TaxTMI 
TaxTMI 
TaxTMI 
2022 (7) TMI 1140
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....was included in the total taxable income calculated by the assessee in his return of income. Assessing Officer rejected the claim of the assessee during the assessment proceeding on the technical ground that the return of income of the assessee filed originally was not revised on this account u/s. 139 of the Act and therefore this plea cannot be considered. On appeal the Ld. CIT(A) vide order dated 06.03.2009 upheld the decision of the Assessing Officer with regards to payment of tax on sum of Rs..2,08,64,397/- which was voluntarily declared in the ITR filed by the assessee as long term capital gain. 3. Aggrieved by the decision, assessee preferred appeal before ITAT and the ITAT vide its order no. 1846/Mum/2009 and ITA No.2987/Mum/2009 dated 04.11.2016 restored the issue of levy of tax on LTCG of Rs..2,08,64,396.72/- to file of the Assessing Officer with the following remarks: - "9. We have considered rival contentions and found that this ground was raised before the AO, however, in view of the fact that assessee has not filed any revised return with regard to the capital gains originally offered in the return of income, the AO has declined to consider assessee's claim of a....
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....he plea of the assessee during the course of the assessment proceedings as such receipt was offered for tax wrongly under absence of knowledge of law and improper advice in the return of income for the relevant assessment year u/s 139(1) of the Act. 5. The Assessing Officer observed in para 6.1 of the assessment order that from material available on the record and the fact stated above, the transaction of selling of shares of the NPCL by the assessee cannot be termed as family arrangement and the same is exit of the large stake holder/director from the company which is taxable as LTCG. In addition to the above, the AO has raised the same issues as in original assessment order for not accepting the plea of the assessee like (i) Assessee not filed the revised return of the income for the claim applying the decision of Apex Court in the case of Goetze (India ) Ltd, and (ii) Allowing the claim would lead to assessed income less than returned income not permitted under the act relying on the decision of Apex Court in the case of Kalidas DhanjiBhai v. State of Bom bay and Absalon v. Talbot. 6. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) after considering t....
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....d an appeal before the Hon'ble ITAT, Mumbai. The Hon'ble ITAT E' Bench, Mumbai dealing with the assessee's appeal no 1846/Mum/2009 and Departmental Appeal No. 987/Mum/2009 passed an order dated 04.11.2016 wherein the Hon'ble Tribunal held as under: i. Confirmed the order of the Ld. CIT(A) and deleted the addition of Rs. 50 lakhs alleged to have been received from M/s.Natar Parikli Co. Ltd. (hereinafter referred to as 'NPCL'). ii. The addition of Rs. 74,565/- pertaining to alleged discrepancies in Jewellery confirmed by the Ld. CIT(A) was deleted. iii. The additional ground raised by the appellant with respect to the capital gain received out of family settlement was allowed by the Hon'ble Tribunal and the issue was set- aside to the file of the Assessing Officer for deciding afresh in light of materials available on record. 7. The relevant portion of the order of the Hon'ble Tribunal is reproduced hereunder for ready reference: "8. Ld. AR raised an additional ground to the effect that amount of capital gain so offered by the assessee was received out of family settlement, therefore, not liable to tax. 9. We have considered rival conte....
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....ing, large shareholder. The Assessing Officer also contended that the appellant received many other benefits drawn by it along-with its group members. The Company NPCL has treated this selling of shares as buyback of shares which is akin to a normal equity sale / purchase transaction. Further. the appellant has failed to file the petition submitted by it before the Company Law Board from which inference on the transfer of shares out of 'family arrangement' could be drawn. 9. The Assessing Officer further contended that the appellant had not revised his return of income and had voluntarily declared the receipt on sale of shares as long-term capital gains in his return of income. Further reliance has been placed reliance on the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT reported at 284 ITR 323 (SC) (2006) wherein it was held that the Assessing Officer cannot entertain a claim for deduction otherwise than by filing of a revised return. 10. The appellant filed an appeal before the Ld. CIT(A) against the aforesaid order passed by the Assessing Officer u/s. 143(3).r.w.s. 254 of the Act. Before the Ld.CIT(A) the appellant had filed the....
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.... or delete all or modify any or all the above grounds of appeal." Submissions of the Appellant: 14. It is the humble submission of the appellant that he belongs to Parikh Group which carries out business in the name and style of its two main companies viz. NPIL and NPCL together with other small private limited companies and partnership firms. The assessee Sujan Parikh. Ms Avani Parikh. Soha Parikh alias Singh and Enakshi Parikh are known as SAP Group. Sri Apurva Parikh and all other family members are known as ANP Group. In the year 2004. some dispute arose in the family in relation to conducting the business of NPIL and other business concerns. In order to settle the dispute and to bring peace and harmony among the members of the family and to avoid litigation family arrangement was arrived at and orders by way of consent terms of the Company Law Board. Principal Bench, New Delhi dated 30.3.2006 (Page No 1-11 of the Paperbook) in the cases of NPCL and NPIL. 15. The Petition filed by the appellant before the Company Law Board (Page No 12-37 of the Paperbook) and provided as additional evidence before the Ld. CIT(A) brings out the following facts: i. That the entire shareho....
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....an Parikh & Others Vs. Natwar Parikh & Company Private Limited & others. The Company law Board vide order dated 30.3.2006 (Page No 1-11 of the Paperbook) passed minutes of the, order wherein it was decided that SAP group shall transfer their entire shareholding 41.06% in Natwai' Parikh & Co Pvt Ltd to either ANP group or NPCL on receipt of the aggregate consideration comprising of: (a) Rs. 21,57,50.000/- to be received by SAP group from either AN group or NPCL as the case may be and (b) various other payments and benefits. 18. In this regard, attention is invited to the order of Company Law Board dated 13.4.2006 (Page No 38- 41 of the Paperbook) which states as under: `NPCL shall pay a sum of Rs. 19,01,80,753/- to the SAP Group on or before 28.4.2006. The consideration so paid of Rs. 19,01,80753/- (being the net amount payable to SAP group) shall either be adjusted against the reserves of NPCL or the credit in the Profit & loss A/c of NPCL at the time of buy back of shares by it. The said order further states that 'it is clarified that implementation of the aforesaid buy hack scheme and the making payment of the aforesaid sum of Rs.19,01,80,753/- to SAP ,group. shal....
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.... by the other parties. Every party who takes benefit under it need not necessarily be shown to have, under the law, a claim to a share in the property. All that is necessary to show is that the parties are related to each other in some way and have a possible claim n to the property or a claim or even a semblance of a claim on some other ground as, say, affection. Kale v. Deputy Director of Consolidation, MIR 1976 SC 8071 (Page No 54-77 of the Paperbook) In the above case, the Hon'ble Supreme Court considered the family settlement. the principles behind it, the purpose of the settlement, antecedent title and many more. The/Supreme Court observed he family settlement must be a bona fide one so as to resolve family disputes and rival claims by a fair and equitable division or allotment of properties between the various members of the family. The said settlement must be voluntary and should not be induced by fraud, coercion or undue influence. The members who may be parties to the family arrangement must have some antecedent title, claim or interest even a possible claim in the property which is acknowledged by the parties to the settlement. Even if one of the parties to the settl....
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....ains that the return filed u/s. 139(1) by the assessee is voluntary and the assessee has himself offered the same as capital gains. assessee has not filed any revised return. Assessee 's request to rectify the same also cannot he entertained as the mistake is not apparent from record. Hence, the capital gains offered voluntary in return of income is accepted and no interference in the same is made. 23. Further, even the Hon'ble Tribunal in its order passed on 04.11.20 16 in the case of' the appellant while disposing the appeals filed by the appellant and the Department for the assessment year under consideration, at para 9 has categorically given a finding that that the appellant had sold the shares to NPCL under a family arrangement scheme, as endorsed by the Company Law Boards' order dated 30.03.2006, 13.04.2006 and 26.02.2007. The relevant para of' the order of the Hon* Me Tribunal is reproduced hereunder as ready reference: "9. We have considered rival contentions and found that this ground was raised he/ore the AO, however, in view of the fact that assessee has not filed any revised return with regard to the capital gains originally offered in the retur....
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.... such arrangement took place at the instance of the arbitrator ? 3 Whether, the Tribunal was correct in holding that the finding recorded by the AO that the sale of shares held by the assessee in his individual capacity over various private limited companies can be brought to capital gains tax which came to be upheld by the CIT(A)?" This Court had an occasion to consider the aforesaid questions in the case of Madhusudhan, GT Appeal Nos. I and 2 of 2008 disposed of on 6th Sept., 2010. In the aforesaid Judgment it was held that the word 'transfer' does not include partition or family settlement as defined under the Act. It is well-settled that a partition is not a transfer. What is recorded in a family settlement is nothing hut a partition. Every Member has an anterior title to the property which is the subject-matter of a transaction, that is, partition or a family arrangement. So there is a adjustment of shares. crystallization of the respective rights in the family properties and therefore it cannot the construed as a transfer in the eye of law. When there is no transfer, there is no capital gain and consequently no tax on capital gain is liable to he paid. The Tribuna....
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.... consideration". 28. The Ld. CIT(A) has also placed reliance on the order of the Hon'ble Jurisdictional High Court in the case of B. A. Mohota Textiles Traders (P.) Ltd. vs. DCIT reported at 397 ITR 616 (Bono (Page No 106-1.15 Of the Paperbook) has through the court which required the assessee company to transfer shares held by it in another company in favour of certain family members, will be required to pay the capital gains tax since the assessee was a separate legal entity being incorporated as a limited company. With respect to the aforesaid judgement, it is submitted that the said judgement is distinguishable on facts. In the aforesaid case, the appellant company had transferred shares held by it in Mis Rekhchand Mohota Spinning & Weaving Mills Ltd. and M/s Vaibhav Textiles (P) Ltd. to' other family members in pursuance of family arrangement/settlement. The Revenue had objected by stating that the appellant company was not a family member and therefore. the were not part of family settlement. It has been categorically stated by the Hon'ble Bombay High Court that it is not dealing with the case of the family members, who were party to the family settlement but ....
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....company on buy back agreement and received the compensation. These facts were brought on record by the assessee before the AO and CIT(A). Ld CIT(A) agreed that the assessee has transferred the shares on family arrangement only however, he refused to entertain the claim of the assessee by observing that it is an arrangement for buyback of shares by the assessee. We do not agree with the above observation since the assessee has transferred the shares only on the direction of the CLB. As per the direction of CLB, the assessee has to either transfer the shares to ANP Group or to the company whichever is acceptable to the ANP Group. As far as assessee is concerned, he has agreed to transfer the shares, it is irrelevant for him how the shares to being transferred, as long as he receives the compensation as set out by the CLB. In this case, the ANP Group has decided to buy back the shares in the NPCL itself. Therefore, it is not proper on the part of the tax authorities to take divergent view without their being proper reasons. 11. Coming to another objection raised by the Ld CIT(A) that as per the decision in the case of B A Mohota Textiles (supra), it was held that the assessee company....