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TMI Blog2023 (9) TMI 754X X X X Extracts X X X X X X X X Extracts X X X X ..... . C As assessee had not furnished any valuation as per Rules either before the AO or before the Ld. CIT(A) or before us, we find no error or infirmity in the order of the CIT(A) sustaining the addition made by the AO - Decided against assessee. Unexplained investment - A.O. concluded that the assessee was not doing any actual purchase or sale and are mere name lender - HELD THAT:- Sundry debtors created from fictitious sale made during the AY 2014-15 has no worth and only book entry, and the fact that the assessee has not carried any business during the current year, which is corroborated by the AO from the Profit and Loss account. Apart from the same, the assessee had purchased huge investments through book entry from its opening sundry debtors without any actually receipts payment transaction routed through bank. Thus, we find no error in the orders of the authorities in making the above addition - Decided against assessee. Expansion of scope of limited scrutiny - CIT(A) to confirm the assessment made by the A.O. by rejecting the scope of limited scrutiny having being expanded by the A.O. without prior permission is in violation of the provisions u/s 119 of the Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt is contrary to the material evidences on record and contrary to be expenses claimed and debited in the Profit Loss Account and therefore, the addition confirmed by the Ld CITA) of Rs. 10.15.07,000/-is legal and bad in law. 6. That on the facts and in the circumstances of the case the action Ld CIT(A) to confirm the assessment made by the AO by rejecting the scope of limited scrutiny having being expanded by the AO without prior permission is in violation of the provisions u/s 119 of the Act and the assessments is illegal and bad in law. 7. That the assessment framed by the AO and confirmed by the Ld. CIT(A) is unjust, illegal, arbitrary and excessive. 8. That the above grounds of appeal will be argued in detail at the time of hearing and the appellant crave leave to submit additional grounds of appeal, if any, and/or alter, verify, modify or rectify any grounds of appeal at or before the time of hearing. 2. The brief facts of the case are that the assessee filed return showing total income of Rs. 10,797/-. The assessment came to be passed u/s 143(3) of the Income Tax Act by making addition of difference of the total fair market value and the total purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Miller Traders Private Limited. Further, assessee has claimed that India Finance Ltd. is a company in which public are substantially interested and shares of M/s Miller Traders Private Limited has been purchased from a widely held company and as such provisions of section 56(2)(viia) of the IT. Act, 1961 is not applicable in his case. In support of his claim assessee has submitted bills in respect of share purchase. 8. To verify the claim of assessee, analysis of provisions of section 56(2)(viia) of the 1.T. Act, 1961 is necessary. Provisions of section 56(2)(viia) of the 1.T. Act, 1961 is as under: Where a firm or a company not being a company in which the public are substantially interested, receives, in any previous year, from any person or persons, on or after the 1st day of June, 2010, any property, being shares of a company not being a company not being a company in which the public are substantially interested.- (i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property; (ii) for a consideration which is less than the aggregate fair market value of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year the assessee had purchased 2.18,350 shares of M/s Miller Traders (P) Ltd. Rs. 10% per share for total consideration of Rs. 21.83.500/- Therefore in the books of the assessee company there was increase in investments to the tune of Rs. 21.83,500/- for purchase of shares of M/s Miller Traders (P) Ltd. The A.O. was of the view that the shares which have been purchased were below the market value and therefore was in violation of the provisions of Section 56(2)(viia) of the Act. The AO and on the basis of the balance sheet as on 31.3.2014 derived the market value per share of M/s Miller Traders (P) Ltd. at Rs 214.11 per share. On this basis the A.O. made addition of Rs4,45,68,174/- on account of 218350 shares purchased of M/s Miller Traders (P) Ltd considering the market value as on 31.03.2014 at Rs. 214.11 per share as against Rs. 10/- per share which the assessee paid to purchase the shares The addition was made u/s 56(2)(viia) of the Act. The AO adopted the market value without informing the assessee. The valuation of the shares of Miller Trades (P) Ltd has been made by the assessee and as per the Rule IIUA under discounting method the price of share as on 31. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e so laid down. In the present case, it is also pertinent to refer to section 56 as far its genesis is concerned as follows: 56 Income from other sources (h) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head Income from other sources if it is no chargeable to income tax under any of the heads specified in section 14 items A to E. (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes shall be chargeable to income-tax under the heat Income from other sources e. It is seen that as per section 56(1), income from any source that is not exempted, shall be chargeable to income tax, if the same is not chargeable to Income Tax under the specified heads of the IT Act. This is clearly a deeming provision, specifically creating a fiction that the following income as detailed in (section Section 21) shall is chargeable to tax. The section then names in details as to what is deemed to be income as per clause viia of 56 (2) and so forth Therefore, the differential between the fair market value so co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale was end of the opening stock and there was no fresh purchase during the your Therefore the entire Traction was genuine. The A.O. rejected the above explanation of the assessee and found to be a case of collusive transactions for following reasons:- the sale and purchase involved only a select set of selected parties the expenses did not commensurate with the business and there was no transportation cost despite sales during the year The Ld. A.O. concluded that since Sundry Debtors of AY 2014- 15 had already been found to be fictitious and the current year's sale are also not genuine as the very basic features of commercial activities are absent. Therefore the Sundry Debtors for of the current year were also treated as non- genuine. Thus, the AO made addition of Rs. 10,15,07,000/- under the head of investments made during the year on account of bogus Sundry Debtors for AY 2014- 15 2015-16. The said action of AO has been upheld by the Ld. CIT(A), which has been relied by the Ld. DR. 11. The sundry debtors of Rs. 10,15,07,000/- created from fictitious sale made during the AY 2014-15 has no worth and only book entry, and the fact that the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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