Shresth Dealers Pvt. Ltd., , Kolkata V. ITO, Ward - 8(4) , Kolkata

ITA 2517/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2784 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 03-12-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHURY CIT SR DR R
• Assessee Lawyers: MANISH TIWARI
• Keywords: Fair market value
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (SMC), KOLKATA [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT (KZ)] I.T.A. NO. 2517/KOL/2018 ASSESSMENT YEAR: 2013-14 M/S. SHRESTH DEALERS PVT. LTD...........................................................APPELLANT SIDDHA POINT, GROUND FLOOR, 101, PARK STREET, KOLKATA 700 016. [PAN: AANCS 0680 G] ITO, WARD-8(4), KOLKATA..................................RESPONDENT P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. APPEARANCES BY: SHRI MANISH TIWARI, FCA APPEARING ON BEHALF OF THE ASSESSEE. SHRI ROBIN CHOUDHURY, ADDL. CIT, SR. DR APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : APRIL 01, 2019 DATE OF PRONOUNCING THE ORDER : JUNE 07, 2019 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) 3, KOLKATA DATED 13.09.2018 AND THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE ADDITION OF RS. 3,68,000/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) U/S 56(2)(VIIB) OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN INVESTMENT AND GIVING LOANS AND ADVANCES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 19.08.2013 DECLARING A TOTAL INCOME OF RS. 1,38,610/-. AS NOTED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, UNQUOTED EQUITY SHARES WERE SOLD BY THE ASSESSEE AT RS. 100 PER SHARE AS AGAINST ITS FARE MARKET VALUE OF RS. 98/-. SINCE 1,84,000 SUCH SHARES WERE SOLD BY THE ASSESSEE, THE AMOUNT OF RS. 3,68,000/- (1,84,000 SHARES X RS. 2/-) WAS ADDED BY HIM TO THE TOTAL INCOME OF 2 I.T.A. NO. 2517/KOL/2018 ASSESSMENT YEAR: 2013-14 M/S. SHRESTH DEALERS PVT. LTD. THE ASSESSEE U/S 56(2)(VIIB) IN THE ASSESSMENT COMPLETED U/S 143(3) OF THE ACT VIDE AN ORDER DATED 21.03.2016. 3. AGAINST THE ORDER PASSED BY THE AO U/S 143(3), AN APPEAL WAS FILED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND SINCE THE SUBMISSION MADE BY THE ASSESSEE IN SUPPORT OF ITS CASE ON THIS ISSUE WAS NOT FOUND ACCEPTABLE BY HIM, THE LD. CIT(A) CONFIRMED THE ADDITION OF RS. 3,68,000/- MADE BY THE AO U/S 56(2)(VIIB) FOR THE FOLLOWING REASONS GIVEN IN HIS IMPUGNED ORDER: THE ONLY ISSUE IN THIS APPEAL IS REGARDING THE ADDITION MADE BY THE AO ON ACCOUNT OF THE DIFFERENCE IN FAIR MARKET VALUE OF UNQUOTED EQUITY SHARES, AS PER CERTIFICATE U/S 11UA AND THE ACTUAL SALE PRICE OF THE EQUITY SHARES OF RS. 3,68,000/-. THE AO IN THE ASSESSMENT ORDER HAS OBSERVED THAT THE APPELLANT HAS SOLD THE EQUITY SHARES AT RS. 100/- PER SHARE, HOWEVER AS PER CERTIFICATE U/S 11UA OF THE I.T. ACT, THE FAIR MARKET VALUE OF UNQUOTED EQUITY SHARES IS RS. 98/- PER SHARE, HENCE HE ADDED THE DIFFERENCE OF RS. 2/- PER SHARE. THE TOTAL NUMBER OF SHARES ISSUED BY THE APPELLANT COMPANY WAS 1,84,000 THEREFORE HE ADDED RS. 184000 X RS. 2/- = RS. 3,68,000/- BACK TO THE TOTAL INCOME OF THE APPELLANT. THE AR OF THE APPELLANT IN HIS WRITTEN SUBMISSIONS HAS SUBMITTED THAT THE APPELLANT COMPANY HAS FIXED THE ISSUE PRICE OF SHARES AT RS. 100 FOR ROUNDING OFF PURPOSES AND TO AVOID THE ODD AMOUNT OF RS. 98/-. HE FURTHER RELIED ON THE DECISION OF THE LD. CIT(A)-2, KOLKATA IN THE CASE OF GLOBAL VISION SECURITIES PVT. LTD. FOR ASST. YEAR 2013-14 IN APPEAL NO. 10295/CIT(A)-2/16-17 DATED 10.08.2018. THE OBSERVATIONS OF THE LD. CIT(A)-2, KOLKATA ON THIS ISSUE ARE AS FOLLOWS: I HAVE CONSIDERED THE GROUNDS OF APPEAL, STATEMENT OF FACTS AND SUBMISSIONS OF THE AUTHORISED REPRESENTATIVE OF THE APPELLATE COMPANY AS WELL AS THE ASSESSMENT ORDER FRAMED IN THE LIGHT OF MATERIALS AVAILABLE ON RECORD BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS. THE AO HAS MENTIONED IN THE ORDER THAT THE BOOK VALUE OF THE COMPANY COMES TO RS. 14.92 AND SHARES WERE ISSUED AT THE RATE OF RS. 15/- AND ACCORDINGLY THE ADDITION WAS MADE ON DIFFERENCE AMOUNT. THE AR HAS SUBMITTED THAT THE FRACTION OF RS. 0.08 PER SHARE IS ONLY TO ROUND OFF OF 8 PAISA IS NEGLIGIBLE AND IT WAS DONE FOR ROUNDING OFF THE AMOUNT. KEEPING IN VIEW OF THE FACTS 3 I.T.A. NO. 2517/KOL/2018 ASSESSMENT YEAR: 2013-14 M/S. SHRESTH DEALERS PVT. LTD. AS MENTIONED ABOVE, THE AO IS DIRECTED TO DELETE THE ADDITION. THE GROUND OF APPEAL IS ALLOWED. I HAVE GONE THROUGH THE SUBMISSIONS OF THE ASSESSEE CAREFULLY. IN THE APPELLATE ORDER CITED THE VALUE, AS PER 11UA, WAS RS. 14.92 AND THE ASSESSEE CHARGED RS. 15 FOR ROUNDING OFF PURPOSES. THE DIFFERENCE WAS OF 8 PAISA ONLY WHICH IS NEGLIGIBLE. IN THIS CASE, IT IS ADMITTED THAT THE SHARE VALUATION, AS PER RULE 11UA IS RS. 98/-. IT IS ALSO ADMITTED THAT THE SHARES HAVE BEEN SOLD AT RS. 100/-. THE ONLY CASE OF THE APPELLANT IS THAT THE ADDITIONALLY AMOUNT OF RS. 2/- HAS BEEN CHARGED ON ACCOUNT OF ROUNDING OFF. IT HAS BEEN STATED THAT THE EXCESS AMOUNT CHARGED OF AROUND 2% SHOULD BE IGNORED. NO MITIGATING CIRCUMSTANCES HAVE BEEN GIVEN IN SECTION 56(2)(VIIB). NO SAFE HARBOUR LIMITS HAVE BEEN PRESCRIBED IN SECTION 56(2)(VIIB). IT IS CLEARLY STATED THAT THE EXCESS AMOUNT RECEIVED BY THE ASSESSEE OVER THE FAIR MARKET VALUE, AS PER RULE 11UA FOR THE SHARES HAS TO BE CHARGED TO TAX. AS PER THE RULE OF LITERAL INTERPRETATION WHEN THE LANGUAGE OF THE STATUE IS CLEAR NOTHING EXTRA SHOULD BE READ INTO IT. THERE IS ABSOLUTE CLARITY ON A PLAIN AND SIMPLE READING OF THE SAID SECTION. HENCE NOTHING EXTRA SHOULD BE INTERPRETED. THEREFORE, IN THIS CASE THE EXCESS AMOUNT OF RS. 3,38,000/- HAS BEEN RIGHTLY BROUGHT TO TAX BY THE AO. THE ADDITION IS HEREBY CONFIRMED. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE FAIR MARKET VALUE OF THE UNQUOTED EQUITY SHARES SOLD BY THE ASSESSEE WAS RS. 98.61 PER SHARE AND THE SAME WAS ROUNDED OFF BY THE ASSESSEE TO RS. 100/-. HE HAS CONTENDED THAT EVEN IF THE VALUATION SO ROUNDED OFF AT RS. 100/- MAY NOT BE ACCEPTABLE, THE VALUE AS ROUNDED OFF OF TO NEXT RUPEE THAT IS RS. 99 SHOULD BE ADOPTED FOR THE PURPOSE OF COMPUTING THE ADDITION TO BE MADE U/S 56(2)(VIIB). THE LEARNED DR, ON THE OTHER HAND, HAS SUBMITTED THAT THERE IS NO SUCH PROVISION EITHER IN THE ACT OR EVEN IN THE RELEVANT RULES TO ROUND OFF THE 4 I.T.A. NO. 2517/KOL/2018 ASSESSMENT YEAR: 2013-14 M/S. SHRESTH DEALERS PVT. LTD. VALUATION OF SHARES AT THE NEXT RUPEE. EVEN THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT BEEN ABLE TO POINT OUT ANY PROVISION IN THE ACT OR IN THE RULES WHICH PERMITS SUCH ROUNDING OFF OF THE VALUATION TO THE NEXT RUPEE. THIS MAKES IT CLEAR THAT THE VALUATION TAKEN BY THE AO AT RS. 98/- INSTEAD OF RS. 98.61 WHILE COMPUTING THE AMOUNT TO BE ADDED U/S 56(2)(VIIB) IS ALSO NOT CORRECT. I, THEREFORE, DIRECT THE AO TO RECOMPUTE THE ADDITION U/S 56(2)(VIIB) BY TAKING THE OF VALUATION AT RS. 98.61 AFTER NECESSARY VERIFICATION. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH JUNE, 2019. SD/- (P.M. JAGTAP) VICE PRESIDENT DATED: 07/06/2019 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. M/S. SHRESTH DEALERS PVT. LTD., SIDDHA POINT, GROUND FLOOR, 101, PARK STREET, KOLKATA 700 016. 2. ITO, WARD-8(4), KOLKATA. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, ASSISTANT REGISTRAR / H.O.O. ITAT, KOLKATA