ROSY BLUE (INDIA) P. LTD, MUMBAI V. DCIT CEN CIR-46, MUMBAI

ITA 2466/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0932 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 12-03-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 17-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K R DAS
• Assessee Lawyers: P J PARDIWALLA; P P BHANDARI
• Keywords: Unexplained investment; Depreciation; Income from undisclosed sources; Search and seizure; Deemed to accrue or arise in india; Valuation report; Set aside
• Section: 69B; 250; 201; 192

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI. R.S. PADVEKAR (J.M.) AND SHRI. B. RAMA KOTAIAH (A.M.) ITA NO.2466/MUM/2009 ASSESSMENT YEAR : 2006-2007 ROSY BLUE (INDIA) P. LTD. OPERA HOUSE MUMBAI 400 004 PAN : AACCR2413B VS. D.C.C.C. 46, R.NO.658, 6TH FLR., AAYAKAR BHAVAN, M.K. RD., MUMBAI 400 020. ITA NO.3583/MUM/2009 ASSESSMENT YEAR : 2006-2007 D.C.C.C. 46, R.NO.658, 6TH FLR., AAYAKAR BHAVAN, M.K. RD., MUMBAI 400 020. VS. ROSY BLUE (INDIA) P. LTD. OPERA HOUSE MUMBAI 400 004 PAN : AACCR2413B (APPLICANT) (RESPONDENT) APPLICANT BY : MR.P.J. PARDIWALLA & NITESH JOSHI & P.P. BHANDARI RESPONDENT BY : MR. K.R. DAS (CIT)(DR) O R D E R PER R.S. PADVEKAR, J.M. THESE TWO CROSS APPEALS ONE BY ASSESSEE AND ONE BY REVENUE ARE FILED CHALLENGING THE IMPUGNED ORDER OF THE LEARNED CIT(A ), CENTRAL-II, MUMBAI FOR THE ASSESSMENT YEAR 2006-2007 DATED 20.03.2009. 2. THE FIRST ISSUE IN THE ASSESSEES APPEAL IS DISA LLOWANCE OF RS.9,58,836/- OUT OF VEHICLE EXPENSES AND RS.5,00,7 05/- OUT OF DEPRECIATION OF VEHICLE, AGGREGATING TO RS.14,59,541/-. 3. THE FACTUAL MATRIX PERTAINING TO THE ISSUE BEFOR E IS THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IMPORTING ROUGH DIAMONDS , CUTTING AND POLISHING THEM AND EXPORTING THE FINISH DIAMONDS. THE RETUR N FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY IN ASSESSMENT WAS COMPLET ED U/S.143(3) OF THE ACT. THE ASSESSING OFFICER HAS OBSERVED THAT ASSE SSEE CLAIMED THE SUM OF RS.95,83,368/- AS VEHICLE EXPENSE AND ALSO CLAIMED THE DEPRECIATION ITA NO.3583/MUM/2009 ITA NO.2466/MUM/2009 2 THEREON WHICH WAS TO THE EXTENT OF RS.2,25,68,670/- . THE A.O. MADE DISALLOWANCE AT 10% OF THE TOTAL VEHICLE EXPENSES A S WELL AS DEPRECIATION CLAIMED BY THE ASSESSEE WHICH WAS WORKED OUT TO RS. 22,56,867/-. THE ASSESSEE CHALLENGED THE DISALLOWANCE BEFORE THE LEA RNED CIT(A) CONTENDED THAT ASSESSEE ENGAGED IN THE DIAMOND BUSINESS WHICH REQUIRES HIGH SAFETY FOR MOVEMENT OF GOODS AND PERSONNEL. VISITS OF IN TERNATIONAL CUSTOMERS WHO NEED PROPER ESCORT AND TREATMENT ALSO MAKE IT N ECESSARY FOR THE ASSESSEE TO MAINTAIN PROPER INFRASTRUCTURE. IT WA S ALSO CONTENDED THAT ON ENTIRE VEHICLE EXPENSES INCLUDING DEPRECIATION THE ASSESSEE HAS PAID THE FRINGE BENEFIT TAX (FBT). THE ASSESSEE HAS ALSO RELIED ON THE DECISION OF HONBLE GUJRAT HIGH COURT IN SAYAJI IRON & ENGINEE RING COMPANY (253 ITR 479). ON PRINCIPLE THE LEARNED CIT(A) CONFIRMED T HE ORDER OF THE ASSESSING OFFICER BUT ON QUANTUM OF DISALLOWANCE, THE LEARNED CIT(A) REDUCED THE DISALLOWANCE. IN RESPECT OF THE DEPRECIATION THE LD. CIT(A) OBSERVED THAT THE ASSESSING OFFICER HAD MADE HONEST MISTAKE BY ADOPTING THE FIGURE OF DEPRECIATION AS PER BOOKS AND NOT AS CLAIMED BY THE ASSESSEE IN THE INCOME TAX RETURN AND HE SUSTAINED FINAL DISALLOWANCE TO RS.17,56,163/-. 4. WE HAVE HEARD THE RIVAL SUBMISSION OF THE PARTIE S AND ALSO PERUSED THE RECORD. THE LEARNED COUNSEL ARGUED THAT THE F RINGE BENEFIT TAX HAS BEEN INTRODUCED IN THE I.T. ACT FROM THE ASSESSMENT YEAR 2006-07 AND AS PER THE PROVISIONS OF SECTION 115WB(2)(F) R.W.S. 11 5WA WHICH WAS PAID BY THE ASSESSEE. HE FURTHER PLEADED THAT ONCE FRINGE BENEFIT TAX HAS BEEN PAID BY THE ASSESSEE IN THE CAPACITY OF A EMPLOYER THERE IS NO QUESTION OF HAVING ANY PERSONNEL ELEMENT. WE HAVE ALSO HEARD THE LEAR NED DR WHO RELIED ON THE ORDER OF THE ASSESSING OFFICER AS WELL AS CIT(A ). THE IDENTICAL ISSUE COME FOR THE CONSIDERATION IN ASSESSEES OWN CASE BEFORE THE TRIBUNAL FOR THE ASSESSMENT YEAR 2005-06 AND THE TRIBUNAL SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION IN TH AT YEAR. THE ADDITIONAL ARGUMENT FOR THE LEARNED COUNSEL IS THAT AS THE ASS ESSEE HAS PAID THE FRINGE BENEFIT TAX AND HENCE, NO DISALLOWANCE CAN BE MADE. THE ASSESSEE IN THE CAPACITY OF THE EMPLOYER IS LIABLE TO PAY TAX ON TH E FRINGE BENEFITS PROVIDED TO THE EMPLOYEES. SECTION 115WB DEFINES THE EXPRESS ION OF FRINGE BENEFIT. ITA NO.3583/MUM/2009 ITA NO.2466/MUM/2009 3 SECTION 115WC PROVIDES FOR DETERMINING THE VALUE OF FRINGE BENEFIT. SO FAR AS THE ISSUE OF DISALLOWANCE BEFORE US IS CONCERNED , THE ASSESSING OFFICER MADE THE AD-HOC DISALLOWANCE OF 10% ON OUT OF THE V EHICLE EXPENSES AS WELL AS DEPRECIATION CLAIMED BY THE ASSESSEE. CONSIDER ING THE SCHEME OF THE TAX ON FRINGE BENEFIT AS WELL AS THE FACTS PERTAINING T O DISALLOWANCE, WE ARE AFRAID THAT SAID SUBMISSION CAN NOT BE ACCEPTED AS ENTIRE VEHICLE EXPENSES ARE NOT CLAIMED TO HAVE BEEN INCURRED ON THE EMPLOY EES. AS PER THE FACTS ON RECORD THE VEHICLE ARE USED FOR THE MOVEMENTS GOODS AND PERSONNEL NOT FOR PROVIDING BENEFITS OR SERVICES TO THE EMPLOYEES. MO REOVER, IT CANNOT BE SAID THAT ENTIRE EXPENDITURE IN THE VEHICLES IS IN THE N ATURE OF THE FRINGE BENEFIT TO ASSESSEES EMPLOYEES. WE, THEREFORE, REJECT THE SAID ARGUMENT BUT AT THE SAME TIME IN THE ASSESSMENT YEAR 2005-06 THE TRIBUN AL HAS SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRES H ADJUDICATION. HENCE WE CONSIDERED IT APPROPRIATE TO REMAND THIS ISSUE TO T HE FILE OF THE ASSESSING OFFICER ON THE SAME DIRECTION AS GIVEN IN THE ASSES SMENT YEAR 2005-06. ACCORDINGLY GROUND NO.1 IS ALLOWED FOR THE STATISTI CAL PURPOSE. 5. NEXT ISSUE IS THE ADDITION MADE U/S.69B OF THE A CT OF RS.80,49,540/-. THE ASSESSING OFFICER HAS STATED THAT THE ASSESSEE COMPANY IN THE FINANCIAL YEAR 2005-06 HAS PURCHASED 17499 SHARES OF OCEAN CR OWN DIAMOND P. LTD. HAVING THE NOMINAL VALUE OF RS.100 EACH AT RS.2500 PER SHARE. THE ASSESSING OFFICER HAS ALSO NOTED THAT THE VALUE OF SHARE OF OCEAN CROWN DIAMOND P. LTD. AS ON 31 ST MARCH, 2006 WAS RS.5407/- AND THE SAME VALUE WAS WORKED OUT BY CONSIDERING THE TOTAL SHARE CAPIT AL PLUS RESERVES THAT WAS RS.18,92,42,149/- WHICH IS DIVIDED BY TOTAL SHA RES I.E. 35000 OF RS.100/- EACH OF NOMINAL VALUE. THE ASSESSEE HAS C ONTENDED BEFORE THE ASSESSING OFFICER THAT ASSESSEE NEGOTIATED THE PRIC E OF THE SHARES AND AFTER NEGOTIATION THE PRICE WAS FIXED RS.2500/- PER SHARE . BUT THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AS HE WAS OF THE OPINION THAT ASSESSEE HAS NOT UNDERSTATED THE P RICE FOR PURCHASING THE SAID SHARE BY RS.2907/- PER SHARE. IN HIS OPINION , THE PROVISION OF SECTION 69B OF THE I.T. ACT WAS APPLICABLE TO THE EXTENT OF DIFFERENCE IN THE VALUE OF THE SHARE AND ACTUAL PURCHASE PRICE CLAIMED TO HAVE BEEN PAID BY THE ITA NO.3583/MUM/2009 ITA NO.2466/MUM/2009 4 ASSESSEE WHICH WAS RS.2500/- PER SHARE. THE ASSES SING OFFICER MADE TOTAL ADDITION OF RS.5,08,69,593/-. THE ASSESSEE CHALL ENGED SAID ADDITION BEFORE THE LEARNED CIT(A) AND PARTLY SUCCEEDED. THE LD. C IT(A) WAS OF THE VIEW THAT THE ASSESSING OFFICER HAS NOT OBTAINED THE VALUATIO N REPORT FOR DETERMINING THE VALUATION. BUT HE HAS ALSO OBSERVED THAT THE V ALUATION REPORT WAS FURNISHED BEFORE HIM AND AS PER THE SAID VALUATION REPORT VALUE OF PER SHARE WAS DETERMINED BY RS.2960/-. BUT ON PRINCIPLE HE H ELD THAT THE TO EXTENT OF DIFFERENCE IN THE VALUATION THE ADDITION U/S.69B WA S JUSTIFIED AND HE SUSTAINED TO RS.80,49,540/-. THE REASONING AND FIN DINGS OF THE LD. CIT(A) ARE REPRODUCED AS UNDER: 3.3.8.1. SECTION 69B IS APPLICABLE WHERE (I) THE ASSESSEE HAS MADE INVESTMENTS OR HAS ACQUIRED BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE; AND (II) THE SAME HAS BEEN SHOWN IN BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE, BUT NOT TO THE FULL EXT ENT OF THE INVESTMENT/VALUE OF BULLION, JEWELLERY ETC. 3.3.8.2. IT HAS BEEN HELD BY HONBLE DELHI HIGH COURT THAT SECTION 69B IS CLARIFICATORY IN NATURE (YADU HARI DALMIA VS. CIT (1998) 126 ITR 48 (DEL)). 3.3.8.3. WHERE THE EXPLANATION OFFERED BY THE ASSESSEE FOR T HE EXCESS CASH HELD BY HIM WAS NOT SATISFACTORY, THE PRAYER OF THE ASSESSEE FOR SET-OFF THE AMOUNT WAS UNJUSTIFIED AND THE EXCESS AMOUNT OF LIABLE TO BE T HE DEEMED INCOME OF THE ASSESSEE (V.GOPAL VS. CIT (2001) 250 ITR 780 (MAD). 3.3.8.4. WHERE NO EXPLANATION WAS PUT FORTH BY THE ASSESSEE AS REGARDS DISCREPANCY IN VALUE OF STOCK AS DISCLOS ED TO BANK AND AS SHOWN IN THE BALANCE-SHEET, ADDITION U/S.69B WAS JUSTIFIED. (DHANDIRAM AGARWALA VS. CIT (1993) 201 ITR 192 (GAU.); RAMANLAL KACHARULAL TEJMAL VS. CIT (1984) 146 ITR 368 (BOM)). 3.3.8.5. WHERE THE EXPLANATION OF THE ASSESSEE REGARDING INVESTMENT IN A SOLE PROPRIETARY FOREIGN FIRM CONTA INED SEVERAL IMPROBABILITIES AND MISSING LINKS AND IS NO T ITA NO.3583/MUM/2009 ITA NO.2466/MUM/2009 5 SUPPORTED BY RELIABLE DOCUMENTARY OR OTHER EVIDENCE , ADDITION AS INCOME FROM UNDISCLOSED SOURCES WAS HELD PROPER BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BHOJRAJ KISHANCHAND VS. CIT (1994) 209 ITR 500 (BOM.) 3.3.8.6. THE UNDISCLOSED INVESTMENT IN THE ACQUISITION OF TH E IMPUGNED UNLISTED SHARES OF M/S. OCDPL HAS BEEN WORKED OUT BY THE APPELLANT ITSELF, SUCH VALUATION HAS BEEN MADE IN OBEDIENCE TO THE APPROVED PROFIT EARNING CAPACITY METHOD/YIELD METHOD AS DIRECTED BY HONBLE SUPREME COURT IN THE CASE OF CGT VS. SMT. KUSUMBEN D. MAHADEVIA (SUPRA) AND CWT VS. MAHADEO JALAN & OTHERS (SUPRA). 3.3.8.7. THESE SUPREME COURT JUDGMENTS WERE AVAILABLE TO THE APPELLANT WHILE WORKING OUT THE VALUATION OF THE IMPUGNED SHARES AT THE TIME OF MAKING INVESTMENT. NO MATERIAL OR EVIDENCES WERE PLACED BEFORE ME TO PROVE THE CORRECTNESS OF THE VALUATION OF THE IMPUG NED UNLISTED SHARES AT RS.2500/- PER SHARE. YET IN UT TER DISREGARD TO THE TWO HONBLE SUPREME COURT JUDGMENTS I.E. CGT VS. SMT. KUSUMBEN D. MAHADEVIA (SUPRA) AND CWT VS. MAHADEO JALAN & OTHERS (SUPRA). THE APPELLANT DISCLOSED INVESTMENT AT A REDUCED VALUE OF RS.4,37,47,500/-. 3.3.8.8. THE BASIS OF VALUATION AS ADOPTED BY THE APPELLANT WAS ARBITRARY AND NOT IN CONFORMITY WITH ANY AUTHORITY. NO VALUATION REPORT WAS OBTAINED FROM ANY CHARTERED VALUER IN SUPPORT OF THE ARBITRARY PR ICE OF RS.2500/- PER SHARE. ON THE OTHER HAND, THE ON LY VALUATION REPORT NOW FURNISHED BEFORE ME CERTIFIED THE CORRECT VALUE AT RS.2960/- PER UNLISTED SHARE. 3.3.8.9. THE CIRCUMSTANCES AS NARRATED BY THE APPELLANT DURING COURSE OF APPELLANT PROCEEDINGS ALSO INDICAT E THAT THE SHARES WERE ACQUIRED FROM HIS SISTER CONCE RN AND FROM A RELATED PERSON. THEREFORE, THE TRANSAC TION IS NOT FREE FROM DOUBT. NO DOUBT, THE APPELLANT HAD RECORDED INVESTMENT IN ACQUISITION OF SUCH UNLISTED SHARES ACQUIRED FORM SISTER CONCERN AT A TOTAL AMOU NT OF RS.4,37,47,500/-. THE CORRECT VALUATION OF TH E INVESTMENT AS WORKED OUT BY THE APPELLANT ITSELF, ITA NO.3583/MUM/2009 ITA NO.2466/MUM/2009 6 WHICH IS ALSO IN ACCORDANCE WITH THE CCI GUIDELINES AND THE CAPITAL ISSUE (CONTROL) ACT, 1947 AND THE CAPITAL ISSUE (EXEMPTION) YEAR, 1969. THESE GUIDELINES FOR VALUATION OF EQUITY SHARES OF COMPAN IES WERE AVAILABLE TO THE APPELLANT AND IN ACCORDANCE WITH SUCH GUIDELINES PROFIT EARNING CAPACITY VALUE (PECV) METHOD WAS THE PRESCRIBED METHODOLOGY FOR VALUATION OF SHARES. THE APPELLANT IS A TOP COMPA NY AND IT HAD THE ASSISTANCE OF BEST OF CHARTERED ACCOUNTANTS, THEREFORE, IT CANNOT PRETEND IGNORANCE OF SUPREME COURT JUDGMENTS OR OF THE CONTROLLER OF CAPITAL ISSUES (CCI) GUIDELINES. AS FAR AS THE RELIANCE OF THE APPELLANT ON THE CASE OF DILSHAD TRADING CO. (P) LTD. (SUPRA) IS CONCERNED, IT IS NOTICED THAT THE APPELLANTS CASE IS QUITE DISTINGUISHABLE ON THE FACTS FROM THE FACTS AND CIRCUMSTANCES OF THE S AID CASE OF DILSHAD TRADING CO. (P). LTD. (SUPRA). TH E SILENT FEATURES OF THIS CASE HAVE ALREADY BEEN DISCUSSED IN THE PRECEDING PARAGRAPHS. 3.3.8.10. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE GUIDELINES ISSUED BY T HE CONTROLLER OF CAPITAL ISSUES (CCI), THE GOVERNMENTA L AGENCY RESPONSIBLE FOR ADMINISTERING THE SECURITIES REGULATION IN THE COUNTRY AND IN ABEDIENCE TO HONB LE SUPREME COURT JUDGEMENTS AND HONBLE BOMBAY HIGH COURT JUDGMENTS DISCUSSED IN THE PRECEDING PARAGRAPHS, THE DISALLOWANCE ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S.69B IS RESTRICTED TO RS.80,49,540/-. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 6. NOW ON THE ISSUE OF ADDITION U/S.69B BOTH THE RE VENUE AS WELL AS THE ASSESSEE ARE IN APPEAL BEFORE US. IN THE REVENUES APPEAL THE REVENUE HAS CHALLENGED THE RELIEF GIVEN BY THE LEARNED CIT(A) B Y SUSTAINING OR RESTRICTING THE ADDITION OF RS.80,49,540/- AS AGAINST RS.5,08,69,59 3/- AND THE ASSESSEE IS IN APPEAL, PRAYING FOR ENTIRELY DELETING THE ADDITION SUSTAINED BY THE LEARNED CIT(A). 7. WE HAVE GIVEN OUR ANXIOUS CONSIDERATION TO THE R IVAL SUBMISSIONS OF THE PARTIES AND ALSO PERUSED THE RECORD. THE LEARN ED COUNSEL ARGUED THAT OCEAN CROWN DIAMOND P. LTD. IS IN THE EXPORT OF THE DIAMOND HAVING SHARE ITA NO.3583/MUM/2009 ITA NO.2466/MUM/2009 7 CAPITAL OF RS.35,00,000/- WHICH WAS DIVIDED INTO 35 000 SHARES OF RS.100/- EACH. THE ASSESSEE COMPANY HAD HELD 50% SHARES, REMAINING 50% SHARES WERE HELD BY ONE MR. AJAY MEHTA, WHO WAS WORKING PA RTNER LOOKING AFTER DAY TO DAY ACTIVITIES OF THE COMPANY AND ALSO KEY PERSO N OF A COMPANY. MR. AJAY MEHTA EXPIRED IN FEBRUARY, 2005. ON HIS DEATH HIS WIFE SMT. SONAL MEHTA, SOLD 17499 SHARES TO THE APPELLANT COMPANY A T NEGOTIATED PRICE OF RS.2500/- PER SHARE. HE ARGUES THAT MERELY ON THE BASIS OF THE VALUATION NO ADDITION CAN BE MADE U/S.69B OF THE ACT. HE AR GUES THAT ONLY PRESUMPTION REGARDING VALUE OF ANY AMOUNT NOT SUFFI CIENT. HE FURTHER ARGUES THAT THERE IS NO DISPUTE REGARDING THE SOURC E WHICH IS ONE OF THE MANDATE OF SEC.69B NOR THERE IS EVIDENCE BEFORE THE ASSESSING OFFICER TO SAY THAT ASSESSEE HAS PAID MORE PRICE FOR ACQUIRING THE SHARE THAN THE PRICE DECLARED. THE LEARNED COUNSEL RELIED ON THE DECIS ION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF NEW EXCELSIOR PVT. LTD-18 5 ITR 158 IN SUPPORT OF THE PROPOSITION THAT HIGHER MARKET VALUE CAN NOT BE REASON FOR FORMATION OF A BELIEF FOR RE-OPENING THE ASSESSMENT HE, THEREFO RE, PLEADED THAT THERE IS NO JUSTIFICATION TO SUPPORT THE ADDITION SUSTAINED BY LEARNED CIT(A) PER QUANTUM. THE LEARNED DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SUBMISSIONS THAT THE MATERIAL VALUE OF THE SHARES W AS VALUABLE AND NO PRUDENT PERSON WOULD SALE SHARE AT A VERY LOW PRICE THAN THE MARKET PRICE. 8. FOR INVOKING THE PROVISIONS OF SECTION 69B, TH E FOLLOWING MANDATE OF SAID SECTION MUST BE FULFILLED. I. THE ASSESSEE HAS MADE INVESTMENT OR FOUND TO BE OWNER OF JEWELLERY OR OTHER VALUABLE ARTICLE; II. THE A.O. FINDS THAT AN AMOUNT SPEND FOR INVESTMENT OR FOR ACQUIRI NG THE VALUABLE ARTICLES IS EXCESS THAN THE AMOUNT REC ORDED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE; III. THE ASSESSEE OFFERS NO EXPLANATION ABOUT SUCH EXCESS AMOUNT OR EXPLANATION OFFERED BY THE ASSESSEE IS NOT SATISFAC TORY AS PER THE BASIC FACTS AVAILABLE ON RECORD. THERE IS NO EVIDENCE TO SHOW THAT ASSESSEE HAD PAID SOMETHING MORE THAT WHATEVER IS RECORDED IN HIS BOO KS OF ACCOUNTS FOR ACQUIRING THE SHARE OF OCEAN CROWN PVT. LTD. EXCEPT THE MARKET VALUATION ITA NO.3583/MUM/2009 ITA NO.2466/MUM/2009 8 MADE BY THE A.O. THE FACT IS ALSO NOT DISPUTED TH AT THE SHARES WERE PURCHASED FROM SMT. SONAL MEHTA, WIDOW OF ORIGINAL SHAREHOLDER. THE ASSESSING OFFICER HAS GONE ON THE INTRINSIC VALUE O F THE SHARES AS ON 31.03.2006, WHICH WAS WORKED OUT BY CONSIDERING THE TOTAL SHARE CAPITAL PLUS RESERVES AND DIVIDED BY THE TOTAL NUMBER OF SH ARES, APART FROM THAT THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER. AS PER THE VALUATION WORKED OUT BY THE ASSESSING OFFICER THE SAME WAS TO THE EX TENT OF RS.5407/- AS AGAINST PURCHASE PRICE SHOWN BY THE ASSESSEE AT RS. 2500/- PER SHARE. HENCE, ON THE BASIS OF THE ABOVE VALUATION, THE ASS ESSING OFFICER MADE THE ADDITION U/SEC.69B. THE ARGUMENT OF THE LEARNED C OUNSEL IS THAT THE VALUATION CAN ALSO BE MADE ON THE YIELD METHOD AND CORE QUESTION IS TO BE DECIDED IS WHETHER PRICE CLAIMED TO HAVE BEEN PAID BY THE ASSESSEE COMPANY WHICH IS ADMITTEDLY LESS THAN THE MARKET VALUE OF THE SHARE, IS IT SUFFICIENT TO EVOKE SEC. 69B?. FROM THE LANGUAGE USED BY THE LEGISLATURE IN THE SEC. 69B; IT CAN BE SAID THAT IT CONTEMPLATES CONCLUSIVE FINDING BY THE ASSESSING OFFICER SUPPORTED WITH SOME CONVINCING MATERIAL OR EVIDENCE. IN THIS CASE ASSESSEE FURNISHED THE VALUATION REPORT FROM THE CH ARTERED VALUER, WHO HAS CERTIFIED A MARKET VALUE OF THE SHARE AT RS.296 0/-. IT SUGGESTS THAT THE MARKET VALUE OF THE SHARES ACQUIRED BY THE ASSESSEE WAS MORE THAN RS.2500 PER SHARE. ADMITTEDLY, WHEN THERE IS A BULK PURCHAS E OF THE SHARES AND PRICES ARE NEGOTIATED THERE WOULD BE SOME DIFFERENC E IN THE NEGOTIATED PRICE AND ACTUAL MARKET VALUE OF THE SHARES. IT IS ALSO TRUE THAT A MARKET VALUE OF THE ASSET CANNOT BE TOTALLY DISCARDED WHILE ACCEPTI NG THE THEORY OF NEGOTIATION. IF THE GOLD OR DIAMOND IS PURCHASED IN THE MARKET AT 50% OF A MARKET RATE, THEN CERTAINLY IT CAN BE PRESUMED THAT THE SELLER HAS SOLD THE GOLD OR DIAMOND AT HIGHER RATE TO THE PURCHASER AND HAS SHOWN A LESSER PRICE. IN THE CASE OF THESE SHARES THERE IS SOME L IMITATIONS ALSO HENCE ARGUMENT ADVANCED BY THE LEARNED SR. COUNSEL SUPPOR TS THAT ASSESSEE HAS NOT PAID MORE PRICE FOR ACQUIRING THOSE SHARES THAN DECLARED IN THE BOOKS OF ACCOUNTS. THE LEARNED CIT(A) HAS ONLY EXPRESSED A DOUBT REGARDING THE PURCHASE PRICE SHOWN BY THE ASSESSEE AT THE SAME TI ME ACCEPTED VALUATION REPORT FURNISHED BY THE ASSESSEE WHICH WAS FURNISH BEFORE HIM FOR THE FIRSTY TIME. IN OUR OPINION, THERE IS NO JUSTIFICATION T O SUPPORT THE ADDITION MADE ITA NO.3583/MUM/2009 ITA NO.2466/MUM/2009 9 U/S.69B AND PARTLY SUSTAINED BY THE LD. CIT(A). W E, THEREFORE, ALLOW THE GROUND OF THE ASSESSEE ON THIS ISSUE AND DELETE THE ADDITION SUSTAINED BY THE LEARNED CIT(A) AND AT THE SAME TIME DISMISS THE GROUND TAKEN BY THE REVENUE. 9. IN THE RESULT, OF THE ASSESSEES APPEAL IS ALLOW ED AND APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS DAY OF 30 TH , JULY, 2010. SD/ (B. RAMAKOTAIAH) (ACCOUNTANT MEMBER) SD/- (R. S. PADVEKAR) (JUDICIAL MEMBER) MUMBAI, DATED 30 TH JULY, 2010. JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS) , MUMBAI 4. COMMISSIONER OF INCOME TAX, CITY- , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH , MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI