TaxTMI 
TaxTMI 
2018 (9) TMI 720
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....o decide these three petitions are that the Indian National Congress ("INC" hereafter, also referred to as "AICC") had over a period of time advanced Rs. 90 crores to Associated Journals Ltd (hereafter "AJL"), publishers of the newspaper "National Herald", with the condition that the amounts be utilized by the latter to write off its accumulated debts and recommence its newspaper. The books of account of AJL showed that for the period 01.04.2010 to 31.03.2011, the total outstanding debt as on 01.04.2010 was Rs. 88,86, 68,976/- and as on 15.12.2010 it was Rs. 90,21,68,980/-. In the meanwhile, an application was made for the incorporation of the charitable non-profit company "Young Indian" ("YI" hereafter) on 13.08.2010, and Form 1A with Registrar was filed for availability of the Young Indian name. On 18.11.2010, a license was issued by the appropriate authority to YI which was then incorporated on 23.11.2010; M/s. Suman Dubey and Sam Pitroda were its founder members and founder directors. On 13.12.2010, the first Managing Committee meeting took place; Mr. Rahul Gandhi was appointed as Director (non-shareholder); Mr. Motilal Vora and Mr. Oscar Fernandes were nominated as Ordinary Me....
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....m FY 2010-11. The income tax returns of the three petitioners before this Court, were dealt with and assessment orders made, on various dates. With these common basic facts, the individual circumstances and facts of the three petitioners are discussed below. 5. W.P.(C) 8293/2018 pertains to Mr. Rahul Gandhi for AY 2011-12. This assessee [hereafter referred to as "Mr. Rahul Gandhi"] filed a return of income declaring Rs. 68,12,018/- which included income from house property and from other sources. After some examination and consideration of details, the income returned was accepted by a scrutiny order dated 30.09.2013 by the Assessing Officer (AO) under Section 143(3). In these circumstances, on 31.03.2018, Mr. Rahul Gandhi received an e-mail from the ACIT, i.e. the AO [hereafter "the ACIT"] at 11.25 PM, intimating that notice under Section 148 for the relevant period, i.e. AY 201112 was issued. A copy of the notice was not, however, attached; the assessee received it on 02.04.2018, through speed post. On 11.04.2018, yet another notice - dated 31.03.2018, but this time containing the digital signatures of ACIT were received through e-mail by Mr. Rahul Gandhi. Acting through his C....
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....s is plainly erroneous and cannot be the basis of a reassessment. It is also urged that since Mr. Rahul Gandhi was a shareholder of YI - a non-profit and charitable company, he was under no obligation to disclose the value of his shares in the manner that the Revenue alleges. In this regard, it is argued that the said provision, i.e. Section 56(2)(vii) is inapplicable in the issue of fresh shares. The specific ground articulated on behalf of the petitioner Mr. Rahul Gandhi is that second proviso to Section 56(2)(vii) (c) (ii) enacts certain exceptions to the provision one of which is that if any property is received by an individual from any Trust or institution, including an institution registered under Section 12(AA), Section 56(2)(vii) could not apply. 7. It is also alleged that an order subsequently cancelling the registration granted to YI, on 26.10.2017, with retrospective effect is of no avail in view of decisions of this Court and the Allahabad High Court. The reliance placed upon the TEP is attacked as vitiated because the revenue has acted on stale grounds. It is also alleged that the AO should have made independent investigations as to whether in fact any obligation t....
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....omputing the Book Value of shares of YI which was held by him, the values of shares of AJL should be taken at NIL, though the book value of Rs. 902168980 of the company's shares were ignored. It is contended that besides the fact that this is factually and legally wrong, this Court ought not examine the issue as that would entail scrutiny on merits which is impermissible since the limited scope of these proceedings is to see whether reopening of assessment was valid. 9. Mrs. Sonia Gandhi is the petitioner in W.P. (C) 8482/2018. She too, like Mr. Rahul Gandhi impugns the reassessment notice; the grounds urged are similar. She acquired shares in Young Indian (YI), in 2011. Her return disclosed Rs. 17,92,092/-, consisting of income from other sources; the return of income was accepted under Section 143(1) of the Act by the AO/ACIT. Alleging that income had escaped assessment, the ACIT issued reassessment notice under Section 148again on 31.03.2018 at 11:28 PM through email. A notice was received on 02.04.2018, through speed post; a third intimation, with scanned copy of the notice, was received electronically, with digital signature of the ACIT, on 11.04.2018. Return of income was ....
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....n 143(1) of the Act. On 31.03.2018, like in the case of the other petitioners, he received intimation stating that he would be reassessed under Section 147/148 of the Act by an email at 11:22 PM. He received a notice by speed post, which contained a scanned copy of the earlier notice on 02.04.2018; Mr. Fernandes filed his return on 17.04.2018 and requested for a copy of the "reasons to believe", which was provided to him. Thereafter, like Mr. Rahul Gandhi and Ms. Sonia Gandhi, he sought inspection of the record which was partly granted. He preferred objections to reassessment notice which was rejected on 03.08.. The grounds urged by Mr. Fernandes are similar to that in Ms. Sonia Gandhi's petition; i.e. that the reassessment notice is illegal as it was barred by limitation prescribed under section 149 of the Act; the sanction under section 151 of the Act was mechanical; that the impugned notice is in of violation of principles of natural justice; provisions of section 56(2)(vii) are not applicable to the present case; that as a matter of fact, no income which has escaped assessment; that the revenue has taken contradictory stands in the case of the Petitioner as against their stands....
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....or Directors was exempted in respect of not-for-profit companies. As a consequence, Directors such as Mr. Rahul Gandhi was exempted from disclosure of interest; in fact, there could not have been any interest that needed disclosure under the Income Tax Act. Such being the position in law, stressed Mr. Datar, Mr. Rahul Gandhi could not be faulted for not stating any detail with respect to the acquisition of shares in YI in the period covered by 2010-11. Mr. Datar relied upon the judgment of the Supreme Court reported as Commissioner of Wealth Tax v. Arvind Narottam (Individual) AIR 1988 SC 1824, especially the following observations: "a mere right to be considered for distribution of the income or of the corpus of the Trust Fund cannot be regarded as an 'interest' since it was not capable of valuation." 14. It is, therefore, urged that as the beneficiary under Trust is merely entitled to income or benefits and has no interest in a trust, likewise, the director in a Section 25 company is at least similar, if not on a higher pedestal and does not have any interest which needed disclosure in his or her income tax returns. The second aspect which related to the non-disclos....
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....to be set aside. 16. Mr. Chidambaram argued that a proper and valid notice under Section 148, with the AO's digital signatures (as obligated by Centralized Communication Scheme, 2018 dated 22.02.2018 issued by the CBDT in Notification No. 8/2017 and dated 29.09.2017 Notification No. 1/2018 dated 12.02.2018), was not issued before limitation set in at midnight on 31.03.2018. Hence the proceedings are barred by limitation. It is contended that the impugned order by the AO rejecting the objections to the reasons is violative of the principles of natural justice. Upon receiving the reasons recorded (on 15.05.2018) the assessees demanded copies of the documents relied upon in the said reasons; the AO, however, rejected these requests resulting in denial of principles of natural justice. Reliance is placed in this regard, on Sabh Infrastructure Ltd. v. Assistant Commissioner of Income Tax (judgment dated 25.09.2017 of this court in W.P.(C) 1357/ 2016). 17. Learned senior counsel submitted that the revenue's position indicates contradictory and inconsistent stands. The basis for making valuation in the present writ petition is to treat the debt assigned of Rs. 90 crores (approximate....
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....ncome Tax 27 ITR 1 (SC); R.C. Cooper vs. Union of India 1970 (1) SCC 248 and Bharat Hari Singhania & Ors. v Commissioner of Wealth Tax 207 ITR 1 (SC) in support of this argument. 21. It is argued that arguendo, there were income when YI converted the debt (owed by AJL) into equity, the income may be taxable in the hands of YI; it cannot be the income of AJL and the income of the petitioners, in the same assessment year. It is submitted that in the present case, the same income (allegedly arising out of the conversion) is sought to be taxed in the same assessment year (AY 2011-12) in the hands of YI and its shareholder(s). 22. Both counsel (for the petitioners) stated that the only section invoked to allege there was income that had escaped assessment is Section 56(2)(vii)(c)(ii). The condition is that the assessee receives from any person any property, other than immovable property for a consideration which is less than the aggregate fair market value of the property. In the present case, on 22.01.2011, the assessees received-in case of Ms. Sonia Gandhi- 1900 shares (550 from an existing shareholder and 1350 by way of fresh allotment on paying a consideration of Rs. 100 per s....
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....O 432 dated 18.02.1956 under section 25of the Companies Act. 26. Without prejudice to the above submission, learned counsel state that the application of Section 56(2)(vii)(c)(ii) read with Rule 11UA to the present case is deeply flawed for multifarious reasons. It is stated that firstly, the AO has applied the wrong version of Rule 11UA. The correct rule in force on 22.01.2011 uses the phrase "book value". Secondly Rule 11, in its essentials, takes note of the Assets - Liabilities of the company, YI, i.e. net worth. A-L must be divided by the total number of shares (PE). The divider is, therefore, 5000, not 1100 as incorrectly employed. The multiplier (PV) is correctly taken as 1900, the number of shares held by the petitioners. Since the divider is wrong, the calculation and the result are wrong, and hence the amount of tax that has allegedly escaped tax is wrong. No re-assessment can be made on the basis of such a fundamental error and "reason to believe" based on the said fundamental error. Thirdly the debt was for Rs. 90.21 crore. At its worst, the value of the equity converted could be Rs. 90.21 crore. But the said figure was "magically" transformed to Rs. 407 crore and th....
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....el challenged the ACIT's order rejecting the petitioners' representation, stating that the AO justified the PCIT's satisfaction on the ground that he had been "monitoring the case after receipt of the information from the investigation wing" They urge that this clearly shows that the PCIT had involved himself in the case even before the AO formed her "reason to believe". The natural and inescapable inference is that the AO acted under the instructions and guidance of the PCIT and did not independently form her "reason to believe". Hence, the initiation of the re-assessment proceedings is vitiated and illegal. Reliance is placed on Commissioner of Income Tax v. Greenworld Corporation: 314 ITR 81(SC) and Commissioner of Income Tax v. S. Goyanka Lime & Chemicals Ltd. 56 taxmann.com 390 (MP). 30. Learned senior counsel submitted that re-assessment proceedings have been launched also against YI, in which an order of re-assessment dated 27.12.2017 has been passed. In that order, in para 8.2 it was concluded "In absence of any evidence that the AICC had actually advanced loan of Rs. 90.21 crore to the AJL and keeping in view the fact that quantum of the loan was tailor made to allot 99....
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....dering a notice under Section 147/148 is limited. The Court cannot enter into the merits of the subjective satisfaction of the AO, or judge the sufficiency of the reasons recorded, but rather, determine whether such opinion is based on tangible, concrete and new information that is capable of supporting such a conclusion". Counsel also relied on Commissioner of Income Tax v Rajesh Jhaveri Stock Brokers (P) Ltd., (2008) 14 SCC to state that "reason to believe" cannot be read to mean that the AO has to finally ascertain the facts by legal evidence or conclusions. It is submitted that what is required is "reason to believe", but not the established fact of escapement of income. In other words, at this stage, whether the materials available can prove decisively that there was escapement of income, is not a relevant circumstance at the stage of reassessment, because the AO's opinion is based on his subjective satisfaction and appraisal of the facts and materials available with him. Reliance is placed on Income Tax Officer v. Selected Dalurband Coal Co. (P) Ltd. (1997) 10 SCC 68 and Raymond Woollen Mills Ltd. v. ITO [(2008) 14 SCC 218 (Ref to the latter, which states that "the suffici....
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....ich worked to Rs. 8,15,708/16 per share while calculating the value, in terms of Rule 11UA. 34. The learned ASG also argued that when the debt of Rs. 90.21 crore was assigned by INC to YI on 28.12.2010 there were two shareholders, viz. M/s. Suman Dubey and Shri. Sam Pitroda- both holding 550 shares of the face value of Rs. 100 each. As these individuals were existing shareholders, though YI received the assets (in the form of "debt receivable"), the ratio in Bachha F. Guzdar (supra) protected them, as existing shareholders. Explaining that when the asset of the company increases (in the form of "debt receivable"), the ASG submitted that the fair market value of its shares also increases correspondingly and, therefore, any new allotment of shares thereafter can only be at the fair market value as determined under section 56(2)(vii)(c)(ii) read with Rule 11UA. The Petitioner/assessees became shareholders on 22.1.2011 "receiving" the shares @ Rs. 100 per share which was not the fair market value (as on 22.01.2011). Accordingly the fair market value was computed under section 56(2)(vii)(c)(ii) read with Rule 11UA. The said calculation of "fair market value of shares" is also made on....
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....in response to a query under Section 142(1) he furnished a false information that he was not a director of any other company (including YI). Counsel stated that an analysis and applicability of Section56(2)(vii)(c)(ii) and Rule 11UJ read with Rule 11UA(1)(c) (b) was made by the AO along with computation of income which escaped assessment. 37. The ASG contended that it is evident from these facts that the AO not only carefully examined TEP and report of investigation wing but has also made her own enquiryand collected credible and reliable evidence in form of assessment order of YI for A.Y.2011-12 and the order of competent authority cancelling tax exemption to YI w.e.f. AY 2011-12. The AO has also brought on record the instance of concealment of information by the assessee relevant to assessment of his income. The AO too analysed the relevant provisions carefully before prima facie computing income, which had escaped assessment. The reasons recorded by the AO were approved by the competent authority under Section 151 of the Act after recording his reasons. The reassessment notice was issued on 31.3.2018 within time limit as stipulated under Section149 of the Act and served on th....
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....te to events prior to take over of AJL by YI on 26.02.2011 i.e. on allotment of share to the assessees, on 22.01.2011 whereas YI's income taxed under Section 28(iv), accrued to it as sequel to takeover of AJL by it on 26.02.2011. The argument that even if there was taxable income it cannot be taxed in hand of shareholder of YI has been raised due to an erroneous understanding of the revenue's case by the assessees and by applying a wrong taxable event. 40. Dealing next with the assessees' submission that there was no obligation to disclose any interest in a Section 25 company, as it cannot declare a dividend or part with property it was argued that the Income Tax Act does not distinguish between Section 25 company and other companies. So far as the Companies Act is concerned, Section 25 company can undertake even "commercial activities" and except the prohibition against the paying dividends to its shareholders and deploying its profits for its objects only, there are no other restrictions imposed upon Section 25 company and it is similar to any other company in all other respects. As a matter of fact, Section 25(2) makes it abundantly clear that except the limitations prescribe....
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.... i.e. Rs. 100 per share in this case and that there cannot be any increase in the value of such share when a shareholder wants to transfer it. Such assumption is attacked as unsustainable in law as well as on fact. The face value of share of any Section 25 company can be Rs. 100 -or any other amount such share would not only increase in its monetary value but is also transferable at "fair market value" and this contingency is stipulated in YI's Memorandum of Association. The portion of Memorandum of Association relevant for this purpose, relied on is reproduced below: "4.11 Upon a shareholder (other than a Founder member) ceasing to be a Member whether pursuant to Article 4.11, or by reason of the death of the Shareholder or otherwise ("Outgoing Member) he shall automatically cease to enjoy the benefits and privileges including voting rights, of a Member, and the shares if any held by the Outgoing Member ("Transfer Shares") shall be held in abeyance and the Outgoing Member or his nominee or legal heirs, as the case may be, shall be deemed to have authorised the Managing Committee in its sole and absolute discretion, to determine the person to whom the Transfer Shares shall be tr....
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....asers thereof and if he defaults in so doing, the managing Committee may receive and give a good discharge for the purchase money on behalf of the vendor / Outgoing Member and enter the name of the purchaser in the register as holder by transfer of the shares so purchased by him. e. Proceeds received from the transferred / purchaser shall be distributed to the outgoing member / transferor of shares or his legal heirs. f. However, if no such offer is made within the expiration of the said twenty one days, the Managing Committee shall buyback or cancel as per the applicable laws the shares so put up for sale as per clause (a) hereinabove mentioned." 43. The learned ASG relies on the above condition to state that every share in YI, despite its status as a not-for-profit company has its value other than face value. If any shareholder wishes to sell her or his shares the procedure contemplated is to be followed and the shares would be sold at "fair selling value". Also, points out the ASG, the assessees' contentions that YI is a Section 25 company and its shareholders have no" pecuniary interest", is fallacious and unsustainable as not only shares are sold at "fair ....
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....with Section 149(1)(b)as the jurisdictional requirement to reopen the proceedings. In other words, the said argument would not make any difference to the reopening at this stage. The formula stipulated under Rule 11 UA is as follows: 45. Lastly, the ASG denied that the Principal Commissioner had not applied the mind to the facts of the case, while approving the reassessment proposal. He relied on the handwritten note, recording approval, in this regard, (as the original records were produced for consideration of the court). The ASG relied on the Division Bench judgment of this court in Principal Commissioner of Income Tax v. Meenakshi Overseas Pvt. Ltd., ITA 651/ 2015 (judgment dated 11.1.2016) particularly the following extract: "16. ..For the purpose of Section 151(1) of the Act, what the Court should be satisfied about is that the Additional CIT has recorded his satisfaction "on the reasons recorded by the Assessing Officer that it is a fit case for the issue of such notice". In the present case, the Court is satisfied that by recording in his own writing the words: "Yes, I am satisfied", the mandate of Section 151(1) of the Act as far as the approval of the Additional CIT....
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....ither (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the AO could have jurisdiction to issue notice under Section 148 read with Section 147(a). But under the substituted Section 147 existence of only the first condition suffices. In other words, if the assessing officer for whatever reason has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment." Phool Chand Bajrang Lal v. Income Tax Officer [1993] 203 ITR 456(SC) emphasised on the veracity of information supplied previously be the assessee during the course of the regular assessment, while considering the validity of a reassessment notice; it stated as follows: "From a combined review of the judgments of this Court, it follows that an Income-tax Officer acquires jurisdiction to reopen an assessment under Section 147(a) read with Section 148 of the Income-tax Act, 1961, only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, t....
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....ld be satisfied about is that the Additional CIT has recorded his satisfaction "on the reasons recorded by the Assessing Officer that it is a fit case for the issue of such notice". In the present case, the Court is satisfied that by recording in his own writing the words: "Yes, I am satisfied", the mandate of Section 151(1) of the Act as far as the approval of the Additional CIT was concerned, stood fulfilled." In the present case, the PCIT recorded, on reassessment proposal on the file of each assessee, that inter alia, the "lifting of veil" over the tripartite "arrangement" between AICC (i.e. INC), AJL and YI to tax the assessee under Section 56(2)(vii) (c)(ii) of the Act, the sum of Rs. 48,93, 64,896/-. The PCIT, after stating this also recorded that "I am satisfied that the AO i.e. ACIT...has sufficient information in her possession which leads to reasons to believe that the assessee would have income which had escaped assessment which exceeds Rs. 1 lakh". In view of the ruling in Meenakshi Overseas (supra), therefore, the satisfaction recorded by the PCIT was adequate and in accordance with legal requirements. 50. Were the notices (of reassessment to the assessees) n....
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....t it was through a channel not deemed "regular" is not relevant. The violation of the circulars relied on at best can bespeak of irregularity, but the fact remains that all the three assessee petitioners received email intimations about the reassessment and reopening of their AY 2010-11 assessments before the end of 31.03.2018. In these circumstances, the question regarding alleged improper mode or manner of issuance of email notices does not go to the root of the matter; the notices were issued in time, and served within the time prescribed. 53. As regards mala fides (regarding hasty issuance of notices) this court has previously noticed - in the context of allegations that the PCIT had not applied the mind, that such was not the case. There was some material - in the form of investigation reports (though of 2015 vintage) and a TEP (of 2014). The revenue did not show alacrity or swiftness in proceeding to process these documents and materials; however, they cannot be termed as "stale" or irrelevant materials. Apart from a general allegation of mala fides (which is more of the kind that is frequently made under the submission of abuse of power or use of statutory discretion for ....
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....ation: x x x" 55. Here, by virtue of Section 56 (1) income from any source that is not exempted, "shall be chargeable to income tax.. if it is not chargeable to income tax under any of the heads specified in section 14, items A to E". This is clearly a deeming provision, which specifically creates a fiction that "the following income" (Section 56 (2)) is chargeable to tax. The section then enumerates what is deemed to be income; the relevant part is that "any property", other than immovable property(is acquired)"(ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration". Therefore, the differential between the fair market value and the cost of acquisition, constitutes income. The assessees had relied on Shahrukh Khan v. Deputy Commissioner of Income Tax 2018 (90 Taxmann.com 284) (Bom) in the compilation of judgments, given at the end of the submissions (not alluded to during hearing) where the revenue sought to re-open the assessment, under Section 147, alleging that there was suppression of the value of sha....
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....ements of such disclosure to directors of not-for-profit company is incorporated under section 25; and the other was with respect to exemption [from Section 56(2)(vii)(c) in respect of payments made by trusts, etc. covered by Section 12AA]. 58. The exemption granted some time in 1961 reads inter alia, as follows: SO 1578, Published in the Gazette of India, Part II, Sec 3 (ii) on 8th July, 1961 (Modified by SO 2767 dated 5-8-1964; GSR 73, dated 30-12-1965 & SO 35(E) dated January 9, 1976 "In exercise of the powers conferred by sub-section (6) of Section 25 of the Companies Act, 1956 (1 of 1956), the Central Government has directed that a body to which a license is granted under Section 25 aforesaid shall be exempt from the provisions of the said Act specified in column (1) of the Table below to the extent specified in the corresponding entries in Column (2) of the said Table: TABLE Provisions of Act Extent of exemption Section 2(45) In so far as it required the appointment of an individual to perform the duties which may be performed by a secretary under the said Act and any other ministerial or administrative duties only if he possesses the prescribed qua....
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....is exempted by the notification relied on. Section 257 empowers individuals other than retiring directors to stand for directorships. This is exempted - the reason is not far to seek because this would be provided for, having regard to the underlying charitable objectives of the notfor-profit company. Therefore, the application of this provision is exempted. Likewise, any increase in directorships or membership of the board of directors requires government sanction by virtue of section 259. This too stands exempted. Section 299 is of a similar nature 61. The tenor of provisions exempted, highlight the peculiar nature of a not-forprofit company whose affairs cannot be looked into in the same manner as in the case of a commercial entity or a company that carries on business in the normal course. In the case of a not-for-profit company like a trust the business activities are aimed solely at feeding the trust and furthering their objectives. The rigid insistence on the disclosure obligations and duties and responsibilities of directors, therefore, would detract the effort of feeding charity and furthering charitable objectives. 62. This, however, does not automatically mean t....
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....at: "It is apparent that the assessee was entitled only to the minimum prescribed in each of the deeds of settlement. Whether or not be received any further amount out of the net income of the Trust Fund was left entirely in the discretion of the Trustees. There was no right in the assessee to any portion of the net income in excess of the minimum guaranteed to him. It is the minimum alone which he could claim as his property. So also, on the distribution of the accumulated balance as capital at the end of the stipulated period there was no right in him to receive any part thereof. It was open to the Trustees to ignore him altogether and they could pay it to such other members of the family as they chose. 7. In support of the proposition that the expression 'property' is a term of the widest amplitude and that every possible interest is includible therein we are referred to Ahmed G.H. Ariffand Others v. Commissioner of Wealth-Tax, Calcutta, [1970] 76 I.T.R. 471. I have no doubt that the expression 'property' must bear a comprehensive import. The question remains whether what is conveyed under the three deeds of settlement to the assessee is a right to anything....
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....sell the shares of the outgoing member at the price which the Auditor of the Company for the time being shall certify by writing under his hand to be in his opinion the fair selling value thereof as between a willing vendor and a willing purchaser." The reference to the monetary nature of the transaction - i.e. fair market value, certified by the auditor, means that the promoters and shareholders of the company visualize that the shares of YI - a not-for-profit company- can increase, depending on its activities and income derived by it. As a result of the above analysis, this court is of opinion that the assessees's argument about nondisclosure of their interest upon acquiring the shares (on account of their non taxability at that stage) is unpersuasive; however, it is open to them to urge this on the merits. 66. The next issue which this court would discuss, is the formula applied. The petitioners had urged that the amended rule and not the rule which applied when the shares were acquired, was applied to re-open their assessments. The relevant rule, applicable with effect from 18.02.2010 reads, inter alia, as follows: "In exercise of the powers conferred by section 295 of....
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....g contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares. PE = Total amount of paid up equity share capital as shown in Balance Sheet. PV = the paid up value of such equity shares. (c) the fair market value of unquoted shares and securities other than equity shares in a company which are not listed in any recognized stock exchange shall be estimated to be price it would fetch if sold in the open market on the valuation date and the assessee may obtain a report from a merchant banker or an accountant in respect of such valuation." The fair market value of unquoted equity shares, in terms of the above rule is calculable by deducting from the book value of assets in the balance sheet of the company (with the permissible deductions, called "A") the book value of liabilities (without including paid up capital of equity shares, provision for dividends, reserves, credit balance of P/L account, provision for taxation, etc called "L"), multiplied by the paid up value of such equity shares (PV) and divided by the total amount of paid up equity share capital as shown in Balance Sheet (PE) (Expressed in the rule as Fair value= (A-L) *....
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....mission or failure to disclose fully and truly all material facts necessary for his assessment for that year ". It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts are material, and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his Possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise-the assessing authority has to draw inferences as regards certain other facts; and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable. Thus, when a question arises whether certain income received by an assessee is capital receipt, or revenue receipt, the assessing authority has to find out what primary facts have been proved, what other....