Radhika Roy Vs DCIT (ITAT Delhi)
Conclusion: Enhancement of assessee’s income on account of difference between the purchase price of the shares of NDTV limited at Rs 4 per share and the market price of those shares quoted on recognized stock exchange at Rs. 140 per share was a benefit taxable u/s 56 (2)( vii) as assessee could not justify that there was no motive of tax evasion in the same.
Held: Assessee had purchased shares of NDTV limited at the rate of Rs 4/- per share from M/S RRPR Holdings private limited whereas the market price of the share was INR 140/- per share at National stock exchange and Bombay stock exchange. Therefore, AO made an addition to the income of the assessee under section 69/69B of INR 136/– per share to the number of shares sold. CIT – A analysed the addition made by AO and noted that the provisions of section 56 (2)( vii) enables the taxation of such a scenario on deemed basis. He thus confirmed the addition under section 56 (2)( vii) . It was held as assessee has failed to explain by credible evidence any reason of buying the shares of the above company at Rs. 4/- per share when the quoted price of the share on the recognized stock exchange is INR 140/– per share. As the motive itself of assessee was not demonstrated at all with credible evidences, assessee could not say that there was no motive of tax evasion. Even otherwise the provisions of section 56 (2) deems certain differences/receipts of the transaction as income. There was no infirmity in the order of CIT – A in enhancing the income of the assessee by invoking the provisions of section 56 (2)(vii) on account of difference between the purchase price of the shares of NDTV limited and the market price of those shares quoted on recognized stock exchange.
FULL TEXT OF THE ITAT JUDGEMENT
1. These are the six appeals of two assesses namely, Mr. Dr. Prannoy Roy [ Dr. Roy] and Mrs. Radhika Roy, emanating from transactions of purchase and sale of shares of NDTV Limited entered in to by both of them with M/s RRPR Holdings Pvt Ltd [ RRPR, Company] and also issues of income from house properties pertaining to two assessment years. Shri Sachit Jolly, Ld Advocate on behalf of assessees and Shri Girish Dave, Ld Advocate, special counsel for revenue put extensive, erudite arguments. Thus, all these appeals were heard together on various dates fixed at the convenience and request of both the parties’ i.e. On 29/10/2018, 29/01/2019, 05/03/2019, 06/3/2019, and 19/3/2019 excluding request for adjournments moved. On 19/3/2019, bench asked certain details to be filed which were ultimately filed on 26/3/2019 and finally hearing was concluded on that date. Assessee has filed paper books and both the parties filed written notes. Further, both the parties relied up on several judicial precedents, which would be considered at the relevant point of time. All these appeals are heard together and therefore, disposed of by this common order.
2. First, we take up the appeals filed by assessee Mrs. Radhika Roy for AY 2009-10 in ITA NO. 2019/Del/2017 for AY 2009-10 raising following Grounds of appeals:-
“1. That the learned Commissioner of Income Tax (Appeals), 42, New Delhi has erred both in law and on facts in sustaining the initiation of proceedings under section 147 of the Act and, completion of assessment u/s 147/143(3) of the Act which were without jurisdiction and deserved to be quashed as such.
1.1 That while upholding the assumption of jurisdiction the learned Commissioner of Income Tax (Appeals) has failed to appreciate that reasons recorded were based on factually incorrect assumptions and had been mechanically prepared without independent application of mind on the basis of diktat issued by Investigation Wing.
1.2 That even otherwise the learned Commissioner of Income Tax (Appeals) having not disputed that in the return of income filed, the assessee had duly reflected the capital gain earned by the assessee has erred in upholding the initiation of proceedings on an assumption that, there was an incorrect disclosure of such capital gain as a long term capital gain instead of short capital gain as has been assessed.
1.3 That the learned Commissioner of Income Tax (Appeals) has further erred when he overlooked and failed to appreciate that basis recorded for the initiation of proceedings was that assessee had neither declared long term capital gain and nor declared short term capital gain; whereas said gain was duly disclosed and claimed as exempt which itself demonstrated that action was taken mechanically without reference to the return of income filed by the appellant and as such action u/s 148 was wholly misconceived, misplaced and untenable.
1.4 That the finding of the learned Commissioner of Income Tax (Appeals) that the learned Assessing Officer has clarified the context of non disclosure of long term capital gain and short term capital gain viz-a-viz para 2 of the reasons which duly captured the position of exempt capital gain overlooks the fact that this figure was not based on the return of income filed by the appellant but bodily lifted and adopted from the information received from the Investigation Wing.
1.5 That the learned Commissioner of Income Tax (Appeals) has otherwise too failed to appreciate that there was no tangible, relevant, specific and reliable material on record on the basis of which, it could be held that, there was any reason to believe with the learned Assessing Officer that income of the appellant had escaped assessment and, in view thereof, the proceedings initiated were illegal, untenable and therefore, unsustainable.
2. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in upholding an addition of Rs. 1,30,30,394/- representing alleged short term capital gain on sale of Rs. 6,25,000 shares of M/s. NDTV Ltd by the appellant in the year under consideration
2.1 That while upholding the addition the learned Commissioner of Income Tax (Appeals) has failed to appreciate the scope and ambit of provisions contained in section 45(2A) read with section 2(42A) of the Act and further incorrectly applied Circular no. 768 dated 24.6.1998 to the facts of the case of the appellant and as such addition made and sustained is untenable.
2.2 That the learned Commissioner of Income Tax (Appeals) having not disputed that the assessee held and owned 1,66,60,658 shares on 19.6.2008 which were held since 28.2.1996, could not have arbitrarily reckoned the period of holding of shares from the date of shifting to the joint account and computed short term capital gain instead of long term capital gain as claimed by the appellant.
2.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that all what had happened was that shares held by the assessee and his wife and duly reflected in their individual demat account were shifted for the sake of convenience in a joint demat account and by so doing it did not amount to any transfer made and otherwise too for the purpose of determination of the period of holding such shares, the period of holding of shares is to be reckoned from the date as were “held” by them and were reflected in such demat accounts and not from the date of shifting in the joint demat account from the individual demat account.
2.4 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that unless there was a transfer made, mere shifting of the shares is insufficient to restrict or reduce the period of holding of such shares so as to adopt the date of holding of shares, when they were shifted to the joint demat account and as such mechanical application of Circular No. 768 issued by Central Board of Direct Taxes to make the addition is wholly illegal, arbitrarily and unwarranted.
2.5 That various other adverse findings and conclusions recorded by the learned Commissioner of Income Tax (Appeals) are also factually and legally misconceived and are thus untenable. The addition made and sustained is based on fiction and could not be held as representing any income.
2.6 That the learned Commissioner of Income while computing the aforesaid addition made by the learned Assistant Commissioner of Income Tax has failed to comprehend that if on shifting the shares from individual account to the joint account there was a transfer made then obviously shares resulting into accrual of gain could not be held to be income of the assessee and as such the amount of capital gain ought to have been deleted altogether.
3. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in sustaining addition in respect of alleged income under the head house property from following properties:]
