TaxTMI 
TaxTMI 
2026 (1) TMI 1476
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....al and filed the same on 22-07-2019 before the Tribunal which caused delay of 49 days in filing the appeal. The assessee has shown the sufficient cause not to file the appeal within time. For the reasons stated in the application for condonation of delay, the delay of 49 days in filing the appeal is hereby condoned. 3. The assessee has raised the following grounds in the appeal: 1. The Ld.CIT(A) has erred in law as well as on facts in confirming the assessment framed by Ld. AO u/s 143(3) of the Income Tax Act 1961. 2. The Ld.CIT(A) has erred in law as well as on facts in confirming the addition of Rs. 49,00,000/- u/s 68 of the Act on account of alleged unexplained share premium and share capital. 3. The Ld.CIT(A) has erred in law as well as on facts in confirming the income of appellant assessee of Rs. 26,39,050/- by invoking section (2) (viiib) of the Act wherein rejecting the valuation method taken by appellant assessee. 4. 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. 5. The Ld.CIT(A) has erred in law as well as on facts in confir....
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....e assessee the identity and creditworthiness of the investors are suspicious and need detailed enquiries. The Ld. assessing Officer was of the opinion that the submission made by assessee are not acceptable in regard with the identity, creditworthiness and genuineness. Accordingly share capital and share premium amount collected/received by the assessee from the five parties amounting to Rs. 94,00,000/- are not genuine and the same has been treated as unexplained sources of Income of the assessee and brought to tax under section 68 of the Act. Further fair market value as per Rule 11UA on the basis of Net Worth made the addition of Rs. 26,39,050/- on the protective basis. Lastly the Assessing Officer made the addition of difference the interest amounting to Rs. 1,15,842/- on the basis of 26AS. 5.1 Aggrieved by the order of the AO the assessee filed the appeal before the Ld. CIT(A), who vide his order dated 30-03-2021 partly allowed the appeal filed by the assessee, by confirming the addition of Rs. 49,00,000/- made under 68 of the Act. The Ld.CIT(A) also confirmed the income of the assessee of Rs. 5,76,679/- by invoking the section 56(2)(viib) of the Act. The Ld.CIT(A) also conf....
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.... before us in the paper book which as under: (i) M/s Goodluck Industries Ltd.(1) It is submitted that aforesaid company is a corporate entity, incorporated on 13.04.1993 with an objective of carrying on the business of carrying on the business of weaving, spinning, manufacturing or dealing in cotton or other fibrous substances and the preparation, dyeing or colouring of and of any of the said substance and the sale of cloth or other manufactured fibrous products etc. This company has applied for 62,500 shares. Subsequently, the assessee company has allotted 62,500 shares @ Rs. 40/- during the year in concern. A list of documents have been annexed to the Paper Book in order to prove the identity and creditworthiness of the investors and the genuineness of the transaction. S.No. Particulars Page No. of the Paper Book. 1. Copy of Certificate of Incorporation, alongwith MOA & AOA Attached with this synopsis 2. Copy Auditor's report, balance sheet and trading and profit and loss account as on 31.3.2015 alongwith notes to financial statement 88-98 3. Copy of acknowledgement of return of income for AY 2015-16 alongwith computation of inco....
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.... developers etc. to purchase or take on lease under concession or otherwise lands, building, civil works, construct houses, flats, apartments, etc. This company has applied for 35,000 shares. Subsequently, the assessee company has allotted 35,000 shares @ Rs. 40/- during the year in concern. A list of documents have been annexed to the Paper Book in order to prove the identity and creditworthiness of the investors and the genuineness of the transaction. S.No. Particulars Page No. of the Paper Book. 1. Copy of Certificate of Incorporation, alongwith MOA & AOA Attached with this synopsis 2. Copy Auditor's report, balance sheet and trading and profit and loss account as on 31.3.2015 alongwith notes to financial statement 123-133 3. Copy of acknowledgement of return of income for AY 2015-16 alongwith computation of income tax. 134-135 4. Copy of share application form 136 5. Copy of confirmation of accounts dated 1.4.2015 from the period of 1.4.2014 to 31.3.2015 from the assessee company showing the net credit amount of Rs. 30,00,000/- received on 22.8.2014 and debit entry of Rs. 16,00,000/- and Rs. 14,00,000 to bank and share capital ....
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....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 mutual decision between both the companies. In day to day market, unless and until, the rates is fixed by any Govt. Authority or unless there is any restriction on the amount of share premium under any law, the price of the shares is decided on the mutual understanding of the parties concerned. 53. Once the genuineness, creditworthiness and identity are established, the revenue should not justifiably claim to put itself in the armchair of a businessman or in the position of the Board of Directors and assume the role of ascertaining how much is a reasonable premium having regard to the circumstances of the case." 12. In the case of CIT v. Lovely Exports (P) Ltd. reported in 319....
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.... 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 as under : - "28. Now what we are required to examine whether under these facts and circumstances Assessing Officer after invoking the deeming provision of Section 56(2)(vii) could have determined the fair market value of the premium on shares issued at Nil after rejecting the valuation report given by the Chartered Accountant on one of the prescribed methods under the rules adopted by the Valuer. Before us, learned counsel, Mr. Dinodia, first of all had harped upon the spirit and intention of the Legislature in introducing such a deeming provision and submitted that such a provision cannot be invoked on a normal business transaction of issuance of shares unless it has been demonstrated by the Revenue authorities that the entire motive for such issuance of shares on higher premium was for the tax abuse with the objective of tax evasion by laundering its own unaccounted money. His main contention was that, being a deeming fiction, it has to be stric....
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....he provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head "Income from other sources", namely :- (i)....... (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 value - (i) as may be determined in accordance with such method as may be prescribed: or ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date....
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.... 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 capital and larger returns and not simply dividend and interest. Any businessman or entrepreneur, visualise the business based on certain future projection and undertakes all kind of risks. It is the risk factor alone which gives a higher return to a businessman and the income tax department or revenue official cannot guide a businessman in which manner risk has to be undertaken. Such an approach of the revenue has been judicially frowned by the Hon'ble Apex Court on several occasions, for instance in the case of SA Builders, 288 ITR 1 (SC) and CIT vs. Panipat Woollen and General Mills Company Ltd., 103 ITR 66 (SC). The Courts have held that Income Tax Department cannot sit in the armchair of businessman to decide what is profitable and how the business should be carried out. Commercial expediency has to be seen from the point of view of businessman. Here in this case if the investment has made keeping assessee's own business....
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.... 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) Securities & Exchange Board of India &Ors [2015 ABR 291 - (Bombay HC)] "48.6 Thirdly, it is a well settled position of law with regard to the valuation. that valuation is not an exact science and can never be done with arithmetic precision. The attempt on the part of SEBI to challenge the valuation which is but its very nature based on projections by applying what is essentially a hindsight view that the performance did not match the projection is unknown to the law on valuations. Valuation being an exercise required to be conducted at a particular point of time has of necessity to be carried out on the basis of whatever information is available on the date of the valuation and a projection of future revenue that valuer may fairly make on the basis of such information." ii) Rameshwaram Strong Glass Pvt. Ltd. v. ITO [2018-TIOL1358-ITAT- Jaipur] "4.5.2. Before examining the fairness or reasonableness of valu....
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....is found erroneous. The grounds raised by the assessee are allowed. 15.Ground no.6 is regarding disallowance of business expenditure of Rs. 5,76,679/- . The Ld. AR of the assessee submitted that has running its business since the date it came existence. During the year, due to fall in business activities, the assessee could not carry on its business activities. However there are some fixed expenses which has to incur irrespective of business transactions. The assessee has as shown interest income of Rs. 7,29,546/- from "income from other sources". The Ld. Assessing officer disallowed the expenses of Rs. 5,76,679/- on the reasons that assessee has not carried on business in the year under consideration. The Ld.AR submits that assessee has already set up his business and same was in operation, the expenditure claimed u/s 37 of the Act. Further submitted that assessee company, despite not having carried out any business activities during the year has claimed a business expenses of Rs. 5,76,679/- on account of salary to staff and other necessary expenditure which is inevitable in nature. In the case of CIT Gujarat v. M/s Saurashtra Cement and Chemical Industries Ltd. (1973) 91 ITR 1....