Shri Rakesh Bhikhabhai Shah, Ahmedabad V. The Pr. CIT-1, Ahmedabad

ITA 964/AHD/2017

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 8001 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 22-10-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 20-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SHARMA
• Keywords: Sale consideration of property below Jantri Value; Value adopted by valuation officer; Capital asset; Opportunity of being heard; Principle of natural justice; Question of law; Fair market value; Valuation report; Assessment record; Capital Gains
• Section: 143(3); 54F; 55A; 48; 13; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) ITA. NO: 964/AHD/2017 (ASSESSMENT YEAR: 2012-13) SHRI RAKESH BHIKHABHAI SHAH PARAS VIDYANAGAR HOUSING SOCIETY, VIBHAG NO. 3, USMANPURA, AHMEDABAD V/S PR. CIT-1, ROOM-304, C WING, PRATAYKSH KAR BHAWAN, AMBAWADI, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: ACDPS 9763R APPELLANT BY : SHRI S. N. SOPARKAR, SR. ADV. WITH MS. URVASHI SHO DHAN RESPONDENT BY : SHRI O. P. SHARMA, CIT/DR ( )/ ORDER DATE OF HEARING : 22 -10-201 9 DATE OF PRONOUNCEMENT : 31 -12-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. PR. CIT-1, AHMEDABAD U/S 263. THE ASSESSEE HAS TAKEN FO LLOWING GROUNDS: ITA NO 964/A HD/2017 . A.Y.2012-13 2 1 LD. CIT ERRED IN LAW AND ON FACTS INVOKING PROVISIONS OF SECTION 263 OF THE ACT SEEKING TO REVISE SCRUTINY ASSESSMENT ORDER U/S 143 (3) OF THE ACT HOLDING IT AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. THE ORDER OF CIT DIRECTING AO TO FRAME FRESH ORDER IS UNJUST, UNTENABLE AND AGAIN ST PRINCIPLES OF NATURAL JUSTICE THAT DESERVES TO BE QUASHED. 2 LD. CIT ERRED IN LAW AND ON FACTS IN SETTI NG ASIDE SCRUTINY ASSESSMENT FOR FRAMING FRESH ASSESSMENT AFTER CONDUCTING PROPER IN QUIRIES AND VERIFICATION OF ISSUES ALREADY VERIFIED BY AO AND ALSO BY AUDIT PAR TY. LD. CIT FAILED TO APPRECIATE THAT AO PASSED THE ORDER AFTER THOROUGH SCRUTINY OF DOCUMENTS. 3 LD. CIT ERRED IN LAW AND ON FACTS IN HOLDI NG THAT SALE VALUE OF SHARES SOLD TO MANAGING DIRECTOR AT SUBSTANTIALLY LOWER PRICE RESU LTED IN NON REPORTING OF CAPITAL GAINS ON THE GROUND THAT AO FAILED TO EITHE R CONSIDER VALUATION REPORT VALUING SHARES @ RS. 79, 0207- PER SHARE OR PRICE O F RS. 87, 217.75 CHARGED PER SHARE TO FOREIGN BUYER. 4 LD. CIT (A) ERRED IN LAW AND ON FACTS HOLD ING ORDER AS ERRONEOUS DUE TO FAILURE OF AO TO INQUIRE WHETHER APPELLANT FULFILLE D ALL THE CONDITIONS OF SEC 54F FOR CLAIMING THE DEDUCTION THOUGH ALL THE RELEVANT DOCU MENTS WERE SUBMITTED DURING THE ASSESSMENT PROCEEDINGS IN RESPONSE TO QUERIES R AISED. 5 LD. CIT (A) ERRED IN LAW AND ON FACTS IN D IRECTING AO TO VERIFY DEPOSITS IN THE CAPITAL GAINS ACCOUNT ALREADY EXAMINED BY AO AS WEL L AUDIT PARTY. 6. LD. CIT OUGHT TO HAVE APPRECIATED THAT NON DISCU SSION OF ISSUES VERIFIED AND ACCEPTED BY AO AND SUBSEQUENTLY BY AUDIT PARTY AFTE R PROPER SCRUTINY NEED NOT MEAN ORDER AS ERRONEOUS OR PREJUDICIAL TO THE INTER EST OF REVENUE. 7. WITHOUT PREJUDICE TO CHALLENGING ORDER HELD AS E RRONEOUS & PREJUDICIAL BY ID. CIT, EVEN ON MERITS THE APPELLANT HAVING FULFILLED ALL THE CONDITIONS OF SECTION 54F OF THE ACT IS ENTITLED TO DEDUCTION OF COST OF NEW RESIDENTIAL HOUSE FROM RESULTANT CAPITAL GAIN. 2. FACTS OF THE CASE ARE THAT THE ASSESSEE IS A DIRECT OR OF ERIS LIFE SCIENCES PVT. LTD., A CLOSELY HELD COMPANY ENGAGED IN THE BUSINES S OF MANUFACTURING OF PHARMACEUTICAL PRODUCTS. 3. THE ASSESSEE IS A DIRECTOR OF ERIS LIFE SCIENCES PV T LTD, A CLOSELY HELD COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF PHARMAC EUTICAL PRODUCTS. ON VERIFICATION OF ASSESSMENT RECORDS OF THE FOR A. Y. 2012-13, IT WAS OBSERVED THAT THE ASSESSEE HAD SOLD 3025 SHARES OF ERIS LIFE SCIENCES PVT. LTD. TO MR AMIT INDUBHUSHAN BAKSHI, WHO IS ALSO A PROMOTER OF ERIS LIFE SCIENCES PVT. LTD. THE DATE OF SALE WAS 29/08/011 AND PRICE AT WH ICH THE SHARES WERE SOLD ITA NO 964/A HD/2017 . A.Y.2012-13 3 WAS THE FACE VALUE I.E RS 10/- PER SHARE. HOWEVER O N THE SAME UNIT THE ASSESSEE SOLD 2021 SHARES TO M/S BOTTICELLI A COMPANY INCORP ORATED IN MAURITIUS, AT RS. 87,217/- PER SHARE. THUS THE SHARES SOLD TO A FELLO W DIRECTOR WERE HIGHLY UNDERVALUED, AND THE LONG TERM CAPITAL GAINS ON THE SALE OF 3025 SHARES TO AMIT INDUBHUSHAN BAKSHI WAS UNDER STATED, THEREBY L EADING TO UNDERASSESSMENT OF LONG TERM CAPITAL GAIN BY RS 30, 25,57,021/-. ON VERIFICATION OF THE DOCUMENTS ON THE ASSESSMENT RECORD, IT WAS OBSERVED THAT THE ASSESSEE HAS DEPOSITED RS 5,50,00,000/- IN CAPITAL GAINS ACCOUNT, THEREBY EXCESS CLAIM OF RS 51,00,000/- WAS ALLOWED BY THE ASSESSING OFFICER. MOREOVER THE ASSESSEE HAS SHOWN TO HAVE PURCHASED O PEN PLOT FOR CONSTRUCTION OF BUNGALOW, WHEREAS FROM PHOTOGRAPH OF SALE DEED I T IS EVIDENT THAT THE PROPERTY PURCHASED WAS NOT AN OPEN PLOT BUT AN OLD BUNGALOW, AND THERE IS NO EVIDENCE ON RECORD FOR CONSTRUCTION OF NEW BUNGALOW . THUS CLAIM OF RS 4,50,00,000 HAS BEEN ALLOWED BY THE ASSESSING OFFIC ER WITHOUT MAKING ANY INQUIRIES. IN VIEW OF THE ABOVE, A NOTICE UNDER SECTION 263 OF THE I T ACT WAS ISSUED ON '20/02/2017, REQUIRING THE ASSESSEE TO EXPLAIN WHY THE SAID ASSESSMENT ORDER SHOULD NOT BE REVISED, MODIFIED, OR CANCELLED AS PE R LAW. 4. IN RESPONSE TO THE NOTICE, SHRI KAUSHAL VYAS, AUTH ORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED AN AUTHORITY LETTER AND A WRITTEN REPLY ON 08/03/2017. A PERSONAL HEARING WAS ALSO GRANTED TO THE ASSESSEE ON 20/3/2017 DURING THE COURSE OF WHICH THE A.R OF THE ASSESSEE REITERATED THE SUBMISSIONS CONTAINED IN HIS AFOREMENTIONED WRITTEN REPLY. THE RELEVANT CONTENTS OF THE WRITTEN REPLY ARE REPRODUCED BELOW: ITA NO 964/A HD/2017 . A.Y.2012-13 4 1. I HEREBY RELY ON THE ASSESSMENT PROCEEDINGS NARR ATED IN DETAILS IN THE ORDER SHEET ON DIFFERENT DATES WHICH BARE THE SIGNATURE O F MY LEGAL REPRESENTATIVE AND HENCE THE COPY OF THE SAID ORDER SHEET FROM LSL TO LAST BE SUPPLIED TO YOUR ASSESSEE ESPECIALLY TO KNOW AS TO DESPITE OF EVERY POINT DISCUSSED IN DETAIL WITH SUBMISSION AND SUPPORTIVE EVIDENCES , WHY AT THIS S TAGE UNDUE SHELTER HAS BEEN TAKEN TO TREAT THE ASSESSMENT ORDER PASSED AS ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IF THE ANSWER IS THAT THE PRESENT ACTION HAS BEEN TAKEN AT THE INSTANCE OF AUDIT, IT MAY PLEASE BE NOTED TH AT IN THE PRESENCE OF ASSESSING OFFICER , ON EVERY POINT THEN RAISED BY T HE AUDIT -WAS REPLIED IN DETAIL TO THEIR SATISFACTION AND NO POINT OF TIME T HERE WAS ANY DISAGREEMENT BETWEEN THE AUDIT, THE ASSESSEE AND THE AO. FURTHER IT WAS UPON THE INSTANCE OF THE THEN CIT AN , INSPECTOR WAS BEING SENT TO THE NEWLY CONSTRUCTED RESIDENTIAL-PROPERTY WHICH HA S BEEN CLAIMED U/S. 54F AS STATED AND MENTIONED IN YOUR SHOW CAUSE NOTICE. THE THEN INSPECTOR PERSONALLY VISITED THE PLACE AND VERIFIED AND MENTIONED EACH A ND EVERY ASPECT OF THE NEWLY CONSTRUCTED BUNGLOW IN HIS REPORT WHICH IS ALSO LAY ING ON YOUR RECORD. THE SAME FACTS MUST ALSO HAVE BEEN STATED IN THE ORDER SHEET MADE BY THEN AO. IT IS WORTH TO NOTE THAT THE REPORT OF AN INSPECTOR IS AL SO ON YOUR FILE RECORD CONFIRMING THE ADDRESS VIZ; NO.20, VIDHAYANAGAR SOC IETY, B/H. VIDHYANAGAR SCHOOL, USMANPURA, AHMEDABAD. AND THE ADDRESS STATE D IN THE SECOND SALES DEED WHERIN YOUR ASSESSEE HAD PURCHASED THE 3/4'' I N THE PROPERTY FROM HIS WIFE AND PARENTS WHICH IS ALSO STATED CLEARLY IN TH E SALE DEED VIDHAYANAGAR SOCIETY, USMANPURA, AHMEDABAD. FURTHER EVEN THE VAL UATION REPORT OF THE SAME PROPERTY IS ALSO ON YOUR RECORD WHICH BARES TH E SAME ADDRESS AND THEREFORE IT IS NOT UNDERSTOOD THAT HOW THE DOUBT I N CREATED IN YOUR SHOW CAUSE THAT, 'THERE IS NO RECORD OF THE DEMOLITION OF THE EXISTING ONE AND RECONSTRUCTION OF A NEW BUNGLOW', PARTICULARLY WHEN THE ADDRESS OF ALL THE THREE ITA NO 964/A HD/2017 . A.Y.2012-13 5 RELIABLE RECORD VIZ; YOUR INSPECTOR'S REPORT OF PER SONAL VISIT VALUATION REPORT OF THE CIVIL ENGINEERS & THE SALE -DEED BARES THE SAME ADDRESS I.E. NO. NO.20, VIDHAYANAGAR SOCIETY, B/H. VIDHYANAGAR SCHOOL, USMA NPURA, AHMEDABAD. THEREFORE ON THE BASIS OF THE ABOVE R\VO POINTS, YO UR ASSESSEE WOULD LIKE TO GET THE COPIES OF THE FOLLOWINGS: 1. A COPY OF THE ORDER SHEET ATTENDED BY MR. A.R. A ND SIGNED AND CONFIRMED BY YOUR AO OF VARIOUS DATES MENTIONING VARIOUS INSTANC ES. A COPY OF THE REPORT OF AN INSPECTOR WHO WAS SENT T O THE PREMISES AT THE INSTANCES OF THE THEN AO & CIT. JURISDICTION OF THE POINTS RAISED IN SHOW CAUSE: AS REGARDS THE TRANSFER OF SHARES TO AMIT I BAKSHI: - THE SHARES TRANSFERRED WERE 3025 AND NOT 3050 WRONG LY STATED IN YOUR NOTICE. A COPY OF THE EXTRACT OF THE BOARD OF THE DIRECTORS FOR SUCH TRANSACTION HAS BEEN ATTACHED HEREWITH. THOUGH IT IS ALREADY LAYING ON THE ASSESSMENT FILE RECORD. BESIDES LIST OF THE TRANSFER REQUEST MADE B Y THE MEMBERS IN FAVOUR OF THE TRANSFEREE VIZ; AMIT I. BAKSHI HAS ALSO BEEN AT TACHED HEREWITH. A COPY OF THE BANK STATEMENT OF YOUR ASSESSEE SHOWING THE CRE DIT AMOUNT OFRS. 30,250/- RECEIVED ON 24.06.2011 HAS ALSO BEEN ATTACHED HEREW ITH DESPITE OF THE FACT THAT THE ABOVE STATED RECORD ARE FILED IN YOUR FILE. DURING THE COURSE OF HEARING IT WAS ASKED TO PROVE THAT WHY SOME OF THE SHARES HAVE BEEN SOLD AT THE FACE VALUE OF RS. 10/- PER SH ARE AS AGAINST RS. 57,2777- AS SHOWN IN THE STATEMENT OF INCOME. IT IS IN THIS BEH ALF WE HAVE TO SAY THAT IT WAS THE MUTUAL UNDERSTANDING BETWEEN YOUR ASSESSEE AND THE MANAGING DIRECTOR MR. AMIT I BAKSHI THAT IF AT ALL SUCH PRICE SHALL BE RE CEIVED BY YOUR ASSESSEE OUT OF THE TRANSACTION OF SALE OF HIS SHARES TO BOTICELLI COMPANY, THEN YOUR ASSESSEE VIZ; RAKESH B SHAH SHALL HAVE TO GIVE SOME OF HIS S HARES TO MR. AMIT I BAKSHI AT THE FACE VALUE OF THE SHARES. BESIDES THIS BEING A PRIVATE LIMITED COMPANY AND ITA NO 964/A HD/2017 . A.Y.2012-13 6 THE SHARES OF THE SAME ARE BEING NON-LISTED SHARES, THE TRANSFER OF SUCH SHARES BETWEEN THE TWO DIRECTORS ARE ALWAYS AT THE FACE VA LUE OF SHARES AND I.E.RS. 10/- PER SHARE. MR. AMIR BAKSHI WAS THE KEY PERSON THROU GH WHOM THE WHOLE TRANSACTIONS OF SALE OF SHARES TO A FOREIGN COMPANY WAS BEING CARRIED OUT AND THEREFORE OUT OF GRATITUDE AND MUTUAL UNDERSTANDING THE SOME PART OF THE SHARES HAD BEEN SOLD TO HIM AT RS. 10/- PER SHARE. 2. AS REGARDS THE DEDUCTION CLAIMED U/S. 54F:~ IT IS IN THIS BEHALF, YOUR ATTENTION IS INVITED ON THE CAPITAL GAIN A/C FORM NO. A WHEREIN IT HAS BEEN SPECIFICALLY MENTIONED THAT THE ASSESSEE HAD OPENED THE CAPITAL GAIN ACCOUNT ON 26.06.2012, UNDER 'A' & 'B' ACCOUNT COMPRISING IN ALL TO RS. 51,00,0001- AND ACCOUNT 'B' RS. 5,50,00,0001-. IT MAY BE NOTED THAT THE ENTIRE PAYMENT WAS MADE ON 19.07.2012 I.E. BEFORE T HE DUE DATE FOR FILING THE RETURN OF INCOME FOR A. Y. 2012-13. ALL THE COPIES OF THE FORMS AND CAPITAL GAIN AMOUNT DEPOSITED HAVE BEEN LAYING ON YOUR RECORDS W HICH ARE SELF EXPLANATORY IN NATURE. IN THE PREMISES, IT IS IN THE INTEREST OF JUSTICE T HAT THE ACTION RAISED AGAINST YOUR ASSESSEE U/S. 263 BE DROPPED IN ALL FAIRNESS OF THE CASE. 5. THE REPLY OF THE ASSESSEE HAS BEEN CAREFULLY CONSID ERED KEEPING IN VIEW THE FACTS OF THE CASE, THE EVIDENCES AVAILABLE ON RECOR D. THE COMMENTS ON ACCEPTABILITY OR OTHERWISE OF THE CONTENTIONS RAISE D BY THE ASSESSEE ARE DISCUSSED IN THE SUCCEEDING PARAGRAPHS. 6. REGARDING THE SALE SALE OF SHARES AT FACE VALUE TO AMIT INDUBHUSHAN BAKSHI, THE OF THE ASSESSEE ARE NEITHER CREDIBLE NOR ACCEPTABLE DUE TO THE FOLLOWING REASONS: (I) THE ASSESSEE HAS NOT OFFERED ANY EXPLANA TION AS TO WHY HE HAS SOLD THE SHARES AT SUCH A HUGE LOSS TO MR. AMIT BAKSHI. HIS CONTENTION THAT SALE OF SHARES BY ONE DIRECTOR TO ANOTHER IS 'ALWAYS AT FAC E VALUE' IS FAR FROM TRUTH. IN FACT, IT IS INCOMPREHENSIBLE THAT A DIRECTOR WILL S ELL 3025 SHARES TO ANOTHER ITA NO 964/A HD/2017 . A.Y.2012-13 7 DIRECTOR AT RS.10 PER SHARE, WHILE 2021 SHARES OF T HE SAID COMPANY WAS SOLD BY HIM ON THE SAME DATE TO A THIRD PARTY AT RS.87,217. 75 PER SHARE. THIS CANNOT BE JUSTIFIED BY ANY NORMAL COMMERCIAL PRUDENCE. FURTHE R, IN THE VALUATION REPORT DATED 16/08/2011 BY M/S. ANCHALIA & COMPANY, C.AS., APPOINTED BY THE COMPANY - ERIS LIFESCIENCES PVT. LTD. FOR VALUATION OF THE SHARES OF THE COMPANY FOR SALE TO BOTICELLI, THE FAIR VALUE OF TH E EQUITY SHARES OF THE COMPANY HAS SPECIFICALLY BEEN CALCULATED AT RS.79,020/- AS ON 16/08/2011 UNDER THE DCF METHOD. THEREFORE, AGAINST SUCH VALUATION BY TH E COMPANY'S OWN VALUER AT RS.79,020/- PER SHARE AND THE ACTUAL SALE TO THI RD PARTY AT RS.87,217.75 PER SHARE, THE ASSESSEE'S ALLEGED SALE TO ANOTHER DIREC TOR OF 3025 SHARES AT RS.10 PER SHARE ON THE SAME DAY IS COMPLETELY UNACCEPTABLE. (II.) THE ASSESSEE HAS CONTENDED THAT THE SALE OF S HARE AT FACE VALUE WAS BY MUTUAL UNDERSTANDING AND BY CONSENT OF ALL THE DIRE CTORS, BECAUSE MR. AMIT BAKSHI WAS INSTRUMENTAL IN GETTING THE INVESTOR. TH IS STATEMENT IS NOT CORRECT, BECAUSE, THE ASSESSEE HAS HIMSELF PAID A HUGE AMOUN T OF RS.48,63,574/- TO M/S. ADVENDUS CAPITAL PVT. LTD, MUMBAI FOR SERVICES RELATING TO SALE OF 2021 SHARES OF ERIS LIFESCIENCES PVT. LTD. IT IS PERTINE NT TO MENTION THAT AS PER THE PROFILE OF ADVENDUS CAPITAL PVT. LTD., IT IS CATEGO RY-1 MERCHANT BANKER ENGAGED IN PROVIDING FINANCIAL SERVICES WITH AN EMP HASIS ON ADVISING CORPORATE CLIENTS SEEKING TO MOBILIZE CAPITAL FROM INVESTORS. IF MR. AMIT BAKSHI WAS SOLELY INSTRUMENTAL IN GETTING THE INVESTORS, WHAT WAS THE NECESSITY FOR THE ASSESSEE TO HIRE THE MERCHANT BANKER AND PAY SUCH A HEFTY COMMI SSION, IN ADDITION TO INCURRING A HUGE LOSS DUE TO TRANSFER OF SHARES TO MR. AMIT BAKSHI. (III.) IN VIEW OF THE ABOVE, BY SELLING 3025 SHARES TO MR. AMIT BAKSHI AT THE RATE OF RS.10/- ON 29.8.2011, WHICH IS THE SAME DATE ON WHICH HE SOLD 2021 SHARES TO BOTICELLI AT RS.87,217.75 THE ASSESSEE HAS UNDER VALUED THE SALE CONSIDERATION OF THE ABOVE SHARE BY RS.26,32,28,693.75. AS PER EX TRACT OF THE MINUTES OF THE ITA NO 964/A HD/2017 . A.Y.2012-13 8 BOARD MEETING OF ERIS LIFESCIENCES PVT. LTD. DATED 23.06.2011, THE ASSESSEE'S FATHER, MR. BHIKHALAL CHIMANLAL SHAH HAS ALSO SOLD A SIMILAR NUMBER OF 3025 SHARES OF ERIS LIFESCIENCES PVT. LTD. TO MR. AMIT B AKSHI AT THE SAME TIME. THIS FACT HAS ALSO NOT BEEN EXAMINED BY THE AO WHO SHOUL D HAVE ALSO INTIMATED THE AO OF MR.. BHIKHALAL CHIMANLAL SHAH ABOUT SUCH LOSS IN HIS HANDS FOR VERIFICATION. (IV). FROM THE ABOVE , IT IS APPEARS THAT THE S ALE VALUE OF SHARES SOLD TO MR. AMIT BAKSHI HAS BEEN SUBSTANTIALLY UNDER-REPORTED B Y THE ASSESSEE, RESULTING IN NON-REPORTING OF CAPITAL GAINS FOR THE PURPOSE OF T AXATION. THE AO HAS MECHANICALLY ACCEPTED THE CLAIMS OF THE ASSESSEE DU RING THE ASSESSMENT PROCEEDINGS WITHOUT CAUSING PROPER INQUIRY AND VERI FICATION. THE AO HAS NEITHER TAKEN THE VALUATION REPORT BY COMPANY'S VAL UER M/S. ANCHALIA & COMPANY, C.AS. AS PER WHICH THE SHARES WERE VALUED AT RS.79,0207- PER SHARE NOR HAS HE TAKEN INTO ACCOUNT THE ACTUAL SALE OF SH ARES TO BOTICELLI AT RS.87,217.75 PER SHARE. IN THE LEAST, THE AO COULD HAVE REFERRED THE MATTER TO VALUATION OFFICER AS PER THE PROVISION OF SECTION 5 5A OF THE IT ACT, 1961 WHICH HAS NOT BEEN DONE. AS SUCH, THE ASSESSMENT OR DER MADE BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E IN TERMS OF SECTION 263 READ/WITH CLAUSE (A) OF EXPLANATION 2 THEREOF. 7. REGARDING CORRECTNESS AND ELIGIBILITY OF CLAIM O F 54F THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER THE ASSESSEE HAS F ULFILLED ALL THE CONDITIONS OF SECTION 54F I.E. THE ASSESSEE MUST OWN ONLY ONE RES IDENTIAL ACCOMMODATION, ON THE DATE ON WHICH HE INVESTS IN THE NEW ASSET. FROM THE DOCUMENTS AVAILABLE, IT IS FOUND THAT THE FOLLOWING ADDRESSES ARE LISTED AG AINST THE NAME OF THE ASSESSEE. (I) PARAS VIDHYANAGAR HOUSING SOCIETY VIBHAG 3 USMA NPURA (II) C/O SHAH AND COMPANY HARIKRUPA SHOPPING CENTRE B/H CITY GOLD CINEMA ITA NO 964/A HD/2017 . A.Y.2012-13 9 (III) FLAT NO 1 SHAH & CO, BISCUIT GALI, RELIEF ROA D PANKOR NAKA AHMEDABAD (IV) 21 NEW YORK TOWER A, OPPOSITE MUKTIDHAM TEMPLE , NEAR THALTEJ CROSS ROADS THE AO HAS FAILED TO INQUIRE WHETHER ANY OF THE ABOVE PROPERTIES IS A RESIDENTIAL PROPERTY REGISTERED IN THE NAME OF THE ASSESSEE. THE AO IS ALSO DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE MADE D URING THE PROCEEDINGS U/S 263 REGARDING DEPOSITS IN THE CAPITAL GAINS ACCOUNT AND CONSTRUCTION OF A NEW HOUSE PROPERTY AFTER DEMOLISHING THE OLD HOUSE PROP ERTY FOR THE PURPOSE OF SECTION 54F. 8. IN VIEW OF THE ABOVE DISCUSSION, IT IS CLEAR THA T THE ASSESSMENT ORDER PASSED BY THE A.O. IS NOT ONLY ERRONEOUS BUT ALSO P REJUDICIAL TO THE INTEREST OF REVENUE AS PER THE PROVISIONS OF SECTION 263 OF THE I. T. ACT, 1961 READ WITH CLAUSE (A) OF EXPLANATION 2 THEREOF. I, THEREFORE, HEREBY SET-ASIDE THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S. 143(3) F OR A.Y. 2012-13 3 WITH A DIRECTION TO FRAME THE ORDER AFRESH AFTER CONDUCTIN G PROPER INQUIRIES AND VERIFICATIONS IN THE LINES DISCUSSED ABOVE REGARDIN G VALUATION OF SHARES SOLD FOR THE PURPOSE OF CAPITAL GAINS TAX, AS WELL AS ELIGIB ILITY OF CLAIM OF DEDUCTION UNDER SECTION 54F. THE ASSESSING OFFICER IS DIRECT ED TO FOLLOW THE PROCEDURE PRESCRIBED IN THE INCOME TAX ACT HAD ALSO MAKE A CO MPREHENSIVE REFERENCE TO THE VALUATION OFFICER GIVING DETAILS OF THE CASE IN CLUDING VALUATION REPORT OF COMPANY'S VALUER AND ACTUAL SALE PRICE TO BOTICELLI IN RESPECT OF VALUATION OF SHARES. THE ASSESSING OFFICER IS DIRECTED TO ENSURE THAT ADEQUATE OPPORTUNITY OF BEING HEARD IS GRANTED TO THE ASSESSEE. 7. NOW ASSESSEE HAS COME BEFORE US AGAINST THE ORDER O F THE LD. PR. CIT. ITA NO 964/A HD/2017 . A.Y.2012-13 10 8. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER. THE ASSESSEE IS A DIRECTOR OF ERIS LIFE SCIENCES PVT. LTD. A CLOSE LY HELD COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF PHARMACEUTICAL PRODUCT S. IT IS OBSERVED THAT ASSESSEE HAD SOLD 3025 SHARES OF ERIS LIFE SCIENCES PVT. LTD TO MR. AMIT INDUBHUSHAN BAKSHI WHO IS ALSO A PROMOTER OF ERIS L IFE SCIENCES PVT. LTD. THE DATE OF SALE WAS 29.08.2011 AND SHARES WERE SOL D @ FACE VALUE I.E. RS. 10. HOWEVER, ON THE SAME DATE, THE ASSESSEE SOLD 2021 S HARES TO M/S BOTTICELLI A COMPANY INCORPORATED IN MAURITIUS, AT RS. 87,217/- PER SHARE. THUS, THE SHARES SOLD TO A FELLOW DIRECTOR WERE HIGHLY UNDERVALUED, AND THE LONG TERM CAPITAL GAINS ON THE SALE OF 3025 SHARES TO AMIT INDUBHUSHA N BAKSHI WAS UNDER STATED, THEREBY LEADING TO UNDERASSESSMENT OF LONG TERM CAP ITAL GAIN BY RS. 30,25,57,021/-. 9. LD. D.R. STATED THAT FEW DETAILS WERE SUBMITTED BEF ORE THE LD. A.O. AND NO REASONED AND DETAILED ORDER PASSED BY HIM AND HE RE LIED ON THE ORDER OF PR. CIT. THEREAFTER BEFORE THE LD. PR.CIT ASSESSEE FILE D DETAILED PAPER BOOK CONTAINING 163 PAGES. 10. AND IN SUPPORT OF ITS CONTENTION, LD. A.R. CITED A JUDGMENT OF HONBLE SUPREME COURT IN THE MATTER OF CIT, GUJARAT-II VS. KWALITY STEEL SUPPLIERS COMPLEX [2017] 84 TAXMANN.COM 234 (SC) WHEREIN IT IS HELD A FIRM DISSOLVED ON DEATH OR ONE OF ONLY TWO PARTNERS BUT BUSINESS CONTINUED WIT H ONE PARTNER, THERE WAS NO QUESTION OF SELLING ASSETS/STOCK-IN-TRADE AND, THER EFORE, IT WAS NOT NECESSARY TO VALUE STOCK-IN-TRADE AT MARKET PRICE. 11. AND LD. A.R. ALSO CITED AN ORDER OF GUJARAT HIGH CO URT IN THE MATTER OF CIT-6 VS. M/S. MORARJEE TEXTILES LTD. WHEREIN IT IS HELD THAT : ITA NO 964/A HD/2017 . A.Y.2012-13 11 B) THE GRIEVANCE OF THE REVENUE BEFORE US IS THAT T HESE TRANSACTIONS ARE ALL BETWEEN COMPANIES BELONGING TO THE SAME GROUP. THER EFORE IT IS URGED THAT THE TRANSACTION ARE COLOURABLE TRANSACTION AND DIFFEREN T CONSIDERATIONS WOULD APPLY. (C)AT THE HEARING OF THE ADMISSION, THE REVENUE DID NOT POINT OUT ANY FACTS WHICH WOULD EVIDENCE THAT THE TRANSACTION WAS NOT GENUINE . IN SUCH A CASE WHERE THE GENUINENESS IS NOT DISPUTED WITH ANY EVIDENCE, IT I S NOT OPEN TO DISCARD THE DOCUMENTS AND/OR TRANSACTION ON THE BASIS OF SOME S UPPOSED OBJECT/INTENT. IN THE PRESENT FACTS THE REVENUE ACCEPTS THE DOCUMENTS BUT ONLY SUBSTITUTES THE CONSIDERATION. THEREFORE, THE ISSUE IS WHETHER SUCH SUBSTITUTION OF FULL CONSIDERATION RECEIVED BY FAIR MARKET VALUE OF THE ASSET IS PERMISSIBLE AS HELD BY THE TRIBUNAL AT THE RELEVANT TIME THERE WAS NO POWE R VESTED IN THE AUTHORITIES UNDER THE ACT TO SUBSTITUTE A FULL VALUE OF CONSIDE RATION RECEIVED BY FAIR MARKET VALUE IN RESPECT OF STOCK AND SHARES. THE STATUTE O NLY ON INTRODUCTION OF SECTION 50D WITH EFFECT FROM 1ST APRIL, 2013. THE POWER TO SUBSTITUTE FULL CONSIDERATION WITH FAIR MARKET VALUE IN RESPECT OF SHARES CAME IN TO THE STATUTE ONLY ON INTRODUCTION OF SECTION 50D OF THE ACT IS ONLY TO B E EXERCISED IF THE ASSESSING OFFICER COMES TO A FINDING THAT THE CONSIDERATION R ECEIVED IS NOT ASCERTAINED OR CANNOT BE DETERMINED. MOREOVER THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MGM SHAREHOLDERS BENEFIT TR UST (SUPRA) ON IDENTICAL FACTS SITUATION HAS BEEN ACCEPTED BY THE REVENUE, AS NO A PPEAL FROM THE SAME HAS BEEN FILED BY THE REVENUE. D) IN THE ABOVE VIEW, THE QUESTION AS FORMULATED DO ES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS NOT ENTERTAINED. 5. THE APPEAL ADMITTED ON THE SUBSTANTIAL QUESTIONS OF LAW AT QUESTION NOS. (III) AND (IV). ITA NO 964/A HD/2017 . A.Y.2012-13 12 12. ASSESSEE ALSO CITED AN ORDER OF HONBLE DELHI HIGH COURT IN THE MATTER OF CIT VS. GAURANGINIBEN S. SHODHAN [2014] TAXMANN.COM 3 56 (GUJ.) WHEREIN IT IS HELD: SECTION 55A, READ WITH SECTIONS 48 AND 50C, OF THE INCOME-TAX ACT, 1961 - CAPITAL GAINS - REFERENCE TO VALUATION OFFICER (VAL IDITY OF REFERENCE) - ASSESSMENT YEAR 2006-07 - ASSESSEE SOLD A HOUSE PRO PERTY AND ASSESSING OFFICER OPINED THAT ASSESSEE HAD UNDERESTIMATED VAL UE OF SALE CONSIDERATION OF HIS HOUSE PROPERTY BY ADOPTING LOWER RATE AS ON DAT E OF SALE AND FAIR MARKET VALUE AS ON 1-4-1981 WAS ALSO NOT CORRECTLY TAKEN - HE REFERRED VALUATION TO DVO UNDER SECTION 55A - WHETHER ASCERTAINMENT OF FA IR MARKET VALUE WITH AID OF DVO'S REPORT AS REFERRED TO IN SECTION 55A WOULD HAVE NO RELEVANCE FOR PURPOSE OF DETERMINING FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER OF CAPITAL ASSET FOR PURPOSES OF SECTION 48 AND THUS, REFERENCE TO DVO FOR ASCERTAINING FAIR MARKET VALUE OF CAPITA L ASSET AS ON DATE OF SALE WAS WHOLLY REDUNDANT - HELD, YES - WHETHER IN RESPE CT OF FAIR MARKET VALUE AS ON 1-4-1981, SINCE ASSESSEE RELIED ON REGISTERED VA LUER'S REPORT, ASSESSING OFFICER COULD NOT REFER SAME UNDER CLAUSE(B) OF SEC TION 55A - HELD, YES [PARAS 11,12 &16][LN FAVOUR OF ASSESSEE] 13. ASSESSEE RELIED ON A JUDGMENT OF SUPREME COURT IN T HE MATTER OF CIT VS. GILLANDERS ARBUTHNOT & CO. [1973] 87 ITR 407 (SC) W HEREIN IT IS HELD: SECTION 48 OF THE INCOME-TAX ACT, 1961 [CORRESPOND ING TO SECTION 12B OF INDIAN INCOME-TAX ACT 1922] - CAPITA GAINS - COMPUT ATION OF - ASSESSMENT YEAR 1947-48 - ASSESSEE-FIRM SOLD CERTAIN SHARE AND SECURITIES HELD BY IT TO COHPANY ON 28-2-1947 WHICH WAS ADMITTED AS PARTNER IN FIRM WITH 99 PER CENT SHARE IN GOODWILL AND PROFITS OF INN FOR CERTAIN CO NSIDERATION - WHETHER SINCE SECTION 128 WAS INCORPORATED INTO ACT WITH EFFECT F ROM 1-4-1947, AT TIME SALE TRANSACTION TOOK PLACE SECTION 12B WAS NOT PART OF ACT AND SO FIRST PROVISO TO SECTION 12B(2) OF 1922 ACT WAS NOT ATTRACTED ON FAC TS OF CASE - HELD, YES ITA NO 964/A HD/2017 . A.Y.2012-13 13 14. SINCE SALE OF SHARES AT FACE VALUE WAS BY MUTUAL UN DERSTANDING AND BY CONSENT OF ALL DIRECTORS BECAUSE AMIT INDUBHUSHAN BAKSHI WA S INSTRUMENTAL IN GETTING THE INVESTOR WHO CONTRIBUTED ALLOT FOR BENEFIT OF C OMPANY. WE DO NOT FIND ANY ILLEGALITY IN TRANSFER OF SHARES AT FACE VALUE I.E. RS. 10 PER SHARE. 15. RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENTS OF H IGH COURT AND SUPREME COURT, WE ALLOW APPEAL OF THE ASSESSEE AND CANCEL O RDER PASSED BY THE LD. PR. CIT U/S. 263. 16. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 31 - 12- 2019 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 31/12/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD