DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(2), KOLKATA, KOLKATA vs. SAILESH GUPTA, KOLAKTA

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH,KOLKATA SHRI RAJESH KUMAR, ACCOUNTANT MEMBER PRADIP KUMAR CHOUBEY, JUDICIAL MEMBER

IT(SS)A 90/Kol/2025 (Assessment Year 2015-2016)

Deputy Commissioner of Income Tax, Aayakar Bhawan Poorva, 3rd Floor, Room No. 310, 110, Shantipally, Kolkata – 700107 …..…...……………....Appellant vs. Sailesh Gupta, 1st Floor, 95B, Central Avenue, Kolkata – 700073 [PAN: ADOPG1326J] ……..…...…………….... Respondent Appearances by: Assessee represented by : Rabin Maheshwari, CA Department represented by : Sanat Kumar Raha, CIT-DR

Date of concluding the hearing : 19.01.2026 Date of pronouncing the order : 06.04.2026 O R D E R Per Rajesh Kumar, AM

The present appeal filed by the revenue arises from order dated 24.01.2025, passed u/s 250 of the Income Tax Act, 1961 (hereafter referred to as “the Act”) by the Ld. Commissioner of Income Tax (Appeals), Kolkata-20[hereinafter referred to as “the Ld.CIT(A)] for AY 2015-16.

2 IT(SS)A 90/Kol/2025 Sailesh Gupta 3. The only issue raised in the various grounds of appeal is against the deletion of addition of Rs. 4,19,54,500/- by the Ld. CIT(A) as made by the AO in respect of acquisition of shares of RS Builder & Developer Pvt. Ltd. u/s 56(2)(vii) of the Act.

“8.0 Observations and Decisions:

3 IT(SS)A 90/Kol/2025 Sailesh Gupta I have duly considered the facts of the case, submission of the appellant, assessment order and remand report of the A.O. and the rejoinder of the appellant in this case. The appellant, in this case has raised 12 grounds of appeal against the addition of Rs.4,19,54,500/-. The grounds No.1 & 11 are general in nature. Hence, no specific decision is required, whereas grounds of appeal No. 2 to 10 and modified grounds of appeal No. 12 are against the addition of Rs.4,19,54,500/- made u/s.56(2)(vii) of the Act. As per the assessment order, the assessee relates to the Unitech Group of cases, on which search & seizure operation u/s.132 of the I.T. Act was conducted on 06-10- 2015. In consequence to the search and seizure operation proceeding u/s.153A of the Act was initiated for A.Y. 2015-16 by issuing notice dated 17-01-2017. In response to the notice, the assessee filed its ITR on 24-04-2017 disclosing total income of Rs.86,14,839/-. During the course of assessment proceedings, it was found by the A.O., the assessee has purchased 10,500 number of unquoted shares of M/s. R. S. Building Developers Pvt. Ltd. and the price of Rs. 17,95,500/-. These shares were purchased from one, Mrs. Saroj Rani Gupta of Hariyana and the cost of purchase per share was Rs.171/-. The A.O. examined the balance sheet of the company, M/s R. S. Building Developers Pvt. Ltd. The A.O. has mentioned that sole purpose of the investment in the shares of M/s R. S. Building Developers Pvt. Ltd. by the assessee and his family was acquisition of land on which some development was being done. The A.O. through his ITI gathered the information from the office of the Registrar of Assurance in which it was revealed that on going rate for sale and purchase of any property in the vicinity of the said property is of Rs. 1 crore per Kathha for unconstructed Vastu land and for semi-commercial and commercial property, the rates are twice and thrice of the same. So, on the basis of the above information, the A.O. made valuation of the above mentioned property, which is as under: Stamp value of the property as per valuation of Registrar of Assurances for semi- Rs.2,00,00,000 x 5=Rs. 10,00,000/- commercial property

Assessee's proportionate share of valuation in 10,500/24,000 x 10,00,00,000/- terms of share holding Rs.4,37,50,000/-

Less: Disclosed cost of acquisition Rs.17,95,500/-

Difference to be treated as undisclosed Rs.4,19,54,500/- Income from Other Sources

So, the A.O. made addition of Rs.4,19,54,500/- under the head 'Income from Other Sources' u/s.56(2)(vii) of the I.T. Act. The appellant in his written submission has stated that the A.O. has wrongly made addition of Rs.4,19,54,500/- u/s. 56(2)(vii) of the Act in the A.Y. 2015-16 by taking the help of valuation of the share under Rule 11UA (c)(b). As per the appellant for

4 IT(SS)A 90/Kol/2025 Sailesh Gupta purchase of shares, the assessee had paid an advance of Rs.4,00,000/- to seller on 27-12-2012 i.e. in F.Y. 2012-13. The advance was paid through proper banking channel and the same can be found reflected in the books of accounts of the assessee for F.Y. 2012-13. In the F.Y. 2013-14, assessee purchased 10500 equity shares of M/s. R. S. Building Developers Pvt. Ltd. for Rs.17,95,500/- and the rate of Rs.171/- per share which was adjusted out of payment made in F.Y. 2012-13 and the remaining balance amount was paid on 15-04-2014. So, the appellant has stated that out of the total purchase price of these shares of Rs.17,95,500/-, the amount of Rs.4,00,000/- was paid on 27- 12-2012 which was encashed on 29-01-2013 (i.e. F.Y. 2012-13 relevant to A.Y. 2013-14) and part payments (remaining balance of Rs. 13,95,500/-) was made on 15-04-2014 (i.e. F.Y. 2014-15 relevant to A.Y. 2015-16) through proper banking channel. The appellant has stated that this clearly shows the assessee agreed to purchases equity shares of M/s. R. S. Building Developers Pvt. Ltd. in the F.Y. 2012-13 and paid advance through proper banking channel which is evident from the bank statement of the assessee and actual purchase of shares took place in F.Y. 2013-14 i.e. A.Y. 2014-15 earlier to relevant A.Y. 2015-16. The appellant has empathetically stated that no equity shares of the company have been purchased during the F.Y. 2014-15 l.e. relevant to A.Y. 2015-16 as evident from the purchase bill dated 26-03-2014 for A.Y. 2013-14 (Α.Υ. 2014-15). Hence, appellant has submitted that observation made by the A.O. in his order u/s.153A of the Act. dated 31-12-2017 on page No.4 at para 4.1 that assessee has purchased unquoted shares during the current A.Y. 1915-16 is factually wrong and incorrect. The appellant, since no shares have been purchased during the year under consideration. Hence, the addition of Rs.4,19,54,500/- is wrong and it needs to be deleted. The submission of the appellant was verified by the AO in the remand proceedings. The A.O. in his remand report has although not accepted the contention of the appellant that the transaction does not pertain to AY 2015-16. But he has accepted that the payments has been made for the purchases of share in FY 2012-13 vide cheque no.533552 in favour of Saroj Rani Gupta dated 29.01.2013. Furthermore, the appellant has also stated that the A.O. has wrongly applied the provision of Rule 11UA for the valuation of the unquoted share in A.Y. 2015- 16 and that too by taking wrong fair market value of immovable property. It is important to mention that Rule 11UA was effective from 01-04-2018 and made applicable only from A.Y. 2018-19 and onwards. The appellant has stated that Rule 11UA was not in force in impugned A.Y. 2013-14. Furthermore, the value derived by the A.O. can not be substituted to the value as derived under Rule 11UA. The appellant has cited the following decision in his favour: Hon'ble Delhi High Court in the case of PCIT vs. Minda SM Technocast (P.) Ltd. (2023) ITA No. 942 of 2018 dated 04.08.2023 which held as follows - "Section 56 of the Income-tax Act, 1961 read with rule 11UA of the Income-tax Rules, 1962-Income from other sources Chargeable as (Section 56(2)(viia) - Assessment year 2014-15-Assessee purchased 48 per cent shares of a company from three entities at a price of Rs. 5 per share - Assessing Officer applying formula contained in rule 11UA, valued subject shares at Rs. 45.72 per share and made addition of difference amount to assessee's income - Tribunal deleted impugned addition - Whether since formula applied by

5 IT(SS)A 90/Kol/2025 Sailesh Gupta Assessing Officer to arrive value of subject shares was not applicable to assessment year 2014-15, order of Tribunal required no interference - Held, yes [Paras 14 and 15.1) [In favour of assessee)" Hon'ble Mumbai Tribunal in the case of Smiti Holdings & Trading Co. (P). Ltd. vs. PCIT, Mumbai(2018) 99 taxman 157 dated 25.09.2018 held as follows- "The Id. counsel also submits that Rule 11UA as in force in the impugned assessment year does not provide and require to replace FMV of quoted shares to book value and therefore, the value derived by the DCIT 4(1)(1) cannot be substituted to the value as derived under Rule 11UA. It is categorically stated by him that the market value under Rule 11UA is to be worked out by dividing the net worth (i.e. share capital + reserves) by the number of shares. This Rule 11UA has been amended by CBDT Notification No. GSR 865 (E) (No. 149/136/2014-TPL) dated 12.07.2017 providing for substitution of market value of all the assets, effective from AY 2018-19. Thus the Id. counsel submits that in view of the provisions of section 56(2)(vila) r.w. Explanation to clause (vii) and Rule 11UA, no addition is warranted u/s. 56(2)(viia) and therefore, the order of the Assessing Officer can neither be treated as erroneous or prejudicial to the interest of e interest of revenue. 6.1 A similar issue arose in Minda SM Technocast (P.) Ltd. (supra). The AY is 2014-15. The facts are that the assessee had acquired shares of M/s. Tuff Engineering Pvt. Ltd. (in short 'TEPL') at Rs. 5per share. The shares were acquired by the assessee from three companies. The assessee claimed to have valued the shares of TEPL as per the provisions of Rule 11UA and filed a copy of the report prepared by the Chartered Accountants in support of its claim to justify the price of shares at which these were required. However, the AO was of the view that the assets declared by TEPL in its balance sheet should have been valued as per the circle rate while determining the value of shares acquired by the assessee. Accordingly, the AO determined the value of shares at Rs. 45.72 per share of TEPL and treated the difference of Rs. 40.72 as income from other sources under section 56(2)(viia) of the Act. The view taken by the AO was subsequently confirmed by the Ld. CIT (A). In appeal, the Tribunal vide order dated 07.03.2018 held: "6.4 On the plain reading of above Rule, it is revealed that while valuing the shares the book value of the assets and liabilities declared by the TEPL should be taken into consideration. There is no whisper under the provision of 11UA of the Rules to refer the fair market value of the land as taken by the Assessing Officer as applicable to the year under consideration. Therefore, we are of the view that the share price calculated by the assessee of TEPL for Rs. 5per shares has been determined in accordance with the provision of Rule 11UA. In holding so, we find support and guidance from the judgment relied by the leamed Authorized Representative which has been discussed in the preceding paragraphs. Therefore, we have no hesitation in reversing the order of the lower authorities. Hence, the grounds of appeal of the assessee are allowed." Furthermore, appellant has stated that the A.O. has made wrong valuation of the property assuming that the said property was free from encumbrance and was able to fetch full value as per market price. Whereas in fact the said property was a fully tenantal property and located in a very congested market area of Burrobazar. The appellant has furnished list of some 14 long time

6 IT(SS)A 90/Kol/2025 Sailesh Gupta tenant who were residing in this old building and were paying very meagre amounts of monthly rent running from Rs.3.75 to Rs. 50/- per month. Therefore, in view of the facts as mentioned above and the judgement cited by the appellant, I am of the view that the A.O. has not only wrongly assessed the said transaction in the A.Y. 2015-16 as the said purchase of shares pertains to A.Y. 2013-14. Because the agreement for sale of shares were made in F.Y. 2012-2013 (relevant to A.Y. 2013-14) and payments of Rs. 4,00,000/- was made on 29-01-2013 (relevant for FY. F.Y. 2012-13). This fact was confirmed by the A.O. In remand report. Further, valuation made by the A.O. was also not in accordance with the provision of the Income Tax because the Courts have held times and again that the A.O. are not competent authority for making valuation of immovable property to ascertain the fair market value as they are not supposed to be technically competent person for valuation. The proper procedure for ascertaining the fair market value of the property is by referring the matter to the Divisional Valuation Officer (DVO) after obtaining the approval from the PCIT, Furthermore, the A.O. has wrongly applied the amended provision of Rule 11UA for ascertaining the fair of market value of shares by estimating the value of the immovable property by applying the law retrospectively. As per the decision of the Hon'ble Delhi High Court in PCIT vs. Midna SM Technocast (P) Ltd.(supra). The same is applicable from 01-04-2018 relevant to A.Y. 2018-19 onwards. Hence, in view if the above facts and discussion, I find the addition of Rs.4,19,54,500/- is not sustainable in the eyes of law, on all the three counts i.e. (1) Transaction not pertaining to the year under consideration, ii) newly amended Rule 11UA was effective from A.Y. 2018-19, hence can not be applied for A.Y. 2015-16 and iii) the valuation of shares by estimating the value of the property was not done as per proper procedure prescribed in law and by ignoring the fact that it was an old fully tenanted property. Hence, the addition of Rs.4,19,54,500/- is deleted. 6. After hearing the rival submissions and perusing the material available on record, we find that in this case, the assessee has purchased 10,500 shares unquoted shares of M/s R.S. Building Developers Pvt. Ltd. at price of Rs. 17,95,500/- at purchase price per share of Rs. 171/-. We note that the assessee had paid Rs. 4.00 lacs on 27.12.2012 vide cheque which was enchased on 29.01.2013 and remaining payment ofRs. 13,95,500/- was made on 15.04.2014 in assessment year 2015-16 through proper banking channel. The ld. CIT(A) has recorded a findings to this effect in the appellate order. We also note that the assessee has submitted before the AO as well as the Ld. CIT(A) the impugned purchase of shares was made in the financial year 2013-14 relevant to the AY 2014-15 which is prior to the impugned assessment year i.e. 2015-16 as

7 IT(SS)A 90/Kol/2025 Sailesh Gupta evident from the purchase bills dated 26.03.2014 available on record. The Ld. CIT(A) therefore, recorded a finding of the fact that the observation of the AO is actually incorrect that the assessee has not purchased share during the instant financial year. The Ld.CIT(A) also noted that Rule 11UA was applied for valuation of unquoted share in the impugned assessment year 2015-16 to ascertain the fair market value of the property whereas Rule 11UA came into effect from 01.04.2018 and therefore is not applicable to the instant assessment year. The ld. CIT(A) held that the same are applicable from AY 2018-19 and not the impugned assessment year AY 2013-14. Therefore, we do not find any reason to interfere with the same as the Ld. CIT(A) has passed a reasonable and speaking order. Accordingly, we uphold the same by dismissing the appeal of the assessee.

Order pronounced on 06.04.2026

Sd/- Sd/- (Pradip Kumar Choubey) (Rajesh Kumar) Judicial Member Accountant Member

Dated: 06.04.2026 AK,Sr. P.S. Copy of the order forwarded to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. CIT(DR)

//True copy// By order

Assistant Registrar, Kolkata Benches

8 IT(SS)A 90/Kol/2025 Sailesh Gupta