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TMI Blog2022 (9) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... peration was conducted in the group case of ADBL on 18.02.2016 wherein the assessee, being director of the company was also covered. Subsequently, the assessee filed his return of income for the A.Y 2015-16 on 30.09.2016 in response to notice u/s 153A of the I.T. Act 1961 declaring total income at Rs.51,74,240/-. The Assessing Officer completed the assessment u/s 143(3) r.w.s. 153A of the I.T. Act 1961 on 31.3.2017 for the A.Y 2015-16 accepting the income returned. 3. Subsequently, the learned PCIT on verification of the assessment records, noticed that during F.Y. 2014- 15, the assessee purchased 5,15,603 equity shares of CDBL (Cybercity Developers & Builders Pvt. Ltd.) from M/s Ashoka Developers & Builders Ltd. @Rs. 35/- per share, whereas the value per share adopted by the seller i.e., M/s ADBL was @Rs. 51/- per share. Hence, as per the provisions of section 56(2)(vii)(c)(ii) of the Income Tax Act 1961, the difference amounting to Rs. 16/- per share was to be assessed in the hands of the assessee being purchaser. However, the assessing officer did not verify the applicability of provisions of section 56(2) vii)(c)(ii) of the Income Tax Act, 1961 while finalizing the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate i.e as on 09.04.2014 or adopted the balance sheet as on immediate preceding year i.e. 31.03.2014 Since, the auditor was not appointed by the assessee to get the accounts audited as on the valuation date, the only option left with the assessee was to adopt the balance sheet as on 31.03.2014. He noted that the FMV arrives @Rs 51/per share after following the balance sheet as on 31.03.2014 and the same value i.e.(@Rs. 5l/- per share) was adopted by the seller i.e, M/s ADBL to arrive at the capital gain tax for the A.Y. 2015-16. Accordingly, the difference amounting to Rs. 16/- per share was to be assessed in the hands of the assessee as envisaged in section 56(2)(vii)(c)(ii) of the Income Tax Act, 1961. Hence, the objection raised by the assessee with regard to valuation of share is not correct and hence denied. 3.4 So far as the argument of the assessee that the notice u/s 153A is invalid in absence of any incriminating material is concerned, the PCIT observed that the said provisions have been inserted by the Finance Act, 2017 which is effective from 1.4.2017 whereas the case of the assessee is A.Y 2015-16. Therefore, the newly inserted provisions are not applicable to the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61 stands valid. In view of the above, he set aside the order passed by the AO and directed him to decide the issue afresh taking into account the provisions of section 56(2)(vii)(c)(ii) of the I.T.Act after providing due opportunity of being heard to the assessee. 7. Aggrieved with such order of the learned PCIT, the assessee is in appeal before the Tribunal by raising the following grounds of appeal: "1. The order of the Hon'ble Pr.CIT is erroneous in law as well as facts of the case 2. The Hon'ble Pr. CIT ought to have observed that the order passed by the assessing officer u/s.153A of the IT Act is neither erroneous nor prejudicial to the interest of revenue and therefore there is no Scope to invoke provisions of section 263 of the IT Act. 3. The Hon'ble Pr. CIT observed that the valuation of the shares as per the balance sheet dated 31.03.2014 was in-accordance with the provisions / rules under the statute and therefore the value adopted by the assessee need not be disturbed. 4. The Hon'ble Pr. CIT ought to have taken into consideration the fact that the difference in valuation was voluntarily disclosed by the company M/s. Ashoka Developers & Builders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aluation of the shares @ Rs.35/- per share was on the basis of the last audited balance sheet on 31.3.2013 which is not disputed. On the contrary, the computation of value of shares of M/s. Cyber City Developers & Builders (P) Ltd @ 51/- per share as on 31.3.2014, which was not on the basis of audited accounts at Rs.51/- is not in accordance with the statutory provisions and Rules. He accordingly submitted that in accordance with the provisions of valuation as laid down in Rule 11UA of Income Tax Rules, 1961 which was Asset Backing Method i.e.(Assets-Liabilities:-No. of shares). Therefore, the adoption of value of shares at Rs.51/- by the learned PCIT is totally contrary to the statutory provisions. Therefore, the order passed by the learned PCIT u/s 263 has no legs to stand. 11. The learned Counsel for the assessee in yet another plank of his argument submitted that since in the case of the assessee as well as remaining 3 assessees, the original assessments were not taken up for scrutiny and the A.Y involved being A.Y 2015-16, the time limit for issuance of notice u/s 143(2) expired on 30.09.2015 and the entire proceedings stood terminated on 30.09.2015. 12. Referring to the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1913. Referring to the said seized material, he submitted that the rate per share has been mentioned at Rs.35/- per share. 17. Referring to the decision of the Delhi Bench of the Tribunal in the case of Sadhvi Securities (P.) Ltd. vs. Assistant Commissioner of Income Tax reported in 109 Taxmann.com 245, he submitted that the Tribunal in the said decision has held that where the assessee issued equity shares (unquoted) on 31.3.2014, the valuation date of unquoted shares was also 31.3.2014 and if the balance sheet was not drawn up by the Auditor on 31.3.2014 the valuation of assets and liabilities as on 31.03.2013 should have been adopted. 18. Referring to the decision of the Coordinate Bench of the Tribunal in the case of Medplus Health Services (P) Ltd vs. Income Tax Officer reported in (2016)68 taxmann.com 29, he submitted that the Tribunal in the said decision has held that where a method has been prescribed by the Legislature, that method alone shall be followed for computation of the fair market value. 19. He submitted that the decision of Hon'ble A.P. High Court in the case of Gopaldas Bhadruka reported in 346 ITR 106 is not applicable to the fact of the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Ltd. vs Karedla Suryanarayana And Ors. on 18 October, 2001, Reported in(2002) 110 CompCas 193 AP. He accordingly submitted that the order passed by the learned PCIT being not in accordance with law, should be set aside and the grounds raised by the assessee should be allowed. 24. We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned PCIT and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the AO in the instant case completed the assessment u/s 143(3) r.w.s. 153A of the I.T. Act 1961 on 31.3.2017 accepting the income declared at Rs.51,74,240/-. We find the learned PCIT assumed jurisdiction u/s 263 of the I.T. Act on the ground that the assessee, during the year under consideration, has purchased 5,15,603 equity shares of Cybercity Builders & Developers Ltd from M/s. Ashoka Developers & Builders Ltd @ Rs.35/- per share whereas the value per share adopted by the seller i.e. ADBL was at Rs.51/- per share. Therefore, the provisions of section 56(2)(vii)(c)(ii) of the I.T. Act 1961 applies and the difference amount of Rs.16/- per share which should have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 read as under: "(vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009 but before the 1st day of April, 2017, (any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum; (b) any immovable property,- without consideration, the stamp duty value of which exceeds fifty thousand the rupees, stamp duty value of such property; (i for a consideration which is less than the stamp duty value of the property by amount an exceeding fifty thousand rupees, the stamp duty value of such property exceeds such consideration: as Provided that where the date of the agreement fixing the amount oi consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of this sub-clause: Provided further that the said proviso shall apply only in case where the amount of consideration referred to therein, or a part thereof, has been paid cash on or before the date of the agreement for the transfer of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation which read as under: "Determination of fair market value. 11UA. [(1)] For the purposes of section 56 of the Act, the fair market value of a property, other than immovable property, shall be determined in the following manner, namely,- (c) valuation of shares and securities,- (a) the fair market value of quoted shares and securities shall be determined in the following manner, namely,- (i) if the quoted shares and securities are received by way of transaction carried out through any recognized stock exchange, the fair market value of such shares and securities shall be the transaction value as recorded in such stock exchange; (ii) if such quoted shares and securities are received by way of transaction carried out other than through any recognized stock exchange, the fair market value of such shares and securities shall be,- (a) the lowest price of such shares and securities quoted on any recognized stock exchange on the valuation date, and (b) the lowest price of such shares and securities on any recognized stock exchange on a date immediately preceding the valuation date when such shares and securities were traded on such stock exchange, in cases where on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oted shares and securities other than equity shares in a company which are not listed in any recognized stock exchange shall be estimated to be price it would fetch if sold in the open market on the valuation date and the assessee may obtain a report from a merchant banker or an accountant in respect of which such valuation. [(2) Notwithstanding anything contained in sub-clause (b) of clause (c) of sub-rule (1), the fair market value of unquoted equity shares for the purposes of sub-clause (i) of clause (a) of Explanation to clause (viib) of sub-section (2) of section 56 shall be the value, on the valuation date, of such unquoted equity shares as determined in the following manner under clause (a) or clause (b), at the option of the assessee, namely:- (a) the fair market value of unquoted equity shares = where, A = book value of the assets in the balance-sheet as reduced by any amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act and any amount shown in the balance-sheet as asset including the unamortised amount of deferred expenditure which does not represent the value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 of his order makes it clear that the balance sheet means the balance sheet as drawn up on the balance sheet date which has been audited by the auditor of the company and where the balance sheet on the valuation date has not been drawn up the balance sheet drawn up as on a date immediately preceding the valuation date which has been approved and adopted in the AGM of the shareholders of the company. We find in the instant case, on the date of receipt of the consideration the balance sheet of the assessee company was not drawn up as the same was drawn up only on 31st July, 2014 which is evident from the audited balance sheet filed. Clause (b) and clause (j) of Rule 11UA makes it clear that for computing fair market value of the shares the value of the assets and liabilities as stated in the audited balance sheet immediately prior to the receipt of consideration should be adopted. If, on the date of receipt of the consideration, the balance sheet was not drawn up, then, the balance sheet drawn up as on a date immediately preceding the valuation date should be adopted i.e., the balance sheet of the immediately preceding year should be adopted. We find, in the instant case, on the val ..... X X X X Extracts X X X X X X X X Extracts X X X X
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