DEEPAK VIRENDRA KOCHHAR, MUMBAI V. PRINCIPAL COMMISSIONER OF INCOME TAX -3, MUMBAI

ITA 271/MUM/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6321 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 21-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H N SINGH
• Assessee Lawyers: P PARDIWALA
• Keywords: Fair market value; Reason to believe; Set aside
• Section: 56(2); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D , BENCH MUMBAI BEFORE SHRI M.BALAGANESH, AM & SHRI AMARJIT SINGH, JM ITA NO. 271 /MUM/201 9 ( ASSESSMENT YEAR : 2010 - 11 ) SHRI DEEPAK VIRENDRA KOCHHAR 45, CCI CHAMBERS, 5 TH FLOOR DINSHAW VACHHA ROAD C HURCHGATE MUMBAI 400 020 VS. PR. COMMISSIONER OF INCOME TAX - 3, ROOM NO.612, 6 TH FLOOR AAYAKAR BHAVAN M.K.ROAD MUMBAI 400 020 PAN/GIR NO. AABPK3243Q (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI P. PARDIWALA & SHRI JEET KAMDAR REVENUE BY SHRI H .N.SINGH DATE OF HEARING 30 / 07/ 2019 DATE OF PRONOUNCEMENT 02/08 /2019 / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. ADMINISTRATIVE COMMISSIONER (PCIT - 3) - MUMBAI U/S.263 OF THE A CT DATED 16/11/2008 TREATING THE PROCEEDINGS OF THE LD. DCIT CIRCLE - 3(2)(2), MUMBAI DATED 12/09/2017 AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT WAS JUSTIFIED IN INVOKI NG REVISIONARY JURISDICTION U/S.263 OF THE ACT. ITA NO.271/MUM/2019 SHRI DEEPAK VIRENDRA KOCHHAR 2 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y.2010 - 11 ON 30/07/2010 DECLARING TOTAL INCOME OF RS.3,61,863/ - WHICH WAS ACCEPTED U/S.143(1) OF THE ACT. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM DY. DIRECTOR OF INCOME TAX - INVESTIGATION, UNIT - (4)(2), MUMBAI, THE ASSESSMENT WAS SOUGHT TO BE REOPENED U/S.147 OF THE ACT AFTER RECORDING THE FOLLOWING REASONS: - T HE ASSESSEE HAS FIL ED HIS RETURN OF INCOME FOR A Y 2010 - 1 1 ON 30/07/2010 DECLARING TOTA L INCOME OF RS. 3,61,863 / - . T HE RETURN WAS PROCESSED U/S 1 43( 1 ) DTD. 01.05.201 1 ACCEPTING THE RETURNED INCOME. IT IS SEEN THAT PACIFIC CAPITAL SERVICES PVT LTD HAS TRANSFERRED 2498 SHARES OF NUPO WE R RENEWA BLES PVT L TD TO MR. DE EP AK KOCHHAR ON 05.06.09 I.E. IN F Y 2009 - 10. THE FACE VALUE OF THE SHARE IS RS.10/ - PER SHARE. THE BOOK VALUE OF SHARE A S ON 3 1. 03 . 10 AS PER AUDITED FINANCIALS OF NUPOWER RENEWABLES PVT.LTD. IS A T RS.219.56 PER SHARE. IT IS OBSERVED THAT NO CAPITAL G AIN HAS BEEN OFF ERED TO TAX BY PACIFIC CAPITA! SERVICES P VT. LT D IN IT S ROI FOR AY 2010 - 1 I, SUGGESTING THAT THE TRANSACTION HAS HAPPENED AT FACE VALUE OF RS.10/ - PER SHARE THEREFORE, IN THE GIVEN EASE, THE PROVISIONS OF SECTION 56(2) ARE APPLIC ABLE ON THE ABOVE TRANSACTION AND AN AMOUNT OF RS 5.47.062/ - WHICH IS CHANGEABLE IN THE HANDS OF MR. DEEPAK KOCHHAR SHOULD BE TAXED AS INCOME FRO M OTHER SOURCES. I NCOME FROM OTHER SOURCES 56 . (2) IN PARTICULAR, AND WITHOUT PREJUDICE TO THE GENERA LITY OF THE PROVISIONS OF SUB - SECTION (1), THE FOLLOWING INCOMES, SHALL BE CHARGEABLE TO INCOME - TAX UNDER THE HEAD 'INCOME F ROM OTHER SOURCE, NAMELY: - (VII) WHERE AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY RECEIVES IN ANY PREVIOUS YEAR, FROM AN Y PERSON OR PERSONS ON OR AFTER THE 1 ST DAY OF OCTOBER, 2009. (C) ANY PROPERTY, OTHER THAN IMMOVABLE PROPERTY (I) WITHOUT CONSIDERATION, THE AGGREGATE FAIR MARKET VALUE OF WHICH EXCEEDS FIFTY THOUSAND RUPEES, THE WHOLE OF THE AGGREGATE FAIR MARKET VALUE OF SUCH PR OPERTY (II) FOR A CONSIDERATION WHICH IS LESS THAN THE AGGREGATE FAIR MARKET VALUE OF THE PROPERTY BY AN AMOUNT EXCEEDING FIFTY THOUSAND ITA NO.271/MUM/2019 SHRI DEEPAK VIRENDRA KOCHHAR 3 RUPEES, THE AGGREGATE FAIR MARKET VALUE OF SUCH PROPERTY AS EXCEEDS SUCH CONSIDERATION. IN VIEW OF ALL THE ABOVE, I HA VE REASON TO BELIEVE THAT INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT AND NOTICE U/S.148 IS ISSUED. (U NDERLINING PROVIDED BY US ) 3.1. THE ASSESSEE FILED OBJECTIONS TO THE SAID REASONS DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS AND THE LD. ASSESS ING OFFICER DROPPED THE RE - ASSESSMENT PROCEEDINGS VIDE PROCEEDINGS DATED 12/09/2017. THE RELEVANT NOTINGS OF THE LD. AO IN THIS REGARD ARE AS UNDER: - PROCEEDINGS U/S.147 OF THE IT ACT 1961 INITIATED VIDE ISSUE OF NOTICE U/S.148 OF THE IT ACT, 1961 OF THE ACT DATED 30/03/2017 ARE HEREBY DROPPED. 3.2. SUBSEQUENTLY, THE LD. CIT SOUGHT TO TREAT THE AFORESAID NOTING MADE BY THE LD. AO AS AN ORDER PASSED BY HIM AND TREATED THE SAID ORDER AS ERRONEOUS IN AS MUCH AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVEN UE. THE LD. CIT OBSERVED THAT THE LD. AO HAD DROPPED THE PROCEEDINGS BY ACCEPTING THE ASSESSEES CONTENTION AT THE OBJECTION STAGE ITSELF WITHOUT NECESSARY ENQUIRIES, WITHOUT CROSS VERIFICATION OF FACTS AND WITHOUT CHECKING AND VERIFYING THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE REGARDING DATE OF PURCHASE OF SAID SHARES AND OTHER RELEVANT INFORMATION INCLUDING FAIR MARKET VALUE OF SHARES. HE OBSERVED THAT THERE WAS NEITHER ENQUIRY NOR EXAMINATION BY THE LD. AO TO VERIFY THE CORRECTNESS OF ANY OF THE CLAI MS MADE BY THE ASSESSEE. ACCORDINGLY, HE SET ASIDE THE ITA NO.271/MUM/2019 SHRI DEEPAK VIRENDRA KOCHHAR 4 PROCEEDINGS OF THE LD. AO AND DIRECTED THE LD. AO TO PASS AFRESH ORDER AFTER MAKING NECESSARY AND COMPREHENSIVE ENQUIRY AS PER LAW. 4. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD RI VAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE LD. CIT HAS SOUGHT TO INVOKE THE PROVISIONS OF SECTION 56(2)(VII) OF THE ACT IN THE HANDS OF THE ASSESSEE BEING A BUYER OF SHARES OF NU POWER RENEWABLES PVT. LTD. FROM THE REASONS RECORDED BY THE LD. AO, WE FIND THAT THE LD. AO HAD INDEED ACCEPTED THE DATE OF PURCHASE OF SHARES BY THE ASSESSEE TO BE ON 05/06/2009. FROM PARA 2 OF THE REASONS RECORDED REPRODUCE D HEREINABOVE, IT COULD BE SEEN THAT M/S. PACIFIC CAPITAL SERVICES PVT. LTD. HAD TR ANSFERRED 2498 SHARES OF NU POWER RENEWABLES PVT. LTD., TO ASSESSEE ON 05/06/2009 AT FACE VALUE OF RS.10/ - PER SHARE. THE BOOK VALUE OF SHARES AS ON 31/03/2010 AS PER AUDITED FINANCIALS OF N U POWER RENEWABLES PVT. LTD. WAS RS 219.56 . ACCORDINGLY, THE LD. A O ORIGINALLY REOPENED THE ASSESSMENT BY ISSUE OF NOTICE U/S.148 OF THE ACT ON 30/03/2017 TO BRING TO TAX THE DIFFERENCE BETWEEN THE BOOK VALUE PER SHARE AND THE FACE VALUE PER SHARE AS INCOME U/S.56(2)(VII) OF THE ACT IN THE HANDS OF THE BUYER OF THE SHARE S I.E. THE ASSESSEE HEREIN. IN THIS REGARD, IT IS PERTINENT TO NOTE THAT THE PROVISIONS OF SECTION 56(2)(VII) CATEGORICALLY STATES THAT IT IS APPLICABLE ONLY FROM 01/10/2009. THE SAID PROVISIONS WERE INTRODUCED IN THE STATUTE ONLY FROM 01/10/2009. IN THE I NSTANT CASE, THE PURCHASE TRANSACTIONS OF THE SHARES HAS BEEN ITA NO.271/MUM/2019 SHRI DEEPAK VIRENDRA KOCHHAR 5 CARRIED OUT BY THE ASSESSEE ON 05/06/2009 I.E PRIOR TO THE INTRODUCTION OF SECTION 56(2)(VII) OF THE ACT. HENCE, THE PROVISIONS OF SECTION 56(2)(VII)OF THE ACT COULD NOT BE MADE APPLICABLE TO TH E FACTS OF THE INSTANT CASE. THESE POINTS WERE SPECIFICALLY RAISED IN THE FORM OF OBJECTIONS TO THE REASONS RECORDED BY THE ASSESSEE BEFORE THE LD. AO DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS. THE LD. AO ON DUE APPRECIATION OF THESE FACTS AND THE PRE VAILING L AW APPLICABLE THEREON DULY DROPPED THE RE - ASSESSMENT PROCEEDINGS. WHILE THAT IS SO, THERE CANNOT BE ANY ERROR THAT COULD BE ATTRIBUTED IN THE SAID PROCEEDINGS OF THE LD. AO, HENCE, THERE IS NO SCOPE FOR THE LD. CIT TO EVEN SAY THAT THERE WAS ANY O RDER THAT WAS PASSED BY THE LD. AO AND THAT THE SAID ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN FACT IN THE INSTANT CASE, THOUGH THE PROCEEDINGS WERE DROPPED BY THE LD. AO, WE FIND THAT THE LD. AO HAD MENTIONED AS ORDER PASSED U /S.143(3) R.W.S. 147 OF THE ACT DATED 12/09/2017. MERELY BECAUSE THIS HAS BEEN MENTIONED , THE SAID PROCEEDINGS WOULD NOT BECOME AN ORDER WARRANTING ANY REVISIONARY JURISDICTION U/S.263 OF THE ACT. INFACT, THE LD. AO HAD AT THE THRESHOLD STAGE ITSELF DROPPE D THE RE - ASSESSMENT PROCEEDINGS ON HIS OWN AFTER CONSIDERING THE OBJECTIONS OF THE ASSESSEE. ADMITTEDLY, NO NOTICE U/S.143(2) OF THE ACT OR NOTICE U/S.14 2 (1) OF THE ACT WERE SERVED ON THE ASSESSEE DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS AS COULD BE EVIDENT FROM THE PROCEEDINGS OF THE LD. AO REPRODUCED HEREINABOVE. ITA NO.271/MUM/2019 SHRI DEEPAK VIRENDRA KOCHHAR 6 HENCE, FOR ALL PRACTICAL PURPOSES, THE PROCEEDINGS RECORDED BY THE LD. AO COULD NOT BE CONSTRUED AS A LEGAL ORDER IN THE EYES OF LAW, WHICH COULD BE SUBJECTED TO ANY REVISION JURISDICTION U /S.263 OF THE ACT OR WHICH COULD BE SUBJECT MATTER OF ANY APPEAL. IN THESE CIRCUMSTANCES, IT COULD BE SAFELY CONCLUDED THAT THERE WAS NO ORDER PER SE PASSED BY THE LD. AO WHICH COULD BE TREATED AS AN ERRONEOUS ORDER IN AS MUCH AS IT IS PREJUDICIAL TO THE I NTEREST OF THE REVENUE WARRANTING REVISION U/S.263 OF THE ACT BY THE LD. CIT. IN ANY CASE, EVEN IF IT IS TO BE CONSTRUED AS AN ORDER, THE LD AO HAD APPLIED HIS MIND ON THE THEN PREVAILING LAW BY APPRECIATING THAT THE PROVISIONS OF SECTION 56(2)(VII) OF THE ACT WERE NOT APPLICABLE AND ACCORDINGLY HAD DROPPED THE PROCEEDINGS. THIS WOULD CERTAINLY TANTAMOUNT TO TAKING A POSSIBLE VIEW BY THE LD AO AS PER THE THEN PREVAILING LAW. HENCE THE SAME CANNOT BE THE SUBJECT MATTER OF REVISION U/S 263 OF THE ACT. ACCORD INGLY, THE REVISION ORDER PASSED BY THE LD. CIT DESERVES TO BE QUASHED AND IS HEREBY QUASHED. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 02 / 08 /201 9 SD/ - ( AMARJIT SINGH ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 02 / 08 / 2019 KARUNA , SR.PS ITA NO.271/MUM/2019 SHRI DEEPAK VIRENDRA KOCHHAR 7 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASST T. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//