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2024 (1) TMI 154 - AT - Income TaxValidity of assessment framed u/s. 153C - incriminating material found during search or not? - HELD THAT - CIT-DR could not answer or could not convert the statement that there is no seized material or he could not produce any seized material in relation to these issues for the relevant assessment year 2012-13. In the absence of any incriminating material, we feel that the issue is squarely covered by the decision in the case of Abhisar Buildwell (P) Ltd., 2023 (4) TMI 1056 - SUPREME COURT and hence, we allow the additional ground raised by assessee and quash the assessment framed u/s. 153C r.w.s. 143(3) of the Act. Disallowance of expenditure towards helper allowance claimed as deduction u/s. 10(14)(i) - HELD THAT - Assessee only made submission that the assessee has expended the money and this claim is made by assessee in the return filed u/s. 153(3A) of the Act. But on query from the Bench, the ld.counsel could not state any evidence is filed even now before us in regard to claim of helper allowance paid to them. The ld.counsel stated that only few self-made sample copies of vouchers are available. After hearing ld.counsel for the assessee and ld. CIT-DR, we are of the view that the CIT(A) has rightly confirmed the action of AO, we uphold the same. Salary - Taxable perquisites being electronic items like T.V. sets and furniture items placed in assessee s residence and claimed the same as tax free - AO added this sum towards the assets on the ground that same were used by the assessee at his residence and thus 10% of cost of such equipments/perquisites is charged to tax in the hands of the assessee as per section 17(2) - CIT(A) also confirmed the action of the AO - HELD THAT - Before us, assessee could not adduce any evidence or could not controvert the findings of the CIT(A) or could not make any legal arguments on this. Hence, we have no agitation in confirming the order of CIT(A). This issue of assessee s appeal is dismissed. Estimation of income - deemed rental income - HELD THAT - We noted the fact neither the AO nor the CIT(A) has carried out the exercise of as certaining the market value of rent by adopting a scientific method or by going through the municipal valuation. Since the assessee suo-motto quantified deemed rental income of this house at Rs. 1.20 lakhs and divided among himself and his wife and declared Rs. 60,000/- from this property and none of the authorities below have carried out this exercise of computing the correct market value, we feel that on estimate deemed rental income cannot be added u/s. 24 of the Act. Hence, we delete the addition and allow this issue of assessee s appeal. Unexplained expenditure u/s. 69C - foreign travel expenditure - HELD THAT - Even now before us, the assessee could not file any details of his foreign trips and how he made the expenditure. Once details are not available before lower authorities or even now before us, we are of the view that the AO has rightly made addition of foreign travel expenditure of Rs. 1,50,000/- treating the same as unexplained expenditure u/s. 69C of the Act and CIT(A) has rightly confirmed the same in the absence of any evidence to the contrary. We confirm the addition and dismiss this ground of assessee s appeal. Addition u/s 56(2)(vii)(c) - allotment of equity shares @ Rs. 10/- - book value of shares prior to allotment worked out at Rs. 552/- per share - the shares were issued by the company to the existing shareholders who are husband and wife being close relatives - whether the the assessee case squarely falls in the exception as provided by the fourth proviso in term of the definition of relative ? - HELD THAT - A company is a separate and distinct taxable entity being a juristic person eligible to own property and to sue, or be sued, in its name. A company is separate and distinct from its shareholders. Hence, it cannot be stated that the individual assessee who has been allotted shares is relative within the definition provided in Explanation to the proviso to section 56(2)(vii) of the Act. Hon ble Madras High Court in the case of K.S. Mothilal, K.S. Damodaran others, 2001 (10) TMI 1093 - HIGH COURT OF MADRAS held that it is the well settled legal position that a shareholder has no interest in the property of the company, which is a juristic person and which is entirely distinct from the shareholders. According to us, the the individual, the assessee in the present case and the allotter company does not fall under definition of relative. The definition to relative as defined in the Explanation, as reproduced above, is categorical that the definition of relatives defines only blood relations or who are lineal ascendant or descendant of the individual or of the spouse of the individual and so on. Nowhere the company is defined under the definition of relative as provided in the Act. - We have to ascribe the natural and ordinary meaning to the words used by the legislature and ought not, under any circumstances, to substitute our own impression and ideas in place of the legislative intent as is available from a plain reading of the statutory provisions. This view has been held by the Hon ble Supreme Court in the case of Orissa State Warehousing Corporation 1999 (4) TMI 3 - SUPREME COURT The assessee s case squarely falls under the provision of section 56(2)(vii)(c) of the Act and according to our view, assessee s case does not fall under any exceptions as provided in this explanation to proviso to section 56(1)(vii)(c) of the Act. Hence in the present case before us, the shareholder was allotted shares in private placement in number 23,04,114 being equity shares at the face value of Rs. 10 per share whereas the fair market value of each share was at Rs. 552. Therefore in our view, the AO has rightly assessed the differential value of shares received by assessee of Rs. 1,24,88,29,788/- to tax as income from other sources as per the provisions of section 56(2)(vii)(c) of the Act and upheld by CIT(A). - Additions confirmed.
Issues Involved:
1. Jurisdictional issue regarding the validity of the assessment under section 153C. 2. Disallowance of expenditure towards helper allowance. 3. Taxable perquisites for electronic and furniture items. 4. Deemed rental income estimation. 5. Unexplained foreign travel expenditure under section 69C. 6. Addition under section 56(2)(vii)(c) for allotment of equity shares at less than fair market value. Summary: 1. Jurisdictional Issue: The assessee challenged the assessment under section 153C r.w.s. 144 of the Income Tax Act, 1961, arguing the absence of incriminating material found during the search. The Tribunal noted that the assessment for the relevant year was unabated and no incriminating material was found. Citing the Supreme Court decision in PCIT vs. Abhisar Buildwell (P) Ltd., it was held that the assessment without incriminating material on unabated assessment is bad in law. Thus, the Tribunal quashed the assessment framed under section 153C r.w.s. 143(3). 2. Disallowance of Helper Allowance: The assessee claimed deduction for helper allowance under section 10(14)(i), which was disallowed by the AO due to lack of supporting documents. The Tribunal upheld the disallowance as the assessee could not provide evidence to substantiate the claim. 3. Taxable Perquisites: The AO added Rs. 3,96,016/- as taxable perquisites for electronic and furniture items provided by the company for the assessee's use. The Tribunal upheld the addition, noting the assessee failed to provide evidence to counter the findings. 4. Deemed Rental Income: The AO estimated deemed rental income for properties not declared by the assessee. The CIT(A) reduced the addition, estimating a fair rent. The Tribunal deleted the addition, stating that the authorities did not follow a scientific method or municipal valuation to ascertain the market value of rent. 5. Unexplained Foreign Travel Expenditure: The AO added Rs. 1,50,000/- as unexplained expenditure under section 69C for foreign travel. The Tribunal upheld the addition as the assessee could not provide details or evidence of the expenditure. 6. Addition under Section 56(2)(vii)(c): The AO added Rs. 124,88,29,788/- under section 56(2)(vii)(c) for allotment of equity shares at less than fair market value. The Tribunal upheld the addition, stating that the transaction between the company and the individual shareholder does not fall under the exception for relatives in the proviso to section 56(2)(vii). The Tribunal emphasized that the company and the shareholder are separate entities, and the assessee's case does not qualify for exemption under the definition of 'relative.' Conclusion: The Tribunal allowed the appeal regarding the jurisdictional issue, quashing the assessment under section 153C. Other issues were decided against the assessee, with the Tribunal upholding the disallowances and additions made by the AO and CIT(A). The appeal in ITA No.950/CHNY/2022 was allowed, while ITA No.519/CHNY/2023 was partly allowed.
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