TMI Blog2012 (12) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... action is bonafide and the actual sale consideration received by the assessee has not been suspected, then for the purpose of computation of capital gains, the full value of consideration cannot be substituted by market price or value of the capital asset as on the date of transfer. Therefore we hold that the market price of the shares cannot be taken as full value consideration for the purpose of computation of capital gain as per section 48. Appeal decides in favour of assessee - ITA No. 798/Chny/2011 - - - Dated:- 25-7-2012 - Shri G . E . Veerabhadrappa And Shri Vijay Pal Rao , JJ. Assessee by Shri T . N . Seetharaman Revenue by Sh Pavan Ved Per Vijay Pal Rao , JM This appeal by the assessee is directed against the order dated 22/03/2011 of Commissioner of income tax passed under section 263 of the I T Act for the assessment year 2006 07. 2 The assessee has raised various grounds in this appeal; however, the only issue arises for our consideration and adjudication is whether in the facts and circumstances of the case, the Commissioner is justified to invoke his revisionary powers under section 263 and even otherwise th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d submitted that the assessee has offered capital gain of Rs.. 27,26, 010/- arising from sale of 25962 shares at rate of Rs.. 105/- per se. He has further submitted that the assessee has also filed the working of long term capital gain along with the return of income and therefore, all the relevant details were filed before the Assessing Officer. Since the assessee offered capital gain arising from the shares of the same company for the assessment year 2005 06, which was examined by the Assessing Officer and accepted; therefore, the capital gain offered for the assessment year under consideration was not a new issue before the Assessing Officer; but the same was also examined in the assessment year 2005-06. Accordingly, the learned A.R. has submitted that the claim of the assessee was allowed by the Assessing Officer after considering the details and working of capital gain as filed by the assessee and hence the Assessing Officer applied his mind while passing the assessment order. The learned A.R. has vehemently argued that when the Assessing Officer has taken a view while passing the assessment order under section 143( 3) of the Act, then the CIT cannot take a different view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the shares in question were issued as a bonus shares, the therefore, the assessee valued the same at book value as no cost of acquisition was incurred by the assessee. 4.2 The learned A.R. of the assessee has further submitted that section 52 of I T Act has been omitted from the statute with effect from 1/4/88 and thereafter there is no provision under which the Assessing Officer can adopt the market price of the shares sold by the assessee. In support of his contention he has relied upon the decision of honourable jurisdictional High Court in case of Commissioner of Incometax v. Texspin Engineering and Manufacturing Works reported in 263 ITR 345 and submitted that the expression full value of consideration received/accruing under section 48 can not be the market value of the capital asset on the date of transfer. Section 48 does not empower the Assessing Officer to take the market value as the full value of consideration as in case of 45(4). The learned A.R. has pointed out that the appeal filed by the revenue against the decision of Hon ble High Court has been dismissed by the honourable Supreme Court wide decision dated 4/2/2005 in SLP civil number 5676 of 2004. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l examination of any matter by the Income-tax Officer in the process of assessment. There must be something in the assessment order to show that the Income tax Officer applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non-taxability and not to any incidental connection. He has also relied upon the decision of honourable Madras High Court in case of Commissioner of Income-tax v. Revathi Agencies reported in 226 ITR 554. The learned D.R. has further submitted that in all the decisions relied upon by the assessee, the bonafide and genuineness of the transaction was not doubted by the Assessing Officer as there was no allegation of understatement of consideration. Therefore, the said decisions are not applicable in the facts of the case in hand. He has relied upon the impugned order of Commissioner of income tax. 5 We have considered the rival submissions and carefully perused the relevant material as well as the decisions relied upon by either of the parties. Though the assessment order passed under section 143( 3) does not indicate or suggest that the Assessing Officer made any enquiry on the issue which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. In the fitness of things, it is considered necessary to allow the AD to have an opportunity to examine the details filed before me along with the accompanying statements. The AO should also examine the factual matrix of the case, in the light of the evidence. The assessee would be free to produce documentary and other evidence to establish its stand. The AO is therefore directed to examine the issue afresh and pass an order according to law, after affording adequate and reasonable opportunity to the assessee to explain its case. The assessment is therefore set aside on this issue. 5.2 It is clear from the impugned revision order that the Commissioner has not doubted the actual consideration received by the assessee. Even, there is no indication of any material or expression of his view that the assessee has received more consideration than what has been shown from the sale of shares in question. When there is no indication of understatement of sale consideration by the assessee, then the market value of the shares on the date of transfer can not be construed as full value of consideration under section 48 of the I T Act. The expression full value as per section 48 means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, incoming consideration qua the transferor. In our view, when a firm is treated as a company, the said two conditions are not attracted. There is no conveyance of the property executable in favour of the limited company. It is no doubt true that all properties of the firm vest in the limited company on the firm being treated as a company under Part IX of the Companies Act, but that vesting is not consequent or incidental to a transfer. It is a statutory vesting of properties in the company as the firm is treated as a limited company. On the vesting of all the properties statutorily in the company, the cloak given to the firm is replaced by a different cloak and the same firm is now treated as a company, after a given date. In the circumstances, in our view, there is no transfer of a capital asset as contemplated by section 45(1) of the Act. Even assuming for the sake of argument that there is a transfer of a capital asset under section 45(1) because of the definition of the word transfer in section 2(47)(iii), even then we are of the view that the liability to pay capital gains tax would not arise because section 45(1) is required to be read with section 48, which provides for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any under Part IX constituted transfer under section 45(1), still the assessee ought to succeed because the firm can be assessed only if the full value of the consideration is received by the firm or if it accrues to the firm. In the present case, the company had allotted shares to the partners of the erstwhile firm, but that was in proportion to the capital of the partners in the erstwhile firm. That allotment of shares had no correlation with the vesting of the properties in the limited company under Part IX of the Act. Lastly, section 45(1) and section 45(4) are mutually exclusive. Under section 45(4) in cases of transfer by way of distribution and where such transfer is as a result of dissolution, the Department is certainly entitled to take the full market value of the asset as full value of consideration provided there is transfer by distribution of assets. In this case, we have held that there is no such transfer by way of distribution and, therefore, section 45(4) is not applicable. This deeming provision, regarding full value of consideration, is not there in section 45(1) read with section 48. If one reads section 45(1) with section 48, it is clear that the former is a ch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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