9911796707
TMI Blog2018 (9) TMI 720X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to as "AICC") had over a period of time advanced Rs. 90 crores to Associated Journals Ltd (hereafter "AJL"), publishers of the newspaper "National Herald", with the condition that the amounts be utilized by the latter to write off its accumulated debts and recommence its newspaper. The books of account of AJL showed that for the period 01.04.2010 to 31.03.2011, the total outstanding debt as on 01.04.2010 was Rs. 88,86, 68,976/- and as on 15.12.2010 it was Rs. 90,21,68,980/-. In the meanwhile, an application was made for the incorporation of the charitable non-profit company "Young Indian" ("YI" hereafter) on 13.08.2010, and Form 1A with Registrar was filed for availability of the Young Indian name. On 18.11.2010, a license was issued by the appropriate authority to YI which was then incorporated on 23.11.2010; M/s. Suman Dubey and Sam Pitroda were its founder members and founder directors. On 13.12.2010, the first Managing Committee meeting took place; Mr. Rahul Gandhi was appointed as Director (non-shareholder); Mr. Motilal Vora and Mr. Oscar Fernandes were nominated as Ordinary Members; M/s. Suman Dubey and Sam Pitroda subscribed to 550 shares each. On 18.12.2010 by a Deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on basic facts, the individual circumstances and facts of the three petitioners are discussed below. 5. W.P.(C) 8293/2018 pertains to Mr. Rahul Gandhi for AY 2011-12. This assessee [hereafter referred to as "Mr. Rahul Gandhi"] filed a return of income declaring Rs. 68,12,018/- which included income from house property and from other sources. After some examination and consideration of details, the income returned was accepted by a scrutiny order dated 30.09.2013 by the Assessing Officer (AO) under Section 143(3). In these circumstances, on 31.03.2018, Mr. Rahul Gandhi received an e-mail from the ACIT, i.e. the AO [hereafter "the ACIT"] at 11.25 PM, intimating that notice under Section 148 for the relevant period, i.e. AY 201112 was issued. A copy of the notice was not, however, attached; the assessee received it on 02.04.2018, through speed post. On 11.04.2018, yet another notice - dated 31.03.2018, but this time containing the digital signatures of ACIT were received through e-mail by Mr. Rahul Gandhi. Acting through his Chartered Accountant, Mr. Rahul Gandhi filed a return of income on 01.05.2018 and subsequently e-filed it on 11.05.2018. A request was made to supply "Reasons to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le company, he was under no obligation to disclose the value of his shares in the manner that the Revenue alleges. In this regard, it is argued that the said provision, i.e. Section 56(2)(vii) is inapplicable in the issue of fresh shares. The specific ground articulated on behalf of the petitioner Mr. Rahul Gandhi is that second proviso to Section 56(2)(vii) (c) (ii) enacts certain exceptions to the provision one of which is that if any property is received by an individual from any Trust or institution, including an institution registered under Section 12(AA), Section 56(2)(vii) could not apply. 7. It is also alleged that an order subsequently cancelling the registration granted to YI, on 26.10.2017, with retrospective effect is of no avail in view of decisions of this Court and the Allahabad High Court. The reliance placed upon the TEP is attacked as vitiated because the revenue has acted on stale grounds. It is also alleged that the AO should have made independent investigations as to whether in fact any obligation to value of underlying assets of YI in the light of the fact that it is a charitable institution is necessary before issuing the reassessment notice. The reassessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny's shares were ignored. It is contended that besides the fact that this is factually and legally wrong, this Court ought not examine the issue as that would entail scrutiny on merits which is impermissible since the limited scope of these proceedings is to see whether reopening of assessment was valid. 9. Mrs. Sonia Gandhi is the petitioner in W.P. (C) 8482/2018. She too, like Mr. Rahul Gandhi impugns the reassessment notice; the grounds urged are similar. She acquired shares in Young Indian (YI), in 2011. Her return disclosed Rs. 17,92,092/-, consisting of income from other sources; the return of income was accepted under Section 143(1) of the Act by the AO/ACIT. Alleging that income had escaped assessment, the ACIT issued reassessment notice under Section 148again on 31.03.2018 at 11:28 PM through email. A notice was received on 02.04.2018, through speed post; a third intimation, with scanned copy of the notice, was received electronically, with digital signature of the ACIT, on 11.04.2018. Return of income was filed on behalf of Ms. Sonia Gandhi on 11.05.2015 by e-return procedure. The copy of "reasons to believe" was furnished to the Petitioner, at her request, on 11.05.2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y an email at 11:22 PM. He received a notice by speed post, which contained a scanned copy of the earlier notice on 02.04.2018; Mr. Fernandes filed his return on 17.04.2018 and requested for a copy of the "reasons to believe", which was provided to him. Thereafter, like Mr. Rahul Gandhi and Ms. Sonia Gandhi, he sought inspection of the record which was partly granted. He preferred objections to reassessment notice which was rejected on 03.08.. The grounds urged by Mr. Fernandes are similar to that in Ms. Sonia Gandhi's petition; i.e. that the reassessment notice is illegal as it was barred by limitation prescribed under section 149 of the Act; the sanction under section 151 of the Act was mechanical; that the impugned notice is in of violation of principles of natural justice; provisions of section 56(2)(vii) are not applicable to the present case; that as a matter of fact, no income which has escaped assessment; that the revenue has taken contradictory stands in the case of the Petitioner as against their stands in the case of 'Young Indian'; that there was no independent application of mind by the and further, that there is no tangible material; that reassessment has been initiat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not have been any interest that needed disclosure under the Income Tax Act. Such being the position in law, stressed Mr. Datar, Mr. Rahul Gandhi could not be faulted for not stating any detail with respect to the acquisition of shares in YI in the period covered by 2010-11. Mr. Datar relied upon the judgment of the Supreme Court reported as Commissioner of Wealth Tax v. Arvind Narottam (Individual) AIR 1988 SC 1824, especially the following observations: "a mere right to be considered for distribution of the income or of the corpus of the Trust Fund cannot be regarded as an 'interest' since it was not capable of valuation." 14. It is, therefore, urged that as the beneficiary under Trust is merely entitled to income or benefits and has no interest in a trust, likewise, the director in a Section 25 company is at least similar, if not on a higher pedestal and does not have any interest which needed disclosure in his or her income tax returns. The second aspect which related to the non-disclosure allegation vis-à-vis Mr. Rahul Gandhi's subscription to shares and their value on account of directorship in YI is that Section 147 permits reopening of assessment, if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 22.02.2018 issued by the CBDT in Notification No. 8/2017 and dated 29.09.2017 Notification No. 1/2018 dated 12.02.2018), was not issued before limitation set in at midnight on 31.03.2018. Hence the proceedings are barred by limitation. It is contended that the impugned order by the AO rejecting the objections to the reasons is violative of the principles of natural justice. Upon receiving the reasons recorded (on 15.05.2018) the assessees demanded copies of the documents relied upon in the said reasons; the AO, however, rejected these requests resulting in denial of principles of natural justice. Reliance is placed in this regard, on Sabh Infrastructure Ltd. v. Assistant Commissioner of Income Tax (judgment dated 25.09.2017 of this court in W.P.(C) 1357/ 2016). 17. Learned senior counsel submitted that the revenue's position indicates contradictory and inconsistent stands. The basis for making valuation in the present writ petition is to treat the debt assigned of Rs. 90 crores (approximately) as an 'asset" in the hands of Young Indian. However, the same debt is treated as "bogus" or a "paper entry" in the assessment of YI in which an appeal is pending. (There is a connected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that arguendo, there were income when YI converted the debt (owed by AJL) into equity, the income may be taxable in the hands of YI; it cannot be the income of AJL and the income of the petitioners, in the same assessment year. It is submitted that in the present case, the same income (allegedly arising out of the conversion) is sought to be taxed in the same assessment year (AY 2011-12) in the hands of YI and its shareholder(s). 22. Both counsel (for the petitioners) stated that the only section invoked to allege there was income that had escaped assessment is Section 56(2)(vii)(c)(ii). The condition is that the assessee receives from any person any property, other than immovable property for a consideration which is less than the aggregate fair market value of the property. In the present case, on 22.01.2011, the assessees received-in case of Ms. Sonia Gandhi- 1900 shares (550 from an existing shareholder and 1350 by way of fresh allotment on paying a consideration of Rs. 100 per share); in the case of Mr. Rahul Gandhi, 1900 shares on allotment, by paying Rs. 100 per share; and in the case of Mr. Oscar Fernandes, 50 shares by allotment, by paying Rs. 100 per share. After 22.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case is deeply flawed for multifarious reasons. It is stated that firstly, the AO has applied the wrong version of Rule 11UA. The correct rule in force on 22.01.2011 uses the phrase "book value". Secondly Rule 11, in its essentials, takes note of the Assets - Liabilities of the company, YI, i.e. net worth. A-L must be divided by the total number of shares (PE). The divider is, therefore, 5000, not 1100 as incorrectly employed. The multiplier (PV) is correctly taken as 1900, the number of shares held by the petitioners. Since the divider is wrong, the calculation and the result are wrong, and hence the amount of tax that has allegedly escaped tax is wrong. No re-assessment can be made on the basis of such a fundamental error and "reason to believe" based on the said fundamental error. Thirdly the debt was for Rs. 90.21 crore. At its worst, the value of the equity converted could be Rs. 90.21 crore. But the said figure was "magically" transformed to Rs. 407 crore and the Petitioners' share is valued at astronomical levels (Rs. 154 crore in the case of Mr. Rahul Gandhi, Rs. 90.21 crore in the case of Ms. Sonia Gandhi and Rs. 90.21 crore in the case of Mr. Oscar Fernandes). This ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e investigation wing" They urge that this clearly shows that the PCIT had involved himself in the case even before the AO formed her "reason to believe". The natural and inescapable inference is that the AO acted under the instructions and guidance of the PCIT and did not independently form her "reason to believe". Hence, the initiation of the re-assessment proceedings is vitiated and illegal. Reliance is placed on Commissioner of Income Tax v. Greenworld Corporation: 314 ITR 81(SC) and Commissioner of Income Tax v. S. Goyanka Lime & Chemicals Ltd. 56 taxmann.com 390 (MP). 30. Learned senior counsel submitted that re-assessment proceedings have been launched also against YI, in which an order of re-assessment dated 27.12.2017 has been passed. In that order, in para 8.2 it was concluded "In absence of any evidence that the AICC had actually advanced loan of Rs. 90.21 crore to the AJL and keeping in view the fact that quantum of the loan was tailor made to allot 99% shares of the AJL to the assessee, I am of considered view that alleged loan of Rs. 90.21 crore was not actually a loan but was only a paper entry and an artificially inserted step as part of a scheme of takeover of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased on tangible, concrete and new information that is capable of supporting such a conclusion". Counsel also relied on Commissioner of Income Tax v Rajesh Jhaveri Stock Brokers (P) Ltd., (2008) 14 SCC to state that "reason to believe" cannot be read to mean that the AO has to finally ascertain the facts by legal evidence or conclusions. It is submitted that what is required is "reason to believe", but not the established fact of escapement of income. In other words, at this stage, whether the materials available can prove decisively that there was escapement of income, is not a relevant circumstance at the stage of reassessment, because the AO's opinion is based on his subjective satisfaction and appraisal of the facts and materials available with him. Reliance is placed on Income Tax Officer v. Selected Dalurband Coal Co. (P) Ltd. (1997) 10 SCC 68 and Raymond Woollen Mills Ltd. v. ITO [(2008) 14 SCC 218 (Ref to the latter, which states that "the sufficiency or correctness of the material is not a thing to be considered at this stage."). The ASG points out that the assesses cannot complain that there was a change of opinion since this issue was never examined in the original asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... z. M/s. Suman Dubey and Shri. Sam Pitroda- both holding 550 shares of the face value of Rs. 100 each. As these individuals were existing shareholders, though YI received the assets (in the form of "debt receivable"), the ratio in Bachha F. Guzdar (supra) protected them, as existing shareholders. Explaining that when the asset of the company increases (in the form of "debt receivable"), the ASG submitted that the fair market value of its shares also increases correspondingly and, therefore, any new allotment of shares thereafter can only be at the fair market value as determined under section 56(2)(vii)(c)(ii) read with Rule 11UA. The Petitioner/assessees became shareholders on 22.1.2011 "receiving" the shares @ Rs. 100 per share which was not the fair market value (as on 22.01.2011). Accordingly the fair market value was computed under section 56(2)(vii)(c)(ii) read with Rule 11UA. The said calculation of "fair market value of shares" is also made only taking into account Rs. 90.21 crores as the asset of YI and not computing the immovable property worth approximately Rs. 413.40 crores in which YI acquired beneficial interests on 26.02.2011 by virtue of conversion of debt into equit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Rule 11UA(1)(c) (b) was made by the AO along with computation of income which escaped assessment. 37. The ASG contended that it is evident from these facts that the AO not only carefully examined TEP and report of investigation wing but has also made her own enquiryand collected credible and reliable evidence in form of assessment order of YI for A.Y.2011-12 and the order of competent authority cancelling tax exemption to YI w.e.f. AY 2011-12. The AO has also brought on record the instance of concealment of information by the assessee relevant to assessment of his income. The AO too analysed the relevant provisions carefully before prima facie computing income, which had escaped assessment. The reasons recorded by the AO were approved by the competent authority under Section 151 of the Act after recording his reasons. The reassessment notice was issued on 31.3.2018 within time limit as stipulated under Section149 of the Act and served on the assessees on 31.03.2018 through three modes viz. speed post/registered post, digital transmission and email communication. These facts establish that the requirements of provisions of section 147, First Proviso to section 147, Sections 148, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t even if there was taxable income it cannot be taxed in hand of shareholder of YI has been raised due to an erroneous understanding of the revenue's case by the assessees and by applying a wrong taxable event. 40. Dealing next with the assessees' submission that there was no obligation to disclose any interest in a Section 25 company, as it cannot declare a dividend or part with property it was argued that the Income Tax Act does not distinguish between Section 25 company and other companies. So far as the Companies Act is concerned, Section 25 company can undertake even "commercial activities" and except the prohibition against the paying dividends to its shareholders and deploying its profits for its objects only, there are no other restrictions imposed upon Section 25 company and it is similar to any other company in all other respects. As a matter of fact, Section 25(2) makes it abundantly clear that except the limitations prescribed under section 25(1), all obligations of other companies are imposed on section 25 company also. Section 25 (1) (b) and (2) are relied upon to say that though such companies may not declare dividend to members, they can certainly earn profit in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 25 company can be Rs. 100 -or any other amount such share would not only increase in its monetary value but is also transferable at "fair market value" and this contingency is stipulated in YI's Memorandum of Association. The portion of Memorandum of Association relevant for this purpose, relied on is reproduced below: "4.11 Upon a shareholder (other than a Founder member) ceasing to be a Member whether pursuant to Article 4.11, or by reason of the death of the Shareholder or otherwise ("Outgoing Member) he shall automatically cease to enjoy the benefits and privileges including voting rights, of a Member, and the shares if any held by the Outgoing Member ("Transfer Shares") shall be held in abeyance and the Outgoing Member or his nominee or legal heirs, as the case may be, shall be deemed to have authorised the Managing Committee in its sole and absolute discretion, to determine the person to whom the Transfer Shares shall be transferred ("Transferee") as described hereunder: a. Every outgoing Member, including the deceased outgoing member's nominee or legal heirs, shall be bound to offer the shares held by such outgoing member to the Managing Committee for sale and immediate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Proceeds received from the transferred / purchaser shall be distributed to the outgoing member / transferor of shares or his legal heirs. f. However, if no such offer is made within the expiration of the said twenty one days, the Managing Committee shall buyback or cancel as per the applicable laws the shares so put up for sale as per clause (a) hereinabove mentioned." 43. The learned ASG relies on the above condition to state that every share in YI, despite its status as a not-for-profit company has its value other than face value. If any shareholder wishes to sell her or his shares the procedure contemplated is to be followed and the shares would be sold at "fair selling value". Also, points out the ASG, the assessees' contentions that YI is a Section 25 company and its shareholders have no" pecuniary interest", is fallacious and unsustainable as not only shares are sold at "fair market value"[and not at the face value] but the sale proceeds goes to the shareholders who sell the shares. It is submitted that the A.O., prima facie, had a justified reason to believe that at the time when fresh shares were allotted to the assessees, on 22.01.2011, the value of their shares was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t applied the mind to the facts of the case, while approving the reassessment proposal. He relied on the handwritten note, recording approval, in this regard, (as the original records were produced for consideration of the court). The ASG relied on the Division Bench judgment of this court in Principal Commissioner of Income Tax v. Meenakshi Overseas Pvt. Ltd., ITA 651/ 2015 (judgment dated 11.1.2016) particularly the following extract: "16. ..For the purpose of Section 151(1) of the Act, what the Court should be satisfied about is that the Additional CIT has recorded his satisfaction "on the reasons recorded by the Assessing Officer that it is a fit case for the issue of such notice". In the present case, the Court is satisfied that by recording in his own writing the words: "Yes, I am satisfied", the mandate of Section 151(1) of the Act as far as the approval of the Additional CIT was concerned, stood fulfilled." Analysis and Conclusions 46. The first issue which was urged, attacking the reassessment notice and proceedings emanating from it, relates to the satisfaction recorded by the AO (that she had "reasons to believe") that income had escaped assessment. The first limb of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the substituted Section 147 existence of only the first condition suffices. In other words, if the assessing officer for whatever reason has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment." Phool Chand Bajrang Lal v. Income Tax Officer [1993] 203 ITR 456(SC) emphasised on the veracity of information supplied previously be the assessee during the course of the regular assessment, while considering the validity of a reassessment notice; it stated as follows: "From a combined review of the judgments of this Court, it follows that an Income-tax Officer acquires jurisdiction to reopen an assessment under Section 147(a) read with Section 148 of the Income-tax Act, 1961, only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that, by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to income-tax has escaped assessment. He may start reassessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act as far as the approval of the Additional CIT was concerned, stood fulfilled." In the present case, the PCIT recorded, on reassessment proposal on the file of each assessee, that inter alia, the "lifting of veil" over the tripartite "arrangement" between AICC (i.e. INC), AJL and YI to tax the assessee under Section 56(2)(vii) (c)(ii) of the Act, the sum of Rs. 48,93, 64,896/-. The PCIT, after stating this also recorded that "I am satisfied that the AO i.e. ACIT...has sufficient information in her possession which leads to reasons to believe that the assessee would have income which had escaped assessment which exceeds Rs. 1 lakh". In view of the ruling in Meenakshi Overseas (supra), therefore, the satisfaction recorded by the PCIT was adequate and in accordance with legal requirements. 50. Were the notices (of reassessment to the assessees) not served in accordance with law or prescribed procedure, within the time prescribed? The argument of the assessees on this issue are broadly that the hasty intimation through email process, of the reassessment for the relevant period, shows facial mala fides. The further submission is that the speed post communication with notice, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, the question regarding alleged improper mode or manner of issuance of email notices does not go to the root of the matter; the notices were issued in time, and served within the time prescribed. 53. As regards mala fides (regarding hasty issuance of notices) this court has previously noticed - in the context of allegations that the PCIT had not applied the mind, that such was not the case. There was some material - in the form of investigation reports (though of 2015 vintage) and a TEP (of 2014). The revenue did not show alacrity or swiftness in proceeding to process these documents and materials; however, they cannot be termed as "stale" or irrelevant materials. Apart from a general allegation of mala fides (which is more of the kind that is frequently made under the submission of abuse of power or use of statutory discretion for purposes not authorized by law) there is no allegation of personal mala fides against any official, or that anyone of them was hostile to the petitioners. Consequently, the mere circumstance that reassessment notice was issued on 31.03.2018 does not vitiate the notice or the proceedings. 54. The next main submission of all the assessees is that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is chargeable to tax. The section then enumerates what is deemed to be income; the relevant part is that "any property", other than immovable property(is acquired)"(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". Therefore, the differential between the fair market value and the cost of acquisition, constitutes income. The assessees had relied on Shahrukh Khan v. Deputy Commissioner of Income Tax 2018 (90 Taxmann.com 284) (Bom) in the compilation of judgments, given at the end of the submissions (not alluded to during hearing) where the revenue sought to re-open the assessment, under Section 147, alleging that there was suppression of the value of shares, which should have been at Rs. 33 per share, and not Rs. 10/- per share. That judgment, in this court's opinion, has no relevance, because the shareholder had, in the original returns, declared the value of the shares acquired. The High Court, quite correctly held that the reassessment was based on a second opinion or a review, which was proscribed in law. The effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) on 8th July, 1961 (Modified by SO 2767 dated 5-8-1964; GSR 73, dated 30-12-1965 & SO 35(E) dated January 9, 1976 "In exercise of the powers conferred by sub-section (6) of Section 25 of the Companies Act, 1956 (1 of 1956), the Central Government has directed that a body to which a license is granted under Section 25 aforesaid shall be exempt from the provisions of the said Act specified in column (1) of the Table below to the extent specified in the corresponding entries in Column (2) of the said Table: TABLE Provisions of Act Extent of exemption Section 2(45) In so far as it required the appointment of an individual to perform the duties which may be performed by a secretary under the said Act and any other ministerial or administrative duties only if he possesses the prescribed qualifications Section 147 The whole. Section 160(1)(aa) The whole. Section 166(2) The whole, provided that the time, date and place of each annual general meeting are decided upon beforehand by the Board of Directors having regard to the directions, if any, given in this regard by the company in general meeting. XXXX XXXX Section 292 Matters referred to in clauses (c), (d) and (e) of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directors requires government sanction by virtue of section 259. This too stands exempted. Section 299 is of a similar nature 61. The tenor of provisions exempted, highlight the peculiar nature of a not-forprofit company whose affairs cannot be looked into in the same manner as in the case of a commercial entity or a company that carries on business in the normal course. In the case of a not-for-profit company like a trust the business activities are aimed solely at feeding the trust and furthering their objectives. The rigid insistence on the disclosure obligations and duties and responsibilities of directors, therefore, would detract the effort of feeding charity and furthering charitable objectives. 62. This, however, does not automatically mean that the exemption in regard to provisions of the Companies Act and the disclosure which individual directors have to make to the Board, would in any manner suspend obligations under other laws. In this case, Section 52(2) (v)(c) (ii) clearly deems that the acquisition of certain shares or property can lead to income and the mechanism for dealing with it. Unless that income or information related to it is exempted from the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o, on the distribution of the accumulated balance as capital at the end of the stipulated period there was no right in him to receive any part thereof. It was open to the Trustees to ignore him altogether and they could pay it to such other members of the family as they chose. 7. In support of the proposition that the expression 'property' is a term of the widest amplitude and that every possible interest is includible therein we are referred to Ahmed G.H. Ariffand Others v. Commissioner of Wealth-Tax, Calcutta, [1970] 76 I.T.R. 471. I have no doubt that the expression 'property' must bear a comprehensive import. The question remains whether what is conveyed under the three deeds of settlement to the assessee is a right to anything more than the prescribed minimum under each deed. I may reiterate that the interest extends to no more than that minimum." In this case, given the wording and terminology of Section 56 (2) (vii) (c) (ii), the precedent has no application. It is not the beneficial interest which is in issue here; rather it is the value of the shares acquired on allotment. 64. The next submission made was that disclosure of interest in a not-for-profit c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for-profit company- can increase, depending on its activities and income derived by it. As a result of the above analysis, this court is of opinion that the assessees's argument about nondisclosure of their interest upon acquiring the shares (on account of their non taxability at that stage) is unpersuasive; however, it is open to them to urge this on the merits. 66. The next issue which this court would discuss, is the formula applied. The petitioners had urged that the amended rule and not the rule which applied when the shares were acquired, was applied to re-open their assessments. The relevant rule, applicable with effect from 18.02.2010 reads, inter alia, as follows: "In exercise of the powers conferred by section 295 of the Income tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:- 1. Short title and commencement. - (1) These rules may be called Income-tax (Second Amendment) Rules, 2010. (2) They shall come into force from the 1st day of October, 2009. XXXXXX XXXXXX XXXXXX 11U. Meaning of expressions used in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e may obtain a report from a merchant banker or an accountant in respect of such valuation." The fair market value of unquoted equity shares, in terms of the above rule is calculable by deducting from the book value of assets in the balance sheet of the company (with the permissible deductions, called "A") the book value of liabilities (without including paid up capital of equity shares, provision for dividends, reserves, credit balance of P/L account, provision for taxation, etc called "L"), multiplied by the paid up value of such equity shares (PV) and divided by the total amount of paid up equity share capital as shown in Balance Sheet (PE) (Expressed in the rule as Fair value= (A-L) * (PV) (PE)). 67. The share allotment to Mr. Rahul Gandhi (1900 shares) and Mr. Oscar Fernandes (600 shares) on 22.12.2011, and the allotment of 1350 shares to Mrs. Sonia Gandhi (which increased her holding to 1900) on the same day is said to be the taxing event. The book value of the assets in the balance sheet of the company, YI (which was A) on that day included Rs. 90.21 crores and, therefore, increased; from this the liabilities, (which included the Rs. 1 crore borrowed to acquire the asset) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the correct conclusion. From the primary facts in his Possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise-the assessing authority has to draw inferences as regards certain other facts; and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable. Thus, when a question arises whether certain income received by an assessee is capital receipt, or revenue receipt, the assessing authority has to find out what primary facts have been proved, what other facts can be inferred from them, and taking all these together, to decide what the legal inference should be. There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee. To meet a possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Income-tax Officer might have discovered, the Le ..... X X X X Extracts X X X X X X X X Extracts X X X X
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