuineness of otherwise of a transaction is a matter of fact, on which we observe no finding by the tribunal. What were the terms of the reference before the arbitrator, and which would presumably be only qua the right to forfeit, i.e., given the validity of the Agreement, which itself presumes it being genuine. Again, what was the question/s of law formulated for being answered raised before the Honorable Court? As clarified by the AO in the remand report, the limited purpose thereof was whether the forfeiture was against public policy or not. Why, the very fact that the recovery suits were filed subsequently by the company shows the limited nature of the challenge before the Honorable Court against the arbitration award. There is no whisper on any other or this aspect of the transaction or the Agreement in the order by the tribunal, which is considered as covering the issue under reference on all fours by the ld. CIT(A). It is the genuineness of the Agreement and, consequently, the transactions made in pursuance thereto, that is suspect and in doubt, and which we consider as only validly so. The transaction is between a closely held company (CHL) (as signified by the words ‘family owned company’ by the AO), and the persons having controlling interest therein and managing the same, and their family members. The business purpose of acquiring salt pan lands - to the extent of 178 acres, at huge cost of Rs. 19.58 cr. (i.e., going by 1998 prices), is not clear. Even the title and 7/12 extracts are stated to be in the name of the Centre Government; and to consider that the company agreed to pay a huge cost of nearly Rs.20 cr. The sale 16 to 5141/Mum/2009 & CO Nos. 69 to 72/Mum/2010 (A.Ys. 2001-02, 2003-04 & 2006-07) rate (proposed) itself would require being justified in terms of the going market rate of land, which would in turn depend on the use to which it was or could be put. The transaction under reference is between the company and the owners of land. It is these parties who carried the matter in arbitration and before the honorable courts. Why would they challenge the genuineness of the transaction, making it non-est in the eyes of law. It is, on the other hand, the Revenue that doubts its genuineness, regarding it is as motivated, with the intent to siphon off the company’s monies without paying tax. The question of genuineness was thus not before nor, consequently, examined by either of the two authorities, even as the AO points out in the remand report. The recovery suits filed by the company, again, have been recorded as collusive by the Revenue. The reason for so considering is that the amount being outstanding in the books of the company for long – on the ostensible reason of the matter being subjudice, toward which, therefore, suits, collusive in nature, were filed. We are, therefore, not at all in agreement with the ld. CIT(A) that the transactions have been confirmed by the tribunal as genuine per its order dated 19/1/2005 supra, and its observations, even as pointed out by the AO, are to be read as to the genuineness of the transactions being not in doubt, and toward which it draws on the orders by the Arbitrator and the Hon’ble Court without in any manner referring to their contents. In consequence, the matter must be regarded as open and cannot be regarded as concluded by the said order, as canvassed before us (also refer para 6.2). So, however, the amount could be brought to tax only in the year of its receipt – by way of dividend, or on its forfeiture inasmuch as the same can be regarded as a defining event establishing the motive behind the arrangement, so that the income accrues thereat. The years of receipt are fys. 1998-99 and 1999-00, while the forfeiture is said to be in March, 2000. It is the entries in the books of account of the company, writing off the advances, that would signify the forfeiture. The amount could thus be brought to tax in the relevant assessment years only, being AYs. 1999-00 and 2000- 17 ITA Nos. 5138 to 5141/Mum/2009 & CO Nos. 69 to 72/Mum/2010 (A.Ys. 2001-02, 2003-04 & 2006-07) 01. How could the date of filing the civil suit (No.630 of 2001), i.e., 26/2/2001, we wonder, relevant? As rightly pointed out by the assessee, the AO is precluded from holding that the tax arises with reference to a suit (transaction) which he regards as collusive. How, we wonder, is the said date relevant? No income, accordingly, arises for being taxed for the current year, i.e., AY 2001-02.

Shilpa S. Majithia 6.2 In our clear view, the payment of its entire, nay, more than, its’ net worth, by the company, as advance, exhibits and confirms, if any proof was required, the collusive and sham nature of the transaction. At the same time, it cannot be disputed that, even so, the advances were not recoverable, with in fact the Revenue itself regarding the recovery suits as collusive, and as only a ruse to give a semblance of genuineness to the transaction. We have in fact ourselves considered it to be as a device to siphon off the company’s funds without paying any tax. The shares in the company CHL are, thus, of little value. How, under the circumstances, the sale transaction of its shares be regarded as not proper? That is, even if the buyer is known or, as it appears, hand-picked as a trusted employee (of the company) to buy the shares; the assessee, thereby, only realizing her shares at a fair value. There is nothing on record, nor even alleged, that the sale consideration travelled back to the assessee-seller, or the rights in respect of the transferred shares were still being exercised by her. No doubt, it would be very difficult to prove so, but then the burden of proof in law is only on the person who alleges the apparent as not real. We have already stated the Agreement dated 21/9/1998 and the consequent advance transactions to be sham and a device to siphon off the funds of the company. The amounts advanced being not forthcoming, have to be reduced to arrive at the book value of the shares. The Revenue, therefore, contradicts itself when it doubts the transaction on account of low sale consideration of shares. That the assessee stands to 18 to 5141/Mum/2009 & CO Nos. 69 to 72/Mum/2010 (A.Ys. 2001-02, 2003-04 & 2006-07) gain by set off of loss inuring thus, against the gain arising in future, is to our mind hardly a reason to doubt the genuineness of the transaction which has occurred years earlier. Why, an assessee is at liberty to plan his affairs in a manner so as to minimize his tax liability. The date of filing the original return, declaring income at Rs. 1,48,243/-, per which the impugned loss stands claimed, is not on record. Subject to the satisfaction of the legal requirements, as set out in sections 139(3) and 80, we allow the assessee’s claim for the computation and carry forward of loss arising to the assessee on the sale of 10,000 shares in CHL during the year, vacating the AO’s findings per para 6 of his order, and who shall also determine the loss to be carry forward. He has in fact been directed likewise by the ld. CIT(A). We decide accordingly, and the assessee succeeds.