TaxTMI 
TaxTMI 
2023 (10) TMI 918
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....egal and is not justified. 2 Ld. CIT(A) erred in affirming the action of AO of calculating the fair market value of Rs. 13/- per share in place of Rs. 24/- per share, disregarding legal and cogent evidences available on record. The addition made by AO and sustained by Ld. CIT(A) is arbitrary, baseless and not justified. 3 Ld. CIT(A) erred in confirming the action of AO in adopting the value of land at Rs. 70 lakhs per hectare in place of Rs. 70 lakhs per acre, ignoring the fair market value of shares submitted by the appellant prescribed under Rule 11UA. 4 The appellant reserves the right to amend, modify or add any of the ground/s of appeal." 2. Succinctly stated, the assessee company had e-filed its return of income for A.Y.2018-19 on 30.09.2018, declaring an income of Rs. Nil. Subsequently, the case of the assessee company was selected for limited scrutiny for verifying the applicability of Section 56(2)(viib) of the Act as regards the "large share premium" received during the year under consideration. 3. During the assessment proceedings, it was observed by the A.O that while the "book value" of the shares of the assessee company was Rs. 10/- per share on 31.03.2015, it....
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....gain, the assessee, on being called upon to substantiate the share premium of Rs. 14/- per share that was charged on issuing 348280 shares, submitted that as the appreciation to the land value was added as per "Note-5" to the fixed assets and a corresponding effect was given to "Note-3"- reserves and surplus of its financial statement for the year under consideration, therefore, in spite of no profit or loss, there was spike in the valuation of its shares on 31.03.2017 to Rs. 23.88 per equity shares. However, the A.O. did not find favor with the aforesaid explanation of the assessee company. The A.O. held a conviction that the revaluation of the land could not be accepted as a solitary basis for the share premium charged by the assessee company as the same would be possible only on the basis of its profit or loss. The A.O. observed that as the assessee company had not carried out business activities, the amount of share premium of Rs. 48,75,920/- received as a share premium was without any basis. Accordingly, the A.O., based on his aforesaid deliberations, vide draft assessment order u/s. 143(3) of the Act proposed an addition of Rs. 48,75,920/- u/s. 56(2)(viib) of the Act. 6. The....
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....the manner as prescribed under Rule 11 UA". 5.1 (b). The AO observed that the appellant company converted a piece of land (agriculture land) to industrial land and increased the valuation of land which was reflected in the balance sheet. The valuation report of the Registered Valuer was also furnished by appellant. The contention of appellant regarding valuation of shares has been considered to be not acceptable by the AO and consequently proposed an addition of Rs. 38,31,080/-. The AO issued show cause notice and considered the objections of the assessee before making the addition. This addition made in the assessment is the subject matter of this appeal for adjudication. (ii). The appellant filed written submissions during the course of appeal proceedings. It is stated by the appellant that: "The AO worked out the value of land @Rs. 70 lakh per acre and arrived at the revalued figure of Rs. 1,27,40,000- [Rs. 07 lakh per acre x1.82 hectare]. On this basis, he reworked the revaluation reserve at Rs. 62,62,158/- [Rs. 1,27,40,000/- () Rs. 64,77,842/- being original cost) and arrived at the fair market value of the shares at Rs. 13.45 per share, which he rounded off to Rs. 13 pe....
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....e valuation report is not accepted, which was already rejected". The reasoning stated by the AO in rejecting the valuation report seems to be in line with market rates prescribed by the government. In this view of the matter, there is no ground for agitation over the valuation adopted by the AO and consequently, the grounds of Rs. 48.75appeal on this point needs no consideration. 5.2(b). The AO having not accepted the valuation report proceeds to revalue the land pointing out the deficiencies in the valuation report. On the other hand, the appellant mistook the AO's valuation stating that he valuation is not per hectare and it's per acre and that there is difference in average and hectare and also the extent of land. The AO's finding is that the government rate was Rs. 613 lakhs/hectare. All these things do indicate that there is ample confusion which leads to misunderstandings of statements of facts. The AO, on the other hand, stated that a show cause notice followed by a draft assessment order was issued to the assessee before finalizing the assessment. After considering the facts and circumstances of the case and also the deficiencies found by him in the valuation ....
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..... GROUND No. 4 : The appellant reserves the right to add, amend or alter any ground's of appeal. The appellant had not modified or amended the grounds of appeal nor fined additional grounds. Hence, this ground is technically held as rejected. 6. All the grounds raised by the appellant are rejected and in the result, the appeal is dismissed." 9. The assessee, being aggrieved with the order of the CIT(Appeals), has carried the matter in appeal. 10. I have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities as well as the material available on record. 11. At the threshold of the hearing of the appeal, Shri R.B Doshi, Ld. Authorized Representative (for short 'AR') for the assessee company submitted that the controversy involved in the present appeal finds its genesis in the valuation of the land at Village: Karanja, Bhilai, that was taken by the A.O on an incorrect basis as against that claimed by the assessee company. Elaborating on his aforesaid contention, it was submitted by the Ld. AR that the agricultural land of the assessee company measuring 1.82 hectares at Vill. Karanja, Tehsil & Dist. Durg, pursuant to the divers....
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....ch, as stated by the Ld. AR and, rightly so, is primarily based on the valuation of the land at Village Karanja, Bhilai. Although it is the claim of the Ld. AR that the land under consideration, i.e., at Vill. Karanja, Bhilai had been converted into diverted land, i.e., non-agricultural land for industrial usage (Dal Mill), which fact he had tried to justify by referring to the valuation report dated 31.03.2016 of the government approved valuer, Pages 27 to 31 of APB, but I find that the said factual position had not been appreciated by the A.O while framing the assessment. Considering the aforesaid fact, I am of the considered view that the matter in all fairness requires to be revisited by the A.O. The A.O shall, in the course of set-aside proceedings, verify the aforesaid claim of the assessee, i.e., as to whether or not the 1.82 hectares of land which was originally purchased by it at Village Karanja, Bhilai on 18.06.2013 as an "agricultural land," had thereafter, been converted by diversion letter dated 09.05.2014 into land for an industrial purpose (Dal Mill.). If the claim of the assessee company is found to be in order, then the A.O. shall determine the FMV of the said land....