TaxTMI 
TaxTMI 
2026 (3) TMI 1701
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....d was involved in sham transactions and all shares of this company were acquired by the assessee along with his family members and hence, the assessee was one of the ultimate beneficiary of the transaction. 2) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that at the same time, Shri Rakesh Markhedkar (father of the assessee), had directly purchased 1000 shares of M/s Ratnagiri Financial Advisory Pvt. Ltd. @ Rs. 500/- per share and by purchasing shares of M/s Deb Suppliers & Traders Pvt. Ltd. @ Rs. 10/-, the assessee ultimately had got 72474 shares of M/s Ratnagiri Financial Advisory Pvt. Ltd. wherein assessee's family members had became director just before the transactions and all this arrangement was done to acquire the shares of M/s Ratnagiri Financial Advisory Pvt. Ltd. company at price much lower than the FMV. 3) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering the facts that assessee had used a colorable device to avoid legitimate tax liability and failed to appreciate the unveiling of corporate veil done by AO which is very well....
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....y members of the assessee when it had capital of Rs. 14.03 crores and the FMV of each share, as per the valuation report submitted by the assessee, was Rs. 482.98 per share. The AO invoked provisions of section 56(2)(vii)(c) of the Act, according to which where any individual receives any property for any consideration which is less than FMV of the property, the difference shall be assessed as the income of the recipient. Thereafter, the AO relied on various decisions of Hon'ble Supreme Court and Bombay High Court in the cases of (i) McDowell and Company Ltd. vs. Commercial Tax Officer, 154 ITR 148, Killick Nizon Ltd. vs. DCIT (Bom.) dated 06.03.2012 and added the difference between the FMV of the shares of RFAPL and cost incurred indirectly for acquisition of such shares of RFAPL, amounting to Rs. 3,49,54,942/- u/s 56(2)(vii)(c) r.w.s. Rule 11UA in the hands of the assessee. 4. Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). The CIT(A) deleted the addition by observing as under: 17. To sum-up, in the present case, the appellant has acquired shares of M/s Deb Suppliers and he is not the legal owner of the shares of M/s RFAPL. The addition i....
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....before the Tribunal. The Ld. CIT DR has supported the order of the AO and submitted that the assessee and his family members acquired share capital of more than Rs. 28 crores by paying only Rs.25 lakhs. He argued as to how premium of Rs. 13.73 crore could be raised in case of RAFPL which had no significant capital/assets or any business activity. He submitted that the CIT(A) has grossly erred in deleting the addition made by the AO u/s 56(2)(vii)(c) of the Act which was rightly invoked by the AO. He submitted that Deb Suppliers and Traders, the holding of RAFPL, was only a paper company and was involved in sham transactions. The shares of this company was acquired by the assessee and his family member who were the ultimate beneficiary of the huge share capital and premium of RAFPL. The Ld. CIT DR submitted that the ratio of the decision in case of McDowell and Company Ltd. (supra) was ignored by the CIT(A) while deleting the addition. He requested to set aside the order of the CIT(A) and restore the order of the AO. 6. On the other hand, the Ld. AR of the assessee supported the order of CIT(A). He has filed a paper book enclosing therein (i) Rule 11UA as applicable for the year ....
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....sions relied upon by both parties. We have also carefully perused, the provisions of the prevailing and the amended provisions of section 56(2)(vii)(c) of the Act and Rule 11UA of IT Rules, 1962. We find that the impugned issue is no longer res integra in view of the decision of the co-ordinate bench of the Mumbai Tribunal in case of DCIT vs. Nakul Markhedkar (supra) for the same AY 2015-16 in ITA Nos. 786 and 785/Mum/2025 dated 30.04.2025. The Tribunal decided the issue in favour of the appellant by relying on the decisions of Delhi High Court in case of Minda SM Technocast Pvt. Ltd. (supra) and Mumbai ITAT in case of Smiti Holding and Trading Co. Ltd. (supra). The relevant part of the order is reproduced below for ready reference and clarity: 6. We heard the parties and perused the material on record. From the finding of the AO which is extracted in the earlier part of this order, we notice that the AO has invoked the provisions of section 56(2)(vii)(c) r.w.r 11UA for the reason that the acquisition of shares by the assessee in M/s Farista Financial Consultants Pvt Limited is to indirectly acquire the shares in RFAPL at a nominal value of Rs.10 where the FMV of the share....
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.... has arrived at the FMV of the value of shares of M/s. Farista Financial Consultants Pvt. Ltd. at Rs. 7.67 per share taking the value of assets including shares of RFAPL at book value (refer page 6 of AO's order). However the AO for the purpose of making addition under section 56(2)(vii)(c) has considered the FMV of the RAFPL shares thereby valuing the underlying assets of M/s. Farista Financial Consultants Pvt. Ltd. at FMV which is applicable only from 01.04.2018. In this regard we notice that the Hon'ble Delhi High Court while considering the applicability of amended provisions of Rule 11UA has held that ........... 9. We further notice that a similar view has been held by the Co-ordinate Bench in the case of Smiti Holding & Trading Company Pvt. Ltd. (supra) where it has been held that ............ 10. We find that the AO besides applying the incorrect Rule 11UA has also not followed the right way to calculate the addition to be made under section 56(2)(vii)(c). We notice that the AO has considered 50% of the total shares RAFPL held by M/s. Farista Financial Consultants Pvt. Ltd. and made the addition by taking the difference between FM....