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Case Title: The Principal Commissioner Of Income Tax 1, Ahmadabad Versus Jigar Jashwantlal Shah)

Case No.: R/Tax Appeal No. 80 Of 2023

Appearance

Appellant: Mr.Varun K.Patel, Senior Standing Counsel With Mr. Dev D. Patel

Respondent : Mr B S Soparkar

CORAM: HONOURABLE MR. JUSTICE BIREN VAISHNAV and HONOURABLE MR. JUSTICE BHARGAV D. KARIA

Order dated:: 28/08/2023

Introduction

Recently the High Court of Gujrat has contended that the deduction under section 35(2AB) of the Income Tax Act cannot be denied merely due to failure of authority to send intimataion.

The decision came in response to an appeal filed by the Revenue against the order of the Income Tax Appellate Tribunal ‘C’ Bench, Ahmedabad, about the assessment year 2016-17.

Facts of the case

these tax appeals are filed by the revenue arising from the common judgment and order by the Income-tax Appellate Tribunal.

The assessee filed the return of income for the Assessment Year 2013-14 declaring income of Rs.86,94,247/- which was processed under Sec.143(1) of the Act. Thereafter, during the assessment proceedings of M/s. Kintech Synergy Limited, it was noticed that the assessee was receiving salary in the capacity of Director of the said Company and the assessee was issued two lakhs right shares at face value of Rs.10 in M/s. Kintech Synergy Limited.

The Assessing Officer, while framing the reassessment order under Sec.143(3) r/w. Sec. 147 of the Act, held that under the provisions of Sec.56(2)(vii)(c) of the Act, Rs.4,90,00,000/- was taxable under the head of income for other sources. The assessee also pointed it out that the Assessing Officer erroneously held that shares allotment was disproportionate and the valuation of shares at Rs.255 per share was also excessive.

Both, the assessee and the revenue, therefore, filed appeals challenging the order of the CIT(A) before the Tribunal.

The Tribunal, dismissed the appeal filed by the revenue on both counts i.e. firstly, Sec.56(2)(vii)(c) not applying to the right shares proportionate to not existing holdings, and secondly Fair Market Value of shares was Rs.205.55 per share

The Tribunal, further held that the provisions of Sec.56(2)(vii)(c) would be applicable in respect of 14,800 shares which were allotted to the assessee as a result of the third party declining to apply for the same.

Analysis of the court

certain observations made on the gain made on the sale of property and change in amount of interest were not reflected in the reasons for reopening of assessment which also makes the exercise vulnerable.

Consequently, the court invalidated and annulled the notices issued by the Assessing Officer under Section 148 of the Income Tax Act.

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Written By

Kaulav roy chowdhury

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