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10-07-2019, Priya Tools, Section 56(2)(viia), 148, 132, Tribunal Chandigarh

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3 months 3 days ago #10039 by amit
Section - 56(2)(viia), 148, 132, 133A, 139(1), 159, 166
Order Date - 10-07-2019
Favouring - Assessee
Court - Tribunal Chandigarh
Appellant - Priya Tools Pvt.Ltd.
Respondent - ACIT
Justice - N.K. SAINI VP & SANJAY GARG JM
Citation - 719Taxpundit133
Appeal No. - ITA No. 849/Chd/2017
Asstt. Year - 2011-12

Order

PER : N.K. SAINI

This is an appeal by the Assessee against the order dt. 31/03/2017 of Ld. CIT(A)-3, Gurgaon.

2. In the present appeal Assessee has raised the following grounds:

1. That the Ld. CIT(Appeals) has erred in upholding the reassessment proceedings whereas, the notice issued u/s 148 by the Ld. Assessing Officer is not maintainable as the same is against the law, facts & the jurisdiction and therefore reassessment made be considered as void.

2. That the Ld. CIT (Appeals) has grossly erred in holding the reassessment as valid inspite of the fact that the reassessment order u/s 143(3) r.w.s 147 being bad in law and facts and without jurisdiction liable to be considered null and void and additions made may please be deleted.

3. That the Ld. CIT (Appeals) has erred in holding the reassessment order valid inspite of the fact that the Ld. Assessing Officer has wrongly dismissed the objections raised by the assessee against the notice u/s 148, whereas the objections raised by the assessee ought to have been allowed. Therefore order passed u/s 143(3) r.w.s 147 should be dismissed and additions made therein may kindly be deleted.

4. That, the Ld. CIT(Appeals) has erred in confirming the disallowance of Rs. 1,43,93,620/-u/s 56(2)(viia) on wrong basis in an arbitrary and unjustified manner without appreciating the explanation and evidence placed on record, whereas provision of section 56(2)(viia) were not applicable on the date of transaction of transfer of shares in the present case i.e. 10.05.2010. Therefore no addition can be made to the income of the assessee u/s 56(2)(viia) and the addition of Rs. 1,43,93,620/- may be deleted.

5. That the Ld. CIT(Appeals) has erred in confirming the addition of Rs. 1,43,93,620/- u/s 56(2)(viia) on presumptions by assuming the transaction of share transfer as non genuine on the basis of human probabilities without appreciating the explanation and evidence placed on record. Therefore the addition of Rs.1,43,93,620/- may be deleted.

3. Vide Ground Nos. 1 to 3 the assessee has challenged the validity of the jurisdiction of the A.O. in issuing the notice under section 148 of of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’).

4. Facts of the case in brief are that a search and seizure operation under section 132 of the Act was carried out on 04/10/2012 at the business and residential premises of M/s Steel Strips Group of cases alongwith survey under section 133A of the Act, in the case of the assessee. Earlier the return of income was filed by the assessee under section 139(1) of the Act on 26/09/2011 at an income of Rs. 8030/-, the said return was processed under section 143(1) of the Act at the returned income on 13/01/2012. Thereafter the A.O. issued the notice under section 148 of the Act on 05/03/2015. In response to which the assessee filed its return of income on 08/04/2015 the assessee also requested the reasons for reopening the case vide letter dt. 01/04/2015. The A.O. communicated thereasons recorded for reopening vide letter dt. 16/06/2015 which read as under:

"A search and seizure operation under section 132 of the Income Tax Act, 1961 was carried out on 04.10.2015 by the Directorate of Income Tax (Inv.), Chandigarh at the business and residential premises of the M/s Steel Strips Group of cases alongwith survey in the case of M/s Priya Tools Pvt. Ltd., 341, Sector 40A, Chandigarh.

Amongst the various business / residential premises covered, the premise # 341, Sector 40A, Chandigarh which is the registered address of M/s Priya Tools Pvt. Ltd. was surveyed and that of M/s Bharatnet Technology Ltd. was covered u/s 132 and accordingly both the companies are being assessed with the undersigned u/s 142(1) and 153A respectively.

As per information on record and the reply submitted in this case by M/s Bharatnet Technology Ltd., it is seen that M/s Priya Tools Pvt. Ltd. has made an investment in this year in 719681 unquoted shares of M/s Bharatnet Technology Ltd. by purchasing them at a price ofRs. 1 each. However, the fair market value of such share is much more as calculated from the net assets value of M/s Bharatnet Technology Ltd. as per procedure prescribed under Rule 11UA and it comes to around Rs.21 per share. In the given scenario, as per the provisions of Section 56(2)(viia), the difference of fair market value (as computed in accordance with Rule 11UA) and the actual consideration paid; is taxable in the hands of purchaser i.e. M/s Priya Tools Pvt. Ltd.

I have therefore reasons to believe that approximately Rs.2.10 Cr. has escaped assessment in light of provisions u/s 56(2)(viia) in the hands of M/s Priya Tools Pvt. Ltd. and assessment u/s 148 needs to be resorted for the A. Y.2011-12. Accordingly, notice u/s 148 needs to be issued to assess or reassess such income and also any other income chargeable to tax which comes to notice subsequently in the course of proceedings u/s 147 of the I. T. Act."

Thereafter the assessee vide its letter dt. 15/10/2015 raised objection to the issuance of notice under section 148 of the Act which the A.O. disposed off vide letter dt. 17.11.2015. The A.O. mentioned that the assessee further raised the objections vide letter dt. 07/12/2015 which were also disposed off vide letter dt. 08/12/2015. (However nothing is mentioned as to how and in what manner the objections of the assessee were disposed off).

5. During the course of assessment proceedings the A.O. noticed that the assessee had made an investment in this year for 719681 unquoted shares of M/s Bharatnet Technology Ltd. purchased at a price of Re. 1 each from the following parties:

6. The A.O. observed that the FMV of the share was approximately Rs. 21/-, as calculated from the Net Asset Value of M/s Bharatnet Technology Ltd. but the same had been transferred at a price of Rs. 1. The A.O. asked the assessee to show cause as to why the addition of Rs. 2.10 Crores may not be made to its income. In response the assessee submitted that it had acquired the shares of M/s Bharatnet Technology Ltd. on 10/05/2010 and the provisions of Section 56(vii)(a) came into effect from 01/06/2010 which did not apply to it. The Assessee also furnished a confirmation certification from a practicing company secretary that the shares of M/s Bharatnet Technology Ltd. had been transferred in favour of the assessee on 10/05/2010. The assessee also submitted as under:

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