TMI Blog2021 (7) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... ain 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 justifying the issue of shares of face value of ₹ 10/- at a premium of ₹ 110/-.AO shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for stati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition. He noted that in the instant case, no report of merchant banker or accountant exists. The director of the assessee company who appeared before the AO has stated verbally that they are agriculturist by profession and had wanted to purchase the agricultural land, which is the only asset available with the company. It was stated that only to bypass the Stamp Duty they fell in to the trap of the seller and ended up in acquiring the company. It was also intimated that the land under consideration is forbidden for any other commercial activity by the competent authority and only agricultural activity can be undertaken on the same land. The above facts, though verbally submitted by the Director get confirmed by the Assessing Officer from the fact that the assessee company is not making any compliance to the statutory provisions. Neither, it is furnishing return of income, nor it is filing any document before ROC. The earlier directors of the company, namely Shri Bijender Singh Lohia and Ravinder Singh Lohia have resigned from the company and in their place Gir Raj Bhati and Jitender Bhati have become Directors. He further noted that besides the land at Sohna, the assessee compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir Market Value of unquoted share provisions of section 56(2)(viib) read with rule 11UA(2) aliows the appellant to choose any of the method of valuation given in clause (a) or in clause (b) and accordingly in the present case, the appellant choose method prescribed in Rule 11UA (2) (b) and the Fair Market Value of the equity share having face value of RslO/- each was. determined at ₹ 121/- by the Chartered Accountant M/s P.K. Lakhani Co, Chartered Accountants vide their share valuation report dated 11th February , 2014. The appellant has stated that a deeming provision or a legal fiction, as it is commonly called, is one whose mandate does not exist but for such provision. The appellant has further submitted that in the case of closely holding company for computing the fair market value of unquoted equity shares under section 56(2)(vlib) methods are prescribed under Rule 11UA(2) clause (a) and (b), out of which appellant may choose at his choice any of the method for finding Fair Market Value of Unquoted Equity Shares . Clause (b) of Rule 11UA(2) specified Fair Market Values of unquoted equity shares determined by a merchant banker or an accountant as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived under Section 56(2)(viib). Assessee contended the notice issued was only with respect to the source from which the funds were received and the same had been disclosed and there was no scope for a further proceeding, especially under Section 56(2)(viib). The High Court held in favour of revenue as under: 1) Clause (viib) of section 56(2) is triggered at stage of computation of income itself when share application money received, from a resident, by a Company, in which public are not substantially interested is above face value. 2) Thus, aggregate consideration received for shares as exceeds fair market value will be included as income from other sources. However, as per section 68, as substituted with provisos, when resident investor is not able to explain nature and source for credit seen in books of account of Company or explanation offered is not satisfactory then entire credit would be charged to income-tax for that previous year. 3) Thus, ITAT was right in concluding that order passed by Assessing Officer treating share premium received by assessee on issue of shares was to be assessed as income from other sources under section 56(2)(viib) e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere in in the remand report AO arbitrarily discarded the share valuation method followed by the Appellant without having sufficient material against the value arrived by following Discounted Cash Flow Method (DCF). 5. That on the facts, and in the circumstances of the case and in law, Ld.CIT (A) grossly erred in rejecting the share valuation certificate submitted by the Appellant under Discounted Cash Flow Method (DCF) without appreciating the fact that section 56(2)(viib) read with rule 11UA gives option to the assessee to adopt any of the methods for computation of Fair Market Value of Unquoted Shares and AO is duty bound to consider the higher of two values. 6. That on the facts , and in the circumstances of the case and in law, that provisions of section 56(2)(viib) can not be invoked in the case of appellant company because by virtue of cash being brought in to assessee-company by ' Share Holders' for allotment of shares with high premium, benefit had only passed on to 'relatives' as there is no scope in the Act to tax when cash is transferred to by a 'relative' to another 'relative' as defined in Explanation ('e) of section 56 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncials 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 ₹ 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 ₹ 137 being higher than the issue price per equity share of ₹ 120/-, therefore, the addition of ₹ 2,79,58,260/- made u/s5 6(2)(viib) by the AO deserves to be deleted in full having regard to the provisions of section 56(2)(viib) read with Explanation (a)(ii). The learned counsel for the assessee relied upon the following decisions:- 1. M/s Nabh Multitrade Pvt. Ltd. vs ITO ITA No.269/JP/2018, order dated 09/10/2010(Jaipur Trib.) 2. India Convention and Culture Centre (p.) Ltd. vs ITO (2019) 111 taxmann.com 252(Del. Trib.) 3. Unnati Inorganics (p.) Ltd. vs ITO (2019) 109 taxmann.com 165 (Ahd. Trib.) 8. The learned Counsel for the assessee submitted that the company is the owner of the land admeasuring 2.56 acres located at Village Bandhwari, Dist. Gurga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 110 per share of ₹ 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 for any interference. He accordingly submitted that the grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 justifying the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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