TaxTMI 
TaxTMI 
2016 (1) TMI 1370
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....hunath Bose and Sri Bishwanath Bose for Rs. 48,00,000/- and disclosed the same in its balance sheet. The Learned AO observed that the value determined by the stamp valuation authority for the subject mentioned properties were Rs. 1,05,13,370/- and accordingly treating the same to be the fair market value of the properties, sought to make an addition of Rs. 57,13,370/- as unexplained investment in the assessment. On first appeal, the Learned CITA held that the adoption of fair market value as determined by stamp valuation authority as actual sale consideration of the property is not warranted as admittedly the assessee is only the purchaser of the property and not the seller and accordingly the provisions of section 50C of the Act would not be applicable in the facts of the case. 2.2. The Learned DR argued that no defects were pointed out by the assessee in the valuation done by the stamp valuation authority and relied on the decision of Hon'ble Rajasthan High Court in the case of Smt Amar Kumari Surana reported in 226 ITR 344 (Raj) and vehemently pleaded for confirmation of the order of the Learned AO. In response to this, the Learned AR vehemently supported the order of the Lea....
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....rchase of the property. In this case, AO made addition simply on the basis of the valuation taken for stamp duty by the subregistrar , even after making further inquiries , which were not relied by him. Therefore, by respectfully following the abovenoted decision of the Jodhpur Bench (79 TTJ 178) , we confirm the impugned finding and dismiss ground no. 3 of revenue's appeal." 2.3.1. We also find the valuation adopted by stamp valuation authority is only for the purpose of capital gain as prescribed u/s 50C of the Act which has got very limited scope. This legal fiction has been created for computation of capital gain only in the case of seller of any asset. We hold that the same cannot be extended in the case of the purchaser to estimate the undisclosed investment. Reliance in this regard is placed on the decision of Chandigarh Tribunal in the case of ITO vs Optec Disc Manufacturing dated 30.6.2008 reported in (2008) 11 DTR (Chd) (Trib) 264 , wherein it was held : "The second evidence with the AO is in the shape of determination of market value by the State Revenue authorities for the purpose of computing payment of stamp duty. Clearly, adoption of such market value can....
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....tion as being passed on to the seller by the purchaser in the absence of any admissible evidence. 2.3.3. Reliance is also placed on the decision of the Hon'ble Supreme Court in the case of K.P.Varghese vs ITO reported in (1981) 131 ITR 597 (SC) , wherein it was held : "The onus of establishing that the conditions of taxability are fulfilled, is always on the revenue. It is for the revenue to show that there is an understatement of the consideration. It further laid down that to throw the burden of showing that there is no understatement of the consideration on the assessee, would be to cast an almost impossible burden upon him to establish the negative. " 2.4. Provisions of section 50C not applicable to buyer We find that section 50C is a deeming provision, which is applicable only for the purpose of section 48. The latter section spells out the mode of computation of capital gain. To put it simply, the substitution of 'full value of consideration received' with 'the stamp value' in terms of section 50C, is applicable in the hands of the seller of the property who has to compute capital gains u/s 48 pursuant to the transfer of a capital asset....
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....etrospectively. Once this provision is not applicable, the ratio decided in the case of K.P. Varghese (supra) and Shivakami Co. (P.) Ltd. (supra) would apply leaving no scope for making addition in the circumstances as are prevailing in the instant case. 2.5. In view of the aforesaid findings and judicial precedents relied upon hereinabove, we hold that no addition could be made in the hands of the assessee buyer and hence we find no infirmity in the order of the Learned CIT(A). Accordingly, the ground no.1 raised by the revenue is dismissed. 3. The next ground to be decided in this appeal is as to whether an addition in the sum of Rs. 89,60,000/- towards share capital could be made in the facts and circumstances of the case. 3.1. The brief facts of this issue is that the assessee was in receipt of the following monies during the asst year under appeal towards share application money :- From body corporate Trimudra Credit (P) Ltd 19,00,000 Long View Trade & Credit (P) Ltd 10,00,000 Panoram Fiscal Services (P) Ltd 10,00,000 Tropex Suppliers (P) Ltd 10,00,000 Trade Link Carrying Co (P) Ltd 10,00,000 ....
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....y the assessee to various parties to the tune of Rs. 2,90,20,000/- out of monies lying in the opening balance of share application money (Rs. 2,00,60,000/-) and out of monies received during the year (Rs. 1,21,60,000) , leaving a balance in share application money to the tune of Rs. 32,00,000/- at the end of the asst year under appeal.The assessee filed copies of balance sheet of 5 body corporate except Belfast Engineering (P) Ltd (Rs. 3,50,000/-) to explain that the parties had sufficient sources in their balance sheet to invest in shares of the assessee company. 3.2. The Learned AO did not raise any query regarding share application money received from Meena Devi Agarwal (Wife of Shri Dilip Kumar Agarwal-Director) to the tune of Rs. 25,00,000/-and accepted the same as genuine. He found that the balance sheets of 5 shareholders were filed who had invested Rs. 64,00,000/- and no bank statements of those new shareholders were filed. The Learned AO observed that regarding balance share capital of Rs. 25,60,000/-, no details were filed. He also observed that none of the shareholders were produced before him. Accordingly he held that the identity and creditworthiness of the new shar....
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.... share applicants, genuineness of transaction and creditworthiness of share applicants (except Belfast Engineering P Ltd - Rs. 3,50,000/- ) , the decision of the Hon'ble Apex Court in the case of CIT vs Lovely Exports (P) Ltd reported in (2008) 216 CTR 195 (SC) would be squarely applicable to the facts of the instant case and accordingly deleted the addition. Aggrieved , the revenue is in appeal before us on the following ground:- "2. 2nd ly the Assessing Officer made an addition of Rs. 89,60,000/- under the head fresh share capital introduced during the financial year treating it as unexplained cash credit. The ld.CIT(A) deleted the same addition based on the condition as laid down by the Apex Court in the case CIT Vs. Lovely Exports (P) Ltd (2008) 216 ITR 195(SC). However, the ld. CIT did not consider the fact that none of the new share holders were produced before the AO. " 3.4. We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. The facts stated hereinabove remain undisputed are not reiterated herein for the sake of brevity. We find that the assessee had given the complete details....
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....ion u/s 68 of the Act made in respect of allotment of shares to 20 individuals for an amount of Rs. 57,00,000/- in the facts and circumstances of the case. 4.1. The brief fact of this issue is that the assessee had received share application monies from 20 individuals in the earlier year which were kept in share application money account. During the asst year under appeal, the assessee allotted shares to these 20 individuals out of transferring the monies from share application money account to share capital account. The details of 20 individuals are reflected in page 6 & 7 of the Learned CIT(A) order. The Learned AO asked the assessee to produce the shareholders before him. He found that the assessee did not do so but furnished copies of pay orders used for payments to the assessee company and also furnished income tax particulars and balance sheets of all the shareholders. The Learned AO on analyzing all the balance sheets observed that the shareholders have paltry income and small savings and none of them have any bank account and huge cash balances were shown in their hands out of which pay orders were obtained. Based on this, the Learned AO concluded that these shareholders....