Commissioner Of Income Tax, Kota v. Connected With

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 547 / 2011 COMMISSIONER OF INCOME TAX, KOTA ----Appellant Versus SMT. KANAKLATA JAIN W/O SHRI RAJENDRA JAIN, MEHTABHAWAN, CHANDRA PRABJUJI KI GALI, JAHLARAPATAN, (RAJ) ----Respondent Connected With D.B. Income Tax Appeal No. 548 / 2011 COMMISSIONER OF INCOME TAX, KOTA ----Appellant Versus SMT PRITI JAIN W/O SHRI ANIL JAIN, MEHTA BHAWAN, CHANDRAPRABJUJI KI GALI, JHALARAPATAN, (RAJ) ----Respondent_____________________________________________________ For Appellant(s) : Mrs. Parinitoo Jain For Respondent(s) : Mr. Gunjan Pathak with Ms. Ishita Rawat _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Judgment 30/08/2017 1.In both these appeals, common question of law and facts areinvolved hence they are decided by this common judgment. 2.By way of these appeals, the appellant has assailed thejudgment and order of the tribunal whereby tribunal has allowedthe cross objection of the assessee and dismissed the appeal ofthe department. 3.This court while admitting the appeals framed followingsubstantial questions of law:- 3.1Appeal No.547/2011 admitted on 3.7.2013 “(1) Whether on the facts and in thecircumstances of the case, the Tribunal waslegally justified in upholding the order of theCIT(A) and deleting the addition ofRs.99,00,000/- which was made on account ofundisclosed investment in shares under Section69 of the Income Tax Act, 1961 based on thefair market value of shares as provided underSection 2(22B) of the Act and determined onthe basis of company’s worth as per thebalance-sheet? (2) Whether on the facts and in thecircumstances of the case, the Tribunal waslegally justified in upholding the order of theCIT(A) and deleting the addition ofRs.1,23,70,604/- which was made on accountof long term capital gain under Section 48 ofthe Income Tax Act, 1961 arising out of the saleof the shares by adopting the price at which theshares were allotted by the company to othersduring the year and the indexed cost ofacquisition?” 3.2Appeal No.548/2011 admitted on 3.7.2013 “(1) Whether on the facts and in thecircumstances of the case, the Tribunal waslegally justified in upholding the order of the CIT(A) and deleting the addition ofRs.99,00,000/- which was made on account ofundisclosed investment in shares under Section69 of the Income Tax Act, 1961 based on thefair market value of shares as provided underSection 2(22B) of the Act and determined onthe basis of company’s worth as per thebalance-sheet? (2) Whether on the facts and in thecircumstances of the case, the Tribunal waslegally justified in upholding the order of theCIT(A) and deleting the addition ofRs.1,11,51,472/- which was made on accountof long term capital gain under Section 48 ofthe Income Tax Act, 1961 arising out of the saleof the shares by adopting the price at which theshares were allotted by the company to othersduring the year and the indexed cost ofacquisition?” 4.The facts of the case are that return of income declaringtotal income of Rs.47,650/- was filed on 1.11.2004 which wasprocessed on 24.02.2005. Later on, it was noticed that the incomeescaped assessment hence notice u/s 148 was issued on 2.3.2007and requested to consider the return filed on 1.11.2004 inresponse to notice u/s 148. Further a notice u/s 143(2) alongwithnotice u/s 142(1) and questionnaire was issued on 18.09.2007and 9.10.07 to attend on 15.10.07. In response to this notice Sh.Arvind Gupta CA & A/R and Sh. Rajendra Jain Husband ofassessee time to time and filed details which are placed on record.The case was discussed with them. 4.The facts of the case are that return of income declaringtotal income of Rs.47,650/- was filed on 1.11.2004 which wasprocessed on 24.02.2005. Later on, it was noticed that the incomeescaped assessment hence notice u/s 148 was issued on 2.3.2007and requested to consider the return filed on 1.11.2004 inresponse to notice u/s 148. Further a notice u/s 143(2) alongwithnotice u/s 142(1) and questionnaire was issued on 18.09.2007and 9.10.07 to attend on 15.10.07. In response to this notice Sh.Arvind Gupta CA & A/R and Sh. Rajendra Jain Husband ofassessee time to time and filed details which are placed on record.The case was discussed with them. 4.1During the course of assessment proceedings of M/s PatanFinance & investment Company Ltd., Mumbai it was noticed by theAO of company that during the previous year relating toassessment year 2004-05 the company allotted 2 lacs shares to 120 persons @ Rs. 10/- per share and formed share capital ofRs.20 Lacs. In the same financial year the then director ofcompany Smt. Kanak Lata Jain purchased 1 Lac share from theseallottees @ Rs.1/- per share for total cost of Rs.1 Lac. Further, inthe same financial year the company has issued 4 Lac equityshares of Rs.10 each at a premium of Rs. 90 per share. In thisway the assessee has shown less purchase value of Rs.99/- pershare totaling to Rs.99 lacs (1 Lac x 99/-) which has been incurredfrom the income of assessee from undisclosed sources. 4.2Further the assessee sold 138000/- shares of M/s PatanFinance and Investment Co. Ltd. @ Rs. 1 per share inspite of thesame fact that the company allotted 4 Lac equity shares of Rs.10each at premium of Rs.90 per share during the same F.Y. relatedto assessment year under consideration. 5.Counsel for the appellant contended that AO while assessingthe value instead of @ Rs.1 purchase price has assessed on theground that new management has disposed of the shares andtherefore, the calculation made by the AO is required to beaccepted. 6.We have heard counsel for the parties. 6.1Taking into consideration the basic concept of theappreciation of the price and the fact that the subsequent pricewhich has been adopted by the new management cannot belooked into and apart from that long term capital gain is always to be considered on the different between purchase and sale price ofthe shares which has been paid through account payee cheque. 7.In that view of the matter, the issues are answered in favourof the assessee and against the department. 8.The appeals stand dismissed. (INDERJEET SINGH),J. (K.S. JHAVERI),J. Brijesh 20-21.