TaxTMI 
TaxTMI 
2023 (1) TMI 754
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....d by assessee on 31-03-2022. Moreover, as per sub section (3) of Section 253 of the Income Tax Act, 1961 the Assessee was having 60 days time to file an appeal before the Hon'ble Income Tax Appellate Tribunal against the order of the Ld. CIT(A). It is hereby submitted that the Assessee filed an appeal through the online portal of the ITAT on 31.05.2022, which is within the said timeline. Therefore, the Assessee was of the opinion that he could file the copy prior to 30.06.2022 and the same would not be treated as barred by limitation.However, I humbly request to you to kindly condone the delay in the instant case. Right after filing of such appeal, the Assessee received an e-mail from the e-filing team of Hon'ble ITAT Mumbai, where it was categorically mentioned that the Assessee can file a physical appeal before Hon'ble ITAT Jaipur on or before 30.06.2022. Copy of the e-mail is attached herewith and marked as Annexure-1. Therefore, the Assessee was of the opinion that he could file the copy prior to 30.06.2022 and the same would not be treated as barred by limitation. However, I humbly request to you to kindly condone the delay in the instant case." 3. During the ....
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....to the addition made for an amount of Rs. 1,50,00,000/- as per provision of section 2(22)(e) of the Act. 8. Apropos to this ground the related fact is that the assessee Mr. Vijay Kumar Vijayvergiya, is the Managing Director of M/s Amit Colonizers Ltd. (M/s ACL). During the A.Y. 2012-13, assessee has shown salary income of Rs. 9,00,000/- from company and income from other sources of Rs. 7,16,809/- (interest from bank 11809/- and commission income of Rs. 7,05,000/-). During the period under consideration, assessee has made investment in the following two properties. In the course of the assessment proceeding, assessee filed details of the sources of these investments. On the observation of the same, it has been gathered that assessee has substantial shareholding of the company i.e. M/s Amit Colonizers Ltd. i.e.. as on 31.03.2012 - 63.63% shareholding and as on 31.03.2011 - 46.19% shareholding, in the above-mentioned company.It was also noted that the company M/s Amit Colonizers Ltd. is a limited company and it was having Reserve & Surplus, as on 31.03.2012 Rs. 2,59,05,745/- (as on 31.03.2011 - Rs. 1.79,81,817/-) and duly reflected in its balance sheet.From the Balance sheet of the ....
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....eposit of 1,50,00,000/- in the regular course of business from the company under MOU development agreement for construction of flats and commercial shops on the property under his ownership. The Company has disclosed true character of the transaction under consideration by adding a new sub head as "Security Deposit" which further categorized whether it is secured or unsecured and whether it is good or doubtful complying the provisions of the Companies Act, 2013. Major Head does not change the character of the financial transaction if the sub head otherwise speaks true one. We have already furnished the details of security deposits covering other security deposits also. Therefore, it is not justified to consider the security deposit as loans and advances simply on the basis that it has been disclosed under the head Long term loans and advances ignoring the disclosure requirement under the particulars sub head of the schedule III format prescribed under the Companies Act. Against this contention the ld. AO noted that the assessee's logic that merely by categorizing any transaction, as sub head loans and advances, does not partake its character as loan and advance, as the real intenti....
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....of the managing director unanimously, it was agreed that work of construction of residential flats and commercial shops on the said property should be taken up immediately on such verbal terms and conditions as mutually agreed upon between the company and assessee in the meeting of M/s. ACL. The terms and conditions as mutually decided in the board meeting shall be taken in writing through MOU at convenient time of both the parties. The certified copy of the said resolution was placed on record. Against the submission of the assessee, the ld. AO noted that MOU dated 04.08.2021 does not have any evidential value in its own, being unregistered, non-witness and signed by the same individual in both of the capacity, i.e. in first party as well as in second party. However, no minutes of this so called meeting, held on 04.08.20211, in order to discuss the proposal of director Mr. Vijay Kumar, provided by the ld. AR to support its submission made. Without any documentary evidence, the assessee is just trying a making a story to established that all the director of the board were agreed to enter in an MOU, which was on such "verbal terms and conditions as mutually agreed by the company" an....
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....is plot with the company. Again there is reference of one Bhawani Singh Nayak declaring that this property will be registered on 08/08/2011 in the name of assessee. Surprisingly, no signatures of this Bhawani Singh Nayak are available on the so called "certified copy of resolution". The sign of Mr. Rajesh Kumar Vijayvergiya (family member of the assessee) is available on second paper i.e. not company's letter head. Thus it is evident that the so called MOU is full of error, inconsistency and improbabilities, as discussed above. In nutshell the so-called MOU is full of inconsistency, also lacking essential characteristics to make it a genuine in nature. 5. Most surprisingly, in the so called certified copy of resolution, nothing is mentioned about extending any security deposit to be given to the Assesses, and not the arrangements of this so called security deposit to b given to assessee. This fact also proves that the so-called story of security deposit is an after thought to give a colour of routine business transaction, to bypass applicability of the Sec. 2(22)(e). In view of all the observation made above it is evident that the all the arguments made by the assessee, in t....
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....spects. It is also pertinent to note that the assessee was the only signatory of MOU, in both the capacities. It is also a factual matter that the property was purchased with the initial payment of Rs. 50 lacs received, on 04/08/2011. from the company. Subsequently out of total cost of the land the assessee paid for the property i.e. Rs. 1,83,00,000/ the company had advanced of Rs. 1,50,00,000/ which amount to almost 81% of cost of the property. This proves that it was the company, which has facilitated the assessee to acquire the ownership rights of the property which was later on offered by him to the same company, in the joint venture with the company itself. Thus, the company has allowed him to have stake in a JV, for which the assessee has not contributed in any manner. This sort of favour is possible only in the in-house business affairs, not in a genuine financial deal. All the above discussion, makes it crystal clear that the so called MOU is nothing but a post-created document, much after the dates 04/08/2011 and 08/08/2011 (probably during the course of assessment proceeding when the issue came up for examination) and it is not a valid document in the eye of law for the d....
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....business under MOU for construction of flats and commercial shops on the property whose ownership presently lies with the assessee. It is also important to note here that the payment of security deposit of 1,50,00,000/ has been made on different dates ranging from 04.08.2011 to 23.01.2012 to the assessee as per Clause No. 2 of the MOU. The assessee has received only 50,00,000/ on 04.08.2011 from the company against the total agreed amount of security deposit while he has made total payment of 1,61,00,000 against the property up to 04.08.2011. The details of payment against property have been mentioned in the registry which is reproduced here for ready reference:- Date Name of Seller Amount 25.12.2010 Cumulatively in cash 21,000/- 27.12.2010 Mohd. Yusuf 2,50,000/- 27.12.2010 Mohd. Yusuf 2,50,000/- 04.08.2011 Rashidan Begum 37,00,000/- 04.08.2011 Mohd. Yusuf 33,89,500/- 04.08.2011 Rashidan Begum 33,00,000/- 04.08.2011 Modh. Arif 20,00,000/- 04.08.2011 Mohd. Yusuf 33,89,500/- 04.08.2011 Mohd. Harun 20,00,000/- Total 1,83,00,000/- The above facts confirm that this is purely a business deal not for the benefit of the assessee but for the benefit ....
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.... (including equity share of Rs. 22,69,300/-) and the funds of Rs. 50 lacs had received on 04/08/2011 were paid to the seller parties at the time of registry of documents but the balance funds, which were paid by the company to the assessee, in due course of time, were utilized by the assessee in purchase of other property, at Plot no. 90, Shivaji Nagar, Civil Lines, Jaipur. This clearly proves that it was only the assessee who enjoyed the benefits from the money so received from the company M/s ACL., in the name of security deposit.He had taken funds from the company for initial payment of property and from the same, he could be able to raise further funds as bank loan and became owner of property at 302, Ghat gate Bazar, Jaipur, for which he made joint venture MOU with the company to make a business cum residential complex in the profit sharing ratio of 50% 50% and from rest of the funds out of so called security deposit has helped him to became owner of one more property at Plot no. 90. Shivaji Nagar, Civil Lines, Jaipur. In this manner. the assessee derived most of the benefits from the transaction made with company M/s ACL.The assessee further submitted that the company is a pu....
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....GATE BAZAR, along with ledger of sub accounts in the books of M/s Amit Colonizers Ltd 45-68 6. Copy of Resolution dated 04-08-2011 passed in board meeting of M/s Amit Colonizers Ltd for MOU for property development. 69-70 7. Copy of reply filed to ACIT, Circle-7 during assessment proceedings dated 31-10-2014. 71-73 8. Copy of reply filed to ACIT, Circle-7 during assessment proceedings dated 19-01-2015. 74-76 9. Copy of reply filed to ACIT, Circle-7 during assessment proceedings dated 28-01-2015. 77-78 10. Copy of reply filed to ACIT, Circle-7 during assessment proceedings dated 09-02-2015. 79-82 11. Copy of reply filed to ACIT, Circle-7 during assessment proceedings dated 20-02-2015. 83-92 12. Copy of reply filed to ACIT, Circle-7 during assessment proceedings dated 10-03-2015. 93-97 13. Copy of MOU dated 30-11-2011 98-100 14. Copy of ITR along with Audited Balance Sheet, P & L account and 3CD of M/s Amit Colonizers Ltd for A.Y. 2012-13 101-136 15. Copy of ITR along with computation of income, Capital account, Balance Sheet and source of income for plot no. 90 & 302 of Mr. Vijay Kumar vijayvergiya for A.Y. 2012-13 137-141 16. Copy of profit and loss....
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....ase and the case law relied upon are different on facts and are not applicable in ground No. 1 raised by the assessee. We have also persuaded the findings recorded by the ld. AO as well as the findings of the ld. CIT(A), the findings are in the nature of factual aspects. From the orders of the lower authoritiesbench noted that the assessee has already executed an agreement to sale for the impugned property on 25.12.2010. When the registration of the property scheduled on 08.08.2011 the assessee has invested a sum of Rs. 1,61,00,000/- on this property. The company till 04.08.2011 given only advance of Rs. 50,00,000/- in accordance with the MOU though the property was scheduled to be registered in the name of the assessee on 08.08.2011. Thus, looking to these non-controverted fact placed on record we are of the considered view that the transaction entered by the assessee and M/s. ACL are commercial in nature and not in the nature of loans and advances. The assessee has financed this property with the bank based on these advance money will alone not attract the provision of section 2(22)(e) and the property was already subject to agreement to sale and thus the assessee has already ent....
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.... which it is so set off; (iv) any payment made by a company on purchase of its own shares from a shareholder in accordance with the provisions of section 77A14a of the Companies Act, 1956 (1 of 1956); (v) any distribution of shares pursuant to a demerger by the resulting company to the shareholders of the demerged company (whether or not there is a reduction of capital in the demerged company). Explanation 1.-The expression "accumulated profits", wherever it occurs in this clause, shall not include capital gains arising before the 1st day of April, 1946, or after the 31st day of March, 1948, and before the 1st day of April, 1956. Explanation 2.-The expression "accumulated profits" in sub-clauses (a), (b), (d) and (e), shall include all profits of the company up to the date of distribution or payment referred to in those sub-clauses, and in sub-clause (c) shall include all profits of the company up to the date of liquidation, but shall not, where the liquidation is consequent on the compulsory acquisition of its undertaking by the Government or a corporation owned or controlled by the Government under any law for the time being in force, include any profits of the company pr....
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....ss than fifty per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by, one or more co-operative societies ; (b) if it is a company which is not a private company as defined in the Companies Act, 1956 (1 of 1956)10a, and the conditions specified either in item (A) or in item (B) are fulfilled, namely :- (A) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) were, as on the last day of the relevant previous year, listed in a recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and any rules made thereunder ; (B) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than fifty per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by- (a) the Government, or (b) a corporation established by a Centra....
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....Central, State or provincial Act, (c) any company to which this clause applies or any subsidiary F company of such company if the whole of the share capital of such subsidiary company has been held by the parent company or by its nominees throughout the previous year." The company in which the public are substantially interested is a company where shares in the company carrying not less than 50 per cent. of the voting power have been allotted unconditionally to, or acquired unconditionally by and were throughout the relevant previous year beneficially held by any company to which this clause applies. In the present case, shares of more than 50 per cent. of the voting H power have been allotted unconditionally to or acquired unconditionally by a company in which the public are substantially interested. The find- ing which has been given by the Tribunal in this regard is on the basis of the evidence on the record that the condition is satisfied. Regarding the second condition whether during the previous year the shares were freely transferable or not, the power of the directors not to transfer the shares was held of a general nature and it was observed that there is no evidence....
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....ion 23A(1) of the Indian Income-tax Act, 1922. The assessee-company was, therefore, regarded as one in which the public were substantially interested. It was held that article 37 did not confer any uncontrolled or unrestricted discretion upon the directors to refuse to register the transfer of shares in a given case; in other words, the directors could not act arbitrarily or capriciously. The power conferred by such an article was of a fiduciary nature, which had to be exercised by the directors in the best interests of the company for preventing any undesirable person becoming a member, if that was likely to be prejudicial to the interests of the company; it was a power which had to be reasonably exercised for protecting the interests of the company. Free transferability of shares was a normal and common feature of limited companies and article 37 could not by itself be regarded as a restriction on the transfer of shares. On the basis of the various findings which have been given by the Tribunal and on the plain reading of the provisions of section 2(18) of the Act, we are of the opinion that all the conditions are duly fulfilled and the provisions of section 104 are not attract....
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.... value of equity shares may not be taxed u/s 56(2)(vii)(C) of the Income Tax act, 1961. 16. Against this assessee contended that the provisions of section 56(2)(vii)(c) of the Act uses the wording "receives any property". It means the intension of law is clear that there should be an existing property both in the hands of a person who gives it and a person who receives it. It is further supported by clause (d) of explanation given in the said section wherein the word property has been explained to mean as capital asset. It means any property which is a capital asset both in the hands of giver and receiver of it becomes the subject matter of the section 56(2)(vii)(c) of the Act. In the case of fresh allotment of equity shares (as is thecase with the assessee, there is no such situation- the equity shares are not owned by the company. The moment, at which the allotment of equity shares is made, they comeinto existence and become the property of the allottee. Before the allotment of equity shares they do not stand in the nature of property and capital asset of the company in the eyes of law and, thus, not disclosed in monetary terms in the financial statements as part of the asset of....
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....operty and this provision is not applicable on the fresh allotment of Equity shares. Since, in this case the alleged shares were not in existence before the allotment of fresh shares and therefore, addition is bad in law". The Ld. Assessing Officer has calculated the income from other sources u/s 56(2)(vii)(c) based on the fair market value of unquoted equity share as per rule 11UA . I find no infirmity in computation of the Ld. Assessing Officer. The argument of the appellant that the section 56(2)(vii)(c) is not applicable in case of newly issued shares has no legal ground. The Ld. Assessing Officer has dealt with all the objection in details in assessment order. Therefore, this ground of appeal of the appellant is, hereby, dismissed. 18. Before us the ld. AR of the assessee reiterated the same that was made before the lower authorities and submitted that the allotment of shares are not considered as property and thus, the provision of section 56(2)(vii)(c) will not attract for that the has relied upon the judgment of this bench in the case of Mr. Prakash Chand Sharma HUF in ITA no. 325/JP/2021 dated 06.04.2022. 19. Per contra on this issue the ld. DR submitted a report of ....
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....f section 56(2)(vii) are as under:- "56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head Income from other sources if it is not chargeable to income-tax under any of the heads specified in section 14. items A to E. (2) In particular, and without prejudice to the generality of the provisions of sub- section (1), the following incomes, shall be chargeable to income-tax under the head Income from other sources" (c) any property other that immovable property- (i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees the whole of the aggregate fair market value of such property; (ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, of the aggregate fair market value of such property as exceeds such consideration" In view of the above, the AO has rightly made the addition u/s 56(2)(vii)C of the IT Act and the CIT(Appeals) has rightly confirmed the addition in this case." 20. We have considered the rival contentions and submission placed on record by both the parti....
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....attracted. B. whether there is a difference between allotment of shares and receipt of shares ? We appreciate the view and argumentplaced by the Ld AR for assessee that the company has allotted the shares to an existing shareholder. This is not akin to receipt of shares in as much as there is a distinction between allotment of shares and receipt of shares. Receipt is the action of receiving something or the fact of its being received whereas allotment is defined as the portion or share of something. For receipt of share there should be shares in existence and a person holding such share transferring it to another person. As against this in case of allotment of shares, it comes into existence after it is allotted and there is no transfer of shares from one person to another person. Therefore allotment of shares cannot be equated with receipt of shares because in case of receipt of shares the property is already in existence whereas in case of allotment of shares the property comes into existence after it is allotted. C. Whether assesses comes under the definition of Relative? The definition of close relative given in the act under section 56(2)(vii)(c) of the act in Explanat....
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....ent of shares from M/s Sardar Projects (P) Ltd. The company has allotted the shares of 4,25,000 @ 10 each on 5th April, 2013 and 9,05,000 shares @ 10 each on 26th March, 2014. The net book value of the assets as on 5th April, 2013 was Rs. 1.35 crores. The company had issued 38,30,560 shares @ 10 each to the assessee and 28 others on 5th April, 2013. Similarly, on 26th March, 2014, the company had issued 46,53,700 shares @ 10 each to the assessee and 14 others. In the allotment, the assessee had been allotted 4,25,000 shares on 5th April, 2013 and 9,05,000 shares on 26th March, 2014. The FMV of each share was worked out by the AO at Rs. 676.55 as on 5th April, 2013 as against the book value of assets of Rs. 1,35,30,903. Similarly on 26th March, 2014, the AO had worked out the value of the same shares at Rs. 14.48 without any increase in the value of the assets from 5th April, 2013 to 26th March, 2014. The FMV of the shares has been worked out by the AO at Rs. 676.55 on 5th April, 2013 and Rs. 14.48 per shares on 26th March, 2014. If the share value as on 5th April, 2013 is to be adopted @ Rs. 676.55 the book value of the assets would be increase to astronomical figure of 260 crores ....
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....ght as an anti-abuse measure, seeks to tax the understatement of consideration as the income in the hands of the recipient (of the corresponding asset) as against the donor in the case of GT Act. The transactions between close the relatives are outside the scope of application of 56(2)(vii)(c). The legislature in its wisdom excluded the transaction of close relatives for the purpose of taxation under the income from other sources. Even the gifts received from the close relatives under s. 56(2)(v) are outside the scope of 56(2). Though the shares are allotted to the assessee, the entire shareholding of the company is retained by the family and no share was allotted to the outsiders. In this case, though the assessee had received the excess shares, renouncement was from the close relatives and the assessee is at liberty to transfer the shares to other relatives or shareholders at any point of time without attracting the taxation under s. 56(2)(vii)(c). Therefore, surrender of the rights of the close relatives in favour of the another close relative is covered for exemption under s. 56(2)(vii)(c) of the Act. In the decision rendered by the Hon'ble Madras High Court in the case CIT vs.....
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.... ascendant or descendant of the spouse of the individual; (G) spouse of the person referred to in items (B) to (F)." 12. There is no dispute that the assessee and other shareholders are close relatives, therefore the consideration received rather excess consideration passed on from the share of his brother is exempt from taxation under s. 56(2)(viii)(c)(ii) of the Act. Thus, we hold that the difference in FMV of the shares and the consideration paid by the assessee is squarely covered by the exemption clause provided under s. 56(2)(vii) of the Act and case law relied on by the assessee in the case of Kumar Pappu Singh (supra) is squarely applicable in the assessee's case. The learned Departmental Representative argued that the shares were not only allotted to the assessee but also allotted to others and submitted that the case law of Kumar Pappu Singh has no application in this case. We are unable to accept the argument of the learned Departmental Representative, since, prior to the allotment of shares on 5th April, 2013 the shareholders are only the assessee and his brother. In the fresh allotment apart from the assessee some applicants were allotted the shares. Therefore what....
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....penses of Rs. 6,75,000/- (3,50,000+ 3,25,000) have not been accountant for in the balance sheet submitted by the assessee. Now a revised balance sheet has been submitted alongwith reply dated 20/02/2015 in which value of these properties shown as under- a. 302, Ghat gate Bazar, Jaipur - Rs. 1,89,54,556/- (now revised value at Rs. 1,93,04,556) b. 90, Shivaji Nagar, Jaipur - Rs. 1,47,20,542/-(now revised value at Rs. 1,50,45,542) Comparison of this revised balance sheet has been done with the earlier one. The assessee has appreciated the value of these two properties by the amount mentioned as above and the cash in hand has been reduced by the same amount. Earlier the cash balance shown was at Rs. 13,61,290/- and now it is shown at Rs. 6,86,290/-, reducing by Rs. 6,75,000/-. The explanation submitted by the assessee is nothing but a made up story only. The act of non submission of copy of purchase deed from back side pages was an effort to escape from the sight of the AO, but when asked particularly pin pointing the issue, there was no way to escape and the assessee had to admit that the value shown in the balance sheet is under stated by Rs. 6,75,000/- Now the option left with ....
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....f this revised balance sheet has been done with the earlier one. The assessee has appreciated the value of these two properties by the amount mentioned as above and the cash in hand has been reduced by the same amount. Earlier the cash balance shown was at Rs. 13,61,290/- and now it is shown at Rs. 6,86,290/-, reducing by Rs. 6,75,000/-. The explanation submitted by the assessee is nothing but a made up story only. The act of non submission of copy of purchase deed from back side pages was an effort to escape from the sight of the AO, but when asked particularly pin pointing the issue, there was no way to escape and the assessee had to admit that the value shown in the balance sheet is under stated by Rs. 6,75,000/- Now the option left with the assessee was manipulation in the entries of balance sheet which he exercised. A person who is MD) of a company having good business volume is not expected to maintain is account books in this manner and also not expected to cover up the mistake by such manipulative practices. It is therefore held that the stamp duty expenses of Rs. 6,73,000/- have been made by the asses from his income from unexplained sources which the invested in purchase ....
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....any 1. Padam Chand Jain 06.04.2021 3,00,000 41,250/- 2. Sumit Modi 06.04.2021 6,00,000 75,000 3. Sita Ram Gupta 03.08.2021 7,50,000 NIL 4. Arun Kumar Rohit Goyal HUF 04.08.2021 13,00,000 21,450 29,50,000 137700 The assessee was asked to submit confirmation from these cash creditors along with income-tax assessment particulars of these persons and their relevant bank statement. The assessee was also asked to establish the creditworthiness of these creditors and genuineness of these transactions. Vide reply furnished on 20/02/2015, the assessee submitted that- "We have already submitted the copy of ledger account of Mr. Padam Chand Jain and Sumit Modi duly confirmed by them with our previous reply dated 09/02/2015. Now we are enclosing copy of ledger account of Shri Sita Ram Gupta and M/s Arun Kumar Rohit Goyal HUF duly confirmed by them for your kind perusal and record" As the assessee failed to submit the specific requirements with regard to unsecured loans taken by him, the genuineness of these transactions could not be examined. The assessee has submitted confirmation only. Even in the confirmation of Shri Sita Ram Gupta (loan t....
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....O is cryptic and he has not specifically spell out the reason behind not accepting the confirmation and he has not made any independent enquiry after filling of confirmation by the assessee. Thus relying on the judgment of the jurisdiction High Court delivered in the case of CIT Vs. Bhawani Oil Mills in DB ITA No. 107/2010 Rajasthan HC the ld. AR of the assessee submitted that the addition is required to be deleted. 29. Per contra, the ld. DR relied upon the orders of the lower authorities and submitted that the assessee has filed mere confirmation and not filed the copy of the ITR and copy of their bank statement and therefore he supported the order of the AO. 30. We have considered the rival contentions and submission placed on record by both the parties and have also considered the orders of the lower authorities. The bench noted that in the assessment proceeding the ld. AR of the assessee has filed all the four Loan creditor's confirmation and thereafter neither he has carried out further inquiry nor asked the assessee to submit any further details and considering the jurisdiction high court decision relied upon by the ld.AR of the assessee where in the court has held as unde....