TaxTMI 
TaxTMI 
2022 (4) TMI 1607
X X X X Extracts X X X X
X X X X Extracts X X X X
....rutiny under CASS to verify whether the funds received in the form of share premium are from disclosed sources and have been correctly offered for tax. Accordingly, notice under section 143(2) and 142(1) of the I.T. Act, 1961 were issued to the assessee calling for various details. In response to the same, the assessee filed the requisite details from time to time. 3.1. During the course of assessment proceedings, the A.O. noted that assessee company has received Rs.42 lakhs as share premium on 60000 shares which have been allotted to the following companies/persons. Name of Person PAN Address No. of Shares Share Capital Share Premium Goodluck Industries Ltd. AABCG1474C H.No-10715, GROUND FLOOR, GALI No. 11, MUGAL PRATAP N AGAR-110007 6250 6,25,00/- 4,37500/- Kuber Buildmart H-69, GROUND FLOOR, DDA FLATS, ASHOK VIHAR, PHASE-1, NEW DELHI 110052 10000 1,00,000/- 7,00,000/- Rishikesh Buildcon Pvt. Ltd H-69, GROUND FLOOR, DDA FLATS, PHASE-1, ASHOK VIHAR-110052 31250 3,12500/- 21,87,500/- Texcity Construction Pvt. Ltd. Vrb Agencies House, 891-c, 1st Floor, Vardhman Complex, Raja Stre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s well as in law the learned Commissioner of Income Tax (Appeals) grossly erred in upholding the exteriors consideration of the LD AO and not considered the evidences which was filed before the assessing authorities. 4. Without prejudice to the above grounds, On the facts and in the circumstances of the case as well as in law the learned Commissioner of Income Tax (Appeals) grossly erred in confirming the addition under section 68 of the act in respect of share capital without appreciating the fact that the case was selected for limited scrutiny to investigate "whether the funds received in the form of share premium are from disclosed source" which restrict the scope of assessing authorities to scrutinize only the source of share premium. Hence, investigating the other facts under limited scrutiny is overreaching the jurisdiction assume under the Provision of act/ rules/ instruction issued by the Board which is not permissible either to LD Assessing officer or LD CIT (A). Hence, addition on account of share capital as confirmed by LD CIT(A) is wrong and bad in law, liable to deleted as such. Grounds with regard to enhancement of income on protective basis: 5. On t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he A.O. He submitted that the amount of share capital and share premium received from Kuber Buildmart was received on 16.07.2012 which pertains to A.Y. 2013-14. The shares were only allotted during the year to the extent of Rs.8 lakhs. Therefore, addition of Rs.8 lakhs on account of share capital and share premium received from Kuber Buildmart was not justified. 5.1. So far as Texcity Construction Pvt. Ltd., is concerned, the Learned Counsel for the Assessee submitted that the money was received from Texcity Construction Pvt. Ltd., was on 30.12.2013 which pertains to A.Y. 2014-15. Only the shares were allotted during this year, therefore, the addition of Rs.9,95,950/- in the case of Texcity Construction Pvt. Ltd., is also not justified. 5.2. He submitted that the assessee during the course of assessment proceedings has filed the copy of income tax return along with computation of income, P & L A/c, Auditor's Report, Balance Sheet with Audited Financial Statements, Memorandum of Association and Articles of Association and Certificate of Incorporation of the Investor Companies. The assessee has also filed the bank statement, details of share premium receipt along with name, PAN....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the I.T. Act, 1961 on protective basis. It is the submission of the Learned Counsel for the Assessee that for the purpose of section 56(2)(viib) of the Act the valuation of the shares has to be done in accordance with the Rule 11UA of IT Rules, 1962. As per the said Rule, the fair market value of unquoted equity shares for the purpose of sub-clause (i) of clause (a) of Explanation to clause (viib) of sub-section (2) of section 56 shall be determined under clause (a) or clause (b), at the option of the assessee. It is his submission that the assessee in the instant case has issued the share capital @ Rs.80 per share (face value of Rs.10 per share + premium at Rs.70 per share) as on 31.03.2015 and the valuation of each share was in accordance with Rule 11UA of the Act. It is also his submission that when the statute provides for a particular procedure, the authority has to follow the same and cannot be permitted to act in contravention of the same. 7.1. I find an identical issue had come-up before the Tribunal in assessee's own case for the immediately preceding assessment year. I find the Tribunal in ITA.No.6170/Del./2019 order dated 12.02.2021 has allowed the appeal filed by the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-clause (i) of clause (a) of Explanation to clause (viib) of sub-section (2) of section 56 shall be determined under clause (a) or clause (b), at the option of the assessee. It is his submission that the assessee in the instant case has issued the share capital @ Rs.80 per share (face value of Rs.10 per share + premium at Rs.70 per share) as on 31.03.2015 and the valuation of each share was in accordance with Rule 11UA of the Act. It is also his submission that when the statute provides for a particular procedure, the authority has to follow the same and cannot be permitted to act in contravention of the same. 15. I find merit in the above argument of the ld. Counsel. The provisions of section 56(2)(viib) of the Act reads as under:- "(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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....equity shares where such dividends have not been declared before the date of transfer at a general body meeting of the company; (iii) reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation; (iv) any amount representing provision for taxation, other than amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto; (v) any amount representing provisions made for meeting liabilities, other than ascertained liabilities; (vi) any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares; PE = total amount of paid up equity share capital as shown in the balance-sheet; PV = the paid up value of such equity shares; or (b) the fair market value of the unquoted equity shares determined by a merchant banker as per the Discounted Free Cash Flow method." ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed to explain where did the AO went wrong in his comments in the figures reflected in the valuation report. However, in the instant case, the assessee has issued the shares at fair market value computed in accordance with Rule 11UA(a) of the IT Rules 1962 and no fault has been found in the method applied by the assessee and the lower authorities have made the addition u/s 56(2)(viib) purely on presumptions and surmises. Therefore, in my considered opinion, such action of the lower authorities being not in accordance with law is unsustainable. I, therefore, set aside the order of the CIT(A) and direct the AO to delete the addition. The grounds raised by the assessee are accordingly allowed. 18. In the result, the appeal filed by the assessees is allowed." 7.2. I find the assessee has filed certificate of Auditor valuing the book value of the shares at Rs.80/- the details of which are as under : 7.3. Respectfully following the order of the Tribunal in assessee's own case for the immediately preceding assessment year (supra), I hold that the Ld. CIT(A) was not justified in making the addition of Rs.42 lakhs on protective basis by invoking the provisions of Section 56(2)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....feel that something more which was necessary and required to be done by the AO was not done. The AO failed to carry his suspicious to logical conclusion by further investigation. 7.6. I find the Hon'ble Delhi High Court in the case of CIT vs., Real Time Marketing (P) Ltd., 306 ITR 55 (Del.) has observed as under : "8. There is a finding of fact given by the two authorities namely CIT(A) and the Tribunal to the effect that :- The confirmation of M/s. ACL has been filed by the Assessee. The said company was assessed to tax. The source of ACL had been explained as out of transfer of funds from the accounts of M/s. BTL. Thus, the Assessee discharged its burden of proving identity, capacity and genuineness of the transaction. The Assessing Officer has not brought any material to show that the funds to ACL were provided by the Assessee. Under the circumstances, it cannot be said that the cash credit in question has remained unexplained. There is absolutely no material to link the Assessee with the sum of Rs.22,97,000/- deposited in cash in the bank account of M/s. FBSL. 9. In view of the concurrent findings of the fact given by the two authori....