TaxTMI 
TaxTMI 
2023 (12) TMI 1091
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....stered with Reserve Bank of India as non banking financial company filed its return of income declaring income of Rs. 6,05,600/- which was processed u/s 143(1) of the Act on 28/05/2014. The case was selected for scrutiny u/s 143(3) of the Act under CASS parameters 'introduction of capital in NBFC/investment companies, large share premium received'. The assessment order came to be passed by making addition of Rs. 11,28,575/- u/s 68 of the Act, Rs. 4,450/- u/s 14A of the Act and Rs. 4,40,14,425/- u/s 56(2)(viib) of the Act. Aggrieved by the assessment order dated 09/03/2016, the assessee preferred an appeal before the Ld. CIT(A), the Ld. CIT(A) vide order dated 26/03/2019, deleted the addition of Rs. 4,40,14,425/- made by the A.O. u/s 56(2)(viib) read with Rule 11UA of the Act and also deleted Rs. 11,28,575/- made u/s 68 of the Act. 4. Aggrieved by the order of the CIT(A) dated 26/03/2019, the Department of Revenue preferred the present Appeal. 5. Ground No. 1 is regarding deletion of the addition of Rs. 4,40,14,425/- made by the A.O. u/s 56(2)(viib) of the Act read with Rule 11UA. During the Financial Year 2012-13 relevant for the Assessment Year 2013-14, the assessee issued 45,14....
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....enerality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head "Income from other sources", namely: (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 (ii) by a company from a class or classes of persons as may be notified by the Central Government in this behalf, Explanation.-For the purposes of this clause, - (a) the fair market value of the shares shall be the valueas may be determined in accordance with such method as may be prescribed; or (11) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goo....
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.... that Fair Market Value can be taken by the assessee to its option at higher amount. The order of the Ld. CIT(A) deleting the said addition requires no interference at the hands of the Tribunal, therefore, sought for dismissal of the appeal filed by the assessee. 9. We have heard the parties and perused the materials. The valuation of the shares has been done as per DCF Method. As per the provisions of law the higher of the amount between the working as per Rule 11UA or on the basis of the value of shares taking into consideration the Market Value of the asset, intangible assets and projected profit can be taken by the assessee. The Ld. AO has given the working based on the value of the shares taking into account the projected business and other parameters as per the auditor's report. As per section 56(2) (viib) of the Act, the amount exceeding the Fair Market Value of shares has to be treated as income. As per the Explanation, the Fair Market Value shall be as per the value determined in accordance with the method prescribed or as substantiated by the company based on the value of the shares, goodwill etc. whichever is higher. The working provided as per Rule 110A(2) has 2 limbs ....
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....ctions by the assessee are not genuine transactions. 5.2. It has been judicially established that the primary onus is on the assessee to prove the identity & creditworthiness of entries and the genuineness of transactions in respect of entries in its books of accounts. The identity and creditworthiness with regards to receipt of share application money, in the context of the provisions of section 68. cannot be seen as two separate elements but as two sides of the same coin. The creditworthiness essentially means some financial standing in one's own right backed by one's inherent capacity to earn income or the capacity of some profit-making apparatus available to one. The genuineness of the transaction means that it was actuated by prudent commercial considerations on both sides and there was nothing in the circumstances before, during and after the transaction that strongly suggest that it was not just a make-believe affair. 5.3 It has been held in the following judicial pronouncements that in the absence of adequate explanations by the assessee who has failed to discharge its onus, the A.O. is entitled to make the additions: * Kale Khan Mohammad Hanif Vs CIT (1963) 5....
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.... money received with premium for 45143 shares as worked out above totaling to Rs. 11,28,575/- (Rs. 10/- face value + Rs. 15/- Premium) from the stated concerns is in fact assessee's own money and is consequently added to the total income of the assessee company u/s 68 of the Income Tax Act, 1961 as cash credits where the assessee offered no explanation about the nature and source thereof for the sum found credited in its books of accounts. 5.10 Since the assessee company has furnished inaccurate particulars of its income, I am satisfied that the assessee has concealed its true & correct income and furnished inaccurate particulars of its income as laid down in section 271(1)(c) of the Income Tax Act, 1961. Accordingly, penalty proceedings under section 274 read with section 271(1)(c) of the I.T. Act, 1961 are being initiated separately on this issue. (Addition: Rs. 11,28,575/-) 15. The Ld. CIT(A) while deleting the addition held as under: "8.2 On going through the contention of the appellant, as re-produced earlier, it is seen that there is no enquiry conducted to further probe the said share application money. The appellant has provided due confirmations from each party b....