The following question of law has been referred for our opinion :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the Commissioner (Appeals) in deleting the addition of Rs. 7,57,076 made by the assessing officer on account of transfer of shares made by the assessee to Vishwa Mangal Trading Co. Pvt. Ltd., at rates lower than the quoted market rates on the date of transfer ?'
The assessee is a resident individual and the assessment year involved is 1984-85 for which the previous year ended on 31-3- 1984. The assessment was completed under section 143(3) of the Income Tax Act, 1961 on 27-1-1987.
2. During the relevant previous year, the assessee was the proprietor of a concern known as Nandini Traders in which she made certain share transactions in the ordinary course of business. The shares that she held are related to the Birla group of companies.
The admitted fact is that the quoted price of those shares was to the tune of Rs. 20,67,876. On 9-6-1983, the assessee transferred the said shares in favour of another company by the name of Vishwa Mangal Trading Co. Pvt. Ltd., as per book value at Rs. 13,34,392. As on the valuation date relevant to the assessment year 1984-85, the assessee was holding, after the transfer of the aforesaid shares of the Birla group of companies in favour of the abovenamed Vishwa Mangal Trading Co. Pvt. Ltd., 1,33,410 shares of Rs. 10 each valued at Rs. 13,34,100 in the abovenamed Vishwa Mangal Trading Co. Pvt. Ltd. The assessee, therefore, as on that date was not holding any shares in the Birla group of companies. In the course of assessment, the assessing officer found that in the transaction under consideration no money had actually passed from Vishwa Mangal Trading Co. Pvt. Ltd., to the assessee and that by sale of the shares of the Birla group of companies to Vishwa Mangal Co. Pvt. Ltd., the assessee had received 1,33,410 ordinary shares of that company at the value of Rs. 10 each per share. The assessing officer further found that out of the total paid-up capital of Rs. 13,34,200 of Vishwa Mangal Trading Co. Pvt. Ltd., the assessee was owning shares worth Rs. 13,34,100 and, therefore, the assessee had the absolute control over the said company.
3. Upon consideration of all the above facts and also the question that the market value of the shares transferred by the assessee was Rs. 20,67,876, the assessing officer rejected the contention of the assessee regarding the transfer of shares and added the difference between the amount of Rs. 13,34,392 and Rs. 20,67,876 and thus held that the assessee had earned an income of Rs. 7,57,382.
Being aggrieved, the assessee filed an appeal before the Commissioner (Appeals) who after considering the facts and circumstances of the case reversed the order of the assessing officer being of the opinion that there was no case for substituting the disclosed value of consideration on transfer by the shares and he accordingly deleted the addition made on that account in the income of the assessee by the assessing officer.
Being aggrieved, the revenue filed an appeal before the Tribunal. The Tribunal upheld the finding of the Commissioner (Appeals) by agreeing with the contentions. Thus, under those circumstances, the aforesaid question of law has been referred to us for our opinion.
4. The genuineness of the transaction of the sale and purchase of the shares between the assessee and Vishwa Mangal Trading Co. Pvt. Ltd., has not been doubted by the assessing officer. This has not even been questioned by the department. It is not disputed that the assessee had transferred those shares at the book value cost maintained by her. It is also not disputed that the book value cost was lower than the market value of the shares. In fact it is admitted that the market value of those shares was to the tune of Rs. 20,67,876.
5. Under those circumstances, holding that the assessee had derived any income, being the deference between the market value and the price on which the shares were sold by the assessee, in our opinion, was not correct. We are of the view that the Tribunal rightly upheld the finding of the Commissioner (Appeals). It is not a case where any understatement of value or misstatement of value of the shares sold was made by the assessee. This is a case where the assessee had sold the shares at a value admittedly lower than the market price. Yet the shares could not be assessed on the difference amount being her income because no inference can be drawn in the facts and circumstances of the case that the design of the assessee was such that she concealed certain facts and she received the difference of the value by fraudulent means. There was no evidence direct or inferential, nor was there any finding by any income-tax authority that the assessee indulged in such a practice. We are fortified in our view by a judgment of the Supreme Court in the case of CIT v. Shivakami Co. Pvt. Ltd. : [1986]159ITR71(SC) . We also find support in our view from a Division Bench judgment of the Bombay High Court in the case of India Finance and Construction Co. Pvt. Ltd. v. B.N. Panda, Dy. CIT : [1993]200ITR710(Bom) .
For the reasons above, we answer the question in the affirmative and against the revenue.
All parties are to act on a signed copy of this dictated order on the usual undertaking.