Tribunal orders reassessment of share premium justification under Rule 11U & 11UA The Tribunal directed the Assessing Officer to reexamine the justification of share premium in accordance with Rule 11U and 11UA, giving the appellant a ...
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Tribunal orders reassessment of share premium justification under Rule 11U & 11UA
The Tribunal directed the Assessing Officer to reexamine the justification of share premium in accordance with Rule 11U and 11UA, giving the appellant a reasonable opportunity to be heard. The issue of share premium was restored to the Assessing Officer's files for proper examination as per the prescribed procedures, considering the crystallization of the transaction during the relevant assessment year. The appeal was treated as allowed for statistical purposes, and the stay petition became unnecessary following the decision on the appeal.
Issues: Challenging correctness of order of CIT(A)-2, New Delhi dated 16.07.2018 pertaining to A. Y. 2015-16; Confirming addition of Rs. 6.32 crores made u/s. 56 (2) (viib) of the Act.
Analysis: 1. The appellant challenged the correctness of the order of the CIT(A)-2, New Delhi, regarding the addition of Rs. 6.32 crores made under section 56(2)(viib) of the Income Tax Act for AY 2015-16.
2. The Assessing Officer selected the appellant's return for limited scrutiny due to large share premium received during the year and low income compared to high loans/advances/investment in shares.
3. The appellant contended that section 56(2)(viib) was not applicable as the provisions were inserted w.e.f. 01.04.2013 and justified the share premium by providing a valuation report.
4. The Assessing Officer observed that the share capital and premium increased only in the relevant year, and the appellant failed to justify the premium with proper documentation or calculation as per Rule 11UA.
5. The appellant's reply was deemed untenable as no effort was made to justify the premium with the company's workings in succeeding years, and the valuation report provided was not in compliance with Rule 11UA.
6. An addition of Rs. 6.32 crores was made by the Assessing Officer, which was upheld by the CIT(A) despite the appellant's challenge.
7. The appellant argued that only Rs. 1.79 crores were received as share application money for the year under consideration and that the provisions of section 56(2)(viib) were inapplicable due to the valuation report provided.
8. The DR supported the Assessing Officer's findings, emphasizing the applicability of section 56(2)(viib) for the year under consideration where shares were allotted on premium.
9. After considering the arguments, it was noted that the entire share allotment was done during the year under consideration, requiring justification of share premium as per Rule 11U and 11UA.
10. The Tribunal directed the Assessing Officer to reexamine the justification of share premium in accordance with Rule 11U and 11UA, giving the appellant a reasonable opportunity to be heard.
11. The issue of share premium was restored to the Assessing Officer's files for proper examination as per the prescribed procedures, considering the crystallization of the transaction during the relevant assessment year.
12. The appeal was treated as allowed for statistical purposes, and the stay petition became unnecessary following the decision on the appeal.
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