TaxTMI 
TaxTMI 
2023 (1) TMI 570
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....the lead case. The grounds raised by the assessee for assessment year 2018-19 are reproduced as under: 1. Violation of Principles of Natural Justice That on the facts and circumstances of the case and in law, the National Faceless Appeal Centre (NFAC) has erred in passing an ex-parte order without giving the Appellant an opportunity of being heard which is in violation of Principles of Natural Justice i.e., Audi Alteram Partem. 2. Addition under section 56 (2)(viib) of the Income-tax Act, 1961(Act) That on the facts and circumstances of the case and in law, the NFAC has erred in confirming the addition under section 56 (2)(viib) of the Act to the tune of Rs. 39,99,327/- and deserves to be deleted. 2.2 Without prejudice, that on the facts and circumstances of the case and in law, the NFAC has erred in confirming the addition under section 56 (2)(viib) of the Act to the tune of Rs. 39,99,327/- without appreciating the fact that 56 (2)(viib) of the Act shall not apply when a portion the shares are issued to a non-resident and to a venture capital company/fund. 2.3 That on the facts and circumstances of the case and in law, the NFAC has erred in confirming the addition unde....
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....of the assessee and order has been passed ex-parte, therefore, matter may be remitted back to the Ld. CIT(A) for deciding the order afresh after taking into consideration submission of the assessee. 4. The Ld. Departmental Representative (DR) did not object seriously to the prayer of the Ld. Counsel of the assessee. 5. We have heard rival submissions and perused the relevant material on record. We find that the Ld. CIT(A) while adjudicating the grounds raised by the assessee on the issue of addition u/s. 56(2)(viia) amounting to Rs. 39,99,327/- and disallowance u/s. 40A(2)(b) of the Act amounting to Rs. 2,98,20,988/-, has only referred to the finding of the Assessing Officer and relevant sections only. The relevant finding of the Ld. CIT(A) is reproduced as under: 8. This ground of appeal challenges the addition of Rs. 39,99,327/- made by the AO us 56(2) (viib) of the Act on account of share money application. 8.1 The AO in his assessment order dated 08/03/2021 has stated that:- 7. The reply of the assessee has been carefully gone through. On perusal of the submission and the case laws mentioned by the assessee, the following observation is stated as under:- 7A. regarding....
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....time read as follows: 10(2) (x): any sum paid to an employee as bonus or commission for services rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission: Provided that the amount of the bonus or commission is of a reasonable amount with reference to- (a) the pay of the/employee and the conditions of his service; (b) the profits of the business. profession or vocation for the year in question; and (e) the general practice in similar business profession or vocations; 10(2)(xv): Any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee laid out or expended wholly or exclusively for the purpose of such business, profession or vocation." It was contended on behalf of the assessee that in the circumstances of this case the amount of Rs. 37,733 paid to Shri J.P. Vaish was an amount laid out or expended wholly or exclusively for the purpose of the business of the assessee and was wrongly disallowed by the Income Tax Appellate Tribunal. It was pointed out that Shri J.P. Vaish was in no way related to the proprietors of the firm and the commission on profits clause was....
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.... the excess consideration of Rs. 39,99,327 =(9089380 X 0.44) received by the assessee company as share application is added back to the total income u/s. 56(2)(viib) of the Income Tax Act, 1961." 8.2 Section 56 (2) (viib) of the Act states as follows:- "(viib) where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares: Provided that this clause shall not apply where the consideration for issue of shares is received- (i) by a venture capital undertaking from a venture capital company or a venture capital fund or a specified fund; or (ii) by a company from a class or classes of persons as may be notified by the Central Government in this behalf: Provided further that where the provisions of this clause have not been applied to a company on account of fulfillment of conditions specified in the notification issued under clause (­) of the first proviso and such company fails to comply with any of tho....
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....sessee, or any relative of such individual; (iv) a company, firm, association of persons or Hindu undivided family having a substantial interest in the business or profession of the assessee or any director, partner or member of such company, firm, association or family, or any relative of such director, partner or member, ; (v) a company, firm, association of persons or Hindu undivided family of which a director, partner or member, as the case may be, has a substantial interest in the business or profession of the assessee or any director, partner or member of such company, firm, association or family or any relative of such director, partner or member; (vi) any person who carries on a business or profession,- (A) where the assessee being an individual, or any relative of such assessee, has a substantial interest in the business or profession of that person; or (B) where the assessee being a company, firm, association of persons or Hindu undivided family, or any director of such company, partner of such firm or member of the association or family, or any relative of such director, partner or member, has a substantial interest in the business or profession of that person.....