2018 (10) TMI 1400 - AT - Income Tax

Addition u/s 68 made on account of allotment made of share by the assessee - assessee has submitted copy of the board resolution, ITR, audited financial statement, PAN, bank statement, confirmation, company master data, allotment letter and allotment return of share capital and further stated that source of source was also filed during the assessment proceedings - assessee did not get proper opportunity of producing the directors of the investors company before the assessing officer - Held that:- AR repeatedly stated that assessee did not get proper opportunities of producing the directors before the AO and therefore now case of the assessing officer is that non production of the directors of the investor companies have made all the evidence produced by the assessee redundant, he repeatedly offered to produce the directors of the investor companies.

We are of the opinion that assessee has submitted enough evidences to prove their identity, creditworthiness and genuineness of the transactions. Further if assessee produces the directors of the investor companies before the Lord assessing officer and they are examined by Ld. assessing officer, it will conclusively decide the whole issue. Accordingly, on the request of both the parties, we set aside the first issue covering ground number one of the appeal back to the file of the Learned AO with a direction to the assessee to produce the directors of the investor companies for examination before the assessing officer. The AO is also directed to examine them on the basis of documents submitted by the assessee. Accordingly, ground number one of the appeal of assessee is allowed with above direction.

Addition u/s 56(2)(viib) on protective basis - as the assessee has received share capital of ₹ 20 crores of the face value of ₹ 10 each at a premium of ₹ 1990 per share therefore, AO held that the provision of section 56(2)(viib) are attracted - Held that:- The assessee has claimed that its investment in coal mines in USA is based on certain proposals, due diligence report, coal lease agreement , agreement for transfer of lease rights, engineering service agreement, consulting agreement, approval from environment Ministry and approval of reserve Bank of India for making an overseas investment. Therefore the valuation report submitted by the assessee is required to be objectively evaluated based on these evidences. It is apparent that lower authorities have not given any credence to these details. It is further not possible to ascertain what happened in subsequent years to the business of the coal mine. It is neither found from the assessment orders or appellate orders or submission of the assessee about the cash flow generated by the coal mine business of the LLC.

We set aside the whole issue of tax ability under section 56 (2)(viib) back to the file of the assessee for the reason that that original addition made by AO u/s 68 is also set aside to the file of the AO and further the lower authorities have failed to objectively evaluate the valuation report submitted by the assessee of a chartered accountant based on discounted cash flow method. The assessee is directed to show the details of the valuation made by the assessee on the basis of discounted cash flow methods along with the supporting evidences to substantiate the estimate of the cash flow for respective years. Based on the submission of the assessee, the learned assessing officer is directed to examine the same and decide the issue of tax ability under section 56(2)(viib) of the act after affording proper opportunity of hearing to the assessee. According to this, ground number two of the appeal of the assessee is allowed. Appeal filed by the assessee is allowed for statistical purposes.