Appeal details
Counselvise Citation
17220914 RSA 2010
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 8 month(s) 16 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
12-12-2011
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
DB
Next Hearing Date
12-12-2011
Assessment Year
2006-2007
Appeal Filed On
26-03-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.L. KARWA, HONBLE VICE PRESIDENT AND SH. D.K. SRIVASTAVA, ACCOUNTANT MEMBER I.T.A. NO. 172(ASR)/2010 ASSESSMENT YEAR:2006-07 THE INCOME-TAX OFFICER, VS. SH. GURVINDER SINGH, WARD-5(2), AMRITSAR. AMRITSAR. PAN:BBV6151B (APPELLANT) (RESPONDENT) APPELLANT BY: SH. AMRIK CHAND, DR RESPONDENT BY:S/SH. PADAM BAHL & VIPUL ARORA, CA S DATE OF HEARING :12/12/2011 DATE OF PRONOUNCEMENT:12/12/2011 ORDER PER H.L. KARWA, VP THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A), AMRITSAR, DATED 14.01.2009, RELATING TO THE ASSESSMENT YEAR 2006- 07. 2. IN THIS APPEAL, THE REVENUE HAS TAKEN FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, LD. CIT(A) WAS JUSTIFIED IN LAW AND FACTS IN DELETING THE ADDI TION MADE BY THE ASSESSING OFFICER AMOUNTING TO RS.1,13,62,500/- ON ACCOUNT OF SHORT TERM CAPITAL GAIN, AS THE FULL VALUE OF CO NSIDERATION WAS TAKEN FOR 7500 SHARES @ 1525/- PER SHARE AS AGAINST THE FACE 2 VALUE OF RS.10/- AS SHOWN BY THE ASSESSEE WITHOUT A PPRECIATING THE FACT THAT THE ADDITION WAS MADE ON ACCOUNT OF DIFFERENCE IN THE VALUE OF TRANSFER OF SHARES ON THE BASIS OF EVI DENCE FOUND DURING THE COURSE OF SEARCH AND ASSESSMENT PROCEEDI NGS IN THE CASE OF M/S. TODAY HOMES &INFRASTRUCTURE PVT. LTD. NEW DELHI. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, LD. CIT(A) WAS JUSTIFIED IN NOT APPRECIATING THE BRE AK UP VALUE OF UNQUOTED SHARES IN THE CASE OF PRIVATE LTD. COMP ANY. TO FIND THE TRUE VALUATION OF SHARES IN THE PRIVATE LI MITED COMPANY THE AO FOLLOWED THE DECISION OF HONBLE SUP REME COURT IN THE CASE OF M/S. GAUTAM HARI SINGHANIA & O THERS VS. COMMISSIONER OF WEALTH TAX & ORS REPORTED IN 20 7 ITR 1, WHEREIN IT IS HELD THAT THE BREAK UP METHOD ADOP TED UNDER RULE 1-D OF WEALTH TAX ACT, 1957 IS BASED ON BALANC E SHEET OF THE PVT. LTD. COMPANY. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT R ETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 WAS FILED ON 29.0.32007 DEC LARING AN INCOME OF RS.1,55,170/-, WHICH WAS PROCESSED UNDER SECTION 14 3(1) OF THE ACT ON 04.05.2007. SUBSEQUENTLY, THE AO RECEIVED INFORMATI ON FROM DCIT, CENTRAL CIRCLE 22, NEW DELHI, VIDE LETTER DATED 19.02.2008 WHEREIN IT WAS REPORTED THAT A SEARCH AND SEIZURE ACTION 132 WAS CARRIED OU T IN THE CASE OF M/S. TODAY HOME AND INFRASTRUCTURE PVT. LTD. NEW DELHI O N 23.2.2006 IN WHICH CERTAIN INCRIMINATING EVIDENCES RELATING TO M/S. P. R. INFRASTRUCTURE LTD. AND ITS DIRECTORS WERE SEIZED. ON THE BASIS OF EVIDENCE SEIZED DURING THE COURSE OF SEARCH IN THE CASE OF M/S. TODAY HOME AND INFRAS TRUCTURE (P) LTD AND SUBSEQUENT ASSESSMENT PROCEEDINGS IN ITS CASE, THE COST PRICE OF EACH SHARE OF 3 M/S. P.R. INFRASTRUCTURE LTD. WAS DETERMINED AT RS. 2,041/- AS AGAINST THE TRANSFER PRICE AT FACE VALUE OF RS.10/- BY THE SHAR E HOLDERS OF M/S. P.R. INFRASTRUCTURE LTD. IN THE REPORT OF DCIT CENTRAL C IRCLE -22, NEW DELHI, IT WAS ELABORATED THAT M/S. P.R. INFRASTRUCTURE LTD. HAD TRANSFERRED THE SHARE HOLDING OF THE DIRECTORS ALONGWITH MANAGEMENT OF TH E COMPANY TO M/S. TODAY HOME AND INFRASTRUCTURE (P) LTD FOR A TOTAL C ONSIDERATION OF RS.12.25 CRORES. THE CASE WAS SELECTED FOR SCRUTINY ON RECEI PT OF ABOVE INFORMATION. THE ASSESSEE WAS A SHARE HOLDER IN M/S. P.R. INFRAS TRUCTURE LTD. HOLDING 7500 SHARES. THIS COMPANY WAS INCORPORATED ON 05.04 .2005 AND PURCHASED AN AGRICULTURAL LAND MEASURING 10618 SQ. YARDS AT B ATALA ROAD, AMRITSAR, FOR A TOTAL CONSIDERATION OF RS.79,63350/- ON 14.07.200 5. THE ASSESSEE SOLD 7500 SHARES OF M/S. P.R. INFRASTRUCTURE LTD. AN UNL ISTED COMPANY AT THE FACE VALUE OF RS.10/- EACH TO M/S. TODAY HOMES AND INFRA STRUCTRUE PVT. LTD. FOR A TOTAL CONSIDERATION OF RS.75,000/-. THESE SHARES HA D BEEN ACQUIRED EARLIER BY THE ASSESSEE AT A FACE VALUE ONLY. AS PER THE REPOR T OF DCIT CENTRAL CIRCLE- 22, NEW DELHI, M/S. P.R. INFRASTRUCTURE LTD. HAS TR ANSFERRED ITS TOTAL SHARE HOLDING OF 60000 SHARES AT THE FACE VALUE OF RS.10/ - TO M/S. TODAY HOMES & INFRASTRUCTURE (P) LTD. AND ITS GROUP FAMILY MEMBER S AND THE COMPANY WAS TAKEN OVER BY M/S. TODAY HOMES & INFRASTRUCTURE (P) LTD. FOR RS.6.00 LACS ONLY THOUGH THE VALUE OF LAND OWNED BY THE COMPANY WAS OF RS.12.25 CRORES 4 AS PER PAPERS SEIZED DURING SEARCH AND SEIZURE ACTI ON. THUS, THE MARKET VALUE OF SHARE OF M/S. P.R. INFRASTRUCTURES LTD. WAS WORK ED OUT AT RS.2041/- PER SHARE [RS.12.25 CRORES DIVIDED BY 60000 SHARES). TH E CONTROL AND MANAGEMENT OF THE COMPANY WAS TAKEN OVER BY M/S. TO DAY HOME INFRASTRUCTURE (P) LTD. THROUGH TRANSFER OF SHARES. IN THE ASSESSMENT, THE AO, HOWEVER, WORKED OUT THE VALUE OF EACH SHARE AT RS.1 525/- BY BREAK UP VALUE METHOD CONSIDERING THE ASSET AND LIABILITIES OF M/S . P.R. INFRASTRUCTURE LTD. AND THEREBY MADE ADDITION OF RS.1,13,62,500/- IN TH E HANDS OF ASSESSEE AS SHORT TERM CAPITAL GAIN ON SALE OF SHARES. 4. ON APPEAL, THE LD. CIT(A), DELETED THE ADDITION FOR THE REASONS STATED IN PARAS 6 & 6.1 OF THE IMPUGNED ORDER. THE CONCLUD ING PARA 6.1. OF THE CIT(A)S ORDER READS AS UNDER: 6.1. IN THE CASE OF OTHER SHARE HOLDERS OF M/S. P. R. INFRASTRUCTURE LTD. NAMELY DR. BALWINDER SINGH, DR. POONAM SINGH A ND SMT. SAROJ RANI GUPTA, WHO ALSO TRANSFERRED THEIR SHARES TO M/ S. TODAY HOMES AND INFRASTRUCTURE (P) LTD., THE ADDITIONS WERE MAD E ON ACCOUNT OF SHORT TERM CAPITAL GAIN BY ADOPTING THE VALUE OF S HARES AT RS.1525/- PER SHARE BY BREAK UP VALUE METHOD. MY PREDECESSOR LTD. CIT(A), JAMMU WITH HQRS. AT AMRITSAR IN APPEAL NOS. 668/200 8-09, 669/2008- 09 AND 670/2008-09 AS PER ORDERS DATED 29.06.2009, 29.06.2009 AND 03.07.2009, RESPECTIVELY, DELETED THE ADDITIONS. TH E HONBLE ITAT, AMRITSAR BENCH, AMRITSAR, VIDE ORDER DATED 30.12.20 09 IN APPEAL NO.381(ASR)/2009, 380(AR)/2009 AND 382(ASR)/2009, R ESPECTIVELY, UPHELD THE ORDERS OF LD. CIT(A) JAMMU WITH HQRS. AT AMRITSAR. RESPECTFULLY FOLLOWING THE JUDGMENTS OF MY PREDECES SOR AND HONBLE ITAT, AMRITSAR (SUPRA), THE ADDITION OF RS.1,31,62, 500/- MADE ON 5 ACCOUNT OF SHORT TERM CAPITAL GAINS IS DELETED. AL L THE GROUNDS OF APPEAL TAKEN UP IN THIS REGARD ARE ALLOWED. 5. NOW, REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL A GAINST THE ORDER OF THE CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. SH. AMRIK CHAND, THE LD. DR SU BMITTED THAT IT IS A CASE OF THE DIRECTOR OF THE COMPANY OF M/S. P.R. INFRAST RUCTURE PVT. LTD., WHO WAS TO RESIGN ON 17 TH AUGUST, 2005 AS PER THE DEAL STRUCK WITH M/S. TODA Y HOMES & INFRASTRUCTURE PVT. LTD. ACCORDING TO HIM, THIS CLEARLY SHOWS THAT SH. GURVINDER SINGH IS ONE SUCH OTHER SHARE HOLDER AND ALSO DIRECTOR OF M/S. P.R. INFRASTUCTURE LTD. WHO RECEIVED SALE CONSIDER ATION OVER AND ABOVE THE FACE VALUE FOR TRANSFER OF SHARES TO M/S. TODAY HOM ES AND INFRASTRUCTURE LTD. HE, THEREFORE, SUBMITTED THAT FACTS OF THE PRE SENT CASE ARE DIFFERENT THAN THE FACTS OF THE CASE OF DR. POONAM SINGH, DR. BAL WINDER SINGH AND SMT. SAROJ GUPTA, DECIDED BY THIS BENCH OF THE TRIBUNAL VIDE ITS ORDER DATED 31 ST DEC., 2009 PASSED IN ITA NOS.381(ASR)/2009, 380(AR) /2009 AND 382(ASR)/2009 FOR THE ASSESSMENT YEAR 2006-07. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE, SH. PADAM BAHL, SUBMITTE D THAT THE ASSESSEE WAS ONLY A SHAREHOLDER IN THE COMPANY AT THE TIME OF SA LE OF SHARES AND WAS NOT DIRECTOR IN THE COMPANY AT THAT TIME. HENCE, THE BA SIS TAKEN BY THE LD. DR TO 6 DIFFERENTIATE FROM THE CASE OF DR. POONAM SINGH, DR . BALWINDER SINGH AND SMT. SAROJ GUPTA (SUPRA), IS UNCALLED FOR AND WITHO UT ANY BASIS. 6.1. IN OUR CONSIDERED VIEW, THERE IS NO MERIT IN T HE ABOVE CONTENTION OF THE LD. DR, PARTICULARLY WHEN LD. CIT(A) HAS CATEGO RICALLY STATED THAT FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS OF CAS E OF DR. POONAM SINGH AND OTHERS (SUPRA). HE, THEREFORE, FOLLOWED THE ORDER O F TRIBUNAL IN DECIDING THE PRESENT ISSUE. WE FIND THAT SIMILAR GROUNDS WERE R AISED BY THE REVENUE IN THE CASE OF DR. POONAM SINGH, DR. BALWINDER SINGH A ND SMT. SAROJ GUPTA, PASSED IN ITA NOS.381(ASR)/2009, 380(AR)/2009 AND 3 82(ASR)/2009 FOR THE ASSESSMENT YEAR 2006-07. ON IDENTICAL ISSUE, T HE TRIBUNAL VIDE ITS ORDER DATED 31 ST DEC.,2009 DISMISSED THE APPEALS OF THE REVENUE OBS ERVING AS UNDER: 9. AT THE TIME OF HEARING, BOTH THE PARTIES RELIED UPON THEIR WRITTEN ARGUMENTS, REPRODUCED ABOVE. IN ADDITION T O THIS, THE LEARNED D.R. RELIED UPON THE ORDERS OF THE A.O. AND THE LEARNED COUNSEL FOR THE ASSESSES RELIED UPON THE IMPUGNED O RDERS PASSED BY THE LEARNED CIT(A). THE LEARNED COUNSEL FOR THE ASSESSEE ALSO STATED THAT THE ASSESSEES HAVE FILED THEIR CRO SS OBJECTIONS ONLY TO SUPPORT THE IMPUGNED ORDERS OF THE LEARNED FIRST APPELLATE AUTHORITY. 10. WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSED THE RELEVANT MATERIAL AVAILABLE WITH US, ESPECIALLY, TH E WRITTEN SUBMISSIONS FILED BY BOTH THE PARTIES AND THE IMPUG NED ORDERS PASSED BY THE REVENUE AUTHORITIES. THE FACTS NARRA TED BY THE REVENUE AUTHORITIES ARE NOT DISPUTED BY BOTH THE PA RTIES. AS WE HAVE ALREADY REPRODUCED THE FINDINGS OF THE A.O. IN THE CASE OF DR. POONAM SINGH, IT IS PERTINENT TO MENTION HERE T HAT THE A.O. HAS GIVEN THE SIMILAR FINDINGS IN THE CASES OF OTHE R TWO 7 ASSESSEES EXCEPT THE DIFFERENCE IN NUMBER OF SHARES AND THE AMOUNT OF ADDITIONS IN DISPUTE. IT IS ALSO PERTINE NT TO MENTION HERE THAT THE LEARNED FIRST APPELLATE AUTHORITY HAS ALSO PASSED SEPARATE/SIMILAR ORDERS IN THE CASES OF THE ASSESSE ES EXCEPT THE DIFFERENCE IN NUMBER OF SHARES AND THE AMOUNT OF AD DITIONS IN DISPUTE. FOR THE SAKE OF CONVENIENCE, WE ARE REPRO DUCING THE ORDER OF THE LEARNED FIRST APPELLATE AUTHORITY PAS SED IN THE CASE OF DR. POONAM SINGH, ITA NO.380(ASR)/2009 AS UNDER: - 2. THE FACTS OF THE CASE IN BRIEF ARE THAT THE APP ELLANT SOLD 2000 SHARES OF M/S.P.R. INFRASTRUCTURE LTD., A N UNLISTED COMPANY AT THE FACE VALUE OF RS.10 EACH TO M/S.TODAY HOMES AND INFRASTRUCTURE (P) LTD. DURING THE PREVIOUS YEAR. THESE SHARES HAD BEEN ACQUIRED EARL IER BY THE APPELLANT AT THE FACE VALUE ONLY AND SO AS PER THE APPELLANT, THE TRANSACTION WAS TAX-NEUTRAL. THE A. O., HOWEVER, TOOK THE VIEW THAT THE CORRECT MARKET VALU E OF A SHARE OF M/S.P.R. INFRASTRUCTURE LTD., ON THE DATE ON WHICH THESE WERE SOLD BY THE APPELLANT WAS RS.1525/ - AND HE, THEREFORE, TAXED THE AMOUNT OF RS.30,30,000 /- BEING THE DIFFERENCE BETWEEN THE COMPUTED MARKET VALUE AND THE COST PRICE PAID BY THE APPELLANT AS SHORT TERM CAPITAL GAINS. THE APPELLANT BEING AGGRIEVED BY THIS ACTION OF THE A.O. HAS FILED THE PRESENT APPEA L. 3. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LEA RNED COUNSELS FOR THE APPELLANT HAVE FILED WRITTEN SUBMI SSIONS, STATING THEREIN THAT THE APPELLANT WAS AN ORDINARY SHAREHOLDER IN M/S.P.R. INFRASTRUCTURE LTD. IT HAS BEEN SUBMITTED THAT THE APPELLANT WAS A DOCTOR BY PROFES SION AND BUSY IN HER OWN AFFAIRS. RELIANCE HAS ALSO BEE N PLACED ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF SH. K.P. VARGHESE VS. ITO (131 ITR 597). 4. I HAVE CONSIDERED THE SUBMISSION OF THE LD. COUNSEL FOR THE APPELLANT AND GONE THROUGH THE ASSESSMENT ORDER . THE ASSESSING OFFICER HAS QUOTED EXTENSIVELY FROM T HE ORDER OF ASSESSMENT PASSED IN THE CASE OF M/S.TODAY HOMES AND INFRASTRUCTURE (P) LTD. AND HAS ALSO ALLU DED TO CERTAIN DOCUMENTS, WHICH WERE SEIZED FROM THE PREMI SES 8 OF THIS COMPANY DURING THE COURSE OF A SEARCH CONDU CTED BY THE DEPARTMENT. THE A.O. HAS ALSO REFERRED TO T HE STATEMENTS OF SOME PERSONS, WHO WERE CONNECTED EITH ER WITH M/S.TODAY HOMES AND INFRASTRUCTURE (P) LTD. OR WITH M/S.P.R. INFRASTRUCTURE LTD. HOWEVER, THERE I S NOT A WHISPER ABOUT THE APPELLANT IN EITHER THE DOCUMENTS WEE RECOVERED FROM THE POSSESSION OF APPELLANT NOR DID ANY DOCUMENT SPECIFICALLY CERTAIN HIS NAME. IN THE VAR IOUS STATEMENTS RECORDED, NONE OF THE WITNESSES WAS QUESTIONED ABOUT THE SALE OF SHARES BY THE APPELLAN T, MUCH LESS ANY WITNESS STATING THAT THE APPELLANT HA D BEEN PAID ANY AMOUNT OVER AND ABOVE THE FACE VALUE OF TH E SHARES BY THE BUYER OF THE SHARES. MAY BE, THE STA TEMENTS WERE RECORDED BY THE OFFICERS WHO WERE CONCERNED WI TH THE ASSESSMENT OF OTHER ASSESSEES AND SO THE QUESTI ONS WHICH WERE RELATED TO THEIR ASSESSMENTS WERE ASKED, BUT BE THAT SO, THE A.O. COULD HAVE SUMMONED THE PERSO NS WHO HAD NEGOTIATED THE DEAL OF PURCHASE OF SHARES F ROM THE APPELLANT AND ASCERTAINED WHETHER ANY AMOUNT OV ER AND ABOVE THE FACE VALUE OF THE SHARES WAS PAID TO THE APPELLANT. IT MAY ALSO BE ADDED THAT EVEN IF IT IS ESTABLISHED THAT SOME OTHER SHAREHOLDERS OF M/S.P.R . INFRASTRUCTURE LTD. RECEIVED CONSIDERATION OVER AND ABOVE THE FACE VALUE FOR TRANSFER OF SHARES TO M/S.TODAY HOMES AND INFRASTRUCTURE (P) LTD. IT CANNOT IPSO-FACTO ES TABLISH THAT THE APPELLANT DID NOT SELL ITS HOLDINGS AT THE FACE VALUE. ALL IT WOULD AT THE HIGHEST ESTABLISH IT TH AT THE APPELLANT IS NOT GOD AT BARGAINING BUT THEN SHE IS A DOCTOR NOT A BUSINESS PERSON. THEREFORE, THE POSITION THA T EMERGES IS THAT THERE IS NOT AN IOTA OF EVIDENCE TO ESTABLISH THAT THE APPELLANT RECEIVED ANY MONEY OVE R AND ABOVE THE FACE VALUE FOR THE TRANSFER OF SHARES IN FAVOUR OF M/S.TODAY HOMES AND INFRASTRUCTURE (P) LTD. 4.1 IT WOULD BE IN THE FITNESS OF THINGS TO DISCUS S THE CASE LAWS RELIED UPON BY THE A.O. FOR MAKING THE ADDITION. THE FIRST DECISION IS OF THE HONBLE APE X COURT IN THE CASE OF BHARAT HARI SINGHANIA & ORS. VS. CWT (207 ITR 1). THIS CASE RELATED TO THE VALUATION OF SHARES OF AN UNLISTED COMPANY FOR THE PURPOSE OF THE ASSES SMENT 9 TO WEALTH TAX. THE HONBLE APEX COURT TOOK THE VIE W THAT RULE 1D OF THE WEALTH TAX RULES WHICH PRESCRIB ED THE VALUATION OF SHARES BY BREAK UP METHOD IS A VALID R ULE. THE QUESTION OF SUBSTITUTION OF FAIR MARKET VALUE F OR THE ACTUAL CONSIDERATION FOR THE PURPOSES OF COMPUTATIO N OF CAPITAL GAINS WAS NOT BEFORE THE HONBLE COURT IN T HIS CASE. THE SECOND JUDGMENT IS OF CIT VS. RAJIV GUPT A (292 ITR 263), IN WHICH THE QUESTION AGAIN RELATED TO THE DETERMINATION OF FAIR MARKET VALUE OF THE SHARES OF AN UNLISTED COMPANY AND THE COURT HELD THAT WHERE THE TRIBUNAL HAD MADE THE VALUATION ON THE BREAK UP VAL UE METHOD AFTER EXCLUDING THE MISCELLANEOUS EXPENDITUR E INCURRED BUT NOT WRITTEN OFF, NO SUBSTANTIAL QUESTI ON OF LAW AROSE. IN PARA 8 OF ITS ORDER, THE HONBLE DEL HI HIGH COURT OBSERVED, THE VIEW TAKEN BY THE A.O. BY RELY ING UPON THE BHARAT HARI SINGHANIA (SUPRA) MAY HAVE BEE N RELEVANT FOR THE ASSESSMENT OF WEALTH TAX BUT NOT F OR THE ASSESSMENT OF INCOME TAX. THEREFORE, THIS CASE, I N FACT, GOES AGAINST THE VIEW TAKEN BY THE A.O. AND DOES NO T SUPPORT THE CASE OF THE DEPARTMENT. THE THIRD DECI SION RELIED UPON BY THE A.O. IS OF HONBLE ITAT, MUMBAI IN THE CASE OF DCIT VS. AYESHA ASHOK SONI. THIS WAS A CASE, WHERE FOR COMPUTATION OF CAPITAL GAINS, THE A SSESSEE OPTED TO ADOPT FAIR MARKET VALUE OF THE SHARES OF A N UNLISTED COMPANY AS ON 1ST APRIL, 1981 AS THE COST OF ACQUISITION AS PROVIDED U/S.55(2)(B)(I) OF THE I.T. ACT, 1961. THE HONBLE ITAT HELD THAT THE FAIR MARKET V ALUE OF SHARES OF AN UNLISTED COMPANY ON A PARTICULAR DA TE COULD BE COMPUTED ON THE BASIS OF BREAK UP VALUE METHOD. THE HONBLE ITAT WAS NOT CONCERNED WITH THE QUESTION OF SUBSTITUTION OF FAIR MARKET VALUE IN PL ACE OF ACTUAL CONSIDERATION RECEIVED FOR COMPUTATION OF CA PITAL GAINS. 4.2 RELIANCE OF THE A.O. ON THE OBSERVATIONS OF HONBLE SUPREME COURT IN MCDOWELLS CASE 9154 ITR 148) IS A LSO MISPLACED. THE APPELLANT WAS A MINORITY SHAREHOLDE R OF M/S.P.R. INFRASTRUCTURE LTD., OWNING ONLY 2000 SHAR ES OUT OF TOTAL OF 60,000 SHARES. SHE HAD HARDLY ANY SAY IN RUNNING THE COMPANY. WHEN SHE FOUND THAT THE OTHER 10 SHAREHOLDERS WERE SELLING THEIR SHARES TO A STRANGE R, SHE ALSO THOUGHT IT WISE TO GET BACK HER INVESTMENT RAT HER THAN BE AT THE MERCY OF THE NEW GROUP, CONTROLLING THE COMPANY. THE QUESTION OF CLEVER TAX PLANNING GOES NOT ARISE I THIS CASE. IT IS A SIMPLE CASE, WHERE THE APPELLANT BOUGHT SOME SHARES AT FACE VALUE AND SOLD THESE AT THE FACE VALUE. IF THERE IS ANY EVIDENCE THAT THESE WE RE SOLD AT A PRICE HIGHER THAN THE FACE VALUE, THE PROFIT C AN BE TAXED AS CAPITAL GAINS. THERE IS NO TAX PLANNING O F ANY SORT. THEREFORE IN ALL THE CASES CITED BY THE A.O., THE ISSUE WAS HOW TO COMPUTE THE FAIR MARKET VALUE OF THE SHA RES OF AN UNLISTED COMPANY. NONE OF THE CASES IS AN AUTHORITY FOR THE PROPOSITION THAT THE A.O. COULD SUBSTITUTE FAIR MARKET VALUE IN PLACE OF THE ACTUAL SALE CONSIDERATION RECEIVED BY AN AASSESSEE FOR AN ASSET AND PROCEED TO COMPUTE THE CAPITAL GAINS ON THAT BASIS. 4.3 FOR THE SAKE OF CLARIFICATION, IT MAY BE MENTIONED THAT WHILE THE LAW PROVIDES THAT A ASSESSEE IN CERTAIN C ASES MAY OPT THAT THE FAIR MARKET VALUE AS ON 1ST APRIL, 1981 BE TAKEN AS THE COST OF ACQUISITION IN PLACE OF ACT UAL COST OF ACQUISITION, THERE IS NO PROVISION IN LAW TO SUB STITUTE THE FAIR MARKET VALUE OF AN ASSET FOR ACTUAL SALE CONSIDERATION. THEREFORE, THE APPROACH OF THE AO I N TAKING THE FAIR MARKET VALUE AS THE CONSIDERATION F OR COMPUTATION OF CAPITAL GAINS WAS ERRONEOUS. EARLIE R SECTION 52 OF THE I.T. ACT, 1961 WAS A PROVISION, W HICH ENABLED THE DEPARTMENT TO SUBSTITUTE THE FAIR MARKE T VALUE FOR ACTUAL CONSIDERATION, BUT THAT PROVISION HAS BE EN OMITTED LONG BACK. FURTHER, EVEN WHEN SECTION 52 W AS ON THE STATUE BOOK, THE HONBLE SUPREME COURT IN THE C ASE OF SH. K.P.VARGHESE (131 ITR 597) HELD THAT BEFORE THE PROVISIONS OF SECTION 52 COULD BE APPLIED, THE REVE NUE MUST ESTABLISH THAT THE ACTUAL CONSIDERATION, RECEI VED BY THE ASSESSEE WAS MORE THAN WHAT HAS BEEN DISCLOSED. ONLY IN THE CASE OF IMMOVABLE PROPERTIES, SECTION 5 0C OF THE INCOME TAX ACT, 1961 PROVIDES FOR SUBSTITUTION OF ACTUAL CONSIDERATION BY THE MARKET VALUE DETERMINED BY THE STAMP VALUATION AUTHORITY. IN THE CASE OF MOVA BLE PROPERTY, THE CONCEPT OF FAIR MARKET VALUE AS ON TH E DATE 11 OF SALE IS TOTALLY IMMATERIAL AND IRRELEVANT. IT M AY ALSO BE POINTED OUT THAT IF THE DEPARTMENT WAS ABLE TO ESTA BLISH THAT THE ACTUAL SALE CONSIDERATION RECEIVED BY THE APPELLANT WAS HIGHER THAN THE FACE VALUE OF THE SHA RES, SUCH HIGHER AMOUNT COULD HAVE BEEN THE BASIS FOR COMPUTATION OF CAPITAL GAINS. EVEN IN THAT CASE, T HE FAIR MARKET VALUE OF THE SHARES COULD NOT HAVE BEEN TAKE N FOR COMPUTATION OF CAPITAL GAINS. THEREFORE, THE ENTIR E EXERCISE OF THE A.O. TO DETERMINE THE FAIR MARKET V ALUE OF THE SHARES WAS TOTALLY TUTILE AND WITHOUT ANY LEGAL BASIS. HENCE, THE ADDITION MADE OF RS.30,30,000/- ON ACCOU NT OF SHORT TERM CAPITAL GAINS IS DELETED. 5. IN THE RESULT, THE APPEAL IS ALLOWED. 11. KEEPING IN VIEW THE AFORESAID ORDER OF THE LEARNED FIRST APPELLATE AUTHORITY, WE ARE OF THE CONSIDERED OPINI ON THAT NO INTERFERENCE IS CALLED FOR IN THE WELL REASONED ORD ER PASSED BY THE LEARNED FIRST APPELLATE AUTHORITY BECAUSE THE A SSESSEE SOLD THE SHARES IN DISPUTE OF M/S.P.R. INFRASTRUCTURE LT D., WHICH IS UNLISTED COMPANY ON THE FACE VALUE OF RS.10/- TO M/ S.TODAY HOMES & INFRASTRUCTURE (P) LTD. DURING THE PREVIOUS YEAR. THE A.O. HAS TAKEN THE MARKET VALUE OF THE SHARES IN DI SPUTE ON THE DATE OF SALE AT THE RATE OF RS.1525/- AND TAXED THE DIFFERENCE BETWEEN THE COMPUTED MARKET VALUE AND THE COST PRI CE PAID BY THE ASSESSEE AS SHORT TERM CAPITAL GAINS. IT IS AL SO UNDISPUTED THAT THE ASSESSEES ARE ORDINARY SHARE HOLDERS OF M/ S.P.R. INFRASTRUCTURE LTD. AND NOT IN THE BUSINESS OF PURC HASING AND SELLING THE SHARES OF ANY OTHER COMPANY ALSO. KEEP ING IN VIEW THE FACTS AND THE CIRCUMSTANCES OF THE PRESENT CASE , WE ARE OF THE VIEW THAT THE A.O. HAS MADE THE BASIS FOR FIXIN G THE MARKET VALUE OF THE SHARES IN DISPUTE @ RS.1525/- PER SHAR E ONLY ON THE BASIS OF THE ASSESSMENT ORDER ITSELF IN THE CASE OF M/S.TODAY HOMES & INFRASTRUCTURE P. LTD. IT IS ALSO ADMITTED FACT ON THE FILE THAT DURING THE COURSE OF SEIZURE FROM THE PRE MISES OF THE COMPANY, NAMELY, M/S.TODAY HOMES & INFRASTRUCTURE P . LTD. NO INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED BY THE DEPARTMENT. IT IS ALSO ADMITTED THAT THE A.O. RECO RDED VARIOUS STATEMENTS OF VARIOUS PERSONS WHO WERE CONNECTED EI THER WITH M/S.TODAY HOMES & INFRASTRUCTURE P. LTD. AND M/S.P. R. 12 INFRASTRUCTURE LTD. NO ONE HAS GIVEN ANY STATEMENT AGAINST THE ASSESSEE THAT THE ASSESSEE RECEIVED ANY MONEY OTHER THAN FACE VALUE ON TRANSFER OF SHARES IN FAVOUR OF M/S.TODAY HOMES & INFRASTRUCTURE P. LTD. THE A.O. ALSO HAS NOT BROUG HT ANY EVIDENCE AGAINST THE ASSESSEE ESTABLISHING THAT THE ASSESSEE RECEIVED ANY MONEY OTHER THAN THE FACE VALUE ON TRA NSFER OF SHARES IN FAVOUR OF M/S.TODAY HOMES & INFRASTRUCTUR E P. LTD. IT IS NOT PERMISSIBLE UNDER LAW THAT IF SOME OTHER SHARE HOLDERS RECEIVED ANY CONSIDERATION OTHER THAN THE FACE VALU E FOR THE TRANSFER OF THE SHARES TO M/S.TODAY HOMES & INFRAST RUCTURE P. LTD. THE RATIO OF THE SAME IS APPLICABLE IN THE CA SE OF THE ASSESSEE WITHOUT ANY CORROBORATING EVIDENCE OF THE VERSION OF THE REVENUE. AS PER RECORD, TWO ASSESSEES ARE DOCT ORS AND ARE PRACTISING IN HOMEOPATHIC CLINIC AT AMRITSAR, THEY ARE NOT BUSINESS PERSONS. WE HAVE ALSO GONE THROUGH THE CA SE LAWS CITED BY THE REVENUE AUTHORITIES IN THE CASE OF BHA RAT HARI SINGHANIA AND OTHERS VS. COMMISSIONER OF WEALTH TAX & OTHERS, 207 ITR 01 RENDERED BY THE HONBLE SUPREME COURT OF INDIA, WHICH RELATES TO THE VALUATION OF SHARES OF UNLISTED COMPANY FOR THE PURPOSE OF ASSESSMENT TO WEALTH TAX , WHEREIN THE HONBLE SUPREME COURT OF INDIA TOOK THE VIEW TH AT RULE 1D OF THE WEALTH TAX RULES WHICH PRESCRIBED THE VALUAT ION OF SHARES BY BREAK-UP METHOD IS A VALID RULE. THE QUE STION OF SUBSTITUTION OF FAIR MARKET VALUE FOR THE ACTUAL CO NSIDERATION FOR THE PURPOSES OF COMPUTATION OF CAPITAL GAINS WAS NO T BEFORE THE HONBLE COURT IN THIS CASE. AS REGARDS TO THE OTHE R JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. RAJIV GUPTA REPORTED AT 292 ITR 263 (DELHI) IN WHICH THE QUESTION AGAIN RELATED TO THE DETERMINATION OF FAIR MARKET V ALUE OF SHARES OF AN UNLISTED COMPANY AND THE COURT HELD THAT WHER E THE TRIBUNAL HAD MADE THE VALUATION ON THE BREAK UP VAL UE METHOD AFTER EXCLUDING THE MISCELLANEOUS EXPENDITURE INCUR RED BUT NOT WRITTEN OFF, NO SUBSTANTIAL QUESTION OF LAW AROSE. THE JUDGMENTS CITED BY THE A.O. ARE ACTUALLY APPLICABLE AGAINST THE VIEW TAKEN BY THE A.O. ARE NOT SUPPORTING THE CASE OF THE DEPARTMENT. AFTER GOING THROUGH THE FACTS AND THE CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE CO NSIDERED OPINION THAT THE LEARNED FIRST APPELLATE AUTHORITY HAS PASSED A WELL REASONED ORDER AFTER DISCUSSING IN DETAIL THE FACTS OF THE PRESENT CASE WITH THE SUPPORT OF VARIOUS JUDGMENTS RENDERED BY 13 THE HONBLE SUPREME COURT OF INDIA AS MENTIONED IN THE IMPUGNED ORDER. KEEPING IN VIEW OF THE AFORESAID D ISCUSSION, WE ARE OF THE VIEW THAT THE REVENUE HAS NOT ESTABLI SHED THAT THE ASSESSEEA HAVE RECEIVED ANY CONSIDERATION MORE THAN WHAT HAS BEEN DISCLOSED BY THEM IN THEIR RETURNS OF INCOME. THEREFORE, IN THE ABSENCE OF ANY EVIDENCE ADVERSELY AFFECTING THE CLAIM OF THE ASSESSEES, WE ARE UNABLE TO APPROVE THE STAND O F THE REVENUE. 12. KEEPING IN VIEW THE FACTS AND THE CIRCUMSTANCES OF THE PRESENT CASE AND THE ARGUMENTS ADVANCED BY BOTH THE PARTIES AS WELL AS THE RECORD AVAILABLE WITH US, WE ARE OF THE CONSIDE RED OPINION THAT THE LEARNED FIRST APPELLATE AUTHORITY HAS PASS ED A WELL REASONED ORDER. THEREFORE, NO INTERFERENCE IS CALL ED FOR. HENCE ALL THE APPEALS FILED BY THE REVENUE ARE DISMISSED. 6.2. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUN AL DATED 31 ST DEC.,2009 IN THE CASE OF DR. POONAM SINGH, DR. BALWINDER SING H AND SMT. SAROJ GUPTA (SUPRA), WE CONFIRM THE ORDER OF THE CIT(A) AND DIS MISS THE APPEAL OF THE REVENUE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12TH DECEMBER, 2011. SD/- SD/- (D.K.SRIVASTAVA) (H.L. KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED: 12TH DECEMBER, 2011 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE: SH. GURVINDER SINGH, AMRITSAR. 14 2. THE ITO WARD 5(2), ASR. 3. THE CIT(A), ASR. 4. THE CIT, ASR 5. THE SR DR, ITAT, ASR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR.
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