9911796707
TMI Blog2024 (1) TMI 154X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efinition 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee drew our attention to original return of income filed on 27.09.2017 and no action whatsoever is pending with the Department as on the date of search i.e. 04.10.2017. Hence, in the absence of any incriminating material these grounds are to be admitted and adjudicated. 4. On the other hand, the ld.CIT-DR stated that the decision of National Thermal Power Corporation is against assessee and in favour of Revenue and he read out relevant para 4, 5 6 of the judgment but could not make out assessee s case falls under any of the condition that the facts are not available on record or the issue is not as regards to jurisdiction assumption by AO in the absence of any incriminating material. 5. We have noted the arguments of both the sides and seen the details which are as under:- Events Date Relevant AY Original Return of Income 27-09-2012 Search and seizure operation 04-10-2017 2018-19 Issuance of Notice u/s. 153C by ACIT, Central Circle-2(2) 08-04-2019 2020-21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 13.3) - Rs.7,200/- (Rs.32,75,266) C. Income from Business as returned Rs.15,75,000/- D. Income from Other Sources as returned - Rs.5,22,438/- Add: Addition u/s 56(2)(vii)(c) as in para 15 above - Rs.15,80,200/- Rs.21,02,638/- E. Deemed Dividend u/s. 2(22)(e) as in para 14 above Rs.1,00,000/- Assessed income Rs.23,02,372/- Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) also confirmed the action of the AO and partly allowed some of the issues. Aggrieved, assessee is in appeal before us. 7. Now, the assessee before us contended that there is no incriminating material found during the course of search in the case of Smt. Jothi Narayanan and the very additions made by AO are normal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(2), Chennai for the assessment year 2017-18 u/s. 153A of the Act vide order dated 17.01.2022. 10. The first issue in this appeal of assessee is as regards to the order of CIT(A) confirming the disallowance of expenditure towards helper allowance claimed as deduction u/s. 10(14)(i) of the Act amounting to Rs. 5,14,200/- without considering that the assessee is eligible for such claim. 11. Brief facts are that the assessee filed his return of income u/s. 153A of the Act on 17.08.2019 for the assessment year 2017-18 and claimed allowances to the tune of Rs. 4,80,000/- on account of helper allowance whereas said claim was not there in the original return filed by assessee on 12.08.2018. The AO noted that the assessee has not offered any additional income from salary in the return filed u/s. 153A of the Act and also during the course of special audit carried out u/s. 142(2A) of the Act and also no supporting documents have been submitted before the AO during assessment proceedings and hence, the AO disallowed this sum of Rs. 5,14,200/- The AO noted that the assessee vide submissions dated 07.12.2021 produced sample copies of vouchers for claim of incurring of expenditure towards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t issue in this appeal of assessee is as regards to the order of CIT(A) sustaining the estimated income i.e., deemed rental income of Rs. 1,20,000/- as against assessed by the AO at Rs. 2,00,000/-. 17. Briefly stated facts are that the AO during the course of assessment proceedings noticed that the assessee has two properties i.e., one residential property, house located at Bakha Reddy Nagar, Medavakkam, Chennai and commercial property at Ponniamman Koil Street, Madipakkam, Chennai apart from self-occupied residential house at Velacherry, Chennai. The AO noticed that the assessee has not declared any notional rental income despite assessee having property but offered Rs. 1.20 lakhs for residential house located at Bakha Reddy Nagar, Medavakkam, Chennai in both the hands i.e., assessee and his wife. The AO going through the properties advertised for rentals atGoogle app noted that the 1 BHK property getting rental income of Rs. 7,000/- to Rs. 9,000/- in this area i.e., Medavakkam, Chennai being prime localities of Chennai. Therefore, he treated the total deemed rent at Rs. 4,00,000/- and accordingly added a sum of Rs. 3,40,000/- considering the assessee s rental income of Rs. 60, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dded u/s. 24 of the Act. Hence, we delete the addition and allow this issue of assessee s appeal. 21. The next issue in this appeal of assessee is as regards to foreign travel expenditure treating the same as unexplained expenditure u/s. 69C of the Act, amounting to Rs. 1,50,000/-. 22. Brief facts are that the AO during the course of assessment proceedings noticed from seized material seized during search conducted on the business premises of Annai Builders Real Estate Pvt. Ltd., that the passport of Shri T. Narayanan, the assessee and his company manager Shri P.N. Pandian are available and both have made frequent trips. The assessee during the course of recording of statement u/s. 132(4) of the Act, dated 04.10.2017 admitted that he has incurred foreign trip expenditure to visit Dubai, Singapore and Thailand which were exclusively for business promotion but all other trips were pleasure trips and source of the same was out of his personal income. Subsequently, again statement recorded on 01.12.2017, the assessee offered a sum of Rs. 1,50,000/- per year from assessment year 2014-15 to 2018-19 while answering question no.10, which reads as under:- Q.No.10 While answering t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 25. The next issue in this appeal of assessee is regarding additional ground raised during the course of appeal proceedings that the addition made in the assessment u/s. 153A of the Act in the absence of any incriminating material found during the course of search in view of the decision of Hon ble Supreme Court in the case of PCIT vs. Abhisar Buildwell (P) Ltd., [2023] 454 ITR 212. At the time of hearing, the ld.counsel for the assessee has not pressed this issue and hence, the same is dismissed as not-pressed. 26. The next issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of AO in making addition on account of allotment of equity shares of 23,04,114/- @ Rs. 10/- each on private placement basis as against the book value of shares prior to allotment worked out at Rs. 552/- per share in violation of provisions of section 56(2)(vii)(c) of the Act. For this, assessee has raised following ground Nos. 5 to 5.2 :- 5. For that the learned Commissioner of Income Tax (Appeals) erred in uph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee works out under rule 11UA of the rules is at Rs. 2,30,41,140/-. The difference of Rs. 124,88,29,788/- is required to be assessed to tax as income from other sources as per the provisions of section 56(2)(vii)(c) of the Act. The AO issued show cause notice dated 13.04.2021 to assessee to show-cause as to why the amount of Rs. 124,88,29,788/- should not be added to the returned income of the assessee by invoking the provision of section 56(1)(vii)(c) of the Act. The assessee vide replied dated 15.11.2021 contended that additional shares of the company were allotted on pro-rota basis to shareholders including assessee based on their existing shareholding and hence in view of provisions of section 56(2)(vii)(c) of the Act, the transaction with relatives will not apply as this transaction is between existing shareholders. It was also contended that in case there is disproportionate allotment by the company, it has to be applied only to the extent of excess share received by the assessee over and above the entitlement of assessee. It was contended that in the present case before us the shares were not allotted disproportionately and hence, the provisions of section 56(2)(vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration paid shall be deemed to be income from other sources. In this appellant's case, the appellant did receive 23,04, 144 shares at Rs. 10/- per share when the fair market value of the share was Rs. 552. Thus, the appellant had obtained benefit in getting the property by paying a lesser amount when its market value was more. The provisions of section 56(2)(vii)(c) squarely applies to the appellant's case. It is the Golden Rule of interpretation that when the plain meaning of the statute poses no ambiguity, no extra words should be read into and no purposive interpretation can be resorted to and the statute is to be applied as such. 7.5.5 The decision of the ITAT Visakhapatnam in the case of Sri Y Venkanna Choudhary relied on by the appellant does not apply to the appellant's case as the facts are distinguishable in that the Tribunal held that the excess benefit passed on between the relatives would not attract the provisions of section 56(2)(vii). In the appellant's case, the transaction was not between the relatives but between the company and the shareholder. Hence, the said decision cannot be applied to the appellant's case. 7.5.6 Hence, the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Prakash Chand Sharma HUF vs. ITO, [2022] 139 taxmann.com 286 The ld.counsel for the assessee also stated that the Hon ble Gujarat High Court in the case of PCIT vs. Jigar Jashwantlal Shah in Tax Appeal No.80 of 2023 along with Tax Appeal No.96 of 2023 dated 28.08.2023 has considered an identical issue but could not file judgment or could not give any citation during the course of hearing. Later after two or three days, he filed the copy of this judgment which is available in the file. The ld.counsel for the assessee stated that the provisions of section 56(2)(vii)(c) of the Act has been brought in the statute book to address the issue of consequent to abolition of gift tax where higher value is sought to be passed on from one person to another person without adequate consideration. However, the transactions between close relatives are excluded for the purpose of taxation under the income from other sources under section 56 of the Act. In the instant case, shares were issued by the company ABREPL to the existing shareholders who are husband and wife, being close-relatives and there was no other assessee for whom the shares were issued. Thus, the entire shareholding of the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6(2)(vii) of the Act mandates that the provision of this section will apply subject to certain exceptions. The provisions of section 56(2)(vii)(c) of the Act reads as under:- Sec.56. (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 head Income from other sources , namely: .. .. (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, .. .. (c) any property, other than immovable property, (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 property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration: Further, the fourth proviso to section 56(2)(vii)(c) of the Act provides exceptions and which read as under:- Provided further that this clause shall not apply to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers who are husband and wife being close relatives and there was no outsider to whom shares were allotted and the entire share holding of the company is retained by both the parties prior and subsequent to the allotment of shares, the assessee case squarely falls in the exception as provided by the fourth proviso in term of the definition of relative . We have considered the issue and noted that the transaction is between individual assessee i.e., the shareholder and the company. We are of the view that the assessee being individual shareholder and the allotter is the company, these are two independent entities being a person separately assessable to tax. We also noted from the provisions of section 2(31) of the Act, that person includes an individual and also a company. Here in the present case before us, the company has allotted shares to the individual who is also existing shareholder. 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 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llocation of 1.03 lakh right shares allotted to the assessee proportionate to his shareholding in the company and in term of that, Hon ble High Court held that the issue of new shares by the company as right shares is creation of property and merely receiving such shares cannot be considered as transfer u/s. 56(2)(vii)(c) of the Act and accordingly, these provisions will not be applicable on the issuance of share by the company in the hands of the allottee. Hence, this case is distinguishable on facts. We have gone through the provisions of section 56(2)(vii)(c)(ii) of the Act and noted that where an individual receives, in any previous year, from any person or persons on after the first day of October, 2009 any property, other than immovable property for a consideration which is less than the aggregate fair market value of the property, the aggregate value of that property has exceeds the consideration will be brought to tax under this provision except any exception craved out in this provision. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
