TaxTMI 
TaxTMI 
2023 (7) TMI 1079
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....ing Concise grounds of appeal:- "1. That the Id. CIT (A) has erred in law as well as on facts in confirming addition of Rs. 96,00,000 us 68 of the IT Act, 1961 on account of alleged unexplained share premium and share capital despite furnishing all the documentary evidence for establishing identity, creditworthiness of the investors and the genuineness of the transaction. 2. That the Ld. CIT (A) has erred in law as well as on facts in enhancing the income of appellant as 251(1) of the Act by Rs. 64,00,400/- under the head income from other sources by applying section 56(2)(viib) of the Act on protective basis and rejecting the valuation report furnished under Rule 11UA(2)(b) of Income Tax Rules, 1962 i.e., Discounted Cash Flow Method. 3. That the Ld. CIT(A) has erred in law as well as on facts in enhancing the income of appellant by not issuing valid show cause notice as mandated w/s 250(2) of the Act. 4. That the Ld. CIT(A) has grossly erred in enhancing the income of appellant on protective basis u/s 56(2)(viib) r.w.r 11UA of IT rules without appreciating the fact that the case was selected for limited scrutiny to verify "whether the funds rece....
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....tablished from the entries passed in the respective balance sheet of the investor companies as share capital and investments. Hence, the nature of receipt is proved by the appellant beyond doubt. The investors have furnished the bank statements through which money towards subscription of the share capital in the Assessee Company and Ld.AO is wrong to hold that these are not having any creditworthiness. All the companies are registered companies filing their ITR regularly, with running income and business activities, thus the order of the CIT(A) is erroneous. 5. Per contra, the Ld. Departmental Representative argued that the assessee had failed established identity, creditworthiness of the investors and also failed to prove the genuineness of the transaction, further by relying on the orders of the Lower Authorities prayed for dismissal of the Ground No. 1 of the assessee. 6. We have heard the parties and perused the material available on record. It is also found from the record that during the assessment proceedings, it is found from the record that after filing the return, the case was selected for scrutiny to verify whether the funds received in the form of share premium ar....
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....on of Rs. 96,00,000/- made u/s 68 of the Act on the share premium received. On the ground that the identity of the investors, creditworthiness of the transaction and genuineness of the transaction have not been satisfied and further observed that "mere furnishing names, address and PAN particulars or relying on the entries in ROC website is not enough to prove the creditworthiness of the investors and the genuineness' of the transaction. 10. It is found that to prove the identity, creditworthiness and genuineness of the transaction, the assessee has furnished the relevant documents before the Lower Authorities along with valuation certificate as per the Rule 11UA (2) (b) of the Rules. The assessee produced the documents in respect of all six investors before the Lower Authorities which have been reproduced before us in the paper book in following pages:- Sr. No. Name of the Person Pages 1. Good luck Industries Ltd. 112 to 135 2 M/s Pearl Propcon Ltd. 136 to 161 3 M/s Pearl Multicon Pvt. Ltd. 162 to 186 4. M/s Rishi Credit & industries (P) Ltd. 187 to 212 5. M/s Rupa Promoters Pvt. Ltd. 213 to 234 6. Texcity Construction....
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....ppeared 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 case of the each company in great detail in para 85 to 110 of the impugned order and recorded its finding. The aforesaid finding of fact recorded by the ITAT are based on the material available on record which is a finding based on appreciation of evidence on record. 52. Issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutua....
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....istence." 15. The similar view has been expressed and the similar ratio has also been laid down in following judicial pronouncements:- * (Principal Commissioner of Income Tax v Agson Global (P.) Ltd. (Delhi HC) [2022] 441ITR 550 134 taxmann.com 256 (Delhi)/[2022] 441 ITR 550 (Delhi)[19-0L2022] * Principal of Income Tax v Manoj Kumar Vipin Kumar (Rajasthan HC )/[2022] 441 ITR 632 138 taxmann.com 103 (Rajasthan)/[2022] 441 ITR 632 (Rajasthan)[15-ll-2021] * [2022] 137 Deputy Commissioner of Income Tax v Gandhi Capital (P.) Ltd. 75 (Surat-Trib.)/[2022] 194 ITD 396. * 10 Principal Commissioner of Income Tax v Rohtak Chain Co. 59 (SC) [2019] 110 taxmann.com 59 (SC)/[2019]266 Taxman 459 /(SC)[05-08-2019] 16. Applying the above judicial principles to the cases at hand, since the Assessee herein filed detailed documentary evidences in the form of duly signed confirmation of investors/lenders (parties), details of PAN, copies of ITR, duly establishing the identity of the parties and genuineness of the transactions and the bank statements of the parties duly establishing the creditworthiness of the parties to invest in the share capital of or advance ....
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....cepted the same. The Ld. Assessee's Representative also relied on the judgment of the Gujrat High Court in the case of IMC Limited and ors Vs. Union of India and ors reported in MANU/GJ/0860 2019 and submitted that the Lower Authorities have committed error in not accepting the valuation report and enhancing the addition. On the other hand, the Ld. Departmental Representative relying the orders of Ld. CIT(A) justified the rejection of the valuation report and also the enhancement of the income and submitted that no interference is called for by the Tribunal. 18. On hearing the parties and verifying the material on record, we find that the assessee has provided the valuation report of the Chartered Accountant as per Rule 11UA (2) (b) of the IT Rules and arrived the value of each share calculating the same as per Discount Cash Flow Method. Copy of the valuation report has been annexed at page No. 69 to 71 of the paper book. As per the valuation report the value per share had been computed at Rs. 30 per share i.e. premium of Rs. 20/- per share for a share of Rs. 10/-. Accordingly, new shares were issued and allotted to the investors during the year under consideration. 19. T....
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....er manner." 21. The Coordinate bench of this Tribunal in the case of Cinestan Entertainment (P). Ltd. Vs. ITO for AY 2015-16 dated 27/05/2019, wherein it is held that the Assessing Officer cannot examined or substituted its own value in place of valuation arrived by the assessee either DCF Method or NAV Method, the commercial expediency has to be seen from the point view of businessman. Further held that if law provides the assessee to get the valuation done from a prescribed expert as per the prescribed method, then the same cannot be rejected because neither the Assessing Officer nor the assessee have been recognized as expert under the law. The relevant portion are hereunder:- "32. What is seen here is that, both the authorities have questioned the assessee's commercial wisdom for making the investment of funds raised in 0% compulsorily convertible debentures of group companies. They are trying to suggest that assessee should have made investment in some instrument which could have yielded return/ profit in the revenue projection made at the time of issuance of shares, without understanding that strategic investments and risks are undertaken for appreciation of capit....
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....ide 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 the Valuer, like growth of the company, economic/market conditions, business conditions, expected demand and supply, cost of capital and host of other factors. These factors are considered based on some reasonable approach and they cannot be evaluated purely based on arithmetical precision as value is always worked out based on approximation and catena of underline facts and assumptions. Nevertheless, at the time when valuation is made, it is based on reflections of the potential value of business at that particular time and also keeping in mind underline factors that may change over the period of time and thus, the value which is relevant today may not be relevant after certain period of time. Precisely, these factors have been judicially appreciated in various judgments some of which have been relied upon by the ld. Counsel, for instance: - i) Securiti....
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....thod, then the same cannot be rejected because neither the Assessing Officer nor the assessee have been recognized as expert under the law." 22. The Coordinate Bench of the Tribunal while reiterating the above ratio has also considered the decision of the Coordinate bench in Agro Portfolio Pvt. Ltd. Vs. ITO which has been relied by the CIT(A). Thus, there is no dispute that legally the assessee had option to choose the valuation of the shares as per Rule 11UA of the IT Rules. When the statute provides for particular procedure, authorities have to follow the same and cannot interpret or permitted to act in contravention of the statute. The said legal principal is based on the legal maxim 'Expression Unis Est Exclusion Alterius'. Thus, we hold that the CIT(A) have committed an error in rejected the valuation done by the assessee from prescribed expert as per the prescribed method, which ultimately resulted in enhancement of income of the Assessee u/s 251(1) of the Act. Accordingly, we allow Ground No. 2 of the Assessee and delete the enhancement made by the CIT(A). 23. In view of deleting the addition/enhancement made by CIT(A) by allowing Ground No. 1 & 2, the other grounds re....
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....S Bank from 01.04.2015 to 160-161 31.03.2016 30.08.2005 1.9.2016 iii. M/s Pearl Multicon Pvt. Ltd. i. ii. Form Certificate of Incorporation alongwith 162-167 memorandum and article of association/ AOA auditors report and balance sheet and profit and loss 168-180 account for FY 2015-16 relevant to assessment year 16-17 Acknowledgment of return of income alongwith 181-182 computation of income iv. Share Application Form 183 01.04.2016 V. Confirmation of accounts 184 vi. Bank statement of AXIS Bank from 01.04.2015 to 185-186 31.03.2016 M/s Rishi Credit & Industries Ltd. 14.11.2012 i. Form I Certificate of Incorporation alongwith 187-193 memorandum and article of association/AOA ii. auditors report and balance sheet and profit and loss 194-206 account for FY 2015-16 relevant to assessment year 16-17 28.9.2016 iii. Acknowledgement of return of income alongwith 207-208 computation of income iv. Share Application Form 209 1.4.2016 V. Confirmation of accounts 210 vi. Bank statement of AXIS Bank from 1.7.2014- 3.12.2014 211-212 19.7.2005 ....