AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2019 (6) TMI 1211
X X X X Extracts X X X X
X X X X Extracts X X X X
....ies' i.e. On 29/10/2018, 29/01/2019, 05/03/2019, 06/3/2019, and 19/3/2019 excluding request for adjournments moved. On 19/3/2019, bench asked certain details to be filed which were ultimately filed on 26/3/2019 and finally hearing was concluded on that date. Assessee has filed paper books and both the parties filed written notes. Further, both the parties relied up on several judicial precedents, which would be considered at the relevant point of time. All these appeals are heard together and therefore, disposed of by this common order. 2. First, we take up the appeals filed by assessee Mrs. Radhika Roy for AY 2009-10 in ITA NO. 2019/Del/2017 for AY 2009-10 raising following Grounds of appeals:- "1. That the learned Commissioner of Income Tax (Appeals), 42, New Delhi has erred both in law and on facts in sustaining the initiation of proceedings under section 147 of the Act and, completion of assessment u/s 147/143(3) of the Act which were without jurisdiction and deserved to be quashed as such. 1.1 That while upholding the assumption of jurisdiction the learned Commissioner of Income Tax (Appeals) has failed to appreciate that reasons recorded were based on fac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he addition the learned Commissioner of Income Tax (Appeals) has failed to appreciate the scope and ambit of provisions contained in section 45(2A) read with section 2(42A) of the Act and further incorrectly applied Circular no. 768 dated 24.6.1998 to the facts of the case of the appellant and as such addition made and sustained is untenable. 2.2 That the learned Commissioner of Income Tax (Appeals) having not disputed that the assessee held and owned 1,66,60,658 shares on 19.6.2008 which were held since 28.2.1996, could not have arbitrarily reckoned the period of holding of shares from the date of shifting to the joint account and computed short term capital gain instead of long term capital gain as claimed by the appellant. 2.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that all what had happened was that shares held by the assessee and his wife and duly reflected in their individual demat account were shifted for the sake of convenience in a joint demat account and by so doing it did not amount to any transfer made and otherwise too for the purpose of determination of the period of holding such shares, the period of holding o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion and otherwise too has no evidentiary value. 3.3 That the learned Commissioner of Income Tax (Appeals) has also failed to appreciate that annual value of property cannot exceed the municipal valuation and as such addition sustained is not in accordance with law, more particularly in respect of Mussorie property. 4. That the learned Commissioner of Income Tax (Appeals) has failed to comprehend that municipal value of property at Hauz Khas was Rs. 1,53,586/- and such a value represents annual value of the property u/s 23(1) of the Act and thus e ought to have followed the judgment of Full Bench of Hon'ble Delhi High Court in the case of CIT v. Moni Kumar Subba reported in 333 ITR 38 logically directed the Assessing officer to adopt the annual value at Rs. 1,53,586/- instead of Rs. 3,60,000/-. It is therefore, prayed that it be held that assessment made by the learned Assessing Officer, and sustained by the learned Commissioner of Income Tax (Appeals) is without jurisdiction. It be further held that additions made of Rs. 1,33,19,673/- and upheld by the learned Commissioner of Income Tax (Appeals) deserves to be deleted and appeal of the appellant is thus ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....igation Wing. 1.5 That the learned Commissioner of Income Tax (Appeals) has otherwise too failed to appreciate that there was no tangible, relevant, specific and reliable material on record on the basis of which, it could be held that, there was any reason to believe with the learned Assessing Officer that income of the appellant had escaped assessment and, in view thereof, the proceedings initiated were illegal, untenable and therefore, unsustainable. 2. That the learned Commissioner of Income Tax (appeals) has further erred both in law and on facts in upholding an addition of Rs. 1,30,30,394/- representing alleged short term capital gain on sale of Rs. 6,25,000/- shares of M/s. NDTV Ltd by the appellant in the year under consideration 2.1 That while upholding the addition the learned Commissioner of Income Tax (Appeals) has failed to appreciate the scope and ambit of provisions contained in section 45 (2 A) read with section 2(42A) of the Act and further incorrectly applied Circular no. 768 dated 24.6.1998 to the facts of the case of the appellant and as such addition made and sustained is untenable. 2.2 That the learned Commissioner of Income ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... under the head house property from following properties: Sr. No. Property Amount (Rs.) i) B-13, Greater Kailash-I, New Delhi 34,268 ii) One House at Dehradun 35,469 iii) Property at Mussorie 2,19,542 Total 2,89,279 3.1 That there is no material or valid basis adopted by the learned Commissioner of Income Tax (Appeals) to enhance the annual value declared by the appellant and in absence thereof, addition sustained is illegal, invalid and untenable. 3.2 That while upholding the addition the learned Commissioner of Income Tax (Appeals) has failed to appreciate written submissions filed by the appellant wherein it was stated that comparable instances adopted are non comparable and inspector's report is without jurisdiction and otherwise too has no evidentiary value. 3.3 That the learned Commissioner of Income Tax (Appeals) has also failed to appreciate that annual value of property cannot exceed the municipal valuation and as such addition sustained is not in accordance with law, more particularly in respect of Mussorie property. 4. That the learned Commissioner of Income Tax (Appeals) has failed t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r Of Parliament and Chairman, standing committee on Finance. During the course of investigation into the allegations, the details of capital gains claimed by Dr Prannoy Roy and Mrs. Radhika Roy, promoters of the NDTV limited were also examined. During the investigation proceedings, it was found that Dr Prannoy Roy and Mrs. Radhika Roy were required to submit details of shares purchased, sold/transferred of NDTV limited. It was gathered that they were maintaining three different Securities Dematerialization account [demat] accounts i.e. One joint demat account and two individual demat accounts. These demat accounts were maintained in different depositories over the period. The various transactions undertaken by them in these accounts were also tabulated as under:- Annexure-A Prannoy Roy Date Particulars Whether through Stock Exchange or off market No. of shares Cost of Acquisition Cost per share Total consideration received LTCG/ (LTCL) Cumulative Balance 01/04/07 O.B. 1,66,53,300 54,512 0.00 1,66,53,300 22/01/08 Transferred to Joint account Stock Exchange 4,75,500 00 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Balance 26/12/07 Purchase d in open offer Stock Exchange 48,35,850 2,07,95,93,242 430 48,35.850 22/01/08 Transferred from individual account Stock Exchange 9,51,000 3,113 0 57,86,850 17/03/ 08 Transferred from individual account Stock Exchange 1,50,000 491 0 59,36,850 17/03/08 Transferred from individual account Stock Exchange 1,50,000 491 0 . 60,86,850 19/06/ 08 Sold Stock Exchange 12,50,000 4,092 450 56,28,39,983 56,28,35,892 48,36,850 09/03/10 Sold to RRPR Off market 48,36,850 2,07,95,93,242 140.00 67,71,59,000 (1.40,24,34,242 ) 0 9. In that report, it was further noted that Dr Roy & Radhika Roy have opened joint demat account. The first lots of 4835850 shares of NDTV limited were purchased on 26/12/2007 in open offer through/exchange at Rs. 430/- per share resulting into cost of acquisition of Rs. 2,07,95,15,500/-. Thereafter, total 1250000 shares of NDTV limited were transferred from their individual demat account to the joint demat account on....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... long-term capital gain disclosed in the return of income Rs. 1,085,300,000 2 short-term capital gain to be assessed Rs. 12,700,000 It is further stated in the report that the long-term capital gain and shortterm capital gain accrued to Dr Prannoy Roy for financial year 2008 - 09 would also be modified accordingly in similar manner. The report further stated that assessing officer is advised that necessary proceeding should be initiated in the case of Dr Prannoy Roy and Mrs. Radhika Roy for AY 2009 - 10 in order to tax short-term capital gain of Rs. 12,700,000/- in each case and to take further applicable actions such as levy of interest and penalty. 10. Based on this information received and on perusal of return of income filed by the assessee, the learned AO recorded the reasons for reopening extracted from page no 43 of the paper book as under:- "1. The assessee has filed E- return declaring total income of Rs. 1,67,64,284/-. A detailed information regarding wrong disclosure of capital gains have been received from The DDIT (Investigation) Unit - I, New Delhi, vide letter dated 9/6/2011, intimating that Dr Prannoy Roy and Mrs. Radhika Roy have opened....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in nor short-term capital gain has been disclosed. I, therefore, have reason to believe that on account of failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment for the above assessment year, the short-term capital gain income of Rs. 1.27 crores (as discussed above) chargeable to tax, has escaped assessment within the meaning of provision of section 147 of the act. No assessment u/s 143 (3) was completed. Therefore notice u/s 148 is being issued to the assessee." 11. Thereafter, on 8/2/2013, assessee was asked to show cause as to why income from shares sold out of the joint demat account of the assessee with her husband on 19/6/2008 should not be treated as short-term capital gain. To this, assessee filed her reply dated 27/2/2013 and submitted that to facilitate sale of 1250000 shares jointly on 19/6/2008, equal number of shares i.e. 625000 shares from individual account of assessee and her husband were transferred to the joint demat account wherein total shares 1250000 were transferred. It was further submitted that the assessee is having several demat accounts, which are held by her in her individual capacity. Besides thes....
X X X X Extracts X X X X
X X X X Extracts X X X X
....edged as on 1/1/2008. Further on 30/4/2008 there was unpledged of 37,30,000 shares, thus , on 30/4/2008 only 2,70,000 shares were pledged out of 48,35,850 equity shares. Further actual sale of 1250000 equity shares was transacted on 19/6/2008. Therefore on the date of sale of shares of 12,51,000 shares on 19/6/2008 , there were 45,65,850 (48,35,850 - 2,70,000) free shares were available. Hence, the submission of the assessee was found to be incorrect. iv. The shares would have been sold from the individual demat accounts. Hence, there was no need to transfer shares from individual demat accounts to Joint account by both the assesses. v. Assessee has not declared any short-term capital gain in return of income and long-term capital gain of Rs. 132,65,14,725/- is claimed as exempt. Therefore AO noted that the assessee has manipulated the 'cost of acquisition' and 'period of holding' of these shares to claim the capital gain as exempt and assessee has adopted dubious means under the garb of tax planning. vi. The learned AO applied the decision of the honourable Supreme Court in case of McDowell & Co Ltd vs CTO 22 taxmann 11 and held that the transaction show....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... therefore the addition of Rs. 12,48,000/- was made further with respect to the above two properties at Dehradun. Further the assessee owns a property at B - 213, GK - 1, New Delhi that in the statement of affairs is shown as deemed to be let out and the ratable value of the same is shown to be Rs. 43,664 resulting into fair rental value of Rs. 2,16,000/-. Assessee treated 50% of the same and determined annual value of Rs. 1,08,000/- in the hands of the assessee. The learned assessing officer noted that since the property is located in one of the posh colonies of Delhi where actual rent is quite high, therefore, he determined the minimum property rent of the property at Rs. 2,00,000/- per month, considering 50% share of the assessee determined at Rs. 1,200,000 and therefore the net addition of Rs. 10,92,000/- was made as assessee has only declared Rs. 108000/- as income from that property. The learned AO granted 30% deduction under section 24 of the income tax act and determined additional income under the head income from house property of Rs. 2074800/-. Another disallowance of Rs. 2750/- u/s 80 (G) was made. Consequently, the total income of the assessee was determined at Rs. 3,1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eopening the assessment u/s 148 of the income tax act, the learned authorised representative, Shri Sachit Jolly, referred to the paper book filed by the assessee. He referred to page number 7 of the paper book wherein in 'schedule EI' of the income tax return form ITR - 2, assessee has disclosed at serial number 3 long-term capital gain from transactions on which security transaction taxes are paid amounting to Rs. 1,36,67,68,705/-. He further referred to page number 2 which is the 1st page of ITR - 2 in part B - TI , the long-term capital gain is shown as Nil for the reason that such long-term capital gain is exempt. He further referred to page number 9 of the paper book, which is the computation of the total income, wherein assessee has disclosed the long-term capital gain on sale of shares of New Delhi television limited of Rs. 1,36,67,68,704.42 as exempt under section 10 (38) of the act. He further referred to page number 10 of PB, where the calculation of the capital gain for assessment year 2009 - 10 was given where under the heading 'B' the assessee has disclosed sale consideration of 625000 shares sold on 19/6/2008 holding that same is a long-term capital gain and therefore....
X X X X Extracts X X X X
X X X X Extracts X X X X
....icer, nothing more than DDIT report is recorded in the reasons. He further referred to the decision of CIT V Atul Jain 299 ITR 383 and submitted that there should be a live link between the reasons recorded. He further submitted that though the assessment is concluded under section 143 (1) of the act but there has to be a cogent reason which must exist and the borrowed reasons cannot be a basis for reopening of the assessment proceedings. He submitted that the facts in the case of the assessee are showing that assessee has disclosed long-term capital gain and particulars are shown in the return of income as well as the computation of total income furnished by the assessee. He further stated that on looking at the return of income filed by the assessee, learned officer has not applied his mind in saying that the no long-term capital gain was disclosed by the assessee. He stated that in fact the assessee has disclosed the long-term capital gain. He further stated that the reasons are copy paste from para number 1 and 2 from the report of the investigation wing and therefore such reasons are borrowed reasons and cannot be sustained in the eye of the law. He further stated that as the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to him, circular is not to be construed account basis but a person basis. He further referred to circular number 768 dated 24 - 6 - 1998 with respect to the 'date of transfer' and the 'period of holding' of securities held in dematerialized form under section 45 (2A) of the Act for transaction in securities and submitted that FIFO method be applied account wise. He otherwise submitted that because of the transfer from the individual account to the joint account of the shares of NDTV limited , period of holding and the cost of shares cannot change. He also referred to para number 9 and 10 of the decision of the coordinate bench wherein the above circular has been considered in ITO vs DeepChan G Shah 128 ITD 488 (Mumbai). He also referred to the decision of the coordinate bench in case of the Jafferali K Rattonsey V DCIT 23 taxmann.com 21 (Mumbai) wherein the above circular number 704 and 768 has been considered. He further referred to the decision of the honourable Delhi High Court in case of Arvind Sungloo trust vs Commissioner Of Income Tax 249 CTR (del) 294 (2012) and referred to para number 12 of that decision to show that when the securities are held by the assessee, it should ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssue having regard to the return of income and information received has reopened the case of the assessee. He therefore submitted that the allegation and the argument of the learned authorised representative that there is no application of mind by the learned assessing officer are devoid of any merit. He further referred to the return filed by the assessee at page number 10 of the paper book, which shows that the computation of total income is made, by the assessee. However, in the return of income, he stated that assessee has shown only the exempt income under section 10 of Rs. 1,36,67,68,705/- but has not shown the computation of the total income vis a vis cost of acquisition and basis of the same and period of holding of such shares. He referred to schedule no - 1, which is placed at page number 7 of the paper book being return of income and compared it with schedule BTI at page number 2 and stated that it is 'blank'. He further referred to page number 10 of the computation of the total income. He submitted that with respect to the sale of shares of NDTV of 25, 03,259 shares on 17/4/2008 , there is no dispute, however, only dispute is with respect to the sale of 6,25,000 shares ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....icer to reopen the case of the assessee. Even otherwise, he submitted that the AO was not at all aware and made known about how the assessee has computed the capital gain arising on the sale of the share what is the cost of acquisition. He further stated that according to the dematerialization rules as per the depositories act, the identification of individual sets of lots are lost, moment they are dematrealised. He referred to the relevant provisions of the demat rules and stated that they became fungible and identification of individual share is not permissible as well as not visible. He further referred to the decision of the coordinate bench in ACIT vs Nawal Kishore Kejriwal ITA No.1391/Kol/09 dated 23/4/2010 wherein it has been held that when shares are deposited for Demat, , they loses their identity such as distinctive numbers and share certificates nos. The significant feature of the dematerialized securities is that they are fungible i.e. all the holding of a particular security will be identical and inter- changeable and they will have no unique characteristic such as distinctive number, certificate number, folio number, etc. As the holdings of any securities in demateria....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ised representative of 105 ITR 531 is pertaining to the Estate Duty Provisions and does not apply to the provisions of Income Tax Act. He further referred to the circular and stated that the learned assessing officer has correctly computed the capital gain arising on sale of 625000 shares as short-term capital gain. He extensively referred to the order of the learned CIT - A and ld AO to support his claim. He further referred to the provisions of section 55 (2) (a) of the income tax act and the provisions of section 45 (2A) of the act to support the order of the learned AO and CIT - A. He also referred to the applicability of circular and submitted that when the shares are transferred from the individual account to the joint account, assets become property of joint owners. He further submitted that on reading of the circular where the reference is made to multiple demat accounts, it is held that same applies to account wise, therefore there is no merit in the argument of the ld AR that, circular applies person wise and not account wise. He further submitted that numbers of shares available with Joint account for sale was much higher than the number of shares sold, therefore, explan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....st of acquisition does not change at all. Therefore, he submitted that the orders passed by the authorities below are not sustainable. 25. We have carefully considered rival contentions and perused orders of authorities below. We have also perused the communication received by the Deputy Commissioner of income tax (AO) from the Deputy Director Of Income Tax (Investigation), New Delhi. We have also perused the reasons recorded by the learned AO reproduced in earlier paragraphs. We have also considered the various judicial precedents relied upon by rival parties. On careful consideration we found that as per ground number 1 of the appeal revolves around following dispute:- i. Whether the ld AO has correctly initiated the reassessment proceedings u/s 147 of the income tax act. ii. If, the reassessment proceedings are correctly initiated, whether the shares held by the assessee in the joint demat account are short-term capital asset or long-term capital asset and what is the 'cost of acquisition' and 'period of holding' of those shares for computation of capital gain. 26. We address the first issue that whether the learned assessing officer has correctly initiat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t letter the detailed working of the capital gain on sale of short-term capital asset was worked out and stated that short short-term capital gain of Rs. 12,700,000 have accrued to the assessee and the identical amount to the other joint owner, i.e. husband of the assessee. The letter also advised the assessing officer that necessary proceedings should be initiated in the case of the assessee as well as her husband in order to tax short-term capital gain in each of these cases. Based on this informational AO verified the return of income. Thereafter, learned assessing officer recorded the reasons for reopening of the assessment. While recording the reasons for reopening, the learned AO reproduced the information received from the DDIT in para number 1 - 3. In para number 4 the assessing officer stated that on perusal of the return it was indicated that neither long-term capital gain nor short-term capital gain has been disclosed in the return of income. Therefore, he stated that he has reason to believe that because of failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment in the above assessment year. The return of income was fi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....0 were verified by the learned assessing officer. Thus, on receipt of the information from the Deputy Director of Income Tax (investigation), New Delhi the learned AO verified the above return filed by the assessee and formed a reason to believe that assessee should have disclosed the short-term capital gain of Rs. 12,700,000 but it has not been disclosed. Thus it is evident that ld AO held that shares sold by the assessee were not long term capital assets but short term capital assets as their holding period as per demat account is less than one year. Further the cost of acquisition was also worked out on the shares acquired first, thus, short-term capital gain was worked out. Reopening was challenged before the learned CIT - A. As per para number 6.2 and 6.3 of his order he held that the learned assessing officer has independently validated the facts from the income tax return on receipt of the information from DDIT which shows that assessing officer did apply his mind before recording the reasons to reopen the case. As per para number 6.4 of the order, he held that letter from the investigation wing is not in the nature of a direction from a superior authority. However, it is a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee and her husband and also in the joint account with her husband were tabulated showing cost of acquisition, date of transactions and resultant capital gain. The above information in the demat account summary clearly showed that whether the shares were held in the joint demat account by the assessee can be said to be a short-term capital asset or not. The annexure thus computed that long-term capital gain exempt could only be Rs. 1,08,53,50,759/-. Even in the exempt longterm capital gain, the assessee has shown in her return of income in schedule BI at serial number 3 of Rs. 1,36,67,68,705/-. Therefore, there was a mismatch in the exempt long-term capital gain shown by the assessee and information received from the DDIT , coupled with the fact that in the schedule CG assessee has disclosed nil income, the learned assessing officer clearly applied his mind to this and formed a reason to believe that shortterm capital gain income of Rs. 1. 27 crores chargeable to tax have escaped assessment. Therefore, clearly on the foundation of the information, the learned assessing officer independently verified return of income and noted that assessee has not disclosed short-term capital g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ax (Investigation), New Delhi accompanied with 3 different annexure showing the date wise transactions from the various demat accounts of the assessee and her husband and also from the joint account stating that the long-term capital gain earned by the assessee is only Rs. 108,00,00,000 and the other sale of shares resulted into the short-term capital gain to the assessee. Such annexure were not merely the pointers but did indicate the escapement of income then it is compared with the return of income where the assessee has shown much higher income as exempt u/s 10 (38) of the income tax act. Over and above, the assessing officer applied his own mind to the information and examined the basis and the material of such information with the return of income and thereafter he reopened the case by issuing notice u/s 148 of the income tax act. Accordingly, the above decision does not come to the rescue of the assessee but in fact fulfils all the ingredients for the proper initiation of reassessment proceedings in the present case laid down by the honourable Delhi High Court in that particular decision. 28. The learned authorised representative has also raised an issue that the reopenin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n disclosed in her return of income. Therefore, we do not agree with the argument of the learned authorised representative that reopening is at the instance of or at the dictate of the informing authority. 29. The next argument of the learned authorised representative is that the reasons recorded by the learned assessing officer is mere reproduction of the information received and further there is no live link between the information received (tangible material) and formation of belief. The learned authorised representative for this proposition relied upon the decision of the honourable Delhi High Court in Principal Commissioner of Income Tax vs Meenakshi overseas Ltd 395 ITR 677 (2017). It has been held that he Assessing Officer being a quasi-judicial authority is expected to arrive at a subjective satisfaction independently on objective criteria. The recording of reasons to believe and not the reasons to suspect is the pre-condition to the assumption of jurisdiction under section 147 of the act. The reasons to believe must demonstrate the link between the tangible material and the formation of the belief or the reason to believe that income has escaped assessment. Honourable D....
X X X X Extracts X X X X
X X X X Extracts X X X X
....red from the individual demat account of the assessee and identical number of shares were also transferred from the day individual demat account of her husband to the joint account. This resulted into transfer of 951000 shares in the joint account on 22/1/2008 and 3,00,000 shares on 17/3/2008 totaling to 1251000 shares transferring in to the joint account from the individual account of joint holders. Further on 19/6/2008 1250000 shares were sold from the joint demat account of the assessee and her husband. Assessee claimed it to be a long-term capital asset considering the period of holding as date of acquisition in their individual demats account and also claimed cost of acquisition as incurred by them in their individual demat accounts to compute long-term capital gain. Accordingly, assessee claimed that the shares sold were long-term capital asset and the cost of acquisition was only Rs. 4092/-. The learned assessing officer held that shares transferred by the assessee from the joint demat account are short-term capital asset as they were acquired only on 28/12/2007 and are sold on 19/6/2008 on FIFO basis applicable to the dematarialsed securities. Assessing officer also conside....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the assessee and her husband were the shares which were individually held in their respective demat account and then transferred to joint demat account in AY 2008-09 and since the aggregate period of holding in the individual D-mat account and the joint D-mat account exceeded more than twelve months, the shares sold were long term capital asset and as such, any gain accruing on sale of such shares is long term capital gain. The assessee further, states that on 1.4,2007, 1,66,53,300 shares were held in the individual demat account by the appellant and likewise, her husband held 1,66,53,300 shares on 1.7.2007 in the individual demat account. The assessee contended that if the period of holding in the individual demat account and period of holding in joint demat account is calculated then the shares transferred represented long term capital asset and therefore, the gain accruing on sale of such shares is long term capital gain. The Assessing Officer has not accepted the contention of the assessee regarding claim of long term capital gain on sale of 12,50,000 shares held in joint demat account. 7.4 it may be noted that under the old system, physical share certificates had u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e FIFO method. 7.6 It may be relevant to reproduce provisions of section 45(2a) which are as under: "Where any person has had at any time during previous year any beneficial interest in any securities, then, any profits or gains arising from transfer made by depository or participant of such beneficial interest in respect of securities shall be chargeable to income-tax as income of the beneficial owner of previous year in which such transfer took place............... " "............and for the purpose of Section 48 & proviso to clause (42 A) of Section 2, the cost of acquisition & period of holding of any securities shall be determined on the basis of 'first in first out' method." 7.7 On applying the provisions of Section 45 (2A) to the facts of the case of the assessee, it is quite evident that the assessee had beneficial interest in demat shares of 'NDTV' in two separate demat accounts i.e. (individual account and joint account). There is profit or gain on transfer of 12.5 lakh NDTV shares on 19/06/2008 out of joint demat account. This profit is chargeable to income tax as income of beneficial owner (i.e. the assessee) of the pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,25,000 shares of NDTV were transferred from individual account to joint demat account (4,75,500 shares on 22.01.2008 and 1,50,000 shares on 17.03.2008). However, this argument does not hold good because 6,25,000 shares of NDTV lost its identity on becoming part of demat account due to inherent nature of demat account where identity of a particular share is lost. 7.10 Further, the assessee has drawn an analogy with valuation of stock on FIFO basis lying in four different godowns. The assessee submitted that the stock valuation is done, assessee-wise and not godown-wise. The analogy drawn in this regard with the facts of the case is completely misplaced because the purpose of FIFO in the first case is in the context of valuation of stock of a particular item at gross level at the end of the financial year whereas FIFO method in this case has been applied to ascertain the holding period and purchase value of the specific shares in the demat account. 7.11 The assessee has failed to substantiate the fact of pledging of a particular set of shares. As discussed above, the joint demat account with Indiabulls was opened with purchase of 48,35,850 shares on 26.12,2007. As ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is argument was this that FIFO method should be applied considering the person and his holding in various demat accounts and cannot be considered and applied to each demat account. To this proposition we referred to circular number 768 dated 24/6/1998 which is as under:- Circular No. 768, dated June 24, 1998. To All Chief Commissioners of Income-tax/ Directors-General of Income-tax. Subject : Transactions in securities-Determination of "date of transfer" and the "period of holding of securities" held in dematerialized form under section 45(2A) of the Income-tax Act, 1961. Sir, At present trading in securities is done through the physical movement of the scrips. Transactions are settled through the endorsement and delivery of the certificates which are also the proof of ownership of the security mentioned therein. This system is fraught with many difficulties caused due to bad deliveries and loss of share certificates. In order to remove these difficulties faced by the investors, a system of holding securities in the electronic mode at the option of an investor has now been introduced in India. The object of this system is to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of such securities held in demateralised form is effected, delivery is given or taken by making adjustments in the accounts main- tained with the depository by the two parties. The significant feature of the demateralised securities is that they are fungible, i.e., all the holdings of a particular security will be identical and inter-changeable and they will have no unique characteristic such as distinctive number, certificate number, folio number, etc. As the holdings of any securities in demateria- lised form is represented only by the account with the depository and all transfers are effected through book entries in the accounts maintained by the depository, under this system it is not possible to link the purchase of a security with its sale by means of its distinctive number, etc. It is for this reason that sub-section (2A) has been inserted in section 45 to provide for the computation of capital gains in respect of securities held in dematerialised form. This sub-section provides that for the purposes of calculating the date of transfer and period of holding in respect of shares held in dematerialised form, the FIFO method would apply. Clarifications have been sought on the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ect of the dematerialized holdings because in the case of sale of dematerialized securities, the securities held in physical form cannot be construed to have been sold as they continue to remain in the possession of the investor and are identified separately. (b) In the depository system, the investor can open and hold multiple accounts. In such a case, where an investor has more than one- security account, the FIFO method will be applied accountwise. This is because in case where a particular account of an investor is debited for sale of securities, the securities lying in his other account cannot be construed to have been sold as they continue to remain in that account. (c) If in an existing account of dematerialized stock, old physical stock is dematerialized and entered at a later date, under the FIFO method, the basis for determining the movement out of the account is the date of entry into the account. This is illustrated by the following examples : [extracted from ITRonline and underline supplied by us] On careful reading of para number 5 (b) of the above circular, it is clearly mentioned that in the depository system the investor can open and h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ow FIFO method. When the profits on sale of shares in different circumstances is taxed at different rates, under different heads, non application of standard FIFO method to each account would lead to tax anarchy. Precisely the same is the case of the assessee. Hence we hold that FIFO method will be applied in case of multiple accounts to each of the demat account. 34. The assessee has further relied up on the decision of the honourable Madras High Court in Controller Of Estate Duty vs Kamala Pandalai [105 ITR 531 ] . The facts in that case was with respect to the possession and enjoyment of the money despite the same being deposited in the bank account of the husband of the assessee and was with respect to the chargeability of estate duty on the same. There is no dispute that when the assessee transferred the shares from her individual account to the joint account along with the husband of the assessee, assessee does not lose any enjoyment or possession of those shares transferred. However the issue before us is not whether the assessee loses any enjoyment of possession of such shares but how if such shares are transferred in the joint account but the issue is whether the sales ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he broker note or the date of transfer in the demat account. Applying the circular number 704 of Central Board Of Direct Taxes, coordinate bench set aside the whole issue back to the file of the learned assessing officer to determine period of holding as in the circular itself it is mentioned that in such cases period of holding shall be reckoned with from the date of note of the broker. The above issue arose in the time when the shares were held originally in physical format and later on for sale converted into dematerialized form. In the case before us, the shares were already dematerialized and were transferred from individual account to joint account. Therefore, the facts stated before us are distinguishable with the facts decided by the coordinate bench. 37. In view of our above discussion we confirm the finding of the learned CIT - A with respect to ground number 1 and 2 of the appeal of the assessee and accordingly both this grounds are dismissed. 38. With respect to the ground number 3 of the appeal the only dispute remains is property at Mussoorie wherein the authorities below have sustained the addition of Rs. 219542/- under the head income from house property. With....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntative submitted that the valuation of the property has been carried out by the learned assessing officer as well as the learned CIT - A without any material. He further submitted that the annual value determined by the learned CIT - A also does not have the mandate of the provisions of the income tax act. 40. The learned departmental representative supported the orders of the authorities below. 41. We have carefully considered the rival contentions and perused the orders of the authorities below. With respect to the Mussoorie property the learned assessing officer in the remand report has submitted that the basis of the fair rental value has not yet been received by AO and therefore could not be submitted before the learned CIT - A. Thus, there is no information available with AO of fair rent of the property. Contrary to that assessee has submitted annual let out value of such property that is claimed to not to exceed Rs. 30,000 as mentioned by cantonment board. Therefore, the learned CIT - A should not have substituted the same on hypothetical basis. Accordingly, we direct the ld AO to take the let out value of the property as per the determination of same by cantonment bo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Commissioner of Income Tax (Appeals) that "the assessee cannot escape the taxation under the deeming provisions of section 56 of I.T. Act by making such claim of "conditional transfer" driven by mutual business interests. IT considers each transaction in the natural course of action. Therefore, the stand of the assessee regarding conditional transfer on mutual convenience of the parties cannot help the assessee to avoid taxation under the provision of Income Tax Act" is highly vague and is based on assumption which otherwise too are contrary to record, legally misconceived and untenable. 1.5 That in recording the aforesaid findings the learned Commissioner of Income Tax (Appeals) has failed to comprehend the powers vested in him u/s 251 (1 )a) of the Act; and has failed to appreciate that he had no powers u/s 263 of the Act, in as much as this issue could alone be examined by the learned Commissioner of Income Tax and not by him. 1.6 That the learned Commissioner of Income Tax (Appeals) having deleted the addition made by the learned Assessing Officer of Rs. 47,31,33,800/- which represented the alleged unexplained investment has erred both on facts and in law in m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....facts and circumstances of the case, the CIT(A) is legally justified in deleting addition of Rs. 55,88,73,564/- on account of capital gain on sale of shares quoted @ Rs. 135/- to Rs. 140/- at BSE for sale consideration @ Rs. 4/- per shares to the related party by ignoring finding of facts recorded by the Assessing Officer (the AO)? 2. Whether on facts and in circumstances of the case, the CIT(A) is legally justified in deleting addition of Rs. 55,88,73,564/- on account of capital gain on sale of shares quoted @ Rs. 135/- to Rs. 140/- at BSE for sale consideration @ Rs. 4/- per shares to the related party by ignoring meaning of the phrase "...full value of consideration...accruing..." u/s 48 of the Income Tax Act 1961 (the Act)? 3. Whether on facts and in circumstances of the case, the C1T(A) is legally justified in holding that full value of consideration accruing to the assessee of a quoted shares could be valued other than quoted price? 4. Whether on facts and in circumstances of the case, the CIT(A) is legally justified in holding that full value of consideration accruing on sale of shares in case of quoted shares at the Stock Exchange could be 2.96% o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and proceeded to analyze the transactions made by the assessee of sale of shares. He noted that on 3/8/2009, assessee sold 5781842 equity shares of NDTV limited at Rs. 4/- per share to RRPR Holdings private limited, whereas on the same day at Bombay stock exchange NDTV shares were traded within the range of Rs. 134.95 to Rs. 141.50 Per share. Therefore, he took lowest price of Rs. 135/- as the sale price of the above share as consideration received and accrued to compute long-term capital gain. Therefore according to him the full value of consideration received and accrued to the assessee on sales of this shares should be determined not at the rate of Rs. 4/- per share but @ Rs. 135/- per shares. Accordingly for computation of capital gain, ld AO took the sale consideration at Rs. 780548535/- (Shares 5781841 @ Rs. 135/- per share). Thereafter computation of capital gain the ld AO made the net addition of Rs. 67,22,31,387/- to the income of the assessee on account of capital gain. 50. Further it was noted that assessee has purchased 34,78,925 shares of NDTV Limited from RRPR holdings Limited on 9/3/2010 @ Rs. 4/- per share when the market rate of such shares were Rs. 140/- per s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erty at GK 1 New Delhi of Rs. 10,92,000/- and the property at Cape Town South Africa of Rs. 4,07,000/-. Accordingly, he determined the total income from house property of Rs. 33,71,000/- and granted 30% standard deduction under section 24 of Rs. 10,11,300/- and made an addition of Rs. 23,59,700/- to the total income of the assessee. Accordingly the assessment u/s 143 (3) of The Income Tax Act was passed on 30/3/2013 determining the total income at Rs. 1,15,68,05,570/- against the returned income of the assessee of Rs. 90,80,683/-. 52. Assessee aggrieved with the order of the learned assessing officer preferred an appeal before the learned CIT (A) - 42, New Delhi who passed an order on 23/2/2017 dealing with the issues. 53. On the issue of considering the 'full value of consideration accrued or received' by the assessee for 5781841 shares transferred on 3/8/2009 by the assessee to RRPR Holdings Ltd at Rs. 4/- per share, though the shares were traded on stock exchange at Rs. 140/- per share, Therefore, learned assessing officer has treated average of the High and low of prices on the date of sale of shares as on that date as full value of consideration received and accrued to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ideration received or accruing as a result of the transfer of the capital asset the following amounts, namely (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto " 6.5 Further, according to AO, the market value of the share is exactly-known as it is a listed company and such "market value" of the share has accrued in this case. Hence, the accrued value of consideration in this case is the market value but not the actual value of the consideration as claimed by the appellant. 6.6 I find that the statute has specifically provided in certain provisions that "full value of consideration" shall be deemed to be "fair market value of the asset" which are tabulated below: Sl. NO. Section Mode of Transfer Deemed value of full consideration 1 45(1A) Money/ Asset received from an insurer on account of damage/ destruction of capital asset. Value of money received &/or Full market value of asset on the receipt date. 2 45(2) Conversion of or treatment of Capital Asset into Stock in Trade Full market value ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....- per share, for which the learned assessing officer has made the addition stating that when the fair market value of the above share is Rs. 140/- per share , assessee has purchased the shares at the rate of Rs. 4/- per share, therefore, difference between the fair market value of the share being the quoted price as on that date and the transaction price of Rs. 4/- per share was considered as unexplained investment of the assessee, the learned CIT - A held as under:- "8.2 It is found that the assessee purchased 34,78,925 shares of NDTV from RRPR Holding (P) Ltd. @ Rs. 4 per share on 09/03/2010 while these shares were being traded on BSE in the range of Rs. 129.95 to Rs. 134.70 per share on the same day. It is also important to note that on the same day, the assessee sold 4733187 shares to the same company i.e. RRPR at the rate of Rs. 140/- per share based on the prevailing market rate of the shares on BSE/NSE on the given day. AO held that the assessee carried out these transactions to manipulate the gain or loss. 8.3 The assessing officer made an addition of Rs. 47,31,33,800/- under section 69B of I.T. Act by holding that undisclosed investment has been made in p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ket value of such property as exceeds such consideration : Provided that where the stamp duty value of immovable property as referred to in sub-clause (b) is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of sub-clause (b) as they apply for valuation of capital asset under those sections : Provided further that this clause shall not apply to any sum of money or any property received- (a) from any relative; or (b) on the occasion of the marriage of the individual; or (c) under a will or by way of inheritance; or (d) in contemplation of death of the payer or donor, as the case may be; or (e) from any local authority as defined in the Explanation to clause (20) of section 10; or (f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or (g)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ludes a company- section 2(31)) 1 On or after 1/10/2009 On 09/03/2010 for a consideration which is less For a consideration Rs. 13915700 (@ than the aggregate fair market value of the property Rs. 4 per share for 34,78,925 shares) which is less than the aggregate fair market value of Rs. 45,20,86,304/- based on lowest listed price of Rs. 129.95 on BSE/NSE which was in the range of Rs. 129.95 to Rs. 134.75 per share on 09/03/2010 by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration By an amount of Rs. 43,81,70,604/- for 34,78,925 shares of NDTV {Rs. 129.95-Rs. 4-Rs. 125.95) per share amounting to which exceeds fifty thousand rupees 8.8 The assessee submitted that the section 56(2)(vii)(c) of the Act provides that the clause shall not apply to any sum of money or any property received from any relative. It is also submitted that expression "relative" has also been defined in the Act. The assessee contended that such a definition is not exhaustive and would include a "company" where the shareholders are also the donees, as is the instant case. The appellant furthe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arising out of transfer of shares, which has been the subject matter of appeal before the undersigned. No new source of income has been identified in this case. 8.12 It may be important to mention the relevant extracts of the decision of Supreme Court of India in the case of CIT vs. Kanpur Coal Syndicate (1965 AIR 325)- "The Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The scope of his power is coterminous with that of the Income- tax Officer. He can do what the Income-tax Officer can do and also direct him to do what he has failed to do. If the Income-tax Officer has the option to assess one or other of the entities in the alternative, the Appellate Assistant Commissioner can direct him to do what he should have done in the circumstances of a case." 8.13 Further, it may be relevant to highlight the decision of Mumbai High Court in the case of Narrondas Manordass v. Commissioner of Incometax. The relevant extracts of the same are reproduced as under: "It is clear that the Appellate Assistant Commissioner has been constituted a revising authority against the decisions of the Income- tax Officer; a revi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....try, CIT(A) is not empowered to decide on a new set of transaction (subject matter) which has not been dealt with by the AO. However, where a particular transaction is already the subject matter of the addition, then CIT(A) is duty bound to ensure the proper chargeability of the income flowing from the underlying transaction. 8.16 The assessee has also taken a stand that the transactions of transfer of NDTV shares between the assessee and the RRPR Holding (P) Ltd. were conditional one. The assessee submitted that on 21.7.2009 an agreement was entered between M/s Vishvapradhan Commercial Pvt. Ltd. and M/s RRPR where M/s Vishvapradhan agreed to finance Rs. 350 crores subject to the condition that the promoters i.e. Dr. Prannoy Roy and Radhika Roy, would transfer additional 1,15,63,683 shares to RRPR to secure the finance which M/s Vishvapradhan had committed to advance to RRPR. The assessee stated that 57,81,842 shares of NDTV were conditionally transferred to RRPR @ Rs. 4/- each i.e. with the condition that RRPR will return back the said shares at the rate Rs. 4/- itself, however no time was fixed for the return of shares, since Radhika Roy and her husband were the only sha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Value: Normally municipal authorities use to charge house tax on property based on various factors like nature of the property: residential/commercial, locality, floor, facilities available in the premises, etc. This value of property considered by municipal authority is relevant for levying tax in the Municipal Act. Fair Rental Value: The rent which a similar property in the same or similar locality would have fetched is the fair rental value of the property. This is nothing but notional rent a property can get if it has been let out for a year. e.g. In case of apartment, one can assume approx rent of other similar flat which is already let out with some addition or reduction in rent with reference to facilities of both flats. Standard Rent: Where a rent is fixed under prevailing Rent Control Act, it would be considered as standard rent and owner cannot legally expect to get higher rent than fixed as per the Rent Control Act. "Standard rent", in relation to any premises, means the rent calculated On the basis of ten per cent, per annum of the aggregate amount of the cost, of construction and the market price of the land comprised in the premises on the d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e on suo-moto basis took annual value of property at higher of the two values (i.e. municipal value and fair rental value) which is in line with the principle laid down by Delhi High Court in the case of Vinay Bharat Ram & Sons (HUF) 179 CTR 31. The same principle has been followed for other properties. B-213,G.K.-I, New Delhi : 9.5.2 As regards the property (3 Bed Room Flat Of Covered Area 1175 Sq Ft.) at B- 213,G.K.-I, New Delhi, the assessee has shown his share of the annual value of the property at Rs. 1,06,145/- after deduction of municipal taxes of Rs. 1,855/- by taking the higher of two values of Rs. 1,08,000/- as fair rental value and Rs. 43,664/- as municipal value. The method of determination as adopted by the assessee is to take the higher of the fair rental value and municipal annual value. The assessing officer has not accepted the annual value as determined by the assessee by commenting that "Since the property is located in one of the posh colonies of Delhi, where actual rent is quite high therefore in my opinion minimum rent of this property should be Rs. 200,000/-per month..."and estimated Rs. 12,00,000/- as its fair rental value of his share of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 44 2 BHK in Greater Kailash II,South Delhi 99acres 1300 Sq. Ft. 35,0 00/- 26 2 BHK in Greater Kailash 1,South Delhi 99acres 310 Sq. yards = 2790 Sq. Ft. 1,25, 000 44 2 BHK in Greater Kailash 1,South Delhi 99acres 1400 Sq. Ft. 65,0 00/- 46 2 BHK in Greater Kailash II,South Delhi 99acres 1100 Sq. Ft. 29,0 00/- 26 2 BHK in Greater Kailash 1,South Delhi 99acres 1800 Sq. Ft. 39,0 00/- 21 4 BHK in Greater Kailash magicbricks 300 Sq. 61,0 22 1,South Delhi yards = 2700 Sq. Ft. 00/- 2 BHK in Greater Kailash 1,South Delhi magicbricks 1800 Sq. Ft. 40,0 00/- 2 BHK in Greater Kailash 1,South Delhi magicbricks 1200 Sq. Ft. 36,0 00/- 30 3 BHK in Greater Kailash 1,South Delhi magicbricks 2200 Sq. Ft. 60,0 00/- 27 Average rent per Sq. Ft. 345/11= 31 9.5.5 As per the table above, the current rental value of the area (G.K.- l) is taken at Rs. 30 per sq ft. It may be added that the usage of different property related portals have increased over the years for both landlords and tenants. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....red area of the property is 104.65 Sq. mts. which comes to 1126 Sq. ft. out of the total plot area of the property of 459 Sq. mts.. Further the assessee has another vacant plot of area of 855 Sq. mt. in joint name. The vacant land has not been considered for valuation under section 22 of the Act. The said property is situated outside the municipal limits in a village area. 9.5.10 The assessee submitted that, "The few quotes of the prevailing rent in proper Dehradun as on today are enclosed which shows that the average rent is between Rs. 3-15 per Sq. Ft. as on today, which would be still lower in village area and in FY 2008-09 and FY 2009-10. Flence, you are requested to consider the above in the remand report for AY 2009-10 and AY 2010-11. (Letter dated 13.10.2015 addressed to the DCIT Cir-18(lj". 9.5.11 As regards the property at Dehradun, the assessee has shown his share of the annual value of the property at Rs. 'NIL'. The assessing officer has taken the annual the property at Rs. 12,48,000/- by pointing out as under " asseesse in his reply has submitted that rent of properties at Dehradun may be taken as equal to that of Mussoorie. Since there are two....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Dehradun Quikr 2140 Sq. Ft. 24,000/- 11 Residential apartment in Sewak Ashram 99acres 1800 Sq. Ft. 16,000/- 8 Independent house in rajpur road 99acres 3600 Sq. Ft. 40,000/- 11 Dharampur Nehru Colony, Dehradun Quikr 1430 Sq. Ft. 8,500/- 5 Pacific Golf Estate, Sahastradhara Road, Dehradun Quikr 936 Sq. Ft. 14,000/- 14 1 Pearis Paradise, Dehradun Quikr 1398 Sq. Ft. 12,000/- 8 | Vijay Park, Dehradun Quikr 500 Sq. Ft. 1 8,000/- 16 Dalanwala, Dehradun Quikr 800 Sq. Ft. 10,000/- 12 Average rent per Sq. Ft. 173/14 = 12 9.5.15 It may be added that the usage of different property related portals have increased over the years for both landlords and tenants. Therefore, the information available on such portals is relatively reliable & reasonable as it is based on actual offers of landlords/brokers in the market. Assuming appreciation of 10% ove....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is no other scientific method in this regard. 9.5.18 Accordingly, the fair rental value of the property with covered area of 1126 sq ft. (104.65 sq mt) should be taken at Rs. 1126*7.5= Rs. 8445 per month. In accordance with the method of determination as adopted by the assessee, the fair rental value of Rs. 8445 per month as worked out above may be taken to compute annual value. It is important to note that the annual value of property has been taken at higher of the two values (i.e. municipal value and fair rental value) which is in line with the principle laid down by Delhi High Court in the case of Vinay Bharat Ram & Sons (HUF) 179 CTR 31. Accordingly, the annual value of the property comes to Rs. 1,01,340/- and the share of the assessee comes to Rs. 50,670/-. The income from house property is worked out at Rs. 35,469/- after allowing 30% deduction under Section 24 of the Act. 9.5.19 The assessee has taken the income at zero and therefore, the difference of Rs. 35,469/- is to be added as income from house property. Mussorie property: 9.5.20 The property at Mussorie is situated at Bellevue, Sister's bazaar, Landour Cantonment having an area....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r calculation of fair rental value. Assuming appreciation of 10% over 3 years period in the rental rates, the rental value of such property would be around Rs. 12/- per sq ft in FY 2009-10. 9.5.23 The above method of computation of fair value of rent was confronted to the assessee vide email dated 19.01.2017. The assessee responded vide letter dated 31.01.2017 as under: "...It is thus submitted the annual value of the property for the purpose of assessment under Act cannot exceed Rs. 30,000/- annually and after deducting municipal tax and water tax and, statutory deduction @ 30% the income under the head "house property" cannot exceed Rs. 14,112/- (Rs. 30,000/- - Rs. 9,840/- - Rs. 6,048/-) It is submitted that in such circumstances purported comparable instances cited cannot be relied upon " 9.5.24 The contention of the assessee is not acceptable as the assessee has failed to appreciate that fair & reasonable value of rent can be determined only based on enquiry & public information available in this regard. There cannot be any other yardstick. The standard rent is generally in the range of 7.5% to 10% of cost of construction of the property which sets th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rly income of the person derived from property. In other words, Section 22 and the sections following, viz. Sections 23, 24, 25, 25 and 27 of the Act, all are based on the concept of taxation of property income through 'the annual value of property'. * Legally and etymologically, annual value cannot mean monthly value, weekly value, daily or momentary value. Where property income is brought to tax, therefore, if there is no 'annual value1, there is no authority for taxing the property income in the Act at all. * If the Legislature wanted a taxing of property income for a shorter period, there was no purpose in utilizing the expression 'annual value of property'. As pointed out earlier the concept of 'annual' period for computation of income is completely absent with reference to all other sources and heads of income. * The computation of property income under the Act is not only fictional but also contradicts the very normal conceptional idea of income. It would perhaps be absurd to say that a person who does not receive any rent or so from a property, by the mere holding of it, earns an income. * This special method involved consideration of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me from agriculture or forestry, situated in the other Contracting State may be taxed in that other State". Further paragraph 3 of Article 6 provides that, "the provisions of paragraph 1 shall apply to income derived from the direct use, letting or use in any other form of immovable property". 9.5.31 It is a fact that the South Africa has a right to tax the property income from a property situated in India. However, the residence country also has a right to tax the global income in pursuance to the provisions of section 5 of I.T.Act and the assessee has a right to claim the tax credit under section 90 of I.T.Act. against the tax charged, if any, in South Africa against this property. The assessee is bound to first report the income deemed to accrue or arise under section 22 of I.T.Act and thereafter, the assessee can claim tax credit against the tax paid in South Africa on the income from house property to avoid double taxation on income from house property. 9.5.32 However, in view of the discussion at para no. 9.5.27 to 9.5.29, the addition made by AO on account of income from house property in respect of South Africa property does not hold good. Accordingly, the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....weeks time to prepare detailed submission on the contents of the call option agreement and the effect, if any, of the said agreement on the merits of the present matter. 60. Adverting to the appeal of the ld AO, the learned departmental representative, referred to the application of additional evidence filed by the learned assessing officer on 6/2/2018. By way of this, document titled as 'call option agreement' dated 21/7/2009 between Subhgami Trading private limited and RRPR Holdings private limited and Dr Prannoy Roy and Mrs. Radhika Roy containing 16 pages was requested to be admitted. Ld AO claimed that during the course of hearing on 22/11/2017, revenue had requested for adjournment and further it was asked that the assessee may kindly be directed to provide all supporting agreements as mentioned in the loan agreement dated 21/7/2009 between Vishwapradhan commercial private limited and RRPR Holdings private limited filed at pages number 153 - 169 of the paper book. This agreement being supplementary and complimentary to the agreement dated 21/7/2009 would be relevant to decide the pricing of the shares of NDTV limited at the relevant point of time and which is the subject m....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... pledge of those shares from Vishwapradhan Commercial Pvt Ltd, iv. call option agreement entered into on the same date Simultaneously with Subhgami trading private limited are required to be looked into not in isolation but as a complex structured transaction of transfer of controlling interest of the shares held by the assessee in favour of other parties. Therefore, he submitted that the 'call option agreement' needs to be admitted as additional evidence to decide the issue involved in this appeal. He further stated that it is not fresh evidence. He further stated that all complimentary and supplementary agreements which forms part of the main agreement should have been necessarily be looked into to decide the whole issue and to reach at the true facts. To support his contentions, he referred to the decision of the honourable Supreme Court reported in (2012) 8 SCC 148 Union of India v Ibrahim Uddin, therefore he submitted that the above evidences required to be admitted at this stage. 62. The learned authorised representative vehemently objected to the admission of the above additional evidence and stated that those additional evidences shall be given at the first i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent is a price derived at by dividing the number of shares held by RRPR Holdings Ltd in NDTV limited by the amount of loan of INR 350 crores. Hence even the call option price is not the fair market value of the shares of NDTV He further stated that crossreference to the above agreement was made as it was in the original agreement. vi. He further stated that if the agreement was so relevant and integral to the whole issue then why the same was not referred to by the learned assessing officer or the learned CIT - A. Even otherwise, he submitted that the provisions of section 56 in case of listed shares are not applicable. Thus, the learned authorised representative vehemently objected to the application of the AO for admission of additional evidence in the form of call option agreement entered into by the assessee. 63. The learned departmental representative vehemently objected to the arguments of the learned authorised representative and submitted that both the agreements are part of the same agreement. In addition, the assessee must have disclosed all the interrelated agreements at the first instance. Therefore there is no option with the parties to not to disc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed. Therefore in respect of the compliance of the order of the honourable High Court these are additional documents to be placed before the coordinate bench which is a call option agreement dated 21/7/2009 between Shubhagami trading private limited and RRPR Holdings Pvt ltd and Dr Roy and Mrs. Roy. The application further states that this agreement is a supporting agreement to the loan agreement dated 21/7/2009 between Vishwapradahan Commercial P Ltd ( VCPL) and RRPR Holdings P Ltd which is a loan agreement filed by the respondent assessee. It was further stated that the definition clause of the loan agreement defines call option agreement as the same agreement that the short to be placed in the records through this application. It is further mentioned that the call option agreement as supplementary and complementary to the lowly agreement and is relevant to decide the pricing of shares of NDTV limited at the time of impugned transaction which is the subject matter of challenge by the respondent. The learned AO further stated that since the call option agreement is a part of the loan agreement it would be relevant to find out the nexus of this complementary agreement to ascertain t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... part of the record of the lower appellate authority or the AO did not arise. That is the reason why in the first instance, a complete copy of the said agreement was sought from the assessee. Now there is no dispute that a complete copy is with the Revenue. Nevertheless, the proper procedure prescribed by law in this case has to be followed. In the given circumstances, this naturally means that the Revenue has to move a formal application under Rule 29 of the ITAT Procedure Rules to justify the bringing on record of these additional documents in its possession." 66. As the above agreement has also been received by the learned AO from the assessee herself, and as soon as it is received, at the first instance the learned AO made request for admission of the same. Therefore, there is no reason to say that it has not been pressed for admission at the first instance. 67. Further, at the time of the arguments on the admission of the additional evidence the learned authorised representative submitted that the revenue does not have any authority to improve upon the order of the learned assessing officer. The learned departmental representative has stated that it is just supporting th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t to note that in the present case , assessee has sold shares to a closely linked and controlled company shares of listed company at a substantially low price then quoted prices in the stock exchanges and further those shares are pledged to another company to raise a huge loan free of interest for a fairly long time clearly shows that unless all those agreements and documents referred into these transactions are looked into and real effect and substance of the transactions, if not found, one would not be able to reach at what the transactions are structured for and what is the real intention and effect of these transactions are. The impugned agreement required to be admitted as additional evidence by the AO is clearly linked to the agreement of the loan, therefore, the document being call option agreement is also required to be admitted as an additional evidence. 70. Therefore, in view of the decision of the honourable Delhi High Court, coordinate bench in 83 taxmann.com 282 and in the interest of justice and fair play, we admit the additional evidence raised by the revenue. 71. Coming to the merits of the case, learned departmental representative referred to ground number 1 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... same money clearly shows that that the shares of NDTV limited were transferred by the assessee in favour of a third-party lender group , in the guise of loan, pledge and call option agreements. ii. He referred to page number 29 - 30 of the paper book filed by the assessee wherein the show cause notice dated 8/2/2013 refers to the various transactions of the sale of shares of NDTV limited which are in dispute. He further referred that in para number 4 of the notice clearly shows the view of the assessing officer. He further referred to the reply submitted by assessee on 27/2/2013 placed at page number 32 - 34 of the paper book. Therefore, he submitted that the only controversy that survives in this ground is what is the full value of consideration of shares received or accrued to the assessee in terms of section 48 of the Income Tax Act and consequent computation of capital gain thereon. iii. To substantiate his argument, he referred to the reply dated 20/3/2013 placed at page number 35 of the paper book to show that there is a reference to the 'lender' in para number 3 and para number 4 of that letter. He further referred to page number 155 - 173 of the paper boo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the SEBI at page number 12 and para number 10 of the order, which shows that the 'call option agreement' between the Vishwapradhan Commercial private limited and Shyam equities private limited. He therefore submitted that according to that agreement the value of the share is taken at Rs. 214.65 per share, whereas the market rate of such share was Rs. 140/- per share and therefore the learned assessing officer has taken Rs. 135 per share for making the above addition. v. He further referred to page number 174 of the paper book which is a letter dated 11/9/2015 written by the learned CIT - A to the learned assessing officer for his comment. He referred to para number 4 of that letter which is with reference to the fact that assessee has challenged the substitution of the full value of consideration with fair market value in respect of sale on 3/8/2009 for sale of 3478925 shares of NDTV limited to M/s RRPR Holdings Ltd in which both Dr . Roy and Mrs. Radhika Roy are 50% shareholders. vi. He also referred to page number 179 of paper book which is the explanation given by the learned A O before the CIT - A with respect to the substitution of value of consideration rega....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct the adoption of the market rate of the shares was not at all applicable to section 48 of the act. He stated that each of the above section has different relevance. He further referred to the provisions of section 48 of the income tax and stated that it speaks about the 'full value of the consideration received or accrued' to assessee and therefore the seller has accrued price at least of the listed price at the stock exchange, where the shares are transferred to the company, where the sellers are the only shareholders of equal share in buyer company. xi. He further referred to the letter dated 4 September 2015 of the assessee before CT (A) placed at page number 249 of the paper book wherein several judicial precedents have been cited and stated that none of this judicial precedent applies to the facts of the case. He referred to the decision of the honourable Supreme Court in 66 ITR 622 (Supreme Court) and stated that the above case cited by the assessee before the learned CIT - A is in fact is in favour of the revenue. He referred that decision and submitted that It is manifest that the consideration for the transfer of capital asset is what the transferor receives in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntative rebutting the arguments of the learned departmental representative stated the various dates on which the transactions have occurred. i. He firstly stated that the support of the law for making such addition is available under section 50D of the income tax at which has been inserted with effect from 1/4/2018. Therefore, to the impugned assessment year, such provisions do not apply and AO had no power to substitute the 'transaction value' with the 'market value' of those shares. ii. With respect to the argument of the learned departmental representative, that the price should be Rs. 246/- per-share is beyond the scope of the assessment proceedings. He referred to the decision of Mahindra & Mahindra Limited ( SB) and stated that department cannot go contrary to the order of the learned assessing officer. iii. He further stated that justification of transacting the purchase and sale of shares at Rs. 4/- per share was with respect to the loan, which was taken for purchase of shares from India Bulls Ltd, and it was to be repaid. He further referred to the agreement of Vishwapradhan Commercial private limited and RRPR Holdings Private Limited with Dr Roy....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orable Bombay High court in Vodafone International (Bom) at page number 88 and 237 of that decision it has been stated that call option is not a capital asset at all. ix. He submitted that call option is in respect of RRPR holding Pvt Ltd in shares of NDTV Ltd and not by the assessee. x. With respect to the argument of the learned departmental representative on provisions of section 48 of the act with respect to the full value of the consideration accruing to assessee, he submitted that such consideration could not be substituted with the market value. For the purpose of accrual of income, he stated that there has to be a right to receive such income. xi. With respect to the loan and call option agreement it was submitted that the contention has been raised by the revenue 1st time before the coordinate bench without being raised before the lower authorities and the grounds of appeal raised in the appeal and as such the same cannot be raised here. He further submitted that the revenue has already initiated 147 proceedings in the case of the company on the same basis. He submitted that the above reassessment initiation has already been challenged before the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o the 'call option agreement' argument, he stated that it contains the right of first refusal ( ROFR) conditions therein. He therefore submitted that in fact the share price of Rs. 4/- per share transacted between the parties is a Sham price and the whole affairs of the transaction were so arranged that the full consideration accrued to assessee cannot be less than the listed price as taken by the learned assessing officer. ii. Further case laws are relied upon the issue that call options are not capital assets & for that purpose reliance is placed on findings given in the cases of: i. Vodafone International Holdings B.V. v Union of India & another [2010] 329 ITR 126 (Bom); ii. Vodafone International Holdings B.V. v Union of India & another [2012] 341 ITR 1 (SC); and iii. Vodafone India Services P. Ltd v CIT & another [ 2016] 385 ITR 169 (Bom). As far as decisions in the cases of Vodafone & its other affiliate are concerned, the reference to these cases is irrelevant in the present case & hence no comments are made. 75. On the last date of the hearing, we directed both the parties to furnish i. annual reports of RRPR Holdings....
X X X X Extracts X X X X
X X X X Extracts X X X X
....deducting from the full value of the consideration received or accruing as a result of transfer of the capital asset, the cost of acquisition of that asset, cost of improvement and any expenditure incurred wholly and exclusively in connection with such transfer. Therefore, now it is required to be seen that what is the full value of the consideration received or accrued to the assessee. 78. Buyer in the impugned transaction is one company namely RRPR Holdings private limited which was incorporated in August 2005. Dr Roy and Mrs. Roy are the only shareholders of the above company holding 50% share each. Until 31st of March 2008, balance-sheet size of this company was merely INR 100,000/- which represented the shares allotted to the above two shareholders of the face value of INR 50,000/- each. The company on 03/07/2008, acquired 9795434 equity shares of New Delhi television limited under the open offer for INR 4,299,900,000 financed through a loan. This represented 15.44 percentage of the voting right of NDTV limited. Out of the above shares, RRPR Holdings P Ltd (company) sold 3803728 equity shares on 14/07/2008 and 1249985 equity shares on 06/08/2008 in the secondary market. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e security given is always the shares of the company and the personal guarantee of one of the director. It is apparent that the company obtained loan by purchasing/transferring shares from the promoters. The company obtained the original loan of Rs. 429.99 crores from M/s India Bulls financial services Ltd on 14/05/2008. Company along with its shareholders entered into a pledge agreement. On 14 - 10 - 2008 the company further borrowed a sum of INR 375 crores from ICICI Bank Ltd for repayment of earlier loan taken from India Bulls Limited. On 21/7/2009, Vishwapradhan Commercial Private Limited advanced interest free loan of INR 350 crore with the condition that the company will utilize the loan in repayment of the existing loan availed. The new loan obtained was interest free loan and the maturity date was at the end of 10 years tenure. The company also entered into a call option agreement with Subhgami trading private limited on 21/7/2009 i.e. on the same date on which the assessee entered into agreement for loan of INR 350 crore with Vishwapradhan Commercial Private Limited. On 21/07/2009, agreement assessee entered into with Subhgami trading private limited, gave an option to tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 18813928 equity shares of NDTV aggregating to 30% of the equity share capital of NDTV. According to clause number 19 of that agreement, it was further stated that over the next 3 to 5 years the borrower and the lender will look for a stable and reliable buyer of the borrower company who will maintain the brand and credibility of NDTV. Further clause number 20 referred to 'further assurances' which speaks about exercise of voting right by the 'promoters and its affiliates' to give full and complete effect to the loan agreements. According to clause 6 of schedule -2, it was further stated that that RRPR holding Pvt Ltd does not own or hold any assets other than 16305404 equity shares of NDTV limited. Therefore, it is apparent that that RRPR Holdings private limited is merely a company to borrow loan, which was not to be repaid but to be used by the promoters till the loans get converted into transfer of the shares of NDTV limited by RRPR Holdings Ltd in favour of lender. The company has obtained loan of INR 4,000,000,000 approximately without payment of any interest solely based on pledge of shares of NDTV limited. The borrowed amount is also transferred to the account of the promo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dings private limited which were later on pledged to obtain unsecured loan from Vishwapradhan Limited by loan agreement coupled with "call option agreement" and on reading of all these agreement the apparent transaction is of transferring shares of NDTV limited to the lender in guise of loan agreements. 81. Further it was contended that appellant did not gain anything by purchasing and sale of shares of NDTV limited with RRPR Holdings private limited at Rs. 4/- per share is also devoid of any merit because the assessee is also controlling and managing RRPR Holdings private limited, RRPR Holdings private limited did not have any assets except the assets in the form of shares of NDTV limited. Further only purpose of transfer of the shares to that company was to obtain loan by pledging those shares considering the fair market value of the shares of NDTV, which is obviously the listed price of that company. Therefore, it is apparent that if the shares are transferred at Rs. 4/- per share, the assessee will pay capital gain tax only considering the sale value of those shares at Rs. 4/- per share, ( if the whole transaction is not looked in to by complex agreement of loans ) whereas t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ive provision in clause 20 of the loan agreement and are not significant enough for an independent consideration from the controlling angle." In para number 27 it was further held that the close look at the structure of the transaction involving around the conversion option and the purchase option on the one hand and a call option on the other, clearly reveals that the transaction structure is unusual and peculiar to say the least. The conversion option, which entitles the notice ( VCPL) to 99.99% of RRPR shares, has a perpetual existence not circumscribed by the tenure of the loan. It was further held that VCPL has a right to exercises conversion option even after the loan is settled. In essence, it means that the entitlement of the VCPL 99.99% of RRPR of shares is absolute, not contingent upon any event or mounted by limitations of time. The absence of an explicit clause in the loan agreement rendering the conversion option wide on repayment of loan is strikingly abnormal and it clearly lays out an unfettered path for the VCPL to stake it access to NDTV albeit through the medium of RRPR. The call option construct is also strangely devoid of any time limitations and it endows t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....obtaining interest free loan to be coupled with call option agreement speaks louder that full value of the consideration is INR 135/- per share. Further the decision relied upon by the learned authorised representative is pertaining to provisions of section 12B of the income tax act 1922 where there were no words "as mentioned under section 48 of the income tax act 1961 being " received or accruing". In the present case, the amount of loan that is borrowed by RRPR Holdings private limited is based on the market value of the shares of NDTV limited. All the agreements produced before us clearly showed that assessee made available adequate shares to RRPR Holdings private limited . Those shares were pledged and RRPR Holdings private limited obtained interest free loan for a long period coupled with call option agreements and loan agreements. The conditions were such that it clearly showed that the transaction is of sales of those shares by the assessee and her husband directly to the VCPL through RRPR Holdings P Ltd. The whole sum of loan received has in fact accrued to the assessee pertaining to shares transferred by these two assessee , which is also apparent from the fact that asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d that the assessee realized the consideration for transferring the shares and further pledge in favour of the lenders. In the decision relied upon by the learned authorised representative as stated at page number 239, that case involves sales simpliciter whereas the facts before us shows that assessee entered into complex agreements with the lenders by creating the layer of RRPR Holdings private limited to pledge the shares and realize the sale consideration in guise of loans from lenders. Further, in the decision relied upon by the learned authorised representative there was nothing except the report of the district valuation officer and naturally the assessee in that particular case did not receive anything more than the sale value, whereas in the case before us, it clearly shows that there was no reasonable explanation to transact the property, being share of NDTV limited at such a low price. Similar are the facts in the case of decision of the honourable Delhi High Court in 309 ITR 240. Therefore, the decision relied upon by the learned authorised representative are on distinguishable facts. 86. In view of our above finding, we reverse the finding of the learned CIT - A and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng assessment by invoking provision of section 56(2) of the Act. He further referred to Para number 8.17 of the order of the learned CIT - A wherein it has been held that assessee cannot escape addition under the provisions of section 56 of the income tax act. Contesting the above enhancement made by the learned CIT - A, he stated that the transaction entered into by assessee does not give any benefit to the assessee by entering in to these transaction and there was no purpose to transfer the shares which are made in view of the clause 9(e) of the loan agreement. He further stated that assessee has sold shares at Rs. 4/- per share whereas the share purchased by assessee is at Rs. 140/- per share also. He submitted that assessee cannot purchase those share at Rs. 4/- back, as it would create a fictional loss in the RRPR Holdings P Ltd. He further stated that there is no gain, there is no loss, in the whole transaction and assessee along with her husband are solitary shareholders of RRPR Holdings Private Limited. In short his argument was that that it is not a device to evade any taxes and therefore the provisions of section 56 does not apply to the same. 94. The second argument r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e different sources of income and for this he relied upon the decision of the coordinate bench on Dulari Digital photo services P Ltd 984/CHD/2010. He submitted that section 69 and section 56 are inherently contradictory and diametrically opposite sections. He further stated that the power of modification of section is not with the learned CIT - A under section 251 of the income tax. He further stated that the learned CIT - could not change a head, which requires further enquiry. 96. On the merits of the issue he submitted that the provisions of section 56 (2) (vi) (c ) does not apply as assessee has received the shares from a company which is akin to ' relative' as it is wholly controlled, owned and managed by assessee. It also does not apply as the transaction is pertaining to period before 1/10/2009. He otherwise stated that the transaction is a square off transaction. He stated that assessee has transferred shares to RRPR holdings Ltd at Rs. 4/- per share on 3/8/2009 and return of those shares in March 2010 is part of the same transaction and therefore had to be at Rs. 4/- only. He further submitted that the transaction is between two closely linked parties. It stated that a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the last decision referred to in the list of cases above, Hon'ble Bench in Para (19) at Page 29 held as under: "The principle culled out from the above judicial precedents clearly shows that words "enhance the assessment" are confined to the assessment reached through a particular process. It cannot be extended to the amount, which ought to have been computed. There being other provisions, which allow escaped income from new sources to be taxed after following a certain prescribed procedure. So long as a certain item of income had been considered and examined by the assessing officer from the point of view of its assessibility and so long as the CIT(A) does not travel beyond the record of the year, there has never been any doubt as to his powers of redoing the categorization and bringing the assessment within the true description of the law." [Emphasis supplied]. In all humility & with due regards & utmost respect, it is humbly submitted that Hon'ble Bench failed to read subsequent findings recorded in Para (14) of their order by the Hon'ble Court wherein it is held as under: "14. We have considered the submissions of both the parties. There is no doubt a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tegory falling In (c) & (e), the CIT has been empowered to take an appropriate action under section 263 of the Act In category of cases falling under clause (d) and (f), appropriate action under section 147 of the Act can be taken to tax the income which has escaped assessment or had remained to be taxed. There can be situations where an item has been dealt with in the body of the order of assessment and the assessee being aggrieved from the addition or disallowances so made, had preferred an appeal before the CIT(A) against the said addition and disallowance, the said disallowance and addition being the subject matter of appeal before the CIT(A) in such cases, the CIT(A) has been empowered u/s 251(1)(a) of the Act, to enhance such an income where the Assessing Officer had proceeded to make addition or disallowance by dealing with the same in the body of order of assessment by under assessing the same as the same was the subject matter of the appeal as per the grounds of the appeal raised before him. In other words, the CIT(A) has a power of enhancement in respect of such item or items of income which has been dealt with in the body of the order of the assessment, and arose for his....
X X X X Extracts X X X X
X X X X Extracts X X X X
....overlooked the factual position that what was retransferred were such shares, which were transferred by the appellants conditionally and were on escrow account. iii. It is pertinent to mention here that there is no evidence till date in support of the explanation that certain conditions existed at the time of transfer among the parties to the transaction as well no evidence has till date been led that an escrow account existed/. iv. Legal position on the applicability has very well explained analytically and elaborately by learned CIT (Appeals) in Para (8.7) at Pages (19) & (20) in his order dated 24.02.2017 in a tabular form. v. It is settled position in law that in the interpretation of fiscal statutes, where the language of a provision is unambiguous, clear & unequivocal, literal construction would follow. In this regard, reliance is placed on the decision Hon'ble Apex Court in the case of Calcutta Knitwears reported in [2014] 362 ITR 673 (SC). 99. The learned authorised representative in rejoinder submitted that the issue before the learned assessing officer was with respect to the addition under section 69/69B of the income tax Act. The ld AO has ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d that the buyer has paid the difference in amount between market value and transacted value without recording the same in the books of accounts and therefore the addition has been made under section 69 of the income tax act. However, he examined the fact and noted that the provisions of section 56 (2)( vii) of the act enables the taxation of such a scenario on deemed basis. He then extracted the provisions of the law and noted that that assessee being an individual has received a property being 3478925 shares of NDTV limited from RRPR Holdings Pvt Ltd on 9/3/2010 after the introduction of provisions of section 56 (2) (vii) ( 1/9/2010) for a consideration of INR 13915700/- ( 3478925 *4 ) which is less than the aggregate fair market value of Rs. 45,20,86,304/- ( 3478925 * 129.95 per shares ) thus confirmed the addition 43,81,70,604/- . 102. Now we come to the first issue whether the learned CIT - A has a right to confirm the addition under altogether a different section under the provisions of section 251 (1) (a) of the act. In plain reading of the provisions of section 251 of the income tax act the Commissioner of income tax has a wider power however such part by the power canno....
X X X X Extracts X X X X
X X X X Extracts X X X X
....efore CIT (A) was with respect to eligibility of deduction u/s 54 / 54 F of the act, where the ld CIT )A found that sales consideration itself is chargeable to tax u/s 68 of the act as there was no sales of any property. Under that circumstances it was held that , CIT ()A has discovered already a new sources of Income and as such in that case, only option with revenue was to proceed u/s 263 of the act. The facts in the present case are distinguishable. 105. In view of the above facts we do not find any infirmity in invoking the provision of section 56 (2) (vii) ( C ) of the act by ld CIT (A). 106. Now we come to the issue whether such provision are applicable or not. The learned CIT - A has reproduced the above provisions at paragraph number 8.6 of his order. According to that , where an individual or after 1st day of October 2009, receives any property other than immovable property for a consideration, which is less than the aggregate fair market value of the property by an amount exceeding INR 50,000/- , the aggregate of fair market value of such property as exceeds such consideration is chargeable to tax under the head income from other sources. The impugned asset that has....
X X X X Extracts X X X X
X X X X Extracts X X X X
....shable and not applicable because at that particular time such sum has in dispute before us was not covered under the head of income from other sources. 109. In view of the above facts we do not find any infirmity in the order of the learned CIT - A in enhancing the income of the assessee by invoking the provisions of section 56 (2)(vii) of the act by making an addition of INR 4 38170604/- on account of difference between the purchase price of the shares of NDTV limited and the market price of those shares quoted on recognized stock exchange. Accordingly ground number 1 of the appeal of the assessee is dismissed. 110. The ground number 2 of the appeal is with respect to the addition made by the learned assessing officer and confirmed by the learned CIT - A with respect to the property at Mussoorie. As the identical issue was also involved in appeal of assessee for assessment year 2009 - 10 as per ground number 2 of that appeal and while deciding ground number 2 of that appeal , we have deleted the addition confirmed by the learned CIT - A. Therefore, for the similar reason and to that extent, we allow ground number 2 of the appeal of the assessee. 111. At the time of the h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ived and untenable. 1.5 That in recording the aforesaid findings the learned Commissioner of Income Tax (Appeals) has failed to comprehend the powers vested in him u/s 251 (1 )a) of the Act; and has failed to appreciate that he had no powers u/s 263 of the Act, in as much as this issue could alone be examined by the learned Commissioner of Income Tax and not by him. 1.6 That the learned Commissioner of Income Tax (Appeals) having deleted the addition made by the learned Assessing Officer of Rs. 47,31,33,800/- which represented the alleged unexplained investment has erred both on facts and in law in making an addition by invoking the provisions of section 56(2)(vii) of the Act. 1.7 That in sustaining the addition, has deliberately overlooked the judgment of Full Bench of the Delhi High Court in the case of CIT Vs Sardari Lal & Co. reported in 251 ITR 864, therefore, the order is vitiated. 2. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in sustaining addition in respect of alleged income under the head house property from following properties: Sr. No. Property Amount (Rs.) i B-13, Greate....