Tribunal overturns CIT(A)'s order, deems addition on share sale consideration incorrect. Appeal allowed.

The Tribunal found the order of the Ld. CIT(A) erroneous and bad in law. The addition of Rs. 1,07,66,220/- on the sale consideration of shares was deemed incorrect. The appeal was allowed, and the addition was deleted.

---

---

Issues Involved:
1. Whether the order dated 12.02.2020 passed by the Ld. CIT(A) is erroneous and bad in law.
2. Whether the Ld. CIT(A) erred in sustaining the addition of Rs. 1,07,66,220/- made by the AO on account of increase in sale consideration of shares.

Summary:

Issue 1: Erroneous and Bad in Law Order
The appellant argued that the order passed by the Ld. CIT(A) was erroneous and bad in law. The Tribunal reviewed the case facts, noting that the assessee company declared Long Term Capital Gain (LTCG) from the transfer of shares sold on 28/4/2008 at Rs. 13.50 per share, while the market rate was Rs. 20.50 per share. The AO questioned the valuation method and concluded that the full value of consideration should be Rs. 20.50 per share, leading to an addition of Rs. 1,07,69,220/-. The Ld. CIT(A) upheld this addition.

Issue 2: Addition of Rs. 1,07,66,220/- on Sale Consideration of Shares
The Tribunal examined whether the addition of Rs. 1,07,66,220/- was justified. The assessee contended that the sale price was based on an agreement dated 11.01.2008, where 60.69% shareholders agreed to sell their holdings at Rs. 13.50 per share, complying with SEBI regulations. The Tribunal noted that the transaction was an off-market deal, and the consideration was as per the agreement, not the market price on the transfer date. The Tribunal referenced multiple case laws, including CIT vs. Gillanders Arbuthnot & Co. (1973) 87 ITR 407 (SC), which established that the full value of consideration in section 48 refers to the consideration in the sale deed, not the market value. The Tribunal found no evidence of malafide intent or fraud by the assessee.

The Tribunal concluded that the adoption of the share value by the AO was hypothetical and not tenable. The addition of Rs. 1,07,66,220/- was deemed incorrect, and the appeal was allowed.

Conclusion:
The Tribunal held that the lower authorities erred in making and sustaining the addition of Rs. 1,07,66,220/-. The appeal of the assessee was allowed, and the addition was deleted. The order was pronounced on 14th August 2023.

---