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TMI Blog2021 (7) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... so issued and served upon the assessee. However, there was no compliance to the said notice. Such non-compliance has been elaborated by the AO at page 2 of the assessment order. In view of the persistent non-compliance, the AO inferred that the assessee has nothing to submit to the queries raised in the notice issued u/s 142(1) of the Act. He, therefore, issued another show-cause notice u/s 144 of the Act giving final opportunity to the assessee to furnish details which also remained non-complied with. Since, the assessee did not appear before the AO nor the books of accounts were produced, the AO proceeded to complete the assessment u/s 144 of the Act. 3. The AO observed from the balance sheet of the assessee company, which was download from website of ROC as well as that filed alongwith the return of income that the assessee during the year under consideration has allotted 254166 shares of Rs. 10/- each at a premium of Rs. 110/- per share. Since, the assessee did not respond to the query raised by the AO on this issue i.e. allotment of shares at a premium of 1100% of the share value and to explain as to why share premium so received may not be treated as its income as per provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fair market value of shares was below par. Therefore, he was of the opinion that the shares under the facts and circumstances shares should have been allotted at par. Since, there was no other details available before him, therefore, applying the provisions of section 56(2)(viib) of the Act, the AO held that the assessee company has received excess sum of Rs. 110 per share on 254166/- shares issued during the year. Therefore, he made addition of Rs. 2,79,58,260/- to the total income of the assessee. 4. Before the learned CIT(A), the assessee filed detailed submission alongwith certain additional evidences. The learned CIT(A) called for a remand report from the AO. After considering the remand report of the AO and rejoinder filed by the assessee on such remand report, he upheld the action of the AO by observing as under:- "4.23.2, The appellant has stated that the procedural matters which was considered by the AO in his remand report dated 01/02/2018 for discarding the share valuation certificate like Income Tax Return for subsequent years was not filed, Financials was not Audited and the company has argued that all procedural matters are duly complied and necessary documentary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a premium of Rs. 110/- per share and the allotment of shares at a premium of 1100% of the share value was done by the appellant company. The appellant company has submitted that during assessment proceedings, the AO issued notices under section 133(6) to each share holders and information under section 133(6) from share holders acknowledged on 29/09/2016 and the AO was Satisfied with the information collected under section 133(6) towards Identity, Genuineness and Creditworthiness of the share holders, hence no addition was made under section 68 by the AO. This argument of the appellant is rejected and reliance is placed on the following decision of the Hon'ble Kerela High Court, v/herein, it has been held that 'Excess share premium rightly taxed by AO even if genuineness of transaction was proved'. The facts of the case are given below: a) Assessee, a private limited Company, issued shares at a premium above the face value. It did not offer any amount so received as income for the purpose of taxation under the Income-tax Act. A notice under Section 143(2) was issued and assessee was have disclosed the genuineness of the persons, who purchased the said shares on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be quashed. 2. That on the facts, and in the circumstances of the case and in law, Ld. CIT(A) grossly erred in confirming order of AO passed under section 144 making addition of entire share premium of Rs. 2,79,58,260/- under section 56(2)(viib) which was made arbitrarily , capriciously and without considering the Share Valuation Certificate submitted by the Appellant in the course of Appellate proceedings . This action of lower authorities is clear in breach of law and goes against the mandatory principles lays down by the Courts in the case of" Best Judgement Assessment." 3. That on the facts, and in the circumstances of the case and in law, Ld.CIT (A) grossly erred in sustaining order of AO without appreciating the fact that Share Valuation Certificate under Discounted Cash Flow Method (DCF) submitted by the Appellant was discarded by AO in the remand report due to defect in procedural matters where as such defect in procedural matters were subsequently removed and documentary evidences were duly placed before Ld. CIT(A). 4. That without prejudice to the contention raised in Ground No.3 above, the Ld. CIT(A) was wrong in confirming the order of AO on the basis of rema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Advances 60,00,000/- 60,00,000/- Total Assets (A) 32,306,946/- 38,138,196/- Other Current Liabilities 18,61,822/- 18,61,822/- Net Assets (A-B)=(c) 30,445,124/- 36,276,374/- Nos. Of Equity Shares=(D) 2,64,166 Nos 2,64,166 Nos Net Asset Value/Market Value Per Share=(C/D)=(E)" 115/- 137/- 7. The learned counsel for the assessee further submitted that the assessee has filed a valuation report from M/s M. Choudhary & Associates and the AO has not found any defect in the valuation report. Further, no other evidence is available with the AO to show that the fair market value of the land is incorrect. He submitted that the audited financials at 31st March 2014 was available on records, the learned CIT(A) has again failed to give the credit to the extent of the valuation of Rs. 115/- per equity shares based on net asset value method. The above facts clearly show that the learned CIT(A) is acting for the benefit of the Revenue. He submitted that since as per valuation certificate of land, market value per equity share of Rs. 137 being higher than the issue price per equity share of Rs. 120/-, therefore, the addition of Rs. 2,79,58,260/- made u/s5 6(2)(viib) b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e valuation report under discounted cash flow method was rejected by the CIT(A) and the AO without finding any serious defect. He submitted that since, the assessee has got the valuation done from a prescribed expert as per the prescribed method, therefore, in absence of any contrary material, the lower authorities could not have rejected such certificate. Relying on various decisions, the learned counsel for the assessee, submitted that the order of the learned CIT(A) be set-aside and the ground raised by the assessee be allowed. 11. The learned DR on the other hand, heavily relied on the order of the AO and the learned CIT(A). He submitted that the assessee did not appear before the AO and did not file the requisite details for which the AO was constrained to pass the order u/s 144 of the Act. He submitted that before the learned CIT(A) also, the assessee could not substantiate with documentary evidence regarding issue of shares at high premium of Rs. 110 per share of Rs. 10/- especially when it has not shown any business and was only incurring statutory expenses and filing loss return. He submitted that the learned CIT(A) has given valid reasons for which the same does not call ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bers of the director and therefore no addition u/s 56(2)(viib) of the Act is called for. 13. We find the assessment in the instant case was completed u/s 144 of the Act due to persistent non-compliance of the assessee to the statutory notices issued by the AO. Although, the assessee has filed certain documents in shape of additional evidences before the learned CIT(A), however, the arguments made before the Tribunal were not made before the learned CIT(A). The argument of the assessee that the shares were subscribed by the family members of the Directors and their relatives was never argued before the learned CIT(A). Since, the full details were not filed before the AO and the powers of the AO during the remand proceedings are limited and the various arguments and case law decisions cited before us were not cited before the lower authorities, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore this issue to the file of the AO with a direction to grant one more opportunity to the assessee to substantiate its case. The assessee is also hereby directed to appear before the AO and produce all the relevant details ..... X X X X Extracts X X X X X X X X Extracts X X X X
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