TMI Blog2023 (1) TMI 896X X X X Extracts X X X X X X X X Extracts X X X X ..... 575 - SC ORDER] observed that even if the share capital money is received by the assessee from alleged bogus share holders, whose names are given to the A.O. The Department is free to proceed to reopen their individual assessment in accordance with law. But cannot regarded undisclosed income of the assessee Company. In the present case apart from giving the details of the investors, the assessee has substantially provided materials to prove the genuineness of the share holders apart from giving the Pan Card, name and ROC details. Therefore, we delete the addition made u/s 68 of the Act. Accordingly, the Ground No. 2 of the Assessee is allowed. Enhancement of income by CIT AR argued that the Ld.CIT(A) enhanced the income without giving a mandatory notice as required u/s 250(1) - HELD THAT:- In our opinion, when the CIT(A) deem it fit to enhance the assessed income, shall give mandatory notice u/s 250(1) - In the present case, the Ld. DR has not brought anything on record to prove that the CIT(A) has issued notice u/s 250(1) of the Act before enhancing the income of the assessee. Therefore, the action of the Ld.CIT(A) in enhancing the income of the assessee is found to be erron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the addition without giving cogent reasons and by recording incorrect facts and by disregarding the all the documentary evidences furnished by assessee. 7. That, the appellant craves leave to add, alter, amend or withdraw all or any ground either before or during the hearing of these grounds. It is prayed that it be held that additions/disallowance are not in accordance with law and therefore, the additions/disallowance so made may kindly be deleted and appeal of the appellant may kindly be allowed. 3. There is a delay of 49 days in filing the present appeal. The assessee has pleaded in the affidavit that, the Chartered Accountant was unwell due to highly diabetic condition and was not able to look after the matter and prepare the appeal on time after receiving the copy of the order from Ld. CIT(A). Therefore, the assessee had engaged the service of another Counsel who has preferred the appeal only on 22/07/2019 which caused delay of 49 days in filing the appeal. Thus pleaded that the delay caused in fling the appeal is unintentional and the same due to bona-fide a mistake, accordingly sought for condoning the delay. For the reasons stated in the application for c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total amount paid including premium (Rs.) Herculese Builders Coimbatore Private Limited 16000 10 40 6,40,000 8,00,000 Best Realcon India Private Limited 20000 10 40 8,00,000 10,00,000 Goodluck Industries Ltd. 55000 10 40 22,00,000 27,50,000 Best Propmart Private Limited 17000 10 40 6,80,000 8,50,000 MRS Contractors Private Limited 50000 10 40 20,00,000 25,00,000 Pearl Homecon India Pvt. Ltd. 10000 10 40 4,00,000 5,00,000 Rishikesh Buildcon Pvt. Ltd. 2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to those three Companies before the Lower Authorities which are reproduced before us in the paper book which is as under:- I M/s Good luck Industries(P) Ltd. S. No. Particulars Page No. of the paper book 1 Copy of Certificate of Incorporation, along with MOA AOA Attached with this 2 Copy of confirmation of accounts dated 01.04.2015 from the period of 01.04.2014-31.3.2015 from the assessee company showing the net amount of Rs. . 27,50,000/- received from the investor company by the assessee company. 191 3 Copy of share application form. 192 4 Copy of investor company s bank account statement showing the debit entry of Rs. 15,00,000 on 19.01.2015 and of Rs. 12,50,000/- on 12.02.2015. 193-94 5 Copy of acknowledgement of return of income for AY 2015- 16 along with computation of income tax. 195-96 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 Copy of investor company s bank account statement showing the debit entry of Rs. 10,00,000 on 21.01.2015. 105 5 Copy of acknowledgement of return of income for AY 2015- 16 along with computation of income tax. 106-107 6 Copy Auditor s report, Balance Sheet and trading and profit loss account as on 31.3.2015 along with notes to financial statement. 108-118 7 Copy of Share Certificate of Investor Company issued by the Assessee Company. 119 12. The above details clearly establishes that the assessee had fulfilled the ingredients of Section 68 of the Act by proving the initial burden cast upon him. Once the assessee proves/fulfils the ingredients of Section 68 of the Act, the burden shifts on the revenue. In the present case, the Lower Authorities have not brought anything on record to prove otherwise or to disprove the claim of the assessee and in such circumstances, the authorities are precluded from making any other addition on this cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is any restriction on the amount of share premium under any law, the price of the shares is decided on the mutual understanding of the parties concerned. 53. Once the genuineness, creditworthiness and identity are established, the revenue should not justifiably claim to put itself in the armchair of a businessman or in the position of the Board of Directors and assume the role of ascertaining how much is a reasonable premium having regard to the circumstances of the case. 14. By respectfully following the ratio laid down in the case of PCIT Vs. Rohtak (Supra) and considering the facts and circumstances of the case, we find no merit in the argument of the Ld. DR to hold that the assessee has failed to establish the ingredients of Section 68 of the Act. 15. The Hon'ble Supreme Court in the case of CIT Vs. Lovely Export Pvt. Ltd. reported in 319 ITR 5 (St.) observed that even if the share capital money is received by the assessee from alleged bogus share holders, whose names are given to the A.O. The Department is free to proceed to reopen their individual assessment in accordance with law. But cannot regarded undisclosed income of the assessee Company. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the ratio laid down in the casse of Agro Portfolio Pvt. Ltd. (supra) which is reproduced hereunder:- Particulars Agro Portfolio M/s Punyah Building Materials (P) Ltd. Remark Profit after tax (PAT) Negative AY 14-15: Loss of Rs. 53,083/-. (Para 3 12(ii) of ITAT order) AY 2015-16: Loss of Rs. 1,00,384/- (Para 12(ii) of ITAT Order) Profit a Profit as P L Account A.Y 2014 -15: Rs. 1,95,744/- (PB 42) AY 201 A.Y 2015-16: Rs. 1,89,841/- (PB 42) In ITR, Rs. 2,74,730/- (PB 3). Assessee has sufficient capital base and earned interest on Rs. 86.01 lacs in AY 2014-15 and on Rs. 97.44 lacs in AY 2015- 16 thereon duly declared in ITRs, since inception. (PB 3). Cash Flow to Equity Negative (Para 10 11 of ITAT Order) showing (-) 0.98. Highl Highly positive having a capital base in lacs. Cash flow from equity shown Rs. 19.25 lacs and 20.50 lacs for year ending 31/03/2016 and respectively and even after spending Rs. 4.Q4 lacs and 4.63 lacs on operating cost, it comes to Rs. 19.25 lacs as on 31.3.2016 and 20.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortfolio Pvt. Ltd. (supra) to the case of the assessee, the decision made in Agro Portfolio Pvt. Ltd. (supra) has been considered by the Coordinate bench of this Tribunal in the case of Cinestan Entertainment (P). Ltd. Vs. ITO for AY 2015-16 in ITA No. 8113/Del/2018 vide order dated 27/05/2019, it is held that the Assessing Officer cannot examined or substitute its own value in place of valuation arrived by the assessee either DCF Method or NAV Method, the commercial expediency has to be seen from the point view of businessman. Further held that if law provides the assessee to get the valuation done from a prescribed expert as per the prescribed method, then the same cannot be rejected because neither the Assessing Officer nor the assessee have been recognized as expert under the law. The relevant portion are hereunder:- 28. Now what we are required to examine whether under these facts and circumstances Assessing Officer after invoking the deeming provision of Section 56(2)(vii) could have determined the fair market value of the premium on shares issued at Nil after rejecting the valuation report given by the Chartered Accountant on one of the prescribed methods under the rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the deeming provision such an investment received by the assessee company be brought to tax. The relevant provision of Section 56 for the sake of ready reference is reproduced hereunder: Income from other sources. 56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head Income from other sources , if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head Income from other sources , namely :- (i)....... (viib) where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares: Provided that this clause shall not apply where the consideration for issue of shares is received- (i) by a ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts projected and then discount the same to arrive at the present value of the business .. . 31. . 32. What is seen here is that, both the authorities have questioned the assessee s commercial wisdom for making the investment of funds raised in 0% compulsorily convertible debentures of group companies. They are trying to suggest that assessee should have made investment in some instrument which could have yielded return/ profit in the revenue projection made at the time of issuance of shares, without understanding that strategic investments and risks are undertaken for appreciation of capital and larger returns and not simply dividend and interest. Any businessman or entrepreneur, visualise the business based on certain future projection and undertakes all kind of risks. It is the risk factor alone which gives a higher return to a businessman and the income tax department or revenue official cannot guide a businessman in which manner risk has to be undertaken. Such an approach of the revenue has been judicially frowned by the Hon'ble Apex Court on several occasions, for instance in the case of SA Builders, 288 ITR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach and they cannot be evaluated purely based on arithmetical precision as value is always worked out based on approximation and catena of underline facts and assumptions. Nevertheless, at the time when valuation is made, it is based on reflections of the potential value of business at that particular time and also keeping in mind underline factors that may change over the period of time and thus, the value which is relevant today may not be relevant after certain period of time. Precisely, these factors have been judicially appreciated in various judgments some of which have been relied upon by the ld. Counsel, for instance: - i) Securities Exchange Board of India Ors [2015 ABR 291 - (Bombay HC)] 48.6 Thirdly, it is a well settled position of law with regard to the valuation. that valuation is not an exact science and can never be done with arithmetic precision. The attempt on the part of SEBI to challenge the valuation which is but its very nature based on projections by applying what is essentially a hindsight view that the performance did not match the projection is unknown to the law on valuations. Valuation being an exercise required to be conducted at a parti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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