2012 (2) TMI 507 - AT - Income Tax

Addition on sale of shares - taking into consideration of the land value owned by that company for making the addition - Held that - We find that the addition made by AO which is confirmed by ld. CIT (A) has no leg to stand. Assessee has sold the shares of a company and not the land of that company. Therefore, by taking into consideration of the land value owned by that company making any addition in the hands of the assessee, in our view is not justified. There is no provision under the IT Act that value of land owned by a company whose shares has been given to any person and in the hand of that person any capital gain can be assessed on the basis of land or office sold by the company. If any addition can be made that can be made on the basis of value of those shares or taking into consideration that the sale consideration shown by assessee is not correct, if there is any evidence. No such material was there before the AO that assessee has sold the shares below market price and, therefore, in our considered view the basis on which the addition has been made by AO was not correct - Decided in favour of assessee.

Summary

Issues:
1. Addition in estimating selling price of shares of two companies.
2. Assessment of capital gains based on the value of land owned by the companies.

Analysis:
1. The appeal was against the order of ld. CIT (A) regarding the addition in estimating the selling price of 1100 shares of M/s. Unique Propcon Pvt. Ltd. and 100 shares of M/s. Marudhara Propcon Pvt. Ltd. The AO made an addition of &8377; 1,16,960/- on account of the sale of these shares. The AO computed capital gains based on the market value of the offices owned by the companies whose shares were sold by the assessee. The ld. CIT (A) confirmed the AO's action.

2. The Tribunal found that the addition made by the AO and confirmed by ld. CIT (A) was unjustified. The assessee had sold shares of the companies, not the land owned by these companies. The Tribunal emphasized that there is no provision under the IT Act to assess capital gains in the hands of the assessee based on the land or office owned by the company whose shares were transferred. The Tribunal highlighted that any addition should be based on the value of the shares or evidence proving incorrect sale consideration, which was lacking in this case. The Tribunal concluded that the basis for the addition by the AO was incorrect, and hence, the ld. CIT (A) erred in confirming the order. Consequently, the Tribunal deleted the addition made and confirmed.

Conclusion:
The Tribunal allowed the appeal of the assessee, emphasizing that assessing capital gains based on the land value owned by the companies was not justified. The Tribunal ruled in favor of the assessee, deleting the impugned addition.