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Income Tax Appellate Tribunal, DELHI BENCHES : SMC-I : NEW DELHI
Before: SHRI R.S. SYAL
ORDER This appeal filed by the Revenue is directed against the order passed by the CIT(A) on 20.02.2014 in relation to the assessment year 2007-08.
The only issue raised in this appeal is against the deletion of addition of Rs.1,62,77,577/- made by the Assessing Officer (AO) u/s 28(iv) of the Income-tax Act, 1961.
Briefly stated, the facts of the case are that the AO initiated re- assessment proceedings by observing that the assessee company took over the business of erstwhile Hotel Aurangabad Ashoka in terms of demerger order of the Company Law Board and all the assets and liabilities were taken over in lieu of which 1283594 shares of Rs.10 each were issued to the shareholders of the ITDC. The excess of value of net assets taken over of Rs.1,62,77,577/- over the share capital allotted was credited to the Capital Reserve Account and not offered for taxation. After considering the contentions raised on behalf of the assessee, the AO made addition of Rs.1.62 crore being the excess value of net assets over the share capital allotted. The ld. CIT(A) deleted the addition by observing that the capital reserve of Rs.1.62 crore was created in financial year 2002-03 relevant to assessment year 2003-04 and, hence, it has no relation with the assessment for the current year, namely, AY 2007-08.
I have heard the ld. DR and perused the relevant material on record.
Notices have been sent to the assessee on several occasions starting from 26.10.2015 and, thereafter, on 29.12.2015, 10.12.2016, 23.3.2016, 25.4.2016 and 8.6.2016. The assessee has chosen to remain absent. In this view of the matter, I am proceeding to dispose of the Revenue’s appeal ex parte qua the assessee.
It is noticed that the AO made addition of Rs.1.62 crore towards the Capital reserve created by the assessee on account of excess value of net assets taken over of Rs.1.62 crore over the share capital allotted. The ld. CIT(A) has deleted the addition by observing that such Capital reserve was created in accounts for the assessment year 2003-04. I am unable to find any such finding in the assessment order relating to the creation of reserve in the accounts for the financial year 2002-03 relevant to the AY 2003-04. If the position as noted by the ld. CIT(A) is correct, then, of course, no addition can be made for the assessment year 2007-08 under consideration. However, the fact as taken note of by the ld. CIT(A) about the creation of reserve in an earlier year is not substantiated either from the assessment order or from other material available on record. The 3
assessee has also chosen to remain absent and, as such, the correctness of the finding recorded by the ld. CIT(A) cannot be verified. Under these circumstances, I set aside the impugned order and remit the matter to the file of AO for deciding this issue afresh as per law in the light of the above guideline.
In the result, the appeal is allowed for statistical purposes.
The order pronounced in the open court on 09.08.2016.