TMI Blog2019 (3) TMI 1856X X X X Extracts X X X X X X X X Extracts X X X X ..... ble High Court would relate back to the date of allotment. We are unable to consider the analogy drawn by the Ld. AO and the Ld. DR to say that subsequent/future event cannot affect the taxability in the year of its accrual, because in this matter certain factors which are stipulating constraints on the availment of benefit under the agreement. Firstly, there is a condition of 10 years association, which has failed; that secondly, the Hon ble High Court directed the cancellation of the allotment and to reverse the entries which shall relate back to the date of agreement itself; that thirdly, there is no economic basis for the valuation of the shares to assess the income of the assessee. For these reasons, we are of the considered opinion that the learned CIT(A) rightly reached a conclusion that this is a case of hypothetical income of the nature of perquisite and more so, the very basis of the valuation is not scientific without any financial back up data to justify the valuation. We are in agreement with the submission on behalf of the assessee that the decision in the case of CIT vs Infosys Technology Ltd.[ 2008 (1) TMI 17 - SUPREME COURT ] wherein the issue involved wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Delhi High Court held that the shares issued by M/s Rockland Hospital were wrongly issued and directed the company to reverse the entry of Sweat Equity shares as a result of which the assessee surrendered all the shares. On 7.2.2011, assessee quit his association with the company much before the lapse of 10 years. 3. Assessee filed the original return of income for the AY 2007-08 on 31.7.2007 declaring professional income of ₹ 3,22,053/- and it was processed u/s 143(1) of the Income-tax Act, 1961 ( the Act ). Later on 18.8.2006 by recording reasons, the learned AO issued notice dated 1.2.2011 u/s 148 of the Act. Assessee filed his objections on 12.12.2013. Learned AO disposed of such objections in the assessment order dated 4.3.2014 itself through which he made an addition of ₹ 2 crore u/s 28(iv) of the Act. 4. Aggrieved by the said addition, assessee challenging the order filed an appeal before the learned CIT(A) on two additions. Firstly, assessee challenged the addition on the ground that Section 28(iv) of the Act cannot be invoked in this case. He alsochallenged the legality and validity of the notice u/s 148 of the Act. 5. Learned CIT(A) uphel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axability in the year of its accrual. 8. On the contention of the assessee that the disposal of the objections by way of composite order of assessment is bad under law, Ld. DR submitted that no such ground was taken by the assessee. He submits that even otherwise, in view of the decision of the Hon ble Kerala High Court in the case of Palakkad Distt. Cooperative Bank Ltd. vs ACIT (2017) 392 ITR 539; MohammedallyNoorbhoyBandukwala Trust vs ITO (2017)2017- TIOL-341-HC-Mum-IT; and Home Finders Housing Ltd. vs ITO (2018) 404 ITR 611 (Madras) as confirmed by the Hon ble Supreme Court in 256 Taxman 59 (SC), non compliance of directions of Hon ble Supreme Court in GKN Driveshafts(India) Ltd. vs ITO (2003) 259 ITR 19, that on receipt of objections given by the assessee to notice u/s 148, ld. AO is bound to dispose of objections by passing a speaking order, would not make re-assessment order void ab initio and also that the assessment cannot be termed as invalid for non consideration of the assessee s objections if there was undue delay on the part of the assessee in objecting to the reasons. He submitted that in this case, there was delay of 2 years in the assessee s filing the objectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... light of the submissions on either side. Insofar as the merits are concerned, there is no denial of any of the facts pleaded on behalf of the assessee that the sweat equity share agreement was on 26.2.2007 in accordance with which certain number of shares of face value ₹ 10/- each were allotted to the assessee at a premium of ₹ 190/- without any consideration and subsequently, in view of the decision of the Hon ble Delhi High Court on 26.2.2011 such shares were returned and the entires were reversed whereas the assessee quit the association of the company on 7.2.2011, which is the essential condition under the Sweat Equity Share Agreement to derive the benefit thereunder. Learned CIT(A) also noted the fact that on 20.5.2011, Board of Directors of M/s Rockland Hospitals ltd. has passed a resolution and accepted the surrender of shares by the assessee. Therefore, at the latest by 18.6.2012, the entire process of reversing the entries and acceptance of the surrender pursuant to the directions of the Hon ble High Court was complete. 12. In this factual situation, as rightly contended by the assessee, even before the issuance of the notice u/s 148, it was clear that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, we are in agreement with the submission on behalf of the assessee that the decision of the Hon ble Supreme Court in the case of CIT vs Infosys Technology Ltd. (2008) 297 ITR 167 (SC) wherein the issue involved was that whether allotment of Sweat Equity Shares to an employee is a perquisite or not and it was held that where the lock in period was involved, the perquisite would be treated only in the year in which the lock in period ends. Since in this case the agreement came to an end, shares were surrendered and the entries were reversed long prior to the lock in period, no case of taxing the allotment as perquisite in the hands of the assessee in the AY 2007-08. 16. Be that as it may, in this matter, in so far as the legality of the assessment order without disposing of the objections filed by the assessee are concerned, we have two sets of decisions cited on either side. First line of decisions is the decision of the Hon ble Supreme Court in the case of GKN Driveshafts (India) P. Ltd. (supra) and the decision of the Hon ble Gujarat High Court in the case of General Motors India P. Ltd. (supra) followed by the coordinate benches of Delhi Tribunal in many cases. The second se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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