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2020 (2) TMI 649

..... ushan Bakshi was under stated - HELD THAT:- Since sale of shares at face value was by mutual understanding and by consent of all directors because Amit Indubhushan Bakshi was instrumental in getting the investor who contributed allot for benefit of company. We do not find any illegality in transfer of shares at face value i.e. ₹ 10 per share. As relying on GILLANDERS ARBUTHNOT AND CO. [1972 (9) TMI 13 - SUPREME COURT], S GAURANGINIBEN S. SHODHAN INDL. [2014 (2) TMI 78 - GUJARAT HIGH COURT] and M/S. MORARJEE TEXTILES LTD. [2017 (2) TMI 122 - BOMBAY HIGH COURT] we allow appeal of the assessee and cancel order passed by the ld. Pr. CIT u/s. 263. - ITA. No: 964/AHD/2017 (Assessment Year: 2012-13) - 31-12-2019 - SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER Appellant by: Shri S. N. Soparkar, Sr. Adv. With Ms. Urvashi Shodhan Respondent by: Shri O. P. Sharma, 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 revi .....

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..... Life Sciences Pvt. Ltd. The date of sale was 29/08/011 and price at which the shares were sold was the face value i.e ₹ 10/- per share. However on the same unit the assessee sold 2021 shares to M/s Botticelli a company incorporated in Mauritius, at ₹ 87,217/- per share. Thus the shares sold to a fellow director were highly undervalued, and the Long term capital gains on the sale of 3025 shares to Amit Indubhushan Bakshi was under stated, thereby leading to underassessment of long term capital gain by ₹ 30,25,57,021/-. On verification of the documents on the assessment record, it was observed that the assessee has deposited ₹ 5,50,00,000/- in capital gains account, thereby excess claim of ₹ 51,00,000/- was allowed by the Assessing Officer. Moreover the assessee has shown to have purchased open plot for construction of Bungalow, whereas from photograph of sale deed 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 und .....

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..... same address and therefore it is not understood that how the doubt in created in your show cause that, 'there is no record of the demolition of the existing one and reconstruction of a new Bunglow', particularly when the address of all the three reliable record viz; your inspector's report of personal visit valuation report of the civil engineers & the sale -deed bares the same address i.e. No. No.20, Vidhayanagar Society, B/h. Vidhyanagar School, Usmanpura, Ahmedabad. Therefore on the basis of the above r\vo points, your assessee would like to get the copies of the followings: 1. A copy of the order sheet attended by Mr. A.R. and signed and confirmed by your AO of various dates mentioning various instances. A copy of the report of an Inspector who was sent to the premises at the instances of the then AO & CIT. JURISDICTION OF THE POINTS RAISED IN SHOW CAUSE: As regards 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 t .....

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..... e contentions raised by the assessee are discussed in the succeeding Paragraphs. 6. Regarding the sale sale of shares at face value to Amit Indubhushan Bakshi, the of the assessee are neither credible nor acceptable due to the following reasons: (i) The assessee has not offered any explanation as to why he has sold the shares at such a huge loss to Mr. Amit Bakshi. His contention that sale of shares by one director to another is "always at face value" is far from truth. In fact, it is incomprehensible that a director will sell 3025 shares to another director at ₹ 10 per share, while 2021 shares of the said company was sold by him on the same date to a third party at ₹ 87,217.75 per share. This cannot be justified by any normal commercial prudence. Further, in the valuation report dated 16/08/2011 by M/s. Anchalia & Company, C.As., appointed by the company - Eris Lifesciences 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 a .....

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..... 7; 79,0207- per share nor has he taken into account the actual sale of shares to Boticelli at ₹ 87,217.75 per share. In the least, the AO could have referred the matter to Valuation Officer as per the provision of section 55A of the IT Act, 1961 which has not been done. As such, the assessment order made by the AO is erroneous and prejudicial to the interest of revenue in terms of section 263 read/with clause (a) of Explanation 2 thereof. 7. Regarding correctness and eligibility of claim of 54F the Assessing Officer has not examined whether the assessee has fulfilled all the conditions of section 54F i.e. the assessee must own only one residential accommodation, on the date on which he invests in the new asset. From the documents available, it is found that the following addresses are listed against the name of the assessee. (i) Paras Vidhyanagar Housing Society Vibhag 3 Usmanpura (ii) 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 .....

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..... reasoned and detailed order passed by him and he relied on the order of Pr. CIT. Thereafter before the ld. Pr.CIT assessee filed detailed paper book containing 163 pages. 10. And in support of its contention, ld. A.R. cited a judgment of Hon ble Supreme Court in the matter of CIT, Gujarat-II vs. Kwality Steel Suppliers Complex [2017] 84 taxmann.com 234 (SC) wherein it is held a firm dissolved on death or one of only two partners but business continued with one partner, there was no question of selling assets/stock-in-trade and, therefore, it was not necessary to value stock-in-trade at market price. 11. And Ld. A.R. also cited an order of Gujarat High Court in the matter of CIT-6 vs. M/s. Morarjee Textiles Ltd. wherein it is held that : b) The grievance of the Revenue before us is that these transactions are all between companies belonging to the same group. Therefore it is urged that the 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 .....

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..... yes - Whether in respect of fair market value as on 1-4-1981, since assessee relied on Registered Valuer's Report, Assessing Officer could not refer same under clause(b) of section 55A - Held, yes [Paras 11,12 &16][ln favour of assessee] 13. Assessee relied on a judgment of Supreme Court in the matter of CIT vs. Gillanders Arbuthnot & Co. [1973] 87 ITR 407 (SC) wherein it is held: Section 48 of the Income-tax Act, 1961 [Corresponding to section 12B of Indian Income-tax Act 1922] - Capita gains - Computation of - Assessment year 1947-48 - Assessee-firm sold certain share and securities held by it to coHpany on 28-2-1947 which was admitted as partner in firm with 99 per cent share in goodwill and profits of Inn for certain consideration - Whether since section 128 was incorporated into Act with effect from 1-4-1947, at time sale transaction took place section 12B was not part of Act and so first proviso to section 12B(2) of 1922 Act was not attracted on facts of case - Held, yes 14. Since sale of shares at face value was by mutual understanding and by consent of all directors because Amit Indubhushan Bakshi was instrumental in getting the investor who contributed allot f .....

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