TaxTMI 
TaxTMI 
2021 (12) TMI 706
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....nder section 56(2)(viib) of the Act. Under the aforesaid provisions, if a company in which public are not substantially interested receives in any previous year from a person being a resident any consideration for issue of shares that exceeds the face value of such share, the aggregate consideration received for such share as exceeds the fair market value of the shares, shall be assessed as income under the head "income from other sources". During the previous year the assessee issued/allotted 560000 Equity shares at premium of Rs. 50/- each. It is in this context that the AO called upon the assessee to show cause as to why the provisions of Sec.56(2)(viib) of the Act should not be applied. 3. In reply to the aforesaid notices, the assessee furnished a reply in which it submitted that Reserve Bank of India has Vide notification issued in 2014 stipulated that the price of shares issued should not be less than fair value as per internationally accepted pricing methodology. Based on the Accounting standard under IFRS 13, the fair value has to be based on the most appropriate method, for example on Market Based Approach or Income Based Approach or a combination of these. The assesse....
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....d by the AO. The AO has failed to conduct enquiries regarding the above issues and has failed to bring to tax the correct amount while completing the assessment Liis 143(3). Therefore. action u/s.263 is warranted and the assessment for the AY 2015-16 was proposed to be revised accordingly." 6. In reply to the aforesaid show cause notice, the assessee filed submissions dated 27.12.2018 taking a stand that the AO conducted due enquiries before concluding the assessment. The assessee also submitted that it filed valuation report in accordance with Rule 11UA of the Rules and arrived at a value of Rs. 68/- per share whereas the assessee had issued only at Rs. 60/-. The assessee therefore claimed that there was no case for invoking the provisions of section 56(2)(viib) of the Act. The CIT(A) however did not accept the claim of the assessee and she held that the order of the AO was erroneous and prejudicial to the interest of the Revenue for the following reasons: a) The value of shares as per NAV method was Rs. 42.60/-. b) Assessee did not give any valuation report as required under Rule 11UA of the Rules. c) As per Rule 11UA, the assessee only has ....
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....eturn of income provoke further inquiries. Thus, the assessment in question was made without making proper inquiries or verification which should have been made on the facts of the case. 5. On the facts of the case it appears that no enquiry was conducted by the AO which renders the order erroneous and prejudicial to the interest of revenue. It can only be concluded that there was non application of mind by the AO and hence proceedings u/s 263 o le 1961 Act are warranted. 6. From the foregoing discussion, it is manifestly clear that the assessment order dated 21.12.2017 passed by the Assessing Officer in the case of the assessee for A.Y. 2015-16 is not only erroneous but also prejudicial to the interests of revenue and the twin conditions as contemplated in sec. 263 are, satisfied in the present case. Consequently, the assessment is set aside to the file of the AO with a direction to the Assessing Officer to examine the aforesaid issues and redo the assessment afresh as per law after affording reasonable opportunity of being heard to the assessee." 7. Aggrieved by the order of the CIT, assessee is in appeal before the Tribunal. Learned Counsel for the assessee ....
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....ue of the shares are provided under the statute, and the Assessing Officer adopts one method, the view taken by the Assessing Officer cannot justify interference by the Commissioner u/s 263 of the IT Act. The learned counsel of the Assessee relied on the following decisions: • Malabar Industries Vs. CIT reported in 243 ITR 83 (SC) • CIT Vs. Gokaldas Exports reported in 333 ITR 214 (Kar) 8. Without prejudice to the above submissions, it was submitted that Section 56(2)(viib) of the Act stipulates that receipt of consideration in the previous year is necessary to attract those provisions and that in the present case the consideration for the issue of shares was received in the year ending on 31.03.2014 (relevant to AY 2014-15 and not AY 2015-16. The learned DR relied on the order of the CIT. 9. We have carefully considered the submissions of the learned Counsel for the assessee. It is no doubt true that as per explanation to section 56(2)(viib) of the Act apart from the determination of FMV of shares under Rule 11UA of the Rules, intrinsic value is also one of the methods prescribed method as per Sec.56(2)(viib) (a)(ii) of the Act, but the higher of th....