TMI Blog2023 (1) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... law i.e. if there is an incorrect assumption of facts or an incorrect application of law. The facts of the present case reveal that the invocation of power under Section 263(3) was justified. Though the said company viz., M/s.Sri Solaiandaver Textile Mills Limited had closed down its business in the year 2002, it was endowed with sufficient valuable assets in the form of land. Therefore, the value of the shares ought to have been properly determined by the appellant and the Assessing Officer. The value of the share has been under valued by making it seem that the transfer to their father was only at Rs.4/- per share without any records. When the records were culled out by the Commissioner, the value of the share was re-determined at Rs.19.33 per share as against the nominal value of Rs.10/- per share. We therefore, find no reason to differ with the views expressed by the Tribunal the value of the shares were undervalued. We therefore answer the substantial questions of law against the appellant and in favour of the Income Tax Department. Appeal dismissed. - T.C.A.Nos.441 of 2010 and 175 of 2012 - - - Dated:- 21-12-2022 - Hon'ble Mr. Justice S.Vaidyanathan And Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic value of shares transferred by the assessee in favour of his father. Then only the Assessing Officer can compare the consideration stated in the agreement with the de facto value of the shares. It is only after such comparison, the question arises whether the consideration stated in the agreement was the actual consideration or not? Therefore, it is necessary for the Assessing Officer to examine the basic facts before applying the principle laid down by the Supreme Court in the case of K.P.Varghese v. Income Tax Officer Another (1981) 131 ITR 597(SC). 15. In the present case, it is obvious that the Assessing Officer has not computed the break-up value of shares transferred by the assessee to his father. It is very pertinent to note that the companies are closely held companies. It is further to be noted that the transaction was between father and son. The close personal relationship of the parties involved in the transaction ought to have invoked inquisitiveness in the mind of the Assessing Officer while examining the computation of long term capital loss. Only on the basis of such a necessary inquisitiveness that the Assessing Officer could make a meaningful examination of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the balance sheet per se does not reflect the realisable value of the assets owned by Sri.Solaiandavar Textile Mills Limited. Therefore, the value of the shares on the basis of balance sheet figures could not be an appropriate value for the purpose of consideration and real benefits flowing out of the sale transaction. The break-up value is one of the accepted methods of finding of value of shares in a realistic manner. The Commissioner has adopted that method. There is no illegality or infirmity in that method. Therefore, the computation suggested by the Commissioner is also justified on the facts of the case. 18. Therefore, in the facts and circumstances of the case, the revision order passed by the Commissioner is upheld and the appeal filed by the assessee is dismissed. 4. The above order was followed by the Tribunal in its order dated 22.10.2009 in I.T.A.No.1362/Mds/2007 for the same assessment year which has been impugned in T.C.A.No.441/2010. T.C.A.No.441 of 2010 and T.C.A.No.175 of 2012 was admitted on 08.06.2010 and 20.06.2012 respectively on the following substantial question of law: Whether on the facts and circumstances of the case, the Tribunal was rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case and that it was not a colourable device. In fact, the Assessing Officer had not made proper enquires as to the claim of huge loss in respect of shares of Sri Solaiandavar Textile Mills Limited. In fact, after obtaining the Annual Report of the Company for the year ended 31.03.2003, he has failed to reach any logical conclusion about the genuineness of the claim of loss in shares of the company. There is no mention of break-up method by the Assessing Officer anywhere in the assessment record. In these circumstances, when no proper enquires have been made before accepting the claim of loss, the assessment order is erroneous and prejudicial to the interest of revenue in view of the following rulings: K.A.Ramaswamy Chettiar and another vs. CIT 220 ITR 657 (Mad.) CIT vs. South India Shipping Corporation Ltd., 333 ITR 546 (Mad.) The learned Authorised Representative claims that for computing Capital Gains only, full value of consideration received should be considered received should be considered ( for which he relies on apex court rulings). However, the same applies to genuine sales only. In the present case, the assessee has claimed huge capital loss through co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.19.33 as on 31.03.2003 is not genuine and the Long Term Capital Loss claimed on the sale of shares of M/s.Solaiandavar Textile Mills Ltd. Should not be allowed. The Assessing Officer should enhance the assessment by disallowing capital loss of Rs.7,76,611/- claimed on the sale of the above shares. 9. The Appellate Tribunal has sustained these orders passed by the Commissioner under Section 263 of the Income Tax Act, 1961. The assumption of powers under Section 263 on the ground that the sale of shares held by the respective appellants in Sri Solaiandavar Textile Mills Limited was sold to their father for a sum of Rs.4/- per share as against the nominal value of share at Rs.10/- per share was against the market value of Rs.19.33 per share. 10. The case of the respective appellant is that the power to revise an order of assessment under Section 263 of the Income Tax Act, 1961 can arise only when the order passed by the Assessing Officer is both erroneous and prejudicial to the interest of the revenue. The respective appellants contend that the Commissioner of Income Tax has no power to re-determine the value of shares as against the value determined by the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication of mind to relevant material; or if an order is not in accordance with fact or law i.e. if there is an incorrect assumption of facts or an incorrect application of law. 19. The facts of the present case reveal that the invocation of power under Section 263(3) was justified. Though the said company viz., M/s.Sri Solaiandaver Textile Mills Limited had closed down its business in the year 2002, it was endowed with sufficient valuable assets in the form of land. Therefore, the value of the shares ought to have been properly determined by the appellant and the Assessing Officer. The value of the share has been under valued by making it seem that the transfer to their father was only at Rs.4/- per share without any records. When the records were culled out by the Commissioner, the value of the share was re-determined at Rs.19.33 per share as against the nominal value of Rs.10/- per share. We therefore, find no reason to differ with the views expressed by the Tribunal the value of the shares were undervalued. We therefore answer the substantial questions of law against the appellant and in favour of the Income Tax Department. 20. Under these circumstances, these appeals ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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