2013 (5) TMI 274 - AT - Income Tax

Addition towards book value of share purchased - CIT(A) deleted the addition - case of assessee having been selected for scrutiny under CASS - Held that - No justification for the AO to insist upon the valuation of the shares by the auditors of the M/s Shri Govind Hotels & Health Resort Pvt. Ltd. As per the impugned order, reference has been made by the CIT(A) that notice was issued u/s 133(6) to M/s Krishna Info Media Ltd. i.e the seller of shares to the assessee who has confirmed the transaction at the price and similar notice is stated to have been issued u/s 133(6) to M/s Shri Govind Hotels & Health Resort Pvt. Ltd. who also confirmed the share holding. However no reference in regard to the information sought and received by the AO is found in the assessment order. It is also seen that neither the assessee has cared to address specific reason for the fall in the price of shares nor has the CIT(A) looked into the aspect. Thus where there is a discrepancy on facts qua the impugned order and the AO and the reasons for the drop in share price have not been addressed by the CIT(A) it would be appropriate to restore the issue back to the file of the CIT(A) with the direction to first address the facts and then consider the applicability of the judgements which are relied to pass a speaking order - appeal of the department is allowed for statistical purposes.

Summary

Issues:
- Whether the Ld. CIT(A) erred in deleting the addition of Rs.24,06,747/- towards the book value of shares purchased.
- Whether the AO's calculation of the book value of shares was justified.

Analysis:
1. Issue 1 - Addition of Rs.24,06,747/-:
- The AO made an addition based on the purchase of 2,24,510 equity shares at 50 paise per share, questioning the purchase value compared to the balance sheet value.
- The assessee provided evidence of purchase through banking channels but did not submit the CA-certified purchase value.
- The AO, considering the private limited company status, calculated the book value leading to the addition.
- The CIT(A) found the AO's addition unjustified as no evidence proved the actual purchase amount exceeded the recorded value, and seller confirmations were submitted.

2. Issue 2 - Justification of AO's Calculation:
- The Sr. DR argued that the AO rightly sought reasons for the low purchase value compared to the balance sheet.
- The Ld. AR contended that the AO lacked evidence for the share value and the assessee's inability to obtain CA certification.
- The Tribunal found discrepancies in the AO's order, lack of specific reasons for the share price drop, and directed a reevaluation by the CIT(A) with proper consideration of facts and applicable judgments.

3. Conclusion:
- The Tribunal allowed the department's appeal for statistical purposes, emphasizing the need for a detailed reevaluation by the CIT(A) with proper consideration of facts and providing both parties an opportunity to present their case.

This detailed analysis highlights the issues regarding the addition of the book value of shares, the justification for the AO's calculation, and the Tribunal's decision to remand the case for further review by the CIT(A).