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2019 (6) TMI 1367 - AT - Income TaxPenalty u/s 271AAB - no incriminating evidence papers/documents/stock/cash were found during the search operation other than the statement - addition offered for taxation by the assessee suo moto in order to buy peace of mind - AO treated the assessee s additional income to the tune of 31, 00, 00, 000/- to be representing its undisclosed income u/s 271AAB Explanation (c) - HELD THAT - We find no merit in Revenue s instant arguments in light of decision of Tribunal s coordinate bench s in DCIT vs. M/s. Rashmi Metaliks Ltd. 2019 (2) TMI 1651 - ITAT KOLKATA pertaining to the very search as well as above stated incriminating documents deleting identified penalty. it was held that income offered by the assessee through its joint declaration was neither represented by any assets found in the course of search nor represented by any entry made in the books of accounts or other documents or transactions found in the course of search and income voluntarily offered by the assessee did not come within the ambit and scope of the expression undisclosed income as defined for the purposes of Section 271AAB. It has come on record that the Revenue seeks to rely upon the same very material as it was used in assessee s sister concern s case pertaining to the very search wherein its identical grievance stands declined vide above extracted detailed discussion. We adopt the said reasoning mutatis mutandis in the instant case as well as no distinction on facts and law has been pointed out at the Revenue s behest. The CIT(A) s order under challenge deleting the impugned penalty is confirmed accordingly. - This Revenue s appeal is dismissed.
Issues Involved:
1. Validity of the order dated 24.09.2018 by Ld. CIT (A). 2. Addition of ?90,95,46,200 under Section 56(2)(viib) related to share premium. 3. Rejection of the valuation report by the AO and CIT (A). 4. Rejection of the valuation methodology (DCF Method). 5. Questioning the commercial wisdom of the assessee. 6. Initiation of penalty proceedings under Section 271(1)(c). 7. Charging of interest under Section 234B. Detailed Analysis: 1. Validity of the Order Dated 24.09.2018 by Ld. CIT (A): The first ground was general and did not require specific adjudication. The main issues were addressed under grounds 2 to 5. 2. Addition of ?90,95,46,200 under Section 56(2)(viib) Related to Share Premium: The assessee challenged the addition made by the AO, upheld by the CIT (A), of ?90,95,46,200 received as share premium. The AO treated the share premium as NIL and added it to the income under Section 56(2)(viib), arguing that the projections used for valuation did not match actual revenues and that the investments were not justified. 3. Rejection of the Valuation Report by the AO and CIT (A): The AO and CIT (A) rejected the valuation report submitted by the assessee, which was based on the DCF method. The rejection was based on the discrepancy between projected and actual revenues. The AO argued that the projections were not substantiated and that the investments made did not justify the high premium. The CIT (A) further alleged that the projections were mere paper plans and the figures were cooked up. 4. Rejection of the Valuation Methodology (DCF Method): The assessee argued that the DCF method, as prescribed under Rule 11UA(2)(b), was used for valuation by a Chartered Accountant. The AO and CIT (A) erred by comparing projections with actual revenues and questioning the methodology without providing an alternate fair market value. The assessee contended that the AO and CIT (A) did not have the authority to disregard the valuation done by a prescribed expert using a prescribed method. 5. Questioning the Commercial Wisdom of the Assessee: The AO and CIT (A) questioned the commercial wisdom of the assessee in making investments in zero percent debentures of its associate company. The assessee argued that such strategic investments were made to advance its business objectives and that it was not within the jurisdiction of the revenue authorities to dictate how the business should be conducted. The assessee cited various judicial precedents to support its argument that the revenue authorities cannot question the business decisions of the assessee. 6. Initiation of Penalty Proceedings Under Section 271(1)(c): The assessee contended that the AO initiated penalty proceedings under Section 271(1)(c) mechanically and without recording any satisfaction for its initiation. 7. Charging of Interest Under Section 234B: The assessee argued that the AO erred in charging interest under Section 234B on wholly illegal and untenable grounds. Decision: The Tribunal allowed the appeal of the assessee, holding that the AO and CIT (A) erred in rejecting the valuation report and methodology used by the assessee. The Tribunal emphasized that the DCF method was a prescribed method under the law, and the AO did not have the authority to disregard it without providing an alternate fair market value. The Tribunal also noted that the investments made by the assessee were genuine business transactions and that the commercial wisdom of the assessee could not be questioned by the revenue authorities. The addition of ?90,95,46,200 was deleted, and the appeal was allowed in favor of the assessee. Other grounds were treated as infructuous or academic. Order pronounced in the open Court on 27th May, 2019.
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