Asstt. Commissioner of Income Tax, Lucknow V. M/s Nathoo Ram Nityanand Timber Pvt. Ltd., Lucknow

ITA 394/LKW/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4026 (ITAT-LUCKNOW)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 28-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K KHANDELWAL A R DR A K SING
• Keywords: Unexplained investment; Fair market value
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI. P . K. BANSAL , ACCOUNTANT MEMBER AND SHRI ABY T VARKEY , JUDICIAL MEMBER ITA NO. 394/LKW/2016 ASSESSMENT YEAR: 2010 - 11 ASSTT. CIT CENTRAL CIRCLE II LUCKNOW V. M/S NATHOO RA M NITYANAND TIMBER PVT. LTD. RAMA DHEEN SINGH ROAD DALIGANJ, LUCKNOW T AN /PAN : AABCN1610G (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI D. K. KHANDELWAL, A.R. RESPONDENT BY: DR. A. K. SINGH, CIT (DR) DATE OF HEARING: 11 08 2016 DATE OF PRONOUNCEMENT: 30 08 2016 PER ABY T VARKEY, J.M : O R D E R THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) III, LUCKNOW DATED 21.4.2016 FOR THE ASSESSMENT YEAR 2010 - 11. 2 . THE MAIN GRIEVANCE OF THE REVENUE IS AGAINST THE DELETION OF ADDI TION OF RS. 50.40 LAKHS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DIFFERENCE IN COST OF SHARES ACQUIRED BY THE ASSESSEE. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCO ME SHOWING TOTAL INCOME AT RS.7, 96,770/ - . THE ASSESSMENT WA S COMPLETED UNDER SECTION 153A/143(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED IN SHORT 'THE ACT') AT AN INCOME OF RS.58,36,770/ - . 4 . AGGRIEVED WITH THE ADDITION, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) , WHO WAS PLEASED TO DELETE THE S AME WHICH WAS CHALLENGED BY THE REVENUE BEFORE THE TRIBUNAL WHEREIN THE TRIBUNAL BY [ ITA NO.394/LKW/2016, A.Y. 2010 - 11 ] 2 ORDER DATED 15.1.2016 IN ITA NO.66/LKW/2015, WAS PLEASED TO REMIT THE MATTER BACK TO THE LD. CIT(A) TO DECIDE THE MATTER BY OBSERV ING AS UNDER: - HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT THE ASSESSING OFFICER HAS SIMPLY MADE REFERENCE TO THE PROVISIONS OF SECTION 56(2)(VIIA) OF THE ACT, BUT THE ID. CIT(A) HAS SIMPLY DELETED THE ADDITION HAVING OBSERVED THAT THE PROVISIONS OF SECTION 56(2)(VIIA) OF THE ACT WOULD BE APPLICABLE ONLY W.E.F. ASSESSMENT YEAR 2012 - 13 AND NOT FOR THE IMPUGNED ASSESSMENT YEAR. BUT IN ANY CASE PROVISION OF SECTION 69B OF THE ACT, WHICH DEALS WITH THE UNEXPLAINED INVESTMENT, IS ALR EADY ON THE STATUTE AND APPLICABILITY OF THIS PROVISION SHOULD HAVE BEEN EXAMINED BY THE ID. CIT(A). WE, THEREFORE, SET ASIDE THE ORDER OF THE ID.CIT(A) AND RESTORE THE MATTER TO HIS FILE WITH A DIRECTION TO ADJUDICATE THE APPLICABILITY OF PROVISION OF SEC TION 69B OF THE ACT TO THE IMPUGNED ADDITION. ACCORDINGLY, THESE APPEALS OF THE REVENUE STAND ALLOWED FOR STATISTICAL PURPOSES. 5 . PURSUANT TO THE SAID DIRECTION OF THE TRIBUNAL, THE LD. CIT(A) WAS PLEASED TO DELETE THE ADDITION. AGGRIEVED BY THE SAID ORDE R OF THE LD. CIT(A), THE REVENUE IS BEFORE US. 6 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. WE TAKE NOTE THAT THE ASSESSEE HAS PURCHASED 56000 SHARES OF M/S GOEL INFRACON PVT. LTD. HAVING FACE VALUE OF RS.10/ - PER SHARE WITH PREMIUM OF RS.90/ - P ER SHARE. THE ASSESSEE HAD PAID ONLY RS.5,60,000/ - FOR THE PURCHASE OF 56000 SHARES OF M/S GOEL INFRACON PVT. LTD. SO, ACCORDING TO THE ASSESSING OFFICER , IF THE SHARE PREMIUM VALUE WAS INCLUDED, THEN THE TOTAL MARKET VALUE OF SHARES WOULD COME TO RS.15. 75 LAKHS. SO THE ASSESSING OFFICER RAISED A QUERY FOR WHICH THE ASSESSEE REPLIED THAT THE ASSESSEE INVESTED IN SHARES OF M/S GOEL INFRACON PVT. LTD. WHICH WAS FORMERLY KNOWN AS M/S SURAJ AMUSEMENT PARKS LTD. THE ASSESSEE POINTED OUT THAT IT HAD PURCHASE D SHA RES FROM RESPECTIVE COMPANY IN AN [ ITA NO.394/LKW/2016, A.Y. 2010 - 11 ] 3 OFF MARKET TRADE A ND THAT M/S SURAJ AMUSEMENT PARKS LTD. WAS A CLOSELY HELD COMPANY AND ITS SHARES WERE NOT LISTED IN ANY STOCK EXCHANGE AND SO THERE WAS NO QUESTION OF ANY MARKET VALUE OF THE SHARES. IT WAS POI NTED OUT THAT THE ASSESSEE ACQUIRED THE ABOVE MENTIONED SHARES IN APRIL, 2010 AND THE PROVISIONS OF SECTION 56(2)(VIIA) OF THE ACT WERE INTRODUCED BY THE FINANCE ACT, 2010 W.E.F. 1.6.2010 AND THEREFORE QUESTION OF MARKET VALUE OF THE TRANSACTION DOES NOT A RISE. HOWEVER, THE ASSESSING OFFICER DID NOT AGREE WITH THE SUBMISSION OF THE ASSESSEE THOUGH THE ASSESSING OFFICER AGREED THAT THE PROVISIONS OF SECTION 56(2)(VIIA) OF THE ACT HAS APPLICABILITY FROM THE DATE AFTER THE DATE OF THE IMPUGNED TRANSACTION. H OWEVER, TAKING INTO CONSIDERATION THE SPIRIT OF THE AMENDMENT , WHICH IS TO PREVENT THE PRACTICE OF TRANSFERRING THE UNLISTED SHARES AT THE PRICES MUCH BELOW THE FAIR MARKET VALUE, THE ADDITION IS WARRANTED AND THE DIFFERENCE IN THE VALUE OF SHARES WHICH CO MES TO RS.50.40 LAKHS WAS ADDED AS UNEXPLAINED INVESTMENT IN THE HANDS OF THE ASSESSEE - COMPANY. 7 . THE ASSESSEES APPEAL BEFORE THE LD. CIT(A) WAS SUCCESSFUL WHEREIN THE LD. CIT(A) TOOK NOTE OF THE FACT THAT THE TRANSACTION TOOK PLACE BEFORE 1.6.2010 AND TH EREFORE THE PROVISIONS OF SECTION 56(2)(VIIA) OF THE ACT WAS NOT APPLICABLE IN THE CASE OF THE ASSESSEE AND THEREFORE THE ADDITION WAS DELETED. WHEN THE REVENUE CHALLENGED THE SAID DECISION OF THE LD. CIT(A) , THE TRIBUNAL WAS PLEASED TO REMAND THE MATTER BACK TO THE FILE OF THE LD. CIT(A) TO SEE WHETHER THE TRANSACTION WILL ATTRACT UNEXPLAINED INVESTMENTS AS ENVISAGED IN SECTION 69B OF THE ACT. VIDE THE IMPUGNED ORDER OF THE LD. CIT(A) , HE HAS DECIDED THIS QUESTION ALSO IN FAVOUR OF THE ASSESSEE AND THERE FORE THE REVENUE IS IN APPEAL BEFORE US. 8 . WE TAKE NOTE THAT THE TRANSACTION IN QUESTION HAS TAKEN PLACE IN APRIL, 2010 AND SINCE SECTION 56(2)(VIIA) OF THE ACT HAS BEEN THOUGH [ ITA NO.394/LKW/2016, A.Y. 2010 - 11 ] 4 INSERTED BY THE FINANCE ACT, 2010 IS W ITH E FFECT FROM 1.6.2010 AND SO, HAS NO AP PLICATION IN RESPECT TO THE TRANSACTION WHICH HAS TAKEN PLACE BETWEEN THE ASSESSEE AND M/S GOEL INFRACON PVT. LTD. (FORMERLY KNOWN AS SURAJ AMUSEMENT PARKS LTD.), THEREFORE, WE AGREE WITH THE DECISION OF THE LD. CIT(A) ON THIS LEGAL ASPECT. 9 . COMING TO THE QUESTION WHETHER THE TRANSACTION ATTRACTS SECTION 69B OF THE ACT AND AS TO WHETHER THERE WAS AN Y UNEXPLAINED INVESTMENT UNDER SECTION 69B OF THE ACT, WE NOTE THAT THE LD. CIT(A) HAS FOUND THAT THE INVESTMENT MADE BY THE ASSESSEE IS RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND THEREFORE THE PROVISIONS OF SECTION 69 AND 69A ARE NOT ATTRACTED. WE TAKE NOTE THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY OTHER MATERIAL ON RECORD TO SHOW THAT THERE WAS ANY CONSIDERATION PAID ON MAKING INVESTME NT IN SHARES BY THE ASSESSEE OVER AND ABOVE WHAT HAS BEEN RECORDED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. SINCE THE ASSESSING OFFICER FAILED TO BRING ANYTHING ON RECORD IN ORDER TO INVOKE THE PROVISIONS OF SECTION 69B OF THE ACT AND IN THE LIGHT OF THE AFORE SAID REASONS, WE DO NOT FIND ANY LEGAL INFIRMITY IN THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) AND THEREFORE, WE ARE NOT INCLINED TO INTERFERE IN THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY WE SUSTAIN IT. 10 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.8.2016. SD/ - SD/ - [P. K. BANSAL ] [ ABY T VARKEY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 TH AUGUST , 2016 JJ: 1708 [ ITA NO.394/LKW/2016, A.Y. 2010 - 11 ] 5 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR