TMI Blog2022 (6) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... and passes the order of cancellation. The order of cancellation of registration is a statutory order which is based on the foundation of certain facts coming on record during the breach of conditions for which registration was granted and such a breach cannot be reckoned from voluntary surrender of registration. The entire process has to be followed in accordance with the statute. Merely because the assessee had filed a letter on 21.03.2016 surrendering its registration u/s 12A or giving its benefit of section 11, does not mean that from the date of the letter, the jurisdiction of the AO automatically got changed. As stated above, at the time of issuance of notice u/s 148, the ACIT or DCIT, Circle Exemption, New Delhi had the valid jurisdiction not only to initiate the proceedings u/s 148 but also pass the assessment order. Insofar as the contention raised by the appellant that, since the assessee had challenged jurisdiction, it was incumbent upon the AO to refer it to the higher authorities in terms of section 124(4). Such a contention is not tenable on the present facts for the reason that the jurisdiction over the assessee lied with the AO, Exemption Circle by virtue of prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing enquiry without any basis or material on record. AO has duly applied his mind after incorporating various material and information coming on record and after independently examining the same, he has recorded the reasons. We do not find any infirmity or illegality either in the recording of the reasons or assuming jurisdiction or reopening the case u/s 147 or issuance of notice u/s 148 - No substantial merit in the contention raised by the appellant before us nor do any of the judgments cited and relied upon before us have any application on the present facts. We reiterate that the AO has to have only prima facie reasons to believe based on tangible material or information which, here in this case, there was sufficient material to entertain reasons to believe that entire transaction right from the incorporation of the appellant company till acquiring of 99.999% of shares of AJL and getting control of huge assets of AJL merely for a sum of Rs.50,00,000/-. At least, this factum itself is sufficient to clothe the AO in entertaining reasons to believe and acquiring the jurisdiction u/s 148. We further notice that very recently, Hon ble Supreme Court in the case of DCIT (Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order of AJL for AY 2011-12 appearing at Sl.No.9 technically cannot be reckoned as additional evidences therefore, the same is also taken into cognizance. In any case, both the parties have made the detailed submissions and also filed their written submissions on all the points which was raised and argued before us on various dates of hearing. Taxing of the fair market value of the properties owned by AJL u/s 28(iv) - whether the provisions of section 56(2)(viia) is applicable specifically dealing with the shares? - treatment of the transaction of assigning of loan by the AICC to appellant company, whether was a fraudulent transaction or not - As contented appellant has acquired the shares of AJL with the intention to use it as launch pad for achieving its objects - HELD THAT:- As provisions of section 56(2)(viia), at the very outset, is not applicable, because the assessee being section 25 company which falls within the ambit and definition of a company in which public are specially interested in section 2(18)(iiaa). Even the ld. Sr. Counsel has agreed that this provision is not applicable but his case was that such transactions will fall u/s 56(2)(viia) and not sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LD THAT:- Herald House, Bahadurshah Zafar Marg, New Delhi - As we find that it is incorrect to suggest that there are any worthwhile restrictions on the use of the property. As discussed above, the nature of the property being commercial, situated in a highly commercial area of Delhi, the DVO has rightly applied the multiplying factor 3 to take into consideration these factors. In the absence of any effective restrictive clause, the cases relied upon by the Ld. Senior Counsel for the Appellant are not applicable and the plea deserves to be rejected and we do accordingly We hold that firstly, the circle rate which has been proposed by the appellant to be applied here in this case for valuing the property is not acceptable, because circle rate are not the right benchmark in all cases for determining the actual market value of property in Delhi especially where the property is located. Here it is found as a matter of fact that even in the sale instance of residential property at Tolstoy Marg, the sale rate was many times higher than the circle rate. In any case, Bahadurshah Zafar Marg and Tolstoy Marg fall in the same zone i.e., Zone A for the purpose of circle rate and if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into account that it was leasehold land which though has been extended from time to time until this date the property is still under the ownership of AJL. Accordingly, the valuation of the property for Patna is determined at Rs.4,90,89,795/-. The appellant gets relief to that extent. Panchkula property - We find that insofar as circle rate of Rs.47,000/- per sq.mtr. for Sector 6, Panchkula, nowhere it has been pointed out by the appellant that it is for commercial establishments or for commercial purpose which, here in this case, is allotted for publication of newspaper which now has stopped its operations. Thus, the land was purely available for commercial usage and purposes and the DVO has applied circle rate for commercial purposes along with CPWD plinth area rate. Thus, we do not find any infirmity in the valuation done by the DVO and accordingly, we uphold the valuation of Rs.32,25,60,000/- in respect of Panchkula property. The contention with regard to restrictive use of the property is not tenable. Properties at Lucknow known as Nehru Bhawan and Nehru Manzil - We hold that instead of 22% deduction, a deduction of 30% should be given. Accordingly, the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following direction to Assessing Officer Firstly, to examine all the evidences filed by the assessee in the form of additional evidences before us, Secondly, to carry out necessary inquiries from Dotex and also summon himself or through a commission to the Directors or the Principal Officer of Dotex to explain the source and genuineness of the transaction;Thirdly, Assessing Officer should confront all the information and material gathered and communicated by the Investigation wing including STR report to the appellant; and; Lastly, the appellant is also directed to cooperate in such enquiry and lead all such evidence as they consider necessary to establish the credentials and the genuineness of the transaction in support of their explanation given before us. Accordingly, the matter is remanded back to the file of AO for making proper enquiry and adjudicate the issue in accordance with law after giving due opportunity of being heard to the appellant. Accordingly, ground no.10 is allowed for statistical purposes. Disallowance of sum paid for assigning of loan from AJL - HELD THAT:- Since we have already upheld the action of the AO insofar as addition made u/s 28(iv), theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. WITHOUT PREJUDICE TO GROUND NO.1 GROUND NO. II: REOPENING OF ASSESSMENT BAD IN LAW 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the re-opening of the assessment u/s. 147 of the Act. 2. The Appellant prays that the re-assessment u/s 147 be held to be void ab initio and/or otherwise bad-in-Iaw. WITHOUT PREJUDICE TO GROUND NO. I II GROUND NO. III: THE ORDER PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the principles of natural justice were not violated during the reassessment proceedings. 2. The Appellant prays that the order be held as illegal having been passed in contravention of the principles of natural justice which are applicable to all the income-tax proceedings and mandate that the assessee be given a fair opportunity of hearing before making any addition/disallowance. WITHOUT PREJUDICE TO GROUNDS NO. I, II AND III GROUND NO. IV: NON ADMISSION OF ADDITIONAL EVIDENCES FILED BY THE APPELLANT 1. On the facts and in the circumstances of the case and in law, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly invoking provisions of section 28(iv). 3. The Appellant prays that it be held that as there is a specific section 56(2)(viia) that governs the taxation of receipts of shares of a company, the AO could not have invoked Section 28(iv) of the Act in respect of such transaction. WITHOUT PREJUDICE TO GROUNDS NO. I TO VI GROUND NO. VII: REFERENCE TO THE DEPARTMENTAL VALUATION OFFICER ( DVO ) BEYOND THE SCOPE OF SECTION 142A OF THE ACT: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the AO of making reference to the Departmental Valuation Officer ('OVO') u/s. 142A of the Act for the purported determination of the FMV of the immovable properties owned by AJL. 2. The Appellant prays that the said reference and consequential determination of the purported FMV be held to be illegal. WITHOUT PREJUDICE TO GROUNDS NO. I TO VII GROUND NO. VIII: COMPUTING THE PURPORTED FMV BEYOND THE VALUE COMPUTED BY THE DVO: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the AO in adopting Rs. 132,94,44,4801- as the purported FMV of the lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an. 2. The Appellant prays that the assignment of loan by AJL to the Appellant carried out be held to be a genuine transaction. WITHOUT PREJUDICE TO GROUNDS NO. I, II, III AND IV GROUND NO.XIII : DISALLOWANCE OF RS.50,00,000/- PAID FOR ASSIGNMENT OF LOAN FROM AJL AS AN EXPENSE INCURRED TOWARDS THE OBJECTS 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the AO of not granting deduction of Rs.50,00,000/- paid by the Appellant for assignment of the loan from AJL as an expense incurred on the objects of the Appellant on the ground that the Appellant had paid the said amount to purchase a non-existent loan. 2. The Appellant prays that the said payment of Rs.50,00,000/- be treated as an expense incurred on the objects of the Appellant. WITHOUT PREJUDICE TO GROUNDS NO. I, II, III AND IV GROUND NO. XIV: ADDITION OF RS.1,00,000/- AS AN UNEXPLAINED EXPENDITURE UIS 69C OF THE ACT TOWARDS RAISING OF THE LOAN FROM DOTEX 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the AO of making a notional addition of Rs.1,00,000/- towards the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, so as to conform to the ideals of the founding fathers of India, Mahatma Gandhi and Pandit ji, Jawahar Lal Nehru. (2) No object of the company will be carried out without obtaining prior approval/no objection certificate from the concern competent authority wherever required and/or prescribed. 5. Immediately after its incorporation, both the Directors transferred the shares to Mr. Oscar Fernandes, Mrs. Sonia Gandhi, Shri Rahul Gandhi and Shri Moti Lal Vohra. Later on, Shri Rahul Gandhi was appointed as Director of Young Indian to acquire 1900 shares. The assessee company disclosed the list of shareholders and directors of Young Indian during the relevant assessment year as under :- Name Position in YI No. of shares held Mrs. Sonia Gandhi Director since 22.01.2011 1900 shares (36%) Shri Rahul Gandhi Director since 22.01.2011 1900 shares (36%) Shri Moti Lal Vora Director since 22.01.2011 600 shares Shri Oscar Fernandes Director since 22.01. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n English, Navjivan in Hindi and Quami Awaz in Urdu. 8. The business of publication of newspaper was suspended on various occasions due to certain financial difficulties and certain labour problem etc. In the year 2008, precisely from 02.04.2008, the business of publication of newspaper was closed/ suspended and all the employees of the AJL were given VRS w.e.f. 02.04.2008. After the publication of the newspaper was suspended or ceased to exist, income of AJL was mainly from exploitation of various properties held by it in different parts of the country. Earlier, the AJL was allotted certain immovable properties located in Delhi, Patna, Lucknow, Punchkula and Mumbai at a nominal price by respective Government of States where the cities are located. The properties were allotted for carrying out newspaper business and publication of newspaper in different languages. However, it was also allowed to let out these properties on rent to feed or cater to its publication business and these properties were commercially used for earning of rental income which has always been shown as part of business income and continued to do so post closure of the newspaper business. The office of AJL w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddress of office. Registered office of AJL shifted from Lucknow to Delhi at 5A Herald House, Bahadur Shah Zafar Marg, New Delhi to provide easy and efficient control and management to the Directors. 14.10.2010 Objects of Young Indian were incorporated Main object was To inculcate in the mind of India's Youth .............. 18.11.2010 Grant of license u/s. 25 of the Companies Act, 1956 To promote object in terms of Section 25(1)(a) 23.11.2010 Incorporation of Young Indian Authorised capital of Rs. 5,00,000 being 500 shares of Rs 100/- each as on 31.03.2011 Address of Registered office was at the same property of AJL, i.e., 5A Herald House, since inception. 23.11.2010 Commencement of directorship of Mr. Sam Pitroda He held 550 shares in YI, which were later on, were transferred to Mr. Oscar Fernandes. He was Director of AJL since 21.12.2010 23.11.2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EGM of AJL Approving fresh issue of 9.021 crore shares 22.01.2011 Commencement of directorship of Mrs. Sonia Gandhi Holds 1900 shares 36% stake in YI 22.01.2011 Commencement of directorship of Mr. Moti Lal Vora Held 600 shares in YI Chairman and MD of AJL since 22.03.2001 22.01.2011 Commencement of directorship of Mr. Oscar Fernandes Held 600 shares held in YI Director in AJL since 17.06.2010 14.02.2011 Bank Account of YI opened After issue of PAN by IT authorities 15.02.2011 Loan from Dotex Merchandise (P) Ltd., Kolkata Loan of Rs 1 crore was taken from this company to pay AICC Rs. 50 Lakhs for assignment of loan in AJL. Confirmation letter dated 24.12.2010 26.02.2011 Allotments of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt had an authorized share capital of 5,000 shares of Rs. 100/- each, valued at Rs. 5,00,000/- and the paid-up share capital of the Appellant was 1100 shares of Rs. 100/- each valued at Rs. 1,10,000/-. The Appellant at that point of time had only two shareholders i.e., - (a) Sh. Sam Pitroda holding 550 shares valued at Rs. 100/- each; and (b) Sh. Suman Dubey holding 5000 shares valued at Rs. 100/- each. On 13.12.2010, the first Managing Committee Meeting of Young India took place and Sh. Rahul Gandhi was appointed as its director, (namely a non-shareholder director) and Sh. Motilal Vora and Sh. Oscar Fernandes as ordinary members. Within five days thereafter, i.e., on 18.12.2010, the loan of Rs. 90 crores and odd outstanding in the books of INC as recoverable from AJL for the period between 2002 to 2011 was assigned to the Appellant without entering into any deed of assignment. Three days thereafter, on 21.12.2010, a board of AJL called for an extraordinary general meeting ( EGM ), which was subsequently held on 24.12.2010, and on the said date, the loan of Rs. 1 crore was received by the Appellant thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.02.2011 and thereafter the Appellant applied for exemption under Section 12A on 29.03.2011 and on 09.05.2011, the Income Tax Authorities granted the exemption with effect from A.Y. 2011-12. STEP-2 As discussed above, the Appellant (which was newly incorporated by Sh. Suman Dubey and Sh. Sam Pitroda) had no assets or funds of its own except those allegedly transferred by AICC i.e., the funds of Rs. 90.21 crores which was camouflaged as sale of alleged loan of Rs. 90.21 crores for a meager sum of Rs. 50 lakhs and Rs. 1 crore was arranged by the Appellant through Dotex which was a company engaged in providing hawala transactions, by laundering of Appellant s own money). This loan of Rs. 1 crore was also flagged as suspicious transaction in the Suspicious Transactions Report ( STR ) by Financial Intelligence Unit ( FIU ), India. The amount of loan entry of Rs. 90.21 crore was fixed in order to ensure that the amount was just sufficient to allot 99% share of AJL to the Appellant. STEP-3 It is pertinent to note that the Appellant which was registered under Section 25 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... STEP-8 The Appellant did not disclose the transaction of purchase of alleged loan of Rs. 90.21 crores at a paltry sum of Rs. 50 lakhs, in its Profit and Loss Account. This was camouflaged as expenditure on the object of the Appellant. In fact, the value of 9,021 crore shares of AJL was also not disclosed in the audited balance sheet on the ground of insignificant investment. It is submitted that the reason for the above-referred accounting treatment was to hide the real transaction from regulatory authorities and Income Tax Department. STEP-9 As discussed above, after the takeover of AJL by the Appellant, Sh. Suman Dubey and Sh. Sam Pitroda who founded the Appellant company (as per the MOA), exited as a shareholder of the Appellant by transferring their share to Smt. Sonia Gandhi and Sh. Oscar Fernandes. This resulted in the transfer and control of the Appellant in the hands of Smt. Sonia Gandhi and Sh. Rahul Gandhi, both majority shareholders, having shareholding of 38% each and their close associates Sh. Motilal Vora and Sh. Oscar Fernandes each having 12% shares of the Appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Close associate of Sh. Sonia Gandhi and Sh. Rahul Gandhi and Press Advisor to Former Prime Minister Director since 21.12.2010. Director since 23.11.2010. Had previously held 550 shares but transferred it to Smt. Sonia Gandhi on 22.01.2011. 13. The aforesaid background has been narrated hereinbefore as preface to understand the genesis of the controversies which are involved in this appeal and shall also have a vital bearing on adjudication of the issues which are being subject matter of appeal hereinafter in the forth-coming paras. INITIATION OF PROCEEDINGS U/S 148 OF THE ACT 14. The appellant company has filed return of income for the AY 2011-12 on 11.10.2011 declaring nil income. The said return was processed u/s 143(1). As noted by the Assessing Officer subsequent to the processing of return, an information was received from the Investigation Wing of the Income-tax Department that the assessee had purchased loan of Rs.90.21 crores which was given by AICC to AJL for a paltry sum of Rs.50,00,000/- and immediately after assigning of loan, AJL allotted 9.021 crore shares to the appellant company. Assessing Officer based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enka Group from the entry operators. Immediately after the Deed of Assignment of loan by the AICC to the Young Indian, on 16.12.2010, the said loan was converted into equity by the AJL, on 26.02.2011 (even when the YI had not paid Rs. 50 Lacs to the AICC in lieu of assignment of loan of Rs. 90 Crore), resulting in holding of 99% of the total issued capital of the AJL by Young Indian. As such, in reality the AJL has become a subsidiary of Young Indian. The Investigation Wing has further informed that though the Deed of Assignment is dated 28.12.2010, the AJL made Journal entries of transfer of loan to the YI in its Books of Accounts, as early as 16.12.2010. Even though the payment of Rs. 50 Lakhs, in lieu of Assignment of loan of Rs. 90,21,68,980/ , was made by the YI to the AICC, only on 01.03.2011, whereas the AJL had issued shares to the YI in lieu of the said loan amount, much earlier, in the month of Feb. 2011. It has been pointed out by the Investigation wing that the assigning of loan owed by M/s AJL to M/s Young Indian by the AICC is an adventure in the nature of trade, as defined u/s. 2(13) of the I.T. Act. The Investigation Wing has further conveyed that high ranking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngress which is a national political party. The Indian National Congress is registered under People Representation and is covered under provisions of section 13A of the Income Tax Act, 1961. Mrs. Sonia Gandhi MP, Sh. Rahul Gandhi MP, Sh. Motilal Vora MP and Mr. Oscar Fernades MR are high ranking official bearers of the party. It is pertinent to mention he e that a political party which received fund from the public as donation can utilize its s for the prescribed object of the political party. Young Indian (YI) The YI is a company incorporated under provisions of section 25 of the Companies Act, 1956 on 23.11.2010 with authorized share capital of Rs 5,00,000. The company was incorporated with the main object of inculcating in the mind of India s youth. Commitment to the ideal of a democratic and secular society for its entire population without any distinction as to religion, caste or creed and to awaken India's youth to participate in activities that promote foregoing objectives. Smt Sonia Gandhi, MP, Sh. Rahul Gandhi, MP, Sh. Moti Lal Vora MP, treasurer of the AICC and Mr. Oscar Fernandes MP are Directors of M/s Young Indian and Mrs. Sonia Gandhi and Mr. Rahul Gandh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3. Building Delhi 5-A, Bahadur Shah Zafar Marg, New Delhi-02 Lucknow 1, Bishweswhwar Nath Road, Lucknow 4. Capital Work in Progress Mumbai S.No.340, Part Aliyavar Marg, Bandra, East Mumbai. Panchkula C-17, Sec-6, Panchkula Patna Village Phulwari, Patna Lucknow 1, Bishweswhwar Nath Road, Lucknow It is pertinent to mention here at most of these properties were acquired by the AJL by sale/ lease from Central and State Government for purpose of publication of newspaper. However, after closure of newspaper business in year 2008, the AJL started business of construction of buildings for commercial purpose and had let out its existing building on rent. Dotex Merchandise Pvt. Ltd. M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t pendency of proceedings is not a pre-requisite for seeking information u/s 133(6) of the I.T. Act. The assessee was also informed about the decisions of Courts including the decision of the ,Hon ble Supreme Court in the case of Kathi Roor Service Cooperative Bank Ltd. Vs. CIT cithers, in Civil appeal No. 7460 of 2013 arising out of SLP (C No. 3976) of 2010 dated 27,08.2013, vide which it was held by the Apex Court that an Income Tax authority below the rank of Director or Commissioner can exercise the power of 133(6) of the I T. Act, in respect of any enquiry in a case, where no proceedings is pending, only with the prior approval of the Director or the Commissioner. The above observation of the Apex Court was in pursuance to an amendment made by the Finance Act (Act 22 of 1995), which has been explained by the CBDT in Circular No. 717dated 14.08.1995. The assessee was again requested to provide the required details/ clarifications/ documents, as asked for vide letter dated 14.07.2015, by 31.07.2015. This letter was also duly served upon the assessee on 27.07.2015. The assessee this time filed its reply in Dak on 27,07.2015, reiterating its stand that no proceedings are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitting the .requisite details, the AR of the assessee requested for inspection of records, which were not required in the above referred context, i.e. information which was not available with the department was requested u/s 133(6) of the Act. It appears that the Yf instead of complying with the terms condition of Section 133(6) of the Income Tax Act, has created a legal facade, to with-hold the information available with the assessee, It has not been explained by the A/R that when the information sought u/s 133(6) of the I.T. Act, is not available with the department, how come the inspection of the records of the department will facilitate in providing the requisite information as per the terms conditions of the Income Tax Act. The above discussion proves that the assessee has been afforded number of opportunities to clarify and submit details in respect of the transactions involving acquisition of loan/ shares of AJL. However, the assessee did not submit the requisite information during several opportunities allowed to it. It is pertinent to mention here that the assessee has adopted similar modus-operandi to with-hold information before the Investigation Wing, despite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceedings in case of the YI. This information has been also passed on to the AO of the AJL, who has been requested to make necessary inquiries n this regard, u/s. 68 of the I.T. Act. In view of above, herein after, I intend to use the term alleged loan of Rs. 90.21 Crore . As discussed above, the unsecured loan of Rs. 87.67 crore was disclosed in the balance sheet of the AJL as on 31st March 2010 and notes to the account (Annexure X) did not disclose the AICC as creditors. Even amount of the unsecured loan of Rs.90.21 does not tally with amount of unsecured loan as per balance sheet of the AJL. Another important issue is about quantum of loan of Rs 90.21 crore which was coincidentally just sufficient for allotment of 9.021 crore shares of the AJL to the YI which accounted for 99% of share capital of the AJL allowing takeover of the AJL by the YI. Since, the AICC claimed advancing loan of Rs. 90.21 crore to the AJL a, engaged in real estate business since year 2008, the issue whether political party can advance interest free loan to a real estate company under its stated object is being separately in the case of the Indian National Congress u/s 13A of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easurer) to the Board of Directors, AJL was filed, however, the assignment of the loan by the AICC to the YI was not acknowledged and confirmed by the AJL, (copy enclosed as Annexure C). Even if the alleged date of assignment of the loan of Rs. 90.21 crore to the YI was 28.12.2010, the date of actual payment of Rs. 50 Lakhs by the YI to the AICC was on 01.03.2011. It may be seen from the sequence of events that the loan was allegedly assigned on 28.12.2010 by the AICC to the YI and the benefit of assignment of loan culminated taking over the AJL by YI by allotment of shares by AJL to YI on 26.02.1010 on the basis of incomplete share application form. However, the payment for alleged assignment of loan was made only on 01.03.2011, whereas the takeover of the AJL by YI through allotment of shares (99% of paid up capital) got completed on 26.02.2011. Since, the YI did not have any fund at the time of alleged purchase of loan of Rs. 90.21 crore it claimed taking loan of Rs. 1 crore from M.s Dotex Merchandise Pvt. Ltd. The Financial Intelligence Unit (FIU), Department of Revenue, Ministry of Finance has reported loan transactions of Rs. 1 crore between YI and M/s Dotex Merchandise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid loan of Rs. 90.21 crore in to -ordinary shares at face value of 10 per share on 26.02.2011 and allotted e shares to the YI on the basis of incomplete share application form which neither mention amount remitted nor had details of payment, etc. (a copy enclosed as Annexure D). In order to ascertain the factual position certain enquiries were conducted which included calling for information/records from the office of DCIT, Circle-6, Lucknow (Assessing Officer of the AJL). Information received from AO revealed that Young India received 9,02,16,898 ordinary shares of the AJL, which forms almost 99% of total share of the AJL. However, perusal of the Balance Sheet for the relevant Financial Year i.e. for the year ending 31st March 2011, revealed that M/s The YI has not shown allotment 9.21 shares of the AJL in the Balance Sheet and investments were disclosed at NIL value in Schedule 4. It has further been noticed that the YI a payment of Rs 50 Lakhs for purchase of the alleged loan of Rs. 90.21 crore to acquire assets of the AJL, a company engaged in the real estate business however, the transaction was also incorrectly recorded in the P L A/c of the YI as expenditure on the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AJL which will enable me to compute income of for taxation. The AJL also earns rental income of Rs. 6.02 Crore per annum from letting out of some of the properties. Besides, the AJL is also engaged in construction of commercial building at Panchkula and at Mumbai. It is pertinent to mention here that a petition has been filed in this case before Metropolitan Court in Delhi along with evidences wherein the petitioner had estimated fair market value of properties of the AJL of more than Rs. 1600 crore (the value of the property at Bahadur Shah Zafar Marg along with few other properties was estimated at Rs. 1600 crore by the petitioner. The Metropolitan Magistrate taking cognizance of prima facie evidence has admitted the case and issued summons to the parties in the last week of June2015. The fact suggests that fair market value of the property leased or owned by the AJL worth of few thousand crore. M/s Dotex Merchandise Pvt. Ltd. : Enquiries were made in respect of loan transaction between YI and M/s Dotex Merchandise Pvt. Ltd. which has revealed following important facts: It is an undisputed fact that Mr. Sunil Bhandari and Mr. Sunil Sanganeria were not only dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout expecting any return of such investment. - Copies of bank A/c of companies engaged in business of accommodation entries typically contains deposits of cash and issue of cheque of equivalent amount. This is being ascertained in this case. - No reasonable explanation for not demanding return of the loan of Rs 1 crore by M/s Dotex Merchandise Pvt. Ltd. and non-returning of the loan by M/s Young Indian has forth come. Information from the Registrar of Companies : The information were also collected from the Registrar of Company which revealed that prior to assignment of loan, there were series of appointment of Directors in the AJL and YI who were either office bearer of AICC or close associates of President of AICC as per the following details: AJL : Mr. Oscar Fernandes was appointed as Director on 17.06.2010 Mr. Suman Dubey was appointed as Director on 21:12.2010 Mr. Satyam Gangaram Pitroda @ Sam Pitroda on 21.12.2010 It is pertinent to mention here that Mr. MotilalVora was Managing Director of AJL since 22.03.2002. YI : Mr. Suman Dubey was appointed as Director on 23.11.2010 Mr. Sam Pitroda was appoin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of FIU, India. The sequence of these transactions carried on by entities to transactions are not as per normal commercial practices. For example in this case the AICC claimed selling loan of Rs.90.21 crore to the YI in month of December 2010 even when assignment of loan was not acknowledged and confirmed by the AJL but the YI paid sale consideration to the AICC only in month of March 2011 at the time when the AJL was already taken over the YI by allotment of 99% of paid share capital of the AJL. No reasonable explanation for selling good loan of Rs.90.21 crore to the YI at meager amount of Rs.50,00,000/- has forth come. However the amount of Rs.90.21 crore was pre-mediated amount essential for YI taking over the AJL by allotment of 9.021 shares of the AJL (99% of paid share capital) in order to full takeover of the AJL. The end result of the these transactions was takeover of the AJL a real estate company having properties of several hundred crore by the YI by making meager investment of Rs. 50,00,000/-. However, such takeover of a real estate company having assets worth of more than Rs. 1600 crore the value which was taken cognizance by Metropolitan Court of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I u/s 28(iv) of the Act for FY 2010-11. 6. Summary of Escapement of Income 6.1 It is evident from the enquiry u/s 133(1) of the Act as sequel to the information received from the Investigation Wing and other sources that following undisputed sequence of events of this deal has taken place in taking over of the AJL by the YI: Shri Suman Dubey, Shri Satyam Gangaram Pitroda and Mr. Oscar Fernandes, found members of M/s Young Indian became directors of the AJL on 21.12.2010 and 17.06.2010 respectively along with Mr. Motilal Vora, Chairman of M/s AJL all close associates of Smt. Sonia Gandhi. A resolution was passed on 01.09.2010 to shift registered office of the AJL to Delhi from Lucknow to Delhi. M/s Young Indian, a section 25 company was incorporated on 23.11.2010 with founder members namely Sh. Suman Dubey and Sh. Satyam Gangaram Pitroda who later transferred their shares to Mrs. Sonia Gandhi, Rahul Gandhi, MotiLalVora and Oscar Fernandes having office address of 5A, Bahadur Shah ZafarMarg, New Delhi (a properly owned by the AJL) with share capital of Rs. 5 lakh. The alleged loan of Rs. 90 crore was transferred by the AICC to M/s Young India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 01.09.2010 Resolution was passed by the Board of Directors to shift the Registered Office of the AJL from Lucknow to Delhi To facilitate takeover and to provide easy and efficient control by Smt. Sonia Gandhi and Sh. Rahul Gandhi. 4 23.11.2010 YI, a section 25 company, was incorporated with Mr. Suman Dubey, Mr. Satyam Gangaram Pitroda with paltry capital of Rs. 5 lacs having registered office at 5A, Bahadur Shah Zafar Marg, New Delhi, a property of AJL It is evident from address of registered office of the YI that since its incorporation, it had started treating property of the AJL as its own. 5 13.12.2010 Rahul Gandhi was appointed as Director of the Yl. Just three days before assignment of alleged loan of Rs. 90 to the YI by the AICC for paltry sum of Rs. 50 lacs. 6 16.12.2010 AICC claimed assigning its alleged loan of Rs. 90 crore with the AJL to the YI for paltry sum of Rs. 50 lacs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 01.03.2011 The YI paid Rs. 50 lacs to the AICC for assignment of loan of Rs. 90 crore on 16.12.2010. No prudent management will assign the loan of Rs.90 crore for a paltry sum of Rs.50 lacs that too was received after a gap of more than 3 months from the date of assignment If one take note of the above referred to illogical sequence of events (e.g. step 8 should precede step 6, step 10 should precede step 6, step 12 should follow step 6 simultaneously, etc.) and the celerity at which these transactions were made by common office bearers of the AJL, the YI and the AICC then conclusion is simple to guess that Mrs. Sonia Gandhi and Mr. Rahul Gandhi along with their trustworthy associates have taken over property of more than Rs. 2000 crore for a paltry sum of Rs. 50 lacs. 6.2 Income from investment of Rs. 50 lakh It is evident from findings as recorded in para-5 that above referred to transactions/ arrangements were not real and genuine and were sham transactions. A pre-mediated scheme was devised to obtain control over immovable properties of the AJL worth of several hundred c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l paid up capital) to the YI on 26.02.2011 on the basis of incomplete and undated share application form. Step 5: The takeover of the AJL was complete within three months from the date of incorporation. After taking over all the immovable properties of the AJL in control, the YI shifted to Herald House, Bahadur Shah Zafar Marg, New Delhi, one of prime properties of the AJL worth of several hundred crore without paying any compensation for use of space to the AJL i.e. in reality the YI used the properly on the name of the AJL as its own property. Step 6: The YI citing the object of the company obtained registration u/s 12 A of the Act which entitled it to exemption on its income on 09.05.2011 so that value of all benefit from real estate business of the AJL get tax exemption. Step 7: In order to achieve object of holding 100 percent share of the AJL by the Yl and :s majority shareholders and their relative like Sh. Rahul Gandhi and Smt. Priyanka Gandhi Vadhera have purchased additional 47,513 and 2,62,411 shares through Rattan Deep Trust and Janhit Nidhi Trust respectively. Step 8: The YI did not disclose the transaction of purchase of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xact FMV of the all properties on the name of the AJL in India is not known at the time of recording of reasons accordingly, the quantum of income u/s 28(iv) i.e., value of benefit accrued to the YI from these assets minus cost of investment of Rs. 50 could be not computed with the precision which shall be determined during reassessment proceeding. 6.3 Unexplained loan of Rs. 1 Crore from M/s. Dotex Merchandise Pvt. Ltd. The YI claimed taking a loan of Rs. 1 Crore from M/s Dotex Merchandise Pvt. Ltd., Kolkata, a company known for providing bogus entries. The transaction is also notified in the STR of FIU India. The YI did not furnish any evidence of genuineness of the loan. Prima facie, it appears that the amount (Rs. 1 Crore) which appears to be money-laundering of own money of YI as discussed earlier is an unexplained credit, as the source of which has not been explained properly. The amount is required to be taxed u/s. 68 of I.T. Act. In view of these facts, I have reason to believe that income of Rs. 1 crore has escaped assessment for AY 2011-12. 6.4 Expenditure of Rs.50 lakh by the YI outside the Aims and Objects: As discussed above, the YI has paid an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome chargeable to tax has escaped assessment. On the basis of the reasons recorded above, I have reason to believe that income chargeable to tax as noted above has escaped assessment for Assessment Year 2011-12 and it is fit case to issue notice u/s. 148 of the Act. In this case the four years but not more than six years have elapsed from the end of the assessment year under consideration and Income chargeable to tax which has escaped assessment is more than Rs. 1 lakh necessary sanction to issue notice u/s 148 of the Act has been obtained from the Commissioner of income Tax (Exemption), Delhi vide letter No. F. No. CIT (E)/u/s151(1)/2016-17/1809 dated 10.01.2017 under amended provisions of section 151 of the Act w.e.f. 01.06.2015. 15. Thereafter, the AO has passed the assessment order u/s 143(3) read with section 147 vide order dated 27.12.2017 determining the total income at Rs.4,14,40,07,490/- after making the following additions:- Sr.No. Particulars Amount (Rs.) 1. Benefit/perquisite computed u/s. 28(iv) in respect of the purported Fair Market Value ( FMV ) of the immovable prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Legal Paper Book-I) wherein Hon ble Court held that in case assessee has shifted his residence or place of his business or work etc., AO of place where assessee has shifted or otherwise, will have the jurisdiction and it is not necessary that in such case, an order u/s 127 is required to be passed. He further relied upon the judgment of Hon ble Rajasthan High Court in case of CIT vs. Poonam Chand Surana 221 Taxman 151, wherein it was held that a notice u/s 148 issued by the Income-tax authorities, who has no jurisdiction over the assessee at the time when the said notice was issued, is bad in law and void. He also relied upon the following decisions:- (i) S.N. Bhargava v. ITO (147 ITD 306)(Agra - Trib.) (ii) Anant Concrete Products Pvt. Ltd. vs. ITO (ITA.No.1632/Del./2017) (iii) DCIT vs. Shri Ram Agarwal (ITA No.756 757/LKW/2011) 18. Mr. Soparkar further submitted that ld. CIT (A) has rejected this ground for the reason that assessee has raised this issue for the first time vide letter dated 18.07.2017 which is after 30 days of issuance of notice u/s 143(2) issued on 21.03.2017 and accordingly, the objection is not maintainable being barred by limitation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his stage. It was only at a later stage when certain enquiries began against the Appellant, that it started building up case to create defense. The registration was later found to have been obtained by mis-representation of facts as held by the Hon ble ITAT in Young Indian v. CIT (Exemption), New Delhi, ITA No.7751/Del/2017, wherein the cancellation was upheld. 21.1 In the backdrop of the facts and circumstances of the case, it needs to be appreciated that the jurisdiction over the Appellant was exercised by virtue of the provisions contained in Section 120 of the Act, more particularly, sub-Section (3) thereof. It is submitted that it is not a case of territorial jurisdiction based on residence or place of business, but it is a case of jurisdiction assumed on the basis of registration granted by the Revenue on the application of the Appellant-Assessee, which brings them into a class of assessees or class of cases. 21.2 The registration has been subsequently cancelled and the assessment relevant to those years for which the Appellant had already claimed exemption was re-opened and relevant proceedings were commenced. To suggest that the cancellation of registration or the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d No.1 are not tenable. DECISION ON GROUND NO.1 22. We have heard the rival submissions and also perused the relevant facts on record. The appellant s contention has been that, firstly, since it has surrendered its registration u/s 12A and 12AA vide letter dated 21.03.2016, therefore, it was no longer an entity that required exemption u/s 11 and consequently DIT (E) or ACIT (E) did not had jurisdiction at the time of issuance of notice u/s 148 on 10.01.2017. Secondly, once the assessee had raised the objection before the AO regarding its jurisdiction then it was incumbent upon the AO to refer the matter to higher authorities for determining the correct jurisdiction. However, we are unable to subscribe to the contention raised by the ld. Senior Counsel for the appellant before us for the reason that, it is an undisputed fact that after granting of registration u/s 12A/12AA by the ld. DIT (E) vide certificate order dated 09.05.2011, thereafter the assessee has been regularly filing its return with Directorate of Exemption including the AY 2011-12. Upto the stage of issuance of notice u/s 148 on 10.01.2017, ld. CIT (E) had not passed any order cancelling the registration w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diction assumed by granting registration by the Income-tax Department on the application filed by the assessee which falls within the definition of class of assessee and class of cases as defined under clauses (c) (d) of sub-section (3) of section 120. The appellant ostensibly falls into a specific category of cases and it is not open for the assessee on its own remove itself from specific category of cases and then contend that it should have been assessed by different Assessing Officer. The matter of jurisdiction is not by the choice of the assessee albeit it depends upon the specific provisions contained in sections 120 124. Thus, we do not find any merits in the contention raised in ground no.1 that Assessing Officer did not had jurisdiction either to issue notice or pass assessment order and the same is thus dismissed. GROUND NO.2 24. The appellant has challenged the notice u/s 148 and reopening of assessment mainly on the ground that, approval from the CIT (E) u/s 151 was obtained prior to the recording of reasons and therefore, it tantamount of rendering the entire proceedings u/s 147/148 bad in law. Apart from that, assessee has also challenged that approval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment. The reasons were recorded by the AO only on 10.1.2018 after seeking approval from the CIT (E), which is not permissible in law. Accordingly, it has been submitted that, since none of the three reasons have been validity in law, all of them are invalid and accordingly, reopening based on the same ought to be held as void. As regards the first two reasons at pages 5-30 and 53-76 of the Revenue PB, it was submitted that where reasons are typed on a plain paper, which is neither signed or dated or the same are signed as draft, the same cannot be regarded as recording of satisfaction and the same is invalid. Accordingly, the first two reasons at pages 5-30 and 53-76, which are not signed or signed as a draft are not valid reasons. 27. In support of his contention, Ld. Counsel relied upon the following decisions wherein it was held that unsigned reasons cannot be a valid document:- 3.6 Prahalad Singh vs. ITO (ITA No. 3375/DEL/2O17) (pages 3-12 of LPB V): The relevant extract of the decision reads as under: 7. It can be seen from the above that this document is not signed by the AO. The Hon'ble Punjab and Haryana High Court in the case of Atlas Cycle I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the eye of law. 11. On the strength of these judgments of the Hon'ble High Courts, the reopening of assessment is quashed. 3.7 The foregoing decision has been affirmed by Punjab and Haryana High court vide order dated 27.02.2020. (pages 13 and 14 of LPB -V) wherein it was held as under: We find that the order of the Tribunal is correct. The mere fact that reasons exist on the file cannot sanctify them and the only way to ascertain whether the requirements under Section 147 of the Act have been met out would be at the very least that the assessing officer sign the same. Without signatures, the document becomes anonymous piece of paper to which no credence can be given. The action under Section 147 of the Act is quasi-judicial action and if it is permitted that such action can be done as anonymously, it would have very serious consequences in other cases also. If the Court accepts such pieces of paper who can tomorrow stop an assessee from substituting a signed paper with another unsigned paper? 6. Moreover the reasons are undated, hence do not establish that they were recorded prior to issuance of notice. 7. In the circumstances, the appeal is dism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. P. Govindasetty Sons 1.3% The driage claimed by the 'a' firm works out to 4.04% and comparatively high. No reasons have been assigned for such a high percentage of driage. The assessment is, therefore, re opened under section 147(b). Whether this 'notes' can be construed as the ITO recording his reasons under section 148 that alone gives him jurisdiction to reopen the concluded assessment proceeding, is the first question that calls for my determination. 11. A 'note' or 'notes' is generally prepared by a subordinate or even by the very same officer, as in the present case, as an aide memoire or to help the memory or enable a superior officer to examine the same and pass his orders thereon. A 'note' even when the same is prepared by the very same officer and even placing the most charitable construction on the same, cannot be elevated to or treated as the ITO recording his reasons under section 148, which is a statutory requirement. In a proceeding under article 226 of the Constitution this Court is empowered to examine only the reasons recorded by the ITO and cannot travel beyond the reasons recorded by him. On the oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of issuing unsigned reasons the AO had not mentioned anything as what was the basis of arriving at the conclusion of escapement of income, that also in the reasons recorded he had not mentioned that the escapement of income was due to failure of the assessee to disclose truly and fully the material facts, that the assessee had raised objection to re-open the matter, that the AO did not deal with the objections and passed the order, that the FAA called for report from the AO, that the reasons mentioned in the report and submitted to the FAA were different from the reasons supplied to the assessee, that the AO himself admitted that the assessee was supplied only gist and same was unsigned, that the AO had not annexed the statements of Guptas while submitting the report to the FAA-though he had mentioned that same are annexed, that the FAA ignored the basic issue raised by the assessee with regard to the jurisdiction. Considering the various factors-like supplying unsigned reasons, existence f two different sets of reasons for issuing 148 notice, not adjudicating objections raised by the assessee, reopening of assessment after a very long period, relying on the statements of third pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, there was no signature of the AO who recorded the reasons for issue notice and for direction for issue of notice u/s 153C. Therefore, it is to be construed that no reasons were recorded by the AO as required u/s 153C of the Act. As per section 153C it is mandatory on the part of the AO to record satisfaction for issue of notice u/s 153C. 3.14 Without prejudice, if reasons are dated 9.1.2017 are the valid reasons, then the said reasons were not provided to the Appellant (as what was provided to the Appellant was reasons dated 10.1.2017) and therefore, reassessment proceedings are bad in law and without jurisdiction. In this regard, reliance is placed on the following decisions: S.No. Case law/proposition Page No. 1 CIT v. IDBI Ltd. [2016] 76 taxmann.com 227 (Bombay) 1-4 of LPB IV 2 CIT v. Videsh Sanchar Nigam Ltd.[2012] 340 ITR 66 (Bombay) 5 of LPB IV 3 PCIT v. Jagat Talkies Distributors [2017] 85 taxmann.com 189 (Delhi) 6-12 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PL s Siddhartha Ltd. 345 ITR 223 wherein Hon ble Court has held that, firstly, satisfaction of one authority cannot be substituted by the satisfaction of other authority and secondly, it is a mandatory condition that the satisfaction recorded should be independent and not borrowed or dictated satisfaction. He also referred to following decisions:- S.No. Case Law Page No. 1 PCIT v. Meenakshi Overseas (P) Ltd (395 ITR 677)(Del) 108-117 of LPB-V 2 CIT v. Shankardas B Pahajani (93 taxmann.com 248)(Bom HC) 122-124 of LPB-V 3 PCIT v. Shodiman Investments (P) Ltd (93 taxmann.com 153)(Bom HC) 125-129 of LPB-V 30. Alternatively, he submitted that approval from CIT (E) u/s 151 was mechanically obtained. In support, he relied upon the following decisions:- S.No. Case Law Page No. 1 Signature Hotels Pvt. Ltd. Vs. ITO (338 ITR 51) (Del.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod and it has no standing for the year under consideration. Regarding the reasons initially mentioned as draft because if approval does not come, reason would not become final, he submitted that the said statement itself shows the tentativeness and non-finality of the reasons sent for approval. Under the provisions of the Act, in a case where the Commissioner does not grant approval to the reasons recorded, it does not mean that the reasons itself disappear and that the belief which the AO had formed becomes non-existent. Where approval is not provided by the Commissioner, then the reopening would not take place, however, the action of the AO of recording the reasons would not efface or disappear as if it never existed. Accordingly, he submitted that in the present case, admittedly the AO has finalized his opinion and recorded the reasons only after obtaining the approval from the CIT(E), which vitiates the entire process and makes the reopening bad-in-law. 33. Ld. Special Counsel for the Revenue has also stated that even though the reasons are not signed, however covering letter in the proforma in the same has been signed to which the ld. Sr. Counsel for the assessee submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factually incorrect. The aforementioned information on the shares acquired along with the number of shares was duly reflected in Schedule 4 as also in Note 1 of Schedule 7 of the audited Balance Sheet of the Appellant for the year ended March 31, 2011 (Page 56 of the PB-I). The said Note read as under: In pursuit of its objects, the Company acquired loan of Rs. 90,21,68,980 by The Associated Journals Ltd. ( the said Company ), presently engaged in achieving a recast of its activities so as to have its main object congruent to the main object of the Company, for a consideration of Rs. 50 lacs. As a part of restructuring exercise of the said Company, the said loan was converted into 9,02,16,898 Ordinary shares of Rs. 10 each fully paid. Since said acquisition of treated as application on the objects of the Company (and accordingly, treated in the financial statements of the Company), the same has not been reflected as 26 AS investment in shares. Besides, even if the shares were to be treated as an asset ( investment ), having regard to the fact that the net worth of the said company is negative, recognizing the entire cost as diminution in value would result in an equivalent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had failed to disclosed that the consideration paid by the Appellant was only Rs. 50 lakhs. In this regard, it is submitted that the said statement of the Ld. DR is factually incorrect as the Appellant had made full disclosure of this transaction in its return of income. In AY 2011-12, physical returns were filed and the Appellant along with the return has filed even its financial statements, and Note 1 to the financial statements give complete detail of the transaction in question. (Please see pages 30 to 56 of the PB-1). As would be observed at Page 56, in Note 1, it is clearly mentioned that the loan/shares were acquired for a consideration of Rs. 50 lakhs. Further, at page 54, Schedule 4, the investment in shares of AJL is disclosed at Nil. Further, at page 53, Rs.50 lakhs has been shown as expenditure towards Youth Commitment to ideal of democratic and secular society. Further, the loan of Rs. 1 crore taken by the Appellant is also disclosed at page 54. Accordingly, it is submitted that the entire transaction was disclosed by the Appellant and accordingly, in absence of any new material, the reopening done by the AO is bad in law. 35. Shri Soparkar further pointed out tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... handise Pvt. Ltd. is standing as it is and has not been repaid. (Page 174 of the PB- II) This statement is also a half truth. The loan has been repaid in FY 2015-16, well before the date of the impugned Assessment Order. This is evident from the balance sheet of the company for the year ended March 31, 2016, which was part of the assessing officer s records when the reasons for reopening were recorded. (please see page 154 of PB-I for the Balance Sheet of YI as on March 31, 2016). It is also stated that, as per Note 6 of the Balance Sheet of Young Indian for the year ending on 31.03.2014, even provision for interest to be paid on unsecured loan has not been made for F.Y. 2013-14. (Page 174 of the PB - II). This statement is incorrect as it can be seen from Note 12 that interest is duly accrued during the year. (Please see page 146 of PB-I). The AO has referred to the wrong Note which refers to interest accrued but not due instead of considering Note 12 which provides the details on interest expense incurred during the year. In support, he relied upon the following decisions :- (i) Hon ble Madhya Pradesh High Court in CIT vs. Man Mohan Das (218 ITR 730 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation received from investigation wing or other sources and did not independently apply his mind to that information. Further, in the case of Signature Hotels Pvt. Ltd. Vs. ITO (338 ITR 51) (Del.) (Pages 62-67 of LPB-I), the Hon ble Delhi High Court quashed the reopening of assessment on the ground that AO did not independently apply his mind to the information received from the Director of Income Tax (Inv.). The decision of Sarthak Securities Signature Hotels (supra) has been followed in the case of Unique Metal Industries Vs. ITO (ITA No. 1372/Del/2015) (Del.) (Pages 178-215 of LPB-I) where the Hon ble Delhi Tribunal has held that reopening of the assessment only on the basis of information without independent application of mind is invalid and liable to be quashed. Therefore, in view of the above judicial pronouncements, the reopening of assessment is bad in law and deserve to be annulled. 3.58 In view of the foregoing grounds, the Appellant humbly prays that the reassessment conducted by the AO was bad in law and accordingly the assessment order passed under section 147 of the Act ought to be held as void ab initio. Arguments on behalf of Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dded with necessary space left blank to incorporate the factum of approval. If the approval did not come for any reason, the entire exercise of recording the reasons would obviously be dropped. However, if the competent authority approved the proposal for reopening, the letter number and date of the sanction order would then be incorporated in the reasons and then the final reasons would be signed for being communicated to the Appellant. 41. He stated that the reasons were communicated by the A.O. together with the notice under Section 148 as a matter of abundant caution. In this factual backdrop, it is strange for the Appellant to raise such arguments as to suggest that there were three reasons or that these reasons were tentative and the final reason was signed without any sanction under Section 151 of the Act, etc. 42. It is really unfortunate that the Appellant, who had taken a detailed inspection of the records of the A.O., much before raising these kinds of objections, had still made submissions before the Hon ble Bench as if they were not aware of what was contained in the records. 43. It needs to be appreciated that reasons recorded by the A.O. were submitted to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges with detailed discussion on material and information. He submitted that, it needs to be appreciated that the A.O. has given in his reasons the mode and manner in which the Appellant devised a scheme to take over the properties of AJL, how the three entities which were under common control and management combined together to devise such schemes and how the Appellant got benefitted from such adventures. Without going into the merits of these issues, which is the subject matter of other grounds of appeal, it is sufficient to say that there was a strong prima facie reason to believe that income chargeable to tax had escaped assessment. It was neither a case of any roving enquiry, nor of the reopening being based on insufficient material. Further, the A.O. did independently examine the facts in detail, conducted independent enquiries and arrived at the findings after due application of mind. 47. Mr. Srivastava further submitted that the reopening was valid and more so after the cancellation of registration was done by the CIT (E), the findings of CIT (E) already been affirmed by the Hon ble Tribunal. DECISION ON VALIDITY OF REOPENING U/S 147/148 AS RAISED IN GROUND NO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the reasons recorded by the ACIT stating that it is a fit case for reopening u/s 147, wherein JCIT has given very elaborate reasons agreeing with the reasons recorded by the AO; and then in Item 13, the Ld. CIT (E) has given his satisfaction observing that the reasons recorded by the AO as per annexure sent by him alongwith the format, is proper and gave his approval on being satisfied on the reasons recorded that it is a fit case for issue of notice u/s 148. Further, it is seen that approval has been granted by the Ld. CIT (E) on 10.01.2017 and along with it, there are detailed reasons given by him for granting approval and his satisfaction on the reasons recorded by the AO which is placed at page 52 of the paper book. Pages 53 to 76 contain reasons recorded and at the last page, the AO has appended his signature and date 09.01.2017 mentioning it as a draft. Scanned copy of last page of said reasons is reproduced hereunder:- 51. Thereafter, the copy of reasons which were given to the appellant/assessee, scanned copy of last page of the reasons is as under :- 52. For reopening a case u/s 147, first and foremost condition is that the AO must have reason to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Assessing Officer, it seen that he has appended his signature on the reasons recorded sent to the higher authorities which is final reasons from his side albeit he has mentioned before signing it DRAFT . This word draft does not mean that either the reasons recorded by the AO are tentative or was subject to any correction. Insofar as AO is concerned, he has sent his final reasons recorded for seeking approval and has left the approval letter number blank on which immediately after getting the approval he has communicated to the assessee which is evident from the last page of the reasons communicated to the assessee as incorporated above. 55. We are unable to comprehend as to what is the infirmity either in the reasons recorded by the Assessing Officer or the reasons which were sent for approval along with covering letter of the AO and prescribed proforma which are duly signed. It cannot be said that it is not a reasons at all or it is unsigned reasons recorded . It is not a case that the reasons recorded sent for approval are unsigned or there is no signature at all of the AO. He has clearly put his signature with the date which shows that the reasons were reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable to subscribe to the contentions raised by the ld. Senior Counsel for the assessee before us that, unsigned reasons by the AO were sent for approval before the CIT (E) and same is rejected. 57. The next line of argument of the ld. Sr. Counsel for the assessee is that, approval has been given by the ld. CIT (E) in a mechanical manner. Again, what is required under the law is that JCIT or CIT or any other authorities mentioned in section 151 has to be satisfied on the reasons recorded by the AO that it is a fit case for issuance of notice u/s 148. The satisfaction of the CIT depends upon whether the reasons recorded are in accordance with law and AO had any reason to believe that any income chargeable to tax has escaped assessment. If the reason recorded itself has no substratum to stand on its own, i.e., not in accordance with law or on based on some incorrect facts and dehors the material on which reason to believe has been entertained, and then if the ld. JCIT or ld. CIT have merely granted approval without having considering the reasons, facts and information contained in the reasons, then it can be said that approval has been granted in a very mechanical manner. Here i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loan to any unrelated party without expecting any return of such investment. Immediately after the assignment of loan by the AICC to the Young Indian, on 16.12.2010, the said loan was converted into equity by the AJL, on 26.02.2011, resulting in holding of 99% of the total issued capital of the AJL by Young Indian. AJL allotted the shares to Young Indian 'in lieu of recently purchased asset i.e., Rs. 90 Crore (purchased for a sum of Rs. 50 Lakhs} which has resulted in takeover of assets of the AJL, fair market value which would need to be ascertained. AO has formed his belief that income amounting to Rs. 1 crore on account of unexplained cash credits and other income in the nature of benefit or perquisite, whether convertible in to money or not, arising from the business or exercise of a profession, on account of allotment of Shares of Associated Journal Limited, valuation of which is to be made, has escaped assessment in the hands of Young Indian. I am satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of notice u/s 148. Sd/- (RAMESHWAR SINGH) Commissioner of Income Tax (E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d benefit from acquisition of loan given to AJL in respect of loan taken from Dotex wherein it has been stated that in the financial statement, AO has mentioned that in the financial statements for FY 2010-11, the appellant did not disclose the shares of AJL which was incorrect because entire transaction was noted in the notes to accounts and secondly, the observation that business of publication of newspaper of AJL was closed w.e.f. 02.04.2008 which fact is not correct as it is temporarily suspended. Insofar as this objection of the appellant is concerned, even though it has been mentioned in the financial statement that the appellant company has been allotted shares of AJL, however nowhere entire factum of acquisition of shares and the manner in which the whole transaction was undertaken has not been mentioned. Merely describing description of shares does not lead to inference that the manner in which these shares were acquired was also beyond doubt. The reasons to believe of the AO were based on various circumstances in which transaction was undertaken and he has also described various steps to which entire process has undergone for acquiring shares. Thus, it cannot be said that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he loan from the Dotex in the reasons to believe. Even if one fact that AO has observed that no TDS has been deduced that does not mean that entire limb of entertaining reasons to believe doubting the genuineness of the loan gets vitiated. Further, AO in the reasons recorded have noted that loan was to be repaid within one year and till FY 2013-14, the unsecured loan had not been repaid. It may have been repaid in subsequent year but that does not mean that the AO has recorded the wrong fact on perusal of the return filed with ROC for FY 2013-14, because in FY 2013-14 the loan was actually not repaid. 64. Now another point which AO noted is that as per Note 6 of balance sheet of Young Indian for the year ending 31.03.2014, even the provisions for interest of unsecured loan have not been made in FY 2013-14 which, according to the appellant, is not correct because Note No.12 shows that interest is duly accrued in the year and AO has wrongly referred to the wrong note which mentioned interest accrued but not due and he has not seen Note no. 12. Again, this does not materially affect the reasons to believe by the AO even though interest may have accrued and mentioned in Note 12, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation on the present facts. We reiterate that the AO has to have only prima facie reasons to believe based on tangible material or information which, here in this case, there was sufficient material to entertain reasons to believe that entire transaction right from the incorporation of the appellant company till acquiring of 99.999% of shares of AJL and getting control of huge assets of AJL merely for a sum of Rs.50,00,000/-. At least, this factum itself is sufficient to clothe the AO in entertaining reasons to believe and acquiring the jurisdiction u/s 148. We further notice that very recently, Hon ble Supreme Court in the case of DCIT (Central Circle) Vs M/s M R Shah Logistics Pvt Ltd order dtd 28th March 2022, held that reopening of the assessment u/s 147 is valid if there is tangible material for the same and the sufficiency of such material cannot be subject to judicial review. Accordingly, ground no.2 raised by the appellant is dismissed. GROUNDS NO.3 4 66. In Ground No.3 appellant has challenged that the assessment order passed is in violation of principles of natural justice; and in ground no.4, the appellant has objected for non admission of additional eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces were not put to YI for explanation. In the final show cause notice, only allegation is that only confirmation has been filed and that in the confirmation filed, name and address of the person issuing it is not mentioned. (page 367 of PB). All other allegations mentioned in these paras of the order was never put before YI. Para 8.11 During the course of assessment proceedings the assessee had only filed a copy of confirmation of loan by M/s.Dotex Merchandise Pvt. Ltd. along with a claim that loan was taken through banking channel and it was claimed that these evidences were sufficient to discharge its onus u/s 68 of the Act. The AO has made the said observation without considering Appellant s submission dated June 7, 2017 (Pg 244-253), June 13, 2017 (Pg 254-278), August 9, 2017 (Pg 340 351) and December 15, 2017 (Pg 370-378), wherein the Appellant had submitted various documents like loan agreement, TDS statements, bank statement, ledger, etc. 4.4.2 Statements/allegations/inferences made in the assessment order for which no show cause notice has been issued or no/improper opportunity has been provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. was standing as it was not repaid. Non-return of alleged loan within stipulated period of one year and non- payment of interest @ 14% per annum were in contravention to the terms and conditions of the alleged loan. However, surprisingly, even after violation of terms and conditions of the agreement, no action was taken by the lender. In reality, the alleged loan of Rs. 1 crore was interest free loan till investigation started by the Income Tax Department in the year 2012. The paltry sum of TDS was made following enquiry by the Income Tax Department. Para 8.10 (Page 33) No reasonable explanation for not demanding return of the loan of Rs. 1 crore by Dotex and non-returning of the loan by YI within stipulated period of one year has comeforth. In the reply dated June 7, 2017 (Page 244 of PB I) the Appellant has mentioned that the loan was renewed from time to time and was repaid on April 24, 2015. After his submission, the AO has not asked for any question during reassessment regarding the extension of loan. Para 8.10 (Page 33) Copies of bank A/c of companies controlled by above re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .9 (page 28) Reference made to letter of AICC to AJL which has not been acknowledged by AJL No show cause notice for explaining this. 4.6 In respect of conclusion that the entire transaction was fraudulent transaction: 4.6.1 Statements/allegations/inferences made in the assessment order for which no show cause notice has been issued and which were made for the first time directly in the assessment order: Reference of order Statements/allegations/ inferences made in the order Remarks Page 35, para 9(8) Para 8.7, page 27-28 of the order Allegation that provisions of section 81(1A) r.w.s. 67 of companies act not complied It was also mentioned in the notes to account that the main object of the AJL was in process of recasting so as to match to the object of the assessee company. The issue whether the object of the AJL which was engaged in the real estate business was actually recasted to match the object of the assessee company has also been examined and it was found that the object of the AJL was never recasted to match with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e RG became trustee of the said trust. Though RG was trustee in FY 2010- 11 and FY 2011-12 along with Rameshwar Thakur, he resigned from said trusts as a trustee of this Trust in November 2013. Para 8.4, 8.5 It is alleged that loan of Rs. 90.21 crores was assigned for mere Rs. 50 crores even though AJL could repay the same for various stated reasons. No show cause notice issued as to why loan was assigned for mere Rs. 50 lacs Para 8.9 page 30 of the order, Page 37 para9(10) However, perusal of the Balance Sheet of the assessee for the relevant Financial Year i.e. for the year ending 31 st March 2011 has revealed that the assessee had not disclosed value of 9.021 crore shares of the AJL in the Balance Sheet and investments were disclosed at NIL value in Schedule 4 (Refer Exhibit 23). However, the transaction was also incorrectly recorded in the P L A/c of the assessee as expenditure on the object of the company (Refer Exhibit 4). No show cause notice issued for this allegation. Para 16, page 71 of the order. Reference has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver provided to YI. YI came to know about these responses directly from assessment order 68. Thereafter, reliance has been placed on various decisions as under :- (i) Suraj Mall Mohta and Co. v. A.V. Visvanatha Sastri [1954] 26 ITR 1 (SC) (ii) Dhakeshwari Cotton Mills v. CIT [1954](26 ITR 775)(SC) (iii) Gargi Din Jwala Prasad v. CIT [1974] 96 ITR 97 (Allahabad) (iv) Additional ITO v. Ponkunnam Traders [1976] 102 ITR 366 (Kerala) 69. Thus, it has been submitted that assessment has been made without sharing the documents relied upon by the AO to the assessee and without providing any opportunity to provide its rebuttal on the various allegations made by the AO. 70. It has been pointed out by Mr. Soparkar that in order to rebut the allegations made in the assessment order, the assessee had filed certain additional evidences before the ld. CIT (A) under Rule 46 of Income-tax Rules, 1962 which have also been filed before us running into 500 pages. It has been further pointed out that ld. CIT (A) had called for the remand report from the AO in respect of merits as well as admissibility of these additional evidences. Even after calling for the remand re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 73. Another important fact which has been pointed out by Shri Soparkar is that the ld. CIT (A) has not only called for remand report but also considered the additional evidences while deciding the merit of the case for which he has made various references of the additional evidences and also found in the remand report for adjudicating the issues on merits. This have been elaborated in the following manner before us :- Sr.No. Page No. of CIT (A) Order Para No. of CIT (A) order Additional evidences and remand report discussed by CIT (A) 1 Pg. 171 172 5.4.7-5.4.8 1. Ledger account of Loan given to AJL in the books of AICC (Pgs. 725-735 of FPB) 2. Statement of utilization of loan given to AJL (Pgs. 736-738 of FPB) 2 Pg. 173 5.4.10 5.4.11 Order dated November 6, 2012 of the Election Commission of India (Pgs.709-712 of FPB) 3 Pg.173-174 5.4.12 5.4.12.1 Assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Securities and Credits (P.) Ltd. 332 ITR 396 (Del.) (iii) CIT vs. K Ravindranathan Nair (265 ITR 217)(Ker.) (iv) Jai Prakash Tyagi vs. ITO (72 taxmann.com 183) (Delhi, ITAT) (v) ACIT vs. SMT. Prem Anand (I.T.A. No. 3514/DEL/2014) (vi) Seagram Manufacturing Pvt. Ltd. Vs. ACIT (ITA NO. 4534/Del/2004) (Delhi Trib.) 75. Insofar as reliance placed by the ld. CIT (A) on the judgment of Hon ble Delhi High Court in the case of CIT vs. Manish Buildwell for rejecting the additional evidences, ld. Sr. Counsel submitted that reliance on the said judgment is completely misplaced, because in that case Hon ble High Court held that it is mandatory for the ld. CIT (A) to call for the remand report on the additional evidences filed by the assessee. Here in this case, ld. CIT (A) has called for the remand report. Before this Tribunal, the appellant has filed an application dated 15.01.2021 under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 for admitting the same evidences which were placed before the ld. CIT (A). In support of such admissibility, catena of judgments has been referred to, including the judgment of Hon ble Delhi High Court in the case of H.L. Malhot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted to controvert the said allegations. 2 Annual accounts of CEAT Ltd. for Financial Year 2010-11 555-687 3 Balance Sheet of Dotex as at March 31,2011 688-708 4 Order dated November 6, 2012 filed of the Election Commission of India 709- 712 Elaborate discussion has been made in the assessment order on why loan given by AICC to AJL of Ts. 90.21 crores was bogus (Pls refer Paras 15.1 to 15.9 and Para 8.2 of the assessment order). However, no questionnaire has been issued to the Appellant to show cause that this loan is not a paper entry. Please see notice dated March 21, 2017 at page 203 of the PB-1. Even the final SCN on Dec 8, 2017(Pg 366 to PB), does not mention various allegations based on which AO has the loan to be a paper entry. For ego pointed question on AO's inference that AJL books did not show the loan was never raised through any show cause notice, though extensive reliance has been placed on this alleged fact in the assessment order. Hence, YI had no opportunity to provide its explana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y 2012-13 743-756 At Para 3.3 of the remand report to pt additional evidence application (at Page 1027 of PB II, 3rd bullet point), the AO has alleged that the letters of the Appellant dated 20.04.2012 and 20.12.2012 sent to Dotex, which were signed by Shri. Suman Dubey are not genuine for the purported reason that Shri Suman Dubey was neither shareholder nor was holding any position in the Appellant after 31.03.2012. The said evidence is being submitted to substantiate that Shri. Suman Dubey was indeed a director of the Appellant for FY 2012- 13. 11 Copies of the masthead of various newspapers published by AJL 757- 793 The AO has at various places in the assessment order alleged that AJL is a real estate company. The valuation of properties of AJL has also been done on this assumption. However, nothing of this sort is mentioned in the questionnaire dated March 21, 2017. Accordingly, this evidence along with evidence at Sr. No. 20 is being produced to show that AJL cannot be regarded as real estate company. This fact is crucial for the purpose of determining the method of valuation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orts are not at all reliable and have many errors. Accordingly, it is submitted that these reports are very relevant for the issue under consideration. This evidence along with evidence at Sr. No. 23, 24, 25 and 26 are to support this contention of the assessee. 17 Dotex Merchandise Private Ltd. letter to Young Indian with Envelope 804-805 The AO has in his second remand report dated May 21, 2018, at Para 3.3 (Page 1027 of the PB II, second bullet point) alleged that the Appellant has not provided any proof that the correspondences between it and Dotex to extend the term of the loan was actually exchanged between the parties. This evidence is being provided to prove the fact of actual exchange of the letter which is clear from the envelope of the letter. 18 AJL letter dated February 15, 2017 to Deputy Director Town Planning, Mumbai 806 While valuing the Mumbai Property of AJL, the AO had ignored the valuation report of the DVO, and himself valued the property at Rs. 79.10 crores (please see Page 357 of PB I). Further, without even indicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immovable property owned by AJL in New Lucknow 967-996 77. Ld. Special Counsel for the Revenue objected for admission of the additional evidences and submitted that both under Rule 46 of Income-tax Rules, 1962 and Rule 29 of Incometax (Appellate Tribunal) Rules, 1963 are in the nature of negative stipulations providing that party is not allowed to file any additional evidences barring under special exceptions. It is difficult to accept proposition that evidence which has not been inadmissible under Rule 46A by the ld. CIT (A) should be admitted under Rule 29 of ITAT Rules on the same set of facts and arguments. 78. The primary argument of the Appellant is that principles of natural justice have not been followed and they did not get sufficient opportunity to file the evidence before the A.O. He submitted that only one show cause notice ( SCN ) is issued in the entire proceedings and the A.O. did not ask for any of these details. In this regard, it is necessary to point out various correspondences exchanged during assessment proceedings: A very detailed questionnaire was issued on 21.03.2017 (Pg. 203, PB-I). Attention of Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not have rejected the additional ground of appeal. It may be submitted that CIT(A) is mandated to call for a report under Rule 46A (3) before he/she uses such evidence. However, he/she has the inherent power to gather facts to ascertain whether or not the Appellant falls under any of the exceptions of Rule 46A (lack of opportunity to lead evidence or being prevented to lead evidence). 83. Mr. Srivastava pointed out that the Revenue has submitted a copy of letter dated 16.03.2018 of the CIT(A) to the A.O., where he calls for remand report on two counts (one, on the admissibility of additional evidence and two, on the merits of the additional evidence). 84. He submitted that the report of the AO on merits falls under Rule 46A (3) but the report on the admissibility of the evidence is under inherent powers of inquiry by the CIT (A). The report on admissibility comes a stage prior to the report on merits of the evidence. The CIT (A) calls for the report independently on two points and the AO also submits his report independently on each point under separate heads. Hence, it cannot be urged that the decisions in the case of Shahrukh Khan v. DCIT, (13 SOT 61) etc. are applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... long with the petition. After considering the entire gamut of issues involved, we feel that the parties should be allowed to argue the issues based on material placed on record as well as additional evidences. After hearing both the parties, we propose that in our final order, we will decide the relevancy of such additional evidences vis- -vis the issues involved. At this stage, we are permitting the appellant-assessee as well as the respondent-revenue to argue the appeal based on all the 26 documents filed as additional evidences before us . The hearing will continue on 08.12.2021 in afternoon. 88. Further, again vide letter dated 01.02.2022, assessee filed another petition for additional evidences, available at page no.5 of paper book, which has been stated that these documents are not especially additional evidences, since these documents were referred to before the lower authorities and in fact, extracts from the same/relevant pages of the documents have also been reproduced in several pages of the orders passed by the lower authorities. Even the DVO and AO have referred to these documents for arriving at their conclusion which has neither been placed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l impact on the issues involved. For instances, documents pertaining to valuation report sought u/s 11UA which was only for the purpose of section 56 which is neither the case of the assessee nor the case of the Department, so documents mentioned at Sl.No.12 to 15, 21 22 as incorporated above in the list of additional evidences are not relevant. Secondly, newspaper reports appearing at sl.no.11 is also irrelevant as they are not admissible evidences. There is another evidence which is order of Election Commissioner appearing at sl.no.4 of the list, though has been referred before us may also not be relevant on the issues involved which is the order of Election Commissioner in the case of Indian National Congress. The other documents we shall try to deal in brief and take into consideration which are germane to the issues involved. Insofar as various objections and references filed with regard to valuation part, the appellant has filed specific objections before us which are based on and emanating from Registered Valuer s report, and the finding and observations of the AO and are otherwise relevant, we shall deal it comprehensively and then it may not be relevant to counter each a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le properties of AJL which were together valued at Rs.413.41 crores. Assessing Officer was of the opinion that all the properties of AJL were commercial assets and that the nature of benefits flowing from these properties constituting commercial assets were revenue in nature. Accordingly, he held that benefit from the adventure constituted profits and gains from the business within the meaning of section 28 (iv) and would thus be regarded as income chargeable to tax. 92. While arriving to his conclusion, AO has given elaborate sequence of events having nature of transaction in paras 9.1, 10 and 11 and has discussed and summarized entire legal provision in paras 16.1 to 16.10 and findings of the AO in para 17 to 17.7 of the order. For the sake of ready reference, certain excerpts from the order of assessment are reproduced hereunder:- 16.1 It is amply clear from the above uncontroverted facts that sole purpose of transaction leading to acquisition of shares of the AJL was to derive several types of benefit from underlying business properties of the AJL. The impugned transaction was intended to maximize profit and to earn income as reflected in several benefits embodied in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plunge must be in the waters of trade. In other words, at least some of the essential features of trade must be present in the isolated or single transaction. As we have already observed it is impossible to evolve any formula which can be applied in determining the character of isolated transactions which come before the courts in tax proceedings. It would besides be inexpedient to make any attempt to evolve such a rule or formula. Generally speaking, it would not be difficult to decide whether a given transaction is an adventure in the nature of trade or not. It is the cases on the border fine that cause difficulty. 16.5 Hon'ble Supreme Court in its later decision in case of CIT vs. Sutlej Cotton Mills Supply Agency ltd. (1975) 100 ITR 706 examining the term 'adventure in nature of trade' has held that it is not necessary to constitute trade there should be a series of transactions both of purchases and sales. The fact of a single transaction of sale or purchase outside the assessee's line of business may constitute an 'adventure in nature of trade'. Neither repetition nor continuity of similar transactions is necessary to constitute a transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitute business under the definition of that word in section 2(13). It is not essential to constitute a trade that there should a series of transactions, both of purchase and of sale. In other words, neither repetition nor continuity of similar transactions is necessary to constitute a transaction and adventure in nature of trade. Hon'ble Supreme Court in case of Venkatswami Naidu Co. vs. CFT, 35 ITR 594 has clarified that an isolated transaction can satisfy the description of an adventure in nature of trade; a single plunge in the waters of trade may partake of the character of a trade depending upon facts of that case. The courts have also clarified that an activity carried on under strict statutory control may nevertheless be business. 16.9 Whether benefit accrued to the assessee could be taxed as profit gain of business profession? Section 28 provides that several categories of income shall be chargeable to income tax under the head profit and gain of business or profession which include profit and gain of any business or profession which was carried on by the assessee at any time during the previous year, any compensation or other payment subject to certain c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit which can be taxed. [CIT vs Lahore Electric Supply Co. Ltd. (1966) 60 ITR 1, 5 (SC)] The word 'business' is a word of large and indefinite importance. It is same thing which occupies the attention and labour of a person for purchase of earning profit. The word 'business' has more extensive meaning than the word 'trade'. The activity/ activities which constitute carrying on business need not necessarily consists of activities by way of trade, commerce or manufacture or activities in the exercise of a profession of vocation. The activity/ activities in order to constitute a business need not necessarily be concerned with several individual or concern. A single and isolated transaction outside the assessee's line of business has been held to be falling within definition of business as being 'adventure in nature of trade'. The question, therefore, whether a particular source of income is business or not must be decided according to our ordinary notion as to what a business is. Neither repetition nor continuity of similar transactions is necessary to constitute a transaction as adventure in nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly inserted in the well devised scheme led to take over of the AJL by allotment of 99% shares of the AJL without even getting the real estate properties transferred in the name of the assessee but the transaction resulted in accrual of all the benefits from value of the real estate business and properties to the assessee. The transactions were devised and carried out represented an adventure in the nature of trade and would squarely fall within the definition of the term 'business' as appearing in section 2{13} of the Act. This is evident from the following facts and circumstances: The office bearers of AICC and AJL were common and some of these office bearers later on incorporated the assessee company and had become the members of the assessee by acquiring shares. As early as in the beginning of the year 2008 it was decided to close down the business of printing and publishing newspaper by the AJL with the oblique purpose to make commercial use of the business assets of the AJL (commercial property located in posh areas of Delhi, Patna, Panchkula, Mumbai, Lucknow) acquired by it from Central/ State Governments for publishing newspaper at ridiculously low price. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore than 9 crore shares having face value of Rs. 90.21 crore without complying provisions of the Companies Act as discussed in above para 9{8} of this order is amazing particularly even when the share application forms were not properly filled up. The intention and undue haste in obtaining several benefits as embodied in business assets of the AJL by way of takeover of the AJL is evident from the fact that right from the day of incorporation of the assessee company, it was using one of the posh properties of the AJL i.e. Herald House as its registered office by acquiring a floor without any payment of rent. It is also evident from the report of the valuer as extracted earlier in this order that commercial properties of AJL were under custody and control of the assessee company and employees of the assessee company have prohibited entry of valuer in the premises. It is amply clear from the analysis of above steps that even though the transaction of getting benefit from properties of the AJL by takeover of the AJL was one transaction, however, it has involved several steps, some real and some fraudulent, with the real and distinct intent of the transaction to obtai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... romote democratic values as laid down by Mahatma Gandhi and Pandit Nehru and holding property of the AJL was not the purpose of the assessee company in subscribing 99% of the shares of AJL. It is pertinent to mention here that the assessee company was granted registration u/s 12A by the Commission of Income Tax (Exemptions) subject to various conditions and registration of the association u/s 25 of the Companies Act, 1956 was also subject to several conditions as discussed earlier in this order. Further, during the course of assessment proceedings it was revealed that the assessee company had not carried out any activities in furtherance of above referred to object. It is a matter of record that only expenditure incurred by the assessee company during year under consideration was to purchase a non-existent loan of Rs. 90.21 crore through a fraudulent transaction and in subsequent assessment years the only expenditure incurred by the assessee company was to create provision for interest expenditure allegedly meant to pay interest on loan of Rs. 1 crore taken from a hawala entry operator in Kolkata. For the sake of clarity, the nature of expenditure incurred by the assessee is tabula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d relaunching National Herald on 12.06.2017 (after a gap of six years from the impugned transaction) without even putting in place requisite infrastructure of publication of newspaper just to camouflage its real estate business and to create a legal facade. It is also proved beyond doubt that only activity during year under consideration was first to acquire AJL by way of allotment of 99% of the shares and the purpose was not to hold the shares but to enjoy the benefit of properties or business assets as explained earlier. Even in subsequent years, the only activities performed by the assessee company was to enjoy benefit of business assets of the AJL. In this factual backdrop and taking into a/c the celerity at which the 99% shares of AJL were acquired through a series of artificially inserted steps including fraudulent transactions, the argument that acquisition of shares of a company cannot be imputed to mean that the shareholder has acquired the business assets is wholly untenable. It is not the acquisition of shares simpliciter. In this case, the impugned transaction to transfer the enjoyment of several benefits embodied in the business assets of the AJL without getting the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee from the adventure in the nature of trade of takeover the assets of AJL by way of allotment of its 99% shares following several steps including a fraudulent transaction. 17.7 In view of above discussions, income of the assessee for the year under consideration u/s 28(iv) has been computed at Rs. 413.41 crore i.e. FMV of business assets of the AJL which best represents the value of several benefits arising to the assessee from the transaction. (Addition of Rs.413.41 crore) ARGUMENTS ON BEHALF OF THE APPELLANT 93. The main contention of the appellant before us has been that appellant has acquired the shares of AJL with the intention to use it as launch pad for achieving its objects. 94. Before us, Shri Soparkar submitted that right from the stage of assignment of loan and conversion of the equity shares of AJL, an important fact was that objects of AJL were aligned with the assessee company. The objects of the AJL were amended in September 2011 to include following objects:- To inculcate in the mind of India s youth commitment to ideal of a democratic and secular society for its entire populace without any distinction as to religion, ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nged a loan of Rs.1 crore from Dotex. 96. Ld. Sr. Counsel for the assessee further pointed out that between years 2011 to 2016, the preparatory activities were undertaken to revive AJL and to start its publication. This revival factor has also been taken by the Tribunal in assessee s own case in the cancellation proceedings u/s 12A when the Tribunal has noted this fact in paras 68 and 37 which for the sake of ready reference is reproduced hereunder :- 68. ...In so far as reliance placed by the ld. Special Counsel for the Revenue on the judgment of Single Judge of Hon'ble High Court in the case of Associate Journal Ltd. which was upheld by the Division Bench in LPA No. 10/2019, wherein there is an observation that only when relevant authorities initiated inspection, the AJL decided to resume his press activities so as to save the lease of the properties from being cancelled by the Government. In this regard, he submitted that way back on 23.01.2014; AJL had filed a letter to Registrar for News Papers of India, copy of which has been placed at page 267 of the paper book-1 filed by the assessee, which clearly indicated the intention to resume the newspaper activities. Such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's name for operations to start... 37....He submitted that, in fact, the publication had later on recommenced, which is evident from the following facts, placed in the paper book of additional evidences: On 23/01/2014, AJL wrote to the Registrar of Newspapers for India (RNI) informing it of its intent to restart publication of the newspapers. Please see page 267 of the AB - PB I; On 26/09/2016, a resolution was passed by the Board of Directors of AJL to resume the publications of newspapers. Please see page 266 of the AB -PB I; On 14/11/2016, AJL launched National Herald Website. Please see pages204 to 213 of the AB - PB I; On 15/11/2016, an agreement was entered between AJL and Press Trust of India for Wire News Services. Please see pages 245-249 of the AB - PB I; On 12/06/2017, AJL launched the Commemorative Edition of National Herald (Publication) in print in Bangalore. Please see pages 133-153 of the AB - PB I for the copies of various reports and photographs of said launch; On 23/06/2017, AJL obtained Registration Certificate for National Herald Newspaper from the Registrar Office of Newspapers for India, Ministry of Infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment of Hon ble Rajasthan High Court in the case of Indian Medical Trust vs. Pr.CIT (2009) 414 ITR 296 wherein Hon ble Court held that where the acquisition of shares is in furtherance of its objects then the same is regarded as not genuine activities and in the said case, investment was made by the assessee in a TV channel was held to be genuine activity as it was in accordance with the objects of the assessee company. As regards the allegation that there are no document to support such intention, ld. Sr. Counsel submitted that it is clear from various documents on record as well as the facts noted in the ITAT decision in the cancellation of registration proceedings u/s 12AA and rather, there are no documentary evidences on record to support the Revenue s contention. As regards the allegation that appellant had not done any activities towards its objects apart from acquiring shares/properties of AJL, he referred to the decision of the Tribunal at para 44 and para 92 wherein the Tribunal has noted that additional evidences filed by the assessee showing several presentation and photographs showing operations of the assessee and starting of publication through e-medium. Here, it cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .86 crores to AJL. Further, as noted by the AO, the annual reports of AJL for year ended March 31, 2010 showed total unsecured loan of Rs. 89.67 crores. (para 8.1 at page 20 of the assessment order). Hence, the total amount of unsecured 63 loan reported in the books of AJL was more than the amount of loan given by AICC to AJL as on that date. The AO has come to the conclusion that AJL has not disclosed the loan given by AICC merely on the basis that the name of AICC is not separately mentioned in the Annual Accounts of AJL. It is submitted that there is no requirement under the Companies Act that the name of the lenders have to be separately mentioned on the face of the financial statements prepared by a company. The details of lenders appear in the ledger accounts maintained by the company and not on the face of the balance sheet. Accordingly, it is submitted that the reasoning given by the AO for concluding that the loan was not disclosed in the annual accounts of AJL is totally baseless. The AO has relied on the note in schedule X of the annual accounts of AJL, which states that the unsecured loan includes the amount taken in earlier years for its construction activities. Again, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 90.21 crore was coincidentally just sufficient for allotment of 9.021 crore shares of the AJL to the assessee which accounted for 99% of share capital of the AJL which would allow complete takeover of the AJL by the assessee. It is humbly submitted that again the foregoing reasoning of the AO is completely without any proof and incomprehensible. Firstly, it is submitted that the foregoing statement of the AO is without an iota of any proof of any nature and only a figment of his imagination. Secondly, even if it is assumed that the loan was a bogus entry with the intention to acquire 99% shareholding in AJL, it defies any logic why an odd figure of Rs. 90.21 crores was made up by the Appellant so as to acquire 98.79% of AJL. The total share capital of AJL before and after conversion of the loan was Rs. 1.09 crores and Rs. 91.31 crores, respectively. There isn t any indication as to how this conclusion has been arrived by the AO except that he was under a preconceived notion that the entire transaction was sham and bogus. It is humbly submitted that such baseless remarks cannot be given any heed. d. The AO further states that AICC in its reply to notices issued u/s. 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the manner in which the political parties may raise funds and that there is no provision whatsoever in the Act prescribing the manner in which the political parties may use those funds. The copy of said order of the Election Commission is attached at page 709 of PB II. It is humbly submitted that the said order clearly validates the authenticity of the loan provided by AICC to AJL. 5.32.2 Further, to meet the foregoing baseless allegations of the AO, the Appellant has also approached both AICC and AJL (Page 725 and 736 of PB-II) and obtained the ledger details of AICC showing loan given to AJL since FY 2002-03, confirming the loan given by AICC to AJL (Page 726 to 735 of PB-II) and the details of utilisation of loan by AJL (Page 737 to 738 of PBII). It is submitted that prior to the year 2002, AJL was going through financial distress and hence required funds for running the publications. National Herald and other publications of AJL, in accordance with the Objects of AJL, were being run in accordance with the policy and principles of the Indian National Congress. AICC started advancing loans to AJL to help them in their financial hardship. AICC started advancing the said lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant for a consideration of Rs. 50 lacs. He alleges that the reason of the Appellant that AICC assigned the loan of Rs. 90.21 crore to the Appellant for a paltry sum of Rs. 50 Lacs because AICC was not sure if the AJL would be in position to return the loan is not correct. 5.37 In this regard, it is submitted that the logic for assignment of the loan by AICC to the Appellant for a sum of Rs. 50 lakhs has been explained in detail in the deed of assignment of loan, which is on record before the AO (Page 291 of PB-I). As would be observed from the recitals of the deed, AICC has recognised therein that the Appellant is incorporated with the objects of inculcating in the mind of India s youth, commitment to the ideal of a democratic and secular society for its entire populace without any distinction as to religion, caste or creed and to awaken India s youth to participate in activities that may promote the foregoing activities. It further states that AICC endorses and supports the above objects of the Appellant, which AICC has steadfastly advocated. Hence, to support these objects and also keeping in mind that AJL is not presently in position to repay the loan, it has agreed to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Congress. Hence, even AICC never intended for AJL to liquidate and repay its loan. The publication business of AJL was only suspended due to operational issues. However, it was never the intention to liquidate the company. Further, at that time period, these properties did not even fetch any substantial rent since they were not in the state to be let out. In fact, out of five properties of the 68 company, only properties at Lucknow and Delhi had old constructed buildings, which were rented out at nominal value. Properties at Panchkula and Mumbai were barren lands. Further, property at Patna was in adverse possession of jhuggi jhopdi. Further, since the company had faced financial losses in its publication business and was troubled with labour issues, payment of their compensation, etc., the company had taken loans from AICC, who supported its objects. However, due to such high loans in its books and suspension of its business, it was difficult for the company to turn around and revive its financial position. As is clear from the balance sheet of the company for the year ended March 31, 2011, the reserves of the company were negative Rs. 72.5 crores. It was only after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time. Clearly, as stated earlier, the company always intended to revive its business and believed that the financial position of the company would turnaround. However, the same cannot happen overnight. The foregoing note referred to by the AO is the one where it is mentioned that the accounts of the company have been prepared on a going concern basis since it believes that its business would revive. This in fact supports the foregoing statement of the Appellant that the company never intended to liquidate and sell its assets. Accordingly, it is submitted that the foregoing reasoning of the AO also lacks the understanding of the complete picture. c. The AO has further alleged that if AICC believed that its loan was not repayable, then why did it advance fresh loan of Rs. 1.35 crores to AJL in FY 2010-11. It is submitted that as stated earlier, AICC always supported the objects of AJL and the loan was advanced to support AJL. The said loan of Rs. 1.35 crores was advanced by AICC to support AJL (a portion of which was used to meet the statutory fees payable to ROC and another portion was used to pay to a former tenant pursuant to a court order). The loan was assigned to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... labour troubles and strikes, etc. which have been discussed in detail above. 5.47 The said fact is also noted in the ITAT decision in Appellant s case in 12AA registration cancellation matter, wherein at Para 37 it is noted that the business of AJL was temporarily closed and that this fact was also reported by various newspapers. The relevant extract of para 37 of the order (Page 82 of Revenue PB I) is as under: The AJL started publishing newspapers, i.e., National Herald in English, Navjivan in Hindi and Qaumi Awaz in Urdu, which served as the voice of the freedom movement. It was also argued that from time to time, publication business of AJL was suspended and again it was revived. In the year 2008, since AJL started facing financial, operational and labour troubles, the company had to again temporarily suspend its publication business. In support, events leading to temporary suspension of publication business in 2008 were also submitted. These were stated to on account of labour unrest and strikes, printing machinery had become obsolete and there was dip in the circulation of its newspapers and most of its buildings were sealed due to non-payment of labour dues. Not o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essential for it stabilise its financial position and be able to recommence resume newspaper and digital publication. As stated earlier, AJL had losses of about Rs. 72 crores as at March 31, 2011 (Page 470-497 of PB I). Hence, continuing to rent out the properties was a necessary step to enable it is stabilize its financial position so as to be able to restart its business activity. In fact, in the year 2016-17 and 2017-18, the digital and print publication activities of AJL respectively have recommenced and the company is fully committed to continue to conduct its publication activities to their fullest potential. 5.53 Hence, it is submitted that such renting does not make AJL a real estate company as sought to be depicted by the ld. AO. 5.54 In this regard, it is further submitted that the issue whether AJL is a real estate company or not is now settled by the decision of the Hon ble Delhi Tribunal in Young Indian vs. CIT(E)[2019] 111 taxmann.com 235 (Delhi - Trib.) where at Para 105 (Page 108-109 of Revenue PB I), it has been held that the proposition that AJL is a real estate company may not be technically correct. 5.55 The Ld. DR has during the hearing stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd reiterated before us, is that there were no contracts signed by complying with the formalities under Article 299 of the Constitution and therefore, the Government was not obliged to honour its commitments. This contention has rightly been repelled by the Division Bench of the High Court by pointing out that the sale of the land was not a result of any commercial transaction by the State Government, but pursuant to its declared socio-economic policy reflected in the scheme of allotment of land to give incentives to Newspaper Concerns and Educational Institutions. The High Court rightly held that this was an executive act falling within the province of Article 162 and not within the ambit of Article 299 of the Constitution. 40. The ld. counsel also furnished the list of properties of major newspaper companies in India and list of properties allotted to AJL. All the newspapers companies have been partly renting out their properties to support their newspaper business. In support, list of tenants of various such companies in Delhi was also handed over to us at the time of hearing. Thus, it was submitted that practice of allotment of land to newspaper companies and such newspap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation business cannot be held that AJL had acquired the properties for any kind of Real Estate Business. Certain Annexure were filed by the assessee to show that the construction of the Delhi property was completed in the year 1967 and the same has been given on rent since year 1990. It was pointed out the Patna property is an encroached land on which no construction activity has been undertaken ever. Property in Lucknow is a freehold land comprising of two parts, Nehru Bhawan and Nehru Manzil. Construction of Nehru Bhawan was completed in the year 1984 and newspaper activity was conducted there from. However, a fire broke out in the year 2002 destroying the printing press, after which the building was repaired in the FY 2007-08 and given on rent to a charitable organization. In case of Nehru Manzil, construction had started in the year 1988, but was never completed due to financial constraints. In case of Panchkula property, the construction has been completed in 2013, from where newspaper activity is being conducted. In case of Mumbai property, the construction is still in process, which after completion would be used for newspaper activity, for establishing a Nehru Library cum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inancial constraints, it suspended the construction and gradually refunded the booking amount to the parties. Not a single property has been sold and all the properties remain in dilapidated conditions even today. In any case, the transaction, which has taken place in the year 1988, for which the booking amount was received, has no relevance for the period when the publication business was temporarily suspended. The fact that Lucknow property was never sold is also evident from the accounts of AJL for various years. Thus, when the assessee has not earned income from any sale of property then it can never be treated as Real Estate Company since 2011-12. AJL never stated in its account or its ITR that its income is from Real Estate business. 5.56 In this regard, attached herewith is the list of certain properties of major newspaper companies in Delhi along with the list of the tenants for various such companies at page 1614- 1616 of PB VI. Thus, it was submitted that practice of allotment of land to newspaper companies and such newspaper companies using the same for renting purpose is part and parcel of the publication activity and is not so uncommon. 5.57 It is accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company. 5.62 It is accordingly submitted that the AO is incorrect in alleging that the objects of AJL was not aligned till 2016 which is substantiated from the documents on record. 5.63 During the hearing, the Ld. DR has further argued that the 2016 amendment is not relevant since after said amendment, actual licence u/s. 8 of the Companies Act was not obtained as AJL did not take any steps in respect thereof and that in any case, it is an event which is in the future as far as AY 2011-12 is concerned. 5.64 In this regard, it is submitted that after the 2016 amendment, all the necessary forms were filed before ROC by AJL for making it a section 8 company and therefore, all steps were taken by AJL. However, the same could not fructify due to certain technical problems. In this regard, reference is drawn to Para 81 of the decision in Young Indian vs. CIT(E)[2019] 111 taxmann.com 235 (Delhi - Trib.) (Page 99 of Revenue PB I), where it is noted as under: 81. In so far as, the allegation of the ld. DR that AJL has not filed necessary forms with the ROC to take interest in converting into non-profit entity, reference was made to Form MGT-14 to allege that there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellant. Accordingly, in absence of any specific requirement to submit the same by the AO, the Appellant had no reason to call for said documents and submit the same to the AO. Such presumptions of non-compliance based on mere vague allegations shows the mala fide of the AO in the matter. If required, the Appellant would be happy to arrange for said documents. 5.70 Allegation 8: The acquisition of loan/shares was not disclosed in the Balance Sheet of the Appellant 5.71 The AO has also alleged that the acquisition of the loan/shares of AJL was not disclosed in the Balance Sheet of the Appellant for the relevant Financial Year ended on March 31, 2011. He states that the same was camouflaged as expenditure on prescribed object of the Appellant. He accordingly concludes that the reason for above referred accounting treatment was to hide the real transaction from regulatory authorities and Income Tax Department. 5.72 In this regard, it is submitted that the Appellant has in fact given full disclosure of the said transaction in its financial statements in its notes to accounts. Please see page 56 of PB-I. As would be observed therefrom, the said note clearly discloses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the said trust. Though PGV was trustee in FY 2010-11 and FY 2011-12 along with Rameshwar Thakur, she resigned as a trustee of this Trust in November 2013. Ratan Deep Trust is also a public trust that was established in 1970s. Various prestigious persons have been Trustees of this trust from time to time. Ratan Deep Trust acquired 47513 (5.10%) during the period 1977 to 1978 i.e. before RG became trustee of the said trust. Though RG was trustee in FY 2010-11 and FY 2011-12 along with Rameshwar Thakur, he resigned as a trustee of this Trust in November 2013. Even after change in the Trustees, these charitable trusts continue to hold the shares of AJL. 5.78 At page 42 of Assessment Order, the AO states the aforesaid Trusts acquired shares in FY 2011-12. Similar finding is at pages 37, 39 and 45 of the assessment order. CIT(A) has also referred to this finding at page 177 of the CIT(A) order, 1st para of the page. However, the AO has simply relied on Annual ROC return filed by AJL of one year and not seen ROC returns of the preceding and the subsequent years. If one sees the same, it would be realised, there has not been any fresh acquisition of shares of AJL in any of thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is regard, as explained in detail above, the assignment of loan and conversion thereafter into equity shares of AJL followed by conversion of AJL into a non-profit organization are all different steps in the process of enabling the assessee to achieve its objectives of reaching out to the youths of India in pursuance of its charitable objectives through the platform of AJL by reviving AJL's publication activities. If one looks at this bigger picture, the quick succession of the events taking place can be appreciated. These are transactions outside the realm of business or trade. Viewed from this stand point, the issues raised by the ld. AO reduces to nullity. 5.85 Further, it is undisputed that the Appellant, even though its registration u/s. 12AA has cancelled (though the matter is presently sub-judice), it continues to be a charity as per its MoA and as per the licence u/s. 25 granted to it, which is still valid licence. In this regard, attention is invited to the Licence u/s. 25 of the Companies Act, 1956 issued to the Appellant, at page 59 of PB-I. As would be observed therefrom, the conditions provided in the licence itself provides that the income of the company can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the foregoing allegations the AO has ultimately concluded that the Appellant has benefitted from the assets of AJL taken over by the Appellant. (Various places of the assessment order). Further, the Ld. DR has stated that the corporate veil of AJL has already been lifted by the Delhi High Court and therefore, benefit has arisen to the Appellant. 5.90 The Appellant humbly submits that despite the elaborate discussion and accusations of the AO with respect to the transaction in question, there is no basis to arrive at the foregoing conclusion that by acquiring the loan from AICC and conversion thereof into shares of AJL, the Appellant has itself acquired the assets of AJL. In the entire assessment order, the AO has not demonstrated any benefit which the Appellant has actually received by acquisition of shares of AJL. He has merely alleged that by acquiring the shares of AJL, the Appellant has taken over the assets of AJL. However, no facts have been put forward to prove the same except that the registered office of the Appellant is at one of the rooms of various properties of AJL, for which no rent is being paid. 5.91 It is submitted that AJL has permitted the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Lessee for its office. Photographs taken at the premises are also enclosed. 5.92 As would be observed, in the detailed floor by floor listing made by the L DO, the presence of the Appellant was not even found at the Delhi Property of AJL. 5.93 The AO has also alleged that from the extract of the report of the DVO, extracted at page 49 of the order, it is clear that the properties of AJL were under custody and control of the Appellant and that the employees of the Appellant prohibited the DVO from entering the premises of AJL. It is submitted that even this allegation of the AO is grossly incorrect. From the perusal of the said extract of the report of the DVO referred by the AO, it cannot at all be concluded that the Appellant was in custody or control of the properties of AJL. In fact, as is evident from the extract, the Appellant had in its reply dated 31.8.2017 intimated to the DVO that any attempt on the Appellant s part to allow DVO to entered the property of AJL may be viewed by the owner as an act of trespass. (Please see page 49 of the Assessment Order). The Appellant fails to understand that if AJL did not permit DVO to enter its properties, how would tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Mrs. Bacha F. Guzdar vs. CIT (27 ITR 1)(SC)(Page 11-16 of LPB VII), wherein it has been held as under: a shareholder acquires a right to participate in the profits of the company may be readily conceded but it is not possible to accept the contention that the shareholder acquires any interest in the assets of the company. The use of the word assets in the passage quoted above cannot be exploited to warrant the inference that a shareholder, on investing money in the purchase of shares, becomes entitled to the assets of the company and has any share in the property of the company. A shareholder has got no interest in the property of the company though he has undoubtedly a right to participate in the profits if and when the company decides to divide them 5.99 Similar view has also been held in the following decisions: Rustom Cawasjee Cooper v. Union of India [1970] 1 SCC 248; Carew Co. Limited vs. Union of India (46 CC 121) (SC). 5.100 It is accordingly submitted by merely acquiring the shares of AJL, the Appellant has not become the owner of the assets of AJL. 5.101 The Appellant submits that regardless of various untrue and misconceived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra 34-35 of the Delhi High Court decision (page 179-182 of the Revenue PB II), the relevant extract of which reads as under: 34. Learned Solicitor General invited our attention to certain facts which he pointed out are reflected in the proceedings held before this Court in certain tax matters involving shareholders of the appellant company and the Income Tax authorities and argued that a company named and styled Young India Ltd It was when all these transactions came to light that a notice was issued by the Income Tax Department to Young India and thereafter, notices to the individual shareholders of Young India with regard to re-opening of assessment of tax. Sh.Tushar Mehta argued that this Court should take note of these transactions, apply the principle of lifting of the corporate veil and then considered the question of as to who is the actual beneficiary of all these transactions, whether the premises in question still continues to be in the ownership of AJL and what is the effect of all these transactions. As would be observed, the entire facts based on which the Respondent in that case has argued that the corporate veil should be lifted in based on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied for Income-tax act for lifting of corporate veil, since even after this assessment both entities are being treated as separate entities and AJL continues to be taxed on its income. Under the Income Tax Act, lifting of veil can be done only in respect of cases where there is tax evasion and not case like this and it is no one allegation that the Appellant has carried out any tax evasion. 5.103.5 Besides, the Income-tax Department till today has never lifted the corporate veil of AJL for any of the income-tax matters. For the same, the relevant questions are: i. as to who is being taxed under the provisions of the Income tax Act, 1961 on the rental income, AJL or the Appellant; ii. to who is being granted depreciation on the buildings in computation of income under the provisions of Income tax Act, 1961, AJL or the Appellant; iii. to who could be charged to tax on capital gains if the property is sold (though it is not permissible under the provisions of the lease); AJL or the Appellant? The answer to all these questions he submitted is obvious, viz. AJL and not the Appellant. Under such circumstances, the proposition argued by the Ld. DR that Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ird party since in that case, YI would become a step down subsidiary of the third party. 5.103.10 Besides, even if corporate veil is lifted, the Department has not shown how the Appellant has benefitted from it. Only one instance of using an office in Herald House, New Delhi as registered office has been cited. Detailed discussion in respect thereof is already provided at paras 5.90 to 5.92 of this submission. In 2011, Panchkula and Mumbai were unconstructed open piece of land. Patna was 100% encroached by juggi-jhopdi. In Lucknow, Nehru Bhawan was given on rent to a charitable eye hospital and Nehru Manzil is a half constructed dilapidated building. Hence, how was YI benefitting from these properties? 5.103.11 The premise of the Revenue is that the Appellant has become owner of these properties which have been acquired for a paltry consideration of Rs. 50 lakhs. In this regard, it is submitted that bargain purchase of an asset can never be taxed as benefit u/s. 28(iv). If this is accepted, then every case of bargain purchase by a trader would become taxable in his hands at the stage of purchase itself. This is against the settled legal position. 5.103.12 Benefit i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has failed to appreciate that the Appellant is a section 25 company. It is not engaged in any business whatsoever. Further, the Appellant is not involved in the business of investment in shares or in immovable properties. 5.111 From the perusal of section 28(iv) reproduced above, it is evident that the section seeks to bring to tax as part of profits and gains of business, the value of any benefit or perquisites arising in the course of business, whether convertible into money or not. It is submitted that since no business is carried on by the Appellant, it cannot be the source of alleged benefit, if any, and accordingly, section 28(iv) of the Act has no application in Appellant s case. 5.112 In this regard, the Appellant places reliance on the following decisions: 5.113 CIT v. Elscope Ltd (313 ITR 293)(Guj) (Page 49-55 of LPB VII) In that case, the assessee had acquired four running businesses and paid discounted price for the same. The undertaking acquired included the liability to pay some amount to four investment companies in five annual equal instalments and the assessee-company reworked terms of agreement by mutual consent and commuted liabilities by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts to treat this amount is not in consonance with Section 28(iv) of the Income Tax Act. 5.115 Similar view has also been taken in Mahindra Mahindra Ltd. v. CIT (261 ITR 501)(Bom.) affirmed in (404 ITR 1) (SC) (Page 56 of LPB VII). 5.116 It is humbly submitted that the Appellant is not in business of acquisition of loan/shares, hence, the question of benefit arising in the course of any business, let alone arising directly from a business does not arise. In the present case, the subject shares were received pursuant to the conversion of loan into shares and not in lieu of any business transaction carried on between the Appellant and AJL. The receipt of shares arose on account of a non-business related one-off transaction. In view of the same, the aforesaid receipt of shares was not liable to tax under the head business income and, accordingly, the action of the AO in bringing to tax income in relation to receipt of above shares is not sustainable on facts and in law. 5.117 Further, the transaction of the Appellant can also not be regarded as an adventure in the nature of trade for it to fall u/s. 28(iv). The argument of the Revenue is that the Appellant had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count: Martin v. Lowry [1926] 11 Tax Cas. 297: a person who carries on a money-lending business purchases very cheaply a vast quantity of toilet paper and within a short time thereafter sells the whole consignment at a considerable profit: .. Purchase of the property by the appellant was an isolated transaction not related to the business of the appellant. ---- Granting that the appellant made a profitable bargain when he purchased the property, and granting further that the appellant had when he purchased it a desire to sell the property, if a favourable offer was forthcoming, these could not without other circumstances justify an inference that the appellant intended by purchasing the property to start a venture in the nature of trade. The property purchased was not such that an inference that a venture in the nature of trade must have been intended by the appellant in respect thereof may be raised. 5.119 Indeed, if a discounted purchase is regarded as a business adventure resulting in benefit, then in case of every businessman purchasing a stock-in-trade at less than fair market value would be treated as business income in his hands at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is being achieved and the department has not been able to provide any significant instance demonstrating their allegation that the intention of the Appellant was to take over assets of AJL. It is accordingly submitted that not every scheme or design becomes an adventure in the nature of trade. In fact, in all the foregoing decisions relied upon by the Ld. DR, the Courts was dealing with the taxability of gain which are arisen to the assessee on sale and it is in that context that the courts have decided as to what constitutes adventure in the nature of trade. 5.124 In the case of CIT v. Kasturi Estate (P.) Ltd., (1966) 62 ITR 578 (Mad), the facts (Page 4 of the Revenue PB II) are stated as under: The assessee, which is a private limited company, received in the accounting year, ended June 30, 1958, corresponding to the assessment year 1959-60, a surplus of Rs. 27,568 on sale of certain plots of land. This sum was charged to income- tax on the view that the sales constituted a venture in the nature of trade. As would be observed, this was a case where the assessee had sold plot of land. Further, even in Para 11 of the decision (Page 8 of Revenue PB II) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these plots subsequent to their purchase clearly shows that it was not interested in obtaining any return from them. Hence, it was this design which was referred to by the Court. However, in the Appellant s case, what is the design. The allegation is that the Appellant has taken over the assets of AJL. Now, in the year under consideration, even if AJL had handed over the properties to the Appellant without any consideration, there would not have been any tax implication in the hands of Appellant. There was no provision in the Act in the year under consideration where even pure gift of immovable properties to a company could be taxed in the hands of the company. It is submitted that a sum total of zero cannot become an income through any permutation and combination. The term design cannot be read to mean that merely because there was some purpose it becomes design. The intention of the Appellant is amply clear from the documents as well as its conducts. The Appellant has not even touched any of the properties since the acquisition of shares. 5.126 Next decision relied by the Ld. DR is the case in Khan Bahadur Ahmed Alladin Sons v. CIT, (1968) 68 ITR 573 (SC). Even i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h takeover each other assets, only then would it constitute exchange. Clearly, shares allotted by a company is not the asset of the company but its liability. Further, before shares are allotted, they don t even exist. Shares come into existence only after allotment. Hence, when company allots shares, it is not exchanging shares against the consideration. AJL never had the shares as an asset for it to transfer in exchange of loan. Further, even the loan is not being transferred by the Appellant to AJL. It is converted into shares. Hence, clearly, there is no exchange in the present case. At this stage, what is happening is that for a sum of money shares are being allotted. In this regard, reliance is placed by the Appellant on the decision of the Supreme Court in Khoday Distilleries Ltd. vs. CIT (307 ITR 312)(SC) (Page 31-39 of LPB VIII) wherein it is held as under: 7. At the outset, we may state that none of the above arguments have been considered by the High Court in its impugned judgment. In the case of Sri Gopal Jalan Co. (supra) a question arose as to the meaning of the word allotment . It was held that in Company Law the word allotment means appropriation out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also the conduct of the Appellant. Further, even if it is assumed that the intention was to acquire assets of AJL for small consideration, even in that case, this is a mere case of acquisition/purchase of shares/assets and such a transaction cannot be taxed as a business transaction under any provision of law. There is no real income at all which has been earned by the Appellant. 5.132 It is accordingly, submitted that section 28(iv) has no role in the present case in absence of any business/adventure in the nature of trade. 5.133 Section 28(iv), there should be a benefit which should arise to the assessee. 5.134 As per the Revenue, by acquiring the shares of AJL, the Appellant has earned the benefit in the form of assets of AJL and accordingly, the alleged fair market value of all the assets of AJL is taxed as benefit in the hands of the Appellant u/s. 28(iv). 5.135 In this regard, the Appellant humbly submits as under: 5.136 Firstly, what Appellant has acquired is only shares of AJL and not the assets of AJL as alleged by the AO. 5.137 The rationale behind entering into the said transaction has already been explained at Para I of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iv). The relevant extract is as under: in this case we are concerned with purchase consideration relating to capital asset. The Toolings were in the nature of dies. The assessee was a manufacturer of heavy vehicles and jeeps. It required these dies for expansion. Therefore, the import was that of plant and machinery. The consideration paid was for such import. In the circumstances, Section 28(iv) is not attracted., 5.142 The foregoing decision is affirmed by the Supreme Court in (404 ITR 1)(Pages 26-32 of LPB VII). Similar view has been taken in the following decisions: CIT v. Jindal Equipments Leasing Consultancy Services Ltd. (325 ITR 87)(Delhi)(Page 33 36 of LPB VII); CIT V. Seshasayee Bros. (P.) Ltd. (222 ITR 818)(MAD.); (Page 33 36 of LPB VII); ITO v. Shreyans Investments (P.) Ltd. [2013](141 ITD 672)(Kol.)(Page 33 36 of LPB VII). 5.143 Accordingly, the Appellant submits that the alleged benefit, if any, being in a capital field is not taxable u/s. 28(iv). 5.144 Without prejudice to the above, there is no benefit or perquisite within the meaning of section 28(iv) which has been proved by the Revenue. 5.145 In the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccrual of income , on the one hand, and arising of income , on the other. While accrual is almost notional in nature, the other is factual. It is too well known that in its complex nature, the Act covers not only the income that, in fact, has arisen, but also the one that has accrued. 12. When Parliament has consciously chosen to restrict the taxation of benefit only when it has arisen, it is not permissible to tax the benefits by treating them as accruals . A close scrutiny of the concept of arising of income discloses that, it, in fact, must flow into the assets of the assessee, during previous year, and thereby, it became taxable in the financial year. The Income-tax Officer was not even able to show, much less demonstrate, that the income in the form of benefit has arisen to the respondents at all. The sole basis for levying income tax on the amount was on the assumption that in case the shares are sold, they would have yielded the differential price and that, in turn, can be treated as income . Even if the exercise contemplated by the Income-tax Officer is taken as permissible in law, at the most, it amounts to accrual and not arising of income. Here again, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies to pass on the benefit of duty free imports to the assessee until the goods are actually imported and made available for clearance. The benefits represent, at best, a hypothetical income which may or may not materialise and its money value is therefore not the income of the assessee .Applying the three tests laid down by various decisions of this Court, namely, whether the income accrued to the assessee is real or hypothetical; whether there is a corresponding liability of the other party to pass on the benefits of duty free import to the assessee even without any imports having been made; and the probability or improbability of realisation of the benefits by the assessee considered from a realistic and practical point of view (the assessee may not have made imports), it is quite clear that in fact no real income but only hypothetical income had accrued to the assessee and section 28(iv) would be inapplicable to the facts and circumstances of the case. 5.153 Similarly, in CIT v. Spunpipe and Construction Co. Ltd. (55 ITR 68)(GUJ.)(pages 67-72 of LPB VII) it is held that mere discounted purchase couldn t result in any income. In that case, the assessee-company purchased a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the time of sale, said benefit may or may not remain depending on the financial position of AJL at the time of sale. However, there can be no benefit at the time of purchase. For instance, say a dealer in gold purchases gold at less than market value. Would the legislature tax him today or at the time the gold is sold? Surely the answer is at the time when gold is sold. In that case, how is the Appellant being taxed at this stage of acquiring shares/assets of AJL. 5.156 Accordingly, it is submitted that the question of taxing the benefit under section 28(iv) at the time of acquisition of shares does not arise. 5.157 The Ld. DR, at the time of the hearing has tried to distinguish these decisions by stating that the presumption of Appellant that what is acquired is shares of AJL is false. He states that the argument of the Appellant is based on the premise that Revenue s case is that the Appellant has acquired shares of AJL at lower consideration. He stated that this is a wrong presumption, since the case of the Revenue is that the Appellant has acquired assets of AJL through adventure in the nature of trade. 5.158 In this regard, it is submitted that the ratio of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led off was use of part of one small room of Delhi Property, without any rent; a benefit which would not exceed more than a few thousand rupees. 5.161 Further, the Ld. DR has relied on the decision of the Delhi High Court in the case of The Associated Journals Limited vs. Land Development Office (LPA 10/2019 CM Nos. 566/2019 649/2019) (Page 154 of Revenue PB-II dated 17.01.2022) to state that the Delhi High Court has in the corollary proceedings lifted the corporate veil of AJL and therefore, benefit has arisen to the Appellant. The detailed submission in respect of the same is covered in Appellant s reply to Allegation 12 above. 5.162 It is accordingly submitted that in absence of any benefit which has arisen to the Appellant, there cannot be any taxation in the hands of the Appellant u/s. 28(iv) of the Act. 5.163 Alternatively, even if it is assumed that the shares of AJL so acquired by the Appellant are its business assets and should be regarded as its stock-in-trade, even in that case, it is submitted that no profit can said to have arisen to the Appellant by mere valuation of said shares. It is a settled accounting principle that stock-in- trade has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lts of that period. It cannot be regarded as a source of profits. Profits can be correctly ascertained only after bringing into the trading account the closing stock wherever it may exist. It was further held that the true purpose of crediting the value of unsold stock is to balance the cost of the goods entered on the other side of the account at the time of their purchase, so that on cancelling out of the entries relating to the same stock from both sides of the account would leave only the transactions in which actual sales in the course of the year have taken place and thereby showing the profit or loss actually realized on the years trading. The entry for stock which appears in a trading account is merely intended to cancel the charge for the goods purchased which have not been sold which should necessarily represent the cost of the goods. If it is more or less than the cost, then the effect is to state the profit on the goods actually sold. From this doctrine there is one exception, namely, the adoption of market value at the date of making up of accounts, if that value is less than the cost. This is in anticipation of the loss that may be made on the goods in the following y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is not made applicable to the relevant assessee. If charge is exhausted under one head of income, it cannot be brought to charge under any other head of income: 5.168 Section 56(2)(viia) was inserted in the statute by the Finance Act, 2010 with effect from 1.6.2010. The text of the section as was inserted reads as under: (viia) 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 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 property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration : Provided that this clause shall not apply to any such property received by way of a transaction not regarded as transfer under clause (via) or claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company in which public are substantially interested, it would result in treating the Appellant worse than closely held companies, which is again not impermissible in law. 5.171 It is accordingly, submitted that the stand of the Revenue of taxing something which is already covered under one section by triggering another section, because the charge in the first section fails is fallacious. Besides, it is settled law that when charge is created in one section, then if that charge is exhausted, the same income cannot be brought to tax under any other section. 5.172 In this regard, reliance is placed on the following decisions: 5.173 CIT vs. Smt. T.P. Sidhwa (133 ITR 840)(Bom)(Page 99- 110 of LPB VII) wherein it is held that when a charge is exhausted under a particular head of income, it cannot be brought to charge under any other heads of income. In that case, the assessee had earned rental income, which was chargeable as income from house property. However, due to computation mechanism provided in the Act, no income was chargeable to tax under that section. The tax department therefore sought to tax the rental income under income from other sources. In that contex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of the Department taxing the same by invoking section 28(iv) even though the charge u/s. 56 fails results in gross injustice to the Appellant. 5.176 The Ld. DR has during the hearing argued that section 56 is a residual taxing provision and is applicable only when income is not taxable under any other section of the Act. According to him, since the transaction is taxable u/s. 28(iv), there is no need to go to section 56. 5.177 In this regard, kind attention is invited to sub-section (1) of section 56 which reads as under: 56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to incometax under the head Income from other sources , if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. 5.178 As would be observed, the said sections seeks to tax only such income, which is not included in any other head of income. Therefore, the moment an item is prescribed u/s. 56, it necessary follows that it does not fall under any other head of section 14. The fact that this transaction was covered u/s. 56(2)(vii) in so far as non-charity entities are concerned, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only statutorily recognised method of valuation of unquoted equity shares in this country, it would not be wrong to adopt that method of valuation for purposes of estate duty also, though the rule as such is inapplicable. The rule can be looked into only for the purposes of knowing the manner of break-up method of valuation which is one of the recognised methods of valuation. ii. Similar view has been held in the following decisions: i. CED vs. R. M. Subhadvala (192 ITR 389) (Bom)(Pages 132- 133 of LPB VII); ii. Jehangir Mahomedli Chagla vs. ACED (155 ITR 637)(Bom)(Pages 134-139 of LPB VII); iii. Madhusudan Dwarkadas Vora vs. Superintendent of Stamps (141 ITR 802)(Bom)(Pages 140-142 of LPB VII); iv. CED vs. G. K. Swaroop (275 ITR 137)(Guj). (Pages 143-145 of LPB VII) 5.182 It is accordingly submitted that even if acquisition of shares is considered to have resulted in any benefit to the Appellant, the valuation of such benefit ought to be done in accordance with Rule 11UA since it is only prescribed rule of valuation of shares under the Act. The Appellant has submitted the Rule 11UA valuation of the shares of AJL both pre-issuance of the shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be wiped in future. It is only when such appreciation is realised/encashed that it could result in any income to an assessee. It is accordingly submitted that there is really no income which the Appellant has earned in the present case. 5.186 In this regard, reliance is placed on the following decisions wherein it is categorically held that only real income can be brought to tax. i. E.D. Sassoon Co. Ltd. vs. CIT (26 ITR 27)(SC)(Pages 146-179 of LPB VII); ii. Godhra Electricity vs. CIT (225 ITR 746)(SC)(Pages 180- 188 of LPB VII); iii. CIT vs. Excel Industries (358 ITR 295)(SC)(Pages 77-83 of LPB VII); iv. CIT vs. Balbir Singh Maini (398 ITR 531)(SC)(Pages 189- 202 of LPB VII). 5.187 The Ld. DR during the hearing has stated that since section 28(iv) is covered within the definition of income u/s. 2(24) of the Act, this argument does not survive. In this regard, it is stated that surely section 28(iv) is covered within the definition of income . But the question is what is covered u/s. 28(iv). Can a notional income be taxed u/s. 28(iv). Unlike certain deeming sections such as section 56(2)(vii)/(viia), section 50C etc. which provides for taxa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... views. Law is different from morality, as the positivist jurists Bentham and Austin pointed out. 5.190 In view of the foregoing, the Appellant humbly submits that the addition u/s. 28(iv) ought to be deleted. ARGUMENTS ON BEHALF OF THE REVENUE 100. On the other hand, ld. Special Counsel on behalf of the Revenue, Mr. Srivastava contended that, before examining the merits of the findings of the A.O., it would be appropriate to place on record the legal framework in this regard. The profits and gains of business or the benefits arising from the conduct of such business are chargeable to tax under Section 28 (read with Sections 4 and 5). Section 28 seeks to bring to tax income arising from business or profession with all its dimensions. The expression business is defined under Section 2(13) to mean as under- (13) business includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. 101. He submitted that the definition so given of the word business is inclusive in nature. The word business has a very wide connotation and its contours are not limited by this definition. Even otherwise, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds No. 5, 6 and 12) 22. The word business as defined in s. 2(4) of the Indian I.T. Act, 1922, includes any trade, commerce, or manufacture or any adventure of trade, commerce or manufacture . When s. 2(4) refers to an adventure in the nature of trade, it clearly suggests that the transaction cannot properly be regarded as trade or business. It is allied to transactions that constitute trade or business but may not be trade or business itself. It is characterised by some of the essential features that make up trade or business but not by all of them; and so, even an isolated transaction can satisfy the description of an adventure in the nature of trade. 103. He submitted that, from a careful perusal of the judicial precedents the following propositions emerge: - Whether or not a transaction would constitute an adventure in the nature of trade would depend upon various facts and circumstances surrounding that transaction:-a G. Venkataswami Naidu and Co. v. CIT, (1959) 35 ITR 594 (SC) The Hon ble SC had occasion to consider the peculiar facts of a transaction which was devised as a scheme to earn profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asy to assume in the case of a firm like the appellant that the acquisition of the open plots could involve any pride of possession to the purchaser. It is really not one transaction of purchase and resale. It is a series of four transactions undertaken by the appellant in pursuance of a scheme and it was after the appellant had consolidated its holdings that at a convenient time it sold the lands to the Janardana Mills in two lots. When the tribunal found that, as the managing agent of the mills, the appellant was in a position to influence the mills to purchase its properties its view cannot be challenged as unreasonable. If the property had been purchased by the appellant as a matter of investment it would have tried either to cultivate the land, or to build on it; but the appellant did neither and just allowed the property to remain unutilized except for the net rent of Rs 80 per annum which it received from the house on one of the plots. The reason given by the appellant for the purchase of the properties by the mills has been rejected by the Tribunal; and so when the mills purchased the properties it is not shown that the sale was occasioned by any special necessity at the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trading venture: for instance, a man who purchases a large quantity of aeroplane linen and sells it in different lots, and for the purpose of selling starts an advertising campaign, rents offices, engages an advertising manager, a linen expert and a staff of clerks, maintains account books normally used by a trader, and passes receipts and payments in connection with the linen through a separate banking account: Martin v. Lowry; a person who carries on a money-lending business purchases very cheaply a vast quantity of toilet paper and within a short time thereafter sells the whole consignment at a considerable profit: Rutledge v.Commissioners of Inland Revenue; a person even though he has no special knowledge of the trade in wines and spirits, purchases a large quantity of whisky sells it without taking delivery of it at a considerable profit: Commissioners of Inland Revenue v. Fraser may be presumed having regard to the nature of the commodity and extent of the transaction coupled with the other circumstances, to be carrying on an adventure in the nature of trade. These are cases of commercial commodities... c P.M. Mohammed Meerakhan v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in s. 2(4) of the Indian I.T. Act, 1922, includes any trade, commerce, or manufacture or any adventure or concern in the nature of trade, commerce or manufacture . When s. 2(4) refers to an adventure in the nature of trade, it clearly suggests that the transaction cannot properly be regarded as trade or business. It is allied to transactions that constitute trade or business but may not be trade or business itself. It is characterised by some of the essential features that make up trade or business but not by all of them; and so, even an isolated transaction can satisfy the description of an adventure in the nature of trade. c Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax (1954) 26 ITR 765 (Pages 41-47 of Case Law Compilation on behalf of Revenue for Grounds No. 5, 6 and 12) 15. Business as defined in Section 2(5) of the Excess Profits Tax Act includes amongst others, any trade, commerce or manufacture or any adventure in the nature of trade, commerce or manufacture. The first part of this definition of a business in the Excess Profits Tax Act is the same as the definition of a busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be laid down which would be applicable to all cases and that each case must be decided on its own circumstances according to ordinary common = sense principles... Where the purchaser does not have necessary resources to buy something, the transaction may point out to be in the nature of trade:- a P.M. Mohammed Meerakhan v. CIT, (1969) 73 ITR 735 (SC) (Pages 78-85 of Case Law Compilation on behalf of Revenue for Grounds No. 5, 6 and 12) Where the purchaser is found not to have resources to buy when he enters into an agreement to purchase and the conveyance is agreed to be executable in the name of himself or his nominee, the transaction points to be one in the nature of trade. b R. Dalmia v. CIT, (1982) 137 ITR 665 (Del) (Pages 100-107 of Case Law Compilation on behalf of Revenue for Grounds No. 5, 6 and 12) Taking over of liability of payment to shareholders knowing that shareholders could not make claim, the surplus arising was held to be an adventure in the nature of trade. c P.D. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his receivable was done by AICC without any payment and these 50 lakhs was paid some time in February, 2011 when the bank account was opened and the cheque was deposited. This kind of transaction smacks of a clearly design to proceed with a transaction, which completely lacked genuineness and credibility. The Appellant thereafter decides to sell or extinguish his receivables in consideration of equivalent number of shares of AJL. AJL willingly obliges the Appellant by allotting these shares in consideration for the amount which was outstanding in the books in favour of AICC at earlier point of time, and now in favour of Appellant after assignment. It may not be out of place to mention that AJL had ceased its business operations as early as in 2008 and had offered a VRS scheme to all its employees, way back then. It would be difficult to subscribe to the view that any person would invest in the shares of a company which has stopped its business operations and was only surviving on commercial exploitation of its properties unless the real intention of such a person is to get possession and control on enjoyment of these properties. So the facts of the case not only indicate a well-tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s some kind of advantage or gain. Reference is invited to the following: - a P. Ramnatha Aiyar s Advanced Law Lexicon (Page 3 of Case Law Compilation on behalf of Revenue for Grounds No. 5, 6and 12) Advantage; profit; gain; interest use; whatever contributes to promote prosperity or add value to property; includes payment of any kind. b State of Gujarat v. Essar Oil, (2012) 3 SCC 522 (Page 113-136 of Case Law Compilation on behalf of Revenue for Grounds No. 5, 6 and 12) 63. ... Now the question is what constitutes a benefit. A person confers benefit upon another if he gives to the other possession of or some other interest in money, land, chattels or performs services beneficial to or at the request of security or advantage. He confers a benefit not only where he adds to the property of another but also where he saves the other from expense or loss. Thus the word benefit therefore denotes any form of advantage. 106. He submitted that the primary contention of the Assessee is that the transaction in dispute is limited to the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are non-monetary in nature. Whether or not these are sold, these would be liable to tax once it is found that benefits have, in fact, arisen to the Appellant. 109. Mr. Srivastava submitted that the case-laws relied upon by the Appellant are inapplicable on the peculiar facts of the case:- The cases of Rustom Cawasjee Cooper, Carew Co. and Bacha F. Guzdar have been relied to suggest that the Appellant has acquired only the shares and not the assets of AJL. This contention has been rejected by the Hon ble High Court of Delhi. The target of the Appellant was not the shares of the company which had already closed its business and retired its employees but the prime properties standing in different locations. Similarly, the cases of Mahindra Mahindra, Jindal Equipments Leasing Consultancy, Seshasayee Bros. and Shreyans Investments have been referred for the contention that the benefit is in the capital field and not covered in Section 28(iv). As already pointed out, this was not an investment of the Appellant, but an adventure in the nature of trade. The adventure started with the acquisition of receivables and ended with the exchange of that asset with the shares of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orated the relevant portion of assessment order wherein AO has brought to tax the entire transaction under the provisions of section 28(iv) and how the benefit has arisen to the appellant company from the aforesaid transaction right from assigning of loan of more than Rs.90.21 crores for a sum of Rs.50,00,000/- and acquiring 9.021 crores shares thereby getting the share holding of more than 99% in the company. However, in the very succinct manner, the case of AO and his observations are being summarized in brief:- The Assessee had entered into a fraudulent transaction to enjoy the benefits embodied in the business assets of AJL. The alleged loan of Rs. 90.21 crores was an artificially inserted steps in the form of a paper entry of an amount which was sufficient for allotment of 99% shares of AJL. The motive to earn income by way of benefit from underlying assets of 99% shares of AJL was so strong that the assessee engaged itself in fraudulent activity. The sole purpose of transaction leading to acquisition of shares was to derive several types of benefits from underlying business properties of AJL. Legal provisions and case laws in discussed in Para 16.2, wherein the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of AJL in order to get several benefits from business assets of AJL having fair market value of Rs. 413.41 crore as well as to derive the value from these properties. These intermediary steps on paper were artificially inserted in the ell-devised scheme leading to takeover of AJL by allotment of 99% shares of AJL without even getting the real estate properties transferred in the name of the assessee but the transaction resulted in accrual of benefits from value of real estate business and properties to the assessee. The transactions were devised and carried out which represented an 'adventure in the nature of trade' and would squarely fall within the definition of the term business as appearing in Section 2(13). It is amply clear from the analysis of the steps that even though the transaction of getting benefit from properties of AJL by takeover of AJL was one transaction, however, it involved several steps, some real and some fraudulent, with the real and distinct intent of enjoying the benefit of the properties from the day of incorporation of the assessee. The assessee enjoyed the following benefits: - Benefit of underlying value of shares of AJL; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure cannot be held to be for the purpose of the object of the company. In view of the above, the claim of the assessee that the assessee company was carrying out its stated object is factually incorrect and the assessee company as proved above had never engaged in the activities of promoting democratic values by incurring expenditure. Reference is made to the findings of the CIT(E) dated 26.10.2017- Whether the assessee holds the share simplicitor or has the right to direct enjoyment of benefit arising from business assets of AJL: - The profits and gain from business in form of benefits to assessee having value of Rs.413.41 crores under Section 28(iv) has accrued to the assessee during the year under consideration and is taxable as income from profit and gains from business. It is not a case of hypothetical income, but in this case quantification of benefit as derived and accrued to the assessee has already been determined and the assessee had already started enjoying the benefit of possessing and using these commercial assets during the year under consideration. Whether the benefit accrued to the assessee is in the nature of Revenue: - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justify such an exercise. Reliance placed on Karanpura Development Co. Ltd. v. CIT, 44 ITR 362 (SC), Workmen, Associated Rubber Industry Ltd. v. Associated Rubber Industry ltd., 157 ITR 77 (SC), Union of India Ors. v. Playworld Electronics Pvt. Ltd. Anr, 184 ITR 308 (SC), Harsh Win Chadha v. DOlT, Circle-1(1), International Taxation, 2011 135 TT J 513 (Del). Adventure in the nature of trade: - The AO has brought enough facts and surrounding circumstances on record which validate the fact that the real purpose of the artificially inserted step in the transaction involving purchase of non-existent loan from the AICC and allotment of 99% shares of the AJL in reality was only to transfer the underlying value of shares and value of transfer of full right over benefit arising from properties of the AJL without having paid any amount to AJL as well as taxes to the government. It also validates the fact that the artificially inserted steps had no business purpose except for hiding the true nature of income earned by the assessee and evading taxes on income earned by the assessee on the takeover of business properties of AJL. This is further substantiated by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... piercing the veil of these transactions, it is seen that the scheme of takeover of the AJL by the assessee involved several pre-meditated and artificially inserted steps which had no purpose except for the intention of earning benefit from commercial properties of the AJL without paying any taxes, be it in the form of capital gains or in the form of stamp duty which would have to be paid at the time of transfer of ownership of the properties. The scheme led to the take-over of the AJL for the purpose of enjoying the rights in the property by having 100% ownership of the property, i.e., legal ownership of the AJL and its high value business assets. For the same reason the cases relied upon by the appellant in support of its contention that the provisions of section 28(iv) are not applicable and the provisions of section 56 would be applicable will not apply in this case where the AO has given finding of facts and analysed the real purpose of the transaction. 115. We have heard both the parties at length and also the relevant material placed on record before us both in the form of documents which were available with the authorities below as well as certain additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this aspect after considering the additional evidences to show that every step taken was only to promote objects by way of publication: - 102. Now, what has been canvassed before us is entirely a new argument that the sole aim and objective of acquiring the entire stake holding in AJL was to carry out charitable activities for its objects, i.e., to spread democratic and secular values to the Youths of India through the medium of newspapers published by AJL. Now, in support of such newline plea, voluminous additional evidences have been filed before us on the ground that the ld. CIT (E) has wrongly held that AJL was into the Real Estate business and was carrying out commercial activities of construction and sale of properties. In order to controvert such a finding, assessee has filed hundreds of papers to show that how the publication of newspapers and articles in print media have been recommenced, when most of the documents pertain to post 21.03.2016 when the assessee had written a letter offering for suo moto surrender of registration u/s. 12AA; and some are even post facto cancellation order passed by the ld. CIT (E). Since we have permitted the parties to argue and put fort ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 169-172 h. Copy of National Herald Commemorative Edition 173-185 5. Copies of various reports, photographs of : a. Launch of Commemorative Edition of Navjivan newspapers (Publication) in Chandigarh on 10 December 2018 186 b. The Tribune 187 c. Indian Express 188 d. Amar Ujala 189 e. Hindustan Times 190 f. Copy of Navjivan Commemorative Edition 191-203 6. Launch of National Herald Website on 14 November 2016 204-205 a. The Indian Express 206-207 b. The Economic Times 208-209 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011 268-280 17. AJL Form - 14 submitted to ROC along with amended MOA as passed by Shareholders on 21 Jan 2016 281-295 18. Copies of National Herald and Qaumi Awaz Newspapers dated 1 April 2008 publishing the temporary suspension notice of publications 296-299 19. Letter to AJL to the United News of India (UNI) dated 31 March 2008 informing about temporary suspension of publications 300 20. Various Presentations and Photographs showing operations of Young Indian 301-386 103 A bare perusal of the most of the documents, it is quite evident these are post surrender letter of the assessee filed in March 2016 and some are even after the date of passing of the impugned cancellation order. All these documents merely go to show that AJL had recommenced or endeavored to re-start the publication activity from the year 2016- 2017 onwards. As opined above, these documents even if we admit, are not of much signif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impinge upon the case of the assessee or in any way strengthen the case of the assessee. 118. The Tribunal after discussing entire gamut of facts and material, has given a very categorical finding that, at no point of time, the appellant company has carried out any charitable activities in furtherance of its objects and to promote its objects. Had the intention of the appellant company was to promote its so-called charitable objects, then why not its objects were pursued through other agencies and why from an entity (AJL) which was no longer into publication. Nowhere it has been brought on record that YI had used some other agencies for publication and why only the objects could have been pursued publication through AJL only, when it has already ceased/suspended its publication business in 2008 itself. That itself goes to show that it never had an intention to promote its objects through medium of publication or through newspapers etc. For this precise reason, this Tribunal has categorically held that right from day of its inception to grant of registration u/s 12A/12AA, until the cancellation of registration by the ld. CIT (E) in the month of 26.10.2017, such purported objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the ld. counsel that the newspaper business was started later on, which indicates that AJL was acquired only to promote the ideals enshrined in the objects of Young Indian, belies all such intents and in fact the allegations that some printing work had started post inquiries by the Governmental authorities is convincing and probable. 108 Much emphasis has been laid by the ld. counsel that AJL has converted itself into a Section 8 company under the Companies Act 2013 in January, 2016, i.e., as a non-profit company, to carry out the objects of Young Indian and the objects of AJL were aligned with that of Young Indian. Such a contention is of no consequence for the reason that, firstly, it is an admitted fact that till date, the assessee had not been granted license by ROC as Section 8 Company; and secondly, all these events have neither been stated by the assessee before the ld. CIT (E) and are post 2016. The amendment in MoA of AJL in the year 2011 is again of no consequence because till the year 2016, no such activity has been carried out by Young Indian through AJL. In any case, we are in tandem with the contention of the ld. Special counsel that merely adopting th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ald House , 5A, Bahadur Shah Zafar Marg, New Delhi, wherein the Hon ble High Court categorically noted that at the time of inspection by the LDO, no press activity was carried out by the AJL in the said property and in fact, the property was rented out to various commercial establishments. The Hon ble High Court has taken note of inspection committee report and has given a categorical finding that no such printing press was functioning and only National Herald Weekly newspaper was published for the first time on 24.10.2017 which too was outsourced from elsewhere. No such press activity of the editorial team was discernible when the inspection of the premises was taken in the presence of Chairman of AJL and no such evidences were produced either before the inspection committee or before the Hon ble High Court, that before the proceedings were initiated, substantial publication activity had been started. The court also noted that the dominant purpose of leasing out the properties to AJL for publication has now practically lost. 121. Thereafter, the judgment passed by Hon ble Single Judge was challenged by way of an appeal before the Hon ble Division Bench of Delhi High Court in L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to there being no press activity in the premises in question, that is, finding in para-17 of the impugned order. The facts that have come on record clearly shows and it is an admitted position if we analyse the show cause notices issued to the appellants on 10th October, 2016 replied to the same on 19th November, 2016, the second show cause notice dated 5th April, 2018, the third show cause notice dated 18th June, 2018 and the fourth show cause notice dated 24th September, 2018 and the series of replies filed by the appellants on 19th November, 2016, 7th April, 2018, 16th July, 2018 and 9th October, 2018 along with the communication made by Sh. Motilal Vora on 26th September, 2018 available at page-406 of the paper book that between the period from the year 2008 to 2016, the appellant themselves admitted that there was no publication of the newspaper from the premises in question or from any other place and it was only after the inspection of the premises was conducted for the first time on 26th September, 2016 that indication was made about commencement of newspaper publication for 2016 - 2017. 49. In this regard, we may take note of the communication made by Sh. Motilal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vjivan, that is, Hindi version commenced on 28th August, 2017 and the print weekly newspaper, National Herald Sunday resumed publication from 24th September, 2017 and it is the case of the appellants that these newspapers were printed in a press at Noida. Finally the printing of Hindi weekly newspaper Navjivan commenced publication on 14th November, 2018 and the necessary license and authorization for the purpose of publication indicated hereinabove was granted by the Registrar of Newspapers for India on 21st November, 2017 available at page-581 is a certificate of registration issued by Sh. K. Ganeshan, Registrar of Newspaper for India giving registration certificate for a newspaper titled National Herald Sunday . Accordingly, it is clear that publication of the newspapers commenced after a gap of eight years as is indicated hereinabove. If this is the factual position, it can very well be concluded that on 26th September, 2016 when the first inspection took place, admittedly, there was no printing of press or publication activity and the digital versions in English commenced publication only on 14th November, 2016, that is, about one and half month after the inspection took pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e condition that the amount shall be utilized by AJL to write off their accumulated debts and to recommence publication of its newspaper. As per the facts recorded by the co-ordinate Bench of this Court in its decision rendered on 10th September, 2018 in W.P.(C) 8482/2018, the books of account of AJL from 1st April, 2010 to 31st March, 2011 showed an outstanding debt of Rs.88,86,68,976/- and it ultimately became Rs.90,21,68,980/- as on 15th December, 2010. On 13th August, 2010, an application was made for incorporation of a charitable non-profit company (a company under Section 25 of the Companies Act named Young India). The application was in Form 1A with the competent statutory authority and on 18th November, 2010 Young India was incorporated and on 18.11.2010 license was granted and ultimately on 23rd November, 2010 Young India was incorporated with Sh. Suman Dubey and Sh. Sam Pitroda as its founder Directors. This company had an authorized share capital of 5,000 shares of Rs.100/- each valued at Rs.5,00,000/- and the paid up share capital was 1100 shares of Rs.100/- each valued at Rs.1,10,000/- and the company at that point of time had two shareholders, (a) Shri Sam Pitroda - 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,02,16,899 equity shares to Young India in pursuance to the AGM Meeting decision held on 21st January, 2011 and the ALJ Board Meeting on 26th February, 2011 and thereafter Young India applied for exemption under Section 12- A on 29th March, 2011 and on 9th May, 2011 the Income Tax Authorities granted the exemption with effect from the F.Y. 2010-11. 59. Be that as it may, by the aforesaid transaction that had taken place Young India acquired beneficial interest on AJL s property which on the said date was valued at more than Rs.400 crores on payment of a sum of Rs.50 lakhs to AICC. This, according to the respondent, if viewed in the backdrop of the purpose of transfer lease and the modus operandi adopted is nothing but a devise to transfer the property held on lease from the Government by AJL, Young India which became 99% or rather 100% shareholder of AJL. With these facts, we now propose to examine the judgments relied upon by both the parties to evaluate the legal implication and the principles culled out from these judgments and examine their applicability in the present factual matrix to decide the issue of breach of conditions of the lease on this count. 60. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting transfer of ownership of shares or change in the Article of Memorandum, the finding recorded with regard to transfer of ownership of the property recorded by the learned writ Court and the competent authority is unsustainable. The principles laid down in judgment of the Supreme Court in M/s K.G. Electronics (supra) and by this Court in DDA v. Human Care Medical Charitable Trust were also relied upon to canvass this contention. 62. On a consideration of the argument as canvassed by Dr. Singhvi, at the first instance, the same looks very attractive and the findings recorded may look to be unsustainable and perverse, however, it is an equally settled principle of law that in public interest and for assessing the actual nature of a transaction or the modus operandi employed in carrying out a particular transaction, the theory of lifting of the corporate veil is permissible and a Court can always apply this doctrine to see as to what is the actual nature of transaction that has taken place, its purpose and then determine the question before it after evaluating the transaction or the modus operandi employed in the backdrop of public interest or interest of revenue to the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) and one of the relevant exception is that when a corporate personality is being blatantly used as a cloak for fraud or improper conduct or where the protection of public interest is of paramount importance or where the company has been formed to evade obligation imposed under the law, the theory which has been described by certain jurists as peeping behind the corporate veil is employed and in para 27 and 29, the Hon ble Supreme Court goes to determine the doctrine in the following manner: 27. It is thus clear that the doctrine of lifting the veil can be invoked if the public interest so requires or if there is allegation of violation of law by using the device of a corporate entity. In the present case, the corporate entity has been used to conceal the real transaction of transfer of mining lease to a third party for consideration without statutory consent by terming it as two separate transactions--the first of transforming a partnership into a company and the second of sale of entire shareholding to another company. The real transaction is sale of mining lease which is not legally permitted. Thus, the doctrine of lifting the veil has to be applied to give effect to la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk. There is nothing to rebut the allegation that receipt of Rs 160 crores styled as investment in shares is nothing but sale price of the lease. No precedent has been shown permitting such a private sale of a mining lease for consideration without any corresponding benefit to the public. 65. If we consider the transaction in the present case in the backdrop of the aforesaid principles laid down by the Hon ble Supreme Court, we have no hesitation in holding that the purpose for which the doctrine of lifting of the veil is applied is nothing but a principle followed to ensure that a corporate character or personality is not misused as a device to conduct something which is improper and not permissible in law, fraudulent in nature and goes against public interest and is employed to evade obligations imposed in law. If that is the purpose for which the doctrine of lifting of the veil is to be employed and if we see the transaction that has taken place in the present case with regard to how the transfer of shares between AJL and Young India took place, we find that within a period of about three months, that is, between 23rd November, 2010 to 26th February, 2011, Young India was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... character and will look at the reality behind the corporate veil so as to enable it to pass appropriate orders to do justice between the parties concerned. The fact that Tejwant Singh and members of his family have created several corporate bodies does not prevent this Court from treating all of them as one entity belonging to and controlled by Tejwant Singh and family if it is found that these corporate bodies are merely cloaks behind which lurks Tejwant Singh and/or members of his family and that the device of incorporation was really a ploy adopted for committing illegalities and/or to defraud people. 66. Apart from the aforesaid judgments, there are various other judgments which have been brought to our notice wherein the said theory of lifting of the corporate veil has been approved and we have no hesitation in holding that the transfer in question, if analyzed in the backdrop of the principles as discussed hereinabove, we see no error in the findings recorded by the learned writ Court to hold that the transfer in question comes within the prohibited category under clause XIII (3) of the lease agreement. [Emphasis in bold is ours] 122. The Hon ble High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to YI, which became almost 100% shareholder of AJL. Their Lordships have also considered the judgment of Hon ble Supreme Court in the case of Bacha F. Guzdar (supra) which has been strongly relied by the assessee before us and held that though the principle laid down by the constitutional Bench of Hon ble Supreme Court cannot be in dispute and it is an accepted principle of law, however, in the public interest and for assessing the actual nature of transaction or modus operandi employed in carrying out a particular transaction, the theory of lifting of the corporate veil is permissible and the court can always apply this doctrine to see as to what is the actual nature of transaction that has taken place, its purpose and then determine the question before it after evaluating the transaction or the modus operandi employed in the backdrop of public interest or interest of revenue to the State. The principle of lifting of corporate veil is an exception to the corporate personality of a company, but can be resorted to unravel tax evasion to public interest, which is of paramount interest to prevent a corporate entity in attempting to evade legal obligation. If a corporate personalit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haritable institution qua that period only should have the benefit of registration u/s. 12AA for this period of five years, i.e., from the assessment year 2011-12 to A.Y. 2016-17 and post 21st March 2016, the assessee itself chose to surrender its registration and willingly give up its charity status under the Income Tax Act. If both YI and AJL are non-profitable company, then why such a dispute on cancellation from retrospective date. 116 Before us, the ld. counsel had very strongly objected to refer and rely upon the judgments of Hon ble Delhi High Court as cited (supra) on the ground that, Hon ble Supreme Court in SLP No.7345/2019 had stayed the further proceedings pursuant to the High Court order vide order dated 05.04.2019. The relevant directions of the Hon ble Supreme Court read as under: There shall be stay of the further proceedings pursuant to High Court s order. Not only that, it has been strongly contended that once the operation of the order has been stayed then either the said judgment should not be taken into cognizance or the matter should be adjourned sine dine till the matter stands decided by the Hon ble Apex Court. We are unable to accept such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, lead to such a result. It only means that the order which has been stayed would not be operative from the date of the passing of the stay order and it does not mean that the said order has been wiped out from existence. This means that if an order passed by the Appellate Authority is quashed and the matter is remanded, the result would be that the appeal which had been disposed of by the said order of the Appellate Authority would be restored and it can be said to be pending before the Appellate Authority after the quashing of the order of the Appellate Authority. The same cannot be said with regard to an order staying the operation of the order of the Appellate Authority because in spite of the said order, the order of the Appellate Authority continues to exist in law so long as it exists, it cannot be said that the appeal which has been disposed of by the said order has not been disposed of and is still pending. We are, therefore, of the opinion that the passing of the interim order dated February 21, 1991 by the Delhi High Court staying the operation of the order of the Appellate Authority dated January 7, 1991 does not have the effect of reviving the appeal which had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi High Court has not followed the said order. Such a plea and reference does not come to aid for the reason that in the judgment of Delhi High Court (Bhushan Steel) it has been held that the Sales Tax Subsidy is the Revenue receipt and the Hon ble Supreme Court had admitted the SLP and the entire order was stayed. Here situation and direction are not similar. Further the judgment of Hon ble Calcutta High Court in Exide Industries Ltd.(supra), wherein the provisions of section 43B(f) was declared unconstitutional where also SLP was filed before the Hon ble Supreme Court the entire operation of the order was stayed. In any case, once the jurisdictional High Court has passed the judgment which has not been set aside or reversed by Hon ble Supreme Court, then for lower courts within its jurisdiction constitutes a binding precedence specifically when the judgment has been rendered on similar facts and transaction as held by the Hon ble Supreme Court in the case of Shree Chamundi Mopeds Ltd. (supra), wherein Hon ble Supreme Court has clearly held that the order of the Appellate Authority where the operation has been stayed continue to exist in law. We are clearly bound by the observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he date he notices the infringement. The cancellation of registration, whether with retrospective effect or prospective, depends upon the facts and circumstances of the case and the Commissioner has power to cancel the registration from the time when such breach has occurred. Suppose, if the assessee after grant of registration carries out its activities in accordance with its objects and the activities are also genuine then the assessee is entitled for benefits of section 12AA; and if from a particular period or year, the activities are found to be either non-genuine or not carried out in accordance with its stated objects, then the Commissioner can cancel the registration from the date or period when such non genuineness is found. Hon ble Madras High Court in the case of Prathyusha Educational Trust (supra) have clearly reiterated this proposition, relevant text of which has been already incorporated above, wherein their Lordships have held that it a misnomer to sate that the order is retrospective or retroactive and the order of the cancellation of registration even passed on subsequent date would take effect from the year when cause of action arose. 121 Here, in this case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re contention that these transactions were nothing but to promote the objects of Young Indian has been rejected and frowned upon by the Hon ble jurisdiction High Court as well as by the Tribunal. In wake of these findings, now what is required to be seen is the underlying substance for entire process of acquisition of shares of AJL, whether there was some other dominant purpose for acquiring the entire stake of AJL? From the sequence of events which have been discussed in the earlier part of the order and the finding of fact arrived by this Tribunal on the same set of transactions in the case of assessee as well as the findings of fact and observations of Hon ble Delhi High Court based on various judicial jurisprudence, it is clearly established that, the corporate entity of AJL stands pierced and in fact what has been acquired by the appellant company is the underlying assets to acquire huge properties by the AJL and to get commercial benefit derived from such properties. It is very difficult to fathom that all these transactions which have been purported to be portrayed within legal framework to show that what is apparent is also real, which has been found to be incorrect. 126 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion business which operation has already ceased to exist or suspended for a substantial time in the year 2008 itself. 128. As noted above, the Hon ble Delhi High Court had pierced the corporate veil after detailed observation in paras 62 to 65 as incorporated (supra), wherein they have observed that when a corporate personality is being blatantly used for fraud or improper conduct or where the protection of interest is of paramount importance or where the company has been formed to evade obligation imposed under the law, the corporate veil can be pierced. In para 65, Hon ble High Court have precisely noted these very transactions which came into the scanner of the authorities and held that, if we see the transaction that has taken place in the present case with regard to how the transfer of shares between AJL and Young Indian took place, we find that within a period of three months, that is, between 23rd November, 2010 to 26th February, 2011, Young Indian was constituted and took over the right to recover a loan of more than Rs.90 crores from AICC for a consideration of Rs.50,00,000/- and thereafter replaced the original shareholders of Young Indian by four new entities includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch a contention is of no consequence for the reason that, firstly, it is an admitted fact that till date, the assessee had not been granted license by ROC as Section 8 Company; and secondly, all these events have neither been stated by the assessee before the ld. CIT (E) and are post 2016. The amendment in MoA of AJL in the year 2011 is again of no consequence because till the year 2016, no such activity has been carried out by Young Indian through AJL. In any case, we are in tandem with the contention of the ld. Special counsel that merely adopting the changes in MoA does not make the company a Section 8 Company or a non-profitable company, because it is always open for the Board of Directors to amend its MoA and become a profitable company at any time and sweet will. Thus, acquisition of AJL to further the objects of the assessee company as purported by the ld. counsel, is not acceptable. 130. The contention that appellant being section 25 Company and, therefore, there is no alleged gain which could have been distributed in the form of dividend to shareholders, does not lead to an inference that entire transaction which has been undertaken was for motive of charity or towar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business so as to augment its own business or there is some business interest in such acquisitions. Here, this is not a case at all. This chain of events definitely leads to only one conclusion that it is nothing but a masquerade and make-believe arrangement which has been given a cloak of charity and to believe that it was purely for the purpose of charitable activities to promote ides of democratic and secular society. Here a company was taken over with huge underlying assets for allegedly promotion of its objects which otherwise stopped carrying out its publication activity and later on also, it was a non-starter when shares were acquired. Such make-believe arrangement cannot convince any prudent mind or judicial conscience. Thus, the contention raised by the ld. Sr. Counsel for the assessee is without any merits and is therefore unacceptable. 132. Another strong contention which has been raised that merely be acquiring shares of a company shareholders would not become owners of the company and in this regard, decision of Hon ble Supreme Court in the case of Mrs. Bacha F. Guzdar vs. CIT 27 ITR 1 and also the judgment of Rustom Cawasjee Cooper vs. UOI (1970) 1 SCC 248 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be taxed under section 28(iv). It has been contended that section 28(iv) applies only to benefit arising out of business which is not in existence in the present case, because the appellant is section 25 Company and not engaged in a business whatsoever and the appellant is not involved in business of shares and immovable properties and in support, various judgments have been cited which have been taken note in the foregoing paragraphs while dealing with the appellant s submissions. It has also been contended that receipt of shares arose on account of a non-business- related one-off transaction and, therefore, the receipt of shares was not liable to be taxed as business income nor it can be regarded as adventure in the nature of trade to fall under section 28(iv). Again, in support, catena of judgments relied upon before us, especially the judgment of Hon ble Supreme Court in the case of Janki Ram Bahadur Ram 57 ITR 21 wherein it was held that mere discounted purchase cannot mean that the assessee was involved in any adventure in the nature of trade to attract the provisions of section 28. 135. Again, the same line of argument is taken that when appellant is itself sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The aforesaid section stipulates that there should be benefit or perquisite whether convertible into money or not, arising from business or exercise of a profession. Thus, section 28 seeks to bring to tax income arising from business or profession in all its dimensions. The expression business has been defined in sub- section (13) of section 2 which means as under :- (13) business includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. 138. The definition of business is inclusive and has therefore, wide connotation and its contours cannot be limited by this definition. One very important facet which has been included in the definition is the term, any adventure or concern in the nature of trade or commerce. It may not mean carrying out trade or commerce or manufacture per se but any activity which has some trapping of a trade, commerce or manufacture would fall within the ambit of expression in the nature of trade or commerce. It could mean that adventure can be a pecuniary risk or a venture or a speculation or commercial enterprise or something which might be carried out in future and may not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sonnel and its stake holders and within days of its formation one of the entity, i.e., AICC offered to sell/assign its receivables worth Rs.90.21crores from AJL in favour of the appellant who at that point of time did not even not had money to undertake a transaction. AICC has offered its huge assets (loan of Rs.90.21 crores) for a mere sum of Rs.50,00,000/-) and the appellant company did not have any resources to pay the same when the loan was assigned. It was only after assignment of the loan of Rs.1 crores which was raised from Kolkata based company; out of that, amount of Rs.50,00,000/- has been paid for acquiring assets worth Rs.90 crores. Before that, AJL had already closed its publication business and was having income only from commercial exploitation of property and was not able to pay the loan, which if had taken from any commercial bank or financial institution would have been obliged to liquidate its debt first. A newly formed Company (YI) buys the loan even before any loan was received. In fact, appellant had not even opened its bank account when the loan was assigned for Rs.50,00,000/-. Such a transaction, we already observed above, is beyond any prudence in any compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lbeit entire assets of AJL, because nature of transaction undertaken has already been opined upon by the Hon ble Delhi High Court and by us in the foregoing paragraphs. 144. Another argument of Ld. Counsel was that, if the appellant is regarded as owner of AJL, benefit if any is only in the capital field and, therefore does not cover u/s 28(iv). It has been contended that acquiring of shares even if it is held that assessee acquired assets at a discounted price which is benefit to the appellant the same is purely in capital in nature, because appellant had no intention of selling the shares for any profit in future. We are unable to appreciate such a contention on the peculiar facts of the case, because here it is not a case of acquisition of shares per se, albeit it is a case where assessee had acquired benefit in the interest in the immovable properties held by AJL. The acquisition of shares is merely a step in the entire adventure, which we have already held in the nature of trade and commerce. The benefit has arisen in this year only, the moment the whole transaction had taken place right from purchase of an asset in the form of loan from AICC for a sum of Rs.50,00,000/- and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of stock-in-trade and, therefore, the judgment of Hon ble Supreme Court in the case of Chainrup Sampatram v. CIT 24 ITR 481 has no application in the present facts of the case or the judgment of Hon ble Supreme Court in the case of CIT vs. Hindustan Zinc Ltd. 291 ITR 391. 148. Another limb of argument which has been vehemently argued before us that when there is a specific provision under the Act that section 56(2)(viia) for taxing the gain of shares then the general provisions cannot be applied mainly because the specific provision is not made applicable to the relevant assessee. First of all, the provisions of section 56(2)(viia), at the very outset, is not applicable, because the assessee being section 25 company which falls within the ambit and definition of a company in which public are specially interested in section 2(18)(iiaa). Even the ld. Sr. Counsel has agreed that this provision is not applicable but his case was that such transactions will fall u/s 56(2)(viia) and not section 28(iv). However, we have already held that how the entire transaction has led to benefit arising from adventure in the nature of trade so as to fall within section 28(iv) and section 56(2)(v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the publication of newspaper was allotted/acquired certain properties all across the country for carrying out its publication business. Over all, it had owned five immovable properties which has been valued by the DVO and AO as at 26.02.2011 on the following value:- Sr.No. Property Value as at 26.02.2011 In Rs. i 5A, Herald House, Bahadur Shah Zafar Marg, New Delhi (Delhi property) 201,83,92,400 ii Land at S. No. 340/341, CTS No. 608/1A, Bandra (East), Mumbai (Mumbai property) 132,94,44,480 iii Land at Plot Nos. 353, 352 360, Thana No. 6 Phulwari, Vill. Mahuli, Patna- 800001 (Patna Property) 5,77,52,700 iv Nehru Bhawan and Nehru Manzil, 1, Bisheshwar Nath Road, Kaiserbagh, Lucknow-226018 (Lucknow property) 40,59,06,400 v Land at C-17, Sector 6, Panchkula (Panchkula property) 32,25,60,000 Total 413,40,55,980 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jehangir Mahomedli Chagla vs. ACED (155 ITR 637)(Bom) 134-139 of LPB VII 4 Madhusudan Dwarkadas Vora vs. Superintendent of Stamps (141 ITR 802)(Bom) 140-142 of LB VII 5 CED vs. G. K. Swaroop (275 ITR 137)(Guj) 143-145 of LPB VII b. Without prejudice to the above, even if the approach adopted by DVO/AO is to be considered, since what has been acquired by the assessee are the shares of AJL, effect has not been given for obvious adjustments for valuation of shares such as: i. Deduction for tax outgo which results in approx. 30% reduction in the value; ii. Deduction of liabilities of the company as on the valuation date. Such as the loan of Rs. 90.21 crores, should have been considered to arrive at the value of the shares acquired by the Appellant. iii. Discount for illiquidity since shares are unlisted, iv. Deduction for cost of Rs. 50 lacs incurred for acquisition of shares, etc. c. Also, even though the valuation reports of registered valuers submitted by the Appellant as additional eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and was determined by considering the CPWD Plinth Area Rates Delhi 2007 at Rs. 7,09,65,900. 6.12 Accordingly, the total value of the Delhi Property has accordingly been determined at Rs. 2,01,83,92,400 (194,74,26,500 + 7,09,65,900). Page 406 of PB I. 6.13 It is submitted that the each of the steps adopted by the DVO and the method of valuation itself is completely erroneous. In this regard, attention is drawn to the observations of the GAA Valuer, Registered Valuers, which is at Page 1377-1378 of PB IV (GAA Report pages 1371-1401 of PB IV). The said report was also submitted to the CIT(A) and the same was also sent to the AO for his remand report. However, neither the CIT(A) nor the AO has commented on this report. Further, our arguments before AO is at Pages 361- 362 of PB-I and detailed submission for CIT(A) are at pages 1304-1310 (Para 2.1-2.6) of PB-II. 6.14 Contentions: 6.15 DVO ought to have considered circle rate instead of comparable sale instance method, especially in absence of a proper comparable instance: 6.15.1 For the period of valuation (valuation date being 26.2.2011), ready reckoner rates for concerned property were readily available. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is at Page 1378 of PB IV, Para 10. 6.15.2 In this regard, reliance is placed on the decision in Appropriate Authority v. Kailash Suneja [2001] 118 Taxman 295 (SC) (Pages 93-99 of LPB IX) wherein it is held that different methods cannot be arbitrarily applied by the valuation officer. 6.15.3 It is accordingly submitted that the circle rates ought to be considered for valuing the Delhi Property. As would be observed from the ready reckoner (Page 1390 of PB IV), the highest base rate prescribed therein for poshest of locality is Rs. 86,000 per sq. m, as against this, the DVO has considered the base rate of Rs. 507,020.67 per sq. m, which is almost 6 times the rate provided in the ready reckoner. 6.15.4 The Ld. DR has, during the course of the hearing, stated that the DVO had given full opportunity to the Appellant and no such ready-reckoner was made available either before the DVO or the AO. Accordingly, this contention cannot be raised now by the Appellant. 6.15.5 In this regard, it is submitted that the ready reckoner issued by the Government Authorities is a public document and a very basic document which the DVO, being the technical expert on valuation, has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expert cannot be challenged subsequently, if the same has been done on reasonable basis. In this regard, it is firstly submitted that the AO himself has ignored the DVO s report in case of the valuation of Mumbai Property and determined the alleged fair market value himself. Hence, when the Department itself does not accept DVO s report to be a final document, it cannot now, at its convenience, ignore the blatant errors in the reports by stating that DVO being a technical expert, its report cannot be questioned. Secondly, it is submitted that, it is amply clear that in the present case, the DVO has considered a total non-comparable sale which is non-comparable qua (i) the type of property (residential vs. institutional) (ii) the year of sale (2008 vs. 2011) (iii) the location of the property (Tolstoy Marg vs. Bahadur Shah Zafar Marg) and then made various adjustments to try and make it comparable by applying arbitrary factors. Hence, the valuation done by the DVO cannot be regarded as reasonable especially without providing any reason for ignoring the applicable ready reckoner rates readily available. 6.16 The property has been allotted for newspaper publication business and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct is at Page 1377 of PB IV (Paras 1, 2 and 7). 6.16.3 In this regard, attention is again invited to the ready reckoner at page 1390 of PB IV. As would be observed therefrom, the multiplicative rate prescribed for properties like this is 2 and not 3. 6.16.4 Further, reference is also drawn to the decision of the Supreme Court in S. N. Wadiyar v. CWT [2015] 62 taxmann.com 289 (SC)(Pages 56-67 of LPB IX), wherein it is held that where there are restrictive clauses in the property which has depressing effect on the value of the asset, impact should be given to such clauses while valuing the property, since a reasonable buyer would pay for the property after considering the impact of such clauses. 6.16.5 Similar view has also been taken in the following decisions: Ajit J. Mehta v. JCIT [2006] 101 ITD 11 (PUNE) (Pages 68-71 of LPB IX) AIMS Oxygen (P.) Ltd. v. CWT [2012] 23 taxmann.com 185 (Guj.) (FB) (Pages 72-78 of LPB IX) CIT v. G. S. Krishnavati Vahuji Maharajkalyanraiji Temple [2003] 131 Taxman 339 (Gujarat) (Pages 79-81 of LPB IX) Gouri Prasad Goenka Family (HUF) v. CWT [1993] 203 ITR 700 (Cal) (Pages 82-86 of LPB IX) CWT v. Smt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly, in any case, the multiplicative factor of only 2 should apply to this property. 6.17 No impact has been given for the transfer restriction on the property and the condition that 50% of the unearned increase is payable to L DO on the transfer: 6.17.1 Attention is invited to Clause (III)(13) of the Perpetual Lease Deed dated 10.1.1967 (Page 1487 of PB V), which provides that prior approval is required before transfer, and L DO shall be entitled to claim 50% of the unearned increase (profit on sale). The said clause reads as under: The Lessee shall not be entitled to sub-divide the demised premises or transfer by sale, mortgage, gift or otherwise the said premises or building erected thereon or any part thereof without obtaining the prior approval in writing of the Lessor or such officer or body as the Lessor may authorise in this behalf and all transferees shall be bound by all the covenants and conditions herein contained and be answerable in all respects thereof. Provided also that the Lessor shall be entitled to claim and recover 50% (fifty) per cent) of the unearned increase i.e. the difference between the market value of the demised premise at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the land and, hence, its value was liable to be deducted from the value of the property in arriving at the net wealth of the assessee. On the revenue's appeal to the Supreme Court, it held the issue in favour of the assessee. The relevant extract of the same is as under: Clause 13 of the lease deed also provided that whenever an assignment of the leasehold interest was made by the lessee, the assignee would be bound by all the covenants contained in the lease deed and these would indisputably include the covenant in clause(13). Clause (13) would equally bind the assignee and if the assignee in his turn wants to assign his leasehold interest in the land, he would have to obtain the prior approval in writing of the lessor to such assignment and the lessor would be entitled to claim 50 per cent of the unearned increase in the value of the land. The covenant in clause (13) was, therefore, clearly a covenant running with the land and it would bind whatsoever was the holder of the leasehold interest for the time being. It was a constituent part of the rights and liabilities and advantages and disadvantages which went to make up the leasehold interest and it was an incident whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. 2(22B) of the Act wherein the said term is defined to mean the price that the capital asset would ordinarily fetch on sale in the open marke ton the relevant date . Accordingly, at para 12.4 of the order, it is stated that a reference was made to the DVO u/s. 142A requesting to estimate the fair market value of the properties of AJL. 6.17.6 From the above, it is clear that the case of the Revenue is that the fair market value of the properties of AJL is the benefit to the Appellant. It is on the said premise that the entire addition has been made by the AO. It is not a case that a value of any benefit from the property (such as the rent amount) has been sought to be added as benefit accrued to the Appellant. Rather, the fair market value of the properties itself has been deemed as the benefit accrued to the Appellant. If that is the case, it is submitted that all the settled valuation principles applicable while valuing the fair market value of a property needs to be complied with even in the present case. Indeed, the definition of fair market value itself refers to price which a property would fetch on sale . Hence, the Ld. DR is completely wrong in contending t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hypothetical sale on the valuation date. 6.17.9 Hence, the said decision is fully applicable even to the present case and accordingly it is submitted that a discount of 50% ought to be provided in view of clause (III)(13) of the Lease Deed. 6.18 Alternatively, since the land allotment instances are available for such institutional lands, the same should have been considered for comparable instance instead of sake of residential plot. 6.18.1 The observation of GAA Valuers, registered valuers in this respect is at Page 1378 of PB IV, Paras 8 and 9. As would be observed, the instances of similar allotment of lands by the government is available in the public domain. Please see Pages 1387-1388 of PB IV and better readable copy at page 1403 of PB IV for the said rates. Accordingly, it is submitted that even if comparable instance method were to be adopted, the DVO ought to have considered these rates as against the instance of sale of residential plot in Tolstoy Marg. The Ld. DR. has not even objected to the said contention of the Appellant during the course of the hearing. 6.19 Alternatively, DVO has incorrectly chosen comparable sale instance method as most a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, as has been submitted in detail earlier, the Herald House is not a commercial property as generally understood, and it falls in the category of institutional property and it is an institutional land allotted by the government for specified purpose. 6.20.4 Further, if this submission of the Ld. DR is accepted, then it would become permissible for any person to compare the rates of any two commercial properties regardless of where they are situated. We have already seen in the case of Mumbai Property that the rates of property can differ even when they are across each other, as in the case of rate of Zone 29/166 viz-a-viz rate of Zone 29/167 at two sides of western express highway. For instance, the rate of open rate of Zone 29/166 in the year 2011 is 46300 per sqm whereas that of Zone 29/167 is 71200 per sqm which is 1.5 times of the former. 6.20.5 Besides, it is well known that Tolstoy Marg is fully commercialized lane, whereas on Bahadurshah Zafar Marg there are only institutional properties such as Bureau of Indian Standards, Office of Comptroller and Auditor General of India, office of University Grants Commission (India), etc. Also, the Bahadurshah Zafar Marg fall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the built-up area of the ground floor has been considered as 1779.08 sqm whereas the area of plot itself is 1347.76 sqm. It is submitted that the area of a floor can never be more than the area of the land itself. It is accordingly, submitted that this apparent mistake ought to be corrected while valuing the property. The observations of GAA Valuers, registered valuer in this regard is at Page 1378 of PB IV, para 11. 6.23.2 In this regard, the Ld. DR has referred to page 58 of the assessment order (second bullet point from the top) where it is stated that as per a letter dated 13.7.2017 the property had Mezzanine area and accordingly, that area has been added to Ground floor area for the purpose of valuation. In this regard, it is submitted that firstly, the property in question has no Mezzanine Floor and the basis on which the letter of AO dated 13.7.2017 refers to the same is not clear. The said letter was not shared with the Appellant. Besides, the Appellant submits that the AO has called for the comments of the DVO on the objections raised by the Appellant at the time of assessment. However, these comments were never put to the Appellant and accordingly, the Appellant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he circle rate of land plus built-up area for shops for zone 29/167 at Rs. 1,91,000 per sqm and applied that to the area of land (3478.40 sqm) plus TDR. The final value of Rs. 132.94 crores determined by the AO is at page 55 of the assessment order. 6.32 In this regard, it is submitted that valuation done by the AO is firstly in violation of principles of natural justice and secondly, completely erroneous. In this regard, attention is drawn to the observations of the Kishore Karamsey Co., Registered Valuer at Pages 798-803 of the PB-II. The said report was also submitted to the CIT(A) and the same was also sent to the AO for his remand report. However, neither the CIT(A) nor the AO has commented on this report. Further, our arguments before AO is at Pages 364 of PB-I and detailed submission for CIT(A) are at pages 1332- 1337 (Para 1.24-1.39) of PB-II. 6.33 Contentions: 6.34 The valuation of Rs. 132.94 crores in violation of principles of natural justice in absence of any show cause notice and is therefore, void. 6.34.1 It is submitted that the Appellant was not provided any notice as to why the Mumbai property of AJL should be valued at Rs. 132.94 crores. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h his own valuation. 6.35.1 In this regard, the Appellant places reliance of decision in CWT v. Dr. H. Rahman (189 ITR 307)(All)(Pages 100-101 of LPB IX), where in the context of Wealth Tax Act, it is held that the report of the valuation officer is binding on the AO. Where the AO makes 132 reference to the valuation officer to value immovable properties under section 55A of the Act, said section provides that the provisions of section 16A of the Act would apply even under the Act. Accordingly, it is submitted that the same powers would apply even under the Act. 6.35.2 Without prejudice to the above, despite DVO valuing the property twice, the AO has disregarded the same and himself done the valuation. Hence, CIT(A) should have issued a notice of hearing to the DVO in this matter before deciding the matter. Powers to make reference to the DVO under the Act is derived from the Wealth-tax Act. Section 23(3A)(a) of the Wealth-tax Act specifically requires that where valuation done by the DVO is in dispute, an opportunity of hearing ought to be given to the DVO by the CIT(A). 6.36 Without prejudice to above contentions, 6.37 The circle rate applied by the AO is comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.37.5 It is accordingly submitted that the AO has applied a wrong rate while valuing the property and accordingly, it should be ignored. 6.37.6 The Ld. DR has objected to the foregoing contention by stating that the rates notified by the authorities of Maharashtra, refer to only land with different kinds of usages. This is not a rate of building, but of land only. He has accordingly submitted that the AO was right in ignoring the rate of open land adopted by the DVO. 6.37.7 In this regard, it is submitted that the Ld. DR has grossly misread the circle rates as notified by the Maharashtra Government. In this regard, attention is again invited to the circle rates for the 2011 as notified by the Maharashtra Government at page 803 of PB-II as also circle rates for 2016 and 2013 which are at pages 1544 and 1545 of PB V. As would be observed therefrom, the header of the table is as under :- 6.37.8 As is clear from the foregoing table, it is crystal clear that the last four columns of the table apply only for determining Rate of land + building in Rs. per Sq. Mtr. Builtup and not just the rate of land. 6.37.9 The Ld. DR has placed on record the Marathi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be Rs. 61200 which is the rate of open land as per 2013 ready reckoner (attached at page 1545 of PB V) and the rate for 2016 has been stated by the authority to be Rs. 85200 which is the rate of open land as per 2016 ready reckoner (attached at page 1544 of PB V).This itself destroys the argument of learned DR that the rate of shop at ground floor should be adopted. 6.37.13 Also, if the Ld. DR is right that all the columns of the ready reckoner table are applicable only to land based on its usage, then what would be the relevance of the first column which refers only to open land. Certainly, every land would be either residential or commercial or industrial in nature. If the interpretation of Ld. DR is adopted, it would render the first column of the ready reckoner table otiose. 6.37.14 Hence, the Appellant humbly submits that the AO/DR have chosen to read the rates notified by the Maharashtra government, in a complete misguided and imprudent manner which is apparent from the language of the notification itself. 6.37.15 Accordingly, it is submitted that only the rates specified for open land can be considered for valuing the Mumbai Property of AJL being an o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pages 1544 and 1545 of PB V), it would be observed that even though in these reckoners too, the land in question has been clubbed in zone 29/167, the Municipal Corporation has categorically stated that the rate applicable to the land in question would be that of zone 29/166. Further, even here, the rate considered by the Municipal corporation itself is that of an open land and not that of commercial built up as done by the AO. 6.38.4 Further, the observations of Kishore Karamsey Co., registered valuers in this regard is at page 798 of PB II, 1st bullet. 6.38.5 It is accordingly, mentioned that for valuing this property the rate of open land for zone 29/166 as applicable for 2011 should be considered. As per the ready reckoner of 2011 at page 803 of PB II, the said rate is Rs. 46300 per sqm. 6.38.6 The Ld. DR has objected to this contention and made the following two points, namely: (i) As on 2011, the Mumbai property was falling in zone 29/167 as per the ready reckoner and the zone was changed only subsequently. (ii) In any case, the different zones would not affect the value of the property since the two zones are at two sides of the same western express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not just CTS No. 608/1A but also CTS No. 608 has been shown in zone 29/166 in the ready reckoner of 2017 (Page 58 of Revenue s synopsis) whereas in the earlier ready reckoners for 2011-2016, the same was include in zone 29/167 (Pages 63, 66, 70, 73, 78 and 82 of Revenue s synopsis), which was a wrong classification. In 2017, the Municipal Corporation of Greater Mumbai vide order dated 30th May 2017 (page 1542-1543 of PB V) admitted that this was a wrong classification and since in 2017 this mistake had already come to light subsequent ready reckoners have correctly shown the classification of the plots. Clearly, there was no reason to continue with the wrong classification once the mistake was discovered. 6.38.12Hence, it is submitted that this is not the case that the zone of the Mumbai property has changed subsequently. It is a case where the property was classified in a wrong zone which has been acknowledged and corrected by the relevant authorities subsequently. 6.38.13In fact, it is undisputed fact here, that the land in question is on the opposite side of zone 29/167 as is clear from the map pointed by the Ld. DR himself in his synopsis. It is unimaginable that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the rate for zone 29/166. Apparently, the said difference in rate has been maintained even in 2017 as per the ready reckoner rate filed by the Ld. DR (at pages 58- 59 of the synopsis) where the rate for open land in zone 29/166 is 92400 per sqm whereas rate of open land in zone 29/167 is 169000 per sqm which is 1.8 times the rate for zone 29/166. 6.38.17 Based on these rates on record, it is submitted that the Ld. DR s remark about the value of the two zone should be same should be ignored as irrelevant. Certainly, it cannot be anyone s case, much less the Income-tax Department that why stamp authorities have consistently prescribed different rates for zones, which accordingly, to the department are close enough. If such arguments are allowed, then it could lead to disastrous results in all additions made u/s. 50C. Certainly this cannot be the intention of the law. 6.38.18 Further, the Ld. DR has remarked that it is well know that Bandra Kurla Complex (BKC) is a posh commercial area and has implied that the Mumbai property should be valued in line with the BKC. In this regard, attention is drawn to photograph of the locality of the Mumbai property (pages 1617-1620 of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 sqm is not applicable in the present case. For this statement, the Ld. DR has specified that the said deduction is applicable only to such land which has no usage rights. However, the Ld. DR has not provided any basis whatsoever to support this contention. It is submitted that the DVO has clearly stated in his report (page 444) that as per the valuation guidelines, 15% deduction is to be provided when the land has more than 2000 sqm. The said view is also reiterated in the report issued by Kishore Karamsey Co. (Govt. Registered Valuers) at Page 799 of PB II. 6.39.6 To further substantiate this point, attached herewith is the relevant extract from the Book on Stamp duty Ready Reckoner Market Value of Properties in Mumbai 2011 (Page 1547-1548 of PB VI) wherein at page 3 (page 45 of the book) it is stated as under: (a) Vast Open Land more than 2000 sq. mt. should be valued at 15% less than R.R. rate (b) While valuing No-development Zone land 40% of rate applicable for developed land rate for that zones is to be taken. Further, according to area of the land valuation should be done as per vast open land as per point (a) above. Before adopting this method it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ater Mumbai to start printing press (Page 1549 1552 of PB VI), Approval from the Registrar of Newspaper of India (Page 1553- 1554 of PB VI), storage licence from the Licence department of the Municipal Corporation of Greater Mumbai for storage of various printing material in the building (Page 1555- 1562 of PB VI); fire safety compliance certificate from Mumbai Fire Brigade (Page 1563- 1565 of PB VI), etc. 6.40.9 Accordingly, AJL inaugurated the newspaper publication activity and Nehru Library and Research Centre on November 14, 2021. The pictures for inauguration are at pages 1566- 1578 of PB VI. Further, the copy of the masthead of the first newspaper published on November 14, 2021 is at page 1579 of PB. Accordingly, it is submitted that today, the ground and the first floor of the building is used for the publication activity. The photos of the office and press activity is at pages 1580-1595 of PB VI. And, the second floor of the building is being used by AJL as the Nehru Library and Research Centre. The photographs of the library and research centre is at pages 1596-1606 of PB VI. 6.40.10 It is accordingly submitted that the property is being used by AJL for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost of publishing a newspaper is higher than the price at which the same is sold. Therefore, in order to promote press and ensure its freedom, the Government allots lands/buildings to various entities engaged in the newspaper business so that they can recoup their losses from publication business and survive by commercially exploiting the said allotted lands/buildings by renting out the same. The lease deed allotting the said lands/buildings specifically permits the lessees to use the property for renting out. Indeed, said practice of renting out the properties by newspaper business is permissible in standard newspaper leases and allotments of immovable property for newspaper user. The aforesaid facts are matter of public knowledge and policy. In support, reliance was placed on the judgment of Hon ble Supreme Court in the case of Govt. of AP v. Maharshi Publishers Pvt. Ltd.(Civil appeal 7152-7157 of 2002)(Page 1621-1624 of PB VI). 6.40.13 In this regard, attached herewith is the list of certain properties of major newspaper companies in Delhi along with the list of the tenants for various such companies at page 1614-1616 of PB VI. Thus, it was submitted that practice of allotm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attached to it which warrants a proper discount. 6.40.19 Besides, it is submitted that the Ld. DR is wrong in saying that newspaper activity is not a charitable activity. The activity of AJL may not be eligible for section 11 exemption since it has not applied for 12AA registration, however, it cannot be denied that the activity of publishing newspaper is a part of general purpose utility and 146 therefore, charitable in nature. In this regard, attention is invited to the decision of the Privy Council in the case of The Trustees of the 'Tribune' In re (7 ITR 415) (Page 1625-1628 of PB VI). 6.40.20 Accordingly, it is submitted that even in this case, considering the objects of AJL since inception, the activity of AJL is surely in nature of advancement of general public utility, irrespective of whether it claims or is eligible for exemption u/s. 11 of the Act. 6.40.21 The Ld. DR has further stated that the usage can always be changed with government permission and therefore, this is not relevant. The issue is not whether the usage can or cannot be changed. The issue is that with this usage what is the value of the land. Further, it would be appreciated that eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it thinks fit in its absolute discretion. Though the quantum is not stated in this case like in the case of Delhi and Patna property, it is submitted that the Supreme Court has clearly stated in CIT vs. P.N. Sikand (107 ITR 922)(SC) (Pages 47-55 of LPB IX) that where there is restrictive covenant on the property, which requires that a % of the unearned increase in the value of the land is to be paid to the lessor, in such a case, the fair market value of the land would have to be reduced by the said % of unearned increase in value of land on basis of hypothetical sale on valuation date. 6.1.1 It is accordingly submitted that the contention of the Ld. DR is to be ignored. The Ld. DR has further stated that the Appellant has not provided any proof of payment of such premium. In this regard, it is submitted that it is no one s case that the Appellant has sold the property, hence, the question of it paying any premium at this stage does not arise. Besides, as submitted above, the Appellant indeed is required to pay annual fee of Rs. 38.76 lacs annually for the permission recently received to give portion of the property on lease. 6.42 No deduction has been given by the AO for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.49 No discount has been provided even though the property was under 100% encroachment as on the valuation date: 6.49.1 It is submitted that the Patna property is 100% encroached by the slum dwellers Jhuggi/Jhopdis since atleast 2007. The DVO himself has acknowledged said fact in his report. At page 4 of the report, under the head Any Special Observations , the DVO has mentioned that unauthorised encroachment appears to have taken place in the plot . (Page 416 of PB I, last para). However, the DVO has still not provided any adjustment for the same while arriving at the value of the property on the pretext that the bona fides of the encroachment could not be verified. 6.49.2 In this regard, attention is invited to Pages 1417 and 1418 of PB IV (better copies at 1426-1428 of PB IV), wherein attached are the copies of letters dated September 19, 2007 written by AJL to the Governor of Bihar and the Chief Minister of Bihar, respectively requesting appropriate actions for removal of encroachments on said land 6.49.3 Attention is also invited to Page 1416 of PB IV, which contains an aerial photograph showing the encroachments on said land. 6.49.4 Further, attention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided for the same. 6.50.1 It is submitted that the plot was allotted to AJL by the Bihar Government for a specific use i.e. for newspaper publishing work only. This is clear from the terms of sanction by the Patna Nagar Nigam dated October 27, 2016. Please see page 1412-1413 of PB IV. As would be observed from the first clause therein, it is specifically provided that the land parcel cannot be used for any other purpose than defined, i.e. paper publishing. Further, the second last clause of the letter clearly provides that the land parcel, under no circumstances, can be used for industrial or commercial purpose and has only defined use of newspaper publishing. 6.50.2 Even as per clause 6 of the Lease deed dated April 18, 1988, the said land could not be used for any purpose other than paper publishing and there were restrictions on carrying on any trade or business on the said land. Relevant extract of the deed is at page 1415 of PB IV. Entire lease deed is at pages 1493-1516 of PB V. Clause 6 is at page 1499. 6.50.3 Attention is also invited to the Recital of the Lease Deed which states that the land is allotted for the purpose of publication of National Herald ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has ignored that the plot has limited marketability with restrictive market participants. In this regard, kind attention is invited to Clause 16 of Lease Deed dated 18.4.1988 which states that AJL shall not transfer the land except with previous consent of collector, which shall be contingent upon transfer fee of 25%. (Pages 1493 1516 of additional evidence PB V. Relevant clause 16 is at page 1504). 6.51.2 It is submitted that when the land was allotted for specific purpose of newspaper publishing and was restricted to be used for any other trade or business, the marketability of the property is seriously affected. Such restrictive covenants affect the marketability of the plot by not permitting open market sale and restricting any gain from sale of land parcel to the allottee. Unlike openly marketable properties, wherein number of market participants participates to establish the rate, in case of subject property, rate is affected by factors such as effect of the restrictive clauses, regular permissions/sanctions from the government, etc. Appropriate adjustments on the derived market rate ought to have been provided by the DVO for the same, which has been completely ignored ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be ignored and held to be invalid. Indeed, it is submitted that all the foregoing objections formed part of the observation report of the registered valuer submitted to the AO. However, from the remand report submitted by the AO, it is observed that the AO has not made any adverse comment on said objections whatsoever, which clearly shows that even he agrees with said errors in the DVO s report. 6.55 ERRORS IN VALUATION OF THE LUCKNOW PROPERTY 6.56 The said property has two separate independent builtup structures built on a plot of land. One building is known as Nehru Manzil, which is a poorly maintained dilapidated structure comprising multiple shops. The other building is Nehru Bhawan, known as Indira Gandhi Eye Hospital and Research Centre which is given on lease to Rajiv Gandhi Charitable Trust. 6.57 The Lucknow Property has been valued by the DVO. The DVO report is at pages 412-431 of PB I. 6.58 As would be observed, at Page 418, DVO has considered circle rate of the land for computation of value. He has considered circle rate as at 1.8.2010 and 5.8.2013 and worked out an average. He has further added 10% for prime location and 10% for two side ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the property has two sides roads. It is submitted that these adjustments are not at called forand the DVO has merely arbitrarily increased the value by making such adjustments. 6.62.2 The observation of GAA Valuers, Registered Valuers in this regard is at Page 1455 of PB IV, Para 1. 6.63 Adjustment to derive circle rate for the land on account of partly tenanted, has been ignored while determining the fair market value. As noted by the DVO, Nehru Bhawan on the land was given on rent to Rajiv Gandhi Charitable Trust, which runs an eye hospital. 6.63.1 It is humbly submitted that DVO himself has noted that the Nehru Bhawan was given on rent. At Page 3 of the Report, Para 6.4,(Page 415 of PB I), he has noted that Rajiv Gandhi Charitable Trust was tenant of the property. However, for the purpose of adopting the circle rate of the land, the DVO has ignored said fact. At para 6.6 and 6.7, he states that the details of rent from the property is not relevant. Further, at para 7.2, he states that the most appropriate method is adopted on the basis that the property is self occupied. 6.63.2 It is submitted that when the property has been partly tenanted, it is against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and affects the marketability of the property. Accordingly, appropriate adjustment should be provided to take the impact of the same on the value of the land. 6.66.2 Observation of GAA Valuers, Registered Valuers in this regard is at Page 1456 of PB IV, Para 11(e). 6.67 It is submitted that the DVO has not factored in any of the foregoing adjustment while valuing the land which makes the valuation unreliable and incorrect. 6.68 As regards valuation of Nehru Manzil: 6.68.1 It is submitted that various adjustments due to specific factors of the building has not been considered by the DVO while arriving at its value. In this regard, attention is invited to page 1453 of PB IV, wherein description of the Nehru Manzil Property has been given. As would be observed therefrom, the property is a dilapidated structure; The building is not equipped with necessary MEP (Mechanical, Electrical, and Plumbing) services; Only three floors (lower ground floor, upper ground floor and first floor) exists in the building whereas as per the sanction plan, approval was obtained for basement, ground floor and 14 upper storey structure; There are total of 210 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Page 1455 of PB IV, Paras 8 and 9. 6.70 No adjustment provided in respect of sold portion of the property 6.70.1 Besides, DVO report fails to capture the portion of the property, which is sold. As stated earlier, 9 shops in the building were sold by the company. These sold portions is neither occupied nor in possession of the company. This creates a negative lien, which reduces the market value drastically. Hence, a discount ought to have been provided for the same. Besides, even the area considered by the DVO should be reduced by the area of sold shops. 6.70.2 The Diagramme of shops not in possession of AJL is at page 1465 of PB IV. 6.70.3 Further, the observation of GAA Valuers, Registered Valuers is at Page 1455 of PB IV, Para 3 and page 1456 of PB IV, para 11(b). 6.71 Depreciation has been wrongly considered from the year 1997-98 even though the building was constructed in the year 1987-88 6.71.1 Attention is invited to Annexure A2 of the DVO report (Page 425 of PB ), wherein it is observed that the DVO has considered depreciation on the building for the period 1998 to 2011 on the basis that the building was constructed in 1997- 98. In this regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at para 7.2, he states that the most appropriate method is adopted on the basis that the property is self occupied (Page 416 of PB I 6.76.2 It is submitted that when it is established that the property is rent, the property ought to be valued by applying rent capitalisation method. In this regard, reliance is placed on the following decisions: CGT v. Hans Raj [2001] 119 TAXMAN 129 (DEL)(Pages 23 of LPB IX); Smt. Savita Mohan Nagpal v. CWT [1986] 26 TAXMAN 640 (RAJ.)(Pages 24-28 of LPB IX); CWT v. Seth Gokuldas Pradeep Kumar [1994] 77 TAXMAN 415 (RAJ.)(Pages 29-31 of LPB IX) Dr. Miss V. Banka v. WTO [1995] 52 ITD 623 (DELHI)(Pages 32-35 of LPB IX). 6.76.3 The observation of GAA Valuers, Registered Valuers in this regard is at Page 1455 of PB IV, Para 2. 6.77 Depreciation has been wrongly considered from the year 2007 even though the building was constructed in the year 1981. 6.77.1 Attention is invited to Annexure A1 of the DVO report (Page 422 of PB I), wherein it is observed that the DVO has considered depreciation on the building for the period 2007 to 2011 on the basis that the building was constructed in 2006-07. In this regard, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n dismissed by the AO. e. As regards the impact of physical inspection, it is submitted that it has no bearing for the purpose of valuing the land especially since inspection happened in 2017 and the valuation date is in 2011 and circle rates have been adopted for valuation. Further, merely because inspection could not be done, it cannot validate the errors in the valuation. f. It is accordingly submitted that the valuation ought to be revised and corrected for the errors committed by the DVO/AO. 6.78.3 It is submitted that the Appellant has now substantiated the errors pointed out, such as date of construction of the properties, the dilapidated condition of the property, etc. through various evidence and accordingly, the same ought to be considered. 6.79 Besides, the objections with respect to the method of valuation, such as ignoring the rent capitalisation method, considering Delhi rates instead of Lucknow rates, also ought to be considered. 6.80 In view of the foregoing, the Appellant humbly submits that the method adopted by the DVO in valuation of the Lucknow Property is fraught with various mistakes/errors. Accordingly, said report of the DVO ought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failed to notice that the Appellant has not raised this contention now. As per contention raised at paras (c) and (f) at pages 21-22 of LPB IX, the Appellant s contention is that the circle rate of the land in question for the relevant year is Rs. 47000 sqm (evidenced by ready reckoner at Page 1444 of PBI V) and that the rate of 96000 adopted by the DVO is without any basis and as per ready reckoner (Page 1435 of PB IV, para 3). The Ld. DR has not objected to this contention and accordingly, it is submitted that the same ought to be accepted. 6.87 The land is an institutional land allotted only for the publication activity and had several restrictive covenants, for which discount ought to have been provided. 6.87.1 It is submitted that as per terms and conditions of re-allotment letter dated 28th September 2005 issued by HUDA, clause 14, the plot cannot be used for any purpose other than for which it has been allotted (Please see Page 1439 of PB IV. The complete document is at pages 1517-1520 of PB V.) 6.87.2 Further, as per letter dated 30.10.1992 issued by Estate Officer, HUDA, the specific use of the building so erected on the plot shall be used for Hindi Daily Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for such user restrictions of the land. 6.88 When the rate at which the land was allotted to AJL is compared with the prevailing market rates for residential and commercial property, it would be observed that the allotment rate is upto 97% less than the prevailing rate for commercial property, which clearly shows that normal circle rate cannot be considered for these types of property. 6.88.1 It is submitted that the land parcel was re-allotted by HUDA to AJL at a premium of Rs.59,39,200/- in year 2005 with amount of Rs. 2,73,000/- already in custody of HUDA by earlier allotment dated 16th December 1981. Thus, the derived allotment land rate for the said property is Rs. 1,850/Sqm, which is 74% less than the collector rate of Rs. 7000/Sqm for residential plots in year 2005 and 97.43% less than the collector rate of Rs. 76000/sqm for commercial plots of nearest sectors notified in year 2005. 6.88.2 Copy of re-allotment letter dated 28.9.2005 showing the allotment price at Rs. 59.39 lacs in the year 2005 is at Page 1517 of PB V. 6.88.3 Further, the rates for residential and commercial properties in the year 2005 is at Page 1443 of PB IV. 6.88.4 Further, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t manner, which is apparent from various documents on records now, ignoring such errors in valuation would lead to gross injustice to the Appellant and unjust enrichment of the Revenue, which can never be permissible in law. 6.93 Also, since valuation of the properties is to be done as on 26.2.2011 and not current status, and also the same have been done based on circle rates, it is submitted that nothing significant turns on the physical inspection of properties. Besides, most of the objections of the Appellant with respect to this property is with respect to the valuation of the land and not the building. Out of the total value of Rs. 413.40 crores determined by the AO/DVO, value determined for land is Rs.385.12 crores which constitutes around 93% of the total value. The bifurcation of the values determined for land and building is as under: (Rs. in crores) Property Land Building Total Value Delhi 194.75 7.09 201.84 Mumba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt or unsubstantiated. The AO infact obtained comments of the DVO on such objections raised by the Appellant, which were never shared with the Appellant. Solely based on said comments, the AO has dismissed the arguments raised during assessment. Hence, the Appellant did not even have any opportunity to rebut to the comments of the DVO based on which all the objections have been dismissed by the AO. It is accordingly, submitted that the Appellant had no other option but to file additional evidences before the appellate authorities to support its objections. In any case, these objections and evidences are clearly relevant for the purpose of the valuation and which were even placed before the AO for his remand report on merits. It is accordingly submitted that the valuation ought to be revised and corrected for the errors committed by the DVO/AO. Without prejudice to above, if necessary, the Appellant humbly requests that the matter be remanded back to the AO/DVO for considering all the evidences now on record and recompute the fair market value of the properties. ARGUMENTS ON BEHALF OF THE REVENUE 156. On behalf of the Revenue, Shri G.C. Srivastava, ld. Special Counsel subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which came to the direct/indirect ownership, control and enjoyment of the Appellant, the A.O. referred the matter to a technical expert like District Valuation Officer ( DVO ) under Section 142A of the Act. A very critical aspect of the matter needs to be highlighted here. The DVO gave a number of opportunities to the Appellant to allow physical inspection of the properties so that proper valuation could be done. However, the Appellant taking one or the other pretext did not allow physical inspection of the property. It s subsidiary company, i.e., AJL also did not allow any physical inspection. The DVO brought these facts to the notice of the Appellant, however no attempts were made to allow the statutory authority to discharge its official functions in a proper manner. After the valuation was done and the matter came in appeal, the Appellant came forward with a lot of additional evidence before CIT(A) which could have been filed before the DVO if the Assessee had chosen to cooperate, but was not done. 159. He submitted that, this raises a very fundamental question, that if an assessee deliberately and knowingly shown defiance of law and procedure, then the adverse inference m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved was a valuation of a gifted property and further that the said property comprised a flat and a shop and the properties were tenanted for a very long time. Such facts do not exist in the present case and if the property is open to commercial exploitation in more than one way, the land and building method was rightly adopted by the DVO. 164. On the issue that the inconsistencies pointed out in the valuation report of the DVO were not considered by the DVO/A.O./CIT(A), he submitted that the order of assessment as also the order of the DVO clearly points out the lack of cooperation on the part of the Appellant in the course of these proceedings. The denial of opportunities of physical inspection and failure to furnish the relevant documents have been highlighted in detail by the A.O. in Para 12.5. The objections raised by the Appellant before the A.O. stand examined and considered in Para 12.7 and thereafter. The CIT(A) has not admitted the evidence for the reason that the Appellant failed to satisfy the appellate authority as to why these pieces of evidence could not be furnished before the assessing authority. However, he called for the remand report and has considered the obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sting that the land will have a lower value for the reason that at a much later point of time, an amendment was made to indicate that the land falls in zone 29/166 and not in zone 29/167. The Appellant has pointed out that a mandatory deduction of 15% to the rate applied ought to have been given. It may be brought to the notice of the Hon ble Bench that the 15% mandated deduction is available for such open land which have not been assigned any usage rights. In this case, the property was already given usage rights and therefore the Appellant would not be entitled to such deduction. The Appellant has further contended that the property was allotted to them for specific purpose and therefore, it cannot be put to any other use. This would substantially bring down the value of the property. According to the Appellant, these restrictive clauses have depressing effect on the value of the property. Reference is made to a number of decisions referred to on Page 12 of LP-IX. It is submitted that the Appellant had discontinued the activity of publication of newspaper in 2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b. Delhi The Appellant has stated that the A.O. has committed an error in not giving deduction for 50% of the unearned increase payable to L DO on the transfer. It is submitted that the land is given for the purpose of construction of building for commercial purposes. There are restrictions only to the extent that the building shall not be used for running of a cinema or restaurant or any other activity which may be noisy, noxious or offensive. (Reference may be made to Page 1485 of LPV). Therefore, this is not really any effective restriction on the commercial use of the building. As regards the provision relating to payment of 50% of unearned increase, it is submitted that the same is payable only at the time of transfer of the rights. (Reference may be made to Page 1487 of LP-V). This is a payment stipulated in the event of a specific eventuality i.e., the transfer of the leasehold rights. In the present case, no such transfer has happened since the grant of rights to AJL as early as in 1967. These restrictions on the transfer of rights are unascertainable in nature and are dependent on future policies of the government f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Appellant has objected to comparable sale instances taken by the DVO. The DVO has clearly stated in his report that there are no clear available sale instances in that area and therefore the rate for the nearby area has been taken and suitable adjustment has been made thereto. As regards the difference in the area, this aspect was already raised before the DVO and the DVO has pointed out that since physical inspection of the property was not allowed, the area of mezzanine floor was added to the ground floor. When the building is being used for commercial purposes, the area of mezzanine floor will also have a commercial floor, may be with some differential. c. Lucknow The Appellant has contended that the DVO should have provided adjustment for the property being rented out and some portion of the property having been already sold. It is submitted that none of these objections were raised before the AO or the DVO. Besides, the DVO has not adopted rent-capitalization method for valuing the property. He has gone by the land and building method. The value of land and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arisen during the year. This accrued benefit to the appellant was underlying value of these shares by way of right to enjoy all the benefits embodied in the commercial assets held by the AJL at several locations in the country as well as direct or indirect enjoyment of substantial income from such business assets. AO has held that value of benefit is represented by Fair Market Value (for short FMV ) of the business properties, exploitation whereof would yield benefit of such assets as exist on the date of taking over of the AJL by the assessee. The FMV has been defined under section 2(22B) in relation to the capital assets to mean the price the capital asset would fetch on the sale in the open market on the relevant date and if price is not ascertainable then such price has to be determined in accordance with the rules made under this Act. The AO has proceeded with determination of FMV by making reference to the DVO in exercise of powers 142(2A), who has submitted his detail report to the AO. AO has discussed the entire background, entire circumstances and the events which took place during the course of reference at the stage of DVO who conducted the valuation. One very importan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, total value received or assessed is only an amount of Rs.18.32 crores. 170. The aforesaid contention raised by the ld. Sr. Counsel on behalf of the assessee is not acceptable on the facts of the present case, because here the acquisition of shares is only a step in the scheme devised by the interested parties for taking over the AJL and consequently, the underlying assets in the form of immovable properties held by the AJL in prime locations of the country. We have already held that it is a part of adventure in the nature of trade. Here again, it is reiterated that the appellant company had acquired/received receivables of Rs.90.21 crores from AICC and sold/exchange the same to AJL for the shares of an equal value of the said company. This acquisition of shares is only of an event in the chain that constituted an adventure in the nature of trade. Here, the appellant never targeted the shares of a loss-making defunct company whose business has already been stopped. In a third party scenario and in a comparable transaction, no person or entity would have invested in the shares of such a non-operational and non-income generating company. The shares here have been acquired only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied to a property on Tolstoy Marg which itself is in far better location and commercially far more valuable than the property being valued. DVO has taken Rs. 4,81,669.64 per square meter assuming that this is a residential property and has used a multiplication factor of 3* for commercial use. Instead of using this approach, the DVO should take comparable commercial properties in that area. Plot No.5 Tolstoy Marg is at a distance of approx. 4 km. from the property being valued and is a significantly more commercially attractive locality with higher far than the property being valued. Therefore, not comparable. Tolstoy Marg building transaction took place on 10.03.2008 that is 35 months prior to the date of valuation of this property. This period (2008-2011) is inflated by DVO at the rate of 21% per annum which is exorbitant and not in line with market inflation which is much less, i.e. closer to 5% per annum. Plot size (land area) as given in Para 5.1 and in Annexure B is = 1347.696 square meters. The constructed Area on the Ground Floor 1779.08 square meters as given in Annexure Ai and used for calculation purposes by DVO is factually incorrect as it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Electric Installation, Water supply Sanitary Installation etc. are adopted for basements than upper floors. A normal practice has been adopted in valuation report, in absence of the property inspection. It is not clear as to how part tenancy impacts the FMV of the property. 175. The AO, after considering the objections of the appellant as well as the comments of the DVO has taken the value of the property at Rs.201.84 crores. 176. First objection raised by the appellant is that DVO ought to have considered the circle rate instead of adopting comparable sale instance method especially in the absence of any proper comparable instance and contended that the ready reckoner rates for the concerned property was readily available and circle rates for Delhi were released vide Notification dated 04.02.2011 which also falls within the same month i.e. valuation date. 177. Its matter of fact that the property at 5A, Herald House, Bahadurshah Zafar Marg, New Delhi is situated at one of the most prime locations of Delhi, wherein various high value commercial establishments are there, with a very high market value of rentals and huge commercial viability. For such place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort, has the appellant come out with, what should be the value of the said property, according to them. Instead of that, they have sought to point out various objections and infirmities in the DVO s valuation report rather than giving what would be FMV of such property according to them. At least, the appellant should have come up with certain proper valuation benchmark and to compare so as to determine the FMV of the said property with suitable justification rather than merely pointing out various objections and defects in the DVO s report. 178. The valuation is always based on fair estimate which is in turn based on certain calculations and workings under prescribed formulas and methods either as per CPWD rate or as per comparable sales instance method etc. In the absence of any value shown by the appellant, it is very difficult to either accept various objections raised by the assessee on DVO s report or to accept contention that the circle rate alone should have been adopted, which in Delhi for most of the zones are not determinative of actual market rate which are manifold higher. 179. Here in this case, it needs to be appreciated that only the basement and first floor o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of the property being commercial, situated in a highly commercial area of Delhi, the DVO has rightly applied the multiplying factor 3 to take into consideration these factors. In the absence of any effective restrictive clause, the cases relied upon by the Ld. Senior Counsel for the Appellant are not applicable and the plea deserves to be rejected and we do accordingly. The judgment relied upon by the appellant on CIT v. P.N. Sikand (supra) is not applicable on facts as here it is not a transfer of the property to a different owner albeit AJL continued to be owner and value is to be seen as benefit arising to YI as discussed above. 183. Now coming to the other limb of the argument that 50% of the unearned increase is payable to L DO, it is found that the same is payable only at the time of transfer of the ownership. In the first place the clause only stipulates the entitlement of the Lessor. As a matter of fact, there are no such instances of transfer in this case for all these years. The rights of the authority are of unascertainable nature and are dependable on future policies of the government from time to time as well as the conduct of the assessee. In the peculiar fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em was the right value on the given date. No sale instance has been pointed out to suggest that the DVO should have taken this sale instance and not that sale instance. In the absence of any instance which could have been relevant, it would not be correct to point fingers at the sale instance which the DVO could find out and rely on, and make an unsubstantiated argument that the approach of the DVO was not correct. It has already been pointed out that both, Bahadur Shah Zafar Marg and Tolstoy Marg fall in the same zone i.e., Zone A. The nature of property is commercial. The DVO has already given a discount of 5% for these factors. Under these circumstances, we do not find any merit in these contentions and these are accordingly rejected. 186. The action has been taken by the L DO for the reason that it was not being used for press activity rather, it was used for other commercial purposes, without their consent . It appears that the authorities were not even informed of the gross violations and hence the authorities initiated the action. However, this would not suggest that the property was not open for commercial use or the multiplying factor needs to be lowered on that accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, considering the entire facts and material on record and in the absence of appellant itself giving any FMV, we do not find any infirmity in the valuation of the DVO which has been adopted by the AO and accordingly the valuation of Rs.201.84 crores for the Delhi property, i.e., 5A, Herald House, Bahadurshah Zafar Marg, New Delhi is confirmed. PATNA PROPERTY 192. Regarding Patna property, the DVO has determined the FMV of the commercial plot of land at Rs.5,77,52,700/-. The only objection which has been raised is that no adjustment on account of encroachment of land has been given in the valuation report. The DVO has rejected the claim on the ground that there was no encroachment of land. Now this has been demonstrated before us by various additional evidences in the form of letters where the appellant has written letters to Authorities to the State Government of Bihar for getting the premises vacated which has been encroached. Another objection has been raised that it is leasehold property, therefore, the value should have been reduced. 192.1 Here in this case, property was allotted to the AJL for publication of newspaper which itself has a commercial purpose, howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,25,60,000/- in respect of Panchkula property. The contention with regard to restrictive use of the property is not tenable for the reasons given herein above. VALAUTION OF NEHRU BHAWAN AND NEHRU MANZIL OF LUCKNOW PROPERTY 195. The DVO has determined the valuation of the properties at Lucknow known as Nehru Bhawan and Nehru Manzil constructed in the year 2006-07 and 1997-98 at Rs.40,59,06,400/- and Rs.64,23,51,100/- as on 26.02.2011 13.07.2017 respectively. The land of both the properties have been valued at circle rate notified by the State Government and FMV of building was determined on the basis CPWD plinth area rate at the relevant point of time. As observed by the AO, the DVO has made the valuation in the following manner :- DVO has considered circle rate of the land for computation of value. He has considered circle rate as at 1.8.2010 and 5.8.2013 and worked out an average. He has further added 10% for prime location and 10% for two side road., thereby arriving at circle rate of Rs. 30,000 per sqm. Accordingly, the value of land is arrived at 6469.33 sqm x Rs. 30,000 = Rs. 19,40,79,900/-. Further, the value of Nehru Bhawan and Nehru Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent has not been made for half constructed and poorly maintained and dilapidated structure of the property and should be computed while taking consideration of the status of the land as it impacts marketability of the said property. Further, it was pointed out that construction of building of Nehru Manzil was stopped in 1986-87 and same could not be completed. All those factors should have been taken into consideration. We find that DVO has given 22% discount on the unfinished property which, according to the appellant, was not correct because the said structure is not equipped with necessary infrastructure and mechanical plumbering services. Even the completion certificate from the local authorities was not obtained. Even if we accept all the contentions, which have been raised then again no quantification has been given by the appellant that how much deduction the appellant has contemplated nor the same has been mentioned by approved registered valuer. 200. However, in the interest of justice and taking note of all such objections, we hold that instead of 22% deduction, a deduction of 30% should be given. Accordingly, the appellant would get relief of extra 8% on the value a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... velopment (in sqm) 6,435.04 (F)=(D)+ (E) 8 Derived FSI (land rate) (in Rs./sqm), based on sale instances 69,440.00 (G) 9 Value of Plot (in Rs.0 446,849,578 (H)=(F)X(G) 10 Deduct for : (i) Cost of acquisition of TDR (3478.40 x 3900 x 10.76) (in Rs.) 145,967,578 (I) 11 Fair Market Value of the land as on 26.02.2011 300,881,600 (J)= (H) (I) FMV 30,08,82,000 203. However, the AO found various infirmities not only in the method of valuation but also in the value adopted by the DVO looking to the various factors which have been highlighted by him in the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Open land (not falling in following categories 71,200/- 1,69,000/- Land for residential complex 1,18,800/- 2,89,900/- Land for office 1,50,200/- 3,10,900/- Land for commercial complex/ shop etc. 1,91,100/- 3,76,700/- Land located in industrial area 1,32,500/- 2,89,900/- 205. Finally, the AO has computed the valuation after taking the FSI and treating it to be commercial property of the land in the following manner :- Total FSI of the land (15% deduction of FSI as allowed by the DVO Mumbai was rejected for the reason that such deduction was without any basis in case of land for commercial complex) 6,956.8 sq.mtr. The circle rate for the land for commercial Complexes as on 26.02.2011 Rs.1,91,100/- per sq.mtr. The circle rate for the land for commercial Complexes as on 13.07.2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Maharashtra Government and also the circle rates for 2016 and 2013. 208. Another important fact which has been brought on record that zone which has been taken by the DVO is 29/167 which is not correct because later on there was correction of zone and now the property falls in zone 29/166 for which the circle rate is lesser. Further our attention was also drawn to letter dated 30.05.2017 of the Municipal Corporation of Greater Mumbai wherein they have admitted the wrong classification of zone for the Mumbai property and the correct zone of the said property is 29/166. He pointed out that the rate of 2013 has been stated to be Rs.61,200/- which is the rate of open land and rate of 2016 has been stated to be Rs.85,200/-. Thus, the rate of wrong zone should not be applied instead of the rate of correct zone and that too of rate for the open land be applied. Further, he also brought to our notice that AJL vide letter dated 15.02.2017 to Dy. Director Town Planning, Mumbai asking for correction of the ready reckoner with regard to zone and Municipal Corporation of Greater Mumbai has passed an order dated 30.05.2017 acknowledging that there was wrong classification of zone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date is 2011 when it was in zone 29/167 and therefore, rate as given for this zone will be applicable. Thus, this contention of the appellant is rejected. 213. Though we agree that on the valuation date, it was an open land and no construction was carried out which only started in the year 2013, when the appellant got the permission for the commencement certificate to construct the property and completion certificate was obtained in the year 2016. As per the lease deed on which our attention was drawn, it is very clear that the land was open use for commercial purpose i.e., for publication of newspaper which itself was the business of the AJL, and it had the full potential for exploiting for commercial use and also open for change of use by paying of certain fee/charges to the State Government. Thus, all throughout, the property had a commercial value attached to it. Even the DVO has noted that at the time of inspection, the land plus building was constructed and it had all potentials of the commercial use by the appellant. As in the case of earlier properties, for this property also, nowhere the appellant has submitted its valuation report nor indicated as to insofar as what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the property, area, usage and market demand especially in very high commercial zones where the property is situated. Thus, we are not agreeable to DVO s valuation and AO was justified in rejecting the valuation of the DVO. 215. Even if we accept the contention of the appellant that there was no construction of the land in the year 2011, the only adjustment that the appellant would be entitled to, is that the cost of construction should get reduced from the value adopted by the AO. Now the cost of construction for estimate purpose for reducing the cost of construction, we are taking the CPWD plinth rate of construction of ground floor with full FSI which we have taken from official guideline from the site of CPWD Website (www.cpwd.gov.in) and same is calculated in the following manner:- Calculation of cost of Construction Sl.No. Description Ground Floor of Floor Height 3.35 M 1 2 3 Floor Height 3.35 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the reason that certain part of land may have to be left open for common facilities and activities. This deduction itself takes care of the objection. 217. Before parting, it would be relevant to mention here that while valuing the property one has to see the location, commercial potentiality as of date and value in open market even at the valuation date the property had potential of good price or not. This is purely an exercise of estimate which is based on certain parameters and guidelines. The rate of open land which has been mentioned does not mention as to whether the said amount is for commercial use or incidental use or for residential use or for any other purpose. If a land has potential use and ultimately it has been used for commercial purpose by the appellant, the method in which we had upheld the valuation is more reasonable. One very important fact which we have already discussed above and is again reiterated that, the rate of open land is around Rs.66,000/- per sq.mtr. but the rate of land with building for commercial use is Rs.1,91,000/- per sq.mtr. or so which is nearly three times of the rate of open land. This huge differential rate cannot represent only the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch our attention was drawn at the time of hearing by Shri Srivastava that, Dotex was one of more than 50 paper companies which were floated and controlled by entry operators, namely Mr. Sunil Bhandari and Mr. Sunil Sanganeria to provide accommodation entries. Dotex was used for providing accommodation entries of loan/share capital by earning commission from 1% to 5% of cheque amount. The AO observed that during the course of assessment proceedings, the assessee was required to prove the identity, genuineness and creditworthiness of Dotex by filing all the relevant evidences and to substantiate the entire transaction. The assessee in response had filed following documents before the AO vide letter dated 07.06.2017:- Name, Address, PAN, Company Identification Number, email id, phone number, fax number of the lender. Letter from Dotex dated December 24, 2010 giving the said loan, which provides all the details of the loan such as date of taking loan, mode of payment, terms and conditions for taking loan and repayment thereof, etc. Confirmatory letter from Dotex dated May 2, 2011, confirming the balance of loan and outstanding interest as at March 31, 2011. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given as per confirmation through cheque on 24.12.2010 why it took 51 days to reach the assessee? 223. Insofar as assessee s contention that assessee had actually paid interest on loan of Rs.1 crore, the AO after examining the audited profit loss account and balance sheet noted following facts:- It is evident from the audited P L A/c and balance sheet as on 31.03.2011 that the assessee had claimed deduction of interest of Rs. 1,72,603/- in P L A/c. However, the amount of Rs.1,72,603/- was disclosed as '''interest accrued but not due on inter corporate loan under Schedule 6 Current Liabilities Provisions of the balance sheet. During the course of assessment proceedings, no evidence that interest of Rs. 1,72,603/- actually paid to the creditors was filed except for an evidence of TDS of Rs. 17,260/- on 19.03.2012. It is pertinent to mention here that as per the copy of the confirmation, the assessee had agreed to pay interest @ 14% per annum to creditors. Accordingly, the interest of Rs. 3,50,000/- for the period from 24.12.2010 to 31.03.2.11 was required to be paid after deducting TDS of Rs. 35,000/- and as against the same the unproved claim of interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng loan and repayment thereof, etc Page 246 of PB I iv. Confirmatory letter from Dotex dated May 2, 2011, confirming the balance of loan and outstanding interest as at March 31, 2011. Page 247 of PB I v. Letter dated April 25, 2015 from Dotex acknowledging the repayment and full settlement of the loan by the Appellant. of PB I Page 248 vi. Copy of loan account as reflected in the books of the Appellant Page 249 of PB I vii. Form 16A issued in respect of TDS deducted on the interest, Form 27A, Quarterly statement of TDS and proof of deposit of TDS deducted for interest accrued for the year under consideration i.e. FY 2010-11. Pages 250-253 of PB I viii. Details of year wise interest accrued and paid by the Appellant since inception till the date of repayment, along with the bank statement showing payment of interest Page 256-261 of PB I ix. Bank Statement showing the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scharged by the Appellant. While coming to this conclusion, various allegations have been made by the AO, which have also been relied by the Ld. DR. The said allegations and the Appellant s reply thereto has been illustrated before us in the following manner: AO s allegation Appellant s reply The letter dated 24.12.2010 from Dotex (page 246 of PB I) did not bear the address and PAN of the creditor (Appellant) and that the name of the authorised signatory was not mentioned in the letter page 89, para 20.1 of the assessment order There is no legal requirement that the letter issued by the lender should mentioned the address and PAN of the borrower. The PAN and address of the lender has anyways been provided to the AO. The subsequent letters submitted in the same reply in fact bears the address and other details of the lender. The confirmation letter of Dotex is on plain paper and does not seem to possess a letter head of its own. (Page 91 of the assessment order) Confirmation letter is at page 247 of PB I. It clearly bears letterhead. Even though the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The loan was subject to demand promissory note. However, no evidence that the assessee had actually issued demand promissory note was filed during the course of assessment proceedings. (Page 91 of the assessment order) The Appellant had issued the demand promissory note to the lender in accordance with the terms of the loan. The AO never asked the Appellant to submit said promissory note during the reassessment proceedings. Hence, the question of the Appellant submitting the same to the AO did not arise. Copy of the same is provided as additional evidence to CIT(A). Page 713 of PB II As per confirmation, the loan was given on 24.12.2010 by cheque, however, it is evident from the bank statement that the loan was credited to the bank account of the assessee only on 15.02.2011 and during the course of assessment proceedings the assessee had failed to explain if the loan was given as per confirmation through cheque on 24.10.2010 why it took 51 days to reach the assessee? (Page 91 of the assessment order) The AO has not asked this specific query to the Appellant during the reassessment proceedings. Accordingly, the question of the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant for these two years. Only part evidence of TDS were filed and no evidence regarding payment of interest to the creditor. (Page 93 of the order, first para) The Appellant has filed the bank statements evidencing payment of interest for all the years (Page 256 to 261 of PB I). Also form 16A issued by the Appellant have been submitted to the AO. (Page 262 to 274 of PB I). Hence, this is statement is untrue. The assessee did not file confirmation of the creditors that it had actually received the interest. The Appellant has filed the confirmation from Dotex regarding repayment of loan along with interest (Page 248 of PB I). Further, the bank statements furnished by the Appellant are sufficient proof to indicate that the interest 177 3 Mr. R. P. Goenka, the founder of the RPG group, was a member of the Rajya Sabha for many years. was actually paid by the Appellant. In fact, from the perusal of the bank statements, it would be noted that the entries itself disclose Dotex as the payee. The Appellant has not paid interest for the year under consideration, but as soon as the inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion entries typically contains deposit of cash and issue of cheque of equivalent amount. Firstly, the Appellant has not been provided a copy of any such investigation report alleging foregoing points for its consideration and submissions. It is settled law that the information gathered behind the back of the assessee cannot be used against him unless and until an opportunity of rebutting the same is given to the assessee. See: PCIT vs. Laxman Industrial Resources Limited (397 ITR 106)(Del)(Page 151- 155 of LPB X). In fact, even the Hon ble CIT(A) has not alleged that Dotex is a paper company and not relied on any such investigation report in the appellate order, and rightly so, since in absence of said report on record and without providing the same to the Appellant was its comment, the same cannot be relied by the Revenue. Further, for the year under consideration Dotex is RPG group company and accordingly, the allegations of the AO based on the premise that said company belonged to persons who were involved in providing accommodation entries is completely misleading. The facts relied by the AO is contrary to the facts placed on record by the Appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 159 ITR 78. Apart from that, he has also relied upon the following judgments :- (i) Ranchood Juvabhai Nakhava 21 taxmann.com 159 (Guj.) (ii) Dwarkadhish Investment Pvt. Ltd. (330 ITR 298)(Del.) (iii) CIT vs Value Capital Services (P) Ltd (307 ITR 334) (Del) (iv) CIT v. Kamdhenu Steel and Alloys Ltd (361 ITR 220)(Del), SLP dismissed vide order dated 17.09.2012 (SLP No. CC 15640/ 2012) (v) CIT v. Gangeshwari Metals (P) Ltd. (361 ITR 10)(Del) (vi) ACIT v. Shyam Indus Power Solutions (P.) Ltd. (90 taxmann.com 424)(DelhiT) (vii) CIT v. Pragati Co-operative Bank Ltd. 278 ITR 170 (Gujarat 230. He further submitted that all the investigations reports/STR report relied upon by the AO was never shared with the appellant which is clear violation of principles of natural justice and, therefore, such information gathered behind the back at the threshold cannot be utilized against the appellant. In support of this contention, he has relied upon following judgments :- (i) Suraj Mall Mohta and Co. v. A.V. Visvanatha Sastri [1954](26 ITR 1)(SC) (ii) Dhakeshwari Cotton Mills v. CIT [1954](26 ITR 775, 783) (SC) (iii) PCIT vs. Laxman Industrial Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigation report is not even on record. The Hon ble CIT(A) has dealt with the issue as to whether the Appellant has discharged its onus; however, it makes no reference to any investigation report nor does it go into the issue as to whether Dotex is a paper company or not. At para 5.5.14, the Hon ble CIT(A) mentions that Dotex is a dummy company, but the said statement is based on the financial statements of Dotex and not the allegations of certain entry operators managing the company, etc. as alleged by the AO. Accordingly, it is submitted that the entire allegation of Dotex being a paper company no more survives in the present case. 7.29 The Ld. DR has referred to a decision of the Kolkata ITAT in case of DCIT vs. Dotex Merchadise Pvt. Ltd. (I.T.A. No. 1602/Kol/2016) to support his contention that Dotex is a paper company. He has referred to the reasons recorded by the AO in that case, which is reproduced at Para 6 of the order to state that even in Dotex s own case, the reasons recorded mentions it to be a paper company. The Ld. DR has further mentioned that the AR in that case has relied on the said reasons. In this regard, it is firstly submitted that the Ld. DR has erre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as treated Dotex as paper company in the present case, especially without providing the copy of the investigation report to the Appellant, cannot have any validity. 7.34 Besides, in the reasons quoted in Dotex s order, it is also mentioned that RPG Group acquired this company in March 2010. As against this, the Appellant has taken the loan from Dotex in December 2010 and the cheque was enchased in February 2011. Hence, it is submitted even if the company was a paper company in earlier years, it is clear that at the time the Appellant took loan from this company it was an RPG Group company. It is submitted that RPG, being a well wisher of the Appellant, has agreed to provide this loan to the Appellant. In fact, the reasons in Dotex s order even state that Mr. RPG himself for the director of this company from 2011 to 2013. It would be appreciated that even during this period, the loan taken by the Appellant was subsisting and renewed time and again by Dotex. It is submitted that regardless of the past of the Company, which too is not substantiated, it is clear that for the years under question, this company did not belong to any entry operators. It belonged to the RPG Group, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in PCIT vs. NRA Iron and Steel Pvt. Ltd (2019)(15 SCC 529). However, in the said decision, it would be observed that the AO had made independent and detailed enquiry, including survey of the investors to verify the credit worthiness of the parties and based thereon arrived at the conclusion that they were non-existent or lacked credit worthiness (Para 11 of the order). However, in the present case, it is clear that the AO has not made any enquiry whatsoever. Hence, without taking proper steps, the AO cannot now discard the evidences filed by the Appellant by stating that merely because the payments are made through banking channel, it is not sufficient evidence. 7.39 The Ld. DR has further stated that even if RPG Group had taken over the company, it does not matter. In this regard, it is submitted that the said fact matters because it directly discredits and contradicts the allegation of the AO that the Company was owned by two entry operators. The company may or may not have been owned by entry operators in the earlier years; however, it is clearly on record that for the year in which loan was taken by the Appellant, this was an RPG group company and not a company belongi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the investigation had reached finality. 235. Based on this, the AO has come to the conclusion that amount of Rs.1 crore represented the appellant s own laundered money for the following reasons :- Dotex, a company known to be engaged in the business of providing accommodation entries had claimed giving loan of Rs. 1 crore to the Appellant. Directors of Dotex were the directors of 50 other companies which were engaged in similar business in complete violation of the provisions of Companies Act which stipulate the norm of having a whole-time director in only one company. The loan of Rs. 1 crore that was given to the Appellant, a newly incorporated company with a small capital base of only Rs. 5 lakhs, without any guarantee. In fact, the Appellant made a provision for payment of interest of Rs. 1,72,603 (which was less than the agreed interest rate of 14% per annum) on this loan in its Balance Sheet for the year ending on 31.03.2022. No TDS had been made on such alleged payment during the year under consideration. A perusal of the return of the Appellant filed with the Registrar of Companies ( ROC ) for A.Y. 2013-14 showed unsecured loan of Rs. 1 crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investigation proceedings were continuing and the Appellant was confronted with the facts that Dotex was a paper company engaged in providing hawala entries. The loan was subject to demand Promissory Note. However, no evidence that the Appellant had actually issued demand promissory note was filed during the course of assessment proceedings. As per confirmation, loan was given on 24.12.2010 by cheque, however, it was evident from the bank statement that the loan was credited to the bank account of the Appellant only on 15.02.2011 and during the course of assessment proceeding the Appellant had failed to that explain if the loan was given as per confirmation through cheque on 24.12.2010, why it took 51 days to reach the Appellant. In view of the above peculiar facts of the case emerging from the confirmation letter, the claim of the Appellant that the creditors had confirmed advancing loan of Rs. 1 crore stood rejected due to lack of genuineness. b. Claim that it had paid interest at the rate of 14% per annum of alleged loan to the creditors which was evident from the fact that: - It had deducted and paid TDS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The claim that latter return of impugned loan (taken on 24.12,2010) during F.Y. 2015-16 was sufficient to prove the genuineness of the loan transaction. The investigation started against the Appellant on 01.11.2012 by filing a petition before the Metropolitan Magistrate and all the act whether deduction of TDS on interest on loan or return of loan after a gap of 5 years to a shell company located in Kolkata were events as sequel to the investigation. During the course of the assessment proceedings, the Appellant did not furnish any evidence to prove that the creditors had explained source of income to advance a loan of Rs. 1 crore on 24.12.2010 which was a crucial evidence in discharging the onus of the Appellant under Section 68 of the Act. 237. After referring to the aforesaid facts and the observations and the finding of the AO, he submitted that here in this case, the onus was entirely on the appellant to prove the identity, creditworthiness of the creditor and genuineness of the transaction. As a prelude to his argument, referred to the following important judgments laying down the principles u/s 68 wherein loan/share applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Mahawar sold this company to the RPG group and Shri Rajendra Jha and Shri Sunil Bhandari who are the employee of the RPG Group become the directors of M/s. Dotex Merchandise Pvt. Ltd. It is also found that from 12/10/2011 to 28/03/2013 Shri R. P. Goenka himself was the director of this company. After RPG group purchased this company, entire shareholding was bought back by two companies of RPG namely, Solty Commercial Pvt Ltd and Ritushri Vanijya Pvt Ltd. As expected after the purchase by Sanjeev RPG group, the investment worth Rs. 34 Crores in paper companies shown in the balance sheet of M/s. Dotex Merchandise Pvt Ltd, were sold on paper to the paper companies of Shri Mahawar and sale proceeds was credited in the bank account of Dotex Merchandise Pvt Ltd. As is clear from the statement of Shri Mahawar that the source of the sale proceed is cash provided by Sanjeev RPG Group to Shri Mahawar, who has routed it through different layers of paper companies and cheques have finally gone from paper companies of Shri Mahawar to Dotex Merchandise Pvt Ltd. Thus there is reason to believe that the income of the assessee company amounting to Rs.34 crores has escaped assessment for the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g advanced to a Section 25 company which had no activity whatsoever, except raising this loan. It doesn t stand to reason as to how a Section 25 company, incorporated in Delhi, within a few days of its incorporation, approaches a company located in another part of the company for a loan of Rs. 1 crore and the said company agrees to give the loan without any security or any risk mitigating factor. This loan continued for a period of 5 years without any voice being raised by Dotex at any time for re-payment of the said loan. The A.O. has categorically observed that while TDS was deducted, there is no proof that any payment was made to the creditor i.e., Dotex. If no amount was paid, but only tax was deducted, this clearly shows that it is a make-believe affair. TDS then remains only a creation for establishing the genuineness of the loan which was not otherwise genuine. It is very interesting to note that Dotex gives a cheque on 24.12.2010 when the Appellant did not even have a bank account. The cheque was encashed only in the month of February, 2011. The date of the cheque of December, 2010 becomes important because that was the point of time when the receivables ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd report. 243. The main contention of the appellant has been that; firstly, the documentary evidences shows that the money has come through banking channels and in the annual accounts of the Dotex for the year ending 31.03.2011, it had share capital of Rs.2 crores and reserves and surplus of Rs.31.19 crores and it had taxable profits of Rs.1 crore, which fact have neither been dealt with by the AO or by the ld. CIT (A); secondly, the thrust of the argument of Ld. Sr. Counsel was that Dotex belonged to reputed business house of RPG Group and for this reason, it cannot be treated as a paper company as alleged by the AO; thirdly, no opportunity was given by the AO and CIT (A) for producing the additional evidences as they have been rejected without any proper reasons; fourthly, Assessing Officer had not shared the information and material about the Dotex founf during the course of inquiry; and, lastly, AO has not made any enquiry once these documents were filed by the appellant. 244. We have considered the entire gamut of facts and contentions raised by the parties. One of the contentions raised before us that Dotex belongs to RPG Group, therefore, it is gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly, the matter is remanded back to the file of AO for making proper enquiry and adjudicate the issue in accordance with law after giving due opportunity of being heard to the appellant. Accordingly, ground no.10 is allowed for statistical purposes. 247. Consequently, ground no.11 being disallowance of interest is also set aside as the same is consequential to the aforesaid ground. GROUND NO.13 248. In this ground, the appellant has challenged the disallowance of Rs.50,00,000/- paid for assigning of loan from AJL. It has been submitted before us that, if addition u/s 28(iv) is upheld, then the sum of Rs.50,00,000/- paid by the appellant for earning the alleged business assets ought to be allowed as deduction while computing the alleged benefit. 249. Since we have already upheld the action of the AO insofar as addition made u/s 28(iv), therefore, the claim for deduction of Rs.50,00,000/- for acquiring the aforesaid business assets and to be allowed as deduction is accepted. Accordingly, we direct AO to allow the deduction of Rs.50,00,000/- from the amount held to be taxable u/s 28(iv). Accordingly, ground no.13 is allowed. GROUND NO.14 250. The appellant ..... 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