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2020 (2) TMI 649

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..... CIT/DR ORDER PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. This appeal filed by the Assessee is directed against the order of the Ld. Pr. CIT-1, Ahmedabad u/s 263. The assessee has taken following grounds: 1 Ld. CIT erred in law and on facts invoking provisions of section 263 of the Act seeking to revise scrutiny assessment order u/s 143 (3) of the Act holding it as erroneous and prejudicial to the interest of revenue. The order of CIT directing AO to frame fresh order is unjust, untenable and against principles of Natural Justice that deserves to be quashed. 2 Ld. CIT erred in law and on facts in setting aside scrutiny assessment for framing fresh assessment after conducting proper inquiries and verification of issues already verified by AO and also by audit party. Ld. CIT failed to appreciate that AO passed the order after thorough scrutiny of documents. 3 Ld. CIT erred in law and on facts in holding that sale value of shares sold to Managing Director at substantially lower price resulted in non reporting of Capital Gains on the ground that AO failed to either consider valuation report valuing shares @ ₹ 79, 0207- per share or price of ₹ 87, 217.75 charged per share to fore .....

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..... eed it is evident that the property purchased was not an open plot but an old bungalow, and there is no evidence on record for construction of new Bungalow. Thus claim of ₹ 4,50,00,000 has been allowed by the assessing officer without making any inquiries. In view of the above, a notice under section 263 of the I T Act was issued on '20/02/2017, requiring the assessee to explain why the said assessment order should not be revised, modified, or cancelled as per law. 4. In response to the notice, Shri Kaushal Vyas, Authorized representative of the assessee submitted an authority letter and a written reply on 08/03/2017. A personal hearing was also granted to the assessee on 20/3/2017 during the course of which the A.R of the assessee reiterated the submissions contained in his aforementioned written reply. The relevant contents of the written reply are reproduced below: 1. I hereby rely on the assessment proceedings narrated in details in the order sheet on different dates which bare the signature of my legal representative and hence the copy of the said order sheet from lsl to last be supplied to your assessee especially to know as to despite of every point discussed in de .....

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..... the transfer of Shares to Amit I Bakshi:- The Shares transferred were 3025 and not 3050 wrongly stated in your notice. A copy of the extract of the board of the directors for such transaction has been attached herewith. Though it is already laying on the assessment file record. Besides list of the transfer request made by the members in favour of the transferee viz; Amit I. Bakshi has also been attached herewith. A copy of the bank statement of your assessee showing the credit amount of₹ 30,250/- received on 24.06.2011 has also been attached herewith despite of the fact that the above stated record are filed in your file. During the course of hearing it was asked to prove that why some of the Shares have been sold at the face value of ₹ 10/- per share as against ₹ 57,2777- as shown in the statement of income. It is in this behalf we have to say that it was the mutual understanding between your assessee and the managing director Mr. Amit I Bakshi that if at all such price shall be received by your assessee out of the transaction of sale of his shares to Boticelli company, then your assessee viz; Rakesh B Shah shall have to give some of his Shares to Mr. Amit I Bak .....

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..... fesciences Pvt. Ltd. for valuation of the shares of the company for sale to Boticelli, the fair value of the equity shares of the company has specifically been calculated at ₹ 79,020/- as on 16/08/2011 under the DCF method. Therefore, against such valuation by the company's own valuer at ₹ 79,020/- per share and the actual sale to third party at ₹ 87,217.75 per share, the assessee's alleged sale to another director of 3025 shares at ₹ 10 per share on the same day is completely unacceptable. (ii.) The assessee has contended that the sale of share at face value was by mutual understanding and by consent of all the directors, because Mr. Amit Bakshi was instrumental in getting the investor. This statement is not correct, because, the assessee has himself paid a huge amount of ₹ 48,63,574/- to M/s. Advendus Capital Pvt. Ltd, Mumbai for services relating to sale of 2021 shares of Eris Lifesciences Pvt. Ltd. It is pertinent to mention that as per the profile of Advendus Capital Pvt. Ltd., it is Category-1 Merchant Banker engaged in providing financial services with an emphasis on advising corporate clients seeking to mobilize capital from investors. .....

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..... ) c/o Shah and Company Harikrupa Shopping Centre B/H City Gold Cinema (iii) Flat No 1 Shah & Co, Biscuit Gali, Relief Road Pankor naka Ahmedabad (iv) 21 New York Tower A, Opposite Muktidham Temple, Near Thaltej cross roads The AO has failed to inquire whether any of the above properties is a residential property registered in the name of the assessee. The AO is also directed to verify the claim of the assessee made during the proceedings u/s 263 regarding deposits in the Capital Gains Account and construction of a new house property after demolishing the old house property for the purpose of section 54F. 8. In view of the above discussion, it is clear that the assessment order passed by the A.O. is not only erroneous but also prejudicial to the interest of revenue as per the provisions of section 263 of the I. T. Act, 1961 read with clause (a) of Explanation 2 thereof. I, therefore, hereby set-aside the assessment order passed by the Assessing Officer u/s. 143(3) for A.Y. 2012-13 3 with a direction to frame the order afresh after conducting proper inquiries and verifications in the lines discussed above regarding valuation of shares sold for the purpose of Capital Gains Tax, as .....

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..... transaction are colourable transaction and different considerations would apply. (c)At the hearing of the admission, the Revenue did not point out any facts which would evidence that the transaction was not genuine. In such a case where the genuineness is not disputed with any evidence, it is not open to discard the documents and/or transaction on the basis of some supposed object/intent. In the present facts the Revenue accepts the documents but only substitutes the consideration. Therefore, the issue is whether such substitution of full consideration received by fair market value of the asset is permissible as held by the Tribunal at the relevant time there was no power vested in the authorities under the Act to substitute a full value of consideration received by fair market value in respect of stock and shares. The statute only on introduction of Section 50D with effect from 1st April, 2013. The power to substitute full consideration with fair market value in respect of shares came into the statute only on introduction of section 50D of the Act is only to be exercised if the Assessing Officer comes to a finding that the consideration received is not ascertained or cannot be det .....

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