Where the assessee purchased shares at a price below the market price and the question was whether the difference between the market price and the purchase price can be assessed as unexplained investment u/s 69 or as a benefit u/s 28(iv) of the Act, held:

(1) Where there was no material to show that the assessee had paid more than the stated consideration and the purchases were recorded in the books of account, s. 69 could not be applied;

(2) The purchase of shares at a price lower than their market value does not constitute “income” as generally understood. In order to attract s. 28(iv), there must be a nexus between the business of the assessee and the benefit derived by him. Further, the benefit arising from a purchase of shares at a price lower than the market price does not accrue till the transfer of the shares;

Held also (1) The taxing authorities are not entitled to ignore the legal charecter of the transaction and go by the so-called “substance of the transaction”. They have to determine the true legal relationship resulting from the transaction;

(2) The contention of the assessee that the sales of shares by certain companies are not transfers as they are part of a family arrangement cannot be accepted as the company’s assets are different from the family assets. It is a distinct juristic entity and its assets cannot be mixed up with the assets of a shareholder. The corporate veil cannot be lifted and it cannot be assumed that the assets of the controlled companies are the assets of the family members;

(3) The mere fact that the transferor has received less than the market value of the asset does not mean that he can be assessed on the basis of the FMV In the absense of evidence to show that he has received more than the stated consideration.