TMI Blog2018 (2) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant. Further , it is apparent that assessment order was passed on 18/3/2016 and order under section 263 was passed on 1/5/2017, both after 1/6/2015, therefore explanation (2) introduced w.e.f. 1/6/2015 squarely applies. Therefore, it is apparent that AO has not made any enquiry with respect to the taxability of gift received by the assessee from the mother of the Karta of assessee. Furthermore, merely notice has been issued under section 154 on the same issue but later on, no rectification order has been passed by the Ld. assessing officer does not help the case of the assessee. The provisions of section 154 operate when there is an apparent mistake from the records. - Decided against assessee. Whether the gift of 75,000 equity shares of a private limited company received by assessee HUF from Mrs. Sneh Gupta is chargeable to tax under section 56 (2) (vii)? - Held that:- In the present case, the assessee is a HUF who received the gift from a non-relative. The ld-authorized representative also could not show us any commentary on Hindu law or any other authoritative material, which says that mother of Karta of assessee HUF, is member of his HUF. Therefore, we reject the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 18-03-2016 is erroneous in so far as it is prejudicial to the interest of revenue. 2. That in any case and in any view of the matter, action of Ld. Pr. CIT in assuming jurisdiction u/s 263 and passing the impugned order under this section is bad in law and against the facts and circumstances of the case. 3. That having regard to facts circumstances of the case, Ld. Pr. CIT has erred in law and on facts in holding that the gift received by the appellant is covered u/s 56(2)(vii) and taxable. 4. That in any case and in any view of the matter, action of Ld. Pr.CIT in bringing to tax the gift as taxable in the hands of appellant is bad in law and against the facts and circumstances of the case. 5. That having regard to facts circumstances of the case, Ld. Pr. CIT has erred in law and on facts in taking the valuation of shares @ ₹ 2375.95/- u/s 56(2)(vii) r.w.s. 2(22B) instead of fair market value @ ₹ 234.82/- per share under rule 11UA as claimed and that too by recording incorrect facts and findings and without observing the principles of natural justice. 6. That in any case and in any view of the matter, action of Pr.CIT in adop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith distinctive numbers by the assessee is enclosed (ii) Copy of the house tax receipt is enclosed. (iii) Shares were submitted for D mat vide letter dated 26.11.2012 to M/s RCMC share registry. The copy of the letter is enclosed. 3. In this submission you have simply submitted the mode and manner of acquisition of shares. There is no inquiry made by the AO as regards the applicability of section 56(2)(vii) therefore your case would fall u/s 263(1) explanation 2. Vide letter dated 01.12.2016 you have accepted that you have received 75,000 equity shares from Mrs. Sneh Gupta who is the mother of Karta of HUF. You have also made your further submission that your case is not covered u/s 56(2)(vii). You have attempted to say that the gift is from relative only. You have also referred to the definition of relative made by the Finance Act 2012 w.e.f. 01.10.2009. You have presumed that the amendment is only to enlarge the definition of relative in so as it relates to HUF and not to restrict its definition. You have also referred to notes of clauses of Finance Bill 2012. It has been specifically mentioned that the relative of HUF would be only the member thereof. It is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect 01.10.2009 and specifically provided that in the case of HUF only member would be the relative. 6. The Hon ble Supreme Court in the case of Tarulata Shyam vs. CIT, 108ITR 345 has referred to a decision of Brandy Syndicate vs. Inland Revenue Commissioner (1921) 1 Kb 64 wherein it was held as under:- Once it is shown that the case of the assessee comes within the letter of the law, he must be taxed, however great the hardship may appear to the judicial mind to be. 7. Similarly the definition of relative has to be seen with reference to what has been mentioned in the Act. We have to look only fair to the language used. There is no scope of presumption of enlargement of definition as mentioned by you in your reply. 8. The Hon ble ITAT, Delhi in the case of DCIT vs. Frontline Capital Services Limited, 96 TTJ 201 has also referred to the decision of the Hon ble Supreme Court in the case ofTarulata Shyam(supra). The portion of the para 12 is reproduced below:- 12. It is well-settled position in law that rules of interpretation can be put into service only where the language of the statute is ambiguous or capable of more than one meaning. In the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old statutes It is not applicable to modern statutes. 9. In the case of Housing and Urban Development Corporation Limited vs. JCIT, 102 TTJ 936 the Hon ble IT A T Delhi referred to a decision of apex court in the case of Suresh Lohiya vs. State of Maharashtra(l966) 10 SCO 379 wherein it held that once a word has been defined in the statute, the court cannot look elsewhere for its meaning. The Hon ble ITAT further referred to the judgement of the Hon'ble Supreme Court in the case of P. Kasilingam vs. PSG College of Technology (1995) Supp 2 SCC 348 and other case laws. The relevant portion of the para 12 is reproduced below:- 12. In our opinion, the word 'means' can only have one meaning, that is, it is an exclusive definition vide P. Kasilingam vs. P.S.G. College of Technology (1995) Supp 2 SCC 348. When we say that a word has a certain meaning then by implication we mean that it has no other meaning vide Punjab Land Development Reclamation Corpn. Ltd. vs. Presiding Officer, Labour Court (1990) 77 FJR 17 (SC) : (1990) 3 SCC 682. However, when certain other categories are added then it means that only those additional categories will be included within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther of the karta of assessee and thus relative . Notice issued by the ld PCIT deliberated that mother is not a member of an HUF and therefore is not covered in the definition of relative as it applies in case of assessee. 7. The assessee submitted its reply in response to the notice on 20/3/2017, which is placed at page No. 178 184 of the paper book. It was stated by the assessee that the above gift is from relative and thus exempt receipt under section 56 of the Income Tax Act. With respect to the valuation, it was submitted that valuation is required to be made as per rule 11 UA of the Income Tax Act. 8. After considering the reply of the assessee, The Ld. PCIT passed order under section 263 of the Income Tax Act as under :- 6. I have carefully considered the submissions of the assessee. The reply of the assessee is considered point by point and not found satisfactory rather it is repetitive in nature to the extent that it reiterates the points of interpretation of the term 'relative' and applicability of section 263. These issues were already dealt with at length in the show cause notice dated 09/02/2017. 7. In para 3 of the reply dated 20.03.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question of law:- Whether the Income Tax Appellate Tribunal was right in setting aside the order passed by the Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961? The Hon'ble Delhi High Court discussed in detail the various case laws like CTT vs. Nagesh Knitwears Pvt. Ltd., 345 ITR 135; Malabar Industrial Company Ltd vs. CTT, 243 ITR 83(SC); Nabha Investments Pvt. Ltd. vs. Union of India, 246 TTR 41(Delhi); TTO vs. DG Housing Projects Ltd., 343 TTR 329(Delhi); Rampyari Devi Saraogi vs. CIT, 67 TTR 84(SC); CIT vs. CTT vs. Sunbeam Auto Ltd., 332 ITR 167. In the case of CTT vs. Nagesh Knitwears Pvt. Ltd.(supra) the Hon'ble Delhi High held as under:- The Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. Section 263 has been enacted to empower the CIT to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and secondly, it shoidd be prejudicial to the interest of the Revenue. The expression prejudicial to the interest of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Delhi Tribunal has referred to the decision of the Hon'ble Delhi High Court in the case of Gee Vee Enterprise vs. ACIT, 99 ITR 375 as under:- 7.5 Furthermore, we find that Hon'ble Jurisdictional High Court in Gee Vee Enterprise vs. Asst. CIT [1975] 99 ITR 375 has held that the Ed. Commissioner of Income Tax can regard the ITO's order as erroneous on the ground that in the circumstances of the case the ITO should have made further enquiries before accepting the statements made by the assessee in his return. We find that this case law is also applicable on the facts of this case Assessing Officer in this regard has not made any enquiry and has accepted the statements made by the assessee in his return. iv. Thomson Press (India) Ltd. vs. CTT, 94 CCH 42(DelHC): In this case also the Hon'ble Delhi High Court has discussed various case laws pronounced on section 263. The observations of the Hon'ble Delhi High Court as in para 51 are reproduced as under:- We are also unable to accept the contention that since in the preceding year, no issue has been raised with regard to charging of interest by one unit to another, the same could not be picke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id jurisdiction but in order to enable him to do it, he may make such inquiry as he deems necessary in this behalf. An order of assessment is subject to exercise of an order of a revisional jurisdiction under section 263 of the Act. The doctrine of merger in such a case will have no application. 10. The sum received by M/S Subodh Gupta HUF from a person other than the relative would be covered u/s 56(2)(vii)(c)(i) as the assessee has not paid any consideration while receiving as gift the 75000 shares of M/s Triveni Polymers Pvt. Ltd. The AO failed to invoke the plain section i.e. 56(2)(vii)(c) read with definition of 'relative' therefore it also becomes a mistake of law. In view of this the AO omitted to add a sum of ₹ 17,81,98,500/- i.e. the fair market value of 75000 shares at the rate of ₹ 2375.95 per share. Hence, in the considered opinion of the undersigned the order passed by the AO u/ s 143(3) of income tax act was held as erroneous so far as it is prejudicial to the interest of revenue. In view of facts detailed above, the twin condition of assessment order being erroneous and prejudicial to the interest of revenue for invoking the section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 56(2). In any particular, and without prejudice to the generality of the provisions of the sub section (1), the following incomes shall be chargeable to income tax under the head income from other sources: (vii) Where an individual or HUF receives, in any previous year, from any person or persons. (c) any property, other than immovable property- (i) without consideration, the aggregate fair market value of which exceeds ₹ 50,000/- , the whole of the aggregate fair market value, (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. 14. The same is chargeable to tax at the aggregate of the fair market value. Explanation to sub-clause (c) of section 56(2)(vii) states: For the purpose of this clause,- (b) fair market value of a property, other than an immovable property, means the value determined with the method as may be prescribed. 15. AR claimed the fair market value is to be determined as per rule 11U and 11UA. And in support of the assessee has quoted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee HUF for a total sale consideration of ₹ 36,82,76,900/- @ ₹ 2375.82/- per share. 19. Of the total of 1,55,000 shares sold in December 2012 by the assessee HUF, 75.0 shares had been received as gift in the month of September 2012. AR has claimed the fair market value of these shares received as per the valuation made under rule 11UA works out as ₹ 234.82 per share. Thus, fair market value of these shares as ₹ 1,76,12,038/-. 20. It is relevant here to quote a landmark judgement of Hon'ble Allahabad high court in case of Amrit Banaspati co. Ltd., 256 ITR 337. In this case the appeal was filed by the assessee against the decision of ITAT, Delhi which had upheld the wealth tax assessment order of the assessing officer. In this case, fair market value of the underlying property which was a flat in Mumbai was determined by the assessing officer at the market value of the property. The assessee, on the other hand, was using the valuation on the basis of the municipal authorities. The valuation so arrived was Rs. x,jo,aC'Q,' - icr die re^evanc assessmem yeai i 99o-9-i. uiioiesuiigiy, me assessee liiiu himself agreed to sell the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue is ascertainable. 22. The value suggested by the AR is unacceptable in light of the clear application of section 2(22B) of income tax act. And as per the section the fair market value is to the price which this capital asset would fetch in open market. The case law of Medplus Health Services (p) Ltd. vs. ITO zvard 16(1) Hyderabad (2016) 68 Taxman.com 29 (Hyd. Tri.) is also not applicable in the case at hand as in the appellate proceedings neither has the application of section 2(22B) being made nor has it been deliberated or adjudicated upon. Moreover, the issue is covered by the ratio of the decision of the Hon'ble Supreme Court in the case of Amrit Banaspati (supra) as no rule would be applicable as per section 2(22B)(i) of the IT Act since the market value is ascertainable. The case of the revenue is on strong footing as no rule would be applicable within the express provision of section 2(22B)(i). 23. The assessee HUF, itself has sold the share at price of ₹ 2,375.98/-per share within a period of less than three months of the acquisition of shares by way of gift, it being verified as to whether it is correct or not as per rule, in view of the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pressed by the AO, being no inquiry has been made. The case is fully covered by explanation 2 to section 263. 27. In the result, it is held that the assessee HUF is liable to pay taxes on the receipt of gift of shares without any consideration. The AO is directed to modify the order passed by the AO vide order dated 18.03.2016 to the extent that the market value of 75000 shares received from the mother are treated as income u/s 56(2Hviib which the AO failed to bring to tax. The income of the assessee HUF is therefore, enhanced by (75000x ₹ 2375.95) ₹ 17,81,98,500/- above and over the assessed income for the present A.Y. 2013-14. The AO is directed to give effect to this order and raise demand immediately. 28. The penalty proceedings u/s 271(1) (c) r.w.s. 1 are also initiated because the assessee failed to apply section 2(22B) for the purpose of fair market value which is ascertainable and also the case of the assessee, on the plain reading of the definition of 'relative', is not covered as mother is not member of HUF. The mother has gifted 75000 shares to the HUF. 9. In nutshell, he directed the Ld. assessing officer to modify the order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of gift from Mrs. Sneh Gupta (Mother). PB 147 148 is the Gift Deed showing that Mrs. Sneh Gupta gave shares jointly to following persons: 1. Sh. Subodh Gupta (Karta) 2. Mrs. Sonal Gupta (wife of the Sh. Subodh Gupta) 3. Ms. Stuti Gupta (daughter of Subodh Gupta) 4. Ms. Sachi Gupta (daughter of Subodh Gupta) 5. Mr. Shreyansh Gupta (Son of Subodh Gupta) 2. Not only this, issue about the acquisition of shares of M/s Triveni Polymers P Ltd (TPPL) taxability of capital gain resulting from the transfer of shares including the shares received from the mother was extensively examined during the course of assessment proceeding as is evident from the following:- PB 1-3 is the copy of return showing that assessee had disclosed amount of capital gain from sale of equity shares of M/s Triveni Polimers Pvt. Ltd. (TPPL). PB 4 is Assessing Officer s notice u/s 142(1) wherein he asked for statement of affairs of the assessee for 3 years. PB 5 is assessee s reply submitting statement of affairs and other details including Bank A/c of the assessee. PB 23-54 is assessee s reply dated 05.08.2015 filed to the Ld. Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by the Ld. Assessing Officer who in any case is taken to have considered all the facets of an issue i.e. gift in the present case as the gift was explained to Ld. AO and further that it was received from the mother of Mr. Subodh Gupta. Since section 56(2)(vii) contains exception that if gift is received from relative , it is not taxable, AO took this view and passed the impugned order. 4. Therefore, the revision order passed by Ld. CIT u/s 263 is bad in law in view of following propositions of law and judgments in support of the same: 1) There is a presumption that an assessment order has been passed after application of mind. Thus, revision u/s 263 of such assessment order would be bad as held in the judgment of Oracle Systems Corporation vs. ADIT 380 ITR 232 (Delhi) (CLC Pg. 110-117) para 10-13 (a) In the following judgments, it has been held that merely because the assessment order is brief it would not be concluded by this fact alone that assessment order was passed without making requisite enquiries. CIT vs. Ashish Rajpal 320 ITR 674 (Del) at page 686 (CLC Pg. 1-13) CIT vs. Gabriel India Ltd. 203 ITR 108 (Bom) at page 114 CIT vs. Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 cannot be initiated for inadequate enquiry, but only for lack of enquiry, which is distinct from inadequate enquiry. CIT vs. Sunbeam Auto Ltd. 332 ITR DIT vs. Jyoti Foundation 357 ITR 388 (Del) (CLC Pg. 37-43) CIT vs. Sunbeam Auto Ltd. 332 ITR 167 (Del) (CLC Pg. 14-27) ITO vs. D.G. Housing Projects Ltd. 343 ITR 329 (Del) (CLC Pg. 44-52) CIT vs. Leisure Wear Exports Ltd. 341 ITR 166 (Del) (CLC Pg. 53-62) CIT vs. Vodafone Essar South Ltd. 212 Taxman 184 (Del) (CLC Pg. 63-67) CIT vs. Hindustan Marketing and Advertising Co. Ltd. 341 ITR 180 (Del) CIT vs. New Delhi Television Ltd. 262 CTR 604 (Del) (CLC Pg. 68-71) CIT vs. Vikas Polymers 236 CTR 476 (Del) (CLC Pg. 28-36) - CIT vs. Hero Auto Ltd. 343 ITR 342 (Del.) Lack of proper enquiry-Assessee having given complete details of the provisions of warranty in response to the query raised by the AO during the course of assessment proceedings and regarding claim of deduction under s. 35DDA. AO accepted the assessee s claim after examining the same, order under s. 263 passed by the CIT cannot be sustained - CIT vs. Bharat Aluminum Co. Ltd. 303 ITR 256 (Del) Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. That out of natural love and affection which I bear towards the family of my son namely Shri Subodh Gupta his wife Sonal Gupta and three children Stuti Gupta, Sachi Gupta Shreyansh Gupta all R/o B-102 Gulmohar Park New Delhi jointly forming Subodh Gupta HUF I make a Gift of 75000 equity shares of Triveni Polymers Pvt. Ltd. having registered office at 2B DCM Building Barakhamba Road New Delhi of ₹ 10/- each bearing distinctive No. 1070001 to 1120000 and 225001 to 250000 in favour of Subodh Gupta HUF on 14/09/2012. Thus, perusal of the above Gift Deed would show that the shares have been gifted to the above said persons collectively and each of them would clearly fall within the definition of term relative as provided in clause e to Explanation provided in Section 56(2)(vii) which has been inserted to enable the HUF assessees to claim exemption of the gifts as would be clear from the notes on clauses to the amendment made by Finance Bill, 2012 (CLC Pg. 194) as is reproduced hereunder: Clause (e) of Explanation to second proviso of the said clause provides that the definition of relative shall have the same meaning assigned to it in the Explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded Family constitutes all persons lineally descended from a common ancestor and includes their mothers, wives or widows and unmarried daughters. All these persons fall in the definition of relative as provided in Explanation to clause (vi) of section 56(2) of the Act. The observation of the CIT(A) that HUF is as good as 'a body of individuals' and cannot be termed as relative is not acceptable. Rather, ar/HUF is 'a group of relative 4Plfilow having found that an HUF is 'a group of relatives', the question now arises as to whether would only the gift given by the individual relative from the HUF be exempt from taxation and would, if a gift collectively given by the 'group of relatives 'from the HUF not exempt from taxation. To better appreciate and understand the situation, it would be appropriate to illustrate an example, thus an employee amongst the staff members of an office retires and in token of their affection and affinity towards him, the secretary of the staff club on behalf of the members of the club presents the retiring employee with a gift could that gift presented by the secretary of the staff club on behalf of the staff club be termed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove said judgments. II. Without prejudice to above submission, it is respectfully submitted that in any case Mrs. Sneh Gupta (Donor) i.e. mother of Sh. Subodh Gupta is also member of Sh. Subodh Gupta (HUF), she being lineal ascendant of Sh. Subodh Gupta (29 ITR 165(Raj)(FB). Under the Flindu law, a Hindu Undivided Family constitute all persons lineally ascendant or descendant from a common ancestor and includes their mother, wives, widows and unmarried daughter/sisters and more importantly all these person falls under the definition of Relative as provided in Explanation (e) of Sec 56(2)(vii). Thus, gift received from the mother would be covered within the meaning of relative in both the clauses of Explanation (e) i.e. clause (i) and clause (ii). Reliance is placed on following judgments of Hon ble Kolkata Bench of ITAT: Subhadra Devi Nevatia vs. Department of Income Tax (Dt. 10th February, 2012, ITA NO. 1298/K/2011, ITAT Kolkata) (CLC Pg. 167-175) In this judgment, Hon ble bench analyzed the provisions of Hindu Law as contained in Hindu Succession Act and their interplay with the provision of Sec 56(2)(v) of Income Tax Act, 1961. It has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clear that it is mandated by the proviso to section 56(2)(v) of the Act that this provision shall not apply to any sum of money received from any relative and according to Explanation to this section 56(2)(v) of the Act the expression 'relative' has been defined and includes any lineally ascendant or descendant of the individual. It means that the HUF consists of members of a joint family who are lineally ascendant or descendant of the individual. Outside the limits of coparcenary there is a fringe of persons, males and females, who constitute an undivided or joint Hindu family. Further, there is no limit to the number of persons who can compose it nor to their remoteness from the common ancestor and to their relationship with one another. It consists of a group of persons who are united by the tie of sapindaship arising by birth, marriage or adoption. If this is the situation, we can easily hold that HUF entity falls within the definition of relative as defined in explanation to section 56(2) of the Act. Once it is held that HUF falls in this dejinition, no receipt from HUF to its coparceners or members can be assessed by invoking the provisions of section 56(2)(v) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no condition as regards to ownership in the provisions of s. 80-IB(10) of the Act, we feel that taking a liberal construction of the provision, the assessee is eligible for deduction under s. 80-IB( 10) of the Act. The Punjab Haryana High Court in the case of B.M. Parmar vs. CIT 235 ITR 679(SC) held that In the m ter of tax, the statute is to be interpreted strictly. A provision has to be construed keep ng in view the purpose and object for which it is enacted. The concept of commercial principles on business practice would not be relevant unless it is found to be inevitable. The Supreme Court in the case of CIT vs. Strawboard Manufacturing Co. Ltd. 177 ITR 431(SC) and the Punjab Haryana High Court in the case of CIT vs. Strawboard Manufacturing Co. Ltd. 1975 CTR (P H) (1975) 98 ITR 78 (P H) holding an interpretation clause which extends the meaning of a word does not take away its ordinary meaning. An interpretation clause is not meant to prevent the word receiving its ordinary, popular and natural sense whenever that would be properly applicable, but to enable the word as used in the Act, when there is nothing in the context or the subject-matter to the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this regard, it is submitted that Ld. CIT has misread the plain reading of law as is expressly provided in Explanation (b) to section 56(2)(vii) providing that fair market value of a property means the value determined in accordance with method as may he prescribed. b) The methods prescribed are as per Rule 11U 11UA as would be evident from the Notification No. 23/2010 and amendments thereafter (CLC Pg. 186-193). c) Ld. CIT has referred to the definition of fair market value as given in Section 2(22B), however it is a general definition and it would be needed to be referred only when specific definition is not provided in the charging section. In this case, since specific definition has been provided under the law therefore, there would not arise any need to refer to the general definition. Thus, action of Ld. CIT is contrary to law on the face of it. d) In this regard, reliance is placed on the judgment of Medplus Health Services (P) Ltd. vs. 1TO in 48 ITR(T) 396 (Hyderabad - Trib.)/ 158 ITD 105 (Hyderabad) (CLC Pg. 176-185) which says that there cannot be any other method when sped lie method has been prescribed under the law. e) Ld. CIT has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. In the above case, it is humbly submitted that the following decision may kindly be considered with regard to validity of proceedings u/s 263 of I.T.Act: 1. Malabar Industrial Co. Ltd. Vs CIT f20001 109 Taxman 66 (SC)/r20001 243 ITR 83 (SC)/ 159 CTR 1 (SC) (Copy Enclosed) Where Hon ble Supreme Court held that where Assessing Officer had accepted entry in statement of account filed by assessee, in absence of any supporting material without making any enquiry, exercise of jurisdiction by Commissioner under section 263(1) was justified 2. Raimandir Estates (P.) Ltd. Vs PCIT 170 taxmann.com 124 (Calcutta)/[201C 240 Taxman 306 (Calcutta)/[2016] 386 ITR 162 (Calcutta)/[2016] 287 CTR 512] (Copy enclosed) Where Hon ble Calcutta High Court held that where assessee with a small amount of authorised share capital, raised a huge sum on account of premium and chose not to go in for increase of authorised share capital merely to avoid payment of statutory fees and Assessing Officer passed assessment order withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 shares at the rate of ₹ 2375.95 per share. Therefore, in the opinion of the Ld. PCIT the order passed by the Ld. assessing officer was held to be erroneous as well as prejudicial to the interest of the revenue. Ld. PCIT noted that the amount of gift received from the mother of the assessee HUF is chargeable to tax under section 56 of the Income Tax Act and then she decided the fair market value of the shares as on the date of the transfer at ₹ 2375.98/ per share. The Value of such shares taken by the ld PCIT was the sale price per share sold by the assessee to the German company within short time as according to him , as per provision of section 2 (22B ) of the act that is the fair market value of gift of shares received by assessee. Consequently, the addition of ₹ 17.81 crores was made in the hands of the assessee. This order is under challenge before us. On the basis of the reading of the facts as well as the order of the Ld. PCIT, following 3 issues emerges before us:- i. whether the order passed by the Ld. assessing officer is erroneous and prejudicial to the interest of revenue as per ground No. 1 and 2 of the appeal of the assessee. ii. Whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e limited were shown in the long term capital gains computation thereof was disclosed in return of income. He further referred to the letter dated 05/08/2015 placed at page No. 23 of the paper book where the computation of long-term capital gain on sale of shares from Triveni polymers private limited were enclosed. He further referred to page No. 34 of the paper book which shows that the complete details of the shareholding of the company whose shares are sold is also available wherein acquisition of the shares by the assessee is shown. He further referred to page No. 147 and 148 of the paper book, which is part of reply of the assessee, dated 12/10/2015 before the Ld. assessing officer, which is a declaration of the gift from Mrs. Sneh Gupta. This gift deed clearly shows that shares have been received by the assessee as gift from mother of karta of assessee HUF. He further referred to letter dated 7/12/2015 wherein the copy valuation report of the shares submitted to the reserve bank of India is submitted to the Ld. assessing officer. In view of this, the contention of the assessee is that the Ld. assessing officer has examined the details and after that, he has accepted the retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils that speak about the submission of the gift deed before the Ld. assessing officer. Vide that letter the date wise detail of acquisition of shares, with distinctive numbers were enclosed and it was mentioned that these shares were acquired through gift from Mrs. Sneh Gupta, mother of karta of HUF assessee on 14/9/2012. It was further stated that the donor originally acquired the shares as per different dates. Therefore it is apparent that the above information was provided with respect to the computation of cost of acquisition to be determined in case of the assessee when it is sold, as the Act provides for cost acquisition of the previous owner substituted in case of certain types of acquisition, such as gift etc. Therefore, it is apparent that the copy of the gift deed, which is submitted by the assessee before the Ld. assessing officer was with respect to the cost of acquisition to be determined at the time of sale of those shares for working capital gain in the hands of the assessee. The ld AO has not at all looked at those documents from the perspective of section 56 (2) of the Act. No other evidence was adduced before us which even remotely suggest that the ld AO has enqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any individual or Hindu undivided family receives in any previous year from any person or persons on or after the 1st day of October 2009 but before the 1st day of April 2017, any sum of money or property without consideration, aggregate fair market value of which exceeds ₹ 50,000, the whole of the fair market value of such property, shall be chargeable to income tax under the Income From Other Sources, as Income of the recipient. As per explanation (d) in the definition of property , several types of assets are listed including shares and securities. It is not denied that assessee is an HUF, during the year it has received from mother of the Kaka of the assessee HUF a gift of 75,000 shares of a private limited company. Therefore, apparently the provisions of section 56 (2) applies in the case of the assessee. However, proviso to the above section provides that the above clause shall not apply to any sum of money or any property received from any relative . Therefore, if such sum or property is received from a relative it will not be chargeable to tax under that section. The explanation (e) defines relatives in case of a Hindu undivided family as any member thereof. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attracting tax liability in his or her individual hands, therefore, if the gift is given to the collective name of HUF comprising the same individual, it should also not attract tax. The above contentions deserves to be rejected because the proviso to section 56 (2) (vii) provides definition of relatives in case of individual and HUF separately. It provides that above clause for taxability shall not apply to any sum of money or property received from any relative . The relative have been mentioned separately with respect to an individual, and with respect to a Hindu undivided family. Therefore, in case of Hindu undivided family, if the gift is not received from member of such HUF then such sum is chargeable to tax. The relatives mentioned with respect to an individual cannot be considered when the recipient of the property is an HUF. Further, it substitutes the earlier definition of the relative when there was no reference about what constitutes relatives with respect to the HUF. It only talks about relatives with respect to an individual. Therefore, earlier the issue was that if the gift is received by an HUF from its members, probably it was taxable. To remove that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word individual includes group of individuals and therefore benefit of exemption would be available to HUF. The above decision also does not apply here. In the section 56 (2) (vii) there are two specific and different types of exclusions provided for individual and HUF . In case of individual different set of relatives have been defined and in case of an HUF there are different set of relatives defined. By relying on that decision, the argument of the assessee is to expand the benefit available to an HUF of tax-free gift from members of HUF as well as from the non-members as applicable to the individual. Before the Hon ble Karnataka High Court, there was no benefit available to an HUF in wealth tax act for that particular section and therefore such a view was taken, Whereas in the present case the legislature has defined relative differently for individual and HUF. In section 56 of the act, legislature has given a clear-cut provision that if the recipient is individual or HUF then from whom it can receive property or sum without paying tax under section 56 of the act. In view of this, the reliance placed by the assessee on the decision of the Hon ble Karnataka High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee HUF is also member of his HUF. For this proposition, he relied on the decision of the Hon ble Rajasthan High Court in 29 ITR 165 and on the decision of the Kolkata bench of ITAT in ITA No. 1298/K/2011. The Hon. Rajasthan High court held that Wives or widows of male members of an undivided Hindu family and unmarried daughters of male members are members of the family, though they may not be coparceners, hence does not address the question before us. We also reject the reliance on the above decision of the coordinate bench because the assessment year involved in that year is 2005 06 and further it was a case of an individual who received gift from HUF. It is on similar lines of earlier decisions relied upon by the assessee. In the present case, the assessee is a HUF who received the gift from a non-relative. The ld-authorized representative also could not show us any commentary on Hindu law or any other authoritative material, which says that mother of Karta of assessee HUF, is member of his HUF. Therefore, we reject the arguments of the assessee that the gift of 75,000 equity shares received by the assessee is not chargeable to tax under section 56 (2) (vii) of the act. Hen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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