ITAT remits share premium valuation case back to AO after ex-parte CIT(A) order under section 56(2)(viib)

The ITAT Delhi remitted the case back to the AO for fresh examination regarding addition under section 56(2)(viib) for share premium received from non-resident. The AO had disallowed discounted cash flow method for valuation and made addition for alleged excess share premium. The Tribunal noted the CIT(A) order was ex-parte and relevant case law from Clearview Healthcare was not considered by lower authorities, which held that addition is unjustified when shares are subsequently sold at higher amounts to non-resident buyers through proper due diligence without unaccounted money involvement.

---

---

Issues Involved:
1. Confirmation of addition made under section 56(2)(viib) of the Income Tax Act.

Summary of the Judgment:
The appeal was filed against the order of the Ld. CIT(A) confirming the addition made under section 56(2)(viib) of the Income Tax Act for the Assessment Year 2013-14. The main contention was regarding the valuation of shares issued by the assessee and the applicability of the said provision.

The assessee issued shares at a premium, and the valuation of shares was a key point of contention. The Assessing Officer noted discrepancies in the valuation report submitted by the assessee. The valuation method used by the assessee was questioned, as the discounted cash flow method was not allowed at the time of the first issue of shares. The Assessing Officer also raised concerns about the projections in the valuation report not being realistic, considering the financial status of the company.

The Assessing Officer held that while the share premium received from a non-resident was not covered under section 56(2)(viib), the shares issued to a resident company were subject to the provision. The non-discrimination clause in international agreements was deemed not applicable to provisions of the IT Act. The timing of the allotment of shares and the applicability of section 56(2)(viib) were crucial considerations.

The Ld. CIT(A) upheld the addition made by the Assessing Officer, emphasizing the applicability of section 56(2)(viib) to shares issued after a certain date, irrespective of when the money was received. The unrealistic nature of the valuation report was also highlighted in the decision.

In a separate judgment, the Tribunal referred to a previous case where a similar addition was deleted based on subsequent share sales at higher values. Considering this precedent, the Tribunal remitted the issue back to the Assessing Officer for further examination in the interest of justice.

Ultimately, the appeal of the assessee was allowed for statistical purposes, and the case was remitted to the Assessing Officer for a fresh examination based on the observations made by the Tribunal.

---