2019 (3) TMI 1611 - AT - Income Tax

Stay of demand - A O determined the FMV of the shares of the assessee at ₹ 84.24 per share as against ₹ 100/- per share and balance taxed u/s 56(2)(viib) - HELD THAT - In this matter no unaccounted money is involved nor any money transactions took place but the matter relates to the exchange of shares and the ld. AO estimating the value of the shares of the assessee at ₹ 84.24 per share whereas the assessee valued the same at ₹ 100/-. As clear from the letter dated 5.3.2019 issued by the ld. AO that he granted stay of the balance amount, leaving ₹ 58.48 lacs that was already attached/realized, in two instalments i.e., 50% on 15.3.2019 and the remaining balance at 10% per month from April onwards. Since more than 1/3rd of the demand is realized by the department, we deem it just and proper to grant stay of the balance demand for a period of six months subject to the condition that the assessee shall not part with the impugned shares or alienate them in any way till the disposal of the appeal. It is also directed that the assessee shall always be ready to proceed with the matter without asking for any time, failing which the stay shall stand vacated. Stay Application of the assessee is allowed.

Summary

Issues:
Stay of demand in respect of Assessment year 2014-15 under Section 56(2)(viib) of the Income-tax Act, 1961.

Analysis:

1. Stay of Demand Application: The applicant sought the stay of demand for Assessment year 2014-15, where the addition was made by the Assessing Officer under Section 56(2)(viib) of the Income-tax Act, 1961. The issue arose from the valuation of shares issued by the assessee to two companies at a premium of ?90 per share, while the Assessing Officer determined the fair market value at ?84.24 per share. The discrepancy led to an addition of ?2,83,68,910, causing grievance to the assessee.

2. Contentions of the Parties: The applicant argued that the authorities did not appreciate the provisions of Section 56(2)(viib) of the Act in the context of the case, leading to unjust additions and actions against the directors under Section 179 of the Act. On the other hand, the Revenue contended that there was no valid ground for granting a stay, especially since the department could recover the amount from the assessee directly.

3. Judicial Decision: The Tribunal carefully considered the matter and observed that no unaccounted money was involved; instead, the issue revolved around the valuation of shares. Notably, the Assessing Officer had already granted a stay for a portion of the demand, leaving a balance of ?58.48 lakhs. Considering this, the Tribunal deemed it appropriate to grant a stay of the remaining demand for six months, subject to the condition that the assessee does not dispose of the shares in question until the appeal is resolved. Additionally, the assessee was directed to be ready for proceedings without seeking additional time, failing which the stay would be vacated.

4. Final Decision: The Tribunal allowed the Stay Application with the specified conditions and directed the registry to schedule the appeal hearing for 24th April, 2019. Consequently, the Stay Application was granted, ensuring a temporary relief for the assessee while awaiting the appeal process.

This detailed analysis encapsulates the key aspects of the legal judgment regarding the stay of demand in a tax assessment case, highlighting the arguments presented, the judicial reasoning applied, and the final decision rendered by the Tribunal.