TaxTMI 
TaxTMI 
2020 (2) TMI 649
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....dy verified by AO and also by audit party. Ld. CIT failed to appreciate that AO passed the order after thorough scrutiny of documents. 3 Ld. CIT erred in law and on facts in holding that sale value of shares sold to Managing Director at substantially lower price resulted in non reporting of Capital Gains on the ground that AO failed to either consider valuation report valuing shares @ Rs. 79, 0207- per share or price of Rs. 87, 217.75 charged per share to foreign buyer. 4 Ld. CIT (A) erred in law and on facts holding order as erroneous due to failure of AO to inquire whether appellant fulfilled all the conditions of sec 54F for claiming the deduction though all the relevant documents were submitted during the assessment proceedings in response to queries raised. 5 Ld. CIT (A) erred in law and on facts in directing AO to verify deposits in the Capital Gains account already examined by AO as well audit party. 6. Ld. CIT ought to have appreciated that non discussion of issues verified and accepted by AO and subsequently by audit party after proper scrutiny need not mean order as erroneous or prejudicial to the interest of revenue. 7. Withou....
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....ing the course of which the A.R of the assessee reiterated the submissions contained in his aforementioned written reply. The relevant contents of the written reply are reproduced below: 1. I hereby rely on the assessment proceedings narrated in details in the order sheet on different dates which bare the signature of my legal representative and hence the copy of the said order sheet from lsl to last be supplied to your assessee especially to know as to despite of every point discussed in detail with submission and supportive evidences , why at this stage undue shelter has been taken to treat the assessment order passed as erroneous and prejudicial to the interest of the revenue. If the answer is that the present action has been taken at the instance of Audit, it may please be noted that in the presence of Assessing Officer , on every point then raised by the Audit -was replied in detail to their satisfaction and no point of time there was any disagreement between the Audit, the assessee and the AO. Further it was upon the instance of the then cit an , Inspector was being sent to the newly constructed residential-property which has been claimed u/s. 54F as stated ....
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....ing the course of hearing it was asked to prove that why some of the Shares have been sold at the face value of Rs. 10/- per share as against Rs. 57,2777- as shown in the statement of income. It is in this behalf we have to say that it was the mutual understanding between your assessee and the managing director Mr. Amit I Bakshi that if at all such price shall be received by your assessee out of the transaction of sale of his shares to Boticelli company, then your assessee viz; Rakesh B Shah shall have to give some of his Shares to Mr. Amit I Bakshi at the face value of the shares. Besides this being a private limited company and the shares of the same are being non-listed Shares, the transfer of such shares between the two directors are always at the face value of shares and i.e.Rs. 10/- per share. Mr. Amir BAkshi was the key person through whom the whole transactions of sale of shares to a foreign company was being carried out and therefore out of gratitude and mutual understanding the some part of the shares had been sold to him at Rs. 10/- per share. 2. As regards the deduction claimed u/s. 54F:~ It is in this behalf, your attention is invited on the capital g....
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....f all the directors, because Mr. Amit Bakshi was instrumental in getting the investor. This statement is not correct, because, the assessee has himself paid a huge amount of Rs. 48,63,574/- to M/s. Advendus Capital Pvt. Ltd, Mumbai for services relating to sale of 2021 shares of Eris Lifesciences Pvt. Ltd. It is pertinent to mention that as per the profile of Advendus Capital Pvt. Ltd., it is Category-1 Merchant Banker engaged in providing financial services with an emphasis on advising corporate clients seeking to mobilize capital from investors. If Mr. Amit Bakshi was solely instrumental in getting the investors, what was the necessity for the assessee to hire the merchant banker and pay such a hefty commission, in addition to incurring a huge loss due to transfer of shares to Mr. Amit Bakshi. (iii.) In view of the above, by selling 3025 shares to Mr. Amit Bakshi at the rate of Rs. 10/- on 29.8.2011, which is the same date on which he sold 2021 shares to Boticelli at Rs. 87,217.75 the assessee has undervalued the sale consideration of the above share by Rs. 26,32,28,693.75. As per extract of the minutes of the Board meeting of Eris Lifesciences Pvt. Ltd. dated 23.06.2011....
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.... section 54F. 8. In view of the above discussion, it is clear that the assessment order passed by the A.O. is not only erroneous but also prejudicial to the interest of revenue as per the provisions of section 263 of the I. T. Act, 1961 read with clause (a) of Explanation 2 thereof. I, therefore, hereby set-aside the assessment order passed by the Assessing Officer u/s. 143(3) for A.Y. 2012-13 3 with a direction to frame the order afresh after conducting proper inquiries and verifications in the lines discussed above regarding valuation of shares sold for the purpose of Capital Gains Tax, as well as eligibility of claim of deduction under section 54F. The Assessing Officer is directed to follow the procedure prescribed in the Income tax Act had also make a comprehensive reference to the Valuation Officer giving details of the case including valuation report of company's valuer and actual sale price to Boticelli in respect of valuation of shares. The Assessing Officer is directed to ensure that adequate opportunity of being heard is granted to the assessee. 7. Now assessee has come before us against the order of the ld. Pr. CIT. 8. We have gone through the relevan....
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....air market value of the asset is permissible as held by the Tribunal at the relevant time there was no power vested in the authorities under the Act to substitute a full value of consideration received by fair market value in respect of stock and shares. The statute only on introduction of Section 50D with effect from 1st April, 2013. The power to substitute full consideration with fair market value in respect of shares came into the statute only on introduction of section 50D of the Act is only to be exercised if the Assessing Officer comes to a finding that the consideration received is not ascertained or cannot be determined. Moreover the decision of the Co-ordinate bench of the Tribunal in the case of MGM Shareholders Benefit Trust (supra) on identical facts situation has been accepted by the Revenue, as no appeal from the same has been filed by the Revenue. d) In the above view, the question as formulated does not give rise to any substantial question of law. Thus not entertained. 5. The appeal admitted on the substantial questions of law at question nos. (iii) and (iv). 12. Assessee also cited an order of Hon'ble Delhi High Court in the matter of CIT vs. ....