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2017 (1) TMI 1677 - AT - Income TaxRevision u/s 263 - addition u/s 56(2)(vii)(c) - bonus shares were issued by way of capitalization of share premium account and reserve account thus benefit given to assessee was clearly chargeable as income from other sources as per CIT - HELD THAT:- Legislator intended to tax the transfer of shares at a value lesser than its fair market value under Provisions of Section 56(2)(vii), and 56(2)(viia). On a careful reading of the provisions and the legislative intent, we agree with the submissions of Ld.AR that the provision would not be applicable to bonus/right shares as there is no increase or decrease in the wealth of shareholder assessee on account of bonus/right shares. Further, there is no element of “gift” in issuing of bonus/right shares to the assessee by the company. We agree with submission advanced by Ld. AR that in case section 56(2)(vii)/56 (2) (viia) is made applicable on issue of bonus/right shares, various other sections of the Act would become contradictory. This is because if for the sake of discussion it is presumed that the provisions of section 56 (2) (vii) are made applicable to the allotment of bonus/Right shares, then for the purpose of calculating capital gains under section 48 and 49 on the sale of such shares, the cost of acquisition shall be taken as per section 49 (4) which means the value of bonus/right shares considered while applying the provisions of section 52 (2) (vii), which is clearly contradicting the provisions of section 55 (2) (aa) (iiiia). If the legislature really intended to bring allotment of bonus/right shares within the ambit of section 56 (2) (vii), it would have amended section 55 (2) (aa) (iiia) simultaneously. As no property however is being passed on to the assessee in the instant case before us on allotment of bonus/right shares and the no addition could be made by applying provisions of section 56 (2) (vii) as the case may be. - Decided in favour of assessee Initiation of proceedings u/s 263 - AR has raised and argument regarding the proceedings under section 263 being initiated wrongly as there was no material before Ld. CIT that was unearthed during the search - HELD THAT:- We reject this argument as the assessing officer has not dealt with share standing in the name of assessee at the time of assessment proceedings and that Assessing Officer has not investigated/inquired about the same by raising any query. It is a settled law that there need not be any incriminating material for making addition in assessment made u/s 153A when assessment has not abated. The Assessing Officer being an Investigating Officer should have conducted enquiry assessment proceedings. We, therefore, dismiss this ground of the assessee.
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