TMI Blog2023 (12) TMI 1091X X X X Extracts X X X X X X X X Extracts X X X X ..... a Chartered Accountant. As also observed by the CIT(A) that AO has not provided any sound reasoning or not brought on record any material to counter the argument or to negate the submissions of the appellant. He has only taken the book value for the fair market value, though it is at the option of the appellant. Since appellant has adopted the higher value, therefore, it cannot be denied the working without any reasoning. Considering the factual position in this case and valuation report etc. It has been rightly held by the Ld. CIT(A) that that there is no case by the AO to take the FMV @ Rs. 25/- per share, on the basis of book value, disregarding the projected value, especially when it is provided in the Act that fair market value can be taken by the assessee to its option and at a higher amount. CIT(A) committed no error in deleting the addition. Accordingly, the Ground No.1 of the Revenue is dismissed. Addition u/s 68 after making addition u/s 56(2) - CIT(A) deleted addition - HELD THAT:- AO conducted the probe regarding share application money and the assessee provided due confirmation from each of the parties along with ITR which has been neither doubted nor proved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessment order dated 09/03/2016, the assessee preferred an appeal before the Ld. CIT(A), the Ld. CIT(A) vide order dated 26/03/2019, deleted the addition of Rs. 4,40,14,425/- made by the A.O. u/s 56(2)(viib) read with Rule 11UA of the Act and also deleted Rs. 11,28,575/- made u/s 68 of the Act. 4. Aggrieved by the order of the CIT(A) dated 26/03/2019, the Department of Revenue preferred the present Appeal. 5. Ground No. 1 is regarding deletion of the addition of Rs. 4,40,14,425/- made by the A.O. u/s 56(2)(viib) of the Act read with Rule 11UA. During the Financial Year 2012-13 relevant for the Assessment Year 2013-14, the assessee issued 45,143/- shares at the face value of Rs. 10 with the premium at 990.00 per share, the assessee has been confronted with the same with regard to justification of premium received on each share at Rs. 990.00 the assessee replied as under:- During the year under consideration the assessee company issued 45.143 Equity Shares of Rs. 10.00 each at a Premium of Rs. 990.00 per Share. Before issuing the Shares at Premium the assessee Company got the Valuation of its Shares done, using Discounted Cash Flow Method from a Fellow Member o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that this clause shall not apply where the consideration for issue of shares is received- (i) by a venture capital undertaking from a venture capital company or a venture capital fund; or (ii) by a company from a class or classes of persons as may be notified by the Central Government in this behalf, Explanation.-For the purposes of this clause, - (a) the fair market value of the shares shall be the valueas may be determined in accordance with such method as may be prescribed; or (11) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, Whichever is higher, 4.6 Keeping in view the provisions contained in section 56(2)(viib) read with Rule 11UA and the facts of the case, the valuation of the shares on the basis of book value of the company as per audited balance sheets as on 31.03.2012 is worked out as under: Total assets -Total liabilities No of Shares Rs 4.78,88,112/= ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the shares has been done as per DCF Method. As per the provisions of law the higher of the amount between the working as per Rule 11UA or on the basis of the value of shares taking into consideration the Market Value of the asset, intangible assets and projected profit can be taken by the assessee. The Ld. AO has given the working based on the value of the shares taking into account the projected business and other parameters as per the auditor s report. As per section 56(2) (viib) of the Act, the amount exceeding the Fair Market Value of shares has to be treated as income. As per the Explanation, the Fair Market Value shall be as per the value determined in accordance with the method prescribed or as substantiated by the company based on the value of the shares, goodwill etc. whichever is higher. The working provided as per Rule 110A(2) has 2 limbs either FMV of unquoted equity share as per formula (A-L)* (PV) / (PE) or as p the FMV worked out for the unquoted shares determined by mercha banker as per discount free cash flow method. It is at the option assessee to choose between two. In the present case, the assessee opted for the second option for working out the fair market v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to receipt of share application money, in the context of the provisions of section 68. cannot be seen as two separate elements but as two sides of the same coin. The creditworthiness essentially means some financial standing in one's own right backed by one's inherent capacity to earn income or the capacity of some profit-making apparatus available to one. The genuineness of the transaction means that it was actuated by prudent commercial considerations on both sides and there was nothing in the circumstances before, during and after the transaction that strongly suggest that it was not just a make-believe affair. 5.3 It has been held in the following judicial pronouncements that in the absence of adequate explanations by the assessee who has failed to discharge its onus, the A.O. is entitled to make the additions: Kale Khan Mohammad Hanif Vs CIT (1963) 50 ITR1(SC). CIT Vs Lachman Dass Oswal (1980) 126 ITR 446(P H). Nanak Chandra Laxman Dass Vs. CIT (1982) 140 ITR 151(AII). R Dalmia Vs. CIT (1976) 113 ITR 522(Del). CIT Vs Devi Prasad Vishwanath Prasad (1968) 72 ITR 194(SC). 5.4 It has been held in the following judicial citatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company u/s 68 of the Income Tax Act, 1961 as cash credits where the assessee offered no explanation about the nature and source thereof for the sum found credited in its books of accounts. 5.10 Since the assessee company has furnished inaccurate particulars of its income, I am satisfied that the assessee has concealed its true correct income and furnished inaccurate particulars of its income as laid down in section 271(1)(c) of the Income Tax Act, 1961. Accordingly, penalty proceedings under section 274 read with section 271(1)(c) of the I.T. Act, 1961 are being initiated separately on this issue. (Addition: Rs. 11,28,575/-) 15. The Ld. CIT(A) while deleting the addition held as under: 8.2 On going through the contention of the appellant, as re-produced earlier, it is seen that there is no enquiry conducted to further probe the said share application money. The appellant has provided due confirmations from each party before AO, along with ITR which is not doubted by the AO nor proved to be bogus. The appellant has also submitted share application form and its allotment with ROC. 8.3 It is further seen that out of total share application money ..... X X X X Extracts X X X X X X X X Extracts X X X X
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