ITO, NEW DELHI vs. SMT. SHIKHA KHANDELWAL, NEW DELHI

The grounds raised in the revenue’s appeal read as under:-

The grounds raised in the Assesse’s Cross objection read as under:-

The brief facts of the case are that assessee filed her return of income declaring income of Rs. 1,21,741/-. The case of the assessee was picked up under scrutiny. The assessee has shown Long Term Capital Gains (LTCG) on the sale of 2950 shares of M/s Anil Steels Pvt. Ltd. the assessee got the shares M/s Anil Steels Pvt. Ltd. through gift from her husband on 22.11.2007, 20.11.2007; which, later on, in the last fortnight of March 2008, were sold for Rs.99,20,000/- as detailed in para 5 of the assessment order. The assessee has claimed deduction u/s 54F of the Act by purchasing a plot against the LTCG derived on transfer of shares of M/s Anil Steels Pvt. Ltd. The AO, by adding 'Share Capital' and 'Reserve & Surplus’ worked out the 'Net Worth' of M/s Anil Steels Pvt. Ltd. and 'Intrinsic Value' of each share of M/s Anil Steels Pvt. Ltd. at Rs. 1,64,52,744/- and Rs. 103.12 respectively. On the basis of the Net Worth of ‘M/s Anil Steels Pvt. Ltd.’ and 'Intrinsic Value' of each share of M/s Anil Steels Pvt. Ltd., the AO doubted the sale price of shares of M/s Anil Steels Pvt. Ltd. @ Rs. 3,000/- to 4,000/- by the assessee. Further, the AO, observed that the assessee has en-cashed the cheques of M/s Chinu Press & Prakashan Pvt. Ltd. on 01.10.2008 though the shares which have been transferred on 31.03.2008, questioned the genuineness of shares transfer. The AO also held that the parties; 7 companies, whom shares have been sold were not having income to explain the purchases of shares by them; however, she did not investigate the genuineness of shares transfer to 7 companies due to paucity of time. In view of these facts, the AO concluded that the assessee has adopted share transfer of M/s Anil Steels Pvt. Ltd. as a colourable device to launder her black money in the garb of LTCG and thus she taxed the entire sale consideration of Rs.99,20,000/- of share transfer of M/s Anil Steels Pvt. Ltd. uls 68 and completed the assessment at Rs. 1,00,41,740/- u/s. 143(3) of the I.T. Act, 1961 vide order dated 27.12.2010. Against the assessment order dated 27.12.2010, assessee appeal before the Ld. CIT(A), who vide his impugned order dated 11.3.2014 has deleted the addition in dispute and allowed the appeal of the assessee. Aggrieved with the impugned order, the Revenue is in appeal before the Tribunal and the Assessee has filed the Cross objection.

Ld. Sr. DR relied upon the order of the AO and reiterated the contentions raised in the grounds of appeal. To support the order of the Assessing Officer, he relied upon the following case laws:-

On the contrary, ld. Counsel of the assessee relied upon the order of the Ld. CIT(A) and also relied upon the Jurisdictional High Court decision dated 18.01.2017 passed in & 44/2016 in the case of Pr. CIT vs. Jatin Investment Pvt. Ltd. and stated that the issue in dispute is squarely covered by the aforesaid decision of the Jurisdictional High Court.

We have heard both the parties and perused the records especially the impugned order. The issue involved is that whether or not the sale consideration of Rs. 99,20,000/- received on transfer of shares is income assessable u/s. 68 of the Act. We find that in this case the assessee has discharged the onus of proving identity of the parties whom the shares were sold. However, during the remand proceedings, the purchase of shares have been confirmed by all the seven parties. The entire sale consideration has been offered as gross income and thereafter deduction u/s. 54F of the Act has been claimed. Thus, we are of the considered view that taxing sale consideration once u/s. 45 and again u/s. 68 amounts to double taxation. Therefore, in view of such facts and circumstances, the addition u/s. 68 is not called for as such because it is a case where one asset gets replaced by another asset and not of cash credit. Here, the AO has not doubted the possession of shares by the assessee through the gift as stated by the assessee. The AO has raised the issue of taxability of income u/s. 64 as evident from the impugned order. However, she has not concluded this issue. Undoubtedly, the assessee received shares through the gift from her husband as detailed in the assessment order; thus, the income derived from transfer of such shares has to be assessed in view of the provisions of section 64(1)(iv) and not 68, which the Ld. CIT(A) has done. Thus, there in the assessee’s case, the issues relating to the working of LTCG and deduction u/s. 54F loses relevance, therefore, Ld. CIT(A) refrained himself in deciding these issues. Accordingly, the addition of Rs. 99,20,000/- made u/s. 68 of the Act in the hands of the assessee was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the finding of the Ld. CIT(A) on the issue in dispute and reject the grounds raised by the Revenue. Since the case laws cited by both the parties are on distinguished facts, hence, the same are not applicable.

In the result, the Revenue’s appeal is dismissed. ASSESSEE’S CROSS OBJECTION 11. As far as Assessee’s Cross Objection is concerned, since we have dismissed the Appeal of the Revenue as aforesaid on the merit of the case, the Cross Objection filed by the Assessee has become infructuous and dismissed as such and accordingly, the Cross Objection of the Assessee also stands dismissed. 12. In the result, the Revenue’s Appeal as well as Assessee’s Cross Objection stand dismissed.