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2022 (4) TMI 1607 - AT - Income TaxAddition u/s 68 - enhancement of income u/s 56(2)(viib) - share capital and share premium received - identity and creditworthiness of the of the investors and genuineness of the transaction not proved - addition on protective basis by invoking the provisions of Section 56(2)(vii)(b) by CIT(A) HELD THAT:- For protective addition u/s 56(2)(vii)(b) Identical issue had come-up before the Tribunal in assessee’s own case for the immediately preceding assessment year [2021 (3) TMI 459 - ITAT DELHI] to 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)(vii)(b) as held assessee has valued its shares as per the valuation certificate issued by the chartered accountant. Although the said valuation report was submitted before the AO to justify that the shares issued by the assessee was at fair market value, it was computed in accordance with Rule 11UA(a) of IT Rules, 1962, however, as we find, the AO rejected the same holding that the assessee is not having any worth of receiving any share premium. He has ignored the various assets shown by the assessee in the balance sheet such as cash and cash equivalent, - short-term loans and advances and other current assets - AO did not apply the formula provided in Rule 11UA and did not make any attempt to compute the value of shares of the assessee in accordance with Rule 11UA of IT Rules, 1962 which has been upheld by the ld.CIT(A). Thus 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. It has been held by Hon’ble Supreme Court in the case of A.K. Roy vs. State of Punjab [1986 (9) TMI 412 - SUPREME COURT] that where a statute requires to do a certain thing in a certain way, the thing must be done in that way or not at all. Other methods or mode of performance are impliedly and necessarily forbidden. 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. For addition u/s 68 - As assessee has filed the requisite details to substantiate the identity and creditworthiness of the share applicants and genuineness of the transaction. Nothing has been brought on record to negate the various evidences filed by the assessee. A perusal of the audited balance-sheet of these Investor Companies shows that these companies are having sufficient capital and reserves to make the investment in the assessee company and the entire transactions have been made through banking channel. Merely because the Investor Companies have shown meager income during the impugned assessment year, the same in our opinion, cannot be a ground to doubt the creditworthiness of the said company especially when the said company is having sufficient funds in its account in shape of share capital and free reserves. Since the assessee in the instant case has proved the identity of the investors and filed sufficient details to substantiate the creditworthiness and genuineness of the transaction, therefore, respectfully following the decisions M/s. Priyatam Plaschem Pvt. [2018 (8) TMI 980 - ITAT DELHI], Real Time Marketing (P) Ltd. [2008 (4) TMI 8 - HIGH COURT OF DELHI] hold that the Ld. CIT(A) was not justified in confirming the addition made by the A.O. under section 68. Appeal of the Assessee is allowed.
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