TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 896
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....,000/- acting ultra vires to statutory limitation of enhancement powers u/s 251 of the Act is ab initio void and fundamentally flawed action. 4. The Ld. CIT(A) has erred in law as well as on facts in enhancing the income of appellant assessee by sum of Rs. 75,20,000/- by invoking section 56(2)(viib) of the Act wherein rejecting the valuation method taken by appellant assessee. 5. The Ld. CIT(A) has erred in law as well as on facts in enhancing the income of appellant assessee by not issuing valid show cause notice as mandated. 6. The Ld. CIT(A) has erred in law as well as on facts in confirming and enhancing the addition without giving cogent reasons and by recording incorrect facts and by disregarding the all the documentary evidences furnished by assessee. 7. That, the appellant craves leave to add, alter, amend or withdraw all or any ground either before or during the hearing of these grounds." It is prayed that it be held that additions/disallowance are not in accordance with law and therefore, the additions/disallowance so made may kindly be deleted and appeal of the appellant may kindly be allowed." 3. There is a delay of 49 days in filing the present appeal. The a....
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....ires no adjudication. Ground No. 2 is regarding the sustaining the addition of Rs. 42,50,000/- made u/s 68 of the Act on account of unexplained share premium and share capital. 9. The Ld. A.O. on the basis of various details filed by the AR found that the assessee had received 75,20,000/- share premium on 1,88,000/- shares at premium of Rs. 40 per share the details of the same are as under:- Name of Person No. of shares Nominal value per share (Rs) Premium per share (Rs.) Amount of premium (Rs.) Total amount paid including premium (Rs.) Herculese Builders Coimbatore Private Limited 16000 10 40 6,40,000 8,00,000 Best Realcon India Private Limited 20000 10 40 8,00,000 10,00,000 Goodluck Industries Ltd. 55000 10 40 22,00,000 27,50,000 Best Propmart Private Limited 17000 10 40 6,80,000 8,50,000 MRS Contractors Private Limited 50000 10 40 20,00,000 25,00,000 Pearl Homecon India Pvt. Ltd. 10000 10 40 4,00,000 5,00,000 Rishikesh Buildcon Pvt. Ltd. 20000 10 40 8,00,000 10,00,000 Total 1,88,000 75,20,000 94,00,000 10. The Ld. A.O has also issued notice u/s 133(6) of the Act and in res....
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....d 01.04.2015 from the period of 01.04.2014-31.3.2015 from the assessee company showing the net amount of Rs. . 27,50,000/- received from the investor company by the assessee company. 191 3 Copy of share application form. 192 4 Copy of investor company's bank account statement showing the debit entry of Rs. 15,00,000 on 19.01.2015 and of Rs. 12,50,000/- on 12.02.2015. 193-94 5 Copy of acknowledgement of return of income for AY 2015- 16 along with computation of income tax. 195-96 6 Copy Auditor's report, Balance Sheet and trading and profit & loss account as on 31.3.2015 along with notes to financial statement. - 195-207 7 Copy of Share Certificate of Investor Company issued by the Assessee Company. 208 II. M/s Pearl Homecon India Pvt. Ltd. S. No. Particulars Page no of the paper book 1 Copy of Certificate of Incorporation, along with MOA & AOA Attached with this synopsis 2 Copy of confirmation of accounts dated 01.04.2015 : period of 01.04.2014-31.3.2015 from the assessee company- showing the net amount of Rs. 5,00,000/'- received from the investor company by the assessee company. 156 3 Copy of share application form. 157 4 Co....
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.... examination of the order of CIT (Appeals) and the documents on record insofar as identity creditworthiness, genuineness of transaction of M/s. Aadhaar ventures (I) Ltd, M/s. Dhanush Technologies Ltd, M/s. Emporis Projects Ltd and M/s. L.N. Industries Ltd (formerly known as L.N. Polyster Ltd) came to the conclusion that the assessee company having receipt share application money through bank channel and furnished complete details of bank statements, copy of accounts and complied with notices issued and the directors of subscriber company also appeared with books of accounts before the appellate authority and confirmed the investment made by them with the assessee company, therefore, the identity and creditworthiness of investor and genuineness of transaction of the share applicant has been proved in the light of the ratio laid down by the M.P. High Court, Delhi High Court and the Hon'ble Supreme Court and were of the opinion that the onus cast upon the assessee as provided under Section 68 of the Act has been duly discharged by the assessee the identity of the share subscriber, creditworthiness and genuineness of the transaction is not to be doubted. The learned ITAT considered the....
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....me Tax Act. It is the case of the assessee that the income of the assessee was enhanced which has been done in violations of principals of natural justice. 17. In our opinion, when the CIT(A) deem it fit to enhance the assessed income, shall give mandatory notice u/s 250(1) of the Act. In the present case, the Ld. DR has not brought anything on record to prove that the Ld. CIT(A) has issued notice u/s 250(1) of the Act before enhancing the income of the assessee. Therefore, the action of the Ld.CIT(A) in enhancing the income of the assessee is found to be erroneous. Therefore, Ground No. 3, 5 & 6 of the assessee requires to be allowed. 18. Ground No. 4 is regarding enhancing the income of the assessee by sum of Rs. 75,20,000/- by invoking Section 56(2) (viib) of the Act by rejecting valuation method taken by the assessee. According to the Ld. A.O, the value of the shares issued to the parties are very high in comparison to fair market value of such shares. It is the contention of the Ld. AR that the valuation of the shares have been done as per Discounted Cash Flow Method (DCF Method) which is prescribed under Rule 11UA (2) (b) of Income Tax Rules which has been certified by the ....
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....n from the Market (RM) It was taken @ 15.80%. The 'A' has taken about 14-16% which is below the market rate of return which is 14%, but reduced its capital by 14% to arrive at the Present Value. (PB 49A- & 49B). Since, the company has no debt, hence Ke i.e Cost of Equity has been taken at 14% as Weighted Average Cost of Capital (WACC). (PB 49A- 49B) Beta Movement of Share Price as per the Market Due to higher debt to value ratio, it has a larger Beta. The 'A' has taken 1 (PB 49-49B) Since, the assessee has no debt, Beta has been correctly assumed at 1 as there is no risk of debt. Disclaimer The valuer clearly states that the valuation of shares is not realistic and figures in the valuation report have been cooked up without providing any reliable basis as to how assumptions took place. The valuer clearly states that it has used the financial information which is believed to be reliable and conclusions are dependent on such information being reliable and accurate with all material aspects. The valuer based its report not on assumption or future projections exorbitantly, but the report was given on the financial information and made conservatively by taking the lowest prof....
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....preme Court, in the case of Dilip Kumar & Sons (supra) that in the matter of charging section of a taxing statute, strict rule of interpretation is mandatory, and if there are two views possible in the matter of interpretation, then the construction most beneficial to the assessee should be adopted. Viewed from such principle, here is a case where the shares have been subscribed by unrelated independent parties, who are one of the leading industrialists and businessman of the country, after considering the valuation report and future prospect of the company, have chosen to make investment as an equity partners in a 'start-up company' like assessee, then can it be said that there is any kind of tax abuse tactics or laundering of any unaccounted money. It cannot be the unaccounted or black money of investors as it is their tax paid money invested, duly disclosed and confirmed by them; and nothing has been brought on record that it is unaccounted money of assessee company routed through circuitous channel or any other dubious manner through these accredited investors. If such a strict view is adopted on such investment as have been done by the Assessing Officer and by ld. CIT(A), then....
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....1UA(2). The relevant extract of the applicable rules is reproduced below: "11UA. [(1)] For the purposes of section 56 of the Act, the fair market value of a property, other than immovable property, shall be determined in the following manner, namely,- (2) Notwithstanding anything contained in sub-clause (b) of clause (c) of sub-rule (1), the fair market value of unquoted equity shares for the purposes of sub-clause (i) of clause (a) of Explanation to clause (viib) of sub-section (2) of section 56 shall be the value, on the valuation date. of such unquoted equity shares as determined in the following manner under clause (a) or clause (b), at the option of the assessee, namely:- (b) the fair market value of the unquoted equity shares determined by a merchant banker or an accountant as per the Discounted Free Cash Flow method." 30. Ergo, the assessee has an option to do the valuation and determine the fair market value either on DCF Method or NAV Method. The assessee being a 'start-up company' having lot of projects in hand had adopted DCF method to value its shares. Under the DCF Method, the fair market value of the share is required to be determined either by the Merchant Ba....
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....d the meaning of scope of any word while interpreting such deeming provision. If the statute provides that the valuation has to be done as per the prescribed method and if one of the prescribed methods has been adopted by the assessee, then Assessing Officer has to accept the same and in case he is not satisfied, then we do not we find any express provision under the Act or rules, where Assessing Officer can adopt his own valuation in DCF method or get it valued by some different Valuer. There has to be some enabling provision under the Rule or the Act where Assessing Officer has been given a power to tinker with the valuation report obtained by an independent valuer as per the qualification given in the Rule 11U. Here, in this case, Assessing Officer has tinkered with DCF methodology and rejected by comparing the projections with actual figures. The Rules provide for two valuation methodologies, one is assets based NAV method which is based on actual numbers as per latest audited financials of the assessee company. Whereas in a DCF method, the value is based on estimated future projection. These projections are based on various factors and projections made by the management and th....