ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "B", NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
AND
SHRI L.P. SAHU, ACCOUNTANT MEMBER
I.T.A. No. 4315/Del/2011
A.Y. : 2007-08
ACIT, Central Circle-03, VS. Smt. Divya Jain,
Room No. 355, 3rd floor, C-215, Vivek Vihar, Delhi
Jhnadewalan Extension, (PAN: AECPJ4086M)
New Delhi 110 055
(APPELLANT) (RESPONDENT)
AND
C.O. No. 355/Del/2011
(In ITA No. 4315/Del/2011)
A.Y. : 2007-08
Smt. Divya Jain, Vs. ACIT, Central Circle-03,
C-215, Vivek Vihar, Delhi Room No. 355, 3rd floor,
(PAN: AECPJ4086M) Jhnadewalan Extension,
New Delhi 110 055
(CROSS OBJECTOR) (RESPONDENT)
Department by : Md. Mohsin Alam, CIT(DR)
Assessee by : Dr. Rakesh Gupta, Advocate
Date of Hearing : 07-9-2015
Date of Order : 09-10-2015
ORDER
PER H.S. SIDHU, JM
The appeal filed by the Revenue and Cross Objections filed by
the Assessee emanate out of the Order dated 07.7.2011 passed by
the Ld. CIT(A-II), New Delhi pertaining to assessment year 2007-08.
2. The grounds raised in the Revenue's appeal being ITA No.
4315/Del/2011 (AY 2007-08) read as under:-
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ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
1. That the Ld. CIT(A) erred in law and on facts of the case
in deleting the addition of Rs. 3,34,47,563/- made on
account of long term capital gain.
2(a) The order of the CIT(A) is erroneous and not enable in law
and on facts.
(b) The appellant craves leave to add, alter or demand any /
all of the grounds of appeal before or during the course of
hearing of appeal.
3. The grounds raised in the Assessee's Cross Objection being
CO No. 355/Del/2011 (A.Y. 2007-08) read as under:-
"1. That having regard to the facts and circumstances of the
case Ld. CIT(A) has rightly deleted the addition of Rs.
2,34,47,563/-, which was made by AO on the ground of
alleged sale proceeds of shares received by the appellant
as against Rs. 3,00,000/- declared by her.
2. The Ld. CIT(A) is erred under the law while holding that
AO has a valid jurisdiction u/s. 153A of the Act.
3. That the Cross Objectors craves the leave to add,
amend, modify, delete any of the ground(s) of cross
objection before or at the time of hearing."
4. Briefly stated the facts are that the Original return declaring
net taxable income of Rs.6,69,800/- was filed on 30.7.2007 with
ACIT, Circle-35(1), New Delhi. The return was duly processed u/s
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ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
143(1) of the l.T. Act. She is one of the directors of M/s Mahagun
(India) Pvt. Ltd. The search was conducted on 26.8.2008 at the
business premises i.e. Plot No.A-19, Sector-63, Noida. Consequent
upon search, the case was centralized with Central Circle-5, New
Delhi vide order dt.06.11.2009. At the time of search, certain
documents pertaining to the assessee were found and seized.
Accordingly, after recording of the satisfaction within the meaning of
section 153C of the l.T. Act, the case was taken up and notice u/s
153C of the l.T. Act was issued on 08.11.2010. In response to this
notice, the assessee furnished a reply on 15.11.2010 stating that the
return filed on 18.02.2010 in response to notice u/s 153A of the I.T.
Act may be treated as having been filed in response to this notice.
Return declaring net taxable income of Rs.6,69,800/- was filed on
18.02.20I0. Subsequently, notice u/s 143(2), 142(I) along with
questionnaire was issued on 22.11.2010 fixing the case for
26.11.2010. In response to this notice, the proceedings were
attended by the Authorised Representatives of the assessee from
time to time as per order sheet and the information filed has been
examined and placed on record.
4.1 As per the return filed; the assessee derives salary income in
her capacity as director of Mahagun Group of companies, income
from capital gain and income from other sources which includes
bank interest and interest on loan advanced to Mahagun (India)
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ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
Pvt.Ltd. and Mahagun Developers Ltd. During the year, the assessee
has sold 3000 shares of Mahagun Realtors Pvt.Ltd. @ Rs.100/- per
share. On 01.12.2006, these shares have been sold outside the
normal market channels amongst the members of the group only.
The shares had a paid up value of Rs.I00/- each and had been
acquired on 29.9.2004 for acquisition cost of Rs.30,000/-. The only
question that can arise is whether in a group transaction, the
assessee has received fair market value for these shares or not.
4.2 As per the facts on record, Mahagun Realtors Pvt. Ltd. had
merged with Mahagun (India) Pvt. Ltd. w.e.f. 01.4.2006 though the
orders of the court sanctifying this merger was passed only on
10.9.2007 and was supposed to take effect from 01.4.2006. The
High Court had approved the merger scheme without any
modification. Both the companies i.e. Mahagun Realtors Pvt. Ltd.
and Mahagun (India) Pvt.Ltd. are family owned concerns. As per the
Merger Scheme approved by the court, the shareholders of Mahagun
Realtors Pvt. Ltd. were to receive 45 equity shares of Mahagun
(India) Pvt.Ltd. of face value Rs.10/- each fully paid up of Mahagun
Realtors Pvt.Ltd. This benchmarking of the relative value of shares
of the two companies had the full support and approval of the
members of the Mahagun Group.
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ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
4.3 Fortunately, there is concrete proof about the value of shares
of Mahagun (India) Pvt. Ltd. as on 31.3.2006 (the case is also
assessed in this Circle only). On 31.3.2006, Mahagun (India) Pvt.Ltd.
had issued and allotted the. following shares at the rate and
premium mentioned below.-
Name of the No. of Face Value Share Total amount
Share shares (per share) Premium received
Applicant (per share)
Mahagun 280000 10/- 240/- 7,00,00,000/-
Developers
Ltd.
Mahagun 236000 10/- 240/- 5,90,00,000/-
Realtors
Pvt. Ltd.
ADR Home 11600 10/- 240/- 29,00,000/-
Décor Pvt.
Ltd.
4.4 Thus, there is independent evidence that the value of shares of
Mahagun (lndia) Pvt.Ltd. was Rs.250/- per share after including
premium of Rs.240/- per equity share. The assessee, Smt. Divya
Jain, possessed 3000 shares of Mahagun Realtors Pvt. Ltd. which
were equivalent to 3000 x 45 = 1,35,000 shares of Mahagun (India)
Pvt. Ltd. The value of each share of Mahagun (India) Pvt. Ltd. on
31.3.2006 was Rs.250/- and on that basis the fair market value of
3000 shares of Mahagun Realtors Pvt. Ltd. comes to 1,35,000 x 250
= Rs.3,37,50,000/-. Therefore, in view of the close nit family
connections and intersee transactions, it is held that the assessee
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ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
received sale proceeds of Rs.3,37,50,000/- and not Rs.3,OO,OOO/-
as declared by her. Accordingly, the total income was assessed at
Rs. 3,41,17,363/- vide order dated 29.12.2010 passed u/s. 153C
read with Section 143(3) of the I.T. Act, 1961.
5. Aggrieved with the aforesaid assessment order, assessee
appealed before the Ld. CIT(A), who vide impugned order dated
07.7.2011 has partly allowed the appeal of the assessee.
6. Now the Revenue is in Appeal and Assessee has filed Cross
Objections before the Tribunal.
REVENUE'S APPEAL
7. First we deal with the Revenue's appeal i.e. ITA 4315/Del/2011
(AY 2007-08) wherein the only effective issue was relating to
deletion of addition of Rs. 3,34,47,563/- made on account of long
term capital gain has been raised by the Revenue. We have heard
both the parties and perused the records available with us,
especially the orders of the authorities below and Brief Synopsis
filed by the Ld. Counsel of the Assessee.
8. As regards the issue involved in the Revenue appeal is
concerned, the Ld. CIT(DR) relied upon the order passed by the AO
and the contention raised in the Grounds of Appeal filed by the
Revenue. On the contrary, the Ld. Counsel for the assessee relied
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ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
upon the order passed by the Ld. CIT(A). Ld. Counsel of the
assessee in support of his contention has also filed the Brief
Synopsis in Revenue's Appeal as well as Assessee's Cross Objection
which is reproduced as under:-
"The only issue in the departmental appeal IS against the
relief of Rs.3,34,47,563/- allowed by Ld. CIT(A) in respect
of addition made by the AO on the ground that sale
consideration of the shares should have been equal to
Fair Market Value.
Facts are like this that assessee sold 3000 shares of
Mahagun Realtors Pvt Ltd at contracted price of @ Rs.I00
per share on 01.12.2006. Accordingly, assessee
calculated Capital Gain by taking the sale consideration
based on actual sale price i.e. Rs.100 per share.
According to A.O., there was merger of Mahagun
Realtors (P) Ltd with Mahagun India (P) Ltd subsequently
and as per the court's order dated 10.09.2007, the
shareholders of Mahagun Realtors (P) Ltd were to receive
45 shares of Mahagun India (P) Ltd. for each share and
that too of the worth @ Rs.250 per shares. Therefore,
according to Ld. A.O., assessee ought to have received
sale proceeds equal to Rs.3,37,50,000/- (3000x45x250)
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ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
and not Rs.3,OO,OOO/- as claimed by the assessee and
computed the capital gain based on this fictional amount.
Ld. CIT(A) deleted the addition and held that so far
assessee is concerned, she sold her shares on
01.12.2006 much before the date of the order of High
Court and she received Rs.3,00,000/- only and when High
Court approved the scheme on 10.09.2007, the share
were not held by the assessee because she had already
sold her shares on 01.12.2006.
In fact, there is no infirmity in the order of Ld. CIT (A) as
u/s 45 read with section 48, actual sale consideration in
the hands of the assessee is the sole determining factor
'for computing the capital gain. Assessee sold her shares
on 01.12.2006 on "as is where is" basis @ Rs.100/shares.
If by subsequent order of High Court dated 10.09.2007,
some more consideration in the form of shares were to
be received, it was to be received and in fact was
received by the holder of shares on the date of the order
of High Court which in any case was not the assessee.
Therefore, there was no question to say in the present
case that assessee received enhanced consideration.
Fact of the matter is that assessee did not receive
8
ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
anything except an aggregate actual sale consideration
of Rs.3,00,000/- in consideration of transfer of her 3000
shares.
PB 22-24 is the Computation of Income of the assessee
showing sale consideration at Rs.3,OO,OOO/-.
PB 41 is letter to Ld. A. O. submitting that sale of share
by the assessee was an independent transaction and
share of Private Limited Company are not freely
transferable and therefore, such sale has got nothing to
do with the merger scheme.
PB 12-21 are the submission before Ld. CIT (A) submitting
that sale of these shares already took place on
01.12.2006 and even the petition was filed in Delhi High
Court for merger only on 26.02.2007 i.e. after the date of
sale and the capital gain is taxable u/s 48 on the basis of
full value of the consideration received by the assessee
and not on the basis of fair market value and relying
upon several judicial decisions as under:-
CIT vs. Infosys Technologies Ltd. reported in [2008] 297
ITR 167 (SC)
9
ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
Hilder vs. Dexter (1902) AC 474 (HL). Head & Co. Ltd. vs.
Ropner Holding Ltd. (1951) 2 AIi ER 994 (Ch. D) followed
in Shearer (Inspector of Taxes vs. Bercain Ltd. (1980) 3
All ER 295
K.P. Varghese's Case [1981] 131 ITR 597 (SC)
CIT vs. Nilofar I Singh (2009) 309 ITR 0233 dated August
27, 2008
Dev Kumar Jain vs. ITO (2009) 309 ITR 0240
Commissioner of Income George Henderson and Co. Ltd.
(1967) 066 ITR 0622 (SC)
Commissioner of Income Tax vs. Gillianders Arbuthnot
and Co. GilIanders Arbuthnot and Co. vs. Commissioner of
Income Tax (1973) 087 ITR 0407 (SC)
CIT vs. Shivakami Co. P. Ltd. (1986) 159 ITR 0071
CIT vs. I.P. Chaudhari (2010) 328 ITR 0007, jurisdiction
Delhi-High Court Moral Trading & Investment Ltd. vs.
DCIT (2011) 0007 ITR (Trib) 0548 (Delhi)
Rupee Finance vs. ACIT (Mumbai ITAT) (2009) 120
ITD0539
CIT vs. Vania Silk Mills P. Ltd. (1977) 107 ITR 300 (Guj.)
10
ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
CIT vs. Lake Palace Hotels and Motels Ltd. (2010) 321 ITR
165 (Raj.)
CIT vs. Gulshan Kumar (Decd.) [2002] 257 ITR 0703
PB 44-45 is the remand report in which Ld. A.O. has said
that assessee should have received the fair market value.
PB 47-48 is our submission to remand report submitting
that capita gain is taxed on the actual sale consideration
and is not calculated based upon fair market value and
any addition based upon fair market value was brought
on the statute w.e.f. 01.10.2009 u/s 56(2)(vii). Therefore,
there is no infirmity in the order of Ld. CIT(A).
Assessee's Cross Objections
The only issue in Cross Objection is regarding assumption
of jurisdiction u/s 153C (wrongly mentioned as 153A in
the grounds of appeal).
Submission of the assessee is that for assuming
jurisdiction u/s 153C, not only the documents of the
assessee should be found and seized but those
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ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
documents found and seized must be of incriminating
nature. To treat a person as searched u/s 153C is very
harsh and mere discovery of disclosed documents should
not confer this harsh jurisdiction, as held in the judicial
decisions given herein after.
PB 25 is the copy of notice u/s 153C.
PB 26-29 is the copy of document, which is copy of the
sale deed of property, B-66, Vivek Vihar, purchased by
the assessee for Rs.22,00,OOO/- on the basis of which the
jurisdiction has been assumed u/s 153C.
PB 30-33 in the copy of return of the assessee wherein at
PB-33, the property B-66, Vivek Vihar has been shown for
Rs.11,72,959/- (being half share of the assessee,
inclusive of expenses).
PB 34-40 are the submission before Ld. A.O. submitting
that the document was not incriminating and was
disclosed in the return and relying upon the following
decision:-
Saraya Industries vs. UOI 306 ITR 189 (Delhi)
Jurisdiction is bad on this reason also that the assessment
of the assessee was not pending and therefore, could not
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ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
be reopened up 153C in view of the following decisions
reported at PB 37:-
Anil P. Khimani v/s. DCIT 2010 - TIOL -177 ITAT - Mumbai
"B" Bench
Anil Kumar Bhatia vis. ACIT (ITA No.
2660to2665/Del/2009 ITAT 'B' Bench
LMJ International Ltd. vls. DCIT (2008) 119 TTJ 214 (Kol)
Ms. Shyam Lata Kaushik vls. ACIT (2008) 114 TTJ 940
(Del)
Shivnath Rai Harnarain (India) Ltd. (2008) 304 ITR (AT)
271 (Del)
PB 3-12 are the submission before Ld. CIT(A).
PB 43-44 is the copy of remand report of this issue giving
the satisfaction note u/s 153C and it may please be seen,
based on that, that the only basis was the document
relating to B-66, Vivek Vihar, which was already
disclosed.
PB 46-47 are the reply to remand report giving few more
judicial decisions which are reproduced as under:-
LMJ International Ltd. vls. DCIT (2008) 119 TTJ 214 (Kol)
13
ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
Sinhgad Technical Education Society vls. ACIT 140 TTJ
233 (Pune)
Bharati Vidya Peeth vts. ACIT 119 TTJ 0261 (Pune)
ACIT vts. Srj Peety Steels P Ltd. 137 TTJ 0627 (Pune)
Ld. CIT(A) has also wrongly interpreted section 153C
which is not in
accordance with the law as laid down in above
decisions."
9. For the sake of convenience, we are also reproducing
hereunder the relevant findings on the issue in dispute of the Ld.
CIT(A) vide para 9 to 11 from pages 21 to 23.
"9. I have considered the assessment order, written
submissions filed by the AR, AO's subsequent
reports and the AR's rejoinder as well as the facts of
the case and position of law. It is observed that the
contention of the AR that the law does not permit
the A.O. to substitute "Fair Market Value" in place of
"Actual Sale Consideration" received for the
purpose of calculation of capital gain is fairly valid.
Moreover, the A.O. has not, adduced any evidence
found either during search proceeding on the group
14
ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
company's business premises u/s 132 or post
search proceedings of the appellant which may
establish that the appellant has received the
consideration more than what she has declared in
her I.T. Return for the year under review. A
combined reading of section 45(1)(a) and section 48
of the Act shows that when a sale of capital assets
take place the capital gain arising out of such
transfer has to be computed by looking at full value
of consideration received or accruing as a result of
such transfer. The expression "full value of
consideration" is not the same as "fair market
value" as appearing in section 55A of the Act. Thus
for the purpose of computing capital gain there is
no necessity to determine the fair market value
unless it is specifically provided in the Act. Reliance
is placed on the following authorities:-
· Moral Trading & Investment Ltd. vis. DCIT (2011)
007 ITR (Trib) 0548 (Delhi)
· CIT vis. I.P. Chaudhari (2010) 328 ITR0007 (Del)
· CIT v. Lake Palace Hotels and Motels Ltd. [2010]321
ITR 165 (Raj)
15
ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
· CIT vis. Ni/ofar I Singh (2009) 309 ITR 0233 (Del)
· Rupee Finance Vs ACIT( Mumbai ITAT) (2009) 310
ITR 403
· Dev Kumar Jain vis. ITO (2009) 309 ITR 0240(Del)
· Commissioner of Income Taxrge Henderson and Co.
Ltd. (1967) 066 ITR 0622 (SC)
· Commissioner of Income Tax vis. Gillianders
Arbuthnot and Co. Gillanders Arbuthnot and Co. v/s.
Commissioner of Income Tax (1973) 087 ITR 0407
(SC)
· CIT v/s Shivakami Co. P Ltd. [1986]159 ITR 0071.
· CIT v. Vania Silk Mills P. Ltd. [1977]107 ITR 300
(Guj)
10. Further, the AR submitted before me that the
appellant was allotted 3000 shares of M/s MRPL on
29.09.2004 at its face value of Rs. 10/- each. The
same has been sold on 01.12.2006 to its group
company. The merger scheme in which the
exchange ratio of shares Of MIPL & MRPL was
formulated was on 26.02.2007. The exchange ratio
so determined was further subject to approval of
16
ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
Delhi High Court, which came on 10.09.2007 i.e.
after a gap of 9 months (approx) from the date of
sale of shares. Had ,the appellant kept the shares,
he would have got 1,35,000 equity shares of MIPL
only on 08.04.2008 i.e. the date of allotment of
shares after merger as stated above or in other
words after 18 months from the date of sale. In
other words, it was only prospective benefit
attached with the shareholding of the appellant in
the MRPL as on date of sale. The AR relied upon
Hon'ble Apex Court decision in the case of CIT vis.
Infosys Technologies Ltd. (2008) ITR 167. Where it
was held that if prospective benefit is in the nature
of income or specifically included, by the legislature
as part of income, the same is not taxable.
11. Therefore, keeping in view the above facts &
circumstances and legal authorities cited by the AR,
the adoption of Fair Market Value of share in lieu of I
value of sale consideration as declared by the
appellant is not valid particularly when there is no
provision under the law to include prospective
benefit in the ambit of the word "income". The
appellant succeed on this ground appeal."
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ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
9.1 After going through the aforesaid relevant findings of the
impugned order on the issue involved in Ground No. 1 raised by the
Revenue, we are of the considered view that the Ld. CIT(A) has
deleted the addition in dispute by observing that the law does not
permit the A.O. to substitute "Fair Market Value" in place of "Actual
Sale Consideration" received for the purpose of calculation of capital
gain is fairly valid. We note that in the present case the A.O. has not
adduced any evidence found either during search proceeding on the
group company's business premises u/s 132 or post search
proceedings of the assessee which may establish that the assessee
has received the consideration more than what she has declared in
her I.T. Return for the year under review. A combined reading of
section 45(1)(a) and section 48 of the Act shows that when a sale of
capital assets take place the capital gain arising out of such transfer
has to be computed by looking at full value of consideration
received or accruing as a result of such transfer. The expression "full
value of consideration" is not the same as "fair market value" as
appearing in section 55A of the Act. Thus for the purpose of
computing capital gain there is no necessity to determine the fair
market value unless it is specifically provided in the Act. We have
perused the following case laws as relied cited by the Ld. CIT(A),
which supports the case of the Assessee:-
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ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
· Moral Trading & Investment Ltd. vis. DCIT (2011)
007 ITR (Trib) 0548 (Delhi)
· CIT vis. I.P. Chaudhari (2010) 328 ITR0007 (Del)
· CIT v. Lake Palace Hotels and Motels Ltd. [2010]321
ITR 165 (Raj)
· CIT vis. Nilofar I Singh (2009) 309 ITR 0233 (Del)
· Rupee Finance Vs ACIT( Mumbai ITAT) (2009) 310
ITR 403
· Dev Kumar Jain vis. ITO (2009) 309 ITR 0240(Del)
· Commissioner of Income Taxrge Henderson and Co.
Ltd. (1967) 066 ITR 0622 (SC)
· Commissioner of Income Tax vis. Gillianders
Arbuthnot and Co. Gillanders Arbuthnot and Co. v/s.
Commissioner of Income Tax (1973) 087 ITR 0407
(SC)
· CIT v/s Shivakami Co. P Ltd. [1986]159 ITR 0071.
· CIT v. Vania Silk Mills P. Ltd. [1977]107 ITR 300
(Guj)
9.2 In this case the assessee was allotted 3000 shares of M/s MRPL
on 29.09.2004 at its face value of Rs. 10/- each. The same has been
19
ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
sold on 01.12.2006 to its group company. The merger scheme in
which the exchange ratio of shares Of MIPL & MRPL was formulated
was on 26.02.2007 and the exchange ratio so determined was
further subject to approval of Delhi High Court, which came on
10.09.2007 i.e. after a gap of 9 months (approx) from the date of
sale of shares. The assessee kept the shares and he would have got
1,35,000 equity shares of MIPL only on 08.04.2008 i.e. the date of
allotment of shares after merger as stated above or in other words
after 18 months from the date of sale. In other words, it was only
prospective benefit attached with the shareholding of the assessee
in the MRPL as on date of sale. We find that the case law referred
by the Ld. CITA(A) in his impugned order of the Hon'ble Apex Court
decision in the case of CIT v/s. Infosys Technologies Ltd. (2008) ITR
167 supports the case of the assessee wherein it was held that if
prospective benefit is in the nature of income or specifically
included, by the legislature as part of income, the same is not
taxable.
9.3 In the background of the aforesaid discussions and the
precedent relied upon by the Ld. CIT(A) in his impugned order, we
are of the considered opinion that the adoption of Fair Market Value
of share in lieu of value of sale consideration as declared by the
assessee is not valid particularly when there is no provision under
the law to include prospective benefit in the ambit of the word
20
ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
"income". Therefore, the Ld. CIT(A) has rightly allowed this ground
and deleted the addition in dispute, which does not need any
interference on our part, hence, we uphold the action of the Ld.
CIT(A) on this ground and dismissed the ground no. 1 raised by the
Revenue in its Appeal. In the result, the Appeal filed by the Revenue
stands dismissed.
ASSESSEE'S CROSS OBJECTION
10. With regard to ground no. 1 relating to rightly deletion of
addition of Rs. 3,34,47,563/- which was made by the AO on the
ground of alleged sale proceeds of shares received by the assessee
as against Rs. 3,00,000/- declared by her. Since we have already
dismissed this ground of appeal raised in the Revenue's Appeal by
upholding the action of the Ld. CIT(A) of deletion of the addition, as
aforesaid, hence, this issue has become infructuous as such.
11. As regards the issue involved in ground no. 2 of the Cross
Objection regarding the assumption of jurisdiction u/s. 153(C)
(wrongly mentioned as 153A in the ground of appeal) is concerned.
Ld. Counsel of the assessee has stated that certain documents
belonging to the assessee were seized by the Search Party of the
Department, which the assessee has already disclosed while filing
the return of income for the assessment year in dispute. Therefore,
21
ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
no incriminating material belonging to the assessee were found
during search period. Therefore, he stated that the assessment
made in the case of the assessee is without jurisdiction, in view of
the Hon'ble Jurisdictional High Court decision dated 28.8.2015 in the
case of CIT vs. Kabul Chawla passed in ITA No. 707, 709 and
713/2014. He further stated that when no incriminating material
are found relating to assessee in the course of search, then the
proceedings initiated u/s. 153C is null and void and this issue has
already been adjudicated and decided in favor of the assessee by
the Hon'ble Jurisdictional High Court in the case of CIT vs. Kabul
Chawla (Supra), which shall be followed in the present case of the
assessee. In this behalf, he draw our attention towards the
relevant para no. 38 of the order, which is reproduced hereunder:-
"38. The present appeals concern AYs 2002-03, 2005-06
and 2006-07. On the date of the search the said
assessments already stood completed. Since no
incriminating material was unearthed during the
search, no additions could have been made ot the
income already assessed."
12. On the other hand, Ld. CIT(DR) opposed the request of the
assessee's counsel.
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ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
13. We have heard both the counsel and perused the records, we
find considerable cogency in the assessee's counsel submission that
if no incriminating material belonging to the assessee were found
during search period, the assessment made is without jurisdiction
and proceedings initiated u/s. 153C is null and void. To support this
contention, we follow the Hon'ble Jurisdictional High Court decision
dated 28.8.2015 in the case of CIT vs. Kabul Chawla passed in ITA
No. 707, 709 and 713/2014 wherein vide para no. 38 it has been
held as under:-
"38. The present appeals concern AYs 2002-03,
2005-06 and 2006-07. On the date of the search the
said assessments already stood completed. Since
no incriminating material was unearthed during the
search, no additions could have been made ot the
income already assessed."
13.1 In the background of the aforesaid discussions and precedent,
we are of the considered view that the present issue involved in
ground no. 2 in the cross objection is squarely covered by the
decision of the Hon'ble Jurisdictional High Court decision dated
28.8.2015 in the case of CIT vs. Kabul Chawla passed in ITA No.
707, 709 and 713/2014. Respectfully, following the above
precedent, we quash the assessment made u/s. 153C and decide
23
ITA NO. 4315/Del/2011 &
CO No. 355/Del/2011
the issue raised in ground no. 2 in favour of the assessee and
accordingly, this ground is allowed. In the Result, the Cross
Objection is partly allowed.
14. In the result, the Appeal of the Revenue Dismissed and Cross
Objection filed by the Assessee stands partly allowed.
Order pronounced in the Open Court 09-10-2015.
Sd/- Sd/-
[L.P. SAHU] [H.S. SIDHU]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date 09/10/2015
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT TRUE COPY
By Order,
Assistant Registrar,
ITAT, Delhi Benches
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