Share premium valuation and addition under 56(2)(vii)(b) reversed by tribunal; enhancement under s251 struck down.

Extraordinary share premium credited at a premium over face value was challenged as income under section 56(2)(vii)(b); the tribunal held that questioning genuineness of the receipt attracts the unexplained receipts doctrine and assessment under that head, not the specified valuation provision, and deleted the addition because the statutory fair market value methods were not invoked. Separately, enhancement of income by the appellate authority on a new head not raised by the assessing officer was held unsustainable as it creates an altogether new income head; that enhancement was deleted accordingly.

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Issues: (i) Whether the share premium amount credited to the assessee is taxable under section 56(2)(vii)(b) of the Income-tax Act, 1961; (ii) Whether the appellate authority could lawfully enhance income by Rs. 5,50,000/- as an alleged unaccounted expenditure when no corresponding addition or disallowance was made by the Assessing Officer.

Issue (i): Whether share premium is taxable under section 56(2)(vii)(b) of the Income-tax Act, 1961.

Analysis: Section 56(2)(vii)(b) applies in specified circumstances with valuation by the statutory methods; issues of genuineness or unexplained credits fall within the scope of section 68. The statutory provision for fair market value under the explanation to section 56(2)(vii) was not invoked. The addition under section 56(2)(vii)(b) was therefore not sustainable on the facts presented.

Conclusion: In favour of Assessee.

Issue (ii): Whether the appellate authority could enhance income by Rs. 5,50,000/- as alleged unaccounted expenditure not subjected to addition or disallowance in assessment proceedings.

Analysis: Enhancement that creates a new head of income not raised or assessed by the Assessing Officer is not sustainable in law; precedent supports deletion of such enhancement where it constitutes an altogether new income head absent assessment-stage determination.

Conclusion: In favour of Assessee.

Final Conclusion: The appeal is allowed by deleting the addition under section 56(2)(vii)(b) and deleting the appellate enhancement of Rs. 5,50,000/-, resulting in overall allowance of the appeal.

Ratio Decidendi: Section 56(2)(vii)(b) must be applied by the valuation methods provided and does not supplant section 68 where genuineness of credits is in issue; appellate enhancement of income creating a new head not made by the Assessing Officer is impermissible.

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