2022 (12) TMI 430

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....ounds taken by the assessee are as under: 1. The learned Commissioner of Income-Tax (Appeals) 15, erred in upholding that share premium as income under section 56(2)(viib) for the Asst. Year 2015- 16. The Appellant submits that the amount of share subscription money of Rs.70,00,000 was received in the appellant bank account during the year 2011-2 vide share subscription agreement dated 23.02.2012 and the share valuation was also fixed in the said share subscription agreement. The learned Commissioner of Income-Tax (Appeals) failed to appreciate that the conversion of Compulsorily Convertible Preference Shares (CCPS) in to equity shares during the Asst. Year 2015-16 was a mere process completed as per the agreement already entered i....

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....s are achievable. 4. The Learned CIT (Appeals) has erred in not appreciating the fact that at the time of making the investment and investment agreement in 2011-12, the real estate market and the economic activities were booming. Subsequently due to change in political and economic climate the performance have taken a big beating and accordingly the actual. 5. The Learned CIT Appeals has erred in not appreciating that the assessing officer has no power to change the method of valuation adopted by the Appellate but at the maximum could have referred the matter to a valuation officer u/s 142A for determining the Fair Market Value of the shares. The statute having given the discretion to the assessee to adopt a particular met....

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....ed commission in real estate business in domestic market through eplatform. It transpired that during the year, the assessee converted compulsory convertible preference shares (CCPS) into equity shares of Rs.100/- each along with hefty premium of Rs.1500/- per share. Accordingly. Ld. AO invoked the provisions of Sec.56(2)(viib) and directed assessee to justify the valuation of shares. 4.2 The assessee submitted that the premium was fixed before-hand in investor agreement dated 23.02.2012. The assessee also filed valuation report of a Chartered Accountant valuing the shares at Rs.1540/- per share adopting Discounted Cash Flow (DCF) method. In support, the assessee filed net cash flow statement and discounted cash flow. However, the detail....

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....tions were not justified and it did not contain empirical data which should be the basis for projected future financials. The relevant economic factors and basis for making assumptions were not discussed in the valuation report. Therefore, the valuation report was not reliable. Finally, the additions were confirmed as under: - 4.3.10 In view of the above remarks and the decisions relied on, I am of the considered opinion that the receipt of share premium of Rs.65,62,500/- by allotting shares with face value of Rs.100 at Rs.1,600 with the share premium of Rs.1,500 is not based on actual valuation and therefore, the genuineness of the same is suspicious. It is inferred from the projection of financials as per the valuation report sub....

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....hat the premium was exorbitantly high. The valuation report was not supported by technical report, revenue and cost projection, cash flow justification, historical data, management plan, details of orders from potential customers etc. The projections were not justified and it did not contain empirical data which should be the basis for projected future financials. The relevant economic factors and basis for making assumptions were not discussed in the valuation report. It could thus be seen that both the authorities have questioned the valuation made by valuer. In our considered opinion, it was the onus of the assessee to justify the valuation by furnishing an acceptable valuation report which is duly corroborated by relevant material. This....