ITO, New Delhi V. M/s. Guddu Electronics Pvt. Ltd., New Delhi

ITA 5157/DEL/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2689 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 15-04-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 18-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: R C RAI
• Keywords: Opportunity of being heard; Fair market value
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI J.S.REDDY, ACCOUNTANT MEMBER I.T.A .NO.-5157/DEL/2011 (ASSESSMENT YEAR-2006-07) ITO, VS M/S GUDDU ELECTRONICS PVT. LTD., WARD-12(3), B-209, ANSAL CHAMBER, NEW DELHI BHIKAJI CAMA PLACE, NEW DELHI-110066. PAN-AAACG0346E (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SATPAL SINGH, SR. DR. RESPONDENT BY: SH.R.C.RAI, CA ORDER PER DIVA SINGH, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 24.08.2011 OF CIT-XXVI, LAXMI NAGAR, DELHI-92 PERTAINING TO 2006- 07 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS :- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDIT ION OF RS.24,06,747/- MADE BY THE AO TOWARDS BOOK VALUE OF SHARE PURCHASED. 2. THE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AME ND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 2. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED A RETURN ON 24.10.2006 DECLARING A LOSS OF RS.4321/-. THE CASE HAVING BEEN SELECTED FOR SCRUTINY UNDER CASS. THE ASSESSEE WAS REQUIRED BY THE AO TO EXPLAIN AND PRODUCE ITS BOOKS OF ACCOUNTS ETC BY WAY OF ISSUANC E OF NOTICE U/S 143(2) ETC. A I.T.A .NO.-5157/DEL/2011 2 PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSE SSEE IS STATED TO BE ENGAGED IN THE BUSINESS OF ELECTRONIC, TELE-COMMUNICATION, ELE CTRICAL EQUIPMENTS INCLUDING THEIR MODULES, SUB-ASSEMBLIES AND COMPONENTS. 3. THE AO OBSERVED THAT THE ASSESSEE COMPANY HAD PU RCHASED 2,24,510 EQUITY SHARES OF M/S SHRI GOVIND HOTELS & HEALTH RESORT P. LTD. HAVING A FACE VALUE OF RS.10 EACH FOR RS.1,12,225/- @ 50 PAISE PER SHARE. ACCORDINGLY, THE AO REQUIRED THE ASSESSEE TO EXPLAIN WHY THE CONSIDERATION AMOUN T FOR THE PURCHASE OF SHARES BE TREATED NOT @ 11.22 PER SHARE WHICH WAS THE VALUE O F EACH SHARE AS PER THE BALANCE SHEET OF M/S SHRI GOVIND HOTELS & HEALTH RESORT P. LTD. 4. IN RESPONSE THERETO, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT ALL THE EVIDENCES LIKE CONFIRMATION FROM THE SELLER HAD BEE N FILED AND THE PAYMENT HAD BEEN ROUTED THROUGH THE BANKING CHANNEL. THE AO RE QUIRED THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 18.11.2008 TO FILE THE PURCHASE V ALUE OF SHARES CERTIFIED BY CA OF THE M/S SHRI GOVIND HOTELS & HEALTH RESORT P. LT D. THE REQUISITE DETAILS WERE NOT FILED. ON THE CONTRARY VIDE LETTER DATED 03.12 .2012, IT WAS SUBMITTED THAT BOOK VALUE DOES NOT HAVE ANY CO-RELATION WITH SALE AND PURCHASE VALUE OF THE SHARES AND THE ASSESSEE FURNISHED THE VALUE OF SHARES OF VARIO US PUBLIC LIMITED COMPANIES ON VARIOUS DATES. 5. THE REPLY OF THE ASSESSEE WAS CONSIDERED AND NOT FOUND TENABLE BY THE AO WHO WAS OF THE VIEW THAT THE ASSESSEE COMPANY IS A PRIVATE LTD COMPANY. HE WAS OF THE VIEW THAT THE SALE AND PURCHASE OF VALUE OF PRIVATE LIMITED CAN NOT BE I.T.A .NO.-5157/DEL/2011 3 COMPARED WITH SHARE VALUE OF PUBLIC LIMITED COMPANI ES WHICH ARE PRONE TO FLUCTUATIONS ACCORDING TO THE MARKET TRENDS. 6. IN THESE CIRCUMSTANCES, TAKING NOTE OF THE FACT THAT 2,24,510 SHARES OF M/S SHRI GOVIND HOTELS & HEALTH RESORT P. LTD HAD BEEN PURCHASED THROUGH M/S KRISHNA INFOMEDIA LTD. FOR CONSIDERATION OF RS.1,12 ,255/- I.E 50 PAISE PER SHARE IN REGARD TO WHICH CERTIFICATE OF THE CONCERNED CA WAS NOT FILED. THE AO WORKED OUT THE BOOK VALUE OF M/S SHRI GOVIND HOTELS & HEALTH R ESORT P. LTD AS ON 31.03.2006 WAS WORKED OUT IN THE FOLLOWING MANNER :- PAID UP CAPITAL RS.50.37,990/- NUMBER OF EQUITY SHARES RS.B4,49,040/- VALUE OF EACH SHARE RS.11.22(5037990/449040) THE BOOKS VALUE OF 224510/- SHARES RS.25,19,002/- SALE CONSIDERATION PAID RS.1,12,255/- DIFFERENCE BETWEEN SALE CONSIDERATION & BOOK VALUE OF SHARES RS.24,06,747/- 7. AS A RESULT THERE OF ADDITION OF RS.24,06,747/- WAS MADE, TAKING NOTE OF THE FACT THAT THE ASSESSEE WAS PROVIDED AN OPPORTUNITY TO FILE THE CERTIFIED VALUE OF SHARES WHICH OPPORTUNITY WAS NOT UTILIZED. 8. AGGRIEVED BY THIS, THE ASSESSEE CAME IN APPEAL B EFORE THE CIT(A) BEFORE WHOM IT WAS CONTENDED THAT THE OWNERSHIP OF SHARES AND ITS HOLDING IS NOT DISPUTED BY THE AO. IT WAS ALSO CONTENDED THAT THE ASSESSEE FILED CONFIRMATION, INCOME TAX PARTICULARS, BANK DETAILS, COPY OF INCOME TAX RETUR NS, BANK STATEMENT ETC. OF SELLER OF SHARES & INVESTEE COMPANY BEFORE THE LD. ASSESSING OFFICER. 8.1. IT WAS FURTHER CLAIMED THAT THE AO ALSO ISSUED NOTICE U/S 133(6) TO THE SELLER OF SHARES AND INVESTEE COMPANY. THEY ALSO CONFIRME D THE TRANSACTIONS AND I.T.A .NO.-5157/DEL/2011 4 PURCHASE PRICE DIRECTLY TO LD. ASSESSING OFFICER. D ESPITE THESE FACTS, THE AO MADE THE ADDITION ON GROUND THAT CERTIFICATES OF THE CA OF THE INVESTEE COMPANY WAS NOT PROVIDED AND APPLIED HIS OWN FORMULA AND CALCULATED THE BOOK VALUE OF THE SHARES. 8.2. THE SAID STAND OF THE AO WAS ASSAILED ON THE G ROUND THAT THE ASSESSEE DOES NOT HAVE ANY CONTROL ON THE AUDITORS OF THE INVESTE E COMPANY AS SUCH CAN NOT FORCE THE AUDITORS TO ISSUE THE CERTIFICATES FOR BOOK VAL UE OF SHARES OF INVESTEE COMPANY. 8.3. IT WAS ALSO SUBMITTED THAT THE AO FAILED TO TA KE INTO CONSIDERATION THE FACT THAT THERE CAN BE VARIOUS REASONS FOR PAYING LESSER AMOUNTS BY THE ASSESSEE SUCH AS DUE TO SLACK IN THE MARKET; DISTRESS SALE BY THE SE LLER; POOR CONDITION OF THE BUSINESS; FUTURE LIFE OF THE PROPERTY; SURROUNDING AREA/ATMOSPHERE AND SO FORTH. IT WAS URGED THAT THE ASSESSEE IS ONLY REQUIRED IN THE CASE OF INVESTMENT TO PROVE THE PURCHASE VALUE AND IN CASE THE AO HAS ANY DOUBT THA T HIGHER PRICE IS PAID THEN SUCH ALLEGATION IS TO BE SUPPORTED BY TANGIBLE EVIDENCES AND NOT ON MERE ASSUMPTIONS OR SUSPICIOUS. RELIANCE WAS PLACED UPON THE FOLLOWING DECISIONS :- A). THE HONBLE HIGH COURT, DELHI IN THE CASE OF CI T VS LALIT BHASIN REPORTED IN 2007-290-ITR-245 (DEL); B). THE HONBLE INCOME TAX APPELLATE TRIBUNAL, MUMB AI IN THE CASE OF RUPEE FINANCE & MANAGEMENT P. LTD. VS. ACIT REPORTE D IN 2009 -120 ITD 539(MUM). 8.4. IT WAS FURTHER SUBMITTED THAT THE BURDEN TO PR OVE THAT THE REAL INVESTMENT EXCEEDS THE INVESTMENT SHOWN IN THE BOOKS OF ACCOUN T OF THE ASSESSEE IS ON THE I.T.A .NO.-5157/DEL/2011 5 DEPARTMENT AND NO ADDITION CAN BE MADE UNDER THIS S ECTION MERELY ON THE BASIS OF THE FAIR MARKET VALUE/BOOK VALUE. FOR THE SAID PROPOSITION, RELIANCE WAS PLACED UPON TWO ORDERS MENTIONED IN:- NARESH KHATTAR VS CIT (2003) 261 ITR 664 (DEL) AMAR KUMARI SURANA VS CIT (1997) 226 ITR 344 (RAJ.) 9. CONSIDERING THE SUBMISSIONS, THE CIT CAME TO THE FOLLOWING CONCLUSIONS :- 6. I HAVE GONE THROUGH THE FACTS OF THE CASE, ASSE SSMENT ORDER, GROUNDS OF APPEAL, WRITTEN SUBMISSIONS, CASE LAWS R EFERRED BY THE APPELLANT AND CAREFULLY CONSIDERED THEM. IN THE PR ESENT CASE, THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY MATERIAL EVIDENCE ON RECORD TO PROVE THAT THE AMOUNT ACTUALLY PAID FOR PURCHASE OF SHARES OF M/S SHRI GOVIND HOTELS & HEALTH RESORTS PVT. LTD. WAS M ORE THAN THE AMOUNT RECORDED IN THE BOOKS OF THE APPELLANT. IN RESPONSE TO NOTICE UNDER SECTION 133(6), IN THE BOOKS OF ACCOUNT OF M/ S KRISHNA INFO MEDIA LTD., THE SELLER OF SHARES TO THE APPELLANT H AS CONFIRMED THE SALE OF SHARES, PRICE AT WHICH SOLD, PAYMENT PARTICULARS AND ITS ANNUAL STATEMENTS. UNDER A SIMILAR NOTICE ISSUED UNDER SE CTION 133(6), M/S SHRI GOVIND HOTELS & HEALTH RESORT PVT. LTD. ALSO C ONFIRMED THE SHARE HOLDING OF THE APPELLANT IN THEIR RECORDS. THE ASS ESSING OFFICER HAS NOT MENTIONED IN HIS ORDER AS TO FROM WHERE HE HAS PROC URED THE FIGURES OF PAID UP CAPITAL, NUMBER OF EQUITY SHARES ETC. FOR W ORKING OUT THE BOOK VALUE OF EACH SHARE AT RS.11.22 PAISE AND THEREBY A RRIVED AT THE DIFFERENCE OF RS.24,06,747/- WHICH HE ADDED TO THE INCOME OF THE APPELLANT. THE CASE LAWS RELIED UPON BY THE AR ALS O SUPPORT THE CASE OF THE APPELLANT. 6.1. IN VIEW OF THE ABOVE DISCUSSION AN AFTER CONSIDERIN G ALL THE FACTS OF THE CASE, SUBMISSIONS AND THE CASE LAWS RELIED U PON BY THE APPELLANT, I HOLD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIE D IN MAKING AN ADDITION OF RS.24,06,747/- AS UNDISCLOSED INVESTMEN T TO THE INCOME OF THE APPELLANT AND ACCORDINGLY ADDITION MADE IS HERE BY DELETED. I.T.A .NO.-5157/DEL/2011 6 10. THE SR. DR, SH. SATPAL SINGH HEAVILY RELYING UP ON THE ASSESSMENT ORDER CONTENDED THAT THERE IS NO MATERIAL ON RECORD TO SH OW HOW A PARTICULAR SHARE WHOSE BOOK VALUE WAS RS.10/- WAS PURCHASED BY THE ASSESSE E AT A MARKET VALUE OF 50 PAISE ONLY. IT WAS HIS SUBMISSION THAT OPPORTUNITY HAD BEEN GIVEN BY THE AO TO THE ASSESSEE TO SHOW WHY THE VALUE OF SAID SHARES BE NO T TAKEN AT RS.11.22 SINCE THE PRICE OF THE SHARE AS PER THE ASSESSEE WAS LESS, IT WAS FOR THE ASSESSEE TO DEMONSTRATE THE REASONS. HE WAS OF THE VIEW THAT T HERE MUST HAVE BEEN SUFFICIENT MATERIAL BEFORE THE AO TO COME TO THAT CONCLUSION E VEN IF THERE IS NO REFERENCE IN THE ORDER BUT IT WAS URGED THE FACT REMAINS THAT IT IS FOR THE ASSESSEE TO PROVE A PARTICULAR INVESTMENTS STATED TO BE MADE FOR SHARES WHOSE AT PAR VALUE WAS RS.10/- COULD BE MADE AT 50 PAISE. 11. THE LD. AR, ON THE OTHER HAND RELYING UPON THE IMPUGNED ORDER CONTENDED THAT NOTHING HAS BEEN BROUGHT ON RECORD BY THE AO T O SHOW THAT THE VALUE OF THE SHARE WAS RS.11.22 PER SHARE AND THE MANNER IN WHIC H THE WORKING HAS BEEN DONE BY THE AO CAN NOT BE SUPPORTED ON LAW OR FACTS. IT WAS SUBMITTED THAT ONCE IT IS FOUND ON RECORD THAT THE ASSESSEE HAS INVESTED IN T HE SAID COMPANY I.E M/S SHRI GOVIND HOTELS & HEALTH RESORT PVT. LTD. THAT DOES N OT MEAN THAT THE ASSESSEE IS NECESSARILY IN A POSITION TO GET THE CA OF THE SAID CONCERN TO CERTIFY THE VALUE OF THE SHARE. 12. RELIANCE WAS PLACED UPON THE JUDGEMENTS RELIED UPON BEFORE THE CIT(A). 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CAREFUL CONSIDERATION OF THE SAME, WE DO NOT FIND ANY JUSTIFICATION FOR I.T.A .NO.-5157/DEL/2011 7 THE AO TO INSIST UPON THE VALUATION OF THE SHARES B Y THE AUDITORS OF THE M/S SHRI GOVIND HOTELS & HEALTH RESORT PVT. LTD. AS PER TH E IMPUGNED ORDER, REFERENCE HAS BEEN MADE BY THE CIT(A) THAT NOTICE WAS ISSUED U/S 133(6) TO M/S KRISHNA INFO MEDIA LTD. I.E THE SELLER OF SHARES TO THE ASSESSEE WHO HAS CONFIRMED THE TRANSACTION AT THE PRICE AND SIMILAR NOTICE IS STAT ED TO HAVE BEEN ISSUED U/S 133(6) TO M/S SHRI GOVIND HOTELS & HEALTH RESORT PVT. LTD. WH O ALSO CONFIRMED THE SHARE HOLDING. HOWEVER NO REFERENCE IN REGARD TO THE IN FORMATION SOUGHT AND RECEIVED BY THE AO IS FOUND IN THE ASSESSMENT ORDER. IT IS A LSO SEEN THAT NEITHER THE ASSESSEE HAS CARED TO ADDRESS SPECIFIC REASON FOR THE FALL I N THE PRICE OF SHARES NOR HAS THE CIT(A) LOOKED INTO THE ASPECT. IT IS ALSO SEEN THA T GENERAL ARGUMENTS WERE ADVANCED BEFORE THE CIT(A) IN THIS REGARD IN SUB PA RA 3 OF PARA 5 REPRODUCED HEREUNDER :- (III) THE LD. ASSESSING OFFICER FAILED TO TAKE INT O CONSIDERATION THAT THERE MAY BE THE VARIOUS REASONS FOR PAYING LESSOR AMOUNT BY THE ASSESSEE SUCH AS MARKET SLACK , DISTRESS SALE BY THE SELLER, POOR CONDITION OF THE BUSINESS, FUTURE LIFE OF THE PROPERTY, SURROUNDING AREA/ATMOSPHERE AND SO FORTH. THEREFORE, IN THESE SITUATIONS, ON PRELIMINARY ISSUE ITSELF, THE LD. AS SESSING OFFICERS TREATMENT OF UNDISCLOSED SOURCES IS NOT AT ALL JU STIFIED. 14. ACCORDINGLY IN THE AFORE-MENTIONED PECULIAR FAC TS AND CIRCUMSTANCES, WHERE THERE IS A DISCREPANCY ON FACTS QUA THE IMPUGNED OR DER AND THE AO AND THE REASONS FOR THE DROP IN SHARE PRICE HAVE NOT BEEN ADDRESSED BY THE CIT(A). WE ARE OF THE VIEW THAT IT WOULD BE APPROPRIATE TO RESTORE THE IS SUE BACK TO THE FILE OF THE CIT(A) WITH THE DIRECTION TO FIRST ADDRESS THE FACTS AND T HEN CONSIDER THE APPLICABILITY OF THE I.T.A .NO.-5157/DEL/2011 8 JUDGEMENTS WHICH ARE RELIED. ACCORDINGLY FOR THE R EASONS GIVEN HEREINABOVE, THE FINDINGS IN THE IMPUGNED ORDER ARE SET ASIDE AND TH E LD. CIT(A) SHALL RE-APPLY HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE FOR DECIDING THE ISSUE. THE AO SHALL BE GIVEN AN OPPORTUNITY OF BEING HEARD WHI LE DECIDING THE ISSUE. NEEDLESS TO SAY THAT THE ASSESSEE SHALL ALSO BE GIV EN A REASONABLE OPPORTUNITY OF BEING HEARD AND A SPEAKING ORDER SHALL BE PASSED IN ACCORDANCE WITH LAW. 15. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 30 TH OF APRIL 2013. SD/- SD/- (J.S.REDDY) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL M EMBER DATED:30/04/2013 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REG ISTRAR ITAT NEW DELHI