2023 (3) TMI 715 - AT - Income Tax

Revision u/s 263 by CIT - applicability of section 56(2)(viib) - share premium received - HELD THAT:- In this case, PCIT simply noted that the assessment order passed by the AO is cryptic. PCIT ought to have been examined the entire record, particularly, notice issued under section 142(1), wherein, the AO has called for various details from the assessee and specifically, all the details were filed before the Assessing Officer. Thus, we are of the opinion that the order passed by the AO is not erroneous and therefore, revision order under section 263 of the Act is not warranted and accordingly, the order passed u/s 263 of the Act is liable to be quashed.

Assessee company has determined the fair market value at ₹.33/- per share on the basis of Net Assets method which is in accordance with the second method i.e., as per Explanation (a)(ii) to section 56(2)(viib) of the Act. The said value is duly substantiated by the valuation certificate issued by the Chartered Accountant, which is already filed in the form of paper book.

Valuation of a subsidiary company is also supported by the valuation certificate issued by a Chartered Accountant. Moreover, the ld. PCIT did not find fault with the fair market value of ₹.33 per share determined by the assessee company on the basis of second method. Therefore, shares were issued at a consideration of ₹.33/- per share which is in line with the fair market value of ₹.33/- per share determined as per Explanation (a0(ii) to section 56(2)(viib) of the Act. Hence, the assessee company has not received any consideration exceeding the fair market value of its shares.

Thus, the question of making any addition under section 56(2)(viib) of the Act does not arise. The ld. PCIT arrived at a fair market value of ₹.15.14/- per share as per Rule 11UA which is as per Explanation (a)(i) and the same is irrelevant since the assessee company had opted for determination on the basis of Net Assets method. In view of the above, we are of the opinion that the order passed by the AO is neither erroneous nor prejudicial to the interest of Revenue. Thus, the revision order passed by the ld. PCIT under section 263 of the Act is quashed. Appeal filed by the assessee is allowed.