RSJ PROPERTIES PVT. LTD., CHENNAI V. ITO CORPORATE WARD 5(3), CHENNAI

ITA 1426/CHNY/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7727 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 08-05-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Fair market value; Valuation report
• Section: 143(3); 56(2)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, C (SMC ) BENCH : CHENNAI , . , [BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ] !' ./I.T.A. NO.1426/CHNY/2019. #$% &$ / ASSESSMENT YEAR : 2015-2016 RSJ PROPERTIES PVT LTD, UNIT NO.10B, 3 RD FLOOR, R.A. BUILDING, 72, MARSHALLS ROAD, EGMORE, CHENNAI 600 008. VS. INCOME TAX OFFICER, CORPORATE WARD 5(3) CHENNAI. [PAN AAACR 8344M] ( / APPELLANT) ( /RESPONDENT) !' '( ) * / APPELLANT BY : SHRI. T. BANUSEKAR, C.A. +,'( ) * /RESPONDENT BY : SHRI. SRIDHAR DORA, IRS, JCIT. # - ) . /DATE OF HEARING : 26-08-2019 /0&% ) . /DATE OF PRONOUNCEMENT : 14-10-2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3 , CHENNAI (CIT(A) FOR SHORT) DATED 28.03.2019 FOR THE ASSES SMENT YEAR (AY) 2015-16. ITA NO.1426 /2019 :- 2 -: 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. FOR THAT THE ORDER OF THE COMMISSIONER OF INCO ME TAX (APPEALS) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANC ES OF THE CASE TO THE EXTENT PREJUDICIAL TO THE INTEREST OF THE AS SESSEE AND AT ANY RATE IS OPPOSED TO THE PRINCIPLES OF EQUITY, NATURA L JUSTICE AND FAIR PLAY. 2. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN UPHOLDING THE ADDITION OF RS.29,62,5601- U/S.56(2)( VIIB). 3. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THAT THE PROVISIONS OF SECTION 56(2)(VII B) ARE NOT INVOCABLE IN THE FACTS AND CIRCUMSTANCES OF THE APP ELLANTS CASE. 4. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONCLUDING THAT FAIR MARKET VALUE OF SHARE IS RS.36 .67 PER SHARE. 5. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN REJECTING THE FAIR MARKET VALUE OF THE LAND ADOPTED BY APPELLANT WHILE DETERMINING THE FAIR MARKET VALUE OF THE SHAR ES 6. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN ADOPTING THE GUIDELINE VALUE OF THE LANDIN DETERMIN ING THE FAIR MARKET VALUE OF THE SHARES 7. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THAT THE GUIDELINE VALUE OF THE LAND IS DIFFERENT FROM THE MARKET VALUE OF THE LAND. 8. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THAT VALUATION OF LAND CAN ONLY BE DONE BY AN EXPERT. 9. FOR THAT THE APPELLANT OBJECTS TO THE LEVY OF IN TEREST U/S.234B. 3. T HE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT NAMELY M/S. RSJ PROPERTIES PRVIATE LIMITED, IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF CONSTRUCTI ON OF BUILDING AND CIVIL ENGINEERING. THE RETURN OF INCOME FOR THE AY 2015-16 WAS FILED ON ITA NO.1426 /2019 :- 3 -: 29.09.2015 ADMITTING LOSS OF RS.2,94,106/-. AGAINS T THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE INCOME TAX OFFICER, CORPORATE WARD 5(3) CHENNAI (HEREINAFTER CALLED A O) VIDE ORDER DATED 22.12.2017 PASSED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AT TOTAL INCOME OF RS.26,68,454/-. WHILE DOING SO, THE ASSESSING OFFICER MADE ADDITION OF RS.29,62,560/- U NDER SECTION 56(2)(VIIB) OF THE ACT. 4. THE FACTUAL BACKGROUND OF THE ADDITION IS AS UNDER: - DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YE AR UNDER CONSIDERATION, ASSESSEE RECEIVED SHARE CAPITA L OF RS.19,20,000/- WITH SHARE PREMIUM OF RS.80,64,000/-. ACCORDING TO THE ASSESSEE THE FAIR MARKET VALUE OF THE SHARES ISSUED IS RS.52.09 PER SHARE BASED ON THE VALUATION REPORT GIVEN BY CHARTERED ACCOUNTANT S NAMELY KKS AND CO, CHENNAI. WHILE COMPUTING THE FMV OF THE SHARES , ASSESSEE ADOPTED MARKET VALUE OF THE LAND AT BIKANER, RAJAST HAN, BASED ON THE VALUATION REPORT OF REGISTERED VALUER. HOWEVER, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD A DOPTED FMV OF THE SHARES AT RS.12.63 PER SHARE BY ADOPTING BOOK VALU E OF THE ASSETS AND MADE AN ADDITION OF RS.75,59,040/- U/S,56(2)(VIIB) OF THE ACT. HOWEVER, PURSUANT TO THE PETITION FILED U/S.144 OF THE ACT, THE ADDITIONAL COMMISSIONER OF INCOME TAX ISSUED DIREC TION TO THE ITA NO.1426 /2019 :- 4 -: ASSESSING OFFICER TO ADOPT THE VALUE OF THE SHARE D ETERMINED IN ACCORDANCE WITH SPECIFIED METHOD RULE 11UA OR THE VALUE OF SHARES AS SUBSTANTIATED BY THE ASSESSEE TO THE SATISFACTION O F THE ASSESSING OFFICER. CONSEQUENT TO THE DIRECTION OF THE ADDL. C IT, THE ASSESSING OFFICER COMPUTED FMV OF THE SHARES BASED ON GUIDELI NE OF THE LAND FOR REGISTRATION PURPOSE AND ADOPTED FMV AT LAND AT RS. 3,15,60,031/- AS AGAINST VALUE ESTIMATED BY THE REGISTERED VALUE AT RS.4,89,86,700/-, COMPUTED FMV AT RS.36.67 PER SHARE AND THE DIFFEREN CE IN FMV OF A SHARE IS RS.15.43 PER SHARE I.E VALUE AS PER ASSE SSEE IS RS.51.10 PER SHARE AND VALUE AS PER ASSESSING OFFICER IS RS.36. 67 PER SHARE FOR 1,92,000 SHARES, AND ASSESSING OFFICER MADE AN ADDI TION OF RS.29,62,560/- AND BROUGHT TO TAX U/S.56(2)(VIIB) OF THE ACT. 5. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE LD.CIT(A) WHO VIDE IMPUGNED ORDER CONFIRMED THE AC TION OF THE ASSESSING OFFICER. 6. BEING AGGRIEVED, THE APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. THE LD.AUTHORISED REPRESENTATIVE DURING THE COURSE OF HEARING SUBMITTED THAT GUIDELINE VALUE PRESCRIBE D FOR THE PURPOSE OF STAMP DUTY IS NOT ALWAYS THE SAME AS FMV. HE ALS O PLACED RELIANCE ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF HINDUSTAN MOTORS LTD VS. MEMBERS, THE APPROPRIATE AUTHORITY & ORS, ITA NO.1426 /2019 :- 5 -: 249 ITR 42 4 AND HE FURTHER SUBMITTED THAT THE FMV WAS COMPUT ED BY THE ASSESSEE BASED ON THE CA CERTIFICATE WHO, IN TU RN, RELYING ON THE VALUERS REPORT, ADOPTED THE MARKET VALUE OF THE LA ND AT BIKANER, RAJASTHAN AT RS.4,89,86,700/-. ACCORDINGLY COMPUTED FMV OF THE SHARES AT RS.52.09 PER SHARE AND THEREFORE FMV COMP UTED BY THE REGISTERED VALUER CANNOT BE ASSAILED. 7. ON THE OTHER HAND, THE LD. SR. DEPARTMENTAL REPRESE NTATIVE PLACED RELIANCE ON THE ORDERS OF LOWER AUTHORITIES. 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE ONLY ISSUE INVOLVED IN THE PRESENT APP EAL RELATES TO ADDITION U/S.56 (2)(VIIB) OF THE ACT. THE BONE OF CONTENTION BETWEEN THE ASSESSEE AND THE ASSESSING OFFICER IS WITH REGA RD TO THE ADOPTION OF THE FMV OF THE SHARES. THE PROVISIONS OF SECTIO N 56(2) (VIIB) OF THE ACT PROVIDES THAT EXCESS OF CONSIDERATION OVER AND ABOVE THE FMV OF THE SHARES IS TAXABLE AS INCOME UNDER THE HEAD IN COME FROM OTHER SOURCES. RULE 11UA (C) PRESCRIBES METHOD OF COM PUTATION OF FMV OF THE SHARES. APPARENTLY IN THE PRESENT CASE NEITHE R ASSESSING OFFICER ADOPTED ONE OF THE PRESCRIBED METHOD FOR VALUATION OF FMV NOR THE ASSESSEE ADOPTED THE PRESCRIBED METHOD UNDER CLAUS E (C) OF RULE 11UA. IN THE CIRCUMSTANCES, WE REMAND THE MATTER B ACK TO THE FILE OF ITA NO.1426 /2019 :- 6 -: THE ASSESSING OFFICER TO RECOMPUTE THE FMV IN ACCOR DANCE WITH THE PRESCRIBED METHODS UNDER THE PROVISIONS OF SAID RU LE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 14TH DAY OF OCTOBER, 2019, AT CHENNAI. SD/- SD/- ( . ! ) (DUVVURU RL REDDY) ' # /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER 1 #- / CHENNAI 2# / DATED: 14 TH OCTOBER, 2019. KV 3 ) +.4 5' !6 5&. / COPY TO: 1 . !' '( / APPELLANT 3. 7. (!' ) / CIT(A) 5. 5 :; +.#< / DR 2. +,'( / RESPONDENT 4. 7. / CIT 6. ;$ =- / GF