JUDGMENT :

KAMAL KHATA, J.

1. The present petition challenges the impugned notice under Section 148 of the Income Tax Act (“the Act”) dated 31st March 2021 on the ground that the respondent no. 1 had reasons to believe that income chargeable to tax for Assessment Year (AY) 2015-16 has escaped assessment within the meaning of section 147 of the Act and the Assessment Order passed under Section 143(3) r.w.s. 147 of the Act dated 31st March 2022 thereby rejecting the set off of the current year’s long-terms capital loss against long term capital gain and consequently the notice of demand u/s 156 of the Act dated 31st March 2022.

2. The reasons for reopening given under notice dated 28th January 2022 are as under:

“The original return of income was filed on 31- 03-2016 declaring total income at Rs. 5,55,93,680/- for A.Y. 2015-116. Subsequently, the revised return was filed by the assessee on 14.02.2017 declaring total income of Rs. 5,56,63,130/-. In this case assessment proceedings u/s.143(3) of the act completed assessing total income at Rs. 6,13,89,818/-.

In this case on verification of case records, it is seen that the assessee had computed long term capital gains of Rs. 2,25,57,987 by selling share of Silver Pearl Reality Pvt. Ltd. sold to Piramal Reality Pvt. Ltd. on 3.2.2015. A gain of Rs. 57,26,688 on sale of Non- Agricultural land. These capital gains were offset by a loss of Rs. 14.00 crores on sales of shares of Shandilya Properties P Ltd and net loss of Rs. 11.17 crores was claimed as carry forward loss which was allowed in scrutiny assessment.

The assessee had purchased the 3675 shares of Shandilya Properties P Lid at Rs. 25,000 each on 17.09.2010 for a total consideration of Rs. 9,75,00,000 and sold the shares to Seaface Buildcon company LLP on 22.1.2015 at a price of Rs. 100 each thereby booking a loss of Rs. 14,00,31,941/-.

The purchasing concern Seaface Buildcon Company LLP is owned by the assessee along with Rashna Noshir Talati a relative of the assessee, so the net effect is that the controlling interest in the company still remained with the assessee. The company of which the shares were sold i.e., Shandilya Properties Pvt. Ltd was converted into LLP with the name Shandilya Properties LLP on 21st February 2015 and the new owners of the LLP were Talati Noshir Darabshaw and Talati Xeres Noshir the children / relatives of the assessee. This showed that the sale at such a low price was only a sham transaction to book a loss to avoid paying taxes on capital gains. The assessee had also received an amount of Rs. 124.36 crores from Shandilya Properties LLP (i.e., erstwhile Shandilya Properties Pvt. Ltd) which goes to show that the company which was sold was a cash rich company and therefore the value of the company must have been very high and the sale price was much below the Fair market value and the sale was not an a arm’s length price and the shares were sold much below the market price only to book the losses.

Further the assessee continues to show an amount of Rs. 12.22 crores as receivable from Shandilya Properties Pvt.Ltd. As on 31st March 2015 even though the company was liquidated due to conversion into LLP in February 2015.

Therefore, the whole transaction of sale of shares of Shandilya Properties Pvt Ltd at the price below the market value to a company in which the assessee had a control is a colorful device to generate long term capital to offset the capital gains and therefore the capital loss of Rs. 14,00,31,941/- should have been disallowed.

The non-disallowance of loss Rs. 14,00,31,941 has resulted in excess carry forward of long-term capital loss Rs. 1,74,73,954/- and non-levy of tax on long term capital gains of Rs. 2,25,57,987 resulting in short levy of tax of Rs. 51,11,640 and further potential revenue loss (due to carry forward of losses) to the extent of Rs. 2,66,19,598/-.

3. Mr. Mistri the learned senior counsel for the petitioner submitted that the reopening of the assessment is based purely on change o