DCIT Vs Ganesh Plantation Ltd. (ITAT Ahmadabad)
AO on one hand has recorded his finding with respect to the shares of certain companies that its face value stands at ₹10 but the assessee has purchased the same at a higher value. The basis of arriving at the conclusion that the assessee has purchased the shares at a higher value was non-availability of shares valuation. In other words the AO himself has admitted the value of the shares of certain companies at ₹10 but he has not given any benefit of such value while working out the loss with respect to purchase and sale of shares. As such the AO has treated the entire loss on the purchase and sale of shares as not genuine which is contrary to the observations made by him during the assessment proceedings. In fact the AO, in the given facts and circumstances, was under the obligation to determine/ work out the valuation of the shares before rejecting the claim of the assessee.
It is an undisputed fact that all the parties with whom the assessee carried out such transaction were identifiable and there was also a consideration among such parties. Admittedly, the price of the shares in market is not always based on the company’s financial position, profit/growth rather its value/price is determined on the demand and supply of the script/shares and various other factors such as elaborated below:
a. the field in which the company is operating
b. the competition that the companies facing
c. the difficulty for making the entry in the particular field
d. the background of the promoters
e. the economic boom
f. Govt. policy
g. budget proposals
h. future plans
i. development chances
j. existing growth in sales
k. high capital
l. reserve
m. Positive net worth and no borrowings so on and so forth.
There are various companies incurring huge losses but price of their shares in market are high. Similarly there are various companies having high book value but trading at a very low price. Accordingly, we are of the view that the high profit/taxable income cannot be a criteria to decide the price of the share/script. Thus any unusual price rise/ fall in the shares of the company cannot be a basis to draw an inference that capital loss generated by the assessee is bogus in nature. Thus after considering the above facts, we are of the opinion that AO is not correct in challenging the loss declared by the assessee on the purchase and sale of shares.
We also note that it is not the case of the Revenue that there was some inflow of money from the buyer of the shares to the assessee which is unaccounted. As there is no dispute about the nature of the transaction and the consideration received by the assessee against the sale of shares, therefore the transaction cannot be termed as a sham transaction. Moreover, the onus is on Revenue to establish that assessee has received some benefit over and above the actual sales consideration.
In view of the above, we are not inclined to interfere in the order passed by ld. CIT(A) deleting the addition of Rs. 10,81,15,500.00 and the same is hereby upheld. This ground of the Revenue’s appeal is dismissed.
