2020 (6) TMI 203 - AT - Income Tax

Addition u/s 56(2)(viib) - CIT-A taxing the share premium hereunder - HELD THAT - Respectfully following this Tribunal order and in turn the judgment of Hon ble Bombay High Court rendered in the case of Vodafone M-Pesa Ltd. Vs. Pr.CIT 2018 (3) TMI 530 - BOMBAY HIGH COURT we set aside the order of CIT(A) on this issue and restore the matter back to the file of AO for a fresh decision. Unexplained cash credit - Addition u/s 56 v/s 68 - AO has made addition by treating the same as income under section 56(2)(viib) - Enhancement by CIT-A without complying with the mandatory requirements of section 251 - HELD THAT - We find that in Assessment Order the AO has noted that prima facie the said amount of 95 lakhs can be construed as unexplained cash credit and thereafter he has discussed and decided about the addition ultimately made by him of 93, 01, 290/- under section 56(2)(viib) Assessment Order is dated 06.11.2017. Under these facts it appears that there is apparent mistake in the Assessment Order because even after observing this in para 1.1 of the Assessment Order that the entire amount of 95 lakhs is unexplained cash credit the AO has made addition of only 93, 01, 290/- under section 56(2)(viib) without making any addition u/s 68. Even now the period of rectification under section 154 has not expired and hence we feel it proper that on this aspect also as to whether any addition is to be made under section 68 or not we feel that the matter should be decided afresh by the AO.Assessee s appeal is partly allowed for statistical purposes.

Summary

Issues:
1. Invocation of section 56(2)(viib) of the Income Tax Act and taxation of share premium.
2. Taxation of share capital along with premium under section 68 without providing a specific opportunity for hearing.

Issue 1: Invocation of section 56(2)(viib) of the Act:
The appeal challenged the invocation of section 56(2)(viib) of the Income Tax Act and taxation of share premium. The assessee contended that the matter should be reconsidered based on a Tribunal order and the judgment of the Bombay High Court in a similar case. The Tribunal referred to the judgment of the Bombay High Court, emphasizing that the valuation method chosen by the assessee should be respected, and any fresh valuation should be based on the DCF method. Consequently, the Tribunal set aside the CIT(A)'s order and directed a fresh decision by the assessing officer following the Bombay High Court's guidance.

Issue 2: Taxation under section 68 without specific hearing opportunity:
Regarding the taxation of share capital along with premium under section 68 without providing a specific opportunity for hearing, the Tribunal noted discrepancies in the Assessment Order. Although the AO initially considered the entire amount as unexplained cash credit, only a portion was added as income under section 56(2)(viib). The Tribunal observed an apparent mistake in the Assessment Order and recommended a fresh decision by the AO to determine if any addition should be made under section 68. As the period for rectification had not expired, the Tribunal concluded that the matter should be reviewed afresh by the AO. Consequently, the Tribunal partially allowed the assessee's appeal for statistical purposes.

In summary, the ITAT Bangalore addressed the issues of invoking section 56(2)(viib) for taxation of share premium and the taxation of share capital under section 68 without a specific hearing opportunity. The Tribunal relied on legal precedents and directed a fresh decision by the assessing officer in both instances. The appeal was partly allowed for statistical purposes, emphasizing the importance of following legal procedures and ensuring fair hearings in tax assessments.