TaxTMI 
TaxTMI 
2025 (7) TMI 1372
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....umstances of the case, the learned AO and CIT(A) were justified in assessing the income of the appellant at INR 2,92,27,44,790/- instead of accepting the returned loss of INR 43,99,76,081/-, by making an addition of INR 3,36,27,20,872/- under section 56(2)(x). 2. The learned AO and CIT(A) failed to appreciate that the appellant had correctly reported their income, and no additions, disallowances, or adjustments were necessary to the returned income. 3. Whether, in the facts and circumstances of the case, the provisions of section 56(2)(x) of the Act, when read with Rules 11U/11UA of the Income Tax Rules, 1962 ('Rules') would be applicable. 4. Whether, in the facts and circumstances of the case, section 56(2)(x) of the Act, read with the Rules 11U/11UA of the Rules, applies to genuine transactions entered by the Appellant considering the legislative intent behind the introduction of section 56(2)(x) of the Act. 5. Whether, in the facts and circumstances of the case, the learned AO and CIT(A) were correct in treating the difference between the acquisition price and the quoted market price as "income from other sources" under section 56(2)(x....
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....rief facts of the case are as under: 2. The assessee is a company and is engaged in the business of making investments and trading of chemicals. The assessee is a part of Privy Group which is engaged in chemical business. A survey action u/s. 133A of the Act was conducted on assessee on 06.06.2022 wherein it was found that the assessee entered into an agreement on 22.04.2021 for purchasing 1,53,05,270 equity shares of M/s. Privi Speciality Chemicals Ltd. (PSCL) from M/s. FIH Mauritius Investments Ltd. (FIH) on 22.04.2021. It was found that, as per this agreement, the assessee was required to pay consideration @ Rs. 653.29 per share of PSCL. The said transaction was completed on 29.04.2021 and the assessee acquired 1,53,05,270 equity shares of PSCL by paying Rs. 999,87,79,838/-. 2.1 During the survey operation, valuation report prepared by M/s. GMJ & Co. dated 22.04.2021 was also found. It was observed that, the valuer valued the FMV of equity shares of PSCL at Rs. 915 per share. There was difference in the sale consideration per share paid by the assessee, and the FMV of equity shares of PSCL. Statement of the CFO of PSCL was recorded who looked after assessee's finance durin....
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..... 2.4 Subsequent to the survey, the assessee company filed original return of income on 30.09.2022 declaring loss of Rs. 43,99,76,081/-. Although the assessee company did not offer any income u/s. 56(2)(x) of the Act, however, it paid self- assessment tax of Rs. 78,11,02,130/- on 30.09.2022 and the same was claimed as refund while filing the return of income. The said return was selected for scrutiny and a notice u/s. 143(2) of the Act was issued on 10.02.2023. 2.5 During the assessment proceedings, the Ld.AO issued show-cause notice to the assessee company asking it to explain the difference between the consideration paid @Rs.653.29 per share and the market value @Rs.873 (lowest on the date of purchase) should not be treated as income as per the provisions of section 56(2)(x) of the Act. In the show cause notice, the Ld.AO computed the amount of difference at Rs. 336,27,20,872/-. In response to this, the assessee filed a detailed submission dated 22.09.2023 which has been reproduced by the Ld.AO at page 3 to 8 of the assessment order. The said explanation was not accepted by the Ld.AO for the following reasons:- i. The sale consideration was paid by the assessee com....
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....consideration was decided on the basis of value of company on 22.05.2019 when the promoters decided to part ways in each other's company. The FMV of shares of PSCL went up in 2 years and the said value should not be considered. This submissions of the assessee was rejected by the Ld.AO by observing as under:- i. The option agreement dt. 22.05.2019 entered between Privi promoters and FIH Mauritius Investments Ltd is not a precursor event which leads to transaction dt. 29.04.2021 and the tax matter under investigation. On the contrary, the 'call option' provided by FIH to Privi promoters for PSCL shares (erstwhile FSL) was only for 9.84% equity shares and not for entire shareholding sold by FIH to Privi promoters. ii. The 'option agreement was supposed to be in force from 31.03.2020 till 30.09.2020. The transaction took place much later date on 29.04.2021. Hence, the defence put forward by the CFO that the transaction entered on 22.05.2019 is finally settled on 29.04.2021is factually incorrect and has no relevancy to the transaction dt, 29.04.2021. iii. The argument of CFO that the value of shares of company has been arrived as per the Net W....
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.... on 29.04.2021. 5.2 The Ld.AR submitted that, the deal could not get materialized to ongoing COVID pandemic. Further as per the decision of Hon'ble Supreme Court regarding extension of time limitation due to COVID pandemic reported in 438 ITR 296, all dates were extended, and thus on the basis of above decision of Hon'ble Supreme Court, the option agreement dated 22.05.2019 was active on 22.04.2021. 5.3 The Ld.AR submitted that, the valuation report gives two valuations i.e. Rs. 641 and Rs. 915 per equity share. As the price of Rs. 915 was higher, the valuer took the higher price as mentioned in the valuation report itself. He submitted that, the Ld.AO did not give any consideration to the valuation at Rs. 641 per equity share which was lower than the consideration price mentioned in the agreement dated 22.04.2021. 5.4 The Ld.AR submitted that, the provisions of section 56(2)(x) are anti-abuse provisions and have to be construed in a manner to achieve the intended purpose. He submitted that, these provisions should not be made applicable to bonafide transactions, as in the present case. It is submitted that, the consideration price was higher than the average price of ....