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TMI Blog2022 (1) TMI 1424X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to the A.Y. 1998- 99. ITA.No.267/ASR/2007 filed by the Revenue is directed against the order dated 21.03.2007 of the Ld. CIT(A), Jammu (HQ at Amritsar) relating to the A.Y. 1998-99. The assessee filed C.O.No.43/ASR/2007 against the appeal filed by the Revenue. ITA.No.268/ASR/2007 filed by the Revenue is directed against the order dated 22.03.2007 of the Ld. CIT(A), Jammu (HQ at Amritsar) relating to the A.Y. 1998- 99. The assessee filed C.O.No.44/ASR/2007 against the appeal filed by the Revenue. ITA.No.269/ASR/2007 filed by the Revenue is directed against the order dated 22.03.2007 of the Ld. CIT(A), Jammu (HQ at Amritsar) relating to the A.Y. 1998-99. The assessee filed C.O.No.45/ASR/2007 against the appeal filed by the Revenue. Since common issues are involved in all these appeals and cross objections, therefore, these were heard together and are being disposed of by this common order. 2. First we take-up the appeal vide ITA.No.263/ ASR/ 2003 in the case of Shri M.K. Ajat Shatru, Jammu as the lead case. 2.1. Facts of the case, in brief, are that the assessee is an individual. He filed his return of income on 28.01.2000 declaring income of Rs.5,85,071/-. Later on notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sked the assessee to justify the exemption/claims with evidence. However, no evidence or copy of return of M/s. Jyoti Pvt. Ltd., was furnished, for which the A.O. held that assessee could not discharge the onus caste on him. The A.O. noted that the assessee during the course of assessment proceedings vide letter dated 18.03.2002 had stated that it had held 10,000 shares @ Rs.100/- each in M/s. Jyoti Pvt. Ltd., amounting to Rs.10 lakhs by way of gift. from his father since long, however, no proof of the same has been attached. During the year assessee sold all the 10,000 shares of the face value of Rs.100/- each to M/s. Bharat Hotels Ltd., Barakhamba Road, New Delhi through its CMD Mr. Lalit Suri. Copy of agreement to sell these shares has been filed on 3.10.1997 for consideration of Rs.4,76,19,048/-. As per this deed an amount of 56 lakhs was received in the shape of pay order and the balance was to be received within 60 days. As no final deed has been filed by the assessee till date so he presumed that the balance amount was received by the assessee during the financial year under consideration. He noted that the assessee in his case has received 10,000 shares as gift from father. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other sources. The A.O. accordingly determined the total income of the assessee at Rs.90,40,365/-. 2.5. Before the Ld. CIT(A), the assessee challenged the action of the A.O. in making the addition of Rs.4,43,09,048/- on account of capital gain on shares. It was submitted that assessee was holding 10,000 equity shares of M/s. Jyoti Pvt. Ltd., much before 01.04.1981. Therefore, the fair market value of these shares is relevant for the purpose of capital gain on shares. It was submitted that the fair market value of the shares of the company was determined by taking market value of all the assets of the company as on 31.03.1981 and actual liabilities as on such date have been deducted from that value. The valuation of the assets of the company has been valued by the Registered Valuer Shri S.P. Gupta, a Government Approved Valuer, Ministry of Finance. Referring to the decision of Hon‟ble Gujarat High Court in the case of A.V. Industries vs., CIT reported in [2002] 125 Taxman 59 it was submitted that once there is report by the Registered Valuer, it is incumbent upon the assessing authority to disclose the same by bringing adequate material on record. It was submitted that A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was accordingly argued that the addition made by the A.O. should be deleted. 2.7. Based on the arguments advanced by the assessee, the Ld. CIT(A) deleted both the additions made by the A.O. So far as the addition of capital gain is concerned, the Ld. CIT(A) deleted the same by observing as under : "3. The appellant submitted the valuation report from the Govt Approved Valuer, Shri S.P. Gupta. The deed of Family Settlement between Dr Karan Singh, Maharani Yashoraja Laxmi and the appellant. The receipts regarding the payment on account of sale of apple orchard at Karan Mahal, Srinagar has also been submitted. The case was partly heard on 16-01-03. On 18-03-2003, the appellant came forward with a certificate from Division Commission, Kashmir regarding the market value of the land pertaining to the Grand Palace Hotel Sinagar (Oberoi Palace Hotel). The counsel in the appeal submitted the arguments regarding the system of valuation of unquoted shares of private companies. The counsel submitted that the market value of unquoted equity shares of Company other than investment Companies shall be determined as per rule ID of the Wealth Tax as mentioned below :- "The value of all the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; 100 1997-98 = 7839.34 Total No. of shares of the Company as on 1-4-1981 38500 Share value of per Equity share as on 1-4-1981. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore keep in mind the considerations dwellings in the mind of buyer seeking to buy these share. Naturally he would be driven by the net value (Assets- liabilities) of the Company to which these shares belong. 6. I find that rule ID exactly deals with valuation in this manner. Although the rule was framed to determine Wealth, it would naturally be help to determine value for our purpose. It is a logical accounting procedure particularly since no specific methodology is suggested in Income Tax law book for this. I, therefore agree with the computations submitted by the Counsel supported by rule 1D mechanism. 7. The hurdle however remains pertaining to valuation of land of the hotel since the Regd. Valuer has not based his valuation report on any sales instance. No body however can blame him for this apparent lapse since turmoil in the valley has left no land transactions to depend upon for estimation of value. This has been certified by the Divisional Commissioner in his Certificate issued vide No.Divcom/3290/AC/67/CA dated 17.01.2003 in which he states "The question has arisen as to what would be a reasonable price for the land within the premises of what is now called the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agricultural land the documents of which have been submitted before the undersigned. Moreover the payment receipts have also been submitted by the appellant. The years prior to the current year are irrelevant to be considered because there was no agricultural income claimed/shown by the appellant. In view of this there is no doubt that the appellant had genuine agricultural income and the observations of the Assessing Officer that this is from undisclosed sources is unwarranted. 11. Appeal is, therefore, allowed". 3. Aggrieved with such order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds : "On the facts and in the circumstances of the case. 1. The Ld. CIT (A) erred in law in deleting the addition of Rs.4,43,09,048/- under the head 'capital gain' arising from sale of equity shares held by the assessee in M/s Jyoti Pvt. Ltd.. 2. The Ld. CIT (A) erred in applying wrong text of ride 1DD of W.T. Rules 1957 even though the said rule was otherwise invoked by the Ld. CIT(A) for the purpose of determining the fair market value of the impugned shares as on 1.4.1981. 3. The Ld. CIT(A) erred in law in admitting additional e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f valuation of equity shares under Rule 1DD of W.T. Rules. 5. That the appellant craves leave to add or amend or alter any grounds of appeal before or time of hearing". ITA No.269/ASR/2007 (A.Y. 1998-99) "On the facts and in the circumstances of the case. 1. The Ld. CIT (A) erred in law in deleting the addition of Rs.3,88,08,572/- under the head 'capital gain' from sale of equity shares held by the assessee in M/s Jyoti Pvt. Ltd. 2. The Ld. CIT(A) erred in applying wrong text of rule 1DD of W. T. Rules 1957 the rule which the assessee as well as the Ld. CIT(A) had otherwise invoked for the purpose of determining the fair market value of the impugned shares as on 1.4.1981. 3. That on the facts and circumstances of the case and in law CIT (A) erred in accepting the land measuring 225.85 Kanals valued at Rs.19,87,48,000/- by the valuer in his report. 4. The Ld. CIT (A) erred in law in relying on certificate of valuation of land by approved valuer for the purpose of valuation of equity shares under Rule 1DD of W. T. Rules. That the appellant craves leave to add or amend or alter any grounds of appeal before or time of hearing.'' 5. The assessee in his C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en framed u/s. 143(3)/147 of the Income Tax Act, 1961. He also relied on various decisions to the proposition that the respondent is entitled to raise a legal ground at any stage of the proceedings, even though he may not have filed an appeal against such an order. 9. Ld. Special Counsel on the other hand submitted that the question of validity of notice u/s. 148 is not the subject matter of assessment or appeal either before the CIT(A) or before the ITAT. The assessee is not the appellant. Therefore, the assessee as respondent is precluded from raising this new plea for the first time before the ITAT under Rule 27 of the ITAT Rules. Referring to the decision of the Co-ordinate Bench of the Tribunal in the case of ST Ericson he submitted that under identical facts, the Tribunal has declined to entertain such a plea. He accordingly submitted that the ground raised by the assessee challenging the validity of reassessment proceedings by invoking Rule 27 of ITAT Rules should be dismissed. 10. We have heard the rival arguments made by both the sides. Provisions of Rule 27 of the ITAT Rules enshrines a right to the respondent before the Tribunal to support the order of the CIT(A) on an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remanded back before the ITAT with a direction to hear the matter afresh by allowing the Appellant- assessee to raise the additional grounds, under Rule 27 of the ITAT Rules, pertaining to issues relating to the assumption of jurisdiction and the validity of the reassessment proceedings under Section 153C of the Act." 10.1. Since all material facts and documents for adjudication of this legal ground are already on record, therefore, we admit the legal ground raised by the assessee under Rule 27 of the ITAT Rules. 10.2. Both the sides made extensive arguments and filed written synopsis. 11. Ld. Special Counsel for the Revenue while explaining the history of the case submitted that the Ld. CIT (Appeals) Jammu passed the order disposing of the appeal of Shri Ajatshatru Singh on 18.3.2003, against which the Department filed appeal before the ITAT, Amritsar bench. In other three assessees the Dept, also filed appeals before the Amritsar Bench of the Tribunal in 2007. These three assessees also filed C.O. Later, these were transferred to Delhi Bench on the request of all concerned parties. He submitted that in the case of Dr. Karan Singh, Shri Vikramaditya Singh and late Smt Yashora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p;Name of the shareholder No. of shares held and transferred Aggregate consideration received (Rs.) Consideration per share (Rs.) 1 Dr. Karan Singh 21,000 10,00,00,000/- 4,761.90/- 2 Shri Ajatshatru Singh 10,000 4,76,19,048/- 4,761.90/- 3 Shri Vikramadiya Singh 15,000 7,14,28,572/- 4,761.90/- 4 Smt. Yashorajaya Laxmi 17,000 8,09,52,380/- 4,761.90/- TOTAL: 63,000 30,00,00,000 13. Ld. Special Counsel for the Revenue submitted that the following are important facts: a) That Jyoti (P) Ltd. was incorporated on 22.1.1969 b)That on 31.3.1981, Jyoti (P) Ltd. was a going concern and was far from being consideration for liquidation. c) That on 31.3.1981 there was no uncertainty of conditions was shown, which could have affected the profit earning capacity of the Company. In fact, vide letter 5.02.2007 in the case of Dr. Karan Singh, the assessee makes it clear that it was since 1989 only that deteriorating social & political conditions came into existence in the valley because of terrorist activities and the price of properties in Srinagar started falling. (Pg. 224 at 253 of Assessee P.B. Vol.-I& Pg. 33/CIT(A) in Dr. Karan Singh) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) makes it clear that:- a) the fair market value of the shares of Jyoti (P) Ltd. as 1.4.1981 should be determined as per Rule 1D of W. T. Rules. b) He has misled himself by using wrong text of the said Rule 1D of the WT Rules. c) The CIT(A) thus erroneously did not take the book value of the assets shown in the Balance Sheet of Jyoti (P) Ltd. as on 31.3.1981. d) The Ld. CIT(A) lost sight of the fact that the 'asset' to be valued was the 'unquoted share of Jyoti P. Ltd.' and not one of its assets which was only partly owned by it. 15.1 Ld. Special Counsel drew the attention of the Bench to para 7 at Pg. 6 of the order where he has mentioned as under: "The hurdle however remains pertaining to valuation of land of the hotel since the Regd. Valuer has not based his valuation report on any sale instance " 15.2 He submitted that this ruling of the CIT(A) relies the fact that the land on which the hotel is situated does not belong to the company Jyoti (P) Ltd. and nor is it shown in its Balance Sheet as on 31.3.1981. He accordingly submitted that the Ld. CIT(A) has held that a) The assessee has exercised the option u/s 55(2)(b)(i) of the Act. b) Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied for determining FMV of a shares in private company which is a going concern as on valuation date. The "Breakup method" can be applied only if the company is in the process of liquidation, or, if the conditions prevailing on the date of valuation are uncertain. He submitted that the value of assets not disclosed in the balance sheet of the company cannot be used for the purpose of valuing the shares even under the "Break up Method". No statute recognizes such a mode of valuation even under "break up method" or any other method of valuation of shares. He submitted that "Inside Information" cannot be used for determining the Fair Market Value of the shares of Private Company; or, for that matter, even a public company. Use of Such information for the purpose of pricing a negotiated private sale is against the basic principle governing determination of Fair Market Value of the shares. It is antithesis of the concept of Fair Market Value. He submitted that the correct method of valuation of private company, which is a going concern, is Yield or Earning method. He submitted that even in the case of shares of companies quoted on the Stock Exchange, the valuation is made on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sheet of the company have been totally ignored. He submitted that the Regd. valuer's report of 2003 values not only the building Gulab Bhawan but also 225 Kanals of land appurtenant to it which was not shown in the B/S of Jyoti (P) Ltd. and which never belonged to the company. Further, the Registered valuer, whose certificate has been relied on, is not a registered valuer of shares. No certificate of a registered valuer of shares in a company has ever been filed. Further, the so-called valuation report of the registered valuer is in violation of Rule 8A read with Form 0-1 of W. T. Rules. Ld. Special Counsel submitted that when it became evident that Jyoti (P) Ltd. was not the owner of the impugned land, a long- term lease of 99 years in favour of Jyoti (P) Ltd. was executed by Shri Vikramaditya Singh as late as on November 22, 1997. (Pg. 4/PB).This lease deed was not in existence in 1981. 21. Ld. Special Counsel submitted that the Hon'ble Supreme Court in the case of Mahadeo Jalan, 86 ITR 621 has laid down the following principles in absence of any rule to the effect of unquoted shares: a) "the value is determined by reference to the dividends, if any, reflecting the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f W.T. Rules is recognized method of valuation. For the above proposition, he relied on the following decisions:- i) CIT Vs. S. Balasubramaniam, 159 ITR 288 ii) Controller of ED Vs. GK Swarup, 275 ITR 137 (Guj) iii) Stewards & Lloyds, 197 ITR (St) 406 (SC) 8A 25. Ld. Special counsel for the Revenue submitted that the correct principle of valuation applicable to a given case is a question of law. The parties can agree upon a principle permissible under and recognised by law. If two or more alternative principles are equally valid and available, it might be permissible for the parties to agree upon one of the alternative modes of valuation in preference to another." For the above proposition, he relied on the following decisions:- Supreme Court in CIT Vs. Estate of Ambalal Modi 170 ITR 144 (SC) Relying on various other decisions and reiterating that the company was a going concern owning several businesses and properties and that the land on which the Palace Hotel was situated was not shown in the balance sheet of the company and there were no uncertain conditions existed which could affect the profit earning capacity of the company. He submitted that the order of Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the impugned shares as on 01.04.1981. From the perusal of the order of learned CIT(A) (in the case of Shri M.K. Ajatshatru Singh) it would be seen that the learned CIT(A) has merely referred to Rule 1D of Wealth Tax Rules. There is no rule 1DD in the Wealth Tax Rules. He accordingly submitted that no error has been committed by the learned CIT(A). In any case, he submitted that the said contention otherwise too is a non-issue, since the learned CIT(A) has not invoked rule 1DD of the Wealth Tax Rules or even 1D to determine the fair market value of the assets transferred and has been held by him in his order passed u/s 154 of the Act dated 30.04.2007 which order has been accepted by the revenue. Further, no such finding has been arrived at by the learned CIT(A). 28.2 He however submitted that it is not denied that the learned CIT(A) has merely stated that principle of breakup method of valuation which is similar to rule 1D of Wealth Tax Rules can be applied to determine the fair market value of an asset. However, he submitted that to determine the fair market value of an asset u/s 2(22B) of the Income Tax Act is different from the principle to determine value of an asset f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valuer at Rs. 8.80 lacs per kanal as on 01.04.1981 was supported by the evidence on record. It is thus incorrect to suggest that the learned CIT(A) had admitted any additional evidence by way of certificate from the Divisional Commissioner without giving any opportunity to the AO, since in the opinion of the AO the fair market value had far exceeded the fair market value of the land as on 01.04.1981. He thus submitted that no additional evidence had been filed by the assessee. In fact, such an evidence is only supporting evidence as held by the Tribunal in the case of Suresh Kumar Gupta vs. ITO reported in 14 TTJ 470. In fact, on the contrary it would be seen that the AO had himself made an application before the appellate proceedings in the case of Shri M.K. Ajatshatru Singh (Pg. 33 - 35) wherein he had prayed for the admission of additional evidence, when he contended that the facts in the instant case are identical to the facts of Dr. Karan Singh and others. 28.5. Ld. Senior Counsel for the assessee submitted that this ground has been raised in the case of Shri. Ajatshatru Singh, Dr. Karan Singh and Late Smt. Yasho Raja Laxmi. He submitted that in so far as the case of Shri. Aj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he capital gain, which has been upheld by the learned CIT(A). He submitted that once the value of building estimated by the registered valuer has been accepted by the ld. AO, then value of leasehold interest in land which was owned by M/s Jyoti Pvt. Ltd., and estimated by the registered valuer cannot be disregarded. However, the AO did not adopt the value of leasehold interest in land on the basis of his assumption that sale consideration of Rs. 30 crores in respect of shares transferred cannot include the value of land since the fair market value of land on the date of transfer of shares as per the estimation of Tehsildar dated 28.03.2006, comes out to Rs. 67.755 crores. 30. He submitted that the AO in fact accepted the valuation made by the registered valuer, however he was of the erroneous opinion that consideration received of Rs. 30 crores cannot include the value of land. He submitted that while arriving at such an erroneous conclusion, he has completely ignored that agreement to sale of shares was subject to the Performance agreement and in view of the Agreements to Sell dated 3.10.1997 executed by all the four shareholders (agreeing thereby to sell their entire shareholdin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermine the fair market value of shares held by the shareholders. (b)The leasehold interest in the land is an asset of the company and is capable of valuation. (c)That the assessee had made no capital gain instead the assessee has suffered a capital loss. (d)The method of valuation adopted under the Wealth Tax Act is not applicable, while arriving at the fair market value of shares as on 01.04.81 for the purpose of section 55(2)(b)(ii) of the Act; (e)There is conceptual difference between fair market value of assets while computing capital gain and the value of an assets which is to be estimated u/s 7 of the Wealth Tax Act; (f) That fair market value has not been defined under the Wealth Tax Act, whereas the same has been define u/s 2(22A) of the Act and thus for the purposes of section 55(2)(b)(ii) of the Act it is a fair market value under the Income Tax Act which has to be adopted; 33.1. Ld. Counsel for the assessee referring to the following decisions submitted that the revenue cannot set up a new case for the first time before Hon‟ble Tribunal, and argument of the revenue would tantamount to making the position of respondent worse than had he not filed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2005-06 xiv. Jaya Hind Sciaky Ltd. vs DCIT reported in 383 ITR 25 HC (Bom) xv. Andhra Networks Ltd [2015] 167 TTJ 496 (Hyderabad- Trib.) xvi. CIT v. MormasjiMancharjiVaid [2001] 250 ITR 542 HC (Guj) 33.5. Referring to the following decisions, he submitted that the appellate court interferes not because the judgment is not right but because the judgment is wrong‟; i. The Dollar Company, Madras vs. Collector of Madras reported in AIR 1975 SC 1670 ii. Snowtex Investment Ltd. vs. Pr. CIT reported in 414 ITR 227 33.6. Referring to the following decisions, he submitted that a precedent is an authority only for what it actually decides and not what may remotely or even logically follow from it: i. Goodyear India Ltd. vs. State of Haryana and another, 188 ITR 402 ii. QUINN v. LEATHEM [1901] AC 495 (HL) iii. STATE OF ORISSA v. SUDHANSU SEKHAR MISRA [1968] 2 SCR 154 34. In so far as Ground No. 5 raised by revenue in the case of Shri. M.K. Ajatshatru Singh is concerned, he submitted that ld. AO has made the addition in respect of the agricultural income. 34.1 Ld. Senior counsel at the outset submitted that the aforesaid addition is out side the scope of section 147 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s thus evident that approach of the A.O. is contradictory. He submitted that, it is settled law that, an assessment made in pursuance to an invalid return is an invalid assessment and, therefore deserves to be quashed as such. For the above proposition, he relied on the judgment of Hon‟ble Himachal Pradesh High Court in the case of Himachal Pradesh State Forest Corporation vs. ACIT, CWP No.125/95 dated 6.5.1997 (as extracted in 80 ITD 591 at P-594 ) where it has been held as under: "In view of the order passed in CWPs No. 590/92 to 593/92, this writ petition does not survive as the entire proceedings commenced from an invalid return. It is needless to say that the subsequent orders of assessment passed by the Income-tax Officer and the Appellate orders passed on the appeals filed against the said assessment orders are invalid consequentially. The writ petition is dismissed with the above observations. Interim order is vacated." 37. Ld. Senior Counsel submitted that from a perusal of the order of assessment, it would be seen that admittedly, return was filed by the assessee disclosing Gross total income of Rs. 5,85,071/- on which tax of Rs. 1,57,049/- was paid before filin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner, New Delhi & others 1978 (1) SCC 405 II. CIT vs. Living Media India Ltd [2013] 359 ITR 106 (Delhi) III. Signature Hotels (P.) Ltd. Vs. ITO [2011] 338 ITR 51 (Delhi) IV. Hindustan Lever Ltd. vs R.B. Wadkar 268 ITR 332(Bom) V. Dynacraft Air Controls v. Smt. Sneha Joshi [2013] 214 Taxman 183 (Bombay) VI. N.D. Bhatt IAC vs. IBM World Trade Corp. 216 ITR 811 (Bom) VII. Prashant S. Joshi vs. ITO 324 ITR 154 HC (Bom) VIII. Austin Engineering Co. Ltd. Vs. JCIT 312 ITR 70 HC (Gujarat) IX. Aayojan Developers vs ITO 335 ITR 234 HC (Gujarat) X. Jamna Lal Kabra Vs. ITO 69 ITR 461(A11) 40. He submitted that in the order of re-assessment, the AO has brought to tax a sum of Rs. 4,43,09,048/- by way of capital gain which was not the ground for the reopening of the assessment, as such, addition made of the said sum is unsustainable in law. For the above proposition he relied on the following decisions. i. Commissioner of Income-tax v. Cheil Communications India (P.) Ltd. [2013] 33 taxmann.com 170 (Delhi) ii.Ranbaxy Laboratories Ltd. v. CIT f2Q111 336 ITR 136 iii. CIT v. Jet Airways (I) Ltd. [20111 331 ITR 236 iv. CIT v. Shri Ram Singh [2008] 306 ITR 343 (Raj.) v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remain valid findings when the learned CIT(A) had held that, no gain had accrued to the assessees. In other words, the foundation on which the structure was proposed did not exist. This is what has been held by High Court in the case of CIT vs. Atlas Cycle Industries reported in 180 ITR 319 and, Allahabad High Court in the case of Farrukhabad Gramin Bank v ITO reported in 273 ITR 113 and Bucyrus India (P.) Ltd. vs. DCIT reported in [2016] 65 taxmann.com 53 (Kolkata - Trib.). He submitted that, order of assessment in the case of Ajatshatru Singh could not otherwise be made a basis much less a valid basis to initiate proceedings u/s 147 of the Act, as the same was an invalid order of assessment and, therefore vitiated in law. 41.2 Referring to the following decisions, he submitted that surfacing of fresh material is necessary even in a case, wherein the assessment was originally made u/s 143(1) of the Act: i) 319 ITR 221 (Del) Shipra Srivastava vs. ACIT ii) 292 ITR 49 (Del) KLM Royal Dutch Airlines vs. CIT A at page 63, placitum 19 iii) 289 ITR37 (Mad) Bapalal and Company Exports vs. JCIT. At page 45 Placitum 12 iv) 321 ITR526 (Del) CIT vs. Batra Bhatta Company. SLP dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the Assessee. We have also considered the various decisions cited before us. The first issue raised by the Revenue in the grounds of appeal in case of M.K. Ajat Shatru relates to the order of the Ld. CIT(A) in deleting the addition of Rs.4,43,09,048/- under the head Capital Gain. From the various details furnished by Ld. Sr. Counsel for the assessee in the paperbooks, we find the four assessee respondents who were the shareholders in M/s Jyoti Private Limited had transferred their entire shares to M/s Bharat Hotel Ltd and on the date of transfer, M/s Jyoti Private Limited had only hotel building along with leasehold interest on the land on which the hotel building stood. A copy of the balance sheet of M/s Jyoti Private Limited as on 31.03.1997 and on 15.01.1998 have been placed in the PB - III and are at Pg. 565 - 574 and at Pg. 575 - 584 respectively. This asset was acquired by M/s Jyoti Pvt. Ltd. in the following manner:- a) Rights in the building and other superstructures were purchased by the Company from its owner Shri Vikramaditya Singh vide Relinquishment Deed dated 21.03.1973. b) The land measuring 225 kanals 17 Marlas was acquired by the Company from its own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s subject to the Perpetual Lease granted in favour of M/s Jyoti (P) Ltd. vide the aforesaid Perpetual Lease Deed dated 22.11.1997) in favour of Shri Narinder Batra (a state subject of J&K and the nominee of Bharat Hotels Ltd.) for a consideration of Rs. 10 lacs thereby transferring him the residuary ownership rights in the said land i.e. title in the land. Upon fulfilment of the obligation as stipulated under the Performance Agreement dated 03.10.1997 and pursuant to the Agreements to Sell dated 03.10.1997, all the shares held by the shareholders in Jyoti Pvt. Ltd. were transferred to Bharat Hotels Ltd on 19.01.1998 for a total consideration of Rs.30 Cr. 45. We find the AO while determining the capital gain did not dispute the sale consideration received by the shareholders. However, while determining the amount of capital gain, he proceeded to adopt the indexed cost of acquisition as on 01.04.1981 at face value in the case of Shri M.K. Ajatshatru Singh; whereas in the case of remaining three shareholders, he proceeded to determine the fair market value of the hotel as on 01.04.1981 so as to determine the cost of acquisition of shares as on 01.04.1981. The assessee and other share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares, the consideration received was far less than the indexed cost of acquisition of the shares, and hence there arose no capital gain. The assessees have got evaluated fair market value of the asset held by the company and after reducing the liability, fair market value of shares as on 01.04.1981 has been determined and since after indexation, cost was much higher than the full value of consideration, as such, long term capital gain was computed at NIL. 48. From the various details furnished by the assessee in the paper book, we find the estimated value of the land as per the registered valuer as on 01.04.1981 was Rs.8.80 lacs per kanal. However, the AO sought a report from Tehsildar who was of the opinion that the fair market value of the land was Rs. 30 lacs per kanal in the year of transfer of shares i.e. in 1998. We find the AO computed the value of shares as per breakup method as approved method after accepting the fair market value of building as per the report of the approved valuer but excluded the value of land on the ground that said land belongs to Shri Vikramaditya Singh. Even in the case of Shri Vikramaditya Singh we find the AO though had made assessment simultane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon‟ble S.C. in MCorp Global (P.) Ltd. vs. CIT reported in [2009] 309 ITR 434 (SC) has held that u/s 254(1) of the Act, the Appellate Tribunal has no power to take back the benefit conferred by the A.O. or enhance the assessment. While so holding the Apex Court referred to its earlier judgment in the case of Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232. 51. It is also well settled rule of law that the AO (who is the appellant here) cannot be permitted to take a contrary view and improve his assessment by adopting a new theory. He cannot be permitted to proceed to frame a fresh assessment contrary to his own stand. 52. We further find the Revenue, in the instant case, has failed to appreciate that in order to determine the capital gain for the purpose of section 45 of the Act it was not the value of the asset which is to be adopted but is the fair market value of the asset. In other words, whatever may be the book value of the asset, is not a relevant consideration for the purpose of determining the cost of acquisition of an asset as is envisaged u/s 55(2)(b)(ii) of the Act. We find Section 48 of the Act provides the mode of computation of capital gain. The income charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e open market on the relevant date is not ascertainable. The term "ordinarily" is not provided in section 7 of the Wealth Tax Act‟ 1957 and, therefore, in such a situation, the fair market value as contemplated under Rule 1D of the Wealth Tax Rules‟ 1957 can neither be applied simpliciter and, nor has been applied, either by the assessee or the Assessing Officer in the orders of assessment. 56. It is evident from the conjoint reading of the aforesaid provisions contained in section 55(2)(b)(ii) of the Act and, section 2(22B) of the Act that, cost of acquisition of shares acquired prior to 01.04.1981 by the shareholders of M/s Jyoti (P) Ltd. would be fair market value as on 01.04.1981 and, fair market value as on 01.04.1981 would be the price that such shares would ordinarily fetch on sale in the open market on 01.04.1981. We, therefore, find merit in the submission of the Ld. Sr. Counsel for the assessee that in such a situation, it is obvious for determining the value of shares of a private limited company, one has to determine the value of assets on 01.04.1981, as if such assets were to be ordinarily sold in the open market on 01.04.81. In other words, while adopting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Ld. Special Counsel for the Revenue, we find the Hon‟ble Supreme Court had neither considered nor decided the question of fair market value under section 2(22B) of the Act and are thus inapplicable. 59. We find the fair market value has not been defined under the Wealth Tax Act, whereas the same has been defined u/s 2(22B) of the Income Tax Act and thus for the purposes of section 55(2)(b)(ii) of the Act since it is a fair market value under the Income Tax Act which has to be adopted. We find in the case of Smt. Krishna Bajajv. Assistant Commissioner of Income-tax [2014] 267 CTR 172 HC(Karnataka), the Hon‟ble High Court has held as under:- "5. When once under the Act, fair market value has been defined, specifically in relation to the capital asset to calculate the capital gain tax, the question of relying on the definition under any other enactment is not permissible. A reading of the aforesaid definition clause makes it clear that fair market value is the price that the capital asset would ordinarily fetch on sale in the open market on the relevant date. Therefore, for levying capital gain tax under the Act for the purpose of computing the capital gain tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Act, 1961 but were rendered in the context of Wealth Tax Act and Gift Tax Act and therefore such judgments being distinguishable on facts cannot be relied to determine the fair market value of the shares. We find merit in the arguments of the Ld. Sr. Counsel for the assessee that it is well-settled that a precedent is an authority only for what it actually decides and not for what may remotely or even logically follow from it 62. We find that the learned CIT(A) while deciding the appeal of the assessees has held that value of leasehold interest in land is to be included while determining the fair market value of the shares held and owned by the shareholders as on 01.04.1981, which is in accordance with the breakup method. 63. On consideration of the orders of assessment and, the orders of the learned CIT(A), it is evident that, the only question for consideration is whether the value of leasehold interest in the land is to be included to determine the fair market value of each share on 1.4.1981. 64. In the instant case, we find that the assessee‟s were shareholders of M/s Jyoti (P) Ltd., who undisputedly owned the hotel building which stood on the land owned by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expire only on 20.3.2013. 66. We therefore hold that in order to determine the fair market value of each share as on 01.04.1981, it is necessary to adopt the aggregate of fair market value of the assets which would obviously include the value of leasehold interest in the land. In CWT vs. PN Sikand reported in 107 ITR 922, the Hon‟ble Apex Court had held that an asset also consists of leasehold interest in a land and should be included in the valuation of such leasehold interest in the land. Similar view has also been taken in the decisions relied on by Ld. Sr. Counsel for the assessee in the case law compilation. 67. In view of our above discussion, we hold that while adopting the fair market value as on 01.04.1981, the value of leasehold interest in the land be also held to be included in the value of asset of M/s Jyoti Private Limited, so as to determine the fair market value of shares held by the sharesholders. The lease hold interest in the land is an asset of company and is capable of valuation. That the assessee had made no capital gain and the method of valuation adopted under the Wealth Tax Act is not applicable, while arriving at the fair market value of shares as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment and such ground has already been admitted for adjudication. A perusal of the reasons recorded shows that the Assessing Officer had reopened the assessment on the ground that income amounting to Rs.5,85,071/- declared by the assessee in the invalid return has escaped assessment in terms of section 147 of the Act. Since, such income has already been offered to tax and due taxes have already been paid, therefore, pre-requisite before the issuance of notice of escapement of income on 10.01.2001 being not satisfied, assumption of jurisdiction u/s 148 of the Act and consequent assessment order passed in our opinion is unsustainable in law especially when there was time available with the AO to complete the assessment u/s 143(3)/144 upto 31.03.2001. Further, the Assessing Officer in the order passed u/s 143/147 of the Act has brought to tax a sum of Rs.4,43,09,048/- by way of capital gain which was not the ground of reopening of the assessment. Therefore, we agree with the contention of the ld. Sr. Counsel for the assessee that such addition made in the assessment order is unsustainable in law in view of the decision of the Hon"ble Delhi High Court in the case of Ranbaxy Laboratories ..... X X X X Extracts X X X X X X X X Extracts X X X X
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