TMI Blog2022 (9) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, since the Balance Sheet for the year ending on 31.03.2014 was adopted and approved on 22.09.2014 i.e. after the shares were purchased, therefore as per the provisions of the I.T.Act, 1961 and I.T.Rules 1962, the AO was not required to examine the applications of section 56(2)(vii)(c)(ii) as wrongly recorded by the PCIT. In view of the above discussion, we are of the considered opinion, that the PCIT was not justified in disputing the valuation of the shares. We accordingly set aside the order passed u/s. 263 and the grounds raised by the assessee challenging the validity of 263 proceedings are allowed. Since, the assessee succeeds on the issue of validity of 263 proceedings, the grounds challenging the validity of assessment proceedings u/s.153A in absence of any incriminating material becomes academic in nature and therefore are not being adjudicated. - ITA No 619/Hyd/2019 And 621/Hyd/2019 And 622/Hyd/2019 And 623/Hyd/2019 - - - Dated:- 30-8-2022 - Shri R.K. Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member For the Assessee : Shri K.C. Devdas For the Revenue : Dr. M. Narmada, CIT (DR) ORDER PER BENCH: The above batch of 4 appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company filed a detailed reply objecting the initiation of proceedings u/s. 263 of the I.T.Act, 1961 3.2 During the proceedings before the PCIT, the assessee submitted that the valuation of share is correct and there is no infirmity in the valuation and therefore, invoking the provisions of section 263 of the I.T. is not applicable. It was argued that the initiation of section 153A of the I.T. Act, 1961 itself is not legally correct. 3.3 However, the learned PCIT was not satisfied with the arguments advanced by the assessee. So far as the argument of the assessee that the valuation of shares is correct as per prescribed rules is concerned, he noted that in the instant case, the property (equity shares of CBDL) was received by the assessee on 9.4.2014, therefore, the value of shares on 9.4.2014 should have been adopted for the purpose of determining the Fair Market Value (FMV) of shares. However, the assessee in the instant case has adopted the value of shares as per the audited balance sheet as on 31.3.2013 considering that the balance sheet as on 31.3.2014 was not drawn up and audited by the auditor of the company u/s 224 of the Companies Act, 1956 following the ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. 4. The assessee argued that the company M/s ADBL had disclosed the difference in rate amounting to Rs. 16/- per share in the company's hands and paid taxes which was brought to the notice of the AO and the same was accepted by the AO. However, on verification of the assessment record, he noted that the Assessing Officer has not examined the applicability of provisions of section 56(2)(vii )(c)(ii) during the assessment proceedings. Hence, there is no question of accepting the claim of the assessee with regard to the payment of taxes by the company M/s ADBL. 5. So far as the objection regarding the invoking of provisions of section 263 of the Act as there is no loss to the Revenue is concerned, he noted that the explanation 2 of sub section l of section 263 clearly specifies that if the order is passed without making inquiries or verification which should have been made or the order is passed allowing any relief without inquiring into the claim, the order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue. In the instant case, it is clearly evident from the verification of record that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiated, the assessment was finalized without making any addition as there was no incriminating material indicating concealment of income and therefore initiation of further proceedings u/s.263 in respect of such order u/s.153A cannot be considered as valid. 7. Any other ground will be raised at the time of hearing . 8. The learned Counsel for the assessee strongly challenged the order of the learned PCIT in invoking the jurisdiction u/s 263 of the I.T. Act. He submitted that on the date of search on 18.2.2016, no incriminating materials were found. Therefore, in absence of any incriminating material found during the course of search, the learned PCIT was not justified in assuming jurisdiction u/s 263 of the I.T. Act. 9. The learned Counsel for the assessee in his next plank of argument submitted that the assessee has disclosed the investment in accordance with the purchase of shares in the return of income filed u/s 139 of the I.T. Act. The shares, in question, were transferred on 9.4.2014 and the assessee has adopted the shares @ Rs.35/- per share which is as per the provisions of section 11 and 11UA of the I.T. Rules. Referring to the provisions of section 11UA of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g addition u/s 153A does not arise in absence of any incriminating material found during the course of search. 13. Referring to the decision of the Kolkata Bench of the Tribunal in the case of Anjali Jewellers vs. Pr.CIT reported in (2021) 92 ITR TRIB.35 (ITAT Kolkata), he submitted that when no incriminating material was found during the course of search, the PCIT fell into error in stating that the addition could be made u/s 153A of the Act and in a proceeding u/s 143(3) r.w.s. 153A a concluded assessment could not be taken up or in short settled issues cannot be unsettled unless there was incriminating material. 14. Referring to the decision of the Hon'ble A.P High Court in the case of Spectra Shares Scrips (P) Ltd vs. CIT reported in 354 ITR 35, he submitted that the Hon'ble High Court in the said decision has held that the Assessing Officer in the assessment order is not required to give detailed reasons and once it is clear that there was application of mind by an enquiry merely because the Commissioner entertains a different opinion in matter, cannot invoke his powers u/s 263 of the Act. 15. Referring to the decision of the Hon'ble A.P High Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee should be allowed. 21. The learned DR, on the other hand, heavily relied on the order of the learned PCIT. He submitted that the Assessing Officer in the instant case had not verified the applicability of provisions of section 56(2)(vii)(c)(ii) of the I.T. Act while finalising the assessment. Further, the statement of the assessee Mr. Vijaya Bhaskar Reddy, who is the director of the M/s. Cyber City Builders Developers (P) Ltd, recorded during the course of search and thereafter including the affidavit on 1.6.2016 by Shri N. Jaiveer Reddy before the DDIT (Inv.) were not considered by the Assessing Officer. 22. Referring to the decision of Hon'ble Kerala High Court in the case of E.N. Gopakumar vs. CIT (Central) reported in (2016) 390 ITR 131 (Kerala), he submitted that the assessment proceedings generated by issuance of a notice u/s 153A(1)(a) can be concluded against the interest of the assessee including making addition even without any incriminating material being available against the assessee in search u/s 132 on the basis of which notice was issued u/s 153A(1)(a) of the I.T. Act. He accordingly submitted that since the Assessing Officer in the instant case h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce sheet as on 31.3.2013 considering that the balance sheet as on 31.3.2014 was not drawn up and audited by the Auditor of the company appointed u/s 224 of the I.T. Act. According to him, since the Assessing Officer has passed the order without making any enquiry which should have been made or the order is passed allowing a relief without enquiry, the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue and therefore, he set aside the order to the file of the Assessing Officer with a direction to redo the same afresh. 24.1 It is the submission of the learned Counsel for the assessee that no incriminating material was found during the course of search and therefore, the learned PCIT could not have invoked the jurisdiction u/s 263 of the I.T. Act. Further, the assessee has disclosed the entire amount of purchase of shares in the balance sheet filed along with the return of income and the provisions of section 11UA are applicable to the facts of the present case according to which the shares have to be valued in accordance with the last audited balance sheet which is in the instant case is 31.03.2013 as no balance sheet was drawn up as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such consideration: Provided that where the stamp duty value of immovable property as referred to in sub-clause (b) is disputed by the assessee on grounds mentioned in sub-section(2) of section 50C, the Assessing Office may refer the valuation of such property to a Valuation OII1cer, and the provisions of section SOC and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of sub-clause (b) as they apply for valuation of capital asset under those sections. Provided further that this clause shall not apply to any sum of money or any property received- (a) from any relative; or (b) on the occasion of the marriage of the individual; or (c) under a will or by way of inheritance; or (d) in contemplation of death of the payer or donor, as the case may be; or (e) from any local authority as defined in the Explanation to clause (20) of section 10; or (f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or (g) from any trust or insti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where, A= book value of all the assets (other than jewellery, artistic work, shares, securities and immovable property) in the balance-sheet as reduced by,- (i) any amount of income-tax paid, if any, less the amount of income-tax refund claimed, if any; and (ii) any amount shown as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset; B = the price which the jewellery and artistic work would fetch if sold in the open market on the basis of the valuation report obtained from a registered valuer; C = fair market value of shares and securities as determined in the manner provided in this rule; D = the value adopted or assessed or assessable by any authority of the Government for the purpose of payment of stamp duty in respect of the immovable property; L= book value of liabilities shown in the balance sheet, but not including the following amounts, namely:- (i) the paid-up capital in respect of equity shares; (ii) the amount set apart for payment of dividends on preference shares and equity shares where such dividends have not been declared before the date of transfer at a general bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity shares where such dividends have not been declared before the date of transfer at a general body meeting of the company; ( iii ) reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation; ( iv ) any amount representing provision for taxation, other than amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto; ( v ) any amount representing provisions made for meeting liabilities, other than ascertained liabilities; ( vi ) any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares; PE = total amount of paid up equity share capital as shown in the balance-sheet; PV = the paid up value of such equity shares; or ( b ) the fair market value of the unquoted equity shares determined by a merchant banker 2 [ *** ] as per the Discounted Free Cash Flow method. ] A perus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the valuation of assets and liabilities in the balance sheet of the immediately preceding year i.e., 31.03.2013 should have been adopted. Since the valuation done by the assessee was not in accordance with the Rule framed for valuation of unquoted shares i.e., the assessee has not taken the value of assets before introduction of share capital received through fresh allotment and since the Assessing Officer has correctly determined the valuation of the unquoted shares which has been upheld by the CIT(A), therefore, we do not find any infirmity in the order of the CIT(A). Accordingly, the same is upheld and the grounds raised by the assessee are dismissed . Since in the instant case the assessee has purchased shares @ Rs.36/- per share on the basis of the last audited balance sheet as on 31.3.2013 therefore, in our opinion, the order passed by the learned PCIT disputing the valuation of shares is totally contrary to the statutory provisions. In our opinion, merely because the director of the seller company had made a statement, the same cannot be basis for addition in the hands of the assessee unless the same is sustainable within the four corners of law. The AO is expected to e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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