TMI Blog2022 (1) TMI 1424X X X X Extracts X X X X X X X X Extracts X X X X ..... ding which stood on the land owned by Shri Vikramaditya Singh one of the shareholder, who had become the owner of the land by virtue of the partition of the family properties and the land falling to his share had in fact been leased out by him to the company, M/s Jyoti (P)Ltd. We find force in the arguments of assessee that since in the state of Jammu and Kashmir no person other than the resident of the state can own the land, the title to the land stood in the name of Shri Vikramditya Singh and even the Hotel Building would have no independent value, if the land on which the building stood is not considered. We find from deed of lease dt. 21.3.1973 that at the time when M/s Jyoti P. Ltd., had purchased the building by another deed of relinquishment on 21.3.1973, the Hotel Building was already existing on the land so leased and as such virtually it was a case where M/s Jyoti P. Ltd., had an absolute interest despite the fact it was only where the title of the land remained in the name of Shri Vikramaditya Singh. We find even the residual ownership rights were transferred in favour of Sh. Narendra Batra (who was the state subject i.e. resident of Jammu Kashmir), who was a nominee of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come - agricultural income or income from other sources - assessee could not substantiate its agricultural income and the assessee was not showing any agricultural income in the past years - CIT(A) deleted addition - HELD THAT:- The assessee before the Assessing Officer as well as the Ld. CIT(A) had filed the details of agriculture produce and the details of sale etc. It is also submitted before the Ld. CIT(A) that the apple and Cherry trees which were planted before three four years earlier had started giving fruits during the year and therefore the assessee has shown agricultural income from this year. Merely because the assessee had not shown agricultural income in the past, in our opinion, cannot be a ground for rejecting the claim of agricultural income during the impugned year especially when the assessee had filed the details of agricultural land and the receipts of the buyers who had purchased the apple and cherry. We, therefore, uphold the order of the ld. CIT(A) on this issue and the ground raised by the Revenue on this issue is dismissed. Validity of reassessment proceedings - income declared by the assessee in the invalid return has escaped assessment in terms of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated 21.03.2007 of the Ld. CIT(A), Jammu (HQ at Amritsar) relating to the A.Y. 1998-99. The assessee filed C.O.No.43/ASR/2007 against the appeal filed by the Revenue. ITA.No.268/ASR/2007 filed by the Revenue is directed against the order dated 22.03.2007 of the Ld. CIT(A), Jammu (HQ at Amritsar) relating to the A.Y. 1998- 99. The assessee filed C.O.No.44/ASR/2007 against the appeal filed by the Revenue. ITA.No.269/ASR/2007 filed by the Revenue is directed against the order dated 22.03.2007 of the Ld. CIT(A), Jammu (HQ at Amritsar) relating to the A.Y. 1998-99. The assessee filed C.O.No.45/ASR/2007 against the appeal filed by the Revenue. Since common issues are involved in all these appeals and cross objections, therefore, these were heard together and are being disposed of by this common order. 2. First we take-up the appeal vide ITA.No.263/ ASR/ 2003 in the case of Shri M.K. Ajat Shatru, Jammu as the lead case. 2.1. Facts of the case, in brief, are that the assessee is an individual. He filed his return of income on 28.01.2000 declaring income of Rs.5,85,071/-. Later on notice under section 139(9) of the I.T. Act, 1961 was issued on 18.02.2000 asking the assessee to remove c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Pvt. Ltd., was furnished, for which the A.O. held that assessee could not discharge the onus caste on him. The A.O. noted that the assessee during the course of assessment proceedings vide letter dated 18.03.2002 had stated that it had held 10,000 shares @ Rs.100/- each in M/s. Jyoti Pvt. Ltd., amounting to Rs.10 lakhs by way of gift. from his father since long, however, no proof of the same has been attached. During the year assessee sold all the 10,000 shares of the face value of Rs.100/- each to M/s. Bharat Hotels Ltd., Barakhamba Road, New Delhi through its CMD Mr. Lalit Suri. Copy of agreement to sell these shares has been filed on 3.10.1997 for consideration of Rs.4,76,19,048/-. As per this deed an amount of 56 lakhs was received in the shape of pay order and the balance was to be received within 60 days. As no final deed has been filed by the assessee till date so he presumed that the balance amount was received by the assessee during the financial year under consideration. He noted that the assessee in his case has received 10,000 shares as gift from father. Cost of shares is 10000 @ 100/- is Rs.10,00,000/- which has been stated and is disputed by the counsel of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner whatsoever. Further the A.O. has also not objected to such valuation report, which means that he has accepted the valuation report submitted by the assessee. Further the A.O. without confronting the assessee on this issue, has made the addition which is not justified. The provisions of Section 55(2) (b)(1) of the I.T. Act, 1961 was brought to the notice of the Ld. CIT(A) and it was submitted that as per the said provision the right of choice is conferred on the assessee solely for the benefits of the assessee and unless there is anything in the enactment to the contrary, the right of the assessee so conferred, to choose one of the modes to determine the cost of acquisition cannot be curtailed. 2.5.1 It was submitted that it is at the option of the assessee to take fair market value as on 01.04.1981 or cost of acquisition. In the present case, the assessee has opted for fair market value as on 01.04.1981 for his shares which has never been disputed by the A.O. at the time of assessment proceedings. Further the fair market value adopted by the assessee was duly supported by the valuation report of the Registered Valuer which was never disputed by the A.O. at the time of asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts paid-up Equity share capital as shown in the Balance Sheet. The resultant amount multiplied by the paid-up value of each equity share shall be the break-up of each unquoted equity share. The market value of each such share shall be 80% of the break-up value so determined. On the basis of this the valuation of the shares has been rightly worked out as under :- (Rs. in lacs) Total Assets of the Company as on 1-4-1981 (Market value) 2491.97 Less: Liabilities as per shown in the Balance Sheet 23.99 Net worth of the Company as on 1/4/1981 2368.38 Cost Index of shares of the Company as the shares were 2368.38 x 331 transferred in the financial year 100 1997-98 = 7839.34 Total No. of shares of the Company as on 1-4-1981 38500 Share value of per Equity share as on 1-4-1981. Rs.20361.92 Market value of each Equity Share 80% of Break-up Rs.16289.53 The Assessee was holding 10000 Equity shares of Rs.100/- each which were sold to M/S Bharat Hotel Ltd.Bharakhamba Road, Delhi at a consideration of Rs.4,76,19,048. The sale value of per equity share is Rs.4761.90 whereas as per the cost index method the cost price of per equity share is Rs. 16289.53. Since the sale value of the share is Rs.4761 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince turmoil in the valley has left no land transactions to depend upon for estimation of value. This has been certified by the Divisional Commissioner in his Certificate issued vide No.Divcom/3290/AC/67/CA dated 17.01.2003 in which he states The question has arisen as to what would be a reasonable price for the land within the premises of what is now called the Grand Palace Hotel, which was known as the Oberoi Palace Hotel till 1990 and which was the residence of the erstwhile rulers of J K till 1947. It would be extremely difficult to place a value on this land because no sale or purchase has even taken place in that area. However, this plot of land is situated in the most up-market and elite part of Srinagar. It has a unique historical value and is also much sought after for the construction of hotels and similar facilities. Therefore, even in 1981, people would have been prepared to pay upwards of Rs.5-6 lakh per kanal for land within the said premises. 7. We, are therefore left with no alternative to turn our attention to the means of estimation other than sales instances. It is here that the estimation provided by the Divisional Commissioner come handy to us. He has estimated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n M/s Jyoti Pvt. Ltd.. 2. The Ld. CIT (A) erred in applying wrong text of ride 1DD of W.T. Rules 1957 even though the said rule was otherwise invoked by the Ld. CIT(A) for the purpose of determining the fair market value of the impugned shares as on 1.4.1981. 3. The Ld. CIT(A) erred in law in admitting additional evidence by way of certificate from the Divisional Commissioner without giving any opportunity to the AO. 4. The Ld. CIT(A) erred in law in relying on certificate of valuation of land by approved valuer for the purpose of valuation of equity shares under Rule 1DD of W.T. Rules. 5. Erred in deleting addition of Rs.1,00,000 made by the ld. A.O. as income from undisclosed source . 6. That the appellant craves leave to add or amend or alter any grounds of appeal before or time of hearing. 4. Identical grounds have been raised by the Revenue in other appeals which are as under: ITA No.267/ASR/2007 (A.Y. 1998-99) On the facts and in the circumstances of the case. 1. The Ld. CIT (A) erred in law in deleting the addition of Rs.7,66,76,700/- under the head 'capital gain from sale of equity shares held by the assessee in M/s Jyoti Pvt. Ltd. 2. The Ld. CIT (A) erred in applying w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by approved valuer for the purpose of valuation of equity shares under Rule 1DD of W. T. Rules. That the appellant craves leave to add or amend or alter any grounds of appeal before or time of hearing. 5. The assessee in his C.O.No.43/ASR/2007 in ITA.No.267/ASR/2007 relating to the A.Y. 1998-99 has raised the following grounds : 1. The Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts of the case in upholding the validity of initiation of proceedings u/s 147 read with section 148 of the Income Tax Act. 2. The Ld. Commissioner of Income Tax (Appeals) has erred in not disposing and without prejudice deciding the non levy of interest under section 234A and 234B of the I.T. Act. 3. The assessee craves leave to add or amend the grounds of cross objections before these are heard and disposed off. 6. The assessee in his C.O.No.44/ASR/2007 in ITA.No.268/ASR/2007 relating to the A.Y. 1998-99 has raised the following grounds : 1. The Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts of the case in upholding the validity of initiation of proceedings u/s 147 read with section 148 of the Income Tax Act. 2. The Ld. Commissioner of Income Tax (Appeals) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e heard the rival arguments made by both the sides. Provisions of Rule 27 of the ITAT Rules enshrines a right to the respondent before the Tribunal to support the order of the CIT(A) on any ground decided against him notwithstanding the fact that the assessee has neither filed a cross appeal nor cross objection. We find the Hon‟ble Delhi High Court in the case of Sanjay Sawhney vs. PCIT vide ITA No.834/2019 order dated 18.05.2020 has observed as under: 26. The upshot of the above discussion is that Rule 27 embodies a fundamental principal that a Respondent who may not have been aggrieved by the final order of the Lower Authority or the Court, and therefore, has not filed an appeal against the same, is entitled to defend such an order before the Appellate forum on all grounds, including the ground which has been held against him by the Lower Authority, though the final order is in its favour. In the instant case, the Assessee was not an aggrieved party, as he had succeeded before the CIT (A) in the ultimate analysis. Not having filed a cross objection, even when the appeal was preferred by the Revenue, it does not mean that an inference can be drawn that the Respondent- assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Later, these were transferred to Delhi Bench on the request of all concerned parties. He submitted that in the case of Dr. Karan Singh, Shri Vikramaditya Singh and late Smt Yashoraja Laxmi returns were originally accepted u/s 143(1) of the Act. Thereafter, relying on the assessment order in Ajatshatru Singh, notice u/s 148 was issued on 24.3.2005. That on April 19, 2005 the assessee wrote to the AO requesting that the original returns may be treated as return u/s 148 of the Act. The AO made the assessment u/s 143(3) on 31.3.2006. The CIT(A) in the case of Dr. Karan Singh allowed assessee's appeals on merit vide order dt 21.3.2007. but dismissed the ground challenging the validity of notice u/s 148. The successor CIT(Appeal) in the case of Dr. Karan Singh Ors. essentially followed the appellate order of his predecessor in the case of Shri Ajatshatru Singh as similar facts were involved. 12. Ld. Special counsel submitted that the Department had subsequently made an application for admission of amended grounds of appeal and the Bench vide order dated 5.1.2017 admitted the amended grounds of appeal, which are all similarly worded in the case of all shareholders for Jyoti (P) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Dr. Karan Singh). d) The four shareholders transferred their shares in Jyoti (P) Ltd. to Bharat Hotels Pvt. Ltd. in 1997. e) That the assets transferred are unquoted equity shares in Jyoti Pvt. Ltd. f) Quantity of shares held and transferred is correct. g) All the shares were transferred to Bharat Hotels on October 3, 1997 by each member of the Group. h) The assessee had furnished to the A. O., the regd. valuer's report on valuation of the market value of land building of the property 'Gulab Bhawan' as on 31.3.1981 assuming that the company was the owner of land. (Pg. 10/AjatShatru PB). i) The approved valuer does not make valuation with reference to the balance sheet of Jyoti (P) Ltd. as on 31.3.1981. He values the impugned land without of which company was not the owner. j) Even the valuation of land was made not on the basis that it was lease-hold land as per lease deed of 1973 for 30 years and the new lease deed, which was entered into between Vikramaditya Singh (owner) and the company in 1997, could not be taken into account for valuation of land as on 31.3.1981. k) No valuation certificate by any valuer (approved or otherwise) valuing shares of Jyoti (P) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.4.1981, made by the assessing officer is arbitrary. c) According to CIT(A), the AO could not ignore the valuation of Gulab Bhawan and the land on which it is situated as per valuation certificate of land and building of the Regd. valuer. d) It was a few years after 18.3.2003 (Date of CIT(A) order) that Sri Vikramaditya Singh, owner of Gulab Bhawan land, filed a certificate dt. 28.3.2006 with CIT(A) by Tehsildar, Srinagar regarding the market value of the land appurtenant to Gulab Bhawan, Srinagar@ Rs. 30 lakhs per Kanal in 1998 e) It may be noted that the land on which Gulab Bhawan is situated is owned by Shri Vikramaditya Singh. 16. He submitted that the Ld. CIT(Appeal) has clearly not looked into the Balance Sheet of Jyoti (P) Ltd as on 31.3.1981 which clearly shows that the company owned several properties and carried on several businesses during F.Y, 1980-81. But, the B/S of Jyoti (P) Ltd. clearly reveals that Jyoti (P) Ltd. does not reflect adjoining 'Gulab Bhawan Building' even on the basis of lease deed of 1973, which was due to expire in 2003. He submitted that the balance sheet of Jyoti (P) Ltd. as on 31.3.1981, shows that as on that date the company had issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rning) and not on the basis Breakup Method . 18. Ld. Special counsel for the Revenue submitted that for the purpose of determining fair market value of the shares as on 1.4.1981, it is impermissible to consider events occurring subsequent to the valuation date particularly those occurring more than a decade later. Such a magical foresight is not available on 1.4.1981. Hence, the Revised Lease Deed of the impugned land as also Performance Agreement and the Agreement to Sell etc., which took place 17 year after the valuation date of 01.04.1981 are irrelevant. He submitted that apart from the fact that balance sheet etc. of the company for A.Y. 1994-95, 1997-98 1998-99 were filed before the Bench without application under Rule 29, these Balance sheets are absolutely irrelevant for deciding the FMV of the shares as on 01-04- 1981. He submitted that the definition of Fair Market Value as per Section 2(22B) of the IT Act is materially same as that of section 7 of W.T. Act prior to its amendment by the Finance Act 1965. 19. Ld. Special Counsel for the Revenue submitted that the impugned asset valued at Rs. 19.87 crores as on 1.4.1981 by the Regd. valuer is owned not by Jyoti (Pvt.) Ltd. b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that basis will determine the value of shares. b) Where the company is ripe for winding up then the break-up value method determines what would be realised by that process . iii) As in Attorney General of Ceylon V. Mackie a valuation by references to the assets would be justified as in that case the fluctuations of profits and uncertainty of the conditions at the date of valuation prevented any reasonable estimation of prospective profits and dividends . 21.1 He submitted that this legal position was reiterated by the Hon'ble Supreme Court again in Kusumben Mahadevia (122 ITR 38), CIT v. Executors Trustees of the Estate of Late Shri Ambalal Sarabhai 170 ITR 144 (SC) and Bharat Hari Singhania Ors. vs. CWT reported in 207 ITR 1(SC). 22. The Ld. Special Counsel further submitted that the Ld. CIT(A) has admitted a certificate filed which was obtained from the Divisional Commissioner, Kashmir which is not only vague; but which also seems to be unaware of the ownership of the impugned land and the terms of the Lease deed dated 21.3.1973. Further it was admitted in violation of Rule 46A of IT Rules. The said certificate also does not value the shares of Jyoti (P) Ltd. 23. Ld. Special ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral income is concerned, he relied on the order of the A.O. So far as validity of reassessment proceedings are concerned, he submitted that due process of law has been followed by the A.O. and the Ld. CIT(A) has rightly dismissed the ground raised by the assessee on this issue and therefore the Cross Objection filed by the assessee as well as the ground as per Rule 27 should be dismissed. 27. Ld. Senior Counsel for the assessee on the other hand heavily supported the order of the Ld. CIT(A) in so far as deletion of the addition made by the A.O. is concerned. He submitted at the outset that in ground no 2 and 4, the revenue has contended that the ld CIT(A) has invoked rule 1DD for determining the fair market value of the impugned shares as on 1.4.1981. However, neither the assessee nor the ld CIT(A) has adopted Rule 1D for determining the fair market value of the shares, and instead breakup method has been applied to determine the fair market value of shares. Ld. Senior Counsel submitted that the Revenue in fact had made an application u/s 154 of the Act before the CIT(A). When it so contended before the learned CIT(A) the application u/s 154 of the Act filed by the revenue against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the balance sheet, has to be adopted: whereas for the purposes of section 2(22B) of the Act, it is the fair market value of the asset as reflected in the balance sheet, has to be adopted as also the value of any other asset which the company may have. He submitted that there is no restriction under the provisions of Income Tax Act to ignore the value of asset not reflected in the balance sheet. On the contrary, the fair market value of an asset held by a company where there is a transfer of shares in the company should be adopted. In this case, it cannot be disputed that M/s Jyoti Pvt. Ltd. owned the building Gulab Bhawan as also the leasehold interest in the land as on 01.04.1981, as such, fair market value of the aforesaid asset has to be determined while valuing the shares as on 01.04.1981. 28.3. Ld. Senior Counsel submitted that as on 01.04.1981, M/s Jyoti Pvt. Ltd. as per the balance sheet, was owning multiple assets as can be seen from the schedule of fixed asset, and if the fair market value of each of the asset is determined and value of liabilities is reduced, the fair market value of each of the asset would have been much higher. However since by adopting fair market valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in his certificate dated 17.01.2003 has estimated the value around 5-6 lakhs per kanal, however if the lower value is also adopted, then also there would be no capital gain. In fact from the concluding para of the order of the ld CIT(A), it would be seen that he has accepted the fair market value based on the report of valuer which was filed during the course of the assessment proceedings. Hence, the report of the Divisional Commissioner was merely in the nature of the supporting evidence and cannot be regarded as additional evidence. 28.6 Further in the case of Dr. Karan Singh and Late Smt. Yasho Raja Laxmi is concerned, such report of the Divisional Commissioner dated 17.01.2003 was filed before the AO vide its reply (see page 65 of PB Vol-1) and hence this ground of the revenue contending that additional evidence was admitted by the ld CIT(A) is wholly misconceived and deserves to be dismissed. 28.7. Even otherwise the AO himself has written a letter dated 24.03.2006 to the Divisional Commissioner, Kashmir, and in response thereto the Tehsildar has submitted a report on 28.03.2006, wherein value of land in the year 1998 (even when the insurgency activity and terrorist activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Lease Deed was executed and registered on 22.11.1997 by Shri Vikramaditya Singh thereby leasing out the said land in favour of Jyoti Pvt. Ltd. in perpetuity. Further, on 16.1.1998, Shri Vikramaditya Singh executed a Sale Deed (which was subject to the Perpetual Lease granted in favour of M/s Jyoti (P) Ltd. vide the aforesaid Perpetual Lease Deed dated 22.11.1997) in favour of Shri Narinder Batra (a state subject of J K and the nominee of Bharat Hotels Ltd.) for a nominal consideration of Rs. 10 lacs thereby transferring him the residuary ownership rights in the said land, and as such, the conclusion of the AO in disregarding the value of leasehold in land for the computation of capital gain was contrary to facts and was purely on the basis of suspicion and hence wholly misconceived. 31. Ld. Senior Counsel submitted that on the perusal of the fixed asset schedule of the M/s Jyoti Pvt. Ltd. as on 01.04.1981, it would be seen that the aforesaid company was holding various assets, however while computing the fair market value, the AO has merely adopted the fair market value of one building i.e. Gulab Bhawan, however the fair market value of the other assets held on 01.04.1981 has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO cannot be permitted to take a contrary view than taken in the assessment and improve his assessment by adopting a new theory: i. Ms. Aishwarya K. Rai, 127 ITD 204 (Mum.) ii. Mahindra Mahindra Ltd. vs. DCIT, 313 ITR (AT) 263 (SB) iii.Kwal Pro Exports vs. ACIT, 110 ITD 59 iv.ITO vs. Anant Y. Chaan, 126 TTJ (Pune) 984 v. CIT vs. Krishna Mining Co., 107 ITR 702 vi.Indian Steel and Wire Products Ltd. vs. CIT, 208 ITR 740 at Pg. 743 vii. CIT vs. Steel Cast Corporation, 107 ITR 683 at Pg. 700 viii. Erriccson AB vs. DDIT, (2012) 25 taxmann.com 466 33.3. Referring to the following decisions, he submitted that Leasehold interest in land is an asset, and the value thereof has to be included while adopting the net worth of the company for determining the cost of the shares: (i) CWT v PN Sikand 107 ITR 922 (SC) (ii) CIT vs. Kesri Chand 118 ITR 692 (Del) (iii) A.R. Krishnamurthy and another vs. CIT 176 ITR 417 (SC) (iv) M. Sulochanamma others vs. CWT 85 ITR 201 (AP) (v) CIT vs. M.N. Enterprises 293 ITR 35 (Kar) (vi) Jaya Hind Sciaky Ltd. vs DCIT reported in 383 ITR 25 HC (Bom) (vii) Andhra Networks Ltd vs DCIT reported in 167 TTJ 496 (viii) CIT vs HormasjiMancharjiVaid reported in 250 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, without prejudice to the above submitted that during the course of the assessment proceedings, the assessee filed its reply along with the receipt of income of the agricultural produce (page 16 of the PB Vol-1). However the AO made the addition on the ground that no such income was offered in the preceding assessment year. He submitted that once the assessee has demonstrated that it had sufficient agricultural land and apple and cherry trees were planted three/four years before this year, and such trees have produced the fruits in respect of which the assessee has earned a sum of Rs. 1 lacs receipt of which was also produced before the AO, then the burden of the assessee was duly discharged, and onus was on the AO to rebut the same by leading some material, and hence in the absence of the same, addition made was untenable. Ld. Counsel submitted that the Ld. CIT(A) after considering the details filed before him has deleted the addition. He accordingly submitted that Ground No. 5 raised by revenue in the case of Shri. M.K. Ajatshatru Singh deserves to be dismissed. 35. He accordingly submitted that apart from the aforesaid no other ground has been raised by the revenue in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn filed was treated as invalid on 22.12.2000, and therewas time available with the AO to frame the assessment, the AO should have completed the assessment u/s 143(3)/l44 of the Act, which he could have done till 31.03.2001. However, instead of making an assessment u/s 143(3)/144, the AO merely to tax the income offered to tax in the return of income, has issued a notice u/s 148 of the Act on 10.01.2001, i.e. notice was issued even when the time was available to frame the assessment u/s 143 (3)/144 of the Act. Thereafter, such a course adopted by the learned AO was impermissible in law. 38. Ld. Senior Counsel for the assessee drew the attention of the Bench to provisions of Section 147 of the Act and submitted that the foundational condition that income should escaped assessment has not been complied as the amount which has been alleged to be escaped assessment has already been offered to tax and tax has also been paid on such income, as such, once there is no escapement of income, assumption of jurisdiction itself is bad in law. 39. Referring to the reasons recorded by the A.O. he submitted that in the reasons to believe, the AO has stated that since an invalid return is no ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the argument of the Ld. Special Counsel for the Revenue that judgment in the case of Ranbaxy Laboratories Ltd. v. CIT 120111 336 ITR 136 is no longer good law since the judgment has been OVERTURNED by the later Bench in the case of CIT vs. Jakhotia Plastics P. Ltd (2018) 94 Taxmann.com 89 (Del) when they have held differently is concerned, he submitted that in fact in a later development, on 07.02.2020, the revenue has withdrawn the appeal before the High Court in view of the lower tax effect. He accordingly submitted that judgment in the case of Ranbaxy Laboratories Ltd. v. CIT [20111 336 ITR 136 still holds good and applicable to the case of the assessee. 41. So far as the reopening in the case of Dr Karan Singh and other two assessee‟s are concerned, he submitted that proceedings u/s 148 of the Act was initiated after a period of four years from the end of the relevant assessment year without surfacing of any fresh tangible material and merely on the basis of the assessment made in the case of Shri M.K. Ajatshatru Singh. He submitted that assessment made in the case of Shri M.K. Ajatshatru Singh is merely an opinion of the AO which assessment was subject matter of appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) ITA Nos 898/D/2008 and 1434/D/2008 A.Y. 2001-02 dated 28.3.2013 M/s Tera Construction Pvt. Ltd. vs. ITO x) 354ITR 536 (Del) CIT vs. Orient Craft Ltd. xi) ITA No. 4613/Mum/2005 Telco Dadajee Dhackjee Ltd. vs. DCIT xii)153 TTJ 506 (Mum) Delta Air Lines, INC vs. ITO xiii) ITA 112/2014 (Del) CIT vs. Shri Atul Kumar Swami xiv) ITA No. 5216/Del/2012 ACIT vs. Sushma Gupta xv) 114 ITD 69 (Del) (TM) ACIT vs. O.P. Chawla xvi) 324 ITR 154 (Bom) Prashant S. Joshi and Dattaram Shridhar Bhosale vs. ITO and UOI xvii)324 ITR 289 (Del) Jay Bharat Maruti Ltd. vs. CIT xviii) SCA 858 of 2006 Inductotherm (India) Pvt. Ltd. vs. CIT (Guj) xix) 252 CTR 316 Puri Brothers vs. CIT xx)246 CTR 308 (MP) CIT vs. Trimurti Builders xxi) 348 ITR 299 (SC) ACIT vs. ICICI Securities Primary Dealership Ltd. xxii)[2008] 300 ITR 276 (Bom) Sanghvi Swiss Refills (P.) Ltd. vs. Asst. CIT xxiii) [2007] 213 CTR 193 (Raj) CIT vs. Manohar Lai Gupta xxiv) W.P. (C) 7660/2012 dated 28.1.2014 (Del) Mohan Gupta (HUF) vs. CIT xxv) 291 ITR 500 (SC) Asst. CIT vs. Rajesh Jhaveri Stock brokers Pvt. Ltd. xxvi) ITA No. 4613/Mum/2005 Telco Dadajee Dhackjee Ltd. vs DCIT 41.3 Referring to the following decisions, he submitted that the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate Financial Corporation as security for the loan granted and recognise the rights of the said corporation to transfer such leasehold interest together with the structures put up there on to a third party in the event of default. Jyoti Pvt. Ltd. is a closely held Private Limited Company having only 4 (four) Shareholders namely Dr. Karan Singh, his wife Smt. Yasho Rajya Lakshmi and two sons Shri Vikramaditya Singh and Shri Ajatshatru Singh. The Company had given the property under a management contract to M/s EIH Limited (the flagship Company of Oberoi Group of Hotels) which was operating the Hotel Oberoi Palace in the said property On account of increasing terrorist activities in the Kashmir Valley during 1990 the Oberois had abandoned the property. The property was lying vacant from 1990 to 1997. M/s Bharat Hotels Limited offered to purchase the property by way of acquiring all the shares of Jyoti Pvt. Ltd. The Shareholders agreed for the sale of the property by way of agreeing to transfer their entire shareholding to M/s Bharat Hotels Limited. Accordingly, each of the shareholders had simultaneously entered into Agreement to Sell with Bharat Hotels Ltd. on 03.10.1997 thereby ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding alongwith the land as per the valuer‟s certificate. However, the AO did not' accept the aforesaid computation, and adopted the face value of shares as cost of acquisition in the case of M. K. Ajatshatru Singh and made addition of Rs.4,43,09,048/- to the total income of the assessee under the head Capital Gain. Thereafter, assessments of the remaining three shareholders were framed when the AO had proceeded to determine the fair market value of said shares on the basis of the breakup method i.e. by adopting the fair market value of the hotel building (as per the report of the approved valuer) to be divided by the number of shares held by the shareholders. We find the Ld. CIT(A) deleted the addition the reasons of which are already reproduced in the preceding paragraphs. 46. We do not find any infirmity in the order of the Ld. CIT(A) on this issue. We find the fair market value of the shares adopted by the AO in the case of Shri M. K. Ajatshatru Singh was Rs. 331 per share after indexation, whereas in the case of three other assessee‟s, same has been adopted at Rs.3262 per share after indexation. However, the assessee computed the fair market value of the asset o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition made by the AO. 49. It is the submission of the Ld. Special Counsel for the Revenue that the AO has erred in adopting the cost of acquisition on the basis of fair market value of the super structure. It has been contended by Ld. Special Counsel for Revenue that the value as reflected in the balance sheet be adopted as provided under Rule 1D of WT Rules. It is his submission that as on 01.04.1981 (Pg. 59-63 of Department Paper Book in the case of Dr Karan Singh) there were number of other buildings owned by M/s Jyoti Private Limited. 50. We find the AO himself had applied the fair market value of building and, other assets, while computing capital gain in the case of three other assessee‟s, namely Dr. Karan Singh and, others, which is conceptually different than the face value of shares as had been adopted in the case of Shri M.K. Ajatshatru Singh. In those cases, the AO had merely not included the fair market value of the leasehold interest in the land since the land was not owned by the company and, was not reflected as an asset in the balance-sheet. Therefore, we find merit in the argument of the Ld. Sr. counsel for the assessee that in such a situation, to contend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided u/s 55(2)(h)(ii) of the Act, So far as the shares acquired after 01.04.1981 are concerned, the same is the actual cost of acquisition of shares. 53. We find for the purposes of section 48 49 cost of acquisition has been defined in section 55(2)(b)(ii) of the Act which reads as under: (2) For the purposes of sections 48 and 49, cost of acquisition , - (b) in relation to any other capital asset,- (ii) where the capital asset became the property of the assessee by any of the modes specified in subsection (1) of section 49, and the capital asset became the property of the previous owner before the 1st day of April, 1981, means the cost of the capital asset to the previous owner or the fair market value of the asset on the 1st day of April, 1981, at the option of the assessee;.... 54. We find the term fair market value has been defined in section 2(22B) of the Income Tax Act and, reads as under: fair market value, in relation to a capital asset, means- (i) the price that the capital asset would ordinarily fetch on sale in the open market on the relevant date; and (ii) where the price referred to in sub-clause (i) is not ascertainable, such price as may be determined in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assets held by the company as on 01.04.1981 as per the contention of the revenue is to be included then it would obviously mean a remand, which will only prejudice the interest of revenue since as on 01.04.1981, assets held by the company were many properties as against only one, which has been considered by the AO himself. The contention of the revenue overlooks the facts that as on 01.04.1981 the company M/s Jyoti Private Limited had number of buildings as is reflected in their balance sheet, the fair market value whereof would be many times more and it was for this reason the AO apparently had not proceeded to determine the cost of acquisition of shares as on 01.04.1981 by adopting the fair market value of all the assets. There is substantial difference between the fair market value of the asset and the value of an asset. It may be for the purpose of Wealth Tax Act, the value of asset is to be determined on the basis of book value but so far as the Income Tax Act is concerned, the fair market value of all the asset has been defined in section 2(22B) of the Act and is thus to be adopted. 58. So far as the contention of the Ld. Special Counsel for the revenue that the Apex Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the wealth tax was payable. The Wealth Tax Act provides a mechanism, under which the property is valued and net wealth determined for the purpose of payment of wealth tax. It is not a fair market value. Therefore, in determining the fair market value under the Act, neither the guideline value prescribed for the purpose of stamp duty and registration under the Karnataka Stamp Act and the Indian Registration Act nor the net wealth value arrived at under the provisions of the Wealth Tax Act, cannot be the guiding factor. The market value of the property is certainly far more than the guideline value. Similarly, the value of the property, which is the subject matter of wealth tax, is also far more than the value for which it is assessed under the Wealth Tax Act. Therefore, the authorities were not justified in relying on those two inadmissible piece of evidence to arrive at a fair market value. 60. Similar view has been taken by the Delhi Bench in the case of Madhu Tyagi vs DCIT reported in 19 SOT 612 and appeal filed by the Revenue has been dismissed by the Hon‟ble Delhi High Court in ITA No.685/2008 dated 07.07.2008. Similar view has also been taken in the following decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the value of land. We find force in the arguments of Ld. Sr. Counsel for the assessee that since in the state of Jammu and Kashmir no person other than the resident of the state can own the land, the title to the land stood in the name of Shri Vikramditya Singh and even the Hotel Building would have no independent value, if the land on which the building stood is not considered. Further, we find from deed of lease dt. 21.3.1973 that at the time when M/s Jyoti P. Ltd., had purchased the building by another deed of relinquishment on 21.3.1973, the Hotel Building was already existing on the land so leased and as such virtually it was a case where M/s Jyoti P. Ltd., had an absolute interest despite the fact it was only where the title of the land remained in the name of Shri Vikramaditya Singh. We find even the residual ownership rights were transferred in favour of Sh. Narendra Batra (who was the state subject i.e. resident of Jammu Kashmir), who was a nominee of Bharat Hotels Ltd. on 16.1.1998 for a nominal value of Rs. 10 lacs when Perpetual Lease Deed was granted in favour of M/s Jyoti (P) Ltd. 65. We, therefore, find merit in the arguments of the ld. Senior Counsel for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Revenue on this issue are dismissed. 69. The second issue that requires adjudication is regarding the order of the ld. CIT(A) in deleting the addition of rupees one lakh treating the same as agricultural income as against income from other sources held by the AO. 70. After hearing both the sides, we find the Assessing Officer treated the agricultural income of rupees one lakh declared by the assessee as income from other sources on the ground that the assessee could not substantiate its agricultural income and the assessee was not showing any agricultural income in the past years. We find the Ld. CIT(A) deleted the addition, the reasons of which have already been reproduced in the preceding paragraph. 71. We do not find any infirmity in the order of the ld. CIT(A) on this issue. The assessee before the Assessing Officer as well as the Ld. CIT(A) had filed the details of agriculture produce and the details of sale etc. It is also submitted before the Ld. CIT(A) that the apple and Cherry trees which were planted before three four years earlier had started giving fruits during the year and therefore the assessee has shown agricultural income from this year. Merely because th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s furnished by Ld. Sr. Counsel for the assessee that the Revenue had withdrawn the appeal before the Hon ble High Court on 7th February, 2020 on account of low tax effect. The ld. Special Counsel for the Revenue could not controvert the above submission of Ld. Senior Counsel for the assessee. Therefore, we agree with the ld. Sr. Counsel for the assessee that the judgment in the case of Ranbaxy Laboratories Ltd. v. CIT (supra) still holds good and applicable to the case of the assessee. The reopening of assessment in the case of Mr. M.K. Ajat Shatru Singh is accordingly liable to be quashed. We hold accordingly. 74. So far as the reopening of the assessment in the case of Dr. Karan Singh and other two assessees are concerned, we find the proceedings u/s 148 of the Act was initiated after a period of four years from the end of the relevant assessment year. The entire basis on which the proceedings had been initiated u/s 147 of the Act in the case of the three assessees was on the basis of the findings recorded by the A.O. in the order of assessment dated 26.03.2002 in the case of Mr. M.K. Ajat Shatru Singh, such findings had ceased to remain valid findings when the learned CIT(A) had ..... X X X X Extracts X X X X X X X X Extracts X X X X
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