2013 (12) TMI 643 - AT - Income Tax

Valuation of rights Held that - Following ACIT vs. Shri Abhijit Rajan 2013 (12) TMI 234 - ITAT MUMBAI the Assessing Officer was not given an opportunity by the CIT(A) before admitting the additional evidence - The issue was restored for fresh decision.

Summary

Issues involved:
1. Acceptance of additional evidence in valuation of rights awarded to a third party.
2. Valuation of rights awarded to a third party and its impact on the value of shares allotted.
3. Reopening of assessment and taxation of benefits obtained from share allotment.

Issue 1: Acceptance of additional evidence in valuation of rights awarded to a third party:
The Department raised concerns regarding the acceptance of additional evidence in the form of an opinion by SSP & Co. without affording an opportunity to the Assessing Officer (AO) as required by Rule 46A of the I.T. Rules, 1962. They argued that SSP & Co. was not a statutory body and their findings were not based on a recognized method. The CIT (A) was criticized for fixing the value of rights awarded to the third party without proper reasoning. The Tribunal, considering a similar case of ACIT vs. Shri Abhijit Rajan, agreed with the Department's contentions. The matter was restored to the file of the AO for fresh adjudication after giving a reasonable opportunity to the assessee and considering all relevant material.

Issue 2: Valuation of rights awarded to a third party and its impact on the value of shares allotted:
The Department challenged the valuation of rights awarded to the third party and the subsequent adjustment in the value of shares allotted. They argued that the CIT (A) arbitrarily estimated the value of these rights without proper justification. The Tribunal, following the decision in a similar case, set aside the CIT (A)'s order and remanded the matter back to the AO for fresh consideration. The Tribunal emphasized the need for a speaking order by the AO, considering all relevant material presented by the assessee.

Issue 3: Reopening of assessment and taxation of benefits obtained from share allotment:
The assessee contested the reopening of assessment and taxation of benefits derived from the allotment of shares at a price lower than their actual value. The CIT (A) upheld the issuance of the notice under Section 148 of the Income Tax Act, 1961, and the subsequent assessment order by the AO. The assessee argued against the method used by the CIT (A) to determine the value of shares and the benefits obtained from the allotment. However, the Tribunal noted that this issue was interlinked with the Department's grounds, which were set aside for fresh adjudication. Therefore, the Tribunal remanded this issue back to the AO for reconsideration in light of all relevant material on record.

In conclusion, the Appellate Tribunal ITAT MUMBAI addressed the issues of accepting additional evidence, valuation of rights awarded to a third party, and the reopening of assessment in a detailed and structured manner. The Tribunal emphasized the importance of providing a fair opportunity to all parties and considering all relevant material before reaching a decision. The judgments in similar cases were cited to ensure consistency and fairness in the adjudication process.