Smt. Prema Mukesh Jhalani Vs ITO (ITAT Mumbai)
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) allowed the assessee’s appeal and held that the reassessment proceedings initiated for Assessment Year (AY) 2011-12 were invalid. The dispute arose after the Assessing Officer (AO) reopened the assessment on the ground that the assessee had received 1,03,786 equity shares of M/s Krishnaping Alloys Pvt. Ltd. as gifts from 20 different donors and treated the value of those shares, amounting to ₹1,03,78,600, as taxable under Section 56(2)(vii)(c) of the Income Tax Act. The assessee contended that the shares had already been gifted before the relevant statutory provision became applicable. According to the sequence of events placed on record, the donors expressed their intention to gift the shares to the assessee on 09.04.2009, and the company acknowledged the proposed transfers. Gift deeds were initially executed on 30.04.2009 but were later required by the company to be executed on stamp paper, following which fresh stamped gift deeds dated 18.09.2010 were submitted.
The assessee challenged both the validity of the reassessment proceedings and the additions made on merits. It was argued that the reasons recorded for reopening were undated, making it impossible to ascertain whether they had been recorded prior to issuance of notice under Section 148. The assessee further submitted that the reassessment was based on incorrect facts and unverified information, without any independent inquiry by the AO. It was also contended that the AO had wrongly assumed that the entire value of ₹100 per share, consisting of face value and share premium, constituted taxable income under Section 56(2)(vii)(c). On merits, the assessee argued that the gifts had been completed during FY 2009-10, as evidenced by the donors’ letters and gift deeds executed in April 2009, and that the later execution of stamped gift deeds merely fulfilled the company’s procedural requirements. The assessee maintained that, even if the later documents were considered relevant, the doctrine of relating back would apply, resulting in the transfers being treated as effective from the original dates in April 2009.
