M/s. Subodh Gupta (HUF), New Delhi V. Pr. CIT- 11, New Delhi

ITA 3571/DEL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4241 (ITAT-DELHI)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 05-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Capital asset; Gift; Business expenditure; Rectification of order; Search and seizure; Share purchase agreement; Opportunity of being heard; Audit objection; Principle of natural justice; Rule of consistency; Retrospective amendment; Question of law; Cost of acquisition; Fair market value; Difference of opinion; Valuation report; Assessment record; Prejudicial to interest; Right to appeal; Notional interest; Benefit of exemption; Change of opinion
• Section: 40A(3); 143(3); 142(1); 56(2); 56; 263; 28; 154

Judgement Text

SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 3571/DEL/2017 (ASSESSMENT YEAR: 2013 - 14 ) SUBODH GUPTA (HUF), C/O. M/S. RRA TAXINDIA, D - 28, SOUTH EXTENSION PART - 1, NEW DELHI PAN:AATHS1361R VS. PR. CIT - 11, NEW DELHI, (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAKESH GUPTA, ADV SHRI SOMIL AGARWAL, ADV REVENUE BY: SHRI S. S. RANA, CIT DR DATE OF HEARING 26/10/ 2017 DATE OF PRONOUNCEMENT 0 5 / 0 1 / 2 0 1 8 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD P RINCIPAL CIT - 11, NEW DELHI [THE LD. P CIT] DATED 01.05.2017 PASSED U/S 263 OF THE INCOME TAX ACT [THE ACT] FOR ASSESSMENT YEAR 2013 - 14 . HE HAS HELD THAT THAT ASSESSMENT ORDER PASSED U/S 143 (3) OF THE A C T BY THE INCOME TAX OFFICER , SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 2 WARD 32 (5), NEW DELHI [THE LD. AO ] ON 18/03/2016 IS ERRONEOUS AND PREJ UDICIAL TO THE INTEREST OF REVENUE. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT HAVING REGARD TO FACTS & CIRCUMSTANCES OF THE CASE, LD. PR. CIT HAS ERRED IN LAW AND ON FACTS IN ASSUMING JURISDICTION U/S 263 AND FURTHER ERRED IN HOLDING THE ASSESSMENT ORDER DATED 18 - 03 - 2016 IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. 2. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. PR. CIT IN ASSUMING JURISDICTION U/S 263 AND PASSING THE IMPUGNED ORDER U NDER THIS SECTION IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THAT HAVING REGARD TO FACTS & CIRCUMSTANCES OF THE CASE, LD. PR. CIT HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE GIFT RECEIVED BY THE APPELLANT IS COVERED U/S 56( 2)(VII) AND TAXABLE. 4. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. PR.CIT IN BRINGING TO TAX THE GIFT AS TAXABLE IN THE HANDS OF APPELLANT IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THAT HAVING REGARD TO FACTS & CIRCUMSTANCES OF THE CASE, LD. PR. C IT HAS ERRED IN LAW AND ON FACTS IN TAKING THE VALUATION OF SHARES @ RS. 2375.95/ - U/S 56(2)(VII) R.W.S. 2(22B) INSTEAD OF FAIR MARKET VALUE @ RS. 234.82/ - PER SHARE UNDER RULE 11UA AS CLAIMED AND THAT TOO BY RECORDIN G INCORRECT FACTS AND FINDINGS AND WITHOUT OBSERVING THE PRINCIPLES OF NATURAL JUSTICE. 6. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF PR.CIT IN ADOPTING THE FAIR MARKET VALUE OF THE SHARE @ 2375.95/ - IS BAD IN LAW AND AGAINST THE FACTS AND C IRCUMSTANCES OF THE CASE. 3. ASSESSEE IS A HINDU UNDIVIDED FAMILY, WHO FILE D ITS RETURN OF INCOME FOR RS . 5 79720/ ON 31/7/2013. THE ASSESSMENT ORDER WAS PASSED ON 18/3/2016 U/S 143 (3) OF THE INCOME TAX ACT AT SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 3 THE RETURNED INCOME. THE ASSESSMENT ORDER PASSED BY THE LD. ASSESSING OFFICER SPEAKS AS UNDER: - AOS ORDER RETURN WAS FILED ON 31ST JULY, 2013 DECLARING INCOME OF RS. 5,79,720/. THE CASE WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER CASS. STATUTORY NOTICES U/S 143(2) DATED 04.09.2014 WAS ISSUED AND SERVED UPON THE ASSESSEE. IN RESPONSE TO WHICH SHRI SUNIL JAIN, CA OF THE ASSESSEE ATTENDED THE CASE PROCEEDINGS FROM TIME TO TIME AND THE CASE WAS DISCUSSED WITH HIM. R EQUISITE DETAILS AND INFORMATION WERE SUBMITTED AND PLACED ON RECORD. AFTER DISCUSSION INCOME OF THE ASSESSEE IS ASSESSED AT RS. 579720/ - UNDER SECTION 143(3) OF THE INCOME TAX ACT. ISSUE NOTICE U/S 143(3) OF THE ACT. ISSUE NOTICE UNDER SECTION 156 OF THE INCOME TAX ACT 1961. ASSESSED ISSUE NECESSARY FORM. 4. SUBSEQUENTLY ON EXAMINATION OF THE ASSESSMENT RECORD , LD PCIT FOUND THAT THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 143 (3) DATED 18/3/2016 IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE . SHE THEREFORE ISSUED SHOW CAUSE NOTICE ON 9/2/2017. THE CONTENTS OF THE NOTICE ARE AS UNDER: - SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 4 THE ASSESSMENT RECORDS IN YOUR CASE FOR THE A.Y. 2013 - 14 WERE CALLED FOR AND EXAMINED. THE AO FRAMED ASSESSMENT U/S 143(3) ON 18.03.2016. ON PERUSAL OF RECORDS I CONSIDER THAT THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE I.T. ACT, 1961 IS E RRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE 2. PLEASE REFER TO THE NOTICE U/S 154 ISSUED VIDE F. NO. ITO/W - 32(5)/2016 - 17/524 DATED 07.01.2016. YOU HAVE FILED A REPLY ON 01.12.2016 IN RESPONSE TO NOTICE U/S 154. IN THE REPLY IT H AS ALSO BEEN MENTIONED IN PARA 5 THAT THE MATTER WAS CONSIDERED IN THE ASSESSMENT PROCEEDINGS WHEREIN A REFERENCE HAS BEEN MADE TO THE WRITTEN SUBMISSIONS DATED 12.10.2015. THE PERUSAL OF REPLY DATED 12.10.2015 SHOWS THAT YOU HAVE SUBMITTED THE DETAILS OF ACQUISITION OF SHARES BY YOU. YOU HAVE SUBMITTED THE DETAIL IS AS UNDER (I) DATE WISE DETAIL OF ACQUISITION OF SHARES WITH DISTINCTIVE NUMBERS BY THE ASSESSEE IS ENCLOSED (II) COPY OF THE HOUSE TAX RECEIPT IS ENCLOSED. (III) SHARES WERE SUBMITTED FOR D MAT VIDE LETTER DATED 26.11.2012 TO M/S RCMC SHARE REGISTRY. THE COPY OF THE LETTER IS ENCLOSED. 3. IN THIS SUBMISSION YOU HAVE SIMPLY SUBMITTED THE MODE AND MANNER OF ACQUISITION OF SHARES. THERE IS NO INQUIRY MADE BY THE AO AS REGARDS THE APPLICABILIT Y OF SECTION 56(2)(VII) THEREFORE YOUR CASE SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 5 WOULD FALL U/S 263(1) EXPLANATION 2. VIDE LETTER DATED 01.12.2016 YOU HAVE ACCEPTED THAT YOU HAVE RECEIVED 75,000 EQUITY SHARES FROM MRS. SNEH GUPTA WHO IS THE MOTHER OF KARTA OF HUF. YOU HAVE ALSO MADE YOUR FURT HER SUBMISSION THAT YOUR CASE IS NOT COVERED U/S 56(2)(VII). YOU HAVE ATTEMPTED TO SAY THAT THE GIFT IS FROM RELATIVE ONLY. YOU HAVE ALSO REFERRED TO THE DEFINITION OF RELATIVE MADE BY THE FINANCE ACT 2012 W.E.F. 01.10.2009. YOU HAVE PRESUMED THAT THE AMEN DMENT IS ONLY TO ENLARGE THE DEFINITION OF RELATIVE IN SO AS IT RELATES TO HUF AND NOT TO RESTRICT ITS DEFINITION. YOU HAVE ALSO REFERRED TO NOTES OF CLAUSES OF FINANCE BILL 2012. IT HAS BEEN SPECIFICALLY MENTIONED THAT THE RELATIVE OF HUF WOULD BE ONLY TH E MEMBER THEREOF. IT IS ADMITTED BY YOU THAT SMT. SNEH GUPTA IS NOT THE MEMBER OF HUF. THERE IS NO IOTA OF DOUBT THAT ANY OTHER PERSON WHO IS NOT A MEMBER OF HF WOULD NOT COME WITHIN THE DEFINITION OF RELATIVE. IT IS ONLY YOUR IMAGINATION THAT THE AMENDMEN T IS ONLY TO ENLARGE THE DEFINITION OF RELATIVE WHEREAS THE LEGISLATURE HAS NARRATED CLAUSE E(II) TO DISTINGUISH BETWEEN RELATIVE IN THE CASE OF INDIVIDUAL AND ALSO IN THE CASE OF HUF. 4. EARLIER THERE WAS A JUDGEMENT OF THE HONBLE IT AT, RAJKOT IN THE C ASE OF VINITKUMAR RAGHAVJIBHAI IN ITA NO. 583/RJT/2007(A.Y. 2005 - 06). IN THAT CASE THE ASSESSEE RECEIVED A SUM OFRS. 60 LACS FROM THE HUF OF WHICH THE ASSESSEE WAS THE MEMBER. IN THAT CASE THE CASE WAS OF THE SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 6 VIEW THAT HUF IS NOT COVERED IN THE DEFINITION OF RELATIVE. IN PARA 12.1 THE IT AT HAS DISCUSSED THAT THERE ARE TWO WAYS INVOLVED IN A TRANSACTION I.E. AMOUNT GIVEN AND AMOUNT RECEIVED. THE HONBLE IT AT FURTHER HELD THAT IF WE RELATE THE PROVISION OF INCOME TAX ACT TO THESE WAYS OF GIVEN AND RECE IVED IN CASE OF HUF, THE CASE OF THE AMOUNT RECEIVED BY A HUFFROM ITS MEMBER IS PROVIDED IN SECTION 64(2). AS PER SECTION 64(2) AN INCOME FROM SUCH TRANSFER OF PROPERTY SHALL BE DEEMED TO ARISE TO THE INDIVIDUAL AND NOT TO THE HUF. IN PARA 11.2 THE ITA T HELD THAT A GIFT RECEIVED FROM RELATIVE, IRRESPECTIVE OF WHETHER IT IS FROM AN INDIVIDUAL RELATIVE OR FROM GROUP OF RELATIVES IS EXEMPT FROM TAX UNDER THE PROVISIONS OF SECTION 56(2)(VI) AS A GROUP OF RELATIVES ALSO FALLS WITHIN THE EXPLANATION TO SECTION 56(2)(VI). IT FURTHER HELD THAT IT IS NOT EXPRESSLY DEFINED IN THE EXPLANATION THAT THE WORD RELATIVE REPRESENTS A SINGLE PERSON. IT HELD THAT A SINGLE WORD OR WORDS CAN BE READ AS PLURAL ALSO, ACCORDING TO THE CIRCUMSTANCES/SITUATIONS. THE IT AT FINALL Y HELD AS UNDER: - THEREFORE, IN OUR CONSIDERED VIEW, THE 'RELATIVE' EXPLAINED IN EXPLANATION TO SECTION 56(2)FVI) OF THE ACT INCLUDES 'RELATIVES' AND AS THE ASSESSEE RECEIVED GIFT FROM HIS 'HUF', WHICH IS 'A GROUP OF RELATIVES', THE GIFT RECEIVED BY THE A SSESSEE FROM THE HUF SHOULD BE INTERPRETED TO MEAN THAT THE GIFT WAS RECEIVED FROM THE 'RELATIVES' THEREFORE SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 7 THE SAME IS NOT TAXABLE UNDER SECTION 56(2)(VI) OF THE ACT, WE HOLD ACCORDINGLY. 5. TO OVERCOME THIS KIND OF SITUATION THE LEGISLATURE MADE AMEN DMENT IN THE DEFINITION OF RELATIVE BY THE FINANCE ACT 2012 WITH RETROSPECTIVE EFFECT 01.10.2009 AND SPECIFICALLY PROVIDED THAT IN THE CASE OF HUF ONLY MEMBER WOULD BE THE RELATIVE. 6. THE HONBLE SUPREME COURT IN THE CASE OF TARULATA SHYAM VS. CIT, 108IT R 345 HAS REFERRED TO A DECISION OF BRANDY SYNDICATE VS. INLAND REVENUE COMMISSIONER (1921) 1 KB 64 WHEREIN IT WAS HELD AS UNDER: - ONCE IT IS SHOWN THAT THE CASE OF THE ASSESSEE COMES WITHIN THE LETTER OF THE LAW, HE MUST BE TAXED, HOWEVER GREAT THE HARDS HIP MAY APPEAR TO THE JUDICIAL MIND TO BE. 7. SIMILARLY THE DEFINITION OF RELATIVE HAS TO BE SEEN WITH REFERENCE TO WHAT HAS BEEN MENTIONED IN THE ACT. WE HAVE TO LOOK ONLY FAIR TO THE LANGUAGE USED. THERE IS NO SCOPE OF PRESUMPTION OF ENLARGEMENT OF DE FINITION AS MENTIONED BY YOU IN YOUR REPLY. 8. THE HONBLE ITAT, DELHI IN THE CASE OF DCIT VS. FRONTLINE CAPITAL SERVICES LIMITED, 96 TTJ 201 HAS ALSO REFERRED TO THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OFTARULATA SHYAM(SUPRA). THE PORTION OF THE PARA 12 IS REPRODUCED BELOW: - 12. IT IS WELL - SETTLED POSITION IN LAW THAT RULES OF INTERPRETATION CAN BE PUT INTO SERVICE ONLY WHERE THE LANGUAGE OF THE STATUTE IS SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 8 AMBIGUOUS OR CAPABLE OF MORE THAN ONE MEANING. IN THE CASE OF CIT VS. SODRA DEVI (19 57) 32 ITR 615 (SC) THE HON'BLE SUPREME COURT HAVE HELD THAT UNLESS THERE IS ANY AMBIGUITY IT WOULD NOT BE OPEN TO THE COURT TO DEPART FROM THE NORMAL RULE OF CONSTRUCTION, I.E., THE INTENTION OF THE LEGISLATURE SHOULD BE PRIMARILY GATHERED FROM THE WORDS WHICH ARE USED. THE SAME VIEW HAS BEEN REITERATED BY THE HON'BLE SUPREME COURT IN THE CASE OFSMT. TARULATA SHYAM & ORS. VS. CIT 1977 CTR (SC) 275 : (1977) 108 ITR 345 (SC). REFERENCE MAY HOWEVER BE MADE TO THE SUPREME COURT DECISION IN THE CASE OF KESHAVJ I RAOJI & CO. VS. CIT (1990) 82 CTR (SC) 123 : (1990) 182 ITR 1 (SC) HOLDING THAT AS LONG AS THERE IS NO AMBIGUITY IN THE STATUTORY LANGUAGE, RESORT TO ANY INTERPRETATIVE PROCESS TO UNFOLD THE LEGISLATIVE INTENT BECOMES IMPERMISSIBLE. THE SUPPOSED INTENTIO N OF THE LEGISLATURE CANNOT THEN BE APPEALED TO WHITTLE DOWN THE STATUTORY LANGUAGE WHICH IS OTHERWISE UNAMBIGUOUS. IF THE INTENDMENT IS NOT IN THE WORDS USED, IT IS NOWHERE ELSE. THE NEED FOR INTERPRETATION ARISES WHEN THE WORDS USED IN THE STATUTE ARE, O N THEIR OWN TERMS, AMBIVALENT AND DO NOT MANIFEST THE INTENTION OF THE LEGISLATURE. IN DOYPACK SYSTEMS (P) LTD. VS. UNION OF INDIA (1988) 69 CTR (ALLIED LAWS) (SC) 6 : AIR 1988 SC 782 IT WAS OBSERVED 'THE WORDS IN THE STATUTE MUST, PRIMA FACIE, BE GIVEN TH EIR ORDINARY MEANINGS. WHERE THE GRAMMATICAL SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 9 CONSTRUCTION IS CLEAR, MANIFEST AND WITHOUT DOUBT, THE CONSTRUCTION OUGHT TO PREVAIL UNLESS THERE ARE SOME STRONG AND OBVIOUS REASONS TO THE CONTRARY IT HAS TO BE REITERATED THAT THE OBJECT OF INTERPRETATION OF A STATUTE IS TO DISCOVER THE INTENTION OF PARLIAMENT AS EXPRESSED IN THE ACT. THE DOMINANT PURPOSE IN CONSTRUING A STATUTE IS TO ASCERTAIN THE INTENTION OF THE LEGISLATURE AS EXPRESSED IN THE STATUTE, CONSIDERING IT AS A WHOLE AND IN ITS CONTEXT. THAT INT ENTION, AND THEREFORE, THE MEANING OF THE STATUTE, IS PRIMARILY TO BE SOUGHT IN THE WORDS USED IN THE STATUTE ITSELF WHICH MUST, IF THEY ARE PLAIN AND UNAMBIGUOUS, BE APPLIED AS THEY STAND ARTIFICIAL AND UNDULY LATITUDINARIAN RULES OF CONSTRUCTION WHICH WI TH THEIR GENERAL TENDENCY TO GIVE THE TAXPAYER THE BREAKS ARE OUT OF PLACE WHERE THE LEGISLATION HAS A FISCAL MISSION. IN DOYPACK SYSTEMS (P) LTD. IT WAS FURTHER OBSERVED THAT CONTEMPORARANEA EXPOSITION IS A WELL - SETTLED PRINCIPLES OR DOCTRINE WHICH A PPLIES ONLY TO THE CONSTRUCTION OF AMBIGUOUS LANGUAGE IN OLD STATUTES IT IS NOT APPLICABLE TO MODERN STATUTES.' 9. IN THE CASE OF HOUSING AND URBAN DEVELOPMENT CORPORATION LIMITED VS. JCIT, 102 TTJ 936 THE HONBLE IT A T DELHI REFERRED TO A DECISION OF APEX COURT IN THE CASE OF SURESH LOHIYA VS. STATE OF MAHARASHTRA(L966) 10 SCO 379 WHEREIN IT HELD THAT ONCE A WORD HA S BEEN DEFINED IN THE STATUTE, THE COURT CANNOT LOOK ELSEWHERE FOR ITS MEANING. THE HON BLE ITAT FURTHER REFERRED TO THE SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 10 JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF P. KASILINGAM VS. PSG COLLEGE OF TECHNOLOGY (1995) SUPP 2 SCC 348 AND OTHER CASE LAWS. THE RELEVANT PORTION OF THE PARA 12 IS REPRODUCED BELOW: - '12. . IN OUR OPINION, THE WORD 'MEANS' CAN ONLY HAVE ONE MEANING, THAT IS, IT IS AN EXCLUSIVE DEFINITION VIDE P. KASILINGAM VS. P.S.G. COLLEGE OF TECHNOLOGY (1995) SUPP 2 SCC 348. WHEN WE SA Y THAT A WORD HAS A CERTAIN MEANING THEN BY IMPLICATION WE MEAN THAT IT HAS NO OTHER MEANING VIDE PUNJAB LAND DEVELOPMENT & RECLAMATION CORPN. LTD. VS. PRESIDING OFFICER, LABOUR COURT (1990) 77 FJR 17 (SC) : (1990) 3 SCC 682. HOWEVER, WHEN CERTAIN OTHER CA TEGORIES ARE ADDED THEN IT MEANS THAT ONLY THOSE ADDITIONAL CATEGORIES WILL BE INCLUDED WITHIN THE DEFINITION AND NONE OTHERS, VIDE MAHALAKSHMI OIL MILLS VS. STATE OFA.P. (1989) 1 SCC 164 : (1988) 71 STC 285 (SC).' THE COURT WENT ON TO FURTHER HOLD THAT QU ESTION OF GIVING A NATURAL MEANING TO THE WORD 'INTEREST' DOES NOT ARISE. THE RELEVANT EXTRACT FROM PP. 654 - 655 OF THEREPORT IS REPRODUCED AS UNDER: 'IT IS OPEN TO THE LEGISLATURE TO DEFINE WORDS AND, IF THE LEGISLATURE HAS DEFINED IT, WE CANNOT GO BY THE MEANING IN COMMON PARLANCE OR WHAT MAY BE CALLED AS ITS 'NATURAL MEANING'. WE HAVE TO STRICTLY ABIDE BY THE MEANING GIVEN TO IT BY THE LEGISLATURE, AS IN THE PRESENT CASE. - SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 11 10. SMT. SNEH GUPTA IS NOT THE MEMBER OF HUF AND HENCE, FROM THE ABOVE READING OF THE SECTION, NOT COVERED UNDER RELATIVE. THEREFORE THE SUM RECEIVED BY M/S SUBODH GUPTA(HUF) FROM A PERSON OTHER THAN THE RELATIVE WOULD BE COVERED U/S 56(2)(VII)(C)(I), AS YOU HAVE NOT PAID ANY CONSIDERATION WHILE RECEIVING AS GIFT THE 75,000 SHARES OF M/S TRIVENI POLYMERS PVT. LTD. THE AO HAS FAILED TO INVOKE PLAIN SECTION I.E. 56(2)(VII)(C) READ WITH THE DEFINITION OF RELATIVE. IT ALSO BECOMES A MISTAKE OF LAW. IN VIEW OF THIS THE AO OMITTED TO ADD A SUM OF RS. 17,81,98,500/ - I.E. FAIR MARKET VALUE OF 75,000 SHARES AT THE RATE OF RS. 2375.95 PER SHARE. 11. IN VIEW OFTHE ABOVE, I AM OF THE OPINION THAT THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE I.T. ACT, 1963 IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. Y OU ARE GIVEN AN OPPORTUNITY OF BEING HEARD AND SHOW CAUSE AS TO WHY THE IMPUGNED ORDER BE NOT ENHANCED/MODIFIED OR SET - ASIDE FOR FRESH ASSESSMENT U/S 263 OF THE IT ACT, 1961. YOUR CASE IS FIXED FOR HEARING ON 20.02.2017 AT 11:30 A.M. 5. IN THE NOTICE U/S 263, IT WAS DEMONSTRATED BY THE LD. PCIT THAT NO ENQUIRY WAS MADE AS REQUIRED TO BE MADE BY THE LD AO . ACCORDING TO HIM, LD AO DID NOT ENQUIRE ABOUT A PPLICABILITY OF SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 12 SECTION 56 (2) (VII ) WITH RESPECT TO GIFT RECEIVED BY THE ASSESSEE FROM KARTA OF ASSESSEE HUF AND THEREFORE THE CASE OF THE ASSESSEE FALSE UNDER EXPLANATION (2 ) OF SECTION 263 (1 ) OF THE ACT. 6. THE FACT OF THE CASE SHOWS THAT THE ASSESSEE HAS RECEIVED 75000 EQUITY SHARES OF A COMPANY FROM MRS SNEH GUPTA, WHO IS MOTHER OF THE KA RTA OF ASSESSEE - HINDU UNDIVIDED FAMILY . ACCORDING TO THE ASSESSEE ABOVE GIFT WAS NOT COVERED UNDER SE CTION 56 (2) (VII) OF THE ACT A S GIFT IS FROM MOTHER OF THE KARTA OF ASSESSEE AND THUS RELATIVE. NOTICE ISSUED BY THE LD PCIT DELIBERATED THAT MOTHER IS NOT A MEMBER OF AN HUF AND THEREFORE IS NOT COVERED IN THE DEFINITION OF RELATIVE AS IT APPLIES IN CASE OF ASSESSEE . 7. THE ASSESSEE SUBMITTED ITS REPLY IN RESPONSE TO THE NOTICE ON 20/3/2017, WHICH IS PLACED AT PAGE NO. 178 184 OF THE PAPER BOOK. IT WAS STATED BY THE ASSESSEE THAT THE ABOVE GIFT IS FROM RELATIVE AND TH US EXEMPT RECEIPT UNDER SECTION 56 OF THE INCOME TAX ACT . WITH RESPECT TO THE VALUATION , IT WAS SUBMITTED THAT VALUATION IS REQUIRED TO BE MADE AS PER RULE 11 UA OF THE INCOME TAX ACT . SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 13 8. AFTER CONSIDERING THE REPLY OF THE ASSESSEE , THE LD. PCIT PASSED ORDER UNDER SECTION 263 OF THE INCOME TAX ACT AS UNDER : - 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE ASSESSEE. THE REPLY OF THE ASSESSEE IS CONSIDERED POINT BY POINT AND NOT F OUND SATISFACTORY RATHER IT IS REPETITIVE IN NATURE TO THE EXTENT THAT IT REITERATES THE POINTS OF INTERPRETATION OF THE TERM 'RELATIVE' AND APPLICABILITY OF SECTION 263. THESE ISSUES WERE ALREADY DEALT WITH AT LENGTH IN THE SHOW CAUSE NOTICE DATED 09/02/2 017. 7. IN PARA 3 OF THE REPLY DATED 20.03.2017 TO THE NOTICE U/S 263 OF I.T. ACT, AR HAS CONTENDED THAT TWIN CONDITIONS OF THE ASSESSMENT ORDER BEING ERRONEOUS AND IT BEING PREJUDICIAL TO THE INTEREST OF REVENUE IS NOT SATISFIED FOR THE UNDERSIGNED TO ASS UME THE JURISDICTION U/S 263 OF INCOME TAX ACT. AR HAS ALSO RELIED ON VARIOUS CASE LAWS WHICH ARE GIVEN BELOW: - A. [2017] 77 TAXMANN.COM 78 (SC) COMMISSIONER OF INCOME TAX, CENTRAL - ILL NIRAV MODI. B. COMMISSIONER OF INCOME TAX CS. JAIN CONSTRUCTION CO. [ 2013] 34 TAXMANN.COM 84 (RAJASHTHAN HC) C. DIRECTOR OF INCOME TAX VS. JYOTI FOUNDATION [2013] 38 TAXMANN.COM 180 (DELHI HC) 8. THERE IS NO SUBSTANCE IN THE CONTENTION OF THE ASSESSEE THAT THE POWER EXERCISED BY THE PCIT U/S 263 IS NOT TENABLE. IN NONE OF THE CASE LAWS, RELIED UPON BY THE ASSESSEE, THESE FACTS EXIST WHEREIN THERE IS AN ISSUE OF RECEIPT OF GIFT BY THE HUF FROM OTHER SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 14 THAN THE MEMBER OF THE HUF. THEREFORE NONE OF THE CASE LAWS WOULD BE APPLICABLE. RELIANCE IS PLACED ON THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF CIT VS. SUN ENGINEERING WORKS PVT. LTD., 198 ITR 297. THE HON'BLE SUPREME COURT HELD AS UNDER: - 'IT IS NEITHER DESIRABLE OR PERMISSIBLE TO PICK OUT A WORD OR A SENTENCE FROM THE JUDGMENT OF THIS COURT, DIVORCED FROM THE CO NTEXT OF THE QUESTION UNDER CONSIDERATION AND TREAT IT TO BE THE COMPLETE 'LAW' DECLARED BY THIS COURT. THE JUDGMENT MUST BE READ AS A WHOLE AND THE OBSERVATIONS FROM THE JUDGMENT HAVE TO BE CONSIDERED IN THE LIGHT OF QUESTIONS WHICH WERE BEFORE THIS COURT . A DECISION OF THIS COURT TAKES ITS COLOUR FROM THE QUESTIONS INVOLVED IN THE CASE IN WHICH IT IS RENDERED AND, WHILE APPLYING THE DECISION TO A LATTER CASE, THE COURTS MUST CAREFULLY TRY TO ASCERTAIN THE TRUE PRINCIPLES LAID DOWN BY THE DECISION OF THIS COURT AND NOT TO PICK OUT WORDS OR SENTENCES FROM THE JUDGMENT, DIVORCED FROM THE CONTEXT OF THE QUESTIONS UNDER CONSIDERATION BY THIS COURT TO SUPPORT THEIR REASONING.' 9. EVEN OTHERWISE THERE ARE DIRECT DECISIONS OF THE HON'BLE DELHI HIGH COURT WHEREIN IN THE SIMILAR CIRCUMSTANCES THE HON'BLE HIGH COURT HAS HELD THAT THE PCIT HAS POWER TO INVOKE HIS POWERS U/S 263 WHERE THE ASSESSMENT ORDER IS PREJUDICIAL TO THE INTEREST OF REVENUE. A GIST OF THE CASE LAWS IS GIVEN AS UNDER: - I. CIT VS. GOETZE (INDIA) LI MITED, 361ITR 505(HC): THE HON'BLE DELHI HIGH COURT URNS REFERRED THE FOLLOWING QUESTION OF LAW: - ' WHETHER THE INCOME TAX APPELLATE TRIBUNAL WAS RIGHT IN SETTING ASIDE THE ORDER PASSED BY THE SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 15 COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE INCOME TAX ACT, 1961?' THE HON'BLE DELHI HIGH COURT DISCUSSED IN DETAIL THE VARIOUS CASE LAWS LIKE CTT VS. NAGESH KNITWEARS PVT. LTD., 345 ITR 135; MALABAR INDUSTRIAL COMPANY LTD VS. CTT, 243 ITR 83(SC); NABHA INVESTMENTS PVT. LTD. VS. UNION OF INDIA, 246 TTR 41(DELH I); TTO VS. DG HOUSING PROJECTS LTD., 343 TTR 329(DELHI); RAMPYARI DEVI SARAOGI VS. CIT, 67 TTR 84(SC); CIT VS. CTT VS. SUNBEAM AUTO LTD., 332 ITR 167. IN THE CASE OF CTT VS. NAGESH KNITWEARS PVT. LTD.(SUPRA) THE HON'BLE DELHI HIGH HELD AS UNDER: - 'THE REV ENUE DOES NOT HAVE ANY RIGHT TO APPEAL TO THE FIRST APPELLATE AUTHORITY AGAINST AN ORDER PASSED BY THE ASSESSING OFFICER. SECTION 263 HAS BEEN ENACTED TO EMPOWER THE CIT TO EXERCISE POWER OF REVISION AND REVISE ANY ORDER PASSED BY THE ASSESSING OFFICER, IF TWO CUMULATIVE CONDITIONS ARE SATISFIED. FIRSTLY, THE ORDER SOUGHT TO BE REVISED SHOULD BE ERRONEOUS AND SECONDLY, IT SHOIDD BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE EXPRESSION 'PREJUDICIAL TO THE INTEREST OF THE REVENUE, IS OF WIDE IMPORT AND I S NOT CONFINED TO MERELY LOSS OF TAX. THE TERM 'ERRONEOUS' MEANS A WRONG/INCORRECT DECISION DEVIATING FROM LAW. THIS EXPRESSION POSTULATES AN ERROR WHICH MAKES AN ORDER UNSUSTAINABLE IN LAW. 11. THE ASSESSING OFFICER IS BOTH AN INVESTIGATOR AND AN ADJUDICATOR. IF THE ASSESSING OFFICER AS AN ADJUDICATOR DECIDES A QUESTION OR ASPECT AND MAKES A WRONG ASSESSMENT XVHICH IS UNSUSTAINABLE IN LAW, IT CAN BE CORRECTED BY IKE COMMISSIONER IN EXERCISE OF RE VISIONARY POWER. AS AN INVESTIGATOR, IT IS INCUMBENT UPON THE ASSESSING OFFICER TO INVESTIGATE THE FACTS REQUIRED TO BE EXAMINED AND VERIFIED TO COMPUTE THE SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 16 TAXABLE INCOME. IF THE ASSESSING OFFICER FAILS TO CONDUCT THE SAID INVESTIGATION, HE COMMITS AN ERR OR AND THE WORD 'ERRONEOUS' INCLUDES FAILURE TO MAKE THE ENQUIRY. IN SUCH CASES, THE ORDER BECOMES ERRONEOUS BECAUSE ENQUIRY OR VERIFICATION HAS NOT BEEN MADE AND NOT BECAUSE A WRONG ORDER HAS BEEN PASSED ON MERITS. 12. DELHI HIGH COURT IN GEE VEE ENTERPRI SES V. ADDITIONAL COMMISSION OF INCOME - TAX (1975) 99 ITR 375, HAS OBSERVED AS UNDER: - REBUTTAL. THE CIVIL COURT IS NEUTRAL. IT SIMPLY GIVES DECISION ON THE BASIS OF THE PLEADING AND EVIDENCE WHICH COMES BEFORE IT. THE INCOME - TAX OFFICER IS NOT ONLY AN ADJU DICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER INQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SU CH AS TO PROVOKE AN INQUIRY. THE MEANING TO BE GIVEN TO THE WORD 'ERRONEOUS' IN SECTION 263 EMERGES OUT OF THIS CONTEXT. IT IS BECAUSE IT IS INCUMBENT ON THE INCOME - TAX OFFICER TO FURTHER INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES XOOULD MAKE SUCH AN INQUIRY PRUDENT THAT THE WORD ' ERRONEOUS' IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN INQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FA CTS STATED THEREIN ARE ASSUMED TO BE CORRECT.' II. PVS MULTIPLES(INDIA) LTD. VS. CIT, IN ITA NO. 2370/DEL/ 2013(ITAT):THE (INDIA) LIMITED(SUPRA) AND ALSO THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. NAGESH KNITWEARS PVT. LTD/SUPRA). SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 17 III. BHARTI HEXACOM LTD. VS. CTT, ITA NO. 2576/DEL/2011: THE HON'BLE DELHI TRIBUNAL HAS REFERRED TO THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF GEE VEE ENTERPRISE VS. ACIT, 99 ITR 375 AS UNDER: - '7.5 FURTHERMORE, WE FIND THAT HON'BLE JURISD ICTIONAL HIGH COURT IN GEE VEE ENTERPRISE VS. ASST. CIT [1975] 99 ITR 375 HAS HELD THAT THE ED. COMMISSIONER OF INCOME TAX CAN REGARD THE ITO'S ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE THE ITO SHOULD HAVE MADE FURTHER ENQUIRIE S BEFORE ACCEPTING THE STATEMENTS MADE BY THE ASSESSEE IN HIS RETURN. WE FIND THAT THIS CASE LAW IS ALSO APPLICABLE ON THE FACTS OF THIS CASE ASSESSING OFFICER IN THIS REGARD HAS NOT MADE ANY ENQUIRY AND HAS ACCEPTED THE STATEMENTS MADE BY THE ASSESSEE IN HIS RETURN.' IV. THOMSON PRESS (INDIA) LTD. VS. CTT, 94 CCH 42(DELHC): IN THIS CASE ALSO THE HON'BLE DELHI HIGH COURT HAS DISCUSSED VARIOUS CASE LAWS PRONOUNCED ON SECTION 263. THE OBSERVATIONS OF THE HON'BLE DELHI HIGH COURT AS IN PARA 51 ARE REPRODUCED A S UNDER: - 'WE ARE ALSO UNABLE TO ACCEPT THE CONTENTION THAT SINCE IN THE PRECEDING YEAR, NO ISSUE HAS BEEN RAISED WITH REGARD TO CHARGING OF INTEREST BY ONE UNIT TO ANOTHER, THE SAME COULD NOT BE PICKED UP BY THE CIT UNDER SECTION 263 OF THE ACT. MERELY BE CAUSE AN ISSUE REMAINED UNCHECKED IN A PRECEDING YEAR DOES NOT MEAN THAT THE CIT IS ESTOPPED FROM EXERCISING ITS POWERS UNDER SECTION 263 OF THE ACT. IT IS WELL ESTABLISHED THAT THE PRINCIPLES OF RES JUDICATA DO NOT APPLY TO INCOME TAX PROCEEDINGS AND AN E RROR IN THE PRECEDING YEAR NEED NOT BE REPEATED OR IGNORED IN THE SUBSEQUENT YEARS. THE DECISION OF THIS COURT IN SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 18 ESCORTS LTD. (SUPRA) WAS BASED ON THE PRINCIPLE OF CONSISTENCY. IN THAT CASE, THE ASSESSEE HAD BEEN CARRYING ON TRANSACTIONS SIMILAR TO THE ON E WHICH WAS SOUGHT TO BE QUESTIONED UNDER SECTION 263 OF THE ACT FOR VAST SEVERAL YEARS PRECEDING THE RELEVANT ASSESSMENT YEAR. THE TRANSACTION HAD ALSO RECEIVED THE ATTENTION OF THE COMMISSIONER OF INCOME TAX IN AN EARLIER YEAR AND HAD BEEN DECIDED IN FAV OUR OF THE ASSESSEE. THE REVENUE HAD ACCEPTED THE SAME AND NOT FILED AN APPEAL. IT IS IN THAT CONTEXT THAT THE COURT HELD THAT SINCE THE REVENUE HAD ACCEPTED SIMILAR TRANSACTIONS IN THE PAST AND HAD ALLOWED A VIEW TO SUSTAIN FOR SEVERAL YEARS, AN EXERCISE UNDER SECTION 263 OF THE ACT WAS NOT WARRANTED. IN THE PRESENT CASE, THE ISSUE WAS NOT PICKED UP IN THE PRECEDING YEAR. FURTHER, THE CLAIM OF THE ASSESSEE CANNOT BE STATED TO BE OF A NATURE WHICH HAS BEEN CONSISTENTLY ACCEPTED IN PAST SEVERAL PRECEDING YEA RS SINCE THE ENTRY IN RELATION TO NOTIONAL INTEREST HAD BEEN PASSED BY THE ASSESSEE ONLY IN ONE PRECEDING YEAR AND HAD REMAINED UNDEBATED.' V. CIT VS. RAISONS LNDUSTIRES LTD., 288 ITR 322(SC): THE HON'BLE SUPREME COURT HELD AS UNDER: 'THE SCOPE AND AMBIT O F A PROCEEDING FOR RECTIFICATION OF AN ORDER UNDER SECTION 154 AND A PROCEEDING FOR REVISION UNDER SECTION 263 ARE DISTINCT AND DIFFERENT. AN ORDER OF RECTIFICATION CAN BE PASSED ON CERTAIN CONTINGENCIES. IT DOES NOT CONFER A POWER OF REVIEW. IF AN ORDER O F ASSESSMENT IS RECTIFIED BY THE ASSESSING OFFICER IN TERMS OF SECTION 154 OF THE ACT, THE SAME ITSELF MAY BE A SUBJECT MATTER OF A PROCEEDING UNDER SECTION 263 OF THE ACT. THE POWER OF REVISION UNDER SECTION 263 IS EXERCISED BY A HIGHER AUTHORITY. IT IS A SPECIAL PROVISION. THE REVISIONAL JURISDICTION IS VESTED SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 19 IN THE COMMISSIONER. AN ORDER THEREUNDER CAN BE PASSED IF IT IS FOUND THAT THE ORDER OF ASSESSMENT IS PREJUDICIAL TO THE REVENUE. IN SUCH A PROCEEDING, HE MAY NOT ONLY PASS AN APPROPRIATE ORDER IN E XERCISE OF THE SAID JURISDICTION BUT IN ORDER TO ENABLE HIM TO DO IT, HE MAY MAKE SUCH INQUIRY AS HE DEEMS NECESSARY IN THIS BEHALF. AN ORDER OF ASSESSMENT IS SUBJECT TO EXERCISE OF AN ORDER OF A REVISIONAL JURISDICTION UNDER SECTION 263 OF THE ACT. THE DO CTRINE OF MERGER IN SUCH A CASE WILL HAVE NO APPLICATION.' 10. THE SUM RECEIVED BY M/S SUBODH GUPTA HUF FROM A PERSON OTHER THAN THE RELATIVE WOULD BE COVERED U/S 56(2)(VII)(C)(I) AS THE ASSESSEE HAS NOT PAID ANY CONSIDERATION WHILE RECEIVING AS GIFT THE 7 5000 SHARES OF M/S TRIVENI POLYMERS PVT. LTD. THE AO FAILED TO INVOKE THE PLAIN SECTION I.E. 56(2)(VII)(C) READ WITH DEFINITION OF 'RELATIVE' THEREFORE IT ALSO BECOMES A MISTAKE OF LAW. IN VIEW OF THIS THE AO OMITTED TO ADD A SUM OF RS. 17,81,98,500/ - I.E. THE FAIR MARKET VALUE OF 75000 SHARES AT THE RATE OF RS. 2375.95 PER SHARE. HENCE, IN THE CONSIDERED OPINION OF THE UNDERSIGNED THE ORDER PASSED BY THE AO U/ S 143(3) OF INCOME TAX ACT WAS HELD AS ERRONEOUS SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF R EVENUE. IN VIEW OF FACTS DETAILED ABOVE, THE TWIN CONDITION OF ASSESSMENT ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE FOR INVOKING THE SECTION 263 ARE DEMONSTRABLY MET. 11. IN REPLY DATED 20.03.2017 IN PARA 4, THE ASSESSEE HAS REITER ATED THAT MOTHER OF KARTA OF HUF EVEN THOUGH NOT A MEMBER OF HUF IS WITHIN THE DEFINITION OF THE TERM 'RELATIVE'. IN THE SHOW CAUSE NOTICE U/S 263 DATED 09/02/2017 THE UNDERSIGNED DELIBERATED UPON THE INTERPRETATION OF THE WORDS USED SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 20 IN THE INCOME TAX ACT AND THE LEGAL READING OF THE STATUTE IN THIS CONTEXT. IT WAS SUFFICIENTLY DEMONSTRATED THAT THE INTERPRETATION OF THE ASSESSEE IS FARFETCHED, A PART OF IMAGINATION AND OPPOSED TO THE LEGISLATIVE INTENT OF THIS PLAIN STATUE. THE ASSESSEE HAS NOT PRODUCED AN Y COUNTER ARGUMENT OR A FRESH/ NEW PLEA TO THE REASONED ARGUMENTS PUT FORTH BY THE UNDERSIGNED IN THE ABOVE MENTIONED SHOW CAUSE. AT THE RISK OF REPEATING, AS ALSO MENTIONED IN SHOW CAUSE NOTICE REPRODUCED ABOVE IN PARA 2, IT SHALL BE CONSIDERED SETTLED PO SITION FOR THE ORDER THAT FOLLOWS THAT IN THIS CASE, MOTHER NOT BEING A PART CF ASSESSE HUF IS NOT WITH IN THE AMBIT OF THE DEFINITION OF THE TERM 'RELATIVE' FOR THE APPLICABILITY OF SECTION 56(2)(VII). 12. IN PARA 5, AR HAS SUBMITTED THE FOLLOWING: ' FURT HER SUBMITTED THAT AS PER THE PROVISIONS OF SECTION AND EXPLANATION 'B' FAIR MARKET VALUE FOR THE PURPOSE OF SECTION 56 IS TO BE AS PER PRESCRIBED RULES WHICH IN THE PRESENT CASE ARE RULE 11U. AS PER THESE RULES IT IS MANDATORY TO COMPUTE THE VALUE AS PER FORMULA GIVEN IN THE RULE. AS PER SUB RULE 2 THE COMPUTATION IS TO BE BASED ON BOOK VALUE OF ASSETS OF THE COMPANY NET OF ITS BOOK LIABILITIES. THERE CANNOT BE ANY OTHER METHOD WHEN A SPECIFIC METHOD HAS BEEN PRESCRIBED UNDER THE LAW. THEREFORE, THE PROPOS ED FAIR VALUE IS TOTALLY UNLAWFUL AND NOT TENABLE AT LAW. THE RIDE ARE MANDATORY IN NATURE AND THE SAME HAS ALSO BEEN SO HELD IN THE FOLLOZVING CASE LAW: (I) MEDPLUS HEALTH SERVICES (P) LTD. VS. ITO WARD 16(1) HYDERABAD (2016) 68 TAXMAN.COM 29 (HYD. TRI.) AS PER RULE 11UA THE COMPUTATION WORKS OUT TO RS. 234.82 PER SHARE. THUS THE FAIR MARKET VALUE OF THE SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 21 SHARES OTHERWISE IS ALSO RS. 17612038/ - AND NOT RS. 178198500/ - AS STATED BY YOUR HONOUR.' 13. ASSESSEE HUF RECEIVED 75000 EQUITY SHARES M/S TRIVENI POL YMERS PVT .LTD WITHOUT ANY CONSIDERATION AS GIFT FROM NON - MEMBER VIA GIFT DEED DATED 14/09/2012. THEREFORE, THE SECTION 56(2)(VII)(C)(I) BECOMES SQUARELY APPLICABLE WHICH READS AS FOLLOWS: 56(2). IN ANY PARTICULAR, AND WITHOUT PREJUDICE TO THE GENERALITY O F THE PROVISIONS OF THE SUB SECTION (1), THE FOLLOWING INCOMES SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM OTHER SOURCES: (VII) WHERE AN INDIVIDUAL OR HUF RECEIVES, IN ANY PREVIOUS YEAR, FROM ANY PERSON OR PERSONS. (C) ANY PROPERTY, OTHER THAN IMMOVABLE PROPERTY - (I) WITHOUT CONSIDERATION, THE AGGREGATE FAIR MARKET VALUE OF WHICH EXCEEDS RS. 50,000/ - , THE WHOLE OF THE AGGREGATE FAIR MARKET VALUE, (II) FOR A CONSIDERATION WHICH IS LESS THAN THE AGGREGATE FAIR MARKET VALUE OF THE PROPERTY BY AN AMOUNT EXCEEDING FIFTY THOUSAND RUPEES, THE AGGREGATE FAIR MARKET VALUE OF SUCH PROPERTY AS EXCEEDS SUCH CONSIDERATION. 14. THE SAME IS CHARGEABLE TO TAX AT THE AGGREGATE OF THE FAIR MARKET VALUE. EXPLANATION TO SUB - CLAUSE (C) OF SEC TION 56(2)(VII) STATES: FOR THE PURPOSE OF THIS CLAUSE, - (B) FAIR MARKET VALUE OF A PROPERTY, OTHER THAN AN IMMOVABLE PROPERTY, MEANS THE VALUE DETERMINED WITH THE METHOD AS MAY BE PRESCRIBED. SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 22 15. AR CLAIMED THE FAIR MARKET VALUE IS TO BE DETERMINED AS PE R RULE 11U AND 11UA. AND IN SUPPORT OF THE ASSESSEE HAS QUOTED CASE LAW 'MEDPLUS HEALTH SERVICES(P) LTD. VS ITO WARD 16(1) HYDERABAD (2016) 68 TAXMANN.COM 29(HYDERABAD TRIBUNAL). THE ARGUMENT OF THE ASSESSEE IS BASED ON THE PARTIAL AND SELECTIVE READING OF THE INCOME TAX ACT. ANY STATUTE UNLESS OTHERWISE STATED HAS TO READ IN ENTIRETY. INCOME TAX ACT DEFINES THE TERM FAIR MARKET VALUE U/S 2(22B) AS FOLLOWS: 2(22B). UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM 'FAIR MARKET VALUE', IN RELATION TO A CAPITAL ASSET, MEANS - I) THE PRICE THAT THE CAPITAL ASSET WOULD ORDINARILY FETCH ON SALE IN THE OPEN MARKET ON THE RELEVANT DATE; AND II) WHERE THE PRICE REFERRED TO IN SUB - CLAUSE (I) IS NOT ASCERTAINABLE, SUCH PRICE AS MAY BE DETERMINED IN ACCORDANCE WITH THE RIDES MADE UNDER THIS ACT. 16. IMPLYING THEREBY THAT IN THIS CASE SUB CLAUSE (I) TO SECTION 2(22B) WOULD COME INTO PLAY. PLAIN READING OF THIS SECTION CLEARLY SPECIFIES THAT FAIR MARKET VALUE IN RELATION TO CAPITAL ASSET MEANS THE PRICE THIS ASSET WOULD O RDINARILY FETCH ON SALE IN OPEN MARKET. THE INTERPRETATION OF THE ASSESSEE IN LIGHT OF THE SAME CANNOT BE ACCEPTED AS THE DETERMINATION OF FAIR MARKET VALUE IN ACCORDANCE WITH THE RULES MADE UNDER THE INCOME TAX ACT FALLS WITHIN THE AMBIT OF SUB CLAUSE (II ) TO SECTION 2(22B). FURTHER, IT IS CLEARLY SPECIFIED THAT SUCH DETERMINATION IS TO BE RESORTED TO IN CASES WHERE PRICE REFERRED IN SUB CLAUSE (I) IS NOT ASCERTAINABLE. THEREFORE, WHY THE PRICE OF RS. SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 23 2375.82/ - PER SHARE IS ACCEPTED AS THE FAIR MARKET VALU E AS NER SPRF - INN 9WRVR 17. IN THE PRESENT CASE, THE SALE OF THE SHARES HELD BY ASSESSE HUF HAS BEEN MADE TO NON - RESIDENT COMPANY GERRESHEIMER GLAS GMBH. THESE TWO ENTITIES ARE UNRELATED TO EACH OTHER AND THE TRANSECTION OF SALE, PURCHASE OF THE SHARES HA S HAPPENED AT ARMS' LENGTH PRICE DETERMINED BY - THE BUSINESS INTEREST OF THE BUYING COMPANY, THE PERCEIVED VALUE OF THE UNDERLYING SHARES, THE FUTURE EARNING POTENTIAL IN SUCH TRANSECTION, AT A MUTUALLY AND VOLUNTARILY AGREED UPON PRICE WHICH IS MARKET CLEARING AS THE WILLINGNESS TO PAY OF THE BUYER MATCHES THE PRICE AT WHICH SELLER IS WILLING TO PART WITH THE UNDERLYING PROPERTY (EQUITY SHARES HERE). 18. VIDE THE SHARE PURCHASE AGREEMENT DATED 17 DECEMBER, 2012, THE BUYER COMPANY HAS PURCHASE D THE 15,79,815 SHARES OF TRIVENI POLYMERS. OUT OF THESE, 1.55.0 SHARES HAVE BEEN SOLD BY THE ASSESSEE HUF FOR A TOTAL SALE CONSIDERATION OF RS. 36,82,76,900/ - @ RS. 2375.82/ - PER SHARE. 19. OF THE TOTAL OF 1,55,000 SHARES SOLD IN DECEMBER 2012 BY THE AS SESSEE HUF, 75.0 SHARES HAD BEEN RECEIVED AS GIFT IN THE MONTH OF SEPTEMBER 2012. AR HAS CLAIMED THE FAIR MARKET VALUE OF THESE SHARES RECEIVED AS PER THE VALUATION MADE UNDER RULE 11UA WORKS OUT AS RS. 234.82 PER SHARE. THUS, FAIR MARKET VALUE OF THESE S HARES AS RS. 1,76,12,038/ - . 20. IT IS RELEVANT HERE TO QUOTE A LANDMARK JUDGEMENT OF HON'BLE ALLAHABAD HIGH COURT IN CASE OF AMRIT BANASPATI CO. LTD., 256 ITR 337. IN THIS CASE THE SUBODH GUPTA ( HUF) V PCIT - 11, NEW DELHI ITA NO 3571/DEL/2017 AY 2013 - 14 PAGE | 24 APPEAL WAS FILED BY THE ASSESSEE AGAINST THE DECISION OF ITAT, DELHI WHICH HAD UPHELD THE WEALTH TAX ASSESSMENT ORDER OF THE ASSESSING OFFICER. IN THIS CASE, FAIR MARKET VALUE OF THE UNDERLYING PROPERTY WHICH WAS A FLAT IN MUMBAI WAS DETERMINED BY THE ASSESSING OFFICER AT THE MARKET VALUE OF THE PROPERTY. THE ASSESSEE, ON THE OTHER HAND, WAS USING THE VALUATION ON THE BASIS OF THE MUNICIPAL AUTHORITIES. THE VALUATION SO ARRIVED WAS RS. X,JO,AC'Q,' - ICR DIE REEVANC ASSESSMEM YEAI I 99O - 9 - I. UIIOIESUII GIY, ME ASSESSEE LIIIU HIMSELF AGREED TO SELL THE PROPERTY FOR RS. 10.26 CRORES IN SEPTEMBER 1995. THE FINDING OF THE HON'BLE HIGH COURT WERE AS FOLLOWS: '... BOTH THE COMMISSIONER WEALTH TAX (APPEALS) AS WELL AS THE TRIBUNAL HAVE REFLECTED THE ASSESSEE'S APPEAL AND HENCE IT HAS COME TO THIS COURT IT MAY BE NOTED THAT WHERE RULE 8 IS APPLICABLE RULE 3 WILL NOT BE APPLICABLE. THE QUESTION IN THIS CASE IS WHETHER IT COULD BE SAID THAT IT WAS NOT PRACTICABLE TO APPLY RULE 3. THE TRIBUNAL HAS HELD IN PARAGRAPHS 2.10 AND 2.11 OF ITS JUDGEMENT THAT RULE 8 WAS RIGHTLY NMUORI IN FLUE M