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TMI Blog2024 (1) TMI 154X X X X Extracts X X X X X X X X Extracts X X X X ..... sence of any incriminating material pertaining to the Appellant found from the persons searched. 2. For that the Learned Commissioner of Income Tax (Appeals) has failed to appreciate that the Order dated 15.01.2022 made u/s. 153C r.w.s. 143(3) of the I.T.Act, 1961 by the AO was without jurisdiction, as the provisions of section 153C(1) of the Act, 1961 did not apply to the Assessment year, in question, in facts and the circumstances of the case and in law. 3. The ld.counsel for the assessee filed petition under Rule 11 of the Income-tax Appellate Tribunal Rules, 1963 for admission of additional grounds and adjudication of the same for the reason that the grounds raised are purely legal and jurisdictional grounds and facts are very much available on the record of the AO. The Tribunal has not to go into new facts. The ld.counsel drew our attention to details that the assessment in this case for the relevant assessment year 2012-13 was unabated and there is no incriminating material found during the course of search conducted on the assessee on 04.10.2017. The ld.counsel for the assessee drew our attention to original return of income filed on 27.09.2017 and no action whatsoever is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me from Thillai Ganga Nagar property (as in para 13.2) - Rs.96,000/- Add: Additional deemed rental income from Ponniamman Koil Street property (as in para 13.2) - Rs.24,000/- Add: Disallowance of deduction u/s 24(a) (as in para 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 additions i.e., emanating from either regular books of accounts or the assessee filed her return of income only. Even the addition u/s. 56(2)(vii)(c) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 helper allowances. The CIT(A) also confirmed the action of AO as these are neither fresh claim arising out of search proceedings found during the course of search and even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 60,000/-. Aggrieved, assessee preferred appeal before CIT(A). 18. The CIT(A) after considering the submissions of the assessee and factual aspect of the case estimated the deemed rental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 to Q.No.35 in the sworn statement recorded u/s. 132(4) of the Income Tax Act, 1961 on 06.10.2017 from you, you have stated that you will submit the source of foreign travel expenses. So far you are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 upholding the addition of Rs. 124,68,29,788/- u/s. 56(2)(vii)(c) of the Act (Tax effect - Rs. 43,01,56,277/-) 5.1 For that the Learned Commissioner of Income Tax (Appeals) ought to have accepted the contention of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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)(vii)(c) of the Act will not apply. But the AO was not convinced and he rejected the assessee's submissions by stating that actually there is no allotment of shares to other shareholders i.e. spouse of the assessee Smt. Jothi Narayanan and only the assessee has received shares on allotment from the company Annai Builder Real Estate Pvt. Ltd., and the company being independent entity, assessee's case does not fit into the definition of close relatives. Hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 addition made by the AO is quite justified and confirmed. I therefore sustain the addition of Rs. 124,88,29,788/- made under section 56(2)(vii)(c) and dismiss the grounds raised. Aggrieved, now assessee is in appeal before the Tribunal. 29. We have heard rival contentions and gone through facts and circumstances of the case. We have perused the assessment order and the order of CIT(A) and paper-book filed by assessee consisting of pages 1 to 230. We also perused the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 company is retained by the family both prior and subsequent to the allotment of shares and no share was allotted to the outsiders. The assessee and his spouse have only applied for additional shares which were allotted by the ABREPL to increase the capital base by converting the unsecured loans as share capital. There is no increase in the assets of the company nor do the shareholders get any extra benefit or any amount other than the interest of the shareholders which they already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 any sum of money or any property received- (a) from any relative; or (b) on the occasion of the marriage of the individual; or (c) under a will or by way of inheritance; or (d) in contemplation of death of the payer or donor, as the case may be; or (e) from any local authority as defined in the Explanation to clause (20) of section 10; or (f) from any fund or foundation or university or other educational institution or hospital or other medical institution or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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, (2003) 113 Comp Cas 562, 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. 32.2 Further, the company is having limited liability under the definition as defined in the provisions of the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 explanation to proviso to section 56(1)(vii)(c) of the Act. Hence, we are of the view that under the provisions of section 56(1)(vii)(c), where an individual receives, in any previous year, from any person or persons any property, other than immovable property, for a consideration which is less than the aggregate fair market value of the property, in excess of the prescribed limit of Rs. 50,000/-, the aggregate of fair market value of that property as exceeds such consideration, will be brought to tax includ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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